4 of 42 DOCUMENTS

AnalysisAs of: Jul 14, 2014

PHOENIX TITLE AND TRUST COMPANY, a corporation, Marvin Lustiger andThelma Lustiger, his wife, Henry Steinberg, Lake Mead Land and Water Co., acorporation, Appellants, v. J. M. SMITH and Winnie E. Smith, his wife, Dale D.

Smith and Barbara M. Smith, his wife, Appellees

No. 7705-PR

Supreme Court of Arizona

101 Ariz. 101; 416 P.2d 425; 1966 Ariz. LEXIS 284

June 30, 1966

SUBSEQUENT HISTORY: [***1] Rehearing Denied September 20, 1966.

DISPOSITION: Decision of Appellate Court vacated; judgment of Superior Court affirmed.

CASE SUMMARY:

PROCEDURAL POSTURE: Defendant sellers sought review of the decision of the Court of Appeals (Arizona),which reversed a decision of the trial court in which the sellers recovered judgment against plaintiff buyers, whobrought suit to quiet title to 40,000 acres of land.

OVERVIEW: The sellers entered into an agreement of sale with the buyers for 40,000 acres of land. Theaccompanying deed provided for the reservation of "range-use rights" by the sellers. The buyers brought suit to quiettitle. The court found that the evidence clearly indicated that the sellers entered into the agreement with the expectationof being able to graze their cattle on the land after transfer of the property. The court stated that this was to beeffectuated by a sale of only the "exchange rights." The court held that the reservation of "range-use rights" by thesellers was valid; that they were entitled to the full and exclusive use of the lands for grazing purposes, and that thebuyers could not fence or occupy the lands in such a way as to interfere with this right. The court held that the sellerswere entitled to relief as set forth in the judgment of the lower court and vacated the judgment of the appellate court.

OUTCOME: The court vacated the decision of the appellate court and affirmed the judgment of the trial court whichfound in favor of the sellers in the buyers' suit to quiet title.

Page 1

CORE TERMS: reservation, range-use, grantor, deed, ranch, acres, purchaser, grazing, realty, federal government,assign, railroad, real property, easement, heirs, conveyed, notice, federal lands, lands owned, conveyance, executors,reserved, grantee, Taylor Grazing Act, ownership, allotment, grazing purposes, adverse possession, destroy, fence

LexisNexis(R) Headnotes

Environmental Law > Natural Resources & Public Lands > Grassland ManagementGovernments > Federal Government > Property[HN1] The Taylor Grazing Act permits a stockman who controls the base properties of a range to secure the grazingallotment on federal land included in such range.

Contracts Law > Types of Contracts > Lease Agreements > General OverviewReal Property Law > Estates > General Overview[HN2] The right of hunting or fowling on another's lands or water may be acquired by grant or lease from the owner,either with or without the soil and with such restrictions or limitations as the owner may see fit to impose. This right,being a right of profit in the land, passes by grant or lease of the land, unless expressly reserved.

Real Property Law > Estates > General Overview[HN3] A reservation is a right in favor of the grantor created out of or retained in the granted premises. A grantor hasthe right to make a reservation of an interest in real property. Grass has been held to be part of real property.

Real Property Law > Estates > General Overview[HN4] It is perfectly legal for parties to contract and place in their deeds certain reservations or exceptions for the useand possession of the conveyed premises as a part of the consideration thereof to be enjoyed by the grantor, his heirsand assigns, for a stated period of time.

Real Property Law > Estates > General OverviewReal Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's Interests[HN5] The purchaser or mortgagee of land in possession of an occupant other than the holder of the record title iscompelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject towhatever rights a proper inquiry would disclose the occupant had therein.

Contracts Law > Types of Contracts > CovenantsReal Property Law > Limited Use Rights > Easements > General Overview[HN6] When it appears by the true construction of the terms of a grant that it was the well-understood purpose of theparties to create or reserve a right, in the nature of a servitude or easement, in the property granted, for the benefit ofother land owned by the grantor, no matter in what form such purpose may be expressed, whether it be in the form of acondition or covenant or reservation or exception, such right, if not against public policy, will be held to be appurtenantto the land of the grantor, and binding on that conveyed to the grantee, and the right and burden thus created andimposed will pass with the lands to all subsequent grantees.

Real Property Law > Deeds > Covenants of Title[HN7] In construing reservations or exceptions in deeds, the courts endeavor, if possible, to ascertain the intention ofthe parties, particularly of the grantor, from the language of the deed, and to give that intention effect if it does not

Page 2101 Ariz. 101, *; 416 P.2d 425, **;

1966 Ariz. LEXIS 284, ***1

contravene any rule of law.

Real Property Law > Estates > General Overview[HN8] It cannot be questioned that the grantor, being the owner of the fee, before giving his deed has a right to go andcome as he will, using any part or all of the land for such purpose, and to invite, authorize, or grant permission, expressor implied to anyone to transverse the land as he saw fit, or to exclude therefrom anyone entering thereon unlawfully.Such right the grantors never parted with, never conveyed, but by the reservation, retained.

COUNSEL: Lewis, Roca, Scoville, Beauchamp & Linton, John P. Frank, Walter Cheifetz, Phoenix, for appellants.

Hughes & Hughes, John C. Hughes, Hess Seaman, Renz L. Jennings, Phoenix, for appellees.

JUDGES: In Banc. McFarland, Justice. Struckmeyer, C. J., Bernstein, V. C. J., and Udall, J., concur.NOTE: JusticeLORNA E. LOCKWOOD did not participate in the determination of this appeal.

OPINION BY: McFARLAND

OPINION

[*102] [**426] Pursuant to Rule 47(b), Rules of the Supreme Court, 17 A.R.S., and A.R.S. § 12-120.24, wegranted a petition to review the decision of the Court of Appeals reported in 1 Ariz.App. 424, 403 P.2d 828, whichreversed a decision of the trial court in which the defendants, appellees, J. M. Smith and Winnie E. Smith, husband andwife, and Dale D. Smith and Barbara M. Smith, husband and wife, hereinafter referred to as the Smiths, recoveredjudgment against the plaintiffs, appellants herein, Phoenix Title and Trust Company, a corporation; Marvin Lustiger andThelma Lustiger, husband and wife; Henry Steinberg; Lake Mead Land and Water Co., a corporation, [***2] whobrought suit to quiet title to some 40,000 acres of land in Mohave County, Arizona.

The questions presented call for an interpretation of the provisions of an agreement of sale and escrow instructionsand accompanying deed which provided for reservation of "range-use rights" by the defendant-sellers.

In the trial there was submitted to the jury an interrogatory which was answered by the jury in favor of thedefendants. 1 The court, in an opinion, set forth the historical background and facts in regard to the land development inMohave County. 2 The material facts set forth in the opinion, based on the record and on matters of which the courtcould take judicial knowledge, were incorporated in the findings of facts by the court which adopted the findings of thejury in answer to the interrogatory and which, together with conclusions of law, formed the basis for the judgment of thecourt.

1 The question presented to the jury:

"Under the evidence, was the use of the words 'range use rights' by the defendants when they sold the landin question to Southwestern Realty Company sufficiently definite and certain to inform subsequent purchasersthereof that they could not fence, improve or occupy such lands, but were merely given the right to exchangethem for lands owned by the United States Government?

(Write an Answer 'Yes' or 'No.')

Answer -- Yes."

[***3]2 The late Charles Elmer, in his opinion and order for judgment, set forth ably the historical background ofland development in the west.

Page 3101 Ariz. 101, *; 416 P.2d 425, **;

1966 Ariz. LEXIS 284, ***1

The history and background of the range and land title situation in northern Arizona give a better understanding ofthe transaction in the instant case.

The building of railroads linking California and other territories with the eastern part of the United States wasnecessary in the development of the west. The railroad builders sought a grant from the Congress of the United Statesfor right-of-way for railroad tracks, station grounds, etc., over the federal lands. They also sought from Congress, toassist them [*103] [**427] in this promotion, a gift-in-aid of the construction which resulted in the Acts of 1860which provided for land grants and grants for railroad rights-of-way. The Atlantic and Pacific Railroad Company, apredecessor of A. T. & S. F. Ry. Co., was granted the ownership in Arizona of each and every odd numbered section offederal lands within forty miles of the center of the line of the railroad, provided they were non-mineral [***4] incharacter and had not been previously sold or occupied.

In Mohave County, for many years known primarily as a mining and livestock producing area, the ranches werecomposed of lands in various categories of ownership. A stockman might own a homestead of 160 acres, or an enlargedhomestead of 320 acres -- or even a grazing homestead of 640 acres. He would then lease school and other landsincluded in his range which was owned by the state, mostly Sections 2, 16, 32 and 36 in each township and then the oddsections from the railroad which it had acquired in the railroad grant. The remainder of his range would then consist oflands still owned by the federal government, generally referred to as the public domain.

Conflict arose among the stockmen. Lands were over-grazed and this resulted in the adoption by Congress of whatis known as the Taylor Grazing Act. Under the Taylor Grazing Act the "open range" disappeared. Each stockman wasgranted allotments of federal land which was based on factors including priority of use, ownership or control of baseproperties such a springs, watering places, and other improvements necessary for stock ranches, all of which were wellknown at [***5] the time of the transaction in the instant case.

J. M. Smith, commonly referred to as Jim Smith, a long-time Arizona cattleman, leased 45,000 acres, known as theDiamond Bar Ranch, a major portion of which is the subject of the instant suit, from Harry Handlery in 1951. TheSmiths entered into a contract to buy the ranch in 1956 from Handlery Hotels, Inc., which held title at that time. Theagreement for sale, dated August 1, 1956, was not signed until October 3, 1956. Prior to the October 3, 1956 date, oneGeorge L. Dobson, hereinafter referred to as Dobson, a California real estate speculator, entered into negotiations withthe Southwestern Realty Company, an Arizona corporation, for the purchase of a large parcel of land to be used forexchange purposes under U.S.C.A. § 315g of the Taylor Grazing Act of 1934. Under this provision, the holder of landmay apply to the United States government to trade or exchange land for other land located elsewhere in the state. It iscommon knowledge that many land exchanges have been effected in Arizona under this provision. Privately ownedlands, such as that included in the Diamond Bar Ranch, were exchanged for government lands. If [***6] the stockmanstill controlled the base property on which his grazing allotment was predicated, he would secure the grazing allotmenton the lands which were exchanged as part of his range. In this manner he would continue to enjoy the use thereofsubstantially as he had theretofore, except that he would be paying grazing fees to the federal government rather thanreal property taxes to the county and the state. In addition, he acquired the ownership of the federal lands for which theexchange was made.

Considerable areas of land in Maricopa County and central Arizona remained in ownership of the federalgovernment, and with the transformation of Arizona into an industrial state after World War II, this exchange of land, orlands, particularly in Maricopa County, became a very profitable business which, as stated in the lower court's opinion,lead to "speculation and development, ultimately leading to some abuses which evidently resulted in a refusal of theFederal Government to approve some of the exchanges offered."

O. C. Williams, a long-time friend of Jim Smith, acting for Southwestern Realty Company, entered into anagreement with the Smiths to purchase 40,000 of the 45,000 [***7] [*104] [**428] acres comprising the DiamondBar Ranch. The evidence is abundantly clear that the Smiths entered into this agreement with the expectation of beingable to graze their cattle on this land after transfer of the property. This was to be effectuated by a sale of only the

Page 4101 Ariz. 101, *102; 416 P.2d 425, **426;

1966 Ariz. LEXIS 284, ***3

"exchange rights"; i. e., the sale of only the right to exchange the 40,000 acres of land of the Diamond Bar Ranch inMohave County for government-owned land located elsewhere in Arizona. The Smiths did not include as part of thesale some 5,000 acres of the Diamond Bar Ranch on which were located waterholes, ranch buildings, etc., the baseproperties necessary to secure the grazing rights. [HN1] The Taylor Grazing Act permits a stockman who controls thebase properties of a range to secure the grazing allotment on federal land included in such range. The Smiths, havingretained their base properties, would have been able, by such a transaction, to secure the grazing allotments on the40,000 acres as part of their range. Thus, the Smiths could continue to graze cattle on the range of the Diamond BarRanch as they had done prior to the sale; otherwise the 40,000 acres of patented lands which were [***8] originallyrailroad grant lands, being the odd numbered sections which checkerboarded the Diamond Bar Ranch, if fenced and putto other use, would seriously damage the remainder of the ranch for grazing purposes.

The agreement between defendants and Williams was dated October 3, 1956. By agreement dated the same day,Williams sold this property to Dobson. This double transaction was entered into with the full knowledge of the Smiths,but Dobson did not learn that Southwestern Realty Company was other than a mere broker for the transaction until afternegotiations were well under way. No specific mention was made in any of the agreements, escrow instructions, ordeeds in either of the two transactions that the sale was to be of "exchange rights" only. The exchange was attemptedfor some three years, but the parties were unsuccessful. Dobson then transferred his interest in the 40,000 acres toothers, some of whom comprise the plaintiffs herein. Both the lower court and the Court of Appeals concluded thatdefendants, Williams and Dobson, intended the transaction to be a sale of "exchange rights" only. We are in accordwith this finding. The question thus remaining is whether [***9] the agreements and deeds embodied this intentsufficiently to put subsequent purchasers on notice. The agreement for sale between defendants and Williamscontained the following:

"The sellers herein reserve unto themselves, their heirs, executors, and assigns, all range use rights."

The warranty deed for the land which was the subject of the sale contained the following:"The grantors herein reserve unto themselves, their heirs, executors, and assigns, all range use rights."

In accordance with the agreement and understanding between the Smiths and O. C. Williams, acting for SouthwesternRealty Company, and Dobson and Williams, that the transaction was for "exchange rights only", Dobson continuednegotiations for making exchanges of the land for other government-owned lands in the state. He first encountereddifficulty, however, because of the reservation by the Smiths of "range-use rights." He therefore addressed a letter to thePhoenix Title and Trust Company, which letter resulted in the Smiths making a release of all their "range-use rights"insofar as they might affect the United States government upon acquisition of said lands by the government [***10] onan exchange. The release provided:

"That we, J. M. Smith and Winnie E. Smith, his wife, and Dale D. Smith and Barbara M. Smith, hiswife, sellers in that certain escrow numbered 541882, Phoenix Title and Trust Company and agreementdated 10/3/56 to Southwestern Realty, buyers of certain lands situated in Mohave County, Arizona, more[*105] [**429] particularly described in said agreement recorded in Docket 17, pages 109-114, recordsof said Mohave County, having reserved unto themselves, their heirs, executors and assigns all describedlands as against the United States Government."

It was then stated that the release was given for the purpose of facilitating an exchange and to guarantee to the UnitedStates government that all reservations were fully released. This release was filed and recorded at the request of theplaintiff, Phoenix Title and Trust Company, on January 22, 1959; however Dobson never completed the exchange. Therecord does not show the reason why the exchange was again denied by the Bureau of Land Management.

In a letter dated January 17, 1959, O. C. Williams wrote Dobson stating that the Smiths wanted to know if hewanted his money [***11] back; also, that he felt the deal was better than ever as the price of land was going up, andstating that if he wished out to please give him the first chance to raise the money.

Page 5101 Ariz. 101, *104; 416 P.2d 425, **428;

1966 Ariz. LEXIS 284, ***7

The Southwestern Realty Company thereafter on the 23rd day of September, 1959, entered into escrow instructionswith Phoenix Title and Trust Company, acting as trustee, and Dobson, which permitted the sale and conveyance ofthese lands to others, but subject still to the reservation of the "range use rights" to the defendants.

After making findings of fact and conclusions of law, the court entered the following judgment:

"IT IS FURTHER ORDERED, ADJUDGED AND DECREED:

1. That the use of the words, 'range-use-rights,' by the defendants when they sold the landshereinafter set out to Southwestern Realty Company and caused to be recorded the original contract andthe deed in the Office of the County Recorder of Mohave County, State of Arizona, was sufficientlydefinite and certain to inform subsequent purchasers thereof that they could not fence, improve oroccupy such lands, but were merely given the right to exchange them for lands owned by the UnitedStates Government.

"2. That the plaintiffs [***12] are the owners of the portions of real property as hereinafter set out:(The names of the plaintiffs and description of the property are set out)

"3. That the reservation of range-use-rights by the defendants is valid and the defendants are entitledthereunder to the full and exclusive use of the lands for grazing purposes.

"4. That the plaintiffs and counter-defendants are barred and forever estopped from having orclaiming any right or title to the above-described premises adverse to the reservation of the defendantsand counterclaimants in and to all range-use-rights, * * *."

In Assignment 1 the plaintiffs assign as error Paragraph 1 of the judgment and the court's findings of 7, 8 and 9, andconclusions of law 3 and 4, contending that the reservation of "all range-use rights" does not give the purchaser of realproperty merely the right to exchange lands for lands owned by the United States government and does not bar suchpurchasers from fencing, improving, or occupying such lands as adjudged in Paragraph 1 of the judgment. UnderAssignment 2, the plaintiffs contend that the court erred in Paragraphs 2, 3 and 4 of the judgment in holding that theproperty is subject [***13] to "range-use rights" and that the plaintiffs are estopped from having or claiming any rightor title to the premises adverse to the reservation of the defendants of all "range-use rights. "Findings 7, 8 and 9 setforth the purchase agreements, stating that the parties were aware that Williams was not buying the land for himself, butintended to resell it and that Williams contracted for the 40,000 acres for that one purpose. The findings of fact by thetrial court as to Williams stated it was: "* * * well understood by both of them, that is, that [*106] [**430] the barelegal title was to be used for exchange purposes only." The findings as to Dobson were that: "* * * Dobson wasinformed by Williams and fully understood that the primary purpose of the deal on the 40,000 acres of Jim Smith landwas a land exchange with the Federal Government." While the words, "exchange rights only" were not made a part ofthe written agreement, the transaction was well understood by the parties.

The question then presented is whether the words placed in the warranty deed of the Smiths, "The Grantors hereinreserve unto themselves, their heirs, executors and assigns, all range use rights [***14] in all of the property * * *"were sufficient notice of intention of the parties to bind subsequent purchasers and to provide the reservation intendedby the parties. According to the record of the case, there is no question but that the agreements as they affected theSmiths, Williams, dba Southwestern Realty Company, and Dobson, were for the conveyance of the exchange rights;however the plaintiffs contend that the reservation of the "range-use rights" is merely a license and, as such, does not infact have the meaning given to it by the trial court.

It is made plain that Dobson, who had experience as a builder, subdivider, and a buyer and seller of real estate, sawan opportunity to contract for these lands and exchange them for federal lands, thereby making a sizable profit. He

Page 6101 Ariz. 101, *105; 416 P.2d 425, **429;

1966 Ariz. LEXIS 284, ***11

admitted that he did not see the lands before he made a deposit on same which, of itself, indicates that his interest was insecuring the land for exchange purposes.

It is likewise apparent from the evidence that Williams, a real estate man who had been State Land Commissionerand was familiar with these exchanges, saw the opportunity to buy the lands and resell them at a profit to a third partyfor [***15] the purpose of making such an exchange. The release by the Smiths of their "range-use rights" in the eventof an exchange to the federal government was in itself evidence that this was the purpose of the transaction. That therehad been a great deal of profit made in such exchanges which made the transaction attractive is evidenced by thetestimony of Dobson when he said, in referring to the release of the "range-use rights" to the government in the event ofan exchange, "* * * but by this time it was too late because there had been a stink in the paper about these exchangesand they were very unpopular. * * *"

Summing up the transaction, the Smiths in their deed implemented by a supplemental release of their "range-userights" in the event of an exchange for United States government property, conveyed to the purchaser the right toexchange this land for other United States government owned land as permitted under the Taylor Grazing Act, and inorder to prevent any possibility of it being used for other purposes which would deprive them of their grazingprivileges, placed in the deed a reservation of their interest in the land for "all range-use rights." These terms are wellknown [***16] in Arizona to be the rights for the grazing of livestock on the lands.

We cannot agree with the plaintiff that the decision in Radke v. Union Pacific Railroad Company, 138 Colo. 189,334 P.2d 1077, is applicable to the instant case. In this case the reservation was exclusive right to prospect for coal andother minerals. The court went on the theory that this was a right to prospect and not a reservation in the land itself.

A grantor has the right to make a reservation of an interest in real property [A.R.S. § 33-432] while providing apresumption of passing fee simple title, permits a reservation of an interest by the words "* * * shall be deemed a feesimple if a lesser estate is not limited by express words or does not appear to have been granted, conveyed or devised byconstruction or operation of law."

The courts have recognized many types of reservations. Snoddy v. Bolen, 122 Mo. 479, [*107] [**431] 24 S.W.142, 25 S.W. 932, 24 L.R.A. 507 (minerals); Warner v. Patton (Tex.Civ.App.), 19 S.W.2d 1111 (oil and gas); Hicks v.Phillips, 146 Ky. 305, 142 S.W. 394, 47 L.R.A.,N.S., 878 (timber); Goodrich v. Burbank (Mass.), 12 Allen 459, 90Am.Dec. 161 (waters); Gay [***17] V. Walker (Maine), 36 Me. 54 (light and air easement).

In Council v. Sanderlin, 183 N.C. 253, 111 S.E. 365, 32 A.L.R. 1527, the court in interpreting and holding valid areservation in a deed which reserved to the grantors, their heirs and assigns, the right to hunt over the lands that mayremain uncleared and uncultivated, said:

"[HN2] The right of hunting or fowling on another's lands or water may be acquired by grant or leasefrom the owner, either with or without the soil and with such restrictions or limitations as the owner maysee fit to impose. This right, being a right of profit in the land, passes by grant or lease of the land,unless expressly reserved. Lee v. Mallard, 116 Ga. 18, 42 S.E. 372; Beckman v. Kreamer, 43 Ill. 447, 92Am.Dec. 146; Matthews v. Treat, 75 Me. 594.

* * *

"We understand the meaning of this conveyance to be a reservation of the right of hunting, the profit aprendre, to the grantors in fee simple as to such parts of the premises as remain 'uncleared anduncultivated,' and so long as they so remain, with power given the grantors to protect the game thereonagainst being hunted by any persons except the Southern Chemical Company, their executors, [***18]administrators, and assigns." 111 S.E. at 367, 32 A.L.R. at 1530.

Page 7101 Ariz. 101, *106; 416 P.2d 425, **430;

1966 Ariz. LEXIS 284, ***14

[HN3] A reservation is a right in favor of the grantor created out of or retained in the granted premises. Saunders v.Saunders, 373 Ill. 302, 26 N.E.2d 126, 129 A.L.R. 306. A grantor has the right to make a reservation of an interest inreal property. Grass has been held to be part of real property. Rogers v. Ft. Worth Poultry and Egg Co. (Tex.Civ.App.),185 S.W.2d 165; Hamilton v. Rock, 121 Mont. 245, 191 P.2d 663; Kiehl v. Holliday, 77 Mont. 451, 251 P. 527.

In the latter case the court said:

"The grass was a part of plaintiff's real property. Real property consists of '(1) Land; (2) That which isaffixed to land. * * *' Section 6667, R.C. 1921. 'A thing is deemed to be affixed to land when it isattached to it by roots, as in the case of trees, vines, or shrubs. * *' Id. 6669. 'Growing grass and treesand the fruit of them, called fructus naturales, are a part of the soil of which they are the natural growth.'Anderson's Law Dictionary, 'Fructus.'" 251 P. at 528.

The reservation of the "range-use rights" in the instant case involved growing grass, "fructus naturales" andtherefore the reservation [***19] of the "range-use rights" is a reservation of an interest in the realty. Plaintiffs contendthis reservation is repugnant with the conveyance and for that reason is invalid. They state it is their contention that thereservation totally swallows up the grant.

In passing upon this question, it is necessary that we determine just what the plaintiffs received when theypurchased the property. They received the legal title to the property with a reservation of the mineral rights and the"range-use rights." The release of the reservation to the "range-use rights" as against the federal government was madeand recorded before the deeds of conveyance to the plaintiffs. Therefore, they had notice at the time of the purchasethat they could use these lands for exchange purposes for federally owned lands which Dobson admitted was theprimary purpose of the transaction. They could also use the lands for any purpose which was not inconsistent with, andwhich would not destroy, the "range-use rights." Some of the witnesses testified as to exceptions of hunting, fishing,and recreation under the Taylor Grazing Act. In the instant case, plaintiffs could use the land for any of these purposes[***20] if such use would not destroy or damage the "range-use rights."

[*108] [**432] While the value of this use alone might be far less than the purchase price, it is well known thatin some locations such rights are sold. However, we are not concerned with the value of the lands. Plaintiffs point outthat the Smiths bought the property for $ 150,000; that Williams bought it for $ 200,000; and that Dobson paid $250,000.

The trial court in its opinion stated: "* * * I feel we have no right in this case to question the propriety or fairness ofthis transaction. * * *" We agree with this statement. The whole record of this case indicates that both Williams andDobson were making the purchase for speculation to sell it to others for a profit, the primary purpose being theexchange rights. It is not for this court to say that because the transaction might have turned out to be nonprofitable,definite "range-use rights" reserved in the deed should be held to be invalid. Plaintiffs cite the case of Word v.Kuykendall (Tex.Civ.App.), 246 S.W. 757, as supporting their position. The deed in that case provided:

"'It being further provided and conditioned that the grantors [***21] reserve and retain the right to theuse and possession of said acreage property for pasturage purposes until the said grantee, his heirs orassigns, shall inclose the same by a good and substantial fence.'" 246 S.W. at 758.

The court, in holding this reservation to be valid, stated:[HN4] "It is perfectly legal for parties to contract and place in their deeds certain reservations or

exceptions for the use and possession of the conveyed premises as a part of the consideration thereof tobe enjoyed by the grantor, his heirs and assigns, for a stated period of time. This is done constantly, andthe books are full of such illustrations, supporting them. * * *" 246 S.W. at 759.

Page 8101 Ariz. 101, *107; 416 P.2d 425, **431;

1966 Ariz. LEXIS 284, ***18

The time limit for pasturage properties in Word v. Kuykendall, supra, was until the lands were fenced. The timelimit of the "range-use rights" in the instant case is until the lands are transferred to the federal government. There canbe no question but that the plaintiffs were put on notice by the reservation of "range-use rights" and that the Smiths werereserving the "range-use rights" on this land to preserve their cattle ranch. Plaintiffs had constructive notice of thisreservation. Defendants [***22] were using the lands for grazing purposes at the time plaintiffs made their purchase.

In Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 296 P. 260, the court said:

"* * * Practically all the authorities give assent to the proposition that [HN5] the purchaser ormortgagee of land in possession of an occupant other than the holder of the record title is compelled toinquire of the occupant by what title he holds possession, or he will be held to have taken subject towhatever rights a proper inquiry would disclose the occupant had therein. * * *" 37 Ariz. at 577, 296P. at 261.

In the instant case, such an inquiry would have revealed to the purchaser, or purchasers, all the facts in regard tothe transactions, including the "exchange rights" and "range-use rights."

The facts in the other cases cited by the plaintiffs are different from those in the instant case. For example, in thecase of Etz v. Mamerow, 72 Ariz. 228, 233 P.2d 442, the case turns solely on the proposition that the plaintiff hadpleaded title by adverse possession; however the court rejected the title by adverse possession and granted aneasement. The court pointed out that evidence to support an easement would [***23] necessarily be different from thatto support title by adverse possession and that there had been no request made to the court to amend the pleadings toconform to the evidence, and reversed the case for this reason.

The plaintiffs state that the reservation of "range-use rights" is repugnant to the grant in that it totally swallows thegrant, stating that "the purchaser paid a quarter of a million dollars for exactly nothing." We cannot agree with thiscontention. Certainly neither Williams nor [*109] [**433] Dobson, when they bought the property, would haveagreed that the exchange rights were "exactly nothing." It is well known that exchanges are now possible with thefederal government. It is true that buyers may not be able to make the profit which was anticipated by Dobson, but aswe have said, we are not concerned with whether the parties make or lose money.

We have likewise pointed out that "range-use rights" are only exclusive to the extent that the use by the purchasersdoes not destroy or damage the "range-use rights" of the Smiths. Their possession is not total. In Etz v. Mamerow,supra, the court recognized the difference between an easement and an adverse [***24] possession. In the instant casethe use is not total. There is no question but that the lands, in accordance with the lower courts' findings, may now beused for exchange purposes and for any other purpose which does not destroy or damage "range-use rights" which werereserved by defendants. In the case of Coudert v. Sayre, 46 N.J.Eq. 386, 19 A. 190, the court said:

"* * * that [HN6] when it appears by the true construction of the terms of a grant that it was thewell-understood purpose of the parties to create or reserve a right, in the nature of a servitude oreasement, in the property granted, for the benefit of other land owned by the grantor, no matter in whatform such purpose may be expressed, whether it be in the form of a condition or covenant or reservationor exception, such right, if not against public policy, will be held to be appurtenant to the land of thegrantor, and binding on that conveyed to the grantee, and the right and burden thus created and imposedwill pass with the lands to all subsequent grantees: * * *" 19 A. at 193-194.

In the Coudert case, supra, reservation was made for the purpose of ensuring egress and ingress to other property. In the[***25] instant case the purpose of the reservation is not only to permit a continuation of grazing on this particularland, but to prevent fencing and other uses which, as testified to, would interfere with grazing on the remainder of theranch and thereby jeopardize its use for this purpose.

Page 9101 Ariz. 101, *108; 416 P.2d 425, **432;

1966 Ariz. LEXIS 284, ***21

In 23 Am.Jur.2d 307, it is stated:

"§ 273. Generally.

[HN7] In construing reservations or exceptions in deeds, the courts endeavor, if possible, toascertain the intention of the parties, particularly of the grantor, from the language of the deed, and togive that intention effect if it does not contravene any rule of law. * * *"

In the case of City of Missoula v. Mix, 123 Mont. 365, 214 P.2d 212, the court in holding valid a reservation for thepurpose of ingress and egress to certain adjoining property, said:

[HN8] "It cannot be questioned that the grantor, being the owner of the fee, before giving his deed had aright to go and come as he will, using any part or all of the land for such purpose, and to invite,authorize, or grant permission, express or implied to anyone to transverse the land as he saw fit, or toexclude therefrom anyone entering thereon unlawfully. Such right the [***26] grantors never partedwith, never conveyed, but by the reservation, retained. See Worcester v. Smith, 117 Me. 168, 103 A. 65.

"'The extent of a servitude is determined by the terms of the grant * * *.' Sec. 6754, R.C.M.1935.

* * *

"When it appears from the clear terms of a grant that it was the intent of the grantor to reserve a right, inthe nature of a servitude or easement, in the property granted, for the benefit of other land owned by thegrantor, no matter in what form such purpose may be expressed, whether it be a condition, or covenant,or reservation, or exception, such right, if not against public policy, will be held to be appurtenant to theland of the grantor, and binding on that conveyed to the grantee, and the right and burden thus createdand imposed will pass with the lands to all [*110] [**434] subsequent grantees. See 6 Thompson onReal Property, Par. 3505, p. 740; Coudert v. Sayre, 46 N.J.Eq. 386, 19 A. 190, and cases cited; 17Am.Jur., 'Easements,' sec. 29, p. 942; Knotts v. Summit Park Co., 146 Md. 234, 126 A. 280; Greenwalt v.McCardell, 178 Md. 132, 12 A.2d 522, 525." 214 P.2d at 216.

The reservation in the deed of the "range-use rights" [***27] is not ambiguous; the intention of the grantors, theSmiths, is ascertainable from the language of the deed which was so worded as to give any future buyers notice of theintent and purpose of this reservation.

We therefore hold that the reservation of "range-use rights" by the defendants, the Smiths, is valid; that they areentitled to the full and exclusive use of the lands for grazing purposes, and that plaintiffs, appellants herein, cannotfence or occupy the lands in such a way as to interfere with this right. The Smiths are entitled to relief as set forth in thejudgment of the lower court.

The decision of the Appellate Court is vacated. Judgment of the Superior Court is affirmed.

Page 10101 Ariz. 101, *109; 416 P.2d 425, **433;

1966 Ariz. LEXIS 284, ***25

5 of 42 DOCUMENTS

CautionAs of: Jul 14, 2014

DAVIS et al. v. KLEINDIENST

No. 4870

Supreme Court of Arizona

64 Ariz. 251; 169 P.2d 78; 1946 Ariz. LEXIS 139

May 20, 1946

PRIOR HISTORY: [***1] Appeal from Superior Court, Navajo County; W. E. Ferguson, Judge.

See also, 165 P.2d 995.

DISPOSITION: Judgment affirmed.

CASE SUMMARY:

PROCEDURAL POSTURE: Defendant subsequent purchasers appealed the decision of the Superior Court, NavajoCounty (Arizona), which found in favor of plaintiff purchaser in the action to reform the deed and quiet title to theproperty. The government had instituted a condemnation action that covered the disputed property and attempted tosettle with plaintiff.

OVERVIEW: After a series of conveyances from the original grantor, including the original warranty deed thatcontained an erroneous description of the property, the parties disputed title to the property. Shortly after the originalgrantor conveyed the land in controversy to defendant by quitclaim deed, the government instituted a condemnationaction. Although defendant withdrew his protest that might have interfered with plaintiff's settlement with thegovernment, defendant refused to sign a disclaimer or quitclaim for the described area. In affirming the lower court'sgrant of plaintiff's request to reform the deed and quiet title, the court found that the uncontradicted evidence establishedthat plaintiff's original purchase covered the ground in controversy and that the description in the deed was a mistake.The quitclaim deed to defendant recited a consideration of one dollar, which the court held would not be a valuableconsideration within the law relating to bona fide purchasers. Defendant failed to raise in the trial court the issue of thegrantor's lack of ownership of additional land contained in the deed.

Page 11

OUTCOME: The court affirmed the decision that granted plaintiff's request to reform the deed and quiet title to theproperty.

CORE TERMS: deed, notice, bona fide purchaser, purchaser, tract, acres, reformation, vendor, quitclaim deed,valuable consideration, grantor, recital, privity, assessor's, good faith, satisfactory, property line, warranty deed, thence,plat, subsequent purchasers, consideration paid, innocent purchaser, convincing, recited, degrees east, northeast corner,cement block, designated, northerly

LexisNexis(R) Headnotes

Civil Procedure > Appeals > Standards of Review > Substantial Evidence > General OverviewReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN1] The question as to whether a party is an innocent purchaser for value without notice is one of fact for the trialcourt. If there is any substantial evidence which would support the trial court's finding that the party is not an innocentpurchaser for value and without notice, the judgment must be sustained.

Evidence > Procedural Considerations > Burdens of Proof > Clear & Convincing ProofReal Property Law > Deeds > EnforceabilityReal Property Law > Title Quality > Adverse Claim Actions > General Overview[HN2] To warrant the reformation of an instrument, mere preponderance of the evidence is insufficient. The mistakeurged as a ground for reformation must be established by evidence that is clear, convincing, and satisfactory.

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN3] Where the controversial question is whether a party was an innocent purchaser for value and without notice,the question is to be determined under the ordinary rule, by a preponderance of the testimony.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Deeds > Types > WarrantyReal Property Law > Deeds > Enforceability[HN4] To constitute a grantee a bona fide purchaser as against outstanding equities or a prior conveyance, of which hehad no notice, his deed must be supported by a consideration, within the meaning of that term as hereinafter defined.Therefore one who takes title as a mere volunteer is not entitled to protection as a bona fide purchaser for value, andthis is true, although the prior conveyance was also voluntary.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Deeds > Types > Quit Claim DeedsReal Property Law > Deeds > Types > Warranty[HN5] The consideration of one dollar will not be a valuable consideration within the law relating to bona fidepurchasers.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Priorities & Recording > Bona Fide PurchasersReal Property Law > Title Quality > Adverse Claim Actions > Quiet Title Actions[HN6] A person who fails to exercise due diligence to avail himself of information which is within his reach is not abona fide purchaser. Thus, a purchaser who has brought to his attention circumstances which should have put him on

Page 1264 Ariz. 251, *; 169 P.2d 78, **;

1946 Ariz. LEXIS 139, ***1

inquiry which if pursued with due diligence would have led to knowledge of an adverse interest in the property, is not abona fide purchaser.

Contracts Law > Breach > Causes of Action > General OverviewContracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN7] Privity exists where successive relationship or ownership to the same property from a common source appears.One who is in privity, unless he be a bona fide purchaser for value without notice, takes the property subject toburdens existing against it and, in effect, stands in the shoes of his predecessor in title.

Civil Procedure > Appeals > Reviewability > Preservation for Review[HN8] A question or issue not raised in the trial court will not be considered on appeal.

COUNSEL: P. H. Brooks, of Winslow, for appellants.

C. D. McCauley, of Winslow, and Moeur & Moeur and Charles N. Walters, all of Phoenix, for appellee.

JUDGES: Morgan, Judge. Stanford, C. J., and LaPrade, J., concurring.

OPINION BY: MORGAN

OPINION

[*253] [**79] Appellee, as plaintiff, instituted this action against appellants, defendants in the court below, forreformation of deed and to quiet title to a tract of ground in the city of Winslow. Defendants resisted the action on theground that they were subsequent purchasers without notice and for a valuable consideration. They denied theallegations pertaining to plaintiff's right to quiet title. Defendant Edna Davis is a party by reason of her maritalrelationship to her husband. The parties will be designated as plaintiff and defendant. The facts proven at the trial maybe stated as follows:

During the year 1924 plaintiff purchased from one John K. and Frances E. Kelley, through their attorney in factJohn L. Sweeney, a tract of ground containing approximately [*254] 15 acres. The deed contained the following[***2] description: "Beginning at the fence at the Northwest corner of the Bazell Motor Company Camp Grounds,Thence in a due Northerly direction to the North Line of the John K. Kelley property, thence Westerly along the John K.Kelley property line to the J. E. Kleindienst property line, thence in a South and slightly Easterly direction along the J.E. Kleindienst property line to a point just West of point of beginning, thence due East to point of beginning, beingunplatted acreage and a portion of the South East Quarter of Section 24, Township 19 North of Range 15 East,G&SRM, Winslow, Navajo County, Arizona."

Through error, the first course or eastern boundary was described as running "in a due northerly direction".Actually this line should have been described as running north 27 degrees east approximately. The deed, on its face,contained only 5.7 acres of the westerly portion of the tract which plaintiff was purchasing. The error resulted from thefact that while the platted portion of Winslow and additions thereto, other than the Mahoney addition, disclose thestreets as running north 27 degrees east, they are generally referred to as [**80] northerly and southerly. At the [***3]time of the purchase, a survey was made and an iron stake was placed in the ground at the northeast corner of the tract,establishing the eastern line as running from the point of beginning north 27 degrees east to the north line of the John K.Kelley property, and including approximately 15 acres.

No improvements were placed on the property nor was it enclosed. Taxes on the 15 acres were assessed to plaintiffand paid by him from and after the year 1925. The description in the assessor's office merely read "Unpl Hicks-W.

Page 1364 Ariz. 251, *; 169 P.2d 78, **;

1946 Ariz. LEXIS 139, ***1

Bazell C. G. 15 A," and later was carried as "15 A." In 1942, plaintiff hired an engineer who platted and subdivided theacreage. The iron pipe at the northeast corner was found and a cement block or marker placed at such corner. The platso prepared was filed and accepted by the city council on June 2, 1942. It was not filed with the county recorder untilFebruary 24, 1944. It apparently was submitted to the county assessor who designated the same as platted land of theplaintiff's addition on the assessor's map. The time of this submission is not shown. At the date of the trial the cementblock had been removed.

By quitclaim deed dated November 13, 1943, [***4] Frances E. Kelley quitclaimed to defendant "For and inconsideration of the sum of One Dollar * * * All the unplatted acreage in the south-east quarter of section twenty-four(24), township Nineteen (19) North of Range Fifteen (15) East, Gila and Salt River Meredian, Winslow, NavajoCounty, Arizona, * * *." By warranty deed April 6, 1945, the same grantor conveyed to defendant Ralph Davis bymetes and bounds, for a recited consideration as follows: "For and in consideration [*255] of other valuableconsideration and One Thousand Dollars" approximately 22 acres. This covered and included the 9.1 acres incontroversy. The evidence also disclosed that the Kelleys, the original grantors, from and after 1924 continued to paytaxes on the land in controversy.

Shortly after defendant received the quitclaim deed above mentioned, the United States Government instituted acondemnation action in the Federal court for the purpose of procuring title to the land for a housing project. This actioncovered the disputed area as well as other lands of the parties in the area involved. The government tendered the pricein court. To obtain release of the money being held, defendant on December [***5] 24, 1944, apparently at the requestof plaintiff, wrote the following letter to Mr. Carson, the government attorney:

"Any protest that I have previously made and which interferes with the settlement between J. E. Kleindienst and theUnited States Government concerning project No. 2301 is hereby withdrawn.

"The property line as set forth on the map prepared by Yost and Gardner is acceptable by me and I agree that I haveno claim to the property designated within the boundaries on the plat recorded in the County Assessors Office inHolbrook, Arizona."

Defendant, however, refused to sign a disclaimer or quitclaim for the described area, which was thereafter preparedby the government.

Before purchasing the land from Mrs. Kelley in 1943, defendant examined the records and plat in the assessor'soffice. His testimony is that from these records and from actual observation he had no notice of plaintiff's claim to thearea in question.

It appears conclusively from the evidence that a mistake was made in drawing up the original warranty deed fromthe Kelleys to the plaintiff, and that it should have included the ground claimed by plaintiff in his complaint. It alsoappears that on or [***6] prior to December 24, 1944, the Yost and Gardner map mentioned in the letter of RalphDavis to Mr. Carson described the eastern line of the tract as claimed by plaintiff. It is also shown by the evidence thatabout the time (probably shortly after) Mr. Davis had procured the quitclaim deed, he was fully advised by Mr.Sweeney as to the ground which plaintiff had purchased in 1924.

The case was tried to the court without a jury. It found the issues in favor of plaintiff and directed reformation ofthe deed as prayed by plaintiff. From the [**81] judgment entered, defendant has brought this appeal.

Defendant supports his various assignments of error by the following propositions of law which for the sake ofbrevity we paraphrase:

[*256] 1. Plaintiff's deed could not be corrected by including additional land which defendant had purchased forvalue and without knowledge of mistake;

Page 1464 Ariz. 251, *254; 169 P.2d 78, **80;

1946 Ariz. LEXIS 139, ***3

2. Defendant was not a party to the original deed. His interest attached to the land long after the mistake was madeand the deed recorded. Therefore, parol or extrinsic evidence is not admissible to change the description contained inthe recorded instrument;

3. Plaintiff wholly failed to [***7] prove open and notorious possession for the statutory period.

The fourth assignment of error, which we think fails to raise questions that we can properly consider, will bereferred to later.

Plaintiff concedes that defendant's first proposition correctly states the law, but takes the position that under thefacts, the court properly found that defendant was not a purchaser for value and without knowledge of the mistake in theprior deed under which plaintiff claims the property.

Obviously, [HN1] the question as to whether defendant was an innocent purchaser for value without notice was,under the issues, one of fact for the trial court. If there is any substantial evidence which would support the trial court'sfinding that defendant was not an innocent purchaser for value and without notice, the judgment would have to besustained. Stewart v. Damron, Ariz., 160 P.2d 321; Atchison, T. P. & S. F. R. Co. v. Hicks, Ariz., 165 P.2d 167.

It appears to be the rule that [HN2] to warrant the reformation of an instrument, mere preponderance of theevidence is insufficient. The mistake urged as a ground for reformation must be established by evidence that is clear,convincing and satisfactory. Gingery [***8] v. Romeris, 24 Ariz. 267, 208 P. 1024; Northwestern Nat. Ins. Co. v.Chambers, 24 Ariz. 86, 206 P. 1081. Inasmuch as both plaintiff and the attorney in fact for the sellers, the Kelleys,testified that plaintiff's original purchase covered the ground in controversy, and that the description in the deed was amistake, and this was uncontradicted, there can be no question that a full compliance was made with the rule. Theevidence was clear, convincing and satisfactory.

[HN3] The controversial question in the case was whether defendant was an innocent purchaser for value andwithout notice. This question is to be determined under the ordinary rule -- by a preponderance of the testimony. 66C.J. 1201, sec. 1065, Vendor and Purchaser. The evidence as to this need not be clear, convincing and satisfactory. If,therefore, there is any reasonable evidence to justify the court in finding that the defendant purchased with notice, orwas not a purchaser for value, then the judgment must be sustained.

The testimony adduced by both of the parties, except as to matters upon which [*257] as we have already statedthere seems to be no controversy, was somewhat meagre and left many matters in [***9] doubt which might have beenshown by an examination of the witnesses. Defendant argues at considerable length that the evidence adduced on thepart of the plaintiff was wholly insufficient to justify the court in finding that he was not a purchaser in good faith andfor value and without notice. If the testimony in this case disclosed that in 1943, the defendant at the time he receivedthe quitclaim deed paid a valuable consideration, this argument would at least require us to carefully examine all theevidence to determine whether the court's judgment could be justified. We have gone carefully into the evidence, anddo not find any testimony as to the purchase price paid by defendant either at the time the quitclaim deed was given in1943, or in 1945 at the time the warranty deed was given to him by Mrs. Kelley, except such as appears in the recitals inthe instruments. Unless defendant was a bona fide purchaser, he stood in exactly the same situation as the originalgrantors of plaintiff. 66 C.J. 1104, sec. 923, Vendor and Purchaser: [HN4] [**82] "To constitute a grantee a bonafide purchaser as against outstanding equities or a prior conveyance, of which he had no notice, his [***10] deed mustbe supported by a consideration, within the meaning of that term as hereinafter defined. Therefore one who takes titleas a mere volunteer is not entitled to protection as a bona fide purchaser for value, and this is true, although the priorconveyance was also voluntary."

This is also the effect of Phoenix Title, etc., Co. v. Old Dominion Co., 31 Ariz. 324, 253 P. 435, 59 A.L.R. 625, inconstruing section 71-423, ACA 1939, relating to subsequent purchases without valuable consideration. 53 C.J. 980,sec. 125, Reformation of Instruments.

Page 1564 Ariz. 251, *256; 169 P.2d 78, **81;

1946 Ariz. LEXIS 139, ***6

When plaintiff, therefore, adduced his proof showing a mistake, the burden was imposed upon the defendant toshow that he was a bona fide purchaser for value and without notice. 66 C.J. 1197, sec. 1063, Vendor and Purchaser.In such case the recitals in the deeds as to consideration would be no evidence as to the consideration paid. 66 C.J.1108, sec. 933; 1204, Sec. 1067, Id. Even if the recited considerations in the instruments are to be considered, thiswould scarcely be helpful to defendant. [HN5] The quitclaim deed recites a consideration of one dollar. This would notbe a valuable consideration within the law relating to bona fide [***11] purchasers. The second or warranty deedreceived by defendant, which recites a consideration of $ 1,000, was not executed or delivered until 1945 and long after,from all the evidence, defendant had full knowledge and notice of plaintiff's claim to the property.

We call attention to the case of Adams Oil & Gas Co. v. Hudson, 55 Okl. 386, 155 P. 220, 222. In that case thedefendant, a subsequent purchaser, claimed to be a bona fide purchaser. The deed recited [*258] a consideration of$ 10,000. It offered no other evidence except the recital in the deed as to the consideration paid. The court held this tobe insufficient. We quote from the opinion: "This being true, what constitutes a bona fide purchase? Three thingsmust exist: (a) A purchase in good faith; (b) for value; and (c) without notice. Where a subsequent purchaserestablishes a purchase for value, good faith and lack of notice are presumed, and the burden shifts to the partyattacking the transfer to show bad faith and notice, actual or constructive. The recital in a deed that the considerationhas been paid is prima facie evidence as between the parties and those claiming under them, but as to strangers and[***12] persons claiming in opposition the recital is no evidence as to the consideration paid. To them it is merehearsay, and is no evidence of a purchase for value. (Citing cases). There is no proof in the record, as against theplaintiffs, even tending to show that the defendant company purchased for value. In the absence of such proof, goodfaith cannot be presumed. Indeed, the defendant company might be termed a bad-faith purchaser. At least it cannot besaid to be a bona fide purchaser, and is therefore not entitled to the benefits thereof. The defendant company and itsgrantor, Adams, knew what consideration, if any, actually passed for this property. Adams and the officers of thedefendant company, and some of its directors, testified as witnesses for the defendant company, but it did not see properto advise the court what consideration, if any was actually paid. If, as a matter of fact, any consideration was paid, thenature, amount of it, and the facts with reference thereto were within the breasts of Adams and the officers and directorsof the defendant company. It was the company's duty to advise the court fully with reference to these matters. This itfailed to do, [***13] and, in the absence of a showing that it is a purchaser for value, it has no right to invoke the aid ofa court of equity. Its hands are not clean. A bona fide purchaser is favored by the courts, but until one brings himselfwithin the rule of a bona fide purchaser a court of equity will not extend its aid. We therefore conclude that thedefendant company was not a bona fide purchaser. * * *"

Since the record fails to show that defendant was a purchaser for value, upon that ground alone the judgment of thecourt would have to be sustained. However, we have made an examination of the testimony pertaining to questions of[**83] notice. Taking all the facts and circumstances into consideration, it is our view that the court's finding that thedefendant did have notice of plaintiff's claims would have to be sustained. The law seems to be settled that [HN6] aperson who fails to exercise due diligence to avail himself of information which is within his reach is not a bona fidepurchaser. University of Richmond v. Stone, 148 Va. 686, 139 S.E. 257. Thus a purchaser who has brought to hisattention circumstances which should have put him on inquiry which if pursued with due [*259] [***14] diligencewould have led to knowledge of an adverse interest in the property, is not a bona fide purchaser. Shephard v. VanDoren, 40 N.M. 380, 60 P.2d 635.

The evidence disclosed numerous acts of obvious ownership of the tract in question on the part of plaintiff. Theplatting and filing of the plat with the city council, the marking of the northeast corner of the tract with a cement block,the fact that the tract as purchased would square out plaintiff's original addition, the assessment of 15 acres out of theHicks addition to the plaintiff, were all matters which at least were sufficient to put the defendant upon notice to makean inquiry. Any reasonable inquiry would have resulted in the disclosure that plaintiff claimed the tract in question.

What we have already said disposes in large part of the defendant's second proposition. As we have heretoforestated, reformation may be had against the original vendor and those in privity with him. The defendant was in privitywith the original vendors. He holds title from one of them. It is of course settled that privity exists between two

Page 1664 Ariz. 251, *257; 169 P.2d 78, **82;

1946 Ariz. LEXIS 139, ***10

successive holders when the latter takes under the earlier by grant. Sherin v. Brackett, [***15] 36 Minn. 152, 30 N.W.551. It may be said that [HN7] privity exists where successive relationship or ownership to the same property from acommon source appears. Green v. Wahl, 117 Okl. 292, 246 P. 419. One who is in privity, unless he be a bona fidepurchaser for value without notice, takes the property subject to burdens existing against it and, in effect, stands in theshoes of his predecessor in title. Boughton v. Van Valkenburgh, 46 App.Div. 352, 61 N.Y.S. 574. The defendant was nota stranger, and was therefore subject to the same claims which might have been presented against the Kelleys.

We think it necessary to determine whether the proof of peaceable and adverse possession on the part of plaintiffwas sufficient to justify the entry of the judgment. Apparently the judgment of the lower court was entered upon thetheory that defendant was not a bona fide purchaser for value without notice, and therefore the deed could be reformedand judgment entered against him in the same manner as if the original vendors were the parties defendant. Under thesecircumstances, the question of whether plaintiff proved a case justifying a judgment under the ten-year statute oflimitations would [***16] not be material. As between the plaintiff and defendant, the former would be entitled to ajudgment of reformation and quieting title.

Defendant's fourth ground is that the court erred in correcting the mistake contained in the deed to includeadditional land because such additional land was never owned by the grantors who executed the deed. Apparently thisproposition is predicated upon the testimony of the county treasurer at the trial, to the following effect: "I found inchecking records that [*260] there was a deed from the Hicks estate to Frances E. Kelley in 1930, transferringtwenty-two acres. That twenty-two acres has been carried right along." The case was tried upon the theory that John K.and Frances E. Kelley, as husband and wife, owned the property in 1924. No issue was made by the defendant that theywere not the owners, nor was any issue made by the plaintiff that Frances E. Kelley succeeded to the rights of herhusband John K. Kelley. For aught we know, the deed from the Hicks estate, mentioned in the Peterson testimony, mayhave been a formality to clear the title. In any event, no issue was made upon this question before the trial court. Wecannot now [***17] entertain it.

It is well settled that [HN8] a question or issue not raised in the trial court will not be considered on appeal. J. H.Mulrein [**84] Plumbing Supply Co. v. Walsh, 26 Ariz. 152, 222 P. 1046; City of Glendale v. Coquat, 46 Ariz. 478, 52P.2d 1178, 102 A.L.R. 837; Hallenbeck v. Yuma County, 61 Ariz. 160, 145 P.2d 837; Stephens v. Thomasson, Ariz., 160P.2d 338. Since the deed mentioned by the treasurer was not put in evidence, nor any facts shown which would disclosethat the Kelleys were not the owners of the property at the time of the original purchase by plaintiff from them, it isobvious that there were insufficient facts to determine the issue now made. The case does not come within the ruling ofthis court in Regan v. First Nat. Bank, 55 Ariz. 320, 101 P.2d 214.

While the record in many respects is not satisfactory, we cannot say that the lower court committed reversible error.The judgment is affirmed.

Page 1764 Ariz. 251, *259; 169 P.2d 78, **83;

1946 Ariz. LEXIS 139, ***14

6 of 42 DOCUMENTS

CautionAs of: Jul 14, 2014

ROY & TITCOMB, INCORPORATED, a Corporation, Appellant, v. D. N. VILLA,Appellee.

Civil No. 2960.

Supreme Court of Arizona

37 Ariz. 574; 296 P. 260; 1931 Ariz. LEXIS 298

February 24, 1931, Filed.

PRIOR HISTORY: [***1] APPEAL from a judgment of the Superior Court of the County of Maricopa. DudleyW. Windes, Judge. Judgment affirmed.

CASE SUMMARY:

PROCEDURAL POSTURE: Defendant corporation appealed the decision of the Superior Court of the County ofMaricopa (Arizona), which entered judgment in favor of plaintiff homeowner on her action to establish her title tocertain real estate and to cancel a mortgage on the property held by the corporation. The homeowner's daughter-in-law,individually and as executrix of her husband's estate, was also named as defendant but was not party to the instantappeal.

OVERVIEW: The homeowner, a citizen of Mexico, purchased a house and lot. Title to the property was taken in thename of the homeowner's son. The homeowner made all payments on the property and a deed conveying the premiseswas delivered to her son. Unbeknownst to the homeowner, the son and his wife executed a mortgage on the property tothe corporation to secure a promissory note for an outstanding debt. The corporation was informed that the homeownerlived there rent free. The son did not inform the corporation that the homeowner claimed the property. After the son'sdeath, the homeowner filed her action seeking title to the property and to cancel the mortgage. In a bench trial, the trialcourt issued a judgment for the homeowner against both the corporation and the daughter-in-law. On appeal, thecorporation contended that the judgment was in error because the corporation had no actual or constructive notice thatthe homeowner owned or claimed the property. The court held that it was the corporation's duty in accepting a mortgageon a property that was occupied by a person other than the purported mortgagor to determine what the occupant'sinterest in the property was.

Page 18

OUTCOME: The court affirmed the trial court's judgment.

CORE TERMS: notice, mortgage, occupant, constructive notice, occupancy, possession of land, undisputed,purchaser, ascertain, disclose, actual knowledge, immaterial, equitable, acquiring, purchase price, county recorder,installment, executrix, recorded, vendor, lived

LexisNexis(R) Headnotes

Real Property Law > Estates > General OverviewReal Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's InterestsReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN1] The purchaser or mortgagee of land in possession of an occupant other than the holder of the record title iscompelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject towhatever rights a proper inquiry would disclose the occupant had therein. Actual possession of land is such notice toall the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title or a lienon the land to ascertain the nature of the right that the occupant has in the premises.

Real Property Law > Estates > General Overview[HN2] The possession of land is notice to the world of every title under which the occupant claims it, unless he has puta title on record inconsistent with his possession. When an individual is in possession under no recorded title, hispossession is notice of every title which he can set up to protect himself, sufficient at least to put a purchaser oninquiry.

Real Property Law > Ownership & Transfer > Equitable Interests[HN3] One in possession under an equitable title has nothing that he can record; and possession, open andunconcealed, is the only mode by which he can give notice to the world of his rights; and when this notice is given, inthe only way in which it could be given, he should be protected.

Real Property Law > Estates > General OverviewReal Property Law > Nonmortgage Liens > Judgment Liens[HN4] Actual possession of land is such notice to all the world or to anyone having knowledge of such possession aswill put upon inquiry those acquiring title to or a lien on the land to ascertain the nature of the rights the occupantreally has in the premises. One who acquires title to or a judgment lien on land with constructive notice of the actualpossession and occupancy of the land by one other than the vendor or judgment debtor takes subject to such rights asproper inquiry will disclose the occupant of the land actually has therein. Possession, in order to be constructivenotice of a claim of title to the land occupied, must be open, visible, and exclusive; and such occupancy may be shownby any use of the land that indicates an intention to appropriate it for the benefit of the possessor.

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN5] It is a purchaser's duty to know who was in possession of the property before making the purchase, and hispurchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden ofmaking the proper inquiry is cast upon him by the mere fact of actual possession on the part of a person other than therecord holder. If it were allowed that, by failing to acquaint himself with the fact of possession on the part of anotherthan the vendor, the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on thesubject, and thereby evade the rule and its consequences entirely.

Page 1937 Ariz. 574, *; 296 P. 260, **;

1931 Ariz. LEXIS 298, ***1

COUNSEL: Messrs. Hardy & Hardy, for Appellant.

Mr. R. H. Brumback and Mr. E. B. Goodwin, for Appellee.

OPINION BY: McALISTER

OPINION

[*575] [**260] McALISTER, C. J. This is an action by D. N. Villa against Catalina Villa, Catalina Villa asexecutrix of the estate of Lorenzo Villa, deceased, and Roy & Titcomb, Incorporated, praying for a decree establishingher title to certain real estate in Phoenix, Arizona, and canceling a mortgage thereon executed by Lorenzo Villa andCatalina Villa, his wife, to Roy & Titcomb, Incorporated.

The facts in the case are undisputed and may be briefly stated. In June, 1911, the plaintiff purchased a house andlot in the City of Phoenix from the O'Malley Lumber Company for $980 to be paid in monthly installments. Her son,Lorenzo Villa, advised her that she could not take or hold title to this property in her own name because she was not acitizen of the United States and believing this to be true, she, through and in his name, entered into a contract with theO'Malley Lumber Company for the purchase of said property and on that day [***2] made in the same way the initialpayment of $20 on the purchase price. Immediately thereafter she went into possession of the premises, has livedthereon continuously from that date and out of her own funds, made by running a boarding-house, paid the full amountof the purchase price therefor, the last installment thereof having been made on December 18, 1919. At that time theO'Malley Lumber Company executed and delivered to her a deed conveying said premises, but her son, Lorenzo Villa,was named therein as grantee, though it was understood by those concerned that he was merely taking the title in trustfor her. Since her occupancy began she has been in actual, open, undisputed and exclusive possession and she paid alltaxes levied against it. On December 6, 1921, however, without her knowledge or consent and contrary to his trust, herson, Lorenzo Villa, together with his wife, Catalina Villa, executed [*576] a mortgage on said premises to Roy &Titcomb, Incorporated, for $600 as security for their promissory note of the same date. This mortgage was recorded inthe office of the county recorder of Maricopa county on December 12, 1921, but plaintiff had no actual knowledge[***3] of its execution until a short while before she filed this action in July, 1928.

The mortgage was given in payment of a past due account and before accepting it Roy & Titcomb, Incorporated,verified the statement of Lorenzo Villa that the property was free of debt by writing the county recorder of Maricopacounty who replied saying that there were no liens or mortgages against it. Lorenzo, who did not live in Phoenix after1913, told defendant at the time that he was maintaining the property but that his mother was living in the house, andthat he was charging her no rent, and that she could have it for a home as long as she lived though he did not informdefendant, and it had no actual notice of the fact, that she claimed the property.

The case was heard by the court without the aid of a jury and at the close of the evidence judgment was renderedagainst Catalina Villa individually and as executrix. Some weeks later the same order was made against Roy &Titcomb, Incorporated, and it has brought the matter here seeking a reversal of the judgment against it.

The only error assigned is that the judgment is contrary to the law and the evidence. Appellant's position is that theevidence [***4] discloses that when it accepted the note and mortgage of Lorenzo Villa and wife it had no noticewhatever, either actual or constructive, that appellee owned or claimed the property and, therefore, it was justified indealing with him upon the theory that he was the owner of both the equitable and legal title. This contention isundoubtedly correct if it be true that appellant took [*577] the mortgage in good faith for value without notice ofappellee's interest. The latter, however, took the position that under the facts appellant was not a purchaser withoutnotice, though she did not contend that it had actual knowledge of her ownership; merely that the facts were such thatthey gave it constructive notice [**261] thereof. If the circumstances were such that notice could be imputed, it issufficient, and the particular fact relied on as having this effect is that appellee was at the time in actual, open,notorious and undisputed possession of the premises and had been since 1911. Practically all the authorities give

Page 2037 Ariz. 574, *; 296 P. 260, **;

1931 Ariz. LEXIS 298, ***1

assent to the proposition that [HN1] the purchaser or mortgagee of land in possession of an occupant other than theholder of the record title is compelled to inquire [***5] of the occupant by what title he holds possession, or he will beheld to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein. "Actualpossession of land," says 46 C.J. 547, "is such notice to all the world or to anyone having knowledge of suchpossession as will put upon inquiry those acquiring title or a lien on the land to ascertain the nature of the right that theoccupant has in the premises." In Rowe v. Ream, 105 Pa. 543, the court quotes with approval this language:

[HN2] "The possession of land is notice to the world of every title under which the occupant claims it, unless hehas put a title on record inconsistent with his possession. When, as in this case, an individual is in possession under norecorded title, his possession is notice of every title which he can set up to protect himself, sufficient at least to put apurchaser on inquiry."

In Oliver v. McWhirter, 112 S.C. 555, 100 S.E. 533, 536, is found this language: [*578]

[HN3] "One in possession under an equitable title has nothing that he can record; and possession, open andunconcealed, is the only mode by which he can give notice to the world of his rights; [***6] and when this notice isgiven, in the only way in which it could be given, he should be protected."

In Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 67 South. 115, 116, the court says:

[HN4] "Actual possession of land is such notice to all the world or to anyone having knowledge of suchpossession as will put upon inquiry those acquiring title to or a lien on the land to ascertain the nature of the rights theoccupant really has in the premises. One who acquires title to or a judgment lien on land with constructive notice of theactual possession and occupancy of the land by one other than the vendor or judgment debtor takes subject to suchrights as proper inquiry will disclose the occupant of the land actually has therein. Possession, in order to beconstructive notice of a claim of title to the land occupied, must be open, visible, and exclusive; and such occupancymay be shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor."

The following are to the same effect: Petrain v. Kiernan, 23 Or. 455, 32 Pac. 158; Follette v. Pacific Light &Power Corp., 189 Cal. 193, 23 A.L.R. 965, 208 Pac. 295; McVey [***7] v. McQuality, 97 Ill. 93; Moore v. Oates, 143Ark. 328, 220 S.W. 657; Niles v. Cooper, 98 Minn. 39, 13 L.R.A. (N.S.) 49, 107 N.W. 744; Garbutt v. Mayo, 128 Ga.269, 13 L.R.A. (N.S.) 58, 57 S.E. 495; Ross v. Hendrix, 110 N.C. 403, 15 S.E. 4; Wood v. Price, 79 N.J. Eq. 620, Ann.Cas. 1913A 1210, 38 L.R.A. (N.S.) 772, 81 Atl. 893.

Appellee contends that it conclusively appears from the statement of Lorenzo Villa to appellant, when the note andmortgage were executed, that it had both actual and constructive notice of appellee's possession and occupancy of thepremises. Whether this be true [*579] or not is immaterial because it was the duty of appellant to ascertain who was inpossession of the property before purchasing an interest therein. As said by the court in Sheerer v. Cuddy, 85 Cal. 270,24 Pac. 713, 714:

"Whether the respondent knew of the appellant's possession or not is immaterial. [HN5] It was his duty to knowwho was in possession of the property before making the purchase, and his purchase without ascertaining the fact mustbe regarded as the strongest evidence of bad faith on his part. The burden of making the proper [***8] inquiry wascast upon him by the mere fact of actual possession on the part of the appellant. If it were allowed that, by failing toacquaint himself with the fact of possession on the part of another than the vendor, the vendee could avoid the effect ofthe rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and itsconsequences entirely."

Finding no error in the record the judgment is affirmed.

ROSS and LOCKWOOD, JJ., concur.

Page 2137 Ariz. 574, *577; 296 P. 260, **261;

1931 Ariz. LEXIS 298, ***4

19 of 42 DOCUMENTS

CautionAs of: Jul 14, 2014

JOHN BIANCONI, Plaintiff and Appellant, v. PARLEY SMITH, Defendant andAppellee

Civil No. 317

SUPREME COURT OF ARIZONA

3 Ariz. 320; 28 P. 880; 1892 Ariz. LEXIS 3

January 16, 1892, Filed

PRIOR HISTORY: [**1] APPEAL from a judgment of the District Court of the Third Judicial District in and forthe County of Yavapai. Henry C. Gooding, Judge.

DISPOSITION: Affirmed.

CASE SUMMARY:

PROCEDURAL POSTURE: Appellant purchaser filed an action against appellee seller to recover damages for analleged false and fraudulent representation in regard to the title to certain real property sold and conveyed to thepurchaser by the seller. The District Court of the Third Judicial District in and for the County of Yavapai (Arizona)sustained the seller's demurrer, and the purchaser appealed.

OVERVIEW: The allegation of the complaint was that the seller's title was derived from a tax-deed to the property andthat at the time of the conveyance to the purchaser another person was in possession of the property, claiming it as hisown. The court affirmed the judgment sustaining the demurrer to the complaint. It was presumed that the tax-deed wasof record at the time of purchase and that any fact or facts which voided its effect as a conveyance could have beenascertained. In addition, the purchaser might also have easily ascertained that the seller was not in the possession of theproperty. Common, ordinary business prudence would have suggested some investigation as to the source of the seller'stitle, and some inquiry as to who was in possession, before purchasing the property. Had some act of deceit orfraudulent concealment been alleged, other than the mere assertion of the seller that he had a good and perfect title tothe property, which induced the purchaser to forego an investigation as to the title and the possession of the property,the case might have presented a different aspect, and its merits have been more apparent.

Page 22

OUTCOME: The court affirmed the judgment.

CORE TERMS: deed, vendor, right of possession, fraudulent representations, conveyance, vendee, perfect, hundreddollars, false representation, property sold, real property, carelessness, warranty, demurrer, tax-deed, induced, void,ascertained, fraudulent, collateral, practiced, connected, conveyed, peculiar, prudence, folly, cause of action,appurtenances, peculiarly, territory

LexisNexis(R) Headnotes

Commercial Law (UCC) > Sales (Article 2) > Warranties > Warranties of TitleContracts Law > Defenses > Fraud & Misrepresentation > General OverviewReal Property Law > Deeds > Types > Warranty[HN1] The common law affords to every one reasonable protection against fraud in dealing; but it does not go to theromantic length of giving indemnity against the consequences of indolence and folly, or careless indifference to theordinary and accessible means of information. A vendee may maintain an action for damages against his vendor, upon asale of real property, upon the ground of false and fraudulent representations, when they relate to some matter collateralto the title and the right of possession, or relate to some matter connected with the title within the peculiar knowledge ofthe vendor, and not otherwise.

HEADNOTES

FRAUD -- FALSE REPRESENTATIONS AS TO TITLE -- PLEADING -- FAILURE TO STATE CAUSE OFACTION. -- Where it appears from the complaint that the fraud alleged to have been practiced upon the vendee relatedsolely to the title of the property sold to him, and there is no allegation that the false representation made by the vendorwas to any matter peculiarly within his knowledge, and that the vendee has been guilty of gross carelessness in failingto investigate the title and right of possession, and in failing to demand a warranty deed a demurrer to the complaint isproperly sustained.

FRAUD -- REAL PROPERTY -- SALES -- FRAUDULENT REPRESENTATION -- WHEN ACTIONABLE. --A vendee may maintain an action for damages against his vendor, upon a sale of real property, upon the ground of falseand fraudulent representations, when they relate to some matter collateral to the title and right of possession, or relate tosome matter connected with the title peculiarly within the knowledge of the vendor, and not otherwise.

COUNSEL: Baldwin & Johnston, for Appellant.

"That the purchaser of real estate may maintain an action to recover damages of his grantor, even when he takes aquitclaim or other deed without covenants upon such purchase, when he has been induced to make the purchase bymeans of fraudulent representations made by the grantor for the purpose of inducing him to purchase, and when thepurchaser relies upon such fraudulent representations, is well settled by authorities. It is not the character or kind ofproperty sold and purchased which gives the purchaser a right of action against the vendor for practicing a fraud uponthe vendee in effecting a sale. It is the fraud of the vendor, and not the kind of property sold, which is the foundation ofthe action. Nor does the fact that the grantor refused to give a deed with covenants relieve him from his liability forfraud." Tyner v. Cotter, 67 Wis. 488; Haight v. Hoyt, 19 N. Y. 465; Whitney v. Allaire, 1 N. Y. 308; McClellan v. Scott,24 Wis. 87; Parks v. Burbank, 58 Iowa, 707, 12 N. W. 729; Starkweather [**2] v. Benjamin, 32 Mich. 306; Lloyd v.Quimby, 5 Ohio St. 265.

"It is not now claimed that the fact that the mortgage was recorded was of any importance. Where positiverepresentations are made concerning a title for fraudulent purposes, and are relied on, it can hardly be insisted that what

Page 233 Ariz. 320, *; 28 P. 880;1892 Ariz. LEXIS 3, **1

would be merely constructive notice in the absence of such declarations, will prevent a person from having the right torely on statements which, if true, would render a search unnecessary." Weber v. Weber, 47 Mich. 571, 11 N. W. 389;Stewart v. Drake, 9 N. J. L. 143; Miller v. Halsey, 14 N. J. L. 48; Chapel v. Bull, 17 Mass. 221; Norton v. Babcock, 43Mass. 510; Mead v. Bunn, 32 N. Y. 279; George v. Taylor, 55 Tex. 97; Jackson v. Armstrong, 50 Mich. 65, 14 N. W.702.

The appellee contends that inasmuch as the deed was a mere quitclaim, the appellant was not a bona fide purchaser;that the quitclaim character of the deed should have warned the appellant into suspicion and vigilance, and that thedoctrine of caveat emptor applies to the transaction. When the grantor induces the grantee by falschood to accept aquitclaim deed, there is no rule of law or equity which will relieve him of liability [**3] for his fraud. Ballou v. Lucas,59 Iowa, 22, 12 N. W. 745.

Herndon & Hawkins, and John Howard, for Appellee.

The allegation of fraud in the complaint is insufficient. It simply charges a conclusion without setting up any facts orcircumstances showing fraud.

The alleged fraud is in regard to a matter of law. The allegation as to fraud relates wholly and entirely to the question oftitle. Where the alleged fraud relates entirely to the question of title, where one has a title or color of title, it isinsufficient to sustain a recovery.

The allegation, showing that plaintiff took only a quitclaim deed, is sufficient to show that he was not an innocentpurchaser in the eyes of the law, but assumed to take upon himself all the defects or infirmities of the title.

"False and fraudulent representations upon the sale of real property may undoubtedly be ground for an action fordamages when the representation relates to some matter collateral to the title of the property and the right of possessionwhich follows its acquisition, such as the location, quantity, quality, and condition of the land, the privileges connectedwith it or the rents and profits derived therefrom. [**4] Such representation by the vendor as to his having title to thepremises sold, may also be ground of action when he is not in possession and had neither color nor claim of title underany instrument purporting to convey the premises, or any judgment establishing his right to them." Andrus v. St. LouisSmelting Co., 130 U.S. 648, 9 Sup. Ct. Rep. 645.

An action cannot be maintained for alleged false representations pertaining solely to the naked fact of title. Andrus v.Smelting Co., 130 U.S. 648, 9 Sup. Ct. Rep. 645; Peabody v. Phelps, 9 Cal. 227.

Statements of opinions do not constitute fraud. Rendell v. Scott, 70 Cal. 514, 11 Pac. 779; Kerr on Fraud and Mistake,p. 83; Buckner v. Street, 15 Fed. 368.

The complaint further shows that plaintiff knew that John White was in possession, claiming to own the premises, andunder this state of facts took a quitclaim deed from the defendant. Plaintiff was not therefore a bona fide purchaserwithout notice. Dickerson v. Colgrove, 100 U.S. 578; May v. Le Claire, 11 Wall. 217; Oliver v. Piatt, 3 How. 333;Johnston v. Williams, 14 Pac. 537.

JUDGES: Sloan, J. Kibbey, J., concurring. Gooding, C. J., not sitting.

OPINION BY: SLOAN

OPINION

[*320] [**5] The facts are stated in the opinion.

[*322] SLOAN, J.--This is a suit to recover damages for an alleged false and fraudulent representation in regard to

Page 243 Ariz. 320, *; 28 P. 880;1892 Ariz. LEXIS 3, **2

the title to certain real property sold and conveyed to appellant [*323] by appellee. The complaint reads as follows:"(1) That the said plaintiff and defendant are residents of said county and territory. (2) That on the nineteenth day ofNovember, 1889, at the town of Prescott, in said county and territory, the said defendant, for and in consideration of thesum of fifteen hundred dollars to him cash in hand paid by this plaintiff, did make, execute, and deliver to this plaintiff acertain deed of conveyance, wherein and whereby, for and in consideration of the said sum paid by this plaintiff asaforesaid, the said defendant did pretend to demise, release, and forever quitclaim to this plaintiff, and to sell andconvey to this plaintiff, a certain piece or parcel of land, with the tenements and appurtenances thereto belonging, acopy of which said deed is hereto annexed, marked 'Exhibit A,' and made a part of this complaint. (3) That before and atthe time of the making, execution, and delivery of said deed by said defendant, [**6] and before and at the time of thepayment of the said sum of fifteen hundred dollars by this plaintiff to said defendant, as aforesaid, the said defendantdid, with the intent to cheat and defraud this plaintiff of said sum of money, falsely and fraudulently represent and sayto this plaintiff that he, the said defendant, had then and there an absolutely valid and perfect title to the said land, andcould and would by said deed, for said consideration, convey said absolutely valid and perfect title to this plaintiff. (4)That this plaintiff, relying implicitly upon and with perfect confidence in the truth and integrity of said representation,sought and received no further knowledge or information touching the sufficiency of the said defendant's title to the saidland; but, being induced by his belief in the truth of said representation, and relying solely and wholly thereon, he wasinduced to pay said sum as aforesaid, and to receive said deed as aforesaid. (5) That said defendant at said time had notitle whatever to said land, nor had he before or since said time any title whatever thereto, except a certain voidtax-deed, of which defendant did not inform plaintiff, and of which [**7] plaintiff had no knowledge whatever at saidtime, all of which defendant well knew. (6) That said representations were and are false and fraudulent. (7) That oneJohn White was at said time, ever since has been, and now is the owner in fee-simple of said [*324] land, and thetenements, hereditaments, and appurtenances thereto belonging, and in the lawful possession thereof, as the saiddefendant well knew. (8) That on the twenty-fourth day of February, 1890, this plaintiff began an action in said court totry his title to the said land as against, and to recover the possession thereof from, the said John White; but suchproceedings were thereupon had therein that on the fifteenth day of March, 1890, by a judgment of said court the saidJohn White was adjudged to be the true and lawful owner of said land, and entitled to the possession thereof, and thatthe title derived by this plaintiff, as aforesaid, from said defendant, to said land, was utterly void and of no effect. (9)That said action is wholly concluded and terminated. (10) That by reason of the premises this plaintiff has beendamaged in the sum of fifteen hundred dollars, and interest thereon at the rate of seven per [**8] cent per annum fromthe nineteenth day of November, 1889, till a recovery of said fifteen hundred dollars. Wherefore plaintiff praysjudgment against said defendant for the sum of fifteen hundred dollars, with interest thereon as aforesaid, and for costs."The appellee demurred to this complaint on the ground that it failed to state facts sufficient to constitute a cause ofaction. The court below sustained the demurrer, and appellant appeals from this ruling.

From the complaint it appears that the fraud, if any, which was practiced upon appellant, related solely to the titleof the property sold and conveyed to him by appellee. It is not alleged that the false representation made by appelleewas to any matter within his peculiar knowledge or possession. On the contrary, the allegation of the complaint is thatsuch title as appellee had was derived from a tax-deed to the property, and that at the time of the conveyance toappellant one White was in possession of the property, claiming it as his own. It is to be presumed that this tax-deed wasof record at the time of purchase, and that any fact or facts which void its effect as a conveyance could have beenascertained by appellant [**9] by an inspection of the record of the proceedings which preceded its execution by theproper officer. From anything which appears to the contrary in the complaint, appellant might also have easilyascertained by simple inquiry that [*325] appellee was not in the possession of the property, and thus have been putupon his guard. Common, ordinary business prudence would have suggested some investigation as to the source ofappellee's title, and some inquiry as to who was in possession, before purchasing the property; and appellant's neglectof these indicated either gross carelessness or a degree of credulity not usually exhibited by men of ordinary experience.Had some act of deceit or fraudulent concealment been alleged, other than the mere assertion of appellee that he had agood and perfect title to the property, which induced appellant to forego an investigation as to the title and thepossession of the property, the case might have presented a different aspect, and its merits be more apparent. Not onlywas gross carelessness and lack of prudence shown by appellant in failing to make any investigation into appellee's title

Page 253 Ariz. 320, *322; 28 P. 880;

1892 Ariz. LEXIS 3, **5

and his right of possession, but also in his failure [**10] to protect himself by a deed containing warranty of title. Thefacilities for obtaining information relative to this title and right of possession were open to appellant, from anythingwhich appears to the contrary from the complaint; and, besides, he could have demanded and required such aconveyance as would have protected him from a failure of title. Will, then, relief, upon the ground of false andfraudulent representation, be granted a vendee, from the consequences of his folly in trusting implicitly in the nakedassertions of his vendor that he has a good title, and in taking without investigation a conveyance without warranty? Wethink not. To use the language of Chancellor Kent in Clark v. Baird, 7 Barb. 66: [HN1] "The common law affords toevery one reasonable protection against fraud in dealing; but it does not go to the romantic length of giving indemnityagainst the consequences of indolence and folly, or careless indifference to the ordinary and accessible means ofinformation." From an examination of the authorities, we deduce the following as the true rule in such cases: A vendeemay maintain an action for damages against his vendor, upon a sale of real property, upon [**11] the ground of falseand fraudulent representations, when they relate to some matter collateral to the title and the right of possession, orrelate to some matter connected with the title within the peculiar knowledge of the vendor, and not otherwise. [*326]Andrus v. Smelting Co., 130 U.S. 645, 9 Sup. Ct. Rep. 645; Peabody v. Phelps, 9 Cal. 213; 2 Kent's Commentaries, 285,484. For the reasons stated, the judgment of the court below in sustaining the demurrer and dismissing the action isaffirmed.

Kibbey, J., concurring. Gooding, C. J., not sitting.

Page 263 Ariz. 320, *325; 28 P. 880;

1892 Ariz. LEXIS 3, **9

34 of 42 DOCUMENTS

CautionAs of: Jul 14, 2014

John KECK and Mary Keck, husband and wife, Appellants, v. J. N. BROOKFIELDand Ruth Brookfield, husband and wife, Buster Jenkins and Dorothy Jenkins,

husband and wife, Buster Jenkins and Grace Jenkins, husband and wife, and GraceJenkins, a single woman, Appellees * * This appeal was filed with the Arizona

Supreme Court and assigned that Court's No. 7266. The matter was referred to thisCourt pursuant to § 12-120.23 A.R.S.

No. 2 CA-CIV 5

Court of Appeals of Arizona

409 P.2d 583; 1965 Ariz. App. LEXIS 503; 2 Ariz. App. 424

December 30, 1965

SUBSEQUENT HISTORY: [**1] Rehearing Denied January 31, 1966. Review Denied March 1, 1966.

CASE SUMMARY:

PROCEDURAL POSTURE: Appellant successor property owners challenged a decision of the Superior Court, PimaCounty (Arizona), which entered judgment holding that appellants' interests in their real property was subject to acontract to make a lease entered into between appellee lessees and appellants' predecessor owners as lessors.

OVERVIEW: Appellants bought real property from the lessors while they were under a lease agreement with lesseesto rent a barn on part of the real property for the lessees' business. Appellants filed an action in the superior courtseeking to recover possession from the lessees of the real property under the lease agreement. The superior court heldthat appellants' interest in the property was subject to a contract to make a lease entered into between the lessees andappellants' predecessor owners. Appellants challenged the ruling, and the court affirmed, concluding that the lesseeswere entitled to possession of the premises. The court concluded that the lease agreement was an enforceable contractbecause sufficient consideration was given, and such agreement was binding on appellants as subsequent purchasers.The court found that appellants were purchasers with notice and bound by the equitable lease, and the lessees were inopen, notorious and exclusive possession of the subject premises. The court concluded that appellants were derelict intheir duty to investigate the interests on the property where they never made inquiry of the lessees as to the extent of

Page 27

their possessory interest.

OUTCOME: The court affirmed the superior court's judgment holding that appellants' interests in the real property wassubject to a contract to make a lease entered into between the lessees and appellants' predecessor owners as lessors.

CORE TERMS: lease, barn, lessee, notice, mattress, lessors, binding, subsequent purchasers, recorded, factory,inquire, rent, husband and wife, subject premises, terminate, purchaser, ascertain, tenants', lease agreement, cyclonefence, signature, term of years, right of possession, exclusive possession, valuable consideration, enforceable contract,extrinsic evidence, purchasing, conveyance, unrecorded

LexisNexis(R) Headnotes

Contracts Law > Types of Contracts > Lease Agreements > General OverviewReal Property Law > Deeds > General OverviewReal Property Law > Estates > Present Estates > Fee Simple Estates[HN1] Ariz. Rev. Stat. § 33-412 provides: A. All bargains, sales and other conveyances whatever of lands, tenementsand hereditaments, whether made for passing an estate of freehold or inheritance or an estate for a term of years, anddeeds of settlement upon marriage, whether of land, money or other personal property, and deeds of trust and mortgagesof whatever kind, shall be void as to creditors and subsequent purchasers for valuable consideration without notice,unless they are acknowledged and recorded in the office of the county recorder as required by law, or where record isnot required, deposited and filed with the recorder. B. Such unrecorded instruments, as between the parties and theirheirs, and as to all subsequent purchasers with notice thereof, or without valuable consideration, shall be valid andbinding.

Contracts Law > Consideration > Mutual ObligationContracts Law > Types of Contracts > Lease Agreements > General OverviewReal Property Law > Landlord & Tenant > Landlord's Remedies & Rights > Power to Reenter & Terminate[HN2] Mutuality is absent when only one of the contracting parties is bound to perform. Where there are mutualpromises between the parties, it is not necessary to render a particular promise by one party binding that there be aspecial promise on the part of the other party directed to that particular obligation.

Contracts Law > Types of Contracts > Lease Agreements > General OverviewEvidence > Documentary Evidence > Parol EvidenceReal Property Law > Landlord & Tenant > Lease Agreements > Lease Provisions[HN3] If a lease contains an ambiguous or uncertain provision, in order to ascertain its meaning, the court may look tothe interpretation that the parties, in the performance of the lease, have placed on such provision.

Real Property Law > Restrictive Covenants > General Overview[HN4] A purchaser of land in possession of one other than the holder of the record title is compelled to inquire of thepossessor by what title he holds possession, or he will be held to have taken subject to whatever rights a properinquiry would disclose that the possessor had.

COUNSEL: Robert D. Stauffer, Tucson, for appellants.

Dunseath, Stubbs & Burch by Dean Burch, Tucson, for appellees.

Page 28409 P.2d 583, *; 1965 Ariz. App. LEXIS 503, **1;

2 Ariz. App. 424, ***

JUDGES: Hathaway, Judge. Krucker, C. J., and Richard N. Roylston, Superior Court Judge, concurring.NOTE: TheHonorable John F. Molloy having requested that he be relieved from consideration of this matter, The HonorableRichard N. Roylston, Judge of the Superior Court, Pima County, was called to sit in his stead and participate in thedetermination of this decision.

OPINION BY: HATHAWAY

OPINION

[***425] [*584] John Keck and Mary Keck, husband and wife, filed suit in superior court, Pima county, seekingto recover possession of certain real property owned by them. The case was tried to the court sitting without a jury andthe Kecks appeal from the portion of the judgment entered therein which decreed that the plaintiffs' interest in theproperty was subject to a contract to make a lease entered into between defendants as lessees and prior owners aslessors. The following facts are disclosed in the record:

In 1948 or early 1949, J. N. Brookfield and Ruth Brookfield, husband and wife, and Buster Jenkins [**2] andDorothy Jenkins, husband and wife, went into possession of a barn under a lease agreement with the owners of a parcelof property on which the barn was located, Mr. and Mrs. Charles Stegmeier. Mr. Brookfield and Mr. Jenkins formed apartnership and established a mattress factory in the barn. Ownership of the property changed several times since thedefendants started their mattress factory, but they continued to operate "Brookfield's Tucson Mattress Company" on thepremises, and paid rent to the various owners. In 1952, the Stegmeiers conveyed the entire property to Mr. and Mrs.Dorris.

On June 1, 1953, J. N. Brookfield and Ruth Brookfield, husband and wife, and Buster Jenkins and Dorothy Jenkins,husband and wife, as lessees, executed a lease agreement with Mr. and Mrs. Dorris, as lessors. The lease was for aone-year period ending on June 1, 1954. It provided that the $ 1,500 rent be paid in monthly installments of $ 125 andgranted to the lessees an option to renew the lease on the same terms for an additional twenty-year period upon thegiving of proper notice. The leased premises were described as "* * * that certain barn located at 2552 Oracle Road,Pima County, Arizona."

[**3] On February 26, 1954, J. N. Brookfield, Buster Jenkins, and the Dorrises, in each other's presence, signedtheir names in the right hand margin of the lease dated June 1, 1953, for the purpose of giving effect to the followingwritten addition to the instrument made at that time by J. N. Brookfield:

"February 26, 1954, it is agreed by all signatures attached that this lease shall run for the 20 year periodstated above and that the lessees can revoke said lease at the end of any given year by giving a 30 daywritten notice."

[***426] [*585] Subsequent to the signing, but on the same occasion and in the presence of all of the signatories,Brookfield interlineated after the word "above" the words "minus renewal claus [sic]." Brookfield crossed out of thehabendum clause of the lease the figure "1954" and inserted in its place the figure "1973." The alteration was initiallymade in pencil prior to the signing and then was redone in ink after the signatures were affixed, while everyone waspresent.

Buster and Dorothy Jenkins were divorced in September, 1953. The divorce decree approved a separationagreement between the parties which provided that upon payment [**4] of a stipulated sum by Buster, the communityinterest in the mattress company was to become his sole and separate property.

Some time later, Brookfield altered the lease agreement by deleting Dorothy Jenkins' name as a lessee andsubstituting Grace Jenkins' name and by crossing out Dorothy's signature which had been affixed thereto in 1953. Atthe time of the alteration, Buster Jenkins had remarried, Grace being his second wife. Grace, however, never signed the

Page 29409 P.2d 583, *; 1965 Ariz. App. LEXIS 503, **1;

2 Ariz. App. 424, ***

lease.

On May 1, 1958, the Dorrises sold the property to Perry and Alvene F. Kinchloe who in turn sold the property tothe plaintiffs on January 1, 1959. At the time of the sale, neither the original 1953 lease nor the altered version had beenacknowledged or placed of record, but the defendants were in exclusive possession of the "barn" and an adjoining areaof approximately 2,165 square feet enclosed by a cyclone fence. In addition, the defendants were using a portion of thelessors' property to the north and south of the enclosed area for purposes of ingress and egress to the enclosure. Thecyclone fence contained two gates, one at the north side and the other at the south side.

After purchasing the property, the [**5] plaintiffs fenced off an area immediately to the north and east of themattress factory, thereby blocking the defendants' access to the north side of the cyclone fence, and placed a housetrailer in this area. They instructed the defendants not to use the south gate which instruction the defendants obeyed.

At the beginning of February, 1959, the plaintiffs notified the defendants that effective March 1, 1959, the month tomonth lease of the defendants would terminate. The defendants were offered a new month to month tenancy at a rentalof $ 175 per month, provided that the offer was accepted prior to February 18, 1959. The defendants did not accept butcontinued to send to the plaintiffs checks in the amount of $ 125 per month which the plaintiffs did not cash but retainedin their possession.

Appellants have set forth numerous assignments of error in their briefs but we find no authority cited in support ofmost of the propositions advanced. Therefore we shall confine our review of the judgment rendered below to aconsideration of the fundamental issue: Were appellees entitled to possession of the subject premises as found by thetrial court?

Appellants take the position that [**6] the 1954 agreement between the Dorrises as lessors and Brookfield andJenkins as lessees was not a valid lease, binding upon appellants, since it was neither acknowledged nor recorded.[HN1] A.R.S. § 33-412 provides:

"A. All bargains, sales and other conveyances whatever of lands, tenements and hereditaments,whether made for passing an estate of freehold or inheritance or an estate for a term of years, and deedsof settlement upon marriage, whether of land, money or other personal property, and deeds of trust andmortgages of whatever kind, shall be void as to creditors and subsequent purchasers for valuableconsideration without notice, unless they are acknowledged and recorded in the office of the countyrecorder as required by [***427] [*586] law, or where record is not required, deposited and filed withthe recorder.

"B. Such unrecorded instruments, as between the parties and their heirs, and as to all subsequentpurchasers with notice thereof, or without valuable consideration, shall be valid and binding."

While the 1954 lease was not a legal conveyance of a leasehold interest, it was an enforceable contract for a leasebetween the parties thereto, and under [**7] the principle that equity regards that as done which ought to be done, alandlord-tenant relationship was created between them. Murphey v. Brown, 12 Ariz. 268, 277, 100 P. 801 (1909);A.R.S. § 33-437.

Appellants argue that the lease in question was void for lack of mutuality of obligation since the appellees had aright to terminate the lease upon 30 days notice. We do not agree. [HN2] Mutuality is absent when only one of thecontracting parties is bound to perform. Where there are mutual promises between the parties, as there are here, it is notnecessary to render a particular promise by one party binding that there be a special promise on the part of the otherparty directed to that particular obligation. Taylor v. Kingman Feldspar Co., 41 Ariz. 376, 381, 18 P.2d 649 (1933).There being sufficient consideration, the validity of the lease is not affected by the fact that the lessees had an option to

Page 30409 P.2d 583, *585; 1965 Ariz. App. LEXIS 503, **4;

2 Ariz. App. 424, ***426

terminate while the lessors had no correlative right.

The demised premises were described in the lease as "that certain barn located at 2552 Oracle Road, Pima County,Arizona." Appellants contend that the trial court erred in admitting parol evidence for the purpose of ascertaining [**8]the extent of the property covered by the written lease. We find no error on the part of the lower court. [HN3] If a leasecontains an ambiguous or uncertain provision, in order to ascertain its meaning, the court may look to the interpretationthat the parties, in the performance of the lease, have placed on such provision. 32 Am.Jur., Landlord and Tenant § 127.The term "that certain barn" is one which requires resort to extrinsic evidence to aid in construing its meaning. Suchextrinsic evidence was not introduced to vary or alter the terms of the contract in violation of the parol evidence rule butrather to ascertain the intention of the parties as to the extent of the property demised. Therefore it was proper for thetrial court to receive evidence showing what property was intended to be covered by the description "that certain barn"and also the actual conduct of the parties in construing this description. See Guttman v. Berry, 83 Cal.App.2d 507, 189P.2d 41, 43 (1948); 32 Am.Jur., Landlord and Tenant § 165.

Having determined that the 1954 document was an enforceable contract for a lease between Jenkins and Brookfieldas lessees and the Dorrises as lessors, the sole remaining [**9] question is whether it is binding upon the appellants assubsequent purchasers. A.R.S. § 33-412, subsec. B as hereinabove set forth provides that unrecorded instrumentsconveying an estate for a term of years is binding upon subsequent purchasers with notice thereof. The trial courtheld, and we believe properly, that appellants were purchasers with notice and therefore bound by the equitable lease. Itis undisputed that the appellees were in open, notorious and exclusive possession of the subject premises. Theappellants, however, according to Mr. Keck's testimony at the trial never made inquiry of the appellees as to the extentof their possessory interest. Mr. Keck, when examined by appellees' counsel, testified:

"Q. Did you ever go on the premises when you bought the property or before you bought the property?

A. I did.

Q. You inspected the premises?

A. I have.

[***428] [*587] Q. Did you ever notice the sign 'Brookfield's Tucson Mattress Factory' on thelarge barn?

A. I did.

Q. You weren't curious as to by what right they were in that barn, Mr. Brookfield and Mr. Jenkins?

A. By what right?

Q. Yes.

A. No.

Q. [**10] You knew that was part of the property that you were purchasing?

A. Yes."

Mr. Keck further testified that his predecessor in interest told him that there was a lease which was to end January1, 1959, and that he felt it unnecessary to inquire further as to the tenants' right of possession. We are of the opinionthat the appellants were derelict in their duty. [HN4] A purchaser of land in possession of one other than the holder ofthe record title is compelled to inquire of the possessor by what title he holds possession, or he will be held to have

Page 31409 P.2d 583, *586; 1965 Ariz. App. LEXIS 503, **7;

2 Ariz. App. 424, ***427

taken subject to whatever rights a proper inquiry would disclose that the possessor had. Roy & Titcomb, Inc. v. Villa,37 Ariz. 574, 577, 296 P. 260 (1931).

In Frame v. Frame, 32 W.Va. 463, 9 S.E. 901, 907, 5 L.R.A. 323 (1889), the court said: "The earth has beendescribed as that universal manuscript, open to the eyes of all. When, therefore, a man proposes to buy or deal withrealty, his first duty is to read this public manuscript; that is, to look and see who is there upon it and what are his rightsthere." The law does not permit a person to close his eyes to facts that he cannot otherwise fail to see for the purpose ofremaining [**11] in ignorance of them and thus acquire an unjust advantage. See Rogers v. Dumas, 166 Kan. 519, 203P.2d 165, 169 (1949).

Appellants claim that they had no duty to inquire since there appeared of record an assignment of rents and profitsexecuted by the Stegmeiers which referred to a lease between the Stegmeiers and the Brookfields and Jenkins datedDecember 1, 1951. This recorded assignment, however, does not relieve appellants of the duty to ascertain appellees'interest. Even if the terms of the 1951 lease were described in the recorded assignment, which they were not, the rulethat, where one is in possession under a known right of possession, such possession is referable to such right and apurchaser is not required to inquire further, is inapplicable to lessees who rent for short periods of time and oftenrenew their leases. See Golden v. Bilbo, 192 Iowa 319, 184 N.W. 643, 645 (1921).

Appellants knew that the appellees were in open and actual possession of the subject premises and knew of priorlease arrangements. Under these facts ordinary business prudence should have prompted them to pursue suchreasonable inquiry as would have disclosed the terms and conditions of the [**12] tenancy. Therefore they must becharged with full knowledge of the terms of the lease and the appellees' rights thereunder.

Judgment affirmed.

Page 32409 P.2d 583, *587; 1965 Ariz. App. LEXIS 503, **10;

2 Ariz. App. 424, ***428