McNaughton v. Carleton College

Clark, J. It is claimed by the plaintiff that by virtue of Gen. St. 1878, c. 40, § 34, the defendant corporation, at the time it assigned to the plaintiff all its right, title and interest in a sheriff’s certificate of sale, executed to it as the purchaser at the sale on the foreclosure by advertisement of a mortgage of real estate, was bound, before the consideration of such assignment was paid, by exception-in the deed of assignment or otherwise, to make known to the assignee that, at the time of the execution of the mortgage, a third party, John Curren, was in possession of, and occupying as a homestead, a part of the mortgaged premises, (one 40-acre tract out of 120-acres,) under a bond for a deed from the mortgagor, which was never recorded, and that the mortgagor subsequently, and before the foreclosure, conveyed the 40-acre tract, by a deed which was duly recorded, to Currén, in pursuance of such bond, and that the defendant, the mortgagee, at the time of such conveyance, agreed with the-mortgagor and such grantee, as one of the conditions on which such conveyance was made, to release such 40-acre tract from the mortgage, and failed so to do, and at the same time took from Curren a mortgage thereon to secure the payment of a sum of money owing-from him to the defendant. The entire mortgaged premises were bid in by defendant at the-foreclosure sale in one parcel, including the 40-acre tract, and were embraced in the certificate so assigned. This 40-acre tract had' remained continuously in the occupation of Curren, as his homestead, from the time he so took possession thereof under the bond fora deed. The assignment to the plaintiff was made shortly before the time for redemption expired, and there was no redemption from the sale. The plaintiff alleges that, at the time he took the assignment and paid the consideration therefor, he was ignorant of the rights of' [289] Curren, and of the facts out of which they arose. He further alleges that the defendant corporation brought an action to foreclose the .mortgage from Curren, in which the plaintiff was made a defendant, wherein a part of the relief asked was that Curren might be decreed to be the real owner of the mortgaged premises, subject to the lien of the mortgage, and the plaintiff in this action might be adjudged to have no estate or interest therein; that the plaintiff herein defended, claiming title to the mortgaged premises by virtue of the certificate of sale and the assignment thereof; that judgment was entered declaring Curren to be the owner of the land, subject to the lien of the mortgage, and decreeing the sale thereof to satisfy the mortgage debt; and that such judgment was affirmed by this court on appeal. This suit is brought to recover the value of the 40 acres by reason of the breach of the obligation so claimed to have been imposed by the statute on the defendant, and comes to this court on appeal by the defendant from an order overruling a demurrer to the complaint. The assignment contained no covenants. Gen. St. 1878, c. 40, § 6, provides that no covenants shall “be implied in any conveyance or mortgage of real estate, whether such conveyance contains special covenants or not.” The plaintiff does not allege that there were any false representations or any fraudulent concealment on the part of the defendant, and there is nothing to show that the defendant offered to sell, or agreed to transfer, any other or greater interest in the land than would actually pass to the defendant by the assignment. In the absence of fraud, it is conceded by counsel, and is unquestionably correct, that the rule of caveat emptor applies to this transaction, unless it is taken out of that rule by the provisions of statute first referred to in this opinion. That section reads as follows: “In all conveyances of real estate by deed or mortgage, upon which any encumbrance exists, the grantor, whether he executes the same in his own right, or as executor, administrator, assignee, trustee, or otherwise, by order of law, shall, before the consideration is paid, by exception in the deed or otherwise, make known to the grantee the existence and nature of such prior encumbrance, so far as he has knowledge thereof.” It is obvious that this section, being in deroga [290] tion of the general rule of law, can only be applied to a case which comes fairly within its terms. It is unnecessary to decide whether an assignment of a certificate of sale on foreclosure is a conveyance within the meaning of the section; for, conceding that it is, we are of opinion that the action cannot be maintained. The plaintiff would certainly have been in no worse position if the time of redemption had been allowed to expire, and he had then taken a deed without covenants from the defendant. The statute was not intended to take the place of covenants for title in a deed of conveyance. In Carleton College v. McNaughton, 26 Minn. 194, between the same parties, and involving the same transaction, it was held that Curren’s possession was notice to the plaintiff of his title, and that the plaintiff acquired no interest whatever in the 40-acre tract by virtue of the sheriff’s certificate and the assignment. An encumbrance is any right to or interest in land which may subsist in third persons to the diminution of the value of the estate of the tenant, but consistently with the passing of the fee. Bouv. Law Diet. We think the statute is properly applicable only to cases where the title of the real estate passes or is affected by the conveyance, and that it does not, by its terms, and was not intended to, afford a remedy in a case where the grantor had no title or interest which could pass or be affected by the deed. If the grantee desires indemnity against the failure of the deed to operate upon the title of the land at all, he must take covenants from his grantor. Order reversed.