Capital City Lumber Co. v. Olson

Owen, J. The sole question for determination is whether the court erred in granting reformation of the deed executed by Lindsay to Mae Smith so that the covenant against in-cumbrances' therein should exclude liens or incumbrances created or suffered by the defendant Mink. Mink evidently purchased the lot in question for the purpose of constructing the house thereon; at least almost immediately after contracting for the purchase of the lot he commenced building operations. Sec. 289.01 of the Statutes expressly exempts the interest of Lindsay from liens growing out of the construction of the house by Mink. Had Lindsay executed the deed directly to Mink, the usual covenants of warranty against incumbrances would not have included any liens or incumbrances placed upon the premises by Mink or any liens arising by virtue of his building operations. The covenant against incumbrances does not indemnify the grantee against incumbrances placed upon the premises by himself. The [186] covenant against incumbrances is a covenant as to things existing at the time it is made. 7 Ruling Case Law, p. 1163, § 78. If broken at all, it is broken at the time it is made. Estate of Hanlin, 133 Wis. 140, 113 N. W. 411. Lindsay did not execute the deed to Mink, but he executed it to Mae Smith. He did this, however, by mutual agreement on the part of himself, Mink, and Mae Smith in fulfilment of and for the purpose of carrying out his contract with Mink. This constituted a substituted performance of the contract between Lindsay and Mink by and with the consent and agreement of all parties to the immediate transaction, and their rights are the same as they would have been had Lindsay deeded to Mink and Mink to Mae Smith. Shockley v. Roelli, 188 Wis. 564, 206 N. W. 856. There may be some doubt as to whether Mae Smith knew the exact arrangement between Lindsay and Mink. She did know, however, that Mink was in possession of the premises, that he was building a house thereon, that he had some sort of a title, which title, to be complete, called for the execution and delivery of a deed by Lindsay. She knew that she was acquiring her title through Mink. She was chargeable with knowledge of the law which exempted Lindsay’s interest in the lot from liens created thereon by Mink if Mink’s interest therein was that of a land contract. All of these circumstances were sufficient to put her upon inquiry as to what Mink’s real interest in the premises was, and whether Lindsay’s covenant against incumbrances included the mechanics’ liens in question, and charged her with constructive notice of the real situation. So far as Mae Smith is concerned, she accepted the deed from Lindsay with constructive notice that the covenant against incumbrances therein contained did not as a matter of law include any liens that might arise by reason of Mink’s building operations. This settles the rights of Mae Smith in the premises. Now what are the rights of the Olsons? It seems to be settled in this state that a covenant against incumbrances [187] runs with the land. Estate of Hanlin, 133 Wis. 140, 113 N. W. 411. The nature, scope, and extent of the covenant, however, does not change, broaden, or develop as it runs. The covenant is an agreement between the covenantor and his grantee. The scope and extent of the covenant is to be determined by the circumstances and the facts existing at the time the covenant is made and should be construed to express the understanding and agreement of the immediate parties to the covenant, and this is especially true where the record furnishes no evidence as to whether liens such as these were incumbrances upon the title which the grantor was conveying. It may be conceded that the Olsons knew that there was a covenant against incumbrances in Lindsay’s deed. The records, however, furnished them no information as to whether the mechanics’ liens here involved constituted an incumbrance upon his title. The situation of the premises put them upon inquiry as to whether there were outstanding liens. They purchased a lot upon which there was a house under construction. It was' not yet completed. They knew that the claims of mechanics or materialmen might constitute a lien on the premises. These facts placed them upon inquiry concerning the true state of facts. If they were relying upon the covenant against incumbrances contained in Lindsay’s deed, the investigation which it was their duty to make would have disclosed to them the fact that these liens never constituted an incumbrance upon Lindsay’s title. Even though a bona fide purchaser might have relied upon the covenant in Lindsay’s deed, the fact is they are not bona fide purchasers, and there is nothing to indicate that in purchasing these premises they relied upon the covenants, and the trial court expressly declared in a memorandum decision that they did not. These considerations lead to the conclusion that it was unnecessary to grant judgment reforming the deed from Lindsay to Smith. However, were it otherwise, the judgment of reformation was eminently proper. While it is the [188] rule of equity that a purchaser without notice, actual or constructive, will not be affected by a latent equity, whether by lien, incumbrance, trust or fraud, or any other claim, the equity to reform an instrument stands on the same footing as any other equity. 23 Ruling Case Law, 340. Deeds and mortgages are frequently the subject of reformation, even as to subsequent grantees. 23 Ruling Case Law, 339 et seq.; notes in 65 Am. Dec. 481; 28 L. R. A. n. s. 785; Fischer v. Laack, 85 Wis. 280, 55 N. W. 398; Drury v. Hayden, 111 U. S. 223, 4 Sup. Ct. 405. Whether reformation will be granted depends upon the equities of the situation. In this case no equitable considerations protest against the judgment of reformation. On the other hand, to refuse reformation would work great injustice, if reformation were necessary to protect Lindsay. There is no justice in subjecting the defendant Lindsay to the burden of these mechanics’ liens. Neither is there any reason nor equitable consideration for relieving either Olson or Smith from the burden of these liens at the expense of Lindsay. While the judgment of reformation entered is deemed unnecessary, it cannot be said to be improper in the sense that it should be reversed, and the judgment appealed from will be affirmed.' By the Court. — Judgment affirmed. Stevens, took no part.