Kraft v. Carson County , 71 S.D. 382 ( 1946 )

The majority opinion states that: "The essential element of the doctrine of estoppel in this type of case is fraud." Actual fraud is deception, intentionally practiced to induce another to part with property or otherwise change his position for the worse. The deception must consist of some affirmative act. 37 C.J.S., Fraud, § 2b.

In Pomeroy's Eq. Jur., 5th Ed., § 802, it is said that equitable estoppel in the modern sense may arise from "silence or negative omission to do anything." The leading case of Dimond v. Manheim, 61 Minn. 178, 63 N.W. 495, 497, states: "First. To create an estoppel, the conduct of the party need not consist of affimative acts or words. It may consist of silence or a negative omission to act when it was his duty to speak or act. Second. It is not necessary that the facts must be actually known to a party estopped. It is enough if the circumstances are such that a knowledge of the truth is necessarily imputed to him. Third. It is not necessary that the conduct be done with a fradulent intention to deceive, or with an actual intention that such conduct will be acted upon by the other party. It is enough that the conduct was done under such circumstances that he should have known that it was both natural and probable that it would be so acted upon."

The foregoing rules, approved by this court in Shelby v. Bowden, 16 S.D. 531, 94 N.W. 416; Farr v. Semmler, 24 S.D. 290, 123 N.W. 835; McDowell v. Jameson, 44 S.D. 480, 184 N.W. 251, and other cases, have firmly established the law of this state to be that fraud, consisting, as it does, of intentional deception by some affirmative act, is not a necessary element of estoppel; that equitable estoppel may consist of silence, acquiescence, or negative omission. This whole subject is reviewed in the annotation found in 50 A.L.R. 668 §§ 7, 8, and 9, commencing at page 686.

In regard to Boggs v. Merced Mining Co., 14 Cal. 279, and Brant v. Virginia Coal Iron Co., 93 U.S. 326, 23 L.Ed. 927, Pomeroy says (§ 805): "These cases are at the present day sometimes treated as examples of equitable estoppel."

In his notes the author makes the following comment on the Brant case (Vol. 3, p. 200): "With great deference to the opinion of so able a judge, I think his error in this passage is evident. * * * If this conclusion be correct, then some of the most important and well-settled species of the estoppel, uniformly regarded as such by text-writers and courts, must be abandoned, and the beneficent doctrine itself must be curtailed in its operation to one particular class of cases. This result is in direct opposition to the tendency of judicial decision and of the discussions of text-writers."

The author says further (§ 806): "It is now in general held that all that is meant by the expression that an estoppel must possess an element of fraud is that the case must be one in which the circumstances and conduct would render it a fraud for the party to deny what he had previously induced or suffered another to believe and take action upon. The element of fraud appears when an effort is made to gainsay or deny the previous conduct."

The rule, as stated above, is the rule now followed by the Supreme Court of California. Seymour v. Oelrichs, 156 Cal. 782,106 P. 88, 134 Am. St. Rep. 154.

The opinion of the majority takes the position that the Minnesota bank and Smith had no knowledge or information that the county and Kraft had been in possession of the land and improved it under claim of ownership. A similar question was before this court in Shelby v. Bowden, supra [94 N.W. 420], where it was said: "When the mortgagor conveyed to Beatty, when Beatty conveyed to Consigny, and when Consigny conveyed to the plaintiff, the respondent was in the actual, quiet, peaceable, open, and notorious possession of the premises, and every part thereof, claiming under a title, to wit, the deed from Samuel C. Blair and wife to the respondent. Under the law in force when they were executed, each of the conveyances in the chain of title from the mortgagor to the plaintiff was void as against the respondent. Comp. Laws 1887, § 3303. Actual, open, and visible possession of real estate is constructive notice to the purchaser of all rights of the possessor in the land. Such possession charges a purchaser with notice of all equities of him in possession. * * *"

The above rule as to constructive notice to a purchaser applies likewise to the person claiming to the be owner of the land. 2 C.J.S., Adverse Possession, § 45.

The case of McDowell v. Jameson, supra, was an action in which it was claimed that the defendant was estopped to assert ownership of the land. The opinion states that Rogers and the Cutting Mining Company were in open, notorious, continuous and exclusive possession of the property at all times since 1911, in good faith claiming to be the owners of it under a sheriff's deed; that they paid all taxes assessed against the property; that during the time of such possession they made permanent improvements, etc., on the premises. On the question of whether defendants were charged with notice of plaintiff's possession and improvement of the property this court said [44 S.D. 480, 184 N.W. 252]: "All of the appellants of necessity must have had knowledge and be charged by law with notice of such possession by said Rogers and Cutting Mining Company, and of the said improvements and labor performed on said premises by them, and also of the claim of ownership made by them under such execution sales."

Either the county or the respondent, its successor in interest, was in the actual, quiet, peaceable, open and notorious possession of the premises, and every part thereof at all times from 1932 when the tax deed was issued, until the trial of this action. They, too, claimed in good faith to own the land, paid the taxes and made valuable and permanent improvements on it while in possession. Such possession was constructive notice to the bank, and to Smith of "all equities of him in possession." It charged them with the duty to inform the county and Kraft of their claim to the property if any they had, and to assert their rights. Betts v. Letcher, 1 S.D. 182, 46 N.W. 193; Shelby v. Bowden, supra; Farr v. Semmler, supra; McDowell v. Jameson, supra.

Ellis M. Lewis acquired his interest in the property, if any, by quitclaim deed from Smith, after the commencement of this action, and, therefore, he stands in the shoes of the bank and Smith as to plaintiff's claim of equitable estoppel. Farr v. Semmler, supra.

Another question argued in the briefs is the knowledge or ignorance of the bank and Smith as to a cause of action existing in their favor. It was incumbent upon the defendants to show that the bank and Smith made a mistake in supposing the tax deed to be valid, the time when they first discovered such mistake and that they acted with reasonable diligence in asserting their rights when advised thereof. Kenny v. McKenzie, 25 S.D. 485, 127 N.W. 597, 49 L.R.A., N.S., 782. The appellants made no attempt to prove any of these things.

The majority opinion declares in substance that an equitable estoppel without "some affirmative act or actual fraud" would amount to "a shortening of the statutory period required for adverse possession." The same question of law was presented to this court in Kenny v. McKenzie, supra. There the distinction between equitable estoppel and title by adverse possession was explained. It was there decided that equitable estoppel may arise from laches covering a period of time much shorter than that prescribed by the statute on adverse possession. That decision was based upon the principle, later affirmed in the McDowell case, that actual fraud is not a necessary element of equitable estoppel.

The evidence in this case shows that the State Bank of Franklin sold the land to C.E. Lewis on cropper's contract. The purchaser defaulted in the payments due under the contract both as to purchase price and taxes. The bank then conveyed the property to G.P. Smith by deed dated May 3, 1940, recorded June 17, 1944. Smith in turn conveyed the property to Ellis M. Lewis, one of the appellants, by quitclaim deed dated April 27, 1944, filed June 17, 1944, the date of the instrument and the date of filing both being subsequent to the recording of the lis pendens in this action. This quitclaim deed recited the consideration of $25. The county took possession when it obtained the tax deed, removed the buildings, and retained such possession until the land was conveyed to respondent. Respondent took possession of each quarter section of land at the time of purchase and has retained such possession ever since. He made many valuable and permanent improvements on the land, which improvements consisted of farm buildings, fences and wells. C.E. Lewis, appellant, or members of his family, leased the land from Corson county for the cropping season of 1932 and in subsequent years. Neither of the appellants, nor the persons from and through whom they derived their interest in the land, has paid any of the taxes on the land for the year 1925 and subsequent years. Neither the appellants nor the commissioner of banks nor Smith took any steps to protect their rights in the property by redeeming from the tax sale involved in this action nor claimed or asserted any interest in the land from the time the tax deed was issued until after the commencement of this action. They abandoned the ownership in the land to the tax title; they acknowledged the county as the owner of the land during the period of time when they knew, or should have known, that it was in possession, treating the land as exempt from taxation on the faith of the validity of its tax deed, and while respondent was in open possession, making payments on his purchase contract, paying the taxes and improving the property. The county and the respondent, as successive owners of the land have, since the issuance of the tax deed, in good faith relied upon such conduct, and have been led thereby to change their position for the worse.

I agree with the majority opinion that the evidence in this case does not show an affirmative act amounting to actual fraud. I believe that the evidence does show the unconscientious assertion of a claim which is inconsistent with former conduct, by which the defendant Ellis M. Lewis is bound, and upon which the plaintiff has acted, and that this constitutes an equitable estoppel. In my opinion the judgment of the circuit court should be affirmed.

WOHLHETER, Circuit Judge, concurs in the above dissent.