The majority opinion results in a grave injustice to innocent purchasers of a valuable property and operates to return said property to the plaintiffs, its former owners, who then will have both the property and the money paid them for it. And they are to have this relief at the hands of a court of equity in a strict application of the penalty doctrine in its relation to altered instruments under facts which I believe fully sustain the trial court's finding that they are guilty of laches. Equity's abhorrence of penalties and forfeitures is axiomatic. And while equity courts as well as courts of law recognize and will enforce the penalty doctrine, nevertheless, where no fraud is perpetrated on the party invoking it, equity's abhorrence of penalties should prompt it to seize upon even slight circumstances to estop a party from reaping benefits under it as against innocent purchasers.
We must determine at the threshold the propriety of applying the doctrine of laches in favor of the defendants. This prompts the inquiry whether they are innocent purchasers. The trial court so found. If such, they are entitled to the benefit of the doctrine. I will accept the majority view that materially altering the mineral deed prior to delivery left the plaintiffs invested with the legal title to the property involved. But this does not settle the question of their present right to it. The more pertinent inquiry is whether they are in a position to assert their title against the *Page 263 defendants. I think they may not because the defendants occupy the position of innocent purchasers, in the sense of having purchased in good faith, and are entitled to interpose laches.
The only things appearing in the abstract pointed out as calculated to put either defendant upon inquiry at the time of their respective purchases were the entries in reference to the Paine transaction. In its statement of plaintiffs' and defendants' chain of title, the prevailing opinion does not disclose that on June 11, 1928, a lis pendens notice was recorded in Lea County, New Mexico, incident to a suit by Paine against the Mosleys for breach of agreement to convey to Paine a one-half interest in the minerals in the property involved. This lis pendens was dissolved by dismissal of the Paine suit on July 11, 1928, the date upon which Paine recorded his deed from the Mosleys, dated June 23, 1928, to a one-fourth mineral interest.
In summarizing the pleadings, the opinion recites the allegations of plaintiffs' reply to the defenses of estoppel and laches which were in substance that the deed from Mosley to his wife recorded June 7, 1928, and the deed from the wife back to Mosley, recorded July 3, 1928, were made for the purpose of showing by the public record their claim to the property. These were mere allegations and the majority do not contend there is the slightest evidence in the record to support them. On the contrary, at the time of Mosley's deed to his wife, recorded June 7, 1928, the Mosleys were ignorant of the fact that their deed had been altered, something they learned for the first time on June 22, 1928. This is conceded. It seems obvious that the deed from Mosley to his wife was made in an effort to avoid the Paine contract upon which the Mosleys were sued two days later. And the wife's deed back to Mosley, recorded July 3, 1928, was made in connection with the Paine settlement, whereby the Mosleys conveyed to Paine the one-fourth interest of which they still had record ownership for exactly one-half the price they had agreed to convey one-half interest. The trial court found that Paine sued the Mosleys to enforce his contract with them and that these deeds between husband and wife "were in connection with their trouble and litigation with Paine".
The cases of Kitchen v. Schuster, 14 N.M. 164, 89 P. 261, and Taylor v. Hanchett Oil Co., 37 N.M. 606, 27 P.2d 59, lay down the rule that has been adopted in this jurisdiction on the question of constructive notice (perhaps more correctly denominated "implied notice" in its application to the facts of this case. Mishawaka-St. Joseph Loan Trust Co. v. Neu, 209 Ind. 433,196 N.E. 85, 105 A.L.R. 881). The true rule to be deduced from these decisions is that absent actual notice, where the facts brought to the knowledge of the intending purchaser are such that in the exercise of ordinary care he ought to inquire, but does not, and his failure so to do amounts to gross or culpable negligence, he will be *Page 264 charged with a knowledge of all the facts which the inquiry, pursued with reasonable diligence, would have revealed. Want of ordinary care alone will not charge him. The circumstances must be such that the failure to make the inquiry suggested by ordinary care will convict the intending purchaser of gross or culpable negligence if he is to be visited with all the consequences of having made the purchase with actual knowledge of the facts. That such is the test applied in this jurisdiction as early as the decision in Kitchen v. Schuster, supra, and more recently in Taylor v. Hanchett Oil Co., supra, seems clear. Note this language of the rule, quoted approvingly in the Taylor case [37 N.M. 606, 27 P.2d 60] from United States v. Detroit T. L. Co., 200 U.S. 321, 26 S. Ct. 282, 50 L. Ed. 499, to-wit: "`the question, then, when it is sought to affect a purchaser with constructive notice, is not whether he had the means of obtaining, and might, by prudent caution, have obtained the knowledge in question, but whether not obtaining was an act of gross or culpable negligence.'"
This is what is known as the federal rule on constructive notice. We adopted it in Kitchen v. Schuster, supra, in territorial days and have reaffirmed it since statehood, in Taylor v. Hanchett Oil Co., supra, after being freed from the binding effect of United States Supreme Court decisions on such a matter. In Kitchen v. Schuster, supra [14 N.M. 164, 89 P. 265], we quoted approvingly from United States v. Detroit T. L. Co., supra, as follows: "The proper rule governing constructive notice is in our judgment stated in United States v. Detroit Co.,200 U.S. 321, 323, 26 S. Ct. 282, 285, 50 L. Ed. 499, where it is said: `When a person has not actual notice he ought not to be treated as if he had notice, unless the circumstances are such as enable the court to say, not only that he might have acquired, but also that he ought to have acquired it, but for his gross negligence in the conduct of the business in question. The question then, when it is sought to affect a purchaser with constructive notice, is not whether he had [the] means of obtaining [and might, by prudent caution, have obtained] the knowledge in question, but whether not obtaining was an act of gross or culpable negligence.'"
Cahill v. Seitz, 93 A.D. 105, 86 N.Y.S. 1009, 1013, is a case in which it was sought to charge a purchaser through a judgment roll in a foreclosure action that a guardian in socage bid in the property from the showing in said roll that the owner was an infant, that her mother and father had died intestate, and that she lived with such guardian, who was her paternal uncle, and had no other general or other guardian. The court, after stating the contention of plaintiff's counsel, said: "We feel constrained to differ with him. * * * While the rule charging people with knowledge of the law includes principles which are complex, obscure, and of infrequent application, as well as those *Page 265 which are simple and familiar, we do not think it is out of the way, in the consideration of what was a reasonable diligence in reference to this title, to bear in mind that a guardianship in socage comes by operation of law, rather than by express appointment; that it is of comparatively infrequent occurrence, and seldom becomes an important element in the transmission of titles. An attorney of average experience and expertness in examining a title might very well fail to direct his mind to the possibility of such a guardianship. We see nothing in the facts disclosed by the judgment roll, that Cahill was the uncle of and temporarily harboring plaintiff, who was an infant and an orphan, to suggest that he was her oldest and nearest relative, and therefore her guardian by operation of law. It seems to us that the facts disclosed were entirely negative upon this subject. It might just as well be thought that he was the youngest as well as the oldest uncle. In fact, the evidence given by plaintiff herself upon the trial was not altogether too clear upon this point. Neither do we think that there was anything in the purchase by Cahill of this property upon the sale which was reasonably calculated to excite inquiry and lead to information. The presumption is in favor of legal conduct, and not in favor of violations of obligations. To our mind, it was more natural for subsequent grantees to assume that Cahill, in purchasing this property, acted rightfully, and with the intention, on account of his general relationship to plaintiff, to deal with and administer the property for her ultimate benefit, than it was for them to suspect that he was so purchasing in violation of his obligations as a guardian, and to the final detriment and injury of the plaintiff."
Noticing the distinction between the rule of other jurisdictions and the rule in the federal courts which is the rule in New Mexico, the Circuit Court of Appeals for the Ninth Circuit in Tobey v. Kilbourne, 222 F. 760, 764, Ann.Cas. 1918C, 470, said: "And it is not held in the federal courts that notice of facts such as would put a reasonably prudent man upon inquiry is constructive notice of the fraud. The rule of those courts is that, where it is sought to affect a bona fide purchaser for value with constructive notice, the question is not whether he had the means of obtaining, and might by prudent caution have obtained, the knowledge in question, but whether his not obtaining it was an act of gross or culpable negligence. Wilson v. Wall, 6 Wall. 83, 18 L. Ed. 727; United States v. Detroit Lumber Co., 200 U.S. 321-333, 26 S. Ct. 282, 50 L. Ed. 499; Reed v. Munn, [8 Cir.], 148 F. 737, 80 C.C.A. 215."
Other cases sustaining my conclusion that the two defendants are in fact innocent purchasers for value without notice are Woodworth v. Paige, 5 Ohio St. 70; Hall v. Livingston, 3 Del. Ch. 348,396-398; Kennedy v. Bridge, 120 Okla. 51, 250 P. 427; Reed v. Munn, 8 Cir., 148 F. 737, 80 C.C.A. 215, certiorari denied,207 U.S. 588, 28 S. Ct. 255, 52 L. Ed. 353; Charles *Page 266 v. Roxana Petroleum Corporation, 8 Cir., 282 F. 983; Strong v. Strong, Tex.Civ. App.,66 S.W.2d 751, affirmed 128 Tex. 470, 98 S.W.2d 346, 109 A.L.R. 739.
So far as my research discloses, the rule upon the question of constructive notice as announced in United States v. Detroit T. L. Co., supra, has remained the guide for the federal courts. Certainly that case has not been overruled in its pronouncements upon the subject. Occasionally, as in Reynolds v. Moseley, 8 Cir., 32 F.2d 979, 981, a federal court will give a statement of the rule which might be deemed a variant thereof, at least as indicating that a want of ordinary care alone in noticing and following up facts "sufficient to put a reasonably prudent man upon inquiry" will charge the intending purchaser with all the consequences of actual knowledge. It may be conceded, too, that a statement of the rule such as that just phrased represents the weight of authority, and in the case of some states, at least, which follow it, obviously is based upon the language of a governing statute. See Doran v. Dazey, 5 N.D. 167, 64 N.W. 1023, 57 Am. St. Rep. 550. An analysis of any seeming departure by the federal courts from the rule as announced in the Detroit Company case will always disclose, as it does in Reynolds v. Moseley, supra, that there not only was present a want of ordinary care, but that the claimed innocent purchaser was guilty of gross or culpable negligence in failing to follow up the inquiry which the known facts reasonably suggested.
And so it is as to some of our own decisions relied upon by plaintiffs as holding that mere want of ordinary caution will bind the purchaser as though possessed of actual knowledge of the unknown facts to have been ascertained by an inquiry. In United States v. San Pedro Canon del Agua Company, supra [4 N.M. 405,17 P. 401], the court after reviewing the facts relied upon as calling for inquiry held they were "sufficient to arouse the grave suspicion of any man of ordinary prudence." To ignore "gravely suspicious" circumstances in accepting title, to say the least, amounts to "gross or culpable negligence." Even if there were inconsistency between some of the statements in that case and what was said in Kitchen v. Schuster and Taylor v. Hanchett Oil Company, supra the latter cases control, being later decisions in point of time.
The opinion in Smith Ricker v. Hill Bros., 17 N.M. 415,134 P. 243, is not in conflict with the federal rule adopted in Kitchen v. Schuster, supra. We first expressed grave doubt whether the recording statutes gave constructive notice at all of the purported chattel mortgage relied upon by appellees in the Hill Bros. case. Then, assuming applicability of the statute and that an intending purchaser saw and examined the record, we held that what such purchaser observed would have furnished no clue to the transaction between appellees' mortgagor and appellant, Duran, relied upon as constituting a sale of sheep supposedly mortgaged to appellees and that Duran's rights were unaffected by what the record *Page 267 disclosed. If there was no duty to inquire we should hardly expect to find a binding statement of the rule governing in default of an inquiry. The statement just made also is applicable to Shephard v. Van Doren, 40 N.M. 380, 60 P.2d 635, another of the cases relied upon by plaintiffs. Furthermore, a careful study of the opinions in that case and in the case of Ham v. Ellis, 42 N.M. 241, 76 P.2d 952, discloses no real conflict between them and the cases of Kitchen v. Schuster and Taylor v. Hanchett Oil Company, supra, upon the question under discussion. Indeed, Ham v. Ellis, supra, does not deal with the situation before us. What is there said concerning the duty to inquire relates to efforts to bind a principal by virtue of dealings with him through his special agent. In such cases, a strict duty of investigation as to the limits of the agent's authority is the rule. Ham v. Ellis, supra, and cases cited.
The majority say they will postpone to another day and decide when the occasion arises whether the federal rule, applied in Kitchen v. Schuster, supra, and later deliberately adopted in Taylor v. Hanchett Oil Co., supra, remains the law of this state upon the question of constructive notice; or, whether the test of ordinary care, approved in the old case of United States v. San Pedro Canon del Agua Co., 4 N.M. 405, 17 P. 337, decided long before the Kitchen and Taylor cases, is to govern upon the question. As already shown in my discussion of the Canon del Agua case, supra, the facts warranted a finding of gross or culpable negligence. The prevailing opinion thus takes notice both of the ordinary care rule mentioned in the Canon del Agua case and of the federal rule adopted in Kitchen v. Schuster and Taylor v. Hanchett Oil Co., supra, expresses no preference for either and finally proceeds to decide this case without disclosing which rule it follows. If applying the ordinary care rule set forth in the Canon del Agua case by the early territorial court, then the later Kitchen and Taylor cases following the federal decisions are overruled. If they are to be overruled this truly is not a case calling for any such declaration.
Turning now to an application of the principles discussed to the facts of this case. The decisive inquiry is whether the defendants were guilty of gross or culpable negligence in failing to follow up known facts. If not, obviously they are not to be charged in law as possessing actual knowledge of facts of which they admittedly were ignorant in fact. Want of ordinary care may be assumed but under our rule we must go further and determine whether it amounted to gross or culpable negligence. It may be conceded at the outset that the Mosleys' act in contracting the sale of a one-half interest in the minerals to Paine when the abstract disclosed ownership of only a one-fourth interest, unexplained, would reasonably suggest dual contingencies. The one first and the more naturally arising in the mind of the title examiner is that of innocent mistake — forgetfulness on the part of vendors as to exact quantity of fractional *Page 268 interests already conveyed or on the part of the scrivener in writing in the quantity of interest intended to be conveyed. The second contingency, although more remote, which ought also to have suggested itself to the mind of the careful title examiner, is the question whether the deeds abstracted spoke the truth with reference to interests already conveyed. Were such deeds or any of them forgeries? Were any of them materially altered or surreptitiously delivered? Because of the sinister implications attending indulgence of this thought as a possible explanation of the Paine contract, as already indicated, it naturally would assume less importance or predominance in the title examiner's mind as the true explanation than the one first suggested — innocent mistake.
Proceeding from this point, however, the instruments abstracted in connection with the Paine transaction, instead of setting the examiner out upon an investigation, were actually calculated to dissipate the examiner's fears that a sinister explanation existed and to confirm the more natural assumption that contracting the sale of the one-half interest was explainable upon the innocent ground of mistake or inadvertence. Subsequent to making the Paine contract, and almost coincident with Paine's suit against the Mosleys for breach thereof the abstract discloses a conveyance from Mosley to his wife and later from the wife back to Mosley, each describing the interest conveyed as one-half. Then following the Paine suit, a conveyance from the Mosleys to him of a one-fourth interest in the minerals. Thus in spite of an apparently excessive claim of interest on the part of the Mosleys in the Paine contract and in the interchange of deeds between husband and wife, the whole transaction ends with a conveyance by them to Paine of an interest in exact accord as to quantity with the interest shown by the abstract to remain in them, viz., one-fourth.
Was it bad faith for the examiner to conclude in view of the circumstances that the Mosleys, having discovered their mistake in contracting the sale of an excessive interest and having been sued by Paine on account thereof, settled and compromised the suit and secured its dismissal by a conveyance to Paine of the interest actually owned? I think not where, as here, the examiner was absolutely correct in the conclusions drawn. Cf. Magee v. Miller, 37 N.M. 293, 22 P.2d 118. This much is absolutely certain, if we are to give effect to the trial court's findings, and it is that contracting the sale of a one-half interest to Paine was due to mistake on the Mosleys' part. The trial court rejected the story of the plaintiffs that they sold only a one-fourth interest to Asbury, giving him a duplicate copy of the deed which had been raised to a deed for a one-half interest with Burke's name substituted as grantee. It found on the contrary that plaintiffs had actually sold a three-fourths interest — a one-fourth interest being described in one deed and a one-half interest in the other. It was this latter deed in which Burke's name was substituted as grantee. *Page 269
Accordingly, when the Mosleys contracted to sell a one-half interest to Paine they should have known that they already had executed deeds conveying away interests totaling three-fourths. They should have remembered that they had received the agreed purchase price of eight hundred dollars for such interests and still retained it. They had every reason to believe they had forever parted with title to that three-fourths interest and absolutely no reason to think otherwise. They then were wholly ignorant of an admittedly unusual chain of circumstances under which by accident of governing legal principles applicable to the situation, title remained in them to the one-half interest already validly conveyed so far as they knew.
Hence, their claim to a one-half interest reflected from the Paine contract, and the deed made by Mosley to his wife in an effort to avoid it, had no connection whatever in fact with the material alteration of their prior deed before delivery by the substitution of Burke's name as grantee. They had never heard of it. No explanation of the Paine contract is at all possible under the court's findings than that of mistake. And when the idea of mistake entered the title examiner's mind as the most plausible, even if not the only explanation of the Paine contract and the interchange of deeds between Mosley and wife, he was fortunate enough to have surmised what indeed was the true explanation. Upon the question of even ordinary care, I repeat again a short excerpt from Cahill v. Seitz, supra: "While the rule charging people with knowledge of the law includes principles which are complex, obscure, and of infrequent application, as well as those which are simple and familiar, we do not think it is out of the way, in the consideration of what was a reasonable diligence in reference to this title, to bear in mind that a guardianship in socage comes by operation of law, rather than by express appointment; that it is of comparatively infrequent occurrence, and seldom becomes an important element in the transmission of titles."
Certainly, the unusual chain of circumstances which eventuated in title remaining in plaintiffs by operation of law is of "comparatively infrequent occurrence". The possibility of it or of the existence of other facts resulting in the nullity of one of the deeds abstracted is to be weighed, as pointed out in Cahill v. Seitz, supra, in the light of the rule that "the presumption is in favor of legal conduct, and not in favor of violations of obligations." See also Smith Ricker v. Hill Bros., 17 N.M. 415, 134 P. 243, and Shaw v. Board of Education,38 N.M. 298, 31 P.2d 993, 93 A.L.R. 432.
Furthermore, the known facts about the Paine contract, including the deed Mosley made to his wife in an effort to avoid it, afford no clue to, nor bear any natural and reasonable connection with, the ultimate fact, viz., the alteration of the Burke deed before delivery, which operated by accident of law to leave plaintiffs still invested with the title. In 46 C.J. 547, § 35, under the *Page 270 subject "Notice", sub-heading "Relation of Known Facts to Ultimate Facts", it is said: "The rule imputes notice only of those facts that are naturally and reasonably connected with the fact known, and of which the known fact or facts can be said to furnish a clue. It does not impute notice of every conceivable fact and circumstance however remote which might come to light by exhausting all possible means of knowledge." Cf. Smith Ricker v. Hill Bros., supra.
The language of the Supreme Court of Oklahoma in Kennedy v. Bridge, supra, is pertinent to the rule just expressed. In that case the plaintiff, a good faith purchaser of the lot in question, sued defendants in ejectment. The plaintiff's position was invulnerable unless the construction of a garage on the rear of said lot by the owner of an adjoining lot and the projection over the property line of his small office building, through mistake, made the lot an "occupied lot" and put the plaintiff upon inquiry which likely would have resulted in a disclosure of the ownership of the lot by defendants under a verbal trust. The court rejected the contention of defendants with comment as follows [120 Okla. 51, 250 P. 429]: "J.W. Adams testified that there was nothing on the property at the time he purchased it. Dr. E.F. Nickells testified that through error and mistake he built his office in part upon the lot in question, thinking that he was building it upon his own lot, and without any intent on his part to construct the building on the lot in question; that he constructed the little garage under the same circumstances; and that he had never at any time paid any rent to anyone for the use of the lot. This evidence, we think, reasonably tended to show that the lot in question was vacant at the time the plaintiff obtained his deed on October 15, 1924, or, if it was not unoccupied, that the possession of Dr. Nickells was purely accidental, and in no way connected with the claim asserted by defendants. The fact that Dr. Nickells, in attempting to take possession of his own property, inadvertently located his office and garage upon the lot in question would not suggest any connection between that fact and an outstanding claim asserted by some third party to said lot so as to require a purchaser to make inquiry concerning such claim."
Here, too, it may be said that the apparent claim to ownership of a one-half interest reflected by the Paine contract "was purely accidental and in no way connected with the claim asserted by plaintiffs."
The conclusion follows that under all the circumstances the defendants were not guilty of gross or culpable negligence in failing to pursue the inquiry suggested beyond the explanation afforded by the abstract itself. While it is true some apprehension of danger in the possible invalidity or nullity of the deed for one-fourth interest to Asbury and Bates or for the one-half interest to Burke would arise, nevertheless, involving as it did implications of fraud and even of criminal conduct, it naturally would seem more *Page 271 remote than the likelihood of mistake or inadvertence. Weighing these possibilities, the examiner then came across entries in the abstract itself — the dismissal of the Paine suit and the deed to Paine of a one-fourth interest — which were calculated to allay the suspicion of fraud and to confirm the idea of mistake. Under the unusual situation here disclosed, the defendants were not grossly or culpably negligent in failing to investigate beyond the facts disclosed by the abstract, a conclusion necessary to charge them with actual knowledge that the Burke deed was materially altered before delivery. In other words, there was no bad faith and under the authorities cited, supra, which apply the federal rule adopted in this jurisdiction, gross or culpable negligence is treated in effect as the equivalent of bad faith.
This leads to the conclusion that the defendants are innocent or good faith purchasers. In other words, they did not purchase in bad faith and, therefore, are entitled to invoke the defenses of laches and estoppel. Of course, they are not innocent purchasers in the sense in which the phrase often is used, as affording a complete defense, merely by virtue of that status, against hidden or unknown equities in property conveyed. There cannot be an innocent purchaser in that sense claiming under a forged or otherwise void deed. The defendants do not even claim to be innocent purchasers under the Burke deed in that sense, but only in the sense in which the expression is used in 16 A.J. 452, Deeds, § 27 (quoted in the prevailing opinion), where it is said: "A forged deed, in the sense defined above, is absolutely void and wholly ineffectual to pass title, even to a subsequentinnocent purchaser from the grantee under such forged deed." (Italics mine.) See, also, Id. § 28 for another and similar use of the phrase. It is only in the sense in which the authors of the text just quoted use the expression, that it is here employed. But if defendants are innocent or good faith purchasers in this sense, they may rely upon laches and estoppel.
All of us agree that mere proof that a purchaser under a forged or otherwise void deed bought in good faith and without notice of any vice in the deed to his grantor, does not make him an innocent purchaser in the sense in which that phrase is often used, viz., as one who has complete protection by virtue of his standing as such. Now, we are agreed on that. We are also agreed that the Burke deed was void and conveyed no title. The facts show that Mosley knew the altered deed was of record more than a year before Reynolds purchased for General Crude Oil Company. Assuming what I maintain, that Reynolds is an innocent purchaser in the sense stated, let us suppose that Mosley, with knowledge of the nullity of the Burke deed, had stood by, observed and heard Burke selling the property to Reynolds and Reynolds paying over to Burke the ten thousand dollar purchase price and that Mosley offered no word of protest nor in any fashion challenged Burke's right to convey. Would anyone contend for a moment that equity would later permit Mosley to assert his *Page 272 title against Reynolds? Certainly not. Its refusal to extend him aid would not be because of Reynolds' standing as an innocent purchaser alone, but that status plus his, Mosley's, conduct. However, if Reynolds at the time knew facts of such strength that his purchase amounted to bad faith, then not being an innocent purchaser, he could not raise up equities in his behalf in reliance upon estoppel or laches.
At this point, I must express my disagreement with the majority statement, considered in all its implications, that "we are not permitted to add to or take from the findings by resort to the opinion of the district court or to the testimony" and that an opinion of the trial court "adds nothing to the facts of the case". Of course, it is not meant that upon a challenge to the sufficiency of the evidence to sustain the findings, the testimony may not be looked to for substantiality. Furthermore, in support of a judgment, but not in derogation of it, where the findings made are silent on a material issue, a finding on such issue favorable to the judgment will be presumed, if supported by the evidence. Naturally, the evidence must be examined in such a case to ascertain whether it will support the presumed finding. This is entirely logical since a general finding only is a finding of every material issue for the party in whose favor the general finding is made. And as to material issues upon which the findings are silent the judgment amounts to a general finding. Every presumption is indulged in support of the judgment. This is one of them.
Neither do I think the opinion of a trial court is as unimportant as may be inferred from the prevailing opinion. True, the trial court is not required to write or file one, but if it does, under our own rules, it must be incorporated in the transcript as a part of the record proper. Supreme Court Rule XIV, § 3. We may resort to it or to the testimony to explain inconsistent, indefinite or ambiguous findings, or to explain the trial court's theory. Hartzell v. Jackson, 41 N.M. 700, 706,73 P.2d 820; National Liberty Ins. Co. v. Silva, 43 N.M. 283,92 P.2d 161.
I agree with the majority that the opinion of the trial court, when filed, is not the "decision" contemplated by 1929 Comp., § 105-813, but I do not concede what might be inferred from their statement, viz., that if findings be irregularly included in the opinion, as is sometimes done by trial judges, that we must or may ignore them. We may adopt a rule to that effect later but we have never done so yet. If findings of fact are found in an opinion we have a right to consider them and in the interest of justice should do so. The cases are many in which we find just this situation to exist. The trial judge will combine in one document his findings, conclusions and opinion, as in the case at bar. Often they are interspersed until it is difficult to tell where findings end and opinion begins. It is a loose practice and not to be commended but a change in our policy toward it should come by rule, not by decision where the rights of the parties are affected. *Page 273
A brief consideration of the action of the majority in canceling finding No. 9 may illustrate my meaning. This finding, so far as material, reads: "9. That the price received for said mineral interests was the fair market value thereof at the time of the sale, but that in the year 1936, three oil wells were brought in on said land by the lessee thereof, the Humble Oil Refining Company; and that the defendants herein and their successors in interest have collected the annual rentals thereof continuously since said date;"
The trial court attached some significance to the fact that plaintiffs had stood by for several years with knowledge that the altered deed was of record and acquiesced in the payment of annual rentals or lease money to the grantee named in it or those claiming under him when plaintiffs themselves were the ones entitled thereto if standing upon the invalidity of the altered deed. For whatever basis this finding may have in the evidence as support for the judgment rendered, it is disregarded as foundfacts by the total abrogation of the finding in the prevailing opinion. The portion of it supported by undisputed evidence is considered, when established by the record, not cumpulsorily, but only as a matter of grace on the part of this court.
The strictness with which the prevailing opinion appraises the findings of the trial court is a new doctrine to me. I do not believe any previous decision of this court will support so severe an appraisal of findings which presumptively support the judgment under review. Heretofore, the record upon which findings are based has been deemed a vast reservoir of support for but not against the judgment and the findings upon which it rests.
The cancellation of finding No. 9, heretofore discussed, is but a single instance of this technical treatment of findings. But there are others. The prevailing opinion asserts "the trial court concluded in his opinion, though not by his decision, that defendants were `bona fide purchasers for value without notice', and the parties have treated it as a part of the decision, and it is so presented here. We will so treat the question". However, the court expressly found in the 15th paragraph of its decision (findings and conclusions) that "the Magnolia Company bought without knowledge, either express or implied, of any of said changes" (alterations). Furthermore, in several instances, there is found in the opinion part of the document entitled "Findings of fact, Opinion and Conclusions of Law", what is essentially a finding of fact, or mixed finding and conclusion, that both defendants are "purchasers in good faith without knowledge of any wrongful delivery of the deed, or of any adverse claims of the plaintiff(s)". Although, as the prevailing opinion states, this will be treated as a part of the decision (findings, etc.), again is this done, not as the defendants are entitled to have it treated as a found fact, as a matter of right, but only as a concession on the part of the court and a matter of grace or discretion. *Page 274
This is an unusual case. There is not another like it in the books. It is not the case of an innocent owner about to lose his estate through a forged deed. In the ordinary case of a forged deed the true owner is about to be defrauded of his estate or some part of it. He has never agreed to sell to anybody and has received nothing on account of a pretended sale. Here the plaintiffs did sell at a price agreeable to them. They received and still retain the purchase price. It is only by accident of the law (an application of the penalty doctrine) that they find themselves still invested with the legal title. This doctrine is penal and exemplary. It does not exist for the special benefit of him whose writing is materially altered. He derives an advantage, it is true, but only in furnishing an example to the public at large. If other proof of this were needed beyond the force of the statement itself, it is rendered conclusive, by recalling that the alteration is deemed material even though the change may be to the maker's financial advantage, as in reducing the rate of interest or the amount of his obligation, if made without his consent. 3 C.J.S. 948-950, §§ 33 and 35, under title Alteration of Instruments.
Under such circumstances, where by accident of a doctrine not intended for his special benefit, an owner finds himself still possessed of title to property which he has sold and attempted to convey and for which he has been paid the agreed purchase price, which he still retains, it is my idea that equity should require of him unusual diligence in the assertion of his claims of ownership thereto and the chancellor should not hesitate to base estoppel upon any equivocal conduct, significant silence or unusual delay on his part, to protect the rights of innocent purchasers of the same property.
It seems unjust and unfair to me to permit an owner even as against a forged or otherwise void deed placed of record and bearing all earmarks of authenticity and genuineness to sit idly by and permit an unsuspecting public to deal with the property and invest upon the faith of the apparent verity of such an instrument. The injustice is emphasized by the fact that no longer as of old is it the usual practice for the vendor to pass along to the vendee for inspection all original muniments of title. Such was the rule and practice in the early periods of conveyancing. In such circumstances the purchaser or his attorney had the opportunity to inspect the original instrument for evidences of fraud, forgery or alteration. But in the multiplicity of transfers of a given piece of property in the commercial minded world of to-day this practice is found no longer feasible and is not generally followed. All of us know that millions are invested daily in America upon the faith of the genuineness of instruments duly recorded as reflected by certified abstracts thereof. Considered in the light of this universal practice and in view of the further fact that instances are rare in which an owner of property is sought to be defrauded of it by virtue of a forged, altered or undelivered deed, it seems only fair to apply a liberal doctrine of laches to *Page 275 such a situation in favor of the innocent purchaser.
There are well reasoned cases sustaining the conclusions announced. Most of them are cases wherein a deed has been wrongfully or fraudulently taken from escrow and placed of record. Then the rights of innocent purchasers dealing with the property upon the faith of it have intervened. It is uniformly held that such a deed for want of proper delivery passes no title and is wholly null and void. In many of the cases the purported deed is likened in effect to a forgery. And, yet, due to delay, acquiescence, or other equivocal conduct, the courts have not hesitated to hold the true owner estopped to assert his title against an innocent purchaser of the property. See McConnell v. Rowland, 48 W. Va. 276, 37 S.E. 586; Haven v. Kramer, 41 Iowa 382; Connell v. Connell, 32 W. Va. 319, 9 S.E. 252; Mays v. Shields, 117 Ga. 814, 45 S.E. 68; Pittman v. Sofley, 64 Ill. 155; Quick v. Milligan, 108 Ind. 419, 9 N.E. 392, 58 Am.Rep. 49; and an excellent annotation in 48 A.L.R. 405 under subject "Effect of unauthorized delivery or fraudulent procurement of escrow on title or interest in property". At page 425 under the sub-topic "Estoppel, Waiver or Ratification" will be found discussed some of the cases just cited.
In Mays v. Shields, supra, the Supreme Court of Georgia, said [117 Ga. 814, 45 S.E. 69]: "There was no instruction that, if Shields subsequently ratified the delivery, the deed would become valid, nor was the jury told that if, with knowledge that thedeed was on record, Shields took no steps to have the recordexpunged, he would be estopped from denying the title of aninnocent purchaser buying on the faith of the record. Where a grantor delivers a deed in escrow, and learns that it has been improperly delivered to the grantee, or that it has been recorded, he must at once take steps to prevent innocent third persons from acting to their injury. Such knowledge would bring the case within the rule as to which of two innocent persons must suffer. Id. §§ 3937, 3940." (Italics mine.)
See, also, Costello v. Meade, 55 How. Prac., N.Y., 356.
In most of these cases possession followed the deed and, of course, involving property capable of physical possession, influenced the decision reached. But that possession is not a controlling factor where the property is of a kind that cannot be physically possessed, or is unoccupied and no one is in the actual visible possession of it, is also established by sound reason and authority.
In Allen v. Powell, 65 Ind. App. 601, 115 N.E. 96, 100, the court dealt with a case somewhat similar to the one at bar. The plaintiff claimed the deed was surreptitiously abstracted from her handbag and the name of the grantee inserted therein. The rights of an innocent purchaser from such grantee arose. The court said:
"It is a conceded fact that regardless of the means by which Crawford possessed himself of the deed involved here, appellee *Page 276 on or about July 31st had full knowledge of the state of the record in the recorder's office, and that some innocent person might be deceived to his injury thereby. Such a situation is sufficient to present the question recognized by the court in the instruction under consideration, whether appellee is estopped by her conduct on that occasion and subsequent thereto to deny the validity of the deed as against innocent purchasers. * * * In either case, she having acquired full knowledge of the facts on or about July 31st, the question is presented whether her conduct or inaction thereafter under all the circumstances, including the element of time, amounted to such negligence or such a breach of duty owing to others as that it may be said that she by her conduct enabled the injury to be inflicted, and that as a consequence she was estopped to deny the validity of the deed as against appellants.
"It has frequently been held that where a person named as grantee in a deed, in the absence of a legal delivery or of an intent to deliver it, wrongfully obtains possession of it and causes it to be recorded, the grantor, having or obtaining knowledge of the facts, is required to take steps promptly toprevent innocent third persons from acting to their prejudice inreliance on the record, and that by failing to do so, such grantor will be held guilty of such laches or such negligent conduct as will stand as a barrier to his asserting title as against such an innocent purchaser. See the following: Mays v. Shields, 117 Ga. 814, 45 S.E. 68; Pittman v. Sofley, 64 Ill. 155; Haven v. Kramer, 41 Iowa 382; McConnell v. Rowland, 48 W. Va. 276, 37 S.E. 586; Costello v. Meade, 55 How.Prac. (N.Y.) 356; Johnson v. Erlandson, 14 N.D. 518, 105 N.W. 722; Breeze v. Brooks, 22 L.R.A. 256, note; Quick v. Milligan, 108 Ind. 419,9 N.E. 392, 58 Am.Rep. 49. In a number of the foregoing someimportance is attached to the fact that possession followed theconveyances involved, but we do not regard such element ascontrolling where, as here, the real estate conveyed isunoccupied and no person is in the actual visible possession ofit. * * *
"`Delay in the assertion of a right, unless satisfactorilyexplained, operates in equity as evidence of assent, acquiescenceor waiver.' Connell v. Connell, 32 W. Va. 319, 9 S.E. 252." (Italics mine.)
Johnson v. Erlandson, 14 N.D. 518, 105 N.W. 722, 724, is another case supporting the view of the Indiana Court in Allen v. Powell, supra, that possession is not a controlling element where the land is unoccupied and no person is in the actual visible possession of it. In this case the deed was fraudulently delivered and placed of record. The court said: "There is a conflict of authority on the question as to whether an unauthorized delivery of a deed held in escrow conveys any title even in favor of an innocent purchaser. We express no opinion on that question, as we are satisfied that upon the evidence in this case it must be held that the defendant is estopped by his own negligence to deny Baker's right to convey to plaintiff. The *Page 277 deed from defendant to Baker was taken from the custody of the depository and recorded September 28, 1892. The defendant was fully aware of that fact within a very short time after it occurred. He made occasional demands upon Baker for a reconveyance, but permitted himself to be lulled into inaction by Baker's promises to reconvey or settle in some other manner. The defendant's action after he discovered the abstraction and recording of the deed is such that it gives, at least, ground to the claim that he ratified the unauthorized delivery and accepted Baker's promise of compensation for the land. He never paid any taxes on the land, or exercised any dominion over it, and knowingly permitted Baker to hold himself out to the world as the rightful grantee. This condition of affairs had existed for about two years before plaintiff purchased. Since that time defendant has never attempted to assert his right to the land until this action was commenced. Meanwhile Baker had died. * * * Mays v. Shields, 117 Ga. 814, 45 S.E. 68; Costello v. Meade, 55 How.Prac. (N.Y.) 356; Haven v. Kramer, 41 Iowa [382] 384; Quick v. Milligan, 108 Ind. 419, 9 N.E. 392, 58 Am.Rep. 49; Connell v. Connell, 32 W. Va. 319, 9 S.E. 252."
The doctrine of Allen v. Powell and Johnson v. Erlandson, supra, is peculiarly applicable to the present case. The subject of the sale by the Mosleys was a mineral interest, incapable of physical possession. "In fact, however, no one had * * * possession of the fugitive oil apart from the lands under which it lay." Thompson, Trustee v. Magnolia Petroleum Co.,309 U.S. 478, 60 S. Ct. 628, 630, 84 L. Ed. 876. When the defendant, General Crude Oil Company, purchased the one-half interest from Burke on July 19, 1929, the Mosleys had parted with title to and possession of the surface and had executed deeds conveying away the entire mineral interest. No one was in physical possession of the mineral content of the land nor could be and the only right of occupying the surface for exploratory purposes was in Humble Oil Refining Co., lessee under an oil and gas lease under which no operations had been begun as yet. Collier v. Collier,184 Okla. 38, 84 P.2d 603. This being the situation, the plaintiffs stood by for more than a year prior to the purchase by defendants with full knowledge that Burke was not their grantee and did nothing to challenge his record right to sell and convey to innocent purchasers. In so doing they invited the public to invest on the faith of it and are not entitled to the aid of equity in upsetting the result their own inaction encouraged.
This was a duty resting upon plaintiffs to take action before the purchase by defendants. If they had moved promptly, upon learning of it, to challenge the verity of the Burke deed, or at least, within a reasonable time under all the circumstances (which may be a very short time), the ten thousand dollars laid out by defendants on the faith of its record would never have been expended. But when there is added to this inaction for more than a year *Page 278 approximately six years of further delay and inaction before the institution of suit, during all of which time the property was known by plaintiffs to be rapidly appreciating in value and during the last four years of which time they acquiesced, without protest, in payment of annual rentals to defendants as the true owners of the interests now adversely claimed by plaintiffs, it is simply incomprehensible to me that equity should not hold them barred by laches.
At the time the property was sold by Mosley to Asbury, according to the court's finding, it had a reasonable value of $800. This embraced a three-fourths interest in the minerals. In June, 1928, a one-fourth interest was sold by Mosley to Paine for $1,000. In June, 1929, Burke sold his one-half interest for $10,000. At the time this suit was instituted the property was of the value of $20,000. At the time of the trial it was worth considerably more and still more at this time as all counsel agree it has several producing wells on it.
The suit was actually brought approximately seven years after the Mosleys discovered these deeds on record. The lapse of time had been so great that the notary public who took the acknowledgements to the deeds in question had no independent recollection of the transaction and had to rely upon his record which was incomplete. The witness Hitson, assistant cashier of the escrow bank, shows by his testimony that he had no independent recollection of the transaction, and the attorneys to whom Mosley related the circumstances of his case, Stagner and Neal, testifying by consent of all parties, stated their recollection was hazy as to what he told them although quite sure he then made no claim of having sold only a one-fourth interest. The witness Burke testified his recollection was vague as to what happened at the time he purchased the property. In fact the testimony of all the witnesses concerning this transaction showed the effect of the lapse of time. In addition, both banks handling the transaction had closed, and the records relating to it had been misplaced or destroyed.
The principles here applicable in favor of good faith purchasers have been invoked so often in equity as to amount almost to truisms. In 21 C.J. 225, Sec. 220, under the topic "Equity", the author states: "A person may not withhold his claim, awaiting the outcome of an enterprise, and then, after a decided turn has taken place in his favor, assert his interest, especially where he has thus avoided the risks of the enterprise. Accordingly, if the property involved is of a speculative or fluctuating character, more than ordinary promptness is required of a claimant; he must press his claim at the earliest possible time. This rule is applied with great strictness in the case of mining property, since it is of specially precarious nature, and is exposed to the utmost fluctuations in value."
Again at 21 C.J. 231, § 225, it is said: "If, in the course of an inexcusable delay in the assertion of a right, changes occur *Page 279 in the subject matter of the transaction in suit or in the relative positions of the parties thereto, as a result of which it is impossible to place the parties in statu quo, and the enforcement of the right would work inequity, relief will be denied because of laches. Prejudice to defendant may prevent relief whether the change in circumstances is the result of the delay itself, or is due to the voluntary act of defendant, provided he acted without notice of plaintiff's rights; if he had notice thereof he cannot assert prejudice."
See also Patterson v. Hewitt, 11 N.M. 1, 66 P. 552, 55 L.R.A. 658, affirmed 195 U.S. 309, 25 S. Ct. 35, 49 L. Ed. 214; Little Bill v. Swanson, 64 Wash. 650, 117 P. 481; Felix v. Patrick,145 U.S. 317, 12 S. Ct. 862, 36 L. Ed. 719; Weniger v. Success Mining Co., 8 Cir., 227 F. 548; Holman v. Gulf Refining Company, 5 Cir.,76 F.2d 94.
Special attention is directed to the cases of Macomber v. Kinney, 114 Minn. 146, 128 N.W. 1001, 130 N.W. 851, and Mohlis v. Trauffler, 91 Iowa 751, 60 N.W. 521. These cases are perhaps as closely related to the one at bar as any to be found in the books. Each of them dictates an affirmance of the judgment reviewed upon the doctrine of laches and estoppel. The similarity in the contentions of the plaintiffs here and of the plaintiff in the Macomber case is reflected by the following quotation from the opinion, to-wit [114 Minn. 146, 128 N.W. 1003]: "Plaintiff's contention is this: That estoppel rested on the mere silence or inaction of plaintiff. The plaintiff had in no wise made any active misrepresentations. Alworth and those whose title was of the same kind did not claim that they were induced to purchase or expend money in reliance on any word or conduct of plaintiff. The state of the records was a sufficient warning to the general public, and of itself showed that he owed no especial duty to the public or to any particular person to take any step to clear his title or in any wise to protect his interest. The law makes no provision for filing or recording of declarations of title, or of claims to title, nor of affidavits as to forgery. Nobody relied on plaintiff's silence or was misled by it. On the contrary, defendants clearly appear to have relied on the record, and on the attorney's opinion that the title was valid. In consequence it is insisted that plaintiff was not estopped." Many authorities are reviewed and the court's holding is epitomized in the following paragraph of the syllabus to the case, to-wit: "One who is in possession of land, or who has recorded his title, is ordinarily under no obligation to speak or take any action concerning a defect in his title. But if one not in possession has an interest in land which does not appear on record, fails to disclose it, and stands by and suffers the estate to be sold and improved with knowledge that the title had been mistaken, he will not be allowed to assert his claim against the purchaser. Gregg v. Von Phul, 1 Wall. 274, 17 L. Ed. 536, followed and applied."
It is my conclusion that plaintiffs are barred by laches from asserting against *Page 280 defendants the title remaining in them by reason of the material alteration prior to delivery of the escrow deed. In so concluding, I am not unmindful of our statement in Algodones Land Company v. Frank, 21 N.M. 82, 153 P. 1032, 1034, that "mere lapse of time gives no ground for the application of the doctrine" of laches. But here we have something more — rapid and extraordinary appreciation in the value of property having a highly speculative character; loss of records incident to closing of banks and unsatisfactory testimony due to faulty memories consequent on the lapse of time. Under some of the text statements and cases cited, supra, silence and inaction over an appreciable period of time as respects property that has greatly enhanced in value have been considered of major significance in applying laches.
If, with knowledge of the alteration, plaintiffs had stood by and, without protest, had observed defendants making large expenditures for improvements, it could not successfully be contended the plaintiffs were not estopped. Pray, wherein is the difference between the supposed factor and what actually happened? The plaintiffs did stand by for almost seven years and watch the property appreciate in value by leaps and bounds due to its oil possibilities — thousands upon thousands of dollars in value being added yearly — and, yet, they reserved this claim within the secrecy of their own bosoms until oil had been discovered so near the property as to render almost certain the presence of oil under it. Then, they struck. Where is the difference in legal effect between the loss to an innocent purchaser of thousands of dollars in enhanced value and its loss in physical improvements? I see none.
If this be not enough to deafen the chancellor's ears to plaintiffs' importunities, as it did below, then their failure to offer to do equity by returning the purchase price while reclaiming its quid pro quo, debars them under every maxim of equity with which I am familiar and every system of jurisprudence from the Mosaic down to the present time.
Would the majority contend the plaintiffs not bound if with actual knowledge of just what did occur — a material alteration before delivery — they had accepted the eight hundred dollars? Suppose, upon returning to the bank Asbury and Bates had explained to the Cashier just what had occurred and he in turn upon tendering the money to plaintiffs likewise had informed them. Could they accept the money and then challenge the deed? All the books and all the cases heretofore have said, "No". Under the authorities, retention of the consideration by plaintiffs, even after full knowledge of the facts, would confirm delivery to Asbury, the grantee first named in the Burke deed, from whom title would pass by the quit claim deed in evidence, procured pending suit, from Asbury to defendants. Certainly, it estops plaintiffs from asserting title against defendants.
It may be argued that if plaintiffs owe anybody a return of this money, it is to Asbury, the original grantee in the altered deed, *Page 281 and not to Burke or to the defendants; and, secondly, that the failure to tender back could not constitute estoppel by conduct or ratification because both presuppose knowledge of all the facts and admittedly plaintiffs first learned that the alteration occurred before delivery from the opening statement of defendants' counsel at the trial. But they knew it then, didthey not? There was still time to amend and offer to do equity. There was yet time to be just, or to pretend to be.
It is easy to understand why plaintiffs did not offer to restore. They had presented a theory in the facts which, if true, did not call upon them to restore. The case had not yet been tried. To offer to restore might raise a question in the trial court's mind as to the truth of the story that they sold only a one-fourth interest, for which they were to receive eight hundred dollars. They went to trial upon that theory. The trial judge rejected it as untrue. If untrue, the plaintiffs knew it was so from the beginning and equity does not absolve those seeking its aid from duties arising on facts found to be true because of embarrassment incident to the making of allegations found to be false.
Yet, not to this good day have plaintiffs offered to pay into court for whomsoever may be entitled thereto the money which paid for the property they seek to reclaim. It is no answer to say it belongs to Asbury. He was a party defendant. Although in default when plaintiffs learned the time of the alteration, the money could have been tendered for his benefit if found to be the one entitled thereto. If to accept the money after knowledge of the facts would bind plaintiffs, a conclusion not open to challenge, retaining it after such knowledge is and should be of like effect. Warren v. New York Life Insurance Co., 40 N.M. 253,58 P.2d 1175; Albarado v. Chavez, 36 N.M. 186, 10 P.2d 1102. The trial court did not find and the majority do not contend, however wrongful and unauthorized the act, that Asbury and Bates intended to perpetrate a fraud on the Mosleys in altering the deed as they did. Whether the trial court accepted the explanation of Asbury and Bates that they had previously sold royalty to Burke and knew his attorneys would not accept a deed showing Asbury as grantee without a new abstract or certificate from Lea County incorporating it; and knew that Burke's attorneys would not pass a mineral deed if the fractional interests were stated in figures instead of words and that such attorneys required land descriptions to be written in full and not abbreviated, we do not know. We do know there was no finding of fraudulent intent.
All the authorities hold that a party may not in equity recover property for which he has been paid without tendering back the purchase price. In other words, a party may not have both the property and the money paid him for it. See Oland v. Malson,39 Okla. 456, 135 P. 1055; Cotton v. Gregory, 10 Neb. 125,4 N.W. 939; Harris v. Geneva Mill Co., 209 Ala. 538, *Page 282 96 So. 622; Spokane Valley State Bank v. Lutes, 133 Wash. 66, 233 P. 308; Gochnauer v. Union Trust Company, 225 Pa. 503, 74 A. 371; Hansen v. Bellman, 161 Or. 373, 88 P.2d 295. See, also, exhaustive note in 130 Am. St. Rep. 910 (Art. XI, page 971), and 19 Am.Jur. 443, § 24, under title "Escrow".
The statement of the text in American Jurisprudence, just cited, concerning the effect of conduct which will estop the true owner from assailing a deed fraudulently delivered from escrow, is just as applicable to the rights of innocent purchasers in relation to a deed materially altered. The author declares: "The rule that a fraudulent delivery by, or procurement from, the depositary of a deed deposited in escrow will not operate to pass the title, even in favor of a subsequent purchaser in good faith without notice, does not extend to enabling the grantor to recognize or affirm the grantee's possession of the instrument as valid for some purposes and to disclaim such instrument as being nugatory for all others, especially when to do so would result in injury to an innocent party."
"The right to rely upon the fact of the material alteration of an instrument as a defense against an action thereon may be waived by one in whose favor such right exists, or a party to an altered instrument may, by his silence or conduct, which misleads another to his prejudice, estop himself from asserting the invalidity of the instrument by reason of the alteration." 2 Am.Jur. 628, § 40.
Oland v. Malson, supra, involved the improper delivery of a deed held in escrow. Pertinent remarks of the court touching the question now discussed are as follows [39 Okla. 456, 135 P. 1056]: "Considering the many claims of the parties, pro and con, as shown in the pleadings, and the rather involved character of the issues presented, this case presents difficulties; but it is apparent at a glance that the disposition of this case made by the trial court cannot be allowed to stand. It cannot be right,in either law or morals, for the defendant in this case to get the $900 paid him early in 1910, together with the $1,400 and interest placed to his credit in 1911, and retain same, [and] also have awarded to him the farm with its revenues for those two years. A statement of the proposition defeats it." (Italics mine.) In that case, as here, as said by the court, "defendant [plaintiffs here] makes no further mention of the $900 paid him, nor does he offer to return the same". And here, as there, "it cannot be right, in either law or morals", for the plaintiffs to eat their cake and have it, too; to recover the mineral interest from innocent purchasers while retaining the money paid them for it.
Cotton v. Gregory, supra, is particularly applicable in that there the former owner was held estopped from challenging delivery of the deed by accepting and retaining the purchase price of one lot, title to which was deraigned by a subsequent purchaser under the void deed. If, as the Nebraska court correctly held, the plaintiff *Page 283 was estopped to repudiate the wrongfully delivered deed, because she had "received and retains" the purchase price of one of several lots described in it, a fortiori, are plaintiffs here estopped to attack the Burke deed as originally executed when they received and still retain the purchase price for all of the property described in it.
The majority may misconceive my position on the effect of plaintiffs' failure to offer to do equity. I do not maintain that retaining the purchase price while seeking to recover the property it paid for vests title in the defendants on the theory of ratification of the altered Burke deed. But, I do strongly insist that it is a factor to be considered by the trial court upon the issue whether they are estopped to assert their title against the defendants and whether, even though the chancellor deems them owners of the legal right to the property, their unenviable position of getting the property and the purchase price, too, without at least offering to restore the latter, so shocks his conscience as to cause him to withhold the aid of equity. The words "ratification", "acquiescence", "estoppel" and "waiver" are often loosely used interchangeably, but they are not synonymous. 52 C.J. 1145, § 3. It is in the sense of "estoppel" that I use the term in discussing the effect of plaintiffs' retention of the purchase price while seeking to recover the property.
But, say the majority of this equity in defendants' favor — retention of the purchase price while reclaiming the mineral interest it paid for — "This question is raised for the first time on the second motion for rehearing and is not available to defendants, but in any event is without merit". Having demonstrated that it is not without merit, it will now be established that this equity was relied upon in aid of the defense of estoppel in the first briefs filed by defendants for the original hearing in this court. And it will later be shown that under the peculiar situation existing under the pleadings and trial in the case, the defendants are entitled to rely upon the question here as the trial court did, in part, below.
The following excerpts from defendants' brief in chief for the original hearing (with italics supplied for the particular language) show their reliance on this circumstance as one of the grounds of estoppel:
"* * * and this (relief prayed by plaintiff) at the instance of a grantor against innocent purchasers more than seven years after he discovered these alterations and who has received andretained the full agreed purchase price."
"Appellants seem to recognize the validity of this transferfor the purpose of retaining the purchase price, then they undertake to repudiate it for all other purposes."
"* * * we have a case where appellants have sold a three-fourths interest in the minerals in a tract of land for an agreed consideration and where the consideration was paid within the agreed time and accepted and retained by the grantors. *Page 284 Under the rule well established in this court by the decisions cited in this brief, a court of equity will not grant a decree at the behest of the appellants quieting their title to the property involved, regardless of whether a valid deed was ever deliveredbecause they have accepted the agreed purchase price and have parted with the equitable title to the mineral interest if not the legal title."
In a summary of equities and considerations supporting an order of affirmance, near the close of their brief in chief, the defendants say:
"We submit that this court should keep in mind that the trial court, in making its findings and conclusions, had before it certain undisputed facts in this case, which we enumerate as follows: (Paragraphs 1 to 3 omitted.)
"4. The agreed consideration for the transaction was $800.00.
"5. This consideration was paid within the agreed time andaccepted and retained by appellants."
It is also clear that the trial judge did not overlook this equity in defendants' favor. On page 93 of the transcript, in his opinion, Judge McGhee said: "It seems to me, in this class of cases, where leases and royalties are subject to such violent fluctuations in value, that those who dispute their title should be compelled to act promptly and not sit by and wait for development which may prove the land to be greatly valuable for oil, and then come in and assert their claims; or, on the other hand, if oil is not found, be allowed to affirm their contractand retain the fruits thereof, although the original purchaseprice may have been small."
Finally, at the conclusion of the whole case, it was within the province of the trial court to dismiss the bill for want of equity. Within the decree in defendants' favor, such disposition may be embraced. True, the decree goes further, deciding upon the merits of the facts adduced that plaintiffs are estopped from challenging the defendants' title. That decree, as it stands and upon becoming final, renders res adjudicata the merits in all future actions at law or suits in equity between the same parties or their privies. This court, even though the majority feel called upon to set aside that decree, as they do, should not withhold from the chancellor the power, undoubtedly possessed, to say whether litigants in the position plaintiffs occupy, move his conscience to award them any relief; whether, regardless of their strict legal rights, his conscience may not dictate that he refuse to extend the aid of equity to accomplish so grave an injustice in favor of parties who have never even offered to do equity, relegating them to an action at law to enforce whatever rights they may have; and, indeed, to declare whether such disposition be within the decree already rendered.
The offer to do equity is something required of one who seeks her aid and is not forgiven or excused by considerations of *Page 285 expediency or speculation as to whether the offer will be accepted. It is the actor's conduct in this respect, not that of his adversary, that is screened before the chancellor's gaze. It is a technical answer to suggest there was no motion to dismiss nor any demurrer with want of equity as a ground. The defendants have claimed the greater right in their presentation below and in their assignments here — a decree on the merits and its affirmance with estoppel as one of their chief defenses. Throughout they have stressed the unconscionable position the plaintiffs occupy in suing to recover the mineral interest involved while retaining the purchase price paid them for it.
I maintain that even without motion to dismiss, when the facts disclose plaintiffs' position unconscionable, as where under a strict application of the penal doctrine invoked, they are about to recover property which they have sold and have been paid for without so much as offering to restore what they have received for it, or where otherwise under the facts their seeking the aid of equity without offering to do equity places them in an unconscionable position, every chancellor has the right to say: "I wash my hands of it. If you have rights at law, that is where you must claim them. I refuse to extend the arm of equity in your behalf." It is the chancellor's privilege to say whether he does feel so moved here. The present disposition of the case amounts to a practical denial of that right.
The majority, however, apparently moved by the strong and obvious inequity of a result that would leave plaintiffs with the property and the money paid them for it as well, in their disposition of the case do give the chancellor (in whose province the matter peculiarly rests primarily), leave to require payment into the registry of the court for disposition to the parties entitled thereto, the money paid them for the property with 6% interest from the date they received it, as a condition to awarding any relief. This they will, of course, now do, if so required. The property has become worth many, many times what they sold it for due to large oil discoveries. But what the majority do not do is to leave the chancellor freedom to exercise fully his discretion in respect of this matter — the right to say whether disgorging the purchase price under compulsion, the failure to have offered voluntarily to restore it, together with other unconscionable aspects of their case, do not move his conscience to withhold equity's aid altogether, relegating them to an action at law for enforcement of whatever rights, if any, they may have. In other words, the chancellor is permitted a partial but not a complete exercise of his discretion in a matter controlled by conscience. If the chancellor is to have the right to say the plaintiffs shall not have relief unless they restore the money received, why not the right to say they shall be denied relief for not having offered voluntarily to restore? *Page 286
Furthermore, the estoppel of plaintiffs to claim the aid of equity arose on the facts as found by the court. If the facts had been found as pleaded and testified to by plaintiffs, they were not called upon to restore. Under such circumstances the strict rule of a special plea of estoppel by him who invokes it is relaxed. Cf. 19 A.J. § 182, page 838. The plaintiffs claimed below and still insist here that they sold only a one-fourth interest for eight hundred dollars, delivering to Asbury and Bates an executed and acknowledged copy of the deed for their files; that it was this copy which was altered to describe a one-half interest as that conveyed and by substituting Burke's name as grantee and delivering the same as an original which was recorded.
The trial court found, upon evidence to the contrary, conceded substantial by the majority, that plaintiff did sell a three-fourths interest for eight hundred dollars, evidenced by two deeds, one for a one-fourth and the other for a one-half interest, both placed in escrow in a Texas bank and that the latter deed, without authority, was taken from the bank and materially altered before delivery by the substitution of Burke's name as grantee. There was no middle ground in this conflict. The trial court believed the defendants' witnesses on this sharply contested issue of veracity. And the plaintiffs are in the anomalous position of challenging before this court, as they did below, the truth of the very facts upon which the majority hold them entitled to recover. But, I make no point of this except to mention it as an incongruity sometimes met with in the law. Cf. Rogers v. Rogers, Tex.Civ.App., 230 S.W. 489. It does explain, however, why neither plaintiffs' pleading nor their proof exposed them at the trial prior to findings to a motion to dismiss for a failure to offer to do equity. It was only when the facts were found contrary to their pleading and testimony that reliance upon the failure became pertinent under any condition but not under conditions then present since coincidentally with announcing its findings, the trial court pronounced judgment in defendants' favor on the merits. If that judgment is to be set aside, the defendants are still entitled to the chancellor's voice on whether in any event he deems plaintiffs entitled to the aid of equity, whatever may be their rights at law.
The prevailing opinion reaches the result it does in what I consider a strict application of the penalty doctrine in relation to altered instruments. Under it, the plaintiffs will get a now valuable property which they sold at a price then agreeable to them which they received and still retain and have never voluntarily offered to return to the rightful owners. Under another penalty doctrine written into the Statute of Frauds, equity consistently declines to permit it to be made an instrument of fraud or imposition. A like attitude toward the penalty doctrine here invoked would result in an order of affirmance. I think that is the proper disposition. But at all events, judgment for plaintiffs should not be ordered, *Page 287 thus denying to the chancellor an exercise of a discretion vested in him to determine when equitable relief should be withheld.
I dissent.
ZINN, J., concurs.