Court Opinion

ID: 9665705
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:55:24.406332+00
Date Added: 2024-06-11T18:15:18.108397
License: Public Domain

TEIGEN, Judge
(dissenting).
I dissent.
I would agree with the result in the majority opinion were it not for the fact that the land was transferred by the mortgagors to the plaintiff Gajewski subsequent to the time the mortgage and the assignment of future rents were given to American State Bank by the former owners, Mr. and Mrs. Skinner. It is established, as stated in the majority opinion, that no foreclosure of the mortgage has been commenced. The assignment of future rents is made operative only in case of default in the covenants, terms and conditions of the note and mortgage. There apparently was no default of mortgage payments at the time the land was conveyed by the Skinners to Gajewski, and the rights given the American State Bank under the terms of the assignment of future rents were not being exercised. There is no evidence that Gajewski had knowledge of the existence of the assignment of rents when he acquired the land by conveyance from the Skinners. An examination of the warranty deed by which the lands were conveyed to Mr. Gajewski discloses that said deed purports to convey this land free from all encumbrances except the mortgage. No reference is made to the assignment of rents therein. The *672warranty clause of the deed warrants the land conveyed “together with all the hereditaments and appurtenances thereunto belonging or in anywise appertaining to” Gajewski, his heirs and assigns forever. The grantors covenant that they are well seized in fee of the lands and have the right to sell and convey the same free of all encumbrances, except the mortgage. The deed recites, however, that the mortgage is void because of a latent defect in that at the time the mortgagors signed the mortgage the land description was not contained therein and was inserted afterwards. No question is raised in this proceeding of the effect of this statement nor is the validity of the mortgage in issue.
The assignment of future rents describes the property described in the mortgage and assigns, sets over, attorns and delivers to American State Bank, the mortgagee, all of the Skinners’ “right, title, interest and demand in and to the rents, issues and profits” of the land. It also constitutes American State Bank as agent or attorney for the purpose of collecting said rents, and as attorney in fact for the Skinners to renew any and all leases and also to make new leases in regard to the premises. The assignment provides, however, that it shall not become operative and effective unless default shall be made in the covenants, terms and conditions of the note and mortgage. The assignment of future rents is dated the same day as the mortgage and was filed for record in the office of the register of deeds and there recorded on the same date as the mortgage.
The record made in this proceeding is completely devoid of any evidence or proof to establish that Gajewski had any knowledge whatsoever of the assignment of rents until the demand was made. As stated by the majority, the trial court did not state its reasons for its decision. Further, Gajewski appeared pro se at the hearing and has taken the appeal pro se. Fie is not a lawyer. There is no evidence that Ga-jewski has assigned future rents nor that he, in any way, has acquiesced in or agreed to the terms of the assignment of rents given by the Skinners.
“Purchasers of land are generally deemed to have notice of facts appearing in a deed through which they deraign title. If they acquire title under a deed which shows that the premises have been leased and the rent assigned or if there are other circumstances present in their acquisition of the premises, through which they are given notice of such fact, they hold the premises subject to the rights of the assignee. Conflicting rights as between one claiming under an assignment of future rents and one who has purchased the reversion without knowledge of such assignment may be resolved according to whether the assignment is an instrument which is required to be recorded in order to be effective as against bona fide purchasers.” 49 Am. Jur.2d Landlord and Tenant, Section 535.
“It is well settled that rent to accrue is an incident to and accompanies the reversion unless separated by an express reservation; therefore, as a general rule, upon a transfer of the reversion by the landlord, his transferee is entitled to receive all rent thereafter accruing, whether payable in money or in a share of the crops, and to retain it as against any claim of the transferor, including a claim for apportionment of the rent payable for a period which had partially run at the time of the transfer. The effect of the transfer itself, under modern decisions and statutes dispensing with the necessity of an attornment, is to create such a privity of estate between the grantee of the reversion and the lessee as will enable the grantee to enforce the obligation of the tenant to pay rent. Moreover, liability of the tenant to the grantee of the reversion can be predicated upon an express agreement of the former to pay rent, pursuant to the principle, heretofore discussed, that such an agreement is one which runs with the land. Such liability can be asserted in an action by the grantee against the *673tenant.” 49 Am.Jur.2d Landlord and Tenant, Section 530.
American State Bank gave notice to Gajewski, to the Skinners, and to the tenant that the mortgage was in default and that it was exercising its rights and prerogatives under the assignment of rents, and demanded that the tenant pay the future rents to American State Bank of Williston. This demand was made December 7, 1970, more than eleven months after the land had been conveyed to Mr. Gajew-ski. The evidence does not establish that Gajewski had previous actual knowledge of the assignment of rents. I shall now consider whether he had constructive notice thereof.
Our statute provides that the depositing with the proper officer for record of any instrument shall be constructive notice of the execution of such instrument to all purchasers and encumbrancers subsequent to such depositing if the instrument is subsequently recorded. Section 47-19-45, N.D. C.C.
Section 47-19-01, N.D.C.C., provides:
“Any instrument affecting the title to or possession of real property may be recorded as provided in this chapter.” [Emphasis added.]
Section 47-19-19, N.D.C.C., provides:
“The record of any instrument shall be notice of the contents of the instrument, as it appears of record, as to all persons.”
The question arises: Does an assignment of future rents affect “the title to or possession of real property,” as required by Section 47-19-01, N.D.C.C., to entitle it to be recorded? If it was not entitled to be recorded, then certainly the deposit and recording of the same in the office of the register of deeds does not constitute constructive notice to a subsequent purchaser of the land.
“The record of an instrument does not constitute constructive notice, if it is not of a class which is authorized or required by law to be recorded. So, in a jurisdiction where a personal covenant or agreement restricting the use of land is not entitled to record, it is held that the instrument, even if recorded, is not constructive notice to subsequent purchasers. Where the recording statutes are inapplicable to assignments of choses in action, the assignment of a fund does not by being recorded become operative against persons having no notice thereof.” 45 Am.Jur. Records and Recording Laws, Section 107.
My research has failed to disclose a special statute which entitles an assignment of rents to be recorded in the office of the register of deeds.
The lease in this case is a cash payment farm lease. Under its terms the tenant agrees to pay the sum of $6,500 per year for a term of three years. The payment becomes due on January 1 of each year the lease is in effect.
The determination of the question as to whether an assignment of rents to accrue from the leasing of real property comes within the operation of the recording laws depends upon the view taken as to the nature of an assignment of future rents. 75 A.L.R.Anno. — Recording Laws — Assignment of Rent, at 270.
According to 45 Am.Jur. Records and Recording Laws, Section 47, an assignment of rents to accrue from a lease of realty is an incorporeal hereditament and comes within the operation of the recording laws “provided the term covered by the assignment is sufficiently long to bring it within such laws.” The holding in the case cited was based on a statute requiring that leases of more than three years’ duration were required to be recorded. This section provides, however, that a contrary conclusion has been reached where it is held that such a transaction is merely the transfer of a *674chose in action. In some cases the assignment of rent to accrue from the lease of real estate has been construed as a tenement or as a chattel real, and also has been classified as an incorporeal hereditament. 49 Am.Jur.2d Landlord and Tenant, Section 515. A chose in action is defined as personal property. 42 Am.Jur. Property, Section 26. A chattel real is also classified as personal property unless modified by statute. 42 Am.Jur. Property, Section 25. A tenement is usually denominated as real property. 42 Am.Jur. Property, Section 16.
Under our statutes, income of property includes the rents and profits of both personal and real property. Section 47-03-01, N.D.C.C. The disposition of the income of property to accrue and to be received at any time subsequent to the execution of the instrument creating such disposition is governed by the rules prescribed by the chapter on future interests. Section 47-03-02, N.D.C.C. A future interest is defined by statute to mean “that the owner is entitled to the possession of the property only at a future period.” Section 47-02-11, N.D.C.C. It is either vested or contingent. It is contingent if the event upon which it is limited to take effect remains uncertain. Section 47-02-15, N.D.C.C. A future interest passes by succession, will or transfer in the same manner as present interests. Section 47-02-18, N.D.C.C. The statute limits the recognition of future interests to those provided by law. Section 47-02-21, N.D.C.C.
The right to exercise the assignment of rents in this case is dependent upon the event of default in the making of the mortgage payments. It is a general assignment of rents, having reference to no specific lease of the real estate in question and is to continue in effect until the note and mortgage described therein have been fully paid and satisfied. It provides that a release of the mortgage constitutes a release of the assignment of rents. The lease was not of record at the time the land was conveyed to Gajewski and, as I have pointed out earlier, the warranty deed conveying the land to him makes no reference to the lease.
The assignment of rents to accrue in the future, contingent upon default of the mortgage, does not purport to constitute an assignment of the lease in existence at the time the transfer was made to Gajew-ski. It is my opinion that the assignment of rents, in this instance, did not create an estate, or interest, or title, or the right of possession in the land. The future interest created under the assignment of rents was contingent because the event upon which it was limited to take effect remained uncertain and did not affect “the title to or possession of real property” as required by our recordation statute. Section 47-19-01, N.D.C.C. The recordation of the assignment, not being contemplated by the statute, constituted no notice to Gajewski of the assignment by the Skinners of future rents to the Bank. It is merely an assignment of the right to collect moneys which may become due in the future and, as such, does not affect or concern the real property. In my opinion it constitutes an assignment of a contingent chose in action, which is personal property, and does not come within our recording laws.
For these reasons, the recording of the assignment of rents did not constitute constructive notice to Gajewski and the trial court’s order should be affirmed.
For cases arriving at a similar result see : Phelps v. Kroll, 211 Iowa 1097, 235 N.W. 67 (1931); Conley v. Fine, 181 App.Div. 675, 169 N.Y.S. 162 (1918); Washoe County Bank v. Campbell, 41 Nev. 153, 167 P. 643 (1917); Harris v. Taylor, 35 App.Div. 462, 54 N.Y.S. 864, appeal dismissed, 159 N.Y. 533, 53 N.E. 1126 (1899).
KNUDSON, J., concurs in the above dissent.