Court Opinion

ID: 7970464
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:54:40.729954+00
Date Added: 2024-06-11T16:34:45.609036
License: Public Domain

BUCK, J.
(dissenting).
I also dissent. From the facts found in the record it appears that Weeks had paid out as former mortgagee, on the interest on the prior mortgage, taxes, repairs and other expenditures the sum of $808.78, more than all his receipts and profits from the premises. The taxes for 1889 were levied upon said premises subsequently to the time when the Barber mortgage was executed to plaintiff, and consequently such payment was beneficial to the plaintiff as mortgagee. This is true also of the interest and taxes paid by Weeks as well as the necessary repairs and improvements made by him on the premises. While these payments operated for the protection of Weeks himself, especially the purchase of the tax title assessed for 1889 and due while he was in possession, which he was compelled to pay for his own protection, equity requires that, if the prior mortgagee would avail itself of the protection thus afforded, it should not be permitted to regain possession of the redemption money so paid by it to the county treasurer, but that it should belong to Weeks by way of reimbursement for the taxes paid by him for the taxes levied for 1889. This, we think, is in line with the law as stated in the opinion on the former appeal. 67 Minn. 303, 69 N. W. 1078.
The facts herein, however, are different in some respects from what they there appeared. It did not there, as here, appear that defendant’s lawful expenditures were more than $800 in excess of the rents and profits. Now, while a second mortgagee is under no obligation to protect the lien of the first mortgagee by payment of taxes or by purchasing the premises for his benefit at a tax sale, yet, if he does pay or purchase, the act ipso facto constitutes a protection. Connecticut v. Bulte, 45 Mich. 113, 7 N. W. 707. And, if the senior mortgagee wants the benefit of the protection thus afforded,
*491he must tender the amount of tax so paid. Fiacre v. Chapman, 32 N. J. Eq. 463. There is good reason for this rule. The tax lien in this case was paramount to the lien of the first mortgage, and, if such lien had not been removed by payment of the tax judgment, a title by a sale of the premises thereunder might have ripened into title superior to the lien of the plaintiff’s mortgage, and cut off all its rights. That such payment protected the defendant as well as the plaintiff did not deprive the defendant of this right of equitable subrogation. The payment was in no sense voluntary. American Baptist M. U. v. Hastings, 67 Minn. 303, 69 N. W. 1078.
The defendants Hastings and Cooley, as officers of Hennepin county, have no interest in this action. The treasurer, Hastings, is merely holding the funds for the benefit of the party entitled thereto. And here it may be noted that plaintiff does not stand in the position of a redemptioner from the defendant’s mortgage foreclosure of the second mortgage.
A senior mortgagee is not entitled to redeem from a foreclosure sale made by a junior mortgagee, although he may do so from a tax lien on the premises, and this, too, where it is held by the junior mortgagee. But this is done, not for the benefit of the junior, but the senior, mortgagee. In this case the action is merely to recover the taxes which the senior mortgagee paid for its own protection, and which defendant Weeks paid for the protection of both. That the payment by defendant Weeks was beneficial to plaintiff, there can be no reasonable doubt. Though Weeks was under no legal obligation to pay the taxes, yet he had the right to do so, and, if such payment inured to plaintiff’s benefit, as senior mortgagee, why should such payment not be allowed to stand as against itself? The burden of showing that defendant Weeks had received more rents and profits while in possession of the premises than were sufficient to pay the taxes of 1897, and' the other lawful expenditures connected with the use and management of said premises, rested with plaintiff, and this, I think, it failed to do. Certainly, the fund sued for was a legitimate expenditure for unpaid taxes for that year, and, as such payment operated for the benefit and protection of plaintiff, it ought not to maintain this action for its recovery. I think the judgment should be reversed.
Geo. D. Emery, for appellant.
Defendant Weeks does not stand in the shoes of his assignor. He was not prevented by any covenants or by law from buying in an outstanding prior lien and thus strengthening his title. Gjerness v. Mathews, 27 Minn. 320; McLaughlin v. Acom, 58 Kan. 514. The prior lien-holder ought to pay for the protection afforded; and, if he wishes immunity from the effect of the tax certificate, he must reimburse the junior lien-holder for-the money thus invested. Max-field v. Willey, 46 Mich. 252, and cases supra. The right to acquire a tax title depends on the absence of any duty in regard to the tax. McLaughlin v. Acorn, supra; Swan v. Emerson, 129 Mass. 289. Weeks was under no obligation to pay the tax. He had never covenanted to pay, and the duty was not enjoined on him as owner. 2 Jones, Mort. § 1134. Prima facie Weeks is the legal owner of the certificates, and entitled to the money paid for their redemption. Plaintiff shows no superior equity. He is subrogated to the prior lien of the state. All the cases distinguish between the duty of the mortgagee in possession as to taxes assessed during such possession and as to those assessed prior thereto. These certificates were assessed before Weeks’ mortgage was made, and as to it he owed no duty to any one, not even to the state. 1 Jones, Mort. § 713; 25 Am. & Eng. Enc. 269, 270; Ebert v. Gerding, 116 Ill. 216. The court overlooked the fact that up to July, 1892, Weeks was simply a creditor charged with no duty towards the first mortgagee, except to submit so much of the title as he acquired from Duffus to the lien of plaintiff’s mortgage. Wilson v. Jamison, 36 Minn. 59; Allison v. Armstrong, 28 Minn. 276. During several years he was in possession in the name of Shattuck, but, as plaintiff alleges, for his own benefit. His possession was notice of his rights, and hence plaintiff bought subject to these certificates, and must have bought with the intention of paying them off. American B. & L. Assn. v. Waleen, 52 Minn. 23; American B. & L. Assn. v. Stoneman, 53 Minn. 212; Pioneer S. & L. Co. v. Freeburg, 59 Minn. 230.
Russell, Gray & Jamison, for respondent.
An application for a reargument having been granted, the case was submitted upon briefs at the October, 1898, term.
*493On November 14, 1898, the following opinion was filed:
MITCHELL, J.
A re-examination of this case upon reargument has satisfied us that the reasoning of the former opinion is fallacious.
The first proposition laid down in that opinion is that Weeks stands in the shoes of Barber; that as the latter would not, in the face of his covenant to plaintiff, be permitted either to acquire a tax title, so as to cut out plaintiff’s mortgage, or to hold it as security for what he had paid-for it, therefore he could not, by assigning the mortgage, give Weeks any greater rights than he himself had. But Barber’s duty to plaintiff to protect the land against taxes arose, not by reason of the second mortgage, but by reason of his covenant in the first mortgage, to which Weeks was in no way a party; and when Barber assigned the second mortgage he neither changed his own duties to the plaintiff, nor devolved them upon Weeks. Weeks stood in exactly the same position as if the second mortgage had been executed directly to him either by Barber or by Barber’s grantee, Duffus. As such second mortgagee, he owed no duty to the first mortgagee to pay the taxes of 1889. There being no such duty, some cases, for that reason, hold that a second mortgagee may, by purchase at a tax sale, cut off the lien of the first mortgage. Other cases hold, what may be the more just and politic doctrine, that in such case, as in the case of tenants in common, the purchase is only a payment of the tax, which will inure to the protection of both mortgages. But in equity the first mortgagee, if he claims the benefit of this protection, must reimburse the second mortgagee for what he has paid for taxes. This is reasonable and equitable, for taxes constitute a lien paramount to both mortgages, and, if not discharged, will extinguish both. A second mortgagee, as such, owes no duty to the first mortgagee to pay taxes on the mortgaged premises. Connecticut v. Bulte, 45 Mich. 113, 7 N. W. 707; Fiacre v. Chapman, 32 N. J. Eq. 463.
We have not overlooked the fact that when Weeks purchased the state assignment certificate he occupied the position of a mortgagee in possession; nor have we forgotten the doctrine, frequently laid down by the authorities without limitation or qualification, that a mortgagee in possession occupies the same position as the mort*494gagor. This is true for certain purposes, but not for all. It certainly would not be held that a second mortgagee, who had received possession of the mortgaged premises merely as additional security for the payment of his debt, thereby assumed the obligation of the mortgagor to pay the first mortgage. He would undoubtedly have to account for the rents and profits, and would be bound to use them, so far as necessary, for the preservation and protection of the premises including the payment of taxes.
It may be also conceded, without deciding, that he would owe the first mortgagee the duty of paying current taxes that accrue while thus in possession. But in this case the tax of 1889 had become due, and the premises sold therefor to the state, before Weeks went into possession. It appears that he has paid out for interest on plaintiff’s mortgage, and for improvements, repairs and taxes (other than those for 1889), on the premises, some $800 in excess of all the rents and profits received by him from the time he went into possession in 1892, down to the time he surrendered possession to the plaintiff in 1895. According to the findings, all these expenditures were reasonably necessary for the preservation and protection of the property. Thus far we see nothing affecting Weeks’ equity to hold the tax title as security for what he paid for it.
The second proposition advanced in the former opinion is that, even if Weeks was originally equitably entitled to hold the tax title as security for what he had paid for it, he had lost that equity by reason of his failure to pay the taxes for 1893 and 1894, which accrued after he became owner in fee of the premises (subject to plaintiff’s mortgage), and while he was in possession as such owner. If this was all of the case, the conclusion reached would seem reasonable and equitable. But this is only a partial view of the case. The remaining facts are that Weeks had already necessarily expended and paid out for the benefit of the plaintiff, or the protection and preservation of the premises, $800 more than all he had received; and of the amount thus paid out by him over $4,500 was intérest on plaintiff’s mortgage, which was paid directly to it, and which he was under no legal obligation to pay. He could have retained enough of that money to pay the taxes of 1893 and 1894, but, instead of that, he paid it to the plaintiff, who in turn paid it *495to the state. We fail to see how the fact that he adopted, the latter course instead of the former should deprive him of the equity, which he previously possessed, to recover the amount of his prior investment in the tax-assignment certificates. The legal title to the fund in controversy is in Weeks, and he is entitled to it unless the plaintiff shows a prior and better equity. The facts do not establish any such equity. Suggestions are made of some sinister motive on the part of Weeks in pursuing the course which he did, but there is nothing in the findings (which are all we have before us) justifying any such charge.
The order of affirmance in the former opinion is vacated, the judgment reversed, and the cause remanded, with directions to the court below to enter judgment in favor of the defendant upon the findings of fact, unless the court shall, for cause shown, grant a, new trial. It is so ordered.