Court Opinion

ID: 7970713
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:54:55.12419+00
Date Added: 2024-06-11T16:34:46.024941
License: Public Domain

CANTY, J.
This is an action to foreclose the first mortgage on the real estate in question. The second mortgage was made to the Central Trust Company, as trustee, to secure the payment of a large number of bonds, all of which are held by the Metropolitan Insurance Company. The insurance company is in fact the holder of the second mortgage or trust deed, and claims to be the owner of the land under a tax title, which, if valid, is paramount to, and free from the lien of, plaintiffs’ mortgage. Plaintiffs’ mortgage was executed and recorded in January, 1887; the defendants’ mortgage in September, 1888. The taxes of 1892 being unpaid, judgment was entered, the land sold for the same and bid in by the state in 1894. In May, 1896, the insurance company took an assignment from the state, and gave due notice of the time of expiration of redemption. No redemption was made.
The trial court found that the tax title is valid, and paramount to the lien of plaintiffs’ mortgage, unless the insurance company “was legally precluded from acquiring such tax title by reason of having stood in the position of mortgagee junior to the said plaintiffs,” and held that it is so precluded. The appellant insurance company concedes that in many states this holding would be good law, but contends that by reason of G. S. 1894, § 1599, the second mortgagee may acquire a valid tax title, as against the first mortgagee. That section provides:
“Any person * * * may become the purchaser at such [tax] sale. If the owner purchase, the sale shall have the effect to pass to him (subject to redemption as herein provided) every right, title and interest of any and every person, company or corporation, free from any claim, lien or incumbrance, except such right, title, interest, lien or incumbrance as the owner so purchasing may be legally or equitably bound to protect against such sale, or the taxes for which such sale was made.”
The insurance company contends that it was neither legally nor equitably bound to protect plaintiffs’ mortgage against said tax sale or said taxes, and therefore has acquired a valid tax title, as against plaintiffs. We have held that, notwithstanding section 1599, one tenant in common cannot acquire a tax title, as against *491his cotenant. Easton v. Scofield, 66 Minn. 425, 69 N. W. 326. It is there said at page 427:
“The decisions hold that his cotenant is one of the parties whom the purchaser is ‘equitably bound to protect.’ It is as much the duty of one tenant in common to pay the taxes as it is of another. Equity holds that one such tenant must protect his cotenant as much as he protects himself. The duty of all is the duty of each in that respect.”
So may it be said that, as between the first mortgagee and the second mortgagee, it is as much the duty of the one to pay the taxes as it is of the other. In equity it was the duty of the first mortgagee to pay the taxes for himself and the second mortgagee. It was the duty of the second mortgagee to pay the taxes for himself and the first mortgagee. The duty of both is the duty of each in this respect. The decisions that hold that the one mortgagee cannot acquire a tax title as against the other liken it to the case of tenants in common. See Connecticut v. Bulte, 45 Mich. 113, 7 N. W. 707; McLaughlin v. Green, 48 Miss. 175, 209; Garrettson v. Scofield, 44 Iowa, 35. In our opinion, the insurance company could not acquire the tax title in question, as against the plaintiffs.
2. The insurance company will be entitled to reimbursement for-the amount of the taxes paid, if its right as second mortgagee is barred by the expiration of redemption under the foreclosure of the first mortgage; and in the meantime it holds a lien for such amount, superior to the lien of the first mortgage. But the court ordered judgment barring all liens and claims of the trust company and insurance company, other than the right of redemption from the foreclosure sale. This is error.'
The validity of a tax title held by the second mortgagee may be litigated in a suit to foreclose the first mortgage. Wilson v. Jamison, 36 Minn. 59, 29 N. W. 887. This is merely holding that in such a suit either party may .determine whether the defendant’s lien or title is subject to the lien of the plaintiffs’ mortgage. But whether-the paramount lien of the second mortgagee for the taxes paid by him should be litigated, the amount thereof ascertained, or ordered paid, or the lien foreclosed, in such an action, we need not determine. Neither party has asked for any such relief, or introduced *492evidence on which it could be granted. The land in question is but a small part of the tract sold for said taxes, and there is no evidence from which it can be determined what part of these taxes the land in question should bear. The plaintiffs or the purchaser at their foreclosure sale may never acquire title to this land. It may be redeemed by the owner or by the second mortgagee itself, and the latter would not, after any such redemption, have a claim on these plaintiffs for reimbursement. Then we are of the opinion that the claim for such reimbursement need not be enforced in this action, or until the time to redeem from such foreclosure sale expires.
The order for judgment must therefore be modified so as not to bar the right of the insurance company to such reimbursement.
3. Plaintiffs’ mortgage was made by one Simonds and others, the then owners of the land; and thereafter, in March, 1887, these mortgagors conveyed the land to the West Duluth Land Company, subject to the mortgage, the payment of which was in the conveyance assumed by the land company, and the deed was then recorded. Thereafter, on August 31, 1888, the land company conveyed a part of the tract to the Minnesota Car Company, with a covenant of warranty against all incumbrances; and on September 1, 1888, the car company made on this part the second mortgage, which was then recorded. Thereafter, at various times from 1892 to 1896, the plaintiffs entered into various agreements with the land company, whereby from time to time they extended for definite periods the time of payment of their mortgage indebtedness.
The first mortgage was made to one George W. Norton, and during his lifetime he knew that the land had been conveyed by the land company to the car company with a warranty against incumbrance. But he died in 1889, and the plaintiffs, his executors, never had any actual knowledge of any such conveyance or of said second mortgage at any of the times they granted said extensions. By mesne conveyances the land was in 1892 conveyed to the Duluth Manufacturing Company, and the latter then took possession of the same, and continued in possession at and during the time of said extensions, but these plaintiffs had no actual knowledge thereof at any of the times they granted said extensions. The second *493mortgagees never consented to any of these extensions, but it does not appear whether or not the car company or its grantees, or any of them, did so consent.
On this state of facts, the trust company and the insurance company contend that, as to plaintiffs’ mortgage, the land company had become the principal debtor, and the part of the land still held by it had become the principal fund out of which that debt should be made; that the part of the land so covered by the second mortgage was only a surety for the payment of the first mortgage, and was released by the granting of the extensions of the time of payment of that mortgage. We cannot hold that the part of the land covered by the second mortgage has been thus released. The record of the second mortgage and of the conveyances subsequent to that to the land company was not sufficient notice to these plaintiffs of the existence of the facts appearing in such record. Jones, Mort. § 1624.
It is generally held that, in order to release such a surety by such an extension of the time of payment, the mortgagee granting the extension must have actual notice of the facts out of which the equities of such subsequent grantees and mortgagees arise. Id. Constructive notice is not sufficient. We are of the opinion that actual notice to the testator at a time when, so far as appears, he did not contemplate the giving of any such extension, is at most only constructive notice to his executors, and not sufficient notice to them. Whether the possession of the manufacturing company was sufficient notice to the executors of the equities of that company, we need not consider.
We may assume that, if the land was by any of those extensions released from the lien of the first mortgage, that release would inure to the benefit of the second mortgage. But the burden was on the trust company and insurance company, appellants, to prove that the manufacturing company did not consent to the extensions (Washington Slate Co. v. Burdick, 60 Minn. 270, 62 N. W. 285; Guderian v. Leland, 61 Minn. 67, 63 N. W. 175), and they failed to maintain that burden. Again, the possession of the manufacturing company was not notice to the executors of the existence of the second mortgage. Then these appellants failed to show that *494by any of said extensions the land in question was released from the lien of the first mortgage.
4. Appellants, the trust company and the insurance company, made a motion so to amend the conclusions of law and order for-judgment as to provide that the land covered by the first mortgage should be sold on the foreclosure sale in parcels, in the inverse order of alienation. In our opinion, the court did not err in denying the motion. No such relief was asked for by these appellants in their answer, or, as far as appears, at any stage of the proceedings, until after the court had filed its findings of fact and conclusions of law. Under these circumstances, we cannot presume that this issue was litigated, or that all the facts bearing on this alleged equity were ever presented to the court.
5. The West Duluth Land Company has also appealed from an order denying a new trial, and urges some of the points above disposed of. But it also urges another point. The complaint alleges that a large portion of the principal sum secured by the first mortgage fell due January 15, 1892, and that in consideration of said extensions the land company agreed to pay interest thereafter on all of the mortgage indebtedness at the rate of 8 per cent, per annum until paid, instead of 6 per cent., as provided in the notes and mortgage. The answer of the land company admits that it agreed, in consideration of said extensions, to pay interest on the amount due at the rate of 8 per cent, per annum until July 15, 1896, but not beyond that date. This interest was paid up to January 15, 1896. On the trial the court made the following finding:
“That there is also due the plaintiffs from the defendant West Duluth Land Company, as bonus or consideration for the extensions referred to in the pleadings, an amount equal to two per cent, on the aforesaid principal sum of $32,188.65, from January 15, 1896, to the date of the commencement of this action, to wit, the 3d day of March, 1897, to wit, the sum of $729.45.”
Thereupon judgment was ordered against the land company for $729.45. Appellant land company contends that the findings of fact will not support this conclusion of law and order for judgment. We agree with appellant. The pleadings contradict each other on the question of what length of time the land company *495agreed to pay this extra 2 per cent, interest. According to the answer, it is owing for only the six months ending July 15, 1896, and the amount thereof is only $821.88. Unless plaintiffs are willing to accept this sum, and release the balance of said $729.45, a new trial must be granted on this issue alone.
This disposes of all the questions raised having any merit.
It is therefore ordered that the order for judgment be modified in accordance with this opinion, and that, unless plaintiffs shall file a written release of all of said $729.45 in excess of said $321.88 within ten days after notice of the filing of the remittitur in the court below, a new trial be granted on the issue mentioned in the fifth or last division of this opinion.
In all other respects the orders appealed from are affirmed.
An application for a reargument having been made, the following opinion was filed December 21, 1898:
CANTY, J.
In the fourth division of the preceding opinion we held that the court below did not err in denying appellants’ motion so to amend the conclusions of law as to order the mortgaged premises sold in parcels in the inverse order of alienation.
We did not so hold merely because such relief was not prayed for in the answers of appellants. We did not, as counsel seem to think, overlook G. S. 1894, § 5413, which provides, in effect, that when the defendants have answered, and the parties go to trial on the merits, the court may grant any relief embraced within the issues, regardless of the specific prayers for relief in the pleadings.
Our main reason for holding that the court below did not err was because it does not appear that any such question was litigated, or even suggested, during the trial. Error is not presumed, but must be affirmatively shown. A bill of exceptions was settled which is wholly silent on the question now under consideration. If appellants had asked for this relief on the trial, the plaintiff might have shown a state of facts which would have raised a counter equity. For instance: The land here in controversy is a submerged tract between the shore and the dock line in St. Louis Bay. .Most of the boundaries of the tract are undefined. It is but a small *496part of the mortgaged premises, and, in disposing of such part, the grantees of the mortgagors cut off most of the rest of the tract from access to the bay. It may be that offering separately at the foreclosure sale the parcels so sold would result in their being bid off at an inadequate price. It might be like selling the front entrance to a man’s house separately from the rest of the premises. See Lalor v. McCarthy, 24 Minn. 417. There may be other countervailing equities.
The petition for reargument is denied.