Merchants' State Bank v. Sawyer Farmers' Co-operative Ass'n

47 N.D. 375, 14 A.L.R. 1353

• Court: North Dakota Supreme Court
• Decided: March 17, 1921
• Status: Published

Opinions

Christianson, J.

This action was brought in the district court of Ward county to recover damages for the alleged conversion of certain wheat. The complaint contained two causes of action. The defendant interposed a general demurrer to both causes. The trial court sustained the demurrer, and the plaintiff has appealed.

For a first cause of action it is averred, in substance: That the plaintiff during all of the year 1919 was the owner of certain lands in Ward county in this state; that in the spring it leased such lands for that year, by a written contract or lease on the so-called “crop-share plan,” to two men named, respectively, Gordon Fix and F. L. Fix; that by the terms of said contract it was provided that the said Gordon Fix and F. J. Fix should not sell or remove, or suffer to be sold or removed, any of the produce of said farm or premises of any kind, character, or description until the division thereof, without the written consent of the plaintiff, and that until such division, the title and possession of all the hay, grain, crops, and produce raised, grown, and produced on said premises should be and remain in the said plaintiff. That by the terms of said contract it was further provided that the plaintiff might deduct from the share of the crop due to the said Gordon Fix and F. J. Fix certain indebtedness owing to the plaintiff from one Anton Fix, the father of said Gordon Fix and F. J. Fix. That the contract further provided that the said plaintiff might- deduct from the share coming to said Gor- and F. J. Fix any just costs or disbursements and any indebtedness owing from them to the said plaintiff. That the said Gordon Fix and F. J. Fix farmed the land described in such contract during the season 1919, and raised 503 bushels of macaroni wheat and 585 and 30 pounds of D-5 wheat. That the plaintiff got its full share (one-half of all) of the macaroni wheat, with the exception of 4 bushels. That the D-5 wheat was all sold, and the proceeds of the share of the crops stipulated to be turned over to said Gordon and F. J. Fix, amounting to $679.64, was turned over to the plaintiff, who applied $662.70 thereof on the indebtedness of Anton Fix in accordance with the stipulation in the contract to that effect, and applied the balance of $16.94 on advances made by the plaintiff to the said Gordon and F. J. Fix in connection with the threshing of the grain. That during the year the plaintiff advanced to the said Gordon and F. J. Fix, $220 in addition to paying their share of the threshing bill. That these items have not been paid. That the notes of Anton Fix which were paid by the pro-c cods of the crop were, by the plaintiff, delivered to Gordon and F. J. Fix, and received and retained by them without protest. That no division of the crop was ever made. That on October 17, 1919, Gordon Fix delivered to the defendant 127 bushels and 30 pounds of macaroni wheat. That plaintiff made demand on the defendant for such wheat, and that such demand was refused. That the defendant had no actual knowledge of the conditions contained in the farm contract. That said contract was at no time recorded or filed in the office of the register of deeds of Ward county.

The second cause of action constitutes a reaverment of the foregoing facts, and in addition thereto it is averred that on or about March 8, 1919, said F. J. Fix made, executed, and delivered to the plaintiff his certain promissory note in the sum of $220.63 payable October 1, 1919, with interest from date at the rate of 10 per cent per annum. That at the same time and place, for the purpose of securing the payrpent of said note, said F. J. Fix executed and delivered to the plaintiff a certain chattel mortgage, whereby, among other things, he mortgaged to the plaintiff an undivided one-fourth interest in'and to all crops of every kind sown, grown, or harvested during the year 1919 upon the premises in controversy. That said chattel mortgage was filed for record in the office of register of deeds of Ward county on March 9, 1919. That the plaintiff is the owner and holder of said promissory note and chattel mortgage, and that no part of the indebtedness evidenced thereby has been paid.

The defendant contends that the provision in the contract reserving title in the plaintiff to all of Gordon and F. J. Fix’s share of the crop was ineffective against it, for the reason that the contract was not filed as a chattel mortgage. That contention presents the principal, and determinative, question on this appeal.

Defendant admits that this court in McFadden v. Thorpe Elevator Co. 18 N. D. 93, 118 N. W. 242, ruled that such provision was effective without filing; but it contends that that decision was overruled by this court in Minneapolis Iron Store Co. v. Branum, 36 N. D. 355, L.R.A. 1917E, 298, 162 N. W. 543. The question of the filing of such contract was not involved or decided in the Branum Case. The controversy there arose between the holder of a chattel mortgage and a general creditor who had garnished an elevator company which had received into its possession the tenant’s share of the grain before any division had been made. Under former decisions of this court it had been ruled that the tenant, prior to division, had no interest in the grain to which a mortgage could attach. After due consideration we determined that such former rulings were erroneous. The decision in the Branum Case, however, was specifically restricted to the following propositions: “1. That instruments known as cropper’s contracts or farm leases, like all other contracts, must be construed so as to carry into effect the actual intention of the parties thereto. One provision cannot Be singled out and given an effect nullifying other provisions, but the contract must be construed as a whole, and the real intention of the parties as thus gathered must control.

“2. That where a lease of a farm on shares gives to the lessee a certain share of the crop, but contains a provision to the effect that title shall remain in the lessor until the conditions of the lease have been complied with by the lessee, he (the lessee) has an equitable interest in the crops, even prior to the performance of the conditions, which equitable interest may be mortgaged.

“3. That the decisions of this court in Bidgood v. Monarch Elevator Co. 9 N. D. 627, 81 Am. St. Rep. 604, 84 N. W. 561, and Herrmann v. Minnekota Elevator Co. 27 N. D. 235, 145 N. W. 821, in so far as they announce the doctrine that a lessee under such lease has no interest in the grain to which a mortgage lien can attach until after a division of the crop has been made, are hereby overruled.” 36 N. D. 383.

The free and untrammeled right to make lawful contracts is guaranteed not only by the Constitution of the state, but by the Federal Constitution, N. D. Const. §§ 1, 13; 14th Amend. IT. S. Const. 6 R. C. L. pp. 269, 270.. The decision in the Branum Case was not intended to deny or infringe upon such right. The decision did not hold the provision reserving title in the landowner to be ineffective or void. If this court had so ruled, then of course the lessee would have been the legal owner of the share of the crop coming to him; but the decision, it will be noted, merely holds that the lessee under a contract containing such provision “had an equitable interest in the crops, even prior to the performance of the conditions (of the contract), which equitable interest may be mortgaged.” 36 N. D. 383. This language, at least, impliedly recognized that, prior to the performance of the conditions of the contract, the theoretical legal title is, by virtue' of the provisions of the contract, in the landlord. It will also be noted that the former decisions of this court were overruled only "in so far as they announce the doctrine that a lessee under such lease (one containing a provision reserving title to all crops in the landlord until the division thereof) has no interest in the grain to which a mortgage lien can attach until after a division of the crop has been made.” 36 N. D. 383.

The fact that the contract may or may not create the relation of landlord and tenant does not alter or affect the relative rights and obligations of the parties thereto. Those rights and obligations are still measured by the terms of the contract. Thus, in Angell v. Egger, 6 N. D. 391, 71 N. W. 547, this court, in effect, held that the contract was a lease, and the relation between the parties that of landlord and tenant. The court said: “Whether the agreement between plaintiff and defendant created the relation of landlord and tenant is not material. We may safely assume it to be a lease, and certain provisions of it seem to be inconsistent with any other interpretation of it. But while it is true that one who has an interest as lessee in real property is prima facie entitled to the crops raised thereon during the life of the lease, yet the parties may, by express agreement, provide that the title to certain crops, or to a certain share of all crops, or to all crops until a certain period, or to all crops absolutely, shall vest in the lessor from the time they come into existence. He who owns the land may certainly reserve to himself any interest therein, or in the produce thereof, he sees fit to reserve, provided the other party to the contract assents to such reservation. There is nothing in the law to prevent a lessee from agreeing that he shall own none of the crops. He may even make an improvident agreement, and give the lessor the title to everything raised on the land as a consideration for the right to occupy it. So he may agree that the title to all crops shall remain in the lessor until the happening of a certain event. Such contracts are not opposed to any principle of law, and should be enforced according to their terms.” 6 N. D. 396. And in Whithed v. St. Anthony & D. Elevator Co. 9 N. H. 224, 50 L.R.A. 254, 81 Am. St. Rep. 562, 83 N. W. 238, this court held a person cropping land under such contract to be a tenant in possession, under the statute authorizing the purchaser at a judicial sale to receive from a tenant in possession of the property sold the rents thereof from the time of the sale until a redemption. That the contract involved in that case was a lease, and created the relation of landlord and tenant, was especially emphasized in the concurring opinion written by Chief Justice Bartholomew, who also wrote the opinion in Bidgood v. Monarch Elevator Co. 9 N. D. 627, 81 Am. St. Rep. 604, 84 N. W. 561, wherein the rule was announced that the tenant under such contract had no mortgageable interest in the grain until after division had been made.

Stipulations reserving title to all crops in the landlord until a division thereof have been the source of much litigation. Some courts have construed such stipulations as vesting actual and complete title in the landlord, and as precluding the tenant from having any interest whatever therein until after a division is made and certain grain set apart to the tenant. That was the view originally taken by this court. After due deliberation we determined that that view was erroneous, and that the tenant did have an equitable interest in the crops which he was producing, even before a division. Those views we still entertain. We do not believe that it accords with the intern tion of the parties to'construe such stipulation as vesting the actual and complete ownership to all the crops in the landlord, and as devesting the tenant of all interest therein until after an actual division has been made. Such construction ignores the very purpose and intention of the parties, and would enable the landlord to violate the rights of the tenant, and “would lead to the unconscionable result that prior to settlement and division the entire crop would be subject to a levy of execution against the landlord, to the exclusion of any rights or interest of the tenant therein.” On the other hand, if such contract is nothing but a chattel mortgage, then of course' a subsequent mortgagee may limit the credit to be given under the contract and stop all future advances by giving the landlord actual notice of his mortgage; and in many cases this would quite effectively impede the carrying out of the contract. In such eases, the owner would be placed between the mortgagee, who gives him notice, and the cropper, who might have little if any further interest in the crop. The owner in contracting with another to till land on the share plan presumably takes into consideration the personal fitness and ability of the person with whom he contracts. The tenant undertakes himself to- do certain things. Under our statute “the burden of the obligation may be transferred with the consent of the party entitled to its benefit, but not otherwise” (except as to covenants running with the land). Comp. Laws 1918, § 5782. If the tenant is the absolute legal owner of the share of the crop stipulated to be turned over to him, even before the performance of the terms of the contract, then of course the stipulation reserving title in the landlord is virtually of no effect whatever, and will in no manner protect the rights of the landlord. If the tenant is the absolute legal owner, he may at any time mortgage and sell his share of the crop, and thereby transfer all the interest which the tenant has at the time he gives the mortgage or makes the sale, and the purchaser or mortgagee, by giving notice to the landlord, could, in effect, terminate and cut off rights which the contract had expressly reserved to him. The tenant in such eases might step out entirely, or be thrust aside by the mortgagee or by the sheriff under a warrant of foreclosure, and the intention of the parties as to essential portions of the contract be wholly defeated. In effect the inducement of the contract would be destroyed, and a contract the parties never made would be substituted by judicial construction. Hence, it seems clear to a majority of the court that it does not accord with the intention of the parties to construe such stipulation either as vesting the actual complete ownership of all crops in the landlord and as devesting the tenant of all interest therein, or as vesting in the tenant the legal ownership, subject, in fact and in law, to a mere chattel mortgage in favor of the landlord. Either situation is contrary to the intention of the contracting parties. As already stated, the parties have the right to make their own contracts. It is not for the courts to malve contracts for them. The courts are alone concerned with ascertaining what the contract is, and, if lawful, then to enforce it in accord with the intention of the parties.

We are not concerned with a situation where, by provision in a lease, it is sought to reserve title in the landlord to certain personal property, such as furniture or appliances, which the tenant has brought upon the premises. We are concerned only with a situation where the owner of land, in contracting with another for its use, expressly stipulates that title and possession of all crops produced shall be and remain in the owner of the land. The right to so contract has frequently been upheld, and, so far as we can ascertain, has never been denied.

It is a well-settled principle of law that “the ownership of realty carries with it as an incident thereto the prima facie presumption of the ownership of both the natural products of the land, such as grass and trees, and the emblements, or annually sown crops, blit such presumption is not conclusive. And the owner of land may, in parting with the úse of it to another, make such conditions and reservations in relation to the land itself or to the products growing from it as he chooses, instead of parting with the full right.” 17 C. J. 381. And where the owner of land, in parting with the use' of it to another, stipulates that the legal title, control, and possession of all crops shall be in him for certain purposes, that stipulation is entitled to be enforced so as to carry out the intention and purposes for which it was made. But it will not be construed so as to enable the owner to violate the rights of the tenant, nor will it be construed so as to violate the rights of the owner of the land. On the one hand, the legal title reserved in the landlord will be recognized and enforced in accordance with, and to carry out, the intention and purposes for which the reservation was made, i. e., it will be enforced in recognition of, and harmony with, the equitable interest which the tenant has in crops, and not in disregard of such interest. On the other hand, the equitable interest of the tenant or those claiming under him will be recognized and enforced in accordance with the terms of the contract, — that is, they will be enforced not in derogation, but in recognition of and harmony with the rights of the landlord as stipulated in the contract. The rights ot the landlord and tenant run along parallel lines, and are measured by the terms of the contract. An assignee of the tenant is presumed to be acquainted with the terms -and stipulations of the lease, and acquires no greater rights than the tenant had to transfer. Underhill, Land. & T. § 639.

• As pointed out in the decision in Minneapolis Iron Store Co. v. Branum, 36 N. D. 355, L.R.A.1917E, 298, 162 N. W. 543, the supreme court of our sister state, South Dakota (National Bank v. Elkins, 37 S. D. 479, 159 N. W. 60), refused to follow the rule laid down in Bidgood v. Monarch Elevator Co. and Herrmann v. Minnekota Elevator Co. and adopted the rule announced by this court in Minneapolis Iron Store Co. v. Branum, 36 N. D. 384, L.R.A.1917E, 298, 162 N. W. 543. That is, the South Dakota supreme court held that under a farm lease reserving title and possession of all crops in the lessor until a division thereof, the lessee has an equitable interest subject to mortgage, and that such mortgage, after division and settlement, attáehes to the legal interest of the lessee. National Bank v. Elkins, 37 S. D. 479, 159 N. W. 60. In so doing, the South Dakota court in effect predicated its ruling upon two former decisions: Lyon v. Phillips, 20 S. D. 607, 108 N. W. 554; Iverson v. Soo Elevator Co. 22 S. D. 638, 119 N. W. 1006 (37 S. D. 479, 159 N. W. 61), The South Dakota supreme ■ court did not, however, deem these decisions contrary to the decision of this court in McFadden v. Thorpe Elevator Co. 18 N. D. 93, 118 N. W. 242; for, although that court in both Lyon v. Phillips, and Iverson v. Soo Elevator Co. supra, had ruled “that the interest of the tenant in crops to be grown under this kind of a farm lease or contract is the subject of mortgage” (37 S. D. 479), it had no hesitancy later to rule that such contract was “not a-chattel mortgage, nor in the nature thereof, so as to be required to be executed as such.” Dobbs v. Atlas Elevator Co. 25 S. D. 177, 126 . In Dobbs v. Atlas Elevator Co. supra, ¶ 1 of the syllabus reads: “An instrument, leasing premises for a stipulated term at an agreed rental, and providing that the title to all crops raised should bo and remain in the lessor until the rent had been paid, is not a chattel mortgage nor in the nature thereof, so as to be required to be executed as such.” In the decision in that case the court said: “Tbe instrument is not a chattel mortgage, neither is it an instrument in the nature of a mortgage. McFadden v. Thorpe Elevator Co. supra. The clause therein, that title to the crops raised under the said lease should remain in N. J. Hunt and her assigns until the rent was paid relates solely to the ownership of the crops, and in no manner attempts to create a lien thereon. It is a provision frequently made in leases, and one which the parties had the right to make, whether the landlord received money or a share of the crop as rent. It was a matter subject to, and that might be varied by, the terms of the contract in accordance with the will of the parties. Consolidated Land & Irrig. Co. v. Hawley, 7 S. D. 229, 63 N. W. 904; Baumann v. Jerome, 21 S. D. 42, 109 N. W. 513; Olson v. Ausdal, 13 S. D. 26, 82 N. W. 89; 24 Cyc. 1470.”

It is interesting to note in this connection that a majority of the members of the South Dakota supreme court (Judges TVhiting, Smith, and McCoy) who participated and concurred in the decision in Dobbs v. Atlas Elevator Co. also, participated and concurred in the decision in National Bank v. Elkins. It might further be noted that two of the judges of the South Dakota court (Judges Corson and Whiting), who participated and concurred in the decision in Dobbs v. Atlas Elevator Co. also participated and concurred in the decision in Iverson v. Soo Elevator Co.; and that the decision in Iverson v. Soo Elevator Co. was written by Judge TVhiting, who, as already stated, also participated and concurred in the decisions in Dobbs v. Atlas Elevator Co. and National Bank v. Elkins. Hence, in so far as South Dakota is concerned, we have the situation that the supreme court of that state refused to follow the decisions of this court in Bid-good v. Monarch Elevator Co. and Herrmann v. Minnekota Elevator Co. in so far as they announced the doctrine that a lessee, under a lease containing a stipulation that the title to all crops raised shall be and remain in the lessor until certain acts are performed by the lessee and a division of the crop is made, has no mortgageable interest in the grain until after a division is made; but that it adopted and roeognized as correct the rule announced by this court in McFadden v. Thorpe Elevator Co. 18 N. D. 93, 118 N. W. 242, that the stipulation in a farm contract reserving title to the crops in the lessor did not in law constitute a chattel mortgage so as to require the contract to be filed in order to render such stipulation effective against purchasers or encumbrancers claiming under the lessee. In our opinion the conclusions thus reached by the South Dakota court were correct ones. They are in harmony with the views which we have expressed above. They give effect to the intention of the contracting parties, and recognize and enforce their rights in accordance with well-settled legal principles applicable to the relation of the parties and the provisions of their contract. Wo are of the opinion, and hold, that it was not necessary to file the contract involved in this case as a chattel mortgage in order to render effective, as against subsequent purchasers or encumbrancers claiming under the lessee, the provision reserving title to all crops in the landlord. See McFadden v. Thorpe Elevator Co. supra; Dobbs v. Atlas Elevator Co. 25 S. D. 177, 126 N. W. 250; Fox, B. & Co. v. McKinney, 9 Or. 493. See also Consolidated Land & Irrig. Co. v. Hawley, 7 S. D. 229, 63 N. W. 904.

Keversed and remanded for further proceedings in conformity with this opinion.

Bronson and Birdzele, JJ., concur.