Oertel v. Pierce

133 N.W. 797, 116 Minn. 266, 1911 Minn. LEXIS 981

Opinion

Brown, J.

Action for an accounting of the rents and profits of certain property ¡alleged to belong to plaintiff, and for other relief. After a trial before the court without a jury, findings of fact and conclusions of law were duly made, and judgment ordered for plaintiff as prayed for in the complaint. Defendant appealed from an order denying a new trial.

The findings of the court disclose the following facts:

Plaintiff was, on June 20, 1889, the owner in fee simple of the real estate and premises involved in the action. On that day, her haisband joining therein, plaintiff executed and delivered to defendant a mortgage upon the property to secure the payment of the sum of $1,800 then due from her to defendant. Default was subsequently made in the payment of the debt, and defendant duly foreclosed "the mortgage; the premises being sold thereunder on April 5, 1895, and defendant being the purchaser at the sale. A certificate of foreclosure in due form was issued by the sheriff, and subsequently recorded in the office of the register of deeds. The 'property at the •sale brought the sum of $1,800, leaving as a balance due upon the mortgage debt the sum of $220.24.

Plaintiff was desirous of preserving her rights in the property, •and sought the aid and assistance of George O. Power, who held a ■second mortgage thereon for the sum of $1,400. On April 4, 1896, the day preceding the expiration of redemption on the foreclosure, at the instance and request of plaintiff, and for her benefit, Power entered into a written contract with defendant, acting through one Clark, his agent, but who was not authorized in writing to make a contract for the sale of the property of his principal, whereby defendant agreed to sell to Power the said real estate, upon the payment of the full amount due upon plaintiff’s foreclosed mortgage, which was then agreed upon as $2,422.89 ; the payment to be made within three-years from the date of the contract. The contract contained numerous provisions not necessary here to mention, and by its language created an obligation on the part of the defendant to sell the property, and a mere option on the part of Power to buy the same.

The court further found that at the time the contract was prepared and executed it was verbally understood that it was made in the interests of plaintiff, and that Power would make no payments thereunder; that the same should be made by plaintiff, and whatever rights Power acquired in the premises should inure to the benefit of plaintiff, the contract being held by him as security for the payment of his second mortgage. At the time the contract was so entered into plaintiff paid to Power the sum of $422.89, to be applied upon the-mortgage debt, and Power in turn paid the same to defendant. Plaintiff thereafter was permitted by defendant to remain in possession of the property, and she collected and received the rent from tenants-until October, 1896, paying of such proceeds the sum of $66 to Power, who paid the same over to- defendant. Other than this sum, and the amount paid when the contract was entered into, namely, $422.89, no part of the debt has been paid, except as received by defendant from rents and profits as now to be stated, though on May 29, 1896, plaintiff paid the taxes upon the property.

During all the times stated plaintiff was also the owner of a certain building standing upon land owned by the Chicago, St. Paul, Minneapolis & Omaha Railway Company, in the city of St. Paul, known as the Omaha Hotel. In October, 1896, plaintiff being about to remove from the state, it was agreed between plaintiff, Power, and defendant that defendant should take possession of all said property, including the Omaha Hotel, which was not covered by the mortgage, and collect and receive the rents accruing therefrom, crediting the same, less expenses of management of the property, upon the indebtedness represented by the foreclosed mortgage. Pursuant to this agreement, which does not appear to have been in writing, defendant took possession of said properties, and since then has had the care thereof, and has received the rents and profits therefrom, but has not applied the same to the payment of plaintiff’s said debt to him, and he has refused to do so.

Plaintiff brought this action to compel an accounting of the rents and profits so received, and to redeem from the mortgage. As bearing upon the question to what extent or for what time plaintiff is entitled to an accounting respecting the rents received by him from the Omaha Hotel property, as well as the question as to the ownership thereof, a further statement of facts in reference 'thereto is necessary.

As already stated, the foreclosure of the mortgage left a deficiency due upon the debt secured, and on March 29, 1896, defendant brought an action against plaintiff to recover the same. The'summons therein, as appears by the sheriff’s return, was personally served upon plaintiff, defendant in that action; but she made no appearance, and on August 4, 1896, default judgment was rendered against her for the sum of $341.21. Oh April 30, 1902, nearly six years after the entry of the judgment, an execution was issued thereon, under which, the sheriff levied upon and sold the Omaha hotel property; defendant being the purchaser at the sale, and paying therefor the sum-of $100. The judgment and proceedings under the execution appear upon their face in all things regular, and vested in defendant, prima facie, title to that property from the expiration of the period of redemption. But plaintiff alleged in her complaint in this action that she had no notice of that -action, that the summons therein was never in- fact served upon her, and she demanded that the judgment be declared null and void for lack of jurisdiction in the court to render the same. The court found the allegations of plaintiff’s complaint in this respect to be true — that the summons was not served upon her.

As conclusions of law the court found (1) that the judgment and proceedings thereunder, resulting in a sale of the Omaha Hotel property, were void, because no service of tbe summons was made upon, defendant therein; and (2) that the transaction by which defendant agreed upon payment of the mortgage indebtedness to sell and convey the property to Power, the agreement having been made in the interests and for the benefit of plaintiff, and to protect her title to the same, operated as an annulment of the foreclosure; that thereafter defendant’s right in the property was that of mortgagee in possession ; that an accounting should be had, and the net income received from the property by defendant applied in the discharge of the mortgage debt; and that plaintiff be granted the right of redemption.

Defendant on this appeal challenges certain parts of the findings, of fact, and the correctness of the conclusions of law. We dispose of the questions thus raised in the order presented in the briefs.

1. It is contended that the findings of the court, to the effect that the summons in the action to recover the amount remaining due upon the mortgage indebtedness after the foreclosure was not served upon plaintiff, defendant therein, are not sustained by the evidence. In this we are unable to concur.

The evidence made the question one of fact, and an examination of the record brings to light no ground for interference with the conclusion of the trial court. While it is true that courts should proceed with caution in overturning the certificate of an officer charged with the duty of serving process, and should require unequivocal, clear, and convincing evidence of the falsity of the returns attacked before doing so (Vaule v. Miller, 69 Minn. 440, 72 N. W. 452; Osman v. Wisted, 78 Minn. 295, 80 N. W. 1127), yet the rule guiding this court in respect to the review of the findings of a trial court in such cases remains the same. The evidence must be clearly against the findings to justify interference by this court, whether the fact found is required to be established by a preponderance of the evidence, or by clear, convincing, and satisfactory evidence.

In the case at bar plaintiff testified explicitly that the summons was not served upon her, .and she was corroborated in a measure by the testimony of other witnesses. Against this testimony is the certificate of the sheriff that personal service was in fact made. The sheriff was called as a witness, and testified that he served the summons at the time and place given in the return, upon a person who> stated to him that her name was that of plaintiff. lie did not disclose' a personal acquaintance with plaintiff, and, though it is clear that he in fact delivered the summons to some person at defendant’s place of' business, he was unable to say from personal knowledge that such person wás defendant. The conflict arising from this state of the evidence presented a question of fact for the trial court, in the determination of which the appearance of the witnesses, their candor or lack of candor, truthfulness, and manner of testifying, were important considerations. The court resolved the question against defendant, and we are unable from the record to say that the evidence is. clearly against the conclusions so reached.

There is no question but that the attorneys for plaintiff in that action, counsel for defendant in this action, proceeded in entire good' faith, and caused the entry of the judgment in the belief that the-officer’s return was true. The result of thé findings of the court, however, is that the officer was mistaken in supposing that he served the summons upon plaintiff. It follows, therefore, the summons not having been served, that the judgment rendered in that action is void,, the sale of the Omaha Hotel property under the execution issued thereon vested no title in defendant, and the court properly ordered! judgment in this action accordingly.

2. It is further contended that the trial court erred in the conclusion of law that the effect of the transaction between the parties subsequent to the foreclosure was an annulment of the foreclosure, and that defendant’s position with reference to the property was that of mortgagee in possession, with the right of redemption in plaintiff still subsisting. We do not sustain this contention.

The facts found and disclosed by the record fully support the conclusion stated. It is well settled that a mortgagee, who becomes the-purchaser of the mortgaged property on the foreclosure of his mortgage, may waive and abandon rights thus acquired, and in effect annul the sale, and that he does so when he enters into a valid agreement with the mortgagor prior to the expiration of the statutory period of redemption, which in effect extends the right of payment of the mortgage debt beyond tbe redemption period; tbe intention of the parties being tbe protection of tbe title of tbe mortgagor. Tbe legal effect of such an agreement is tbe abandonment or waiver of tbe rights acquired by tbe foreclosure, and a continuance of tbe relation of mortgagor and mortgagee. Tbe same result follows, under some of tbe authorities, tbe conduct of tbe mortgagee in accepting payments upon tbe mortgage debt after tbe expiration of tbe period of redemption. Dodge v. Brewer, 31 Mich. 227; Lounsbury v. Norton, 59 Conn. 170, 22 Atl. 153; Osborne v. Tunis, 25 N. J. L. 633; Clarke v. Robinson, 15 R. I. 231, 10 Atl. 642; Scott v. Childs, 64 N. H. 566, 15 Atl. 206. Tbe rule stated, at least where tbe waiver of tbe foreclosure rights is evidenced by a contract providing for the payment of tbe mortgage debt after tbe expiration of tbe redemption, has been followed and applied in this state. Heaton v. Darling, 66 Minn. 262, 68 N. W. 1087; Wenzel v. Weigand, 92 Minn. 152, 99 N. W. 633.

In tbe case at bar tbe parties entered into a written and also a subsequent parol contract, tbe purpose of which, tbe trial court was justified in finding, was to protect plaintiff’s title to tbe property. Tbe written contract was entered into the day preceding tbe expiration of redemption, and took tbe form of an agreement on tbe part of defendant to reconvey tbe property upon tbe payment of tbe indebtedness due him. Tbe contract was executed by Clark, representing defendant, and Power, representing plaintiff. But for .the want of written authority in Clark to so contract it was invalid, and tbe record does not show that plaintiff was ever informed of its provisions, or that she in any manner ratified tbe same. And though, being invalid, it could not be enforced by either party, except upon subsequent ratification or part performance, it may be referred to for tbe purpose of ascertaining tbe intention of tbe parties, and, in connection with tbe subsequent oral agreement, determining tbe legal effect of tbe transaction.

About five months after tbe written contract was made tbe parties entered into tbe further arrangement by which plaintiff surrendered to defendant possession of tbe mortgaged property and also tbe Omaha Hotel, to which defendant bad no claim, under bis agreement to manage, collect, and receive the income therefrom, and apply the net proceeds in discharge of the mortgage debt. In addition to this, it should be further stated that, when the written contract was signed, plaintiff, or Power for her, paid to defendant over •$400 to apply upon the mortgage indebtedness, and subsequent thereto she paid the taxes and $60 from the rents received by her from tenants occupying the mortgaged premises. In this situation of the relations between the parties, and their acts and conduct in reference to the property, we have no difficulty in sustaining the conclusion that the parties intended that title to the property should remain in plaintiff, and that defendant, as a matter of law, waived and abandoned all rights acquired by the foreclosure.

The further contention upon this branch of the case that the fiñdingb of fact are not supported by the evidence is not sustained; We find in the record evidence reasonably tending to support the findings and therefore sustain them. Stress is laid by defendant upon the concluding clause of the written contract, by which the intention of the parties is expressed as “a sale of the property, upon the terms therein set forth,” and that “this contract was in no sense an agreement for security,” and that the writing contained the entire understanding of the parties. And it is urged that this provision clarifies the transaction, and presents a contract for the sale of the property, and nothing else. We are unable to give the force and effect to this part of the contract contended for by defendant. In addition to the fact that it was invalid, the legal effect thereof,' in connection with the later agreement, and not the form of the transaction, controls the determination of the case. As remarked by Mr. Justice Collins in Heaton v. Darling, supra: “We are to determine the nature and effect of the transaction by what was intended to be and was accomplished, not by the methods pursued.” Lounsbury v. Norton, supra.

It follows, therefore, since the relation of the parties continued that of mortgagor and mortgagee, that the provisions of the written •contract, limiting the time within which payment might be made, have no greater force than similar provisions in all mortgages. The contract did not, at the expiration of the time so fixed for payment, expire absolutely, as contended. The legal effect of the transaction was the annulment of the foreclosure, and it was not reinstated by failure to make the payment within the time prescribed.

The case of Williams v. Stewart, 25 Minn. 516, is not in point. It was clear in that case that the parties intended the foreclosure there involved to ripen into title in the mortgagee, then to be transferred -and conveyed to Mrs. Williams, the wife of the mortgagor. The transaction was clearly to finally, through the foreclosure, vest, title in Mrs. Williams, and not to provide for a redemption. A redemption would have annulled the sale, and restored the husband’s title to the property — a situation the parties did not intend to bring about. In the case at bar plaintiff was not attempting to acquire title through the foreclosure, but, on the contrary, to prevent title passing from her; and, to afford her an opportunity of protecting-the same, the right of payment of the debt was extended to her, to be exercised in the manner already outlined.

The question involved in this action was not presented in Tingue v. Patch, 93 Minn. 437, 101 N. W. 792, nor in Pierce v. Clarke, 71 Minn. 114, 73 N. W. 522. In the latter case the contract provided for the foreclosure- of the mortgage, and that the title thus acquired should subsequently be transferred by the mortgagee, who was to become the purchaser at the sale to Clarke, the other contracting party, who had guaranteed the payment of the mortgage debt. Phelps v. Western Realty Co. 89 Minn. 319, 94 N. W. 1085, did not present the question, and is not in point.

Our conclusions are in harmony with those reached by the learned trial court, the record presents no reversible error, and- the order appealed from is affirmed.