Western Holding Co. v. Northwestern Land & Loan Co.

120 P.2d 557, 113 Mont. 24, 1941 Mont. LEXIS 118

• Court: Montana Supreme Court
• Decided: May 27, 1941
• Docket: No. 8,123.
• Status: Published

Opinions

MR. JUSTICE ANDERSON

delivered the opinion of the-court.

This is an appeal from a judgment dismissing an action to-foreclose a real estate mortgage, the judgment of dismissal being-on the ground that the lien of the mortgage had expired under the time limitation as provided by section 8267, Revised Codes of 1921, and under the same section as amended.by Chapter 104 of the Laws of 1933.

The action was commenced in the district court on April 19,. 1935, by the Western Holding Company to foreclose a real estate mortgage made by William Lystra and wife on February 21,, 1917, to the First National Bank of Conrad, and given to secure- the payment of a promissory note of the same date maturing on December 1, 1922, and bearing six per cent, interest payable ■annually. Lystra and wife,, the Northwestern Land and Loan Company, and the First National Bank of Conrad and the receiver of the bank were named as defendants. The complaint sets out the note and mortgage and shows assignment thereof to the plaintiff, all duly recorded, and alleges that on August 21, 1931, an affidavit of renewal was filed as provided for by section ■8267 of the Revised Codes.

The complaint further alleges that the defendant Northwestern Land and Loan Company is the record owner of the mortgaged premises by virtue of a deed of conveyance dated October 31, 1933, and is the same company which had previously held title to the said premises by virtue of a deed from the mortgagor dated November 10, 1924, conveying the premises subject to the mortgage in question, and alleges that at all times mentioned in the complaint the said defendant company had full knowledge and notice of the mortgage.

The complaint further alleges that the whole of the principal sum of the note, $1,500, and interest thereon since December 1, 1930, is unpaid and in default, and prays for judgment of foreclosure.

The defendant Northwestern Land and Loan Company alone made answer, by which it admits the execution and delivery «of the note and mortgage and the recording of the mortgage, and admits that the plaintiff is the owner and holder thereof. It further admits that it is the record owner of the mortgaged premises, and that at the time it acquired title thereto, and at all times mentioned in the complaint, it had full knowledge and notice of the mortgage sought to be foreclosed. The answer denies the sufficiency of the renewal affidavit set forth in the plaintiff’s complaint, and alleges failure to file any affidavit of the renewal of the mortgage within eight years and sixty days from the maturity date of the note, and pleads section 8267 of the Revised Codes of 1921, and Chapter 104 of the Laws of 1933, each separately as a bar to the foreclosure action. Plaintiff by reply set out facts to show an extension agreement but which,, under our views of the ease, need not be considered.

Later, upon request of plaintiff and by leave of court, the administrator of the estate of Wilmer S. Clark was made a party defendant, and a paragraph added to the complaint alleging that title to the mortgaged premises reposes in Wilmer S. Clark, deceased, and that the defendant H. H. Hullinger is the administrator of his estate.

The cause was tried to the court sitting without a jury. The only parties appearing were the plaintiff and the defendant Northwestern Land and Loan Company. The administrator of the Wilmer S. Clark estate had made no answer, nor had the First National Bank of Conrad, nor its receiver, and the default of these defendants had been entered. The action was dismissed as to the defendants Lystra and wife on plaintiff’s motion. The only controversy submitted to the court was the issue as made between the plaintiff and the defendant Northwestern Land and Loan Company.

The note and mortgage were received in evidence without objection, and it was stipulated by counsel for both parties that the principal of the note and the interest accruing thereon since the year 1930 had not been paid, and that the note and mortgage had been duly assigned to the plaintiff.

As to the ownership of the land after the mortgage was given it was further stipulated by counsel for both parties that on November 10, 1924, the land was conveyed by William Lystra and wife to the defendant Northwestern Land and Loan Company by deed, which recited that it was taken subject to the mortgage in question, and recited a consideration of one dollar only; that on March 21, 1928, the land was conveyed by the Northwestern Land and Loan Company to Wilmer S. Clark by deed reciting a consideration of one dollar and that the same was expressly made subject to the said mortgage; that it was shown by the probate court records that Wilmer S. Clark had died on May 5, 1931; that there were two heirs named in the probate proceedings of his estate, Ella G. Clark and William. L. B. Clark; that no decree of distribution of the estate had been made; that Ella G. Clark, one of the heirs, conveyed all: her interest in the mortgaged land by warranty deed to the defendant Northwestern Land and Loan Company on August 31,. 1933, which by its terms was made subject to the mortgage and; recited a consideration of one dollar, and that each of the said' deeds of conveyance was duly recorded shortly after execution^

There was evidence to prove an extension agreement as pleaded in the plaintiff’s reply, but this we need not recite because,, as stated above, of other grounds we find as the basis for our' conclusion.

No evidence was submitted by the defendant. The cause was; submitted to the court for decision. Thereafter the court rendered its judgment dismissing the action, basing the judgment' on its finding that, at the time of the commencement of the action, the mortgage described in the complaint had expired, and that the action, which was for the foreclosure of the said' mortgage, was at the time of its commencement barred by expiration of the time within which such action might be commenced. This appeal is from that judgment.

As above shown, the defendant has pleaded the statute, the original section 8267, and the 1933 amendment, each as separate defenses. This statute was enacted in 1913 and incorporated’ into the Codes as section 8267, reading as follows:

“Every mortgage of real property made, acknowledged, and. recorded, as provided by the laws of this state, is thereupon good and valid as against the creditors of the mortgagor or-owner of the land mortgaged, or subsequent purchasers or encumbrancers, from the time it is so recorded until eight years; after the maturity of the entire debt or obligation secured thereby, and no longer, unless the mortgagee, his heirs, executors, administrators, representatives, successors, or assigns shall, within sixty days after the expiration of said eight years, file in the- office of the county clerk and recorder where said mortgage is recorded, an affidavit, setting forth the date of said mortgage, when and where recorded, the amount of the debt secured thereby, and the amount remaining unpaid, and that the said mortgage is not renewed for the purpose of hindering, delaying, or defrauding creditors of the mortgagor or owner of the land and upon the filing of said affidavit, the said mortgage shall be valid against all persons for a further period of eight years; provided, however, that any mortgage now of record, as to which eight or more years from the maturity thereof have elapsed, may be renewed at any time within six months from the date of the approval of this Act, by filing within said time the aforesaid affidavit with the county clerk of the county wherein such mortgage may be recorded.”

In 1933 this statute was amended by eliminating the words ‘“is thereupon good and valid as against the creditors of the mortgagor or owner of the land mortgaged, or subsequent purchasers or encumbrancers,” and substituting in place thereof the words “shall be good against all”; and by eliminating also the whole of the proviso for six months’ time after approval of the Act within which to file the renewal affidavit for mortgages as to which the specified limitation period of eight years had already elapsed.

The statute in its original form gave protection to third parties dealing with the mortgaged property under the assumption that the mortgage debt was paid, or that the lien of the mortgage had been abandoned as security for the debt because of the lapse of time. It furnished no basis for the plea of the statute of limitations by parties who dealt with the property on the basis of the mortgage as an existing encumbrance, for they were in no better position in respect of the lien of the mortgage than was the mortgagor.

The history of the series of transactions of the sale of this land shows clearly that at all times the mortgage was taken into account in dealing with the land. Every transfer of the title was made expressly subject to the mortgage, and was for a nominal consideration of one dollar. It was a conveyance of the legal title to the land encumbered by the mortgage which in each instance was recognized as an existing encumbrance.. It was a conveyance of the equity of redemption. The purchaser stepped into the shoes of the mortgagor, excepting as to personal liability for the debt, to which he did not become bound, not having assumed and agreed to pay it. The status of the debt as a lien against the land did not suffer any change because of any of these sale transactions, and the rights of the owner of the mortgage were thereby in no way impaired. The mortgage lien encumbrance was assumed without assuming personal liability for the debt. There was a recognition of the debt in each of these transactions which had the effect of tolling the statute of limitations.

“A purchaser assuming the payment of a mortgage recognizes it as a subsisting incumbrance, and cannot set up the statute of limitations against it until the limitation of twenty years or other period of limitation, from that time has elapsed. His grantee is also bound by such admission to the same extent that he was himself bound. A recital in a deed or mortgage that the premises are subject to a prior mortgage has the same effect. It constitutes an admission that removes the bar of the statute as to parties to the deed. ’ ’ (Jones on Mortgages, 8th Ed., sec. 1539; also Wiltsie on Mortgage Foreclosure, 5th Ed., sees. 218, 219, 229 and 230; Hughes v. Edwards, 9 Wheat. 489, 6 L. Ed. 142; Carson v. Cochran, 52 Minn. 67, 53 N. W. 1130; Heyer v. Pruyn, 7 Paige, N. Y., 465, 34 Am. Dec. 355; Hadley v. Clark, 8 Idaho 497, 69 Pac. 319.)

The language employed in each of the deeds making the conveyance subject to the mortgage has a well defined meaning, and the purpose in its use is clear. It shows that in the sale transactions both parties recognized the fact that there was a mortgage which stood as an encumbrance on the land. The grantor so stated in the deed which he executed and which was used in making the conveyance. The grantee took the title on that basis by accepting the deed in that form. It was an acknowledgment of the mortgage by both parties which became written into the chain of title. Had there been any question of the validity of the mortgage and its non-existence as a lien, bnt as to which the grantor hesitated in making any representations, the conveyance conld have been so written that it was understood that the grantor did not warrant the title as against the mortgage and that it was left to the grantee to find out and determine for himself whether the mortgage was a valid lien. This difference .in understanding with respect to encumbrances and distinction in language employed to express the understanding is discussed and made clear in a number of court decisions. In the case of Stough v. Badger Lumber Co., 70, Kan. 713, 79 Pac. 737, 739, there is a full discussion of this question, and a number of cases are cited. In that case there was a conveyance of the land “free and clear of all encumbrances, except all back taxes, and liens, and mortgage held by the Badger Lumber Company.” The court said: “It will be observed that there was no assumption of the mortgage debt by the grantees, nor is the property taken subject to the payment of the liens. The exception is not the equivalent of a statement that the grant is made subject to the mortgage or other liens, and there is nothing approaching an affirmative recital of the existence or validity of any liens. The recital involved here is only a limitation of the covenant against incumbrances, and is not such a recognition of the mortgage or other liens as will estop the grantee from contesting their enforcement against the property conveyed.”

The consideration recited in each deed, the nominal sum of one dollar, is further evidence of the fact that the mortgage was taken into account as a material part of the transaction. It would be unreasonable to assume that the owner of the land would part with title for just that nominal sum with the purchaser free to avoid the payment of the mortgage debt out of the land, leaving the grantor alone to answer for the payment ■thereof.

In the instant case, in each conveyance of the land the reference to the mortgage amounted to an'affirmative recital of its existence as a valid lien upon the land which had the effect of tolling the statute of limitations. Thus the conveyance by the mortgagors to the Northern Land and Loan Company on November 10, 1924, extended the life of the debt and the lien of the mortgage until November 10, 1932; the conveyance by the Northwestern Land and Loan Company to Wilmer S. Clark on May 21, 1928, extended the life of the debt and the lien of the mortgage until May 21, 1936; the conveyance by Ella G-. Clark to the Northwestern Land and Loan Company, on August 31, 1933, extended the life of the debt and the lien of the mortgage until August 31, 1941. So that when this respondent, the Northwestern Land and Loan Company, took title the second time and which is now in question on this appeal, the mortgage was a valid existing lien upon the land, shown to be so by the instruments of record in the chain of title. The lien would have remained effective until May 21, 1936, without any reference to the mortgage in the deed. The Northwestern Land and Loan not only were bound by the public records but were estopped to deny the lien of the mortgage at that time because of its deed of conveyance on March 21, 1928, in which the mortgage was recognized. By taking the deed on August 31,1933, the respondent not only took the title, subject to the mortgage but, because of the affirmative recitals in the deed, it recognized the existence of the mortgage which had the effect of extending the life of the debt and the lien of the mortgage until August 31, 1941. Therefore the statute, section 8267, in its original form, cannot be relied upon by the respondent as a bar to the action, and it is unnecessary to consider the question of the sufficiency of the renewal affidavit nor the extension agreement pleaded by the plaintiff.

Whether the 1933 amendment widened the scope of the limitation as already provided in the statute in its original form, we are not called upon to decide, for granting that it does impose a new limitation which may be taken advantage of by all parties interested in the land title, including those who have actual knowledge of the mortgage, as is here contended, this new limitation cannot be invoked as a defense in this action. The eight-year and sixty-day period from the maturity of the debt had already expired at the time the amendment was enacted, March 13, 1933. If it is given full effect as a limitation statuate, the result would be in this case that instantly upon its enactment this plaintiff was deprived of its right to foreclose its mortgage, for the statute contains no saving clause as to mortgages that would be instantly outlawed, nor does it make any provision of time within which actions might be brought after its enactment which would otherwise be instantly barred. While the legislature may establish a limitation applying to a cause of action as to which none existed before, and may change existing statutes and shorten the period of limitation, always in any such legislation provision must be made allowing a reasonable time for actions to be brought that otherwise would be instantly barred. (Guiterman v. Wishon, 21 Mont. 458, 54 Pac. 566; In re Colbert’s Estate, 44 Mont. 259,119 Pac. 791; Wilson v. Pickering, 28 Mont. 435, 72 Pac. 821; Cooley’s Const. Lim., 8th Ed., 764, 765; Vance v. Vance, 108 U. S. 514, 2 Sup. Ct. 854, 27 L. Ed. 808; McGahey v. Virginia, 135 U. S. 662, 10 Sup. Ct. 972, 34 L. Ed. 304, 318; Myers v. Wheelock, 60 Kan. 747, 57 Pac. 956, 957.)

And, as stated in 17 R. C. L. 677 : “When the legislature makes the time so short that the right to sue is practically denied, courts will declare such time unreasonable, but they cannot go further and fix a different time; neither can they, if the legislature fails to fix any time, supply this legislative lapse. ’ ’

The defendant has not pleaded any limitation bar against the debt itself, and if pleaded it would be of no avail because of the admitted facts, and inasmuch as neither section 8267 in its original form nor as amended by the Act of 1933 is any bar to the action as commenced, the plaintiff was entitled to prevail, and the lower court was in error in entering the judgment of dismissal, and therefore the judgment should be reversed.

Inasmuch as only one of the defendants in the action appears here as respondent to this appeal, we are confronted with the question of the relation thereto of the other defendants who defaulted in the court below, and the extent of the relief to which the appellant shall be entitled as result of reversal of the judgment of the district court. In considering that question, we must have in mind the status of the title as it is presented to us as well as the character and extent of the relief sought by the plaintiff. The record shows that the mortgagors had parted with title to the land, and while they were made parties defendant the action was dimissed as to them; that the whole title to all of the mortgaged land was vested in Wilmer S. Clark at the time of his death subject to the mortgage; that Clark died intestate and his estate is in course of administration and has not been distributed; that the probate record names two heirs of his estate, one of whom, Ella G. Clark, has conveyed all her interest in the land, as such heir, to the defendant, Northwestern Land and Loan Company, subject to the mortgage. There is no demand for personal judgment for the debt as against anyone; the sale of the mortgaged premises in satisfaction of the debt is all that is sought. The First National Bank of Conrad and its receiver were made defendants as claiming an interest in the land subsequent and inferior to the mortgage.

The plaintiff, in taking the appeal, addressed its notice to the answering defendant Northwestern Land and Loan Company only, and the notice states that the appeal is from the judgment entered in favor of the defendant Northwestern Land and Loan Company. Apparently the appellant viewed the issue as lying between the appellant and the respondent only, and that the defaulting defendants are none of them necessary parties in the consideration of the issue by this court. In the briefs filed by counsel on both sides, the discussion of the issue is limited to the case made between these parties. There is some discussion as to the sufficiency of the complaint to state a cause of action against the defendant administrator of the Clark Estate, but the discussion of that point does not go to the extent of showing its relation to the question raised on the appeal, nor how it would in any way be material in the consideration of the issue as between the appellant and the respondent. Neither in the briefs nor in oral argument was the question of necessary parties to the appeal considered, nor has there been any motion to dismiss the appeal for defect of parties or for insufficiency of notice.

The judgment of dismissal in the lower court is a final judgment disposing of the cause in its entirety and as to all the parties. The dismissal was beneficial to the defaulting defendants as well as the answering defendant. A reversal of that judgment as to all the parties would affect adversely the defaulting defendants as well as the answering defendant. The appellant, therefore, cannot have a reversal of the judgment in its entirety without making all the defendants parties to the appeal and serving notice upon them. A defaulting defendant must be served with notice of appeal if a reversal of the judgment may affect him adversely. (T. C. Power & Brother v. Murphy, 26 Mont. 387, 68 Pac. 411; Spokane Ranch & Water Company v. Beatty, 37 Mont. 342, 96 Pac. 727, 97 Pac. 838; Great Falls National Bank v. Young, 67 Mont. 328, 215 Pac. 651.)

The question then is whether, with the case disposed of in its entirety by the lower court, and favorably to all the defendants, we may now on appeal deal with the case only as to one of the defendants who is the respondent here.

If a judgment is severable as between co-parties to the litigation, an appeal may be taken as to any one of the co-parties. This is true only where the judgment is divisible so that the one co-party is in no joint relation with the other co-party, either in receiving the fruits of a judgment favorable to them or in meeting the obligations of an adverse judgment. And so it is not only the interest of the co-party who has not been made a party to the appeal, that must be taken into account. The disadvantage that may result to the co-party who alone is made a party to the appeal, must be considered.

It is clear that upon this appeal we cannot disturb the judgment of the lower court as to any of the defendants not made parties to the appeal. As to them, the judgment must stand. The only question is whether we can proceed with the ease as made between the appellant and respondent. The effect upon the appellant in so limiting the appeal we need not be concerned with, because it was of its own choosing. The only question is as to the effect upon the respondent. A reversal of the judgment means that the plaintiff shall have recovery from sale of the mortgaged premises. But inasmuch as the other defendants and their interests in the mortgaged premises have been wholly absolved from any liability for the satisfaction of the debt, by the judgment of dismissal, the separate interest of the respondent in the mortgaged premises alone may be looked to for the satisfaction thereof. This will place the respondent at a disadvantage for which he would have cause of complaint. The only question then is whether the respondent, by failure to raise this objection by motion to dismiss the appeal or otherwise, has waived the objection, and which raises the further question whether the objection may be waived and we may proceed as having jurisdiction.

Notice of appeal is jurisdictional. This court acquires no jurisdiction of an appeal if notice is not given. The notice must be served upon the adverse party which means all parties to the action who may be adversely affected by a reversal or modification of the judgment from which the appeal is taken. (Sec. 9733, Rev. Codes; Mitchell v. Banking Corp., 81 Mont. 459, 264 Pac. 127). However, “the failure to serve notice of appeal on one of the parties is not jurisdictional to the extent of depriving the court of the power to consider and determine such questions in the case as may be decided without affecting his rights. ’ ’ (3 Am. Jur. 162, sec. 460.)

The ease presented by this appeal then must be limited to the right of the appellant to satisfy the mortgage debt by sale of the separate interest of the respondent in the mortgaged premises. The appellant has abandoned its ease as against all of the other defendants. The respondent has accepted the issue on appeal as made by the appellant and has made no objection to being singled out by the appellant to stand the brunt of a reversal alone. The case before us stands as if the action had been originally brought against the respondent alone. No question but that such an action may have been maintained in the absence of timely objection by the lone defendant that parties other than itself owning interests in the mortgaged premises should be joined so that the payment of the whole debt be not exacted out of its interest alone.

The parties here, the appellant and respondent, by their own doings have narrowed the issue, and, as this may be disposed of without affecting adversely any of the other parties to the litigation, there is no ground for this court saying, on its own motion, that it is without jurisdiction to consider the issue on the case so made.

The judgment of the lower court is reversed as to the defendant Northwestern Land and Loan Company, and the cause is remanded with direction to enter judgment for the plaintiff against the defendant Northwestern Land and Loan Company for the foreclosue of the mortgage and the sale under such judgment of all the right, title and interest of the said defendant in the mortgaged premises.

Mr. Chibe Justice Johnson and Associate Justices Angst-man and Erickson concur.