Burzinski v. Kinyon Investment Company
| Decision Date | 10 August 1934 |
| Docket Number | 29,987 |
| Citation | 256 N.W. 233,192 Minn. 335 |
| Parties | MARY BURZINSKI v. KINYON INVESTMENT COMPANY AND ANOTHER |
| Court | Minnesota Supreme Court |
Action in the district court for Steele county by the special administratrix of the estate of Teofila Burzinski to cancel and set aside the sale of a first mortgage loan participation certificate and to recover the amount paid therefor. There were findings, Fred W. Senn, Judge, in favor of defendants. Plaintiff appealed from the judgment. Affirmed.
Mortgage -- action to rescind purchase of interest in note secured by mortgage -- evidence.
1. Action to rescind the purchase of an interest in a promissory note, secured by a farm mortgage, on the ground that the character of the farm was misrepresented. The evidence justifies the finding that there was no fraud or misrepresentation of the security.
Mortgage -- action to rescind purchase of interest in note secured by mortgage -- rights of purchaser.
2. On the face of the mortgage it secured two notes, one for $12,000 and one for $2,000. In the sale to plaintiff of an interest in the $12,000 note it was represented that it was secured by a first mortgage on the farm in that amount. The legal effect of the arrangement between the mortgagors and the mortgagee, when the notes and mortgage were executed, was that the $12,000 note should be a first and prior lien on the farm, and the $2,000 note subsequent and subordinate thereto. If it be conceded that there was a material difference between the mortgage as represented and as written which would have warranted equity to grant rescission, there was here such long delay, coupled with conduct, on the part of plaintiff which induced the seller to expend time and money in foreclosing the mortgage and managing the farm for the benefit of the holders of the $12,000 note that the court rightly denied rescission.
Limitation of action -- action on note secured by mortgage -- accrual of cause of action.
3. The evidence sustains the findings that in the sale of an interest in the $12,000 note there was no violation of G.S 1923, §§ 3977-4000; and that, even if there had been a cause of action based on such violation, it was barred.
H H. Sturner and Moonan & Moonan, for appellant.
Nelson & Nelson, for respondents.
The appeal is from a judgment in favor of defendants.
There were six cases tried together, but separate findings and judgments were entered. The difference in the cases is merely in dates and in the amount of money involved. The defendants in each case are the Kinyon Investment Company and The First National Bank of Owatonna. The officers of the company are also officers of the bank. Each corporation conducts its business in the banking rooms or offices of the bank. The bank had no interest in the mortgage here involved when it was given, nor did it take any part in disposing of the participation certificates or receive any commission or other benefit from any transaction growing out of the mortgage referred to. It subsequently was intrusted with the documents for safe-keeping. No reference need hereinafter be made to the bank, for there is nothing in the assignments of error that would justify findings holding it liable to any one of the plaintiffs.
Harlan E. Leach owned a 240-acre farm in Steele county, this state, when, on September 1, 1923, he, his wife joining, executed a mortgage thereon to the Kinyon Investment Company to secure the payment of one promissory note for $12,000 due in five years, bearing interest at the rate of 5 1/2 per cent annually, and one note of $2,000 on the same terms. The record shows that Mr. Leach applied to the company for a loan of $14,000, but that it refused to lend more than $12,000. He and one Mrs. Edmonds had formerly owned the farm, and Leach had bought her interest therein. Other jointly owned property figured in the deal. However, Mr. Leach owed her $2,000 which he desired to pay or adjust. So when the company would lend only $12,000 on the farm it was arranged that a note to Mrs. Edmonds might be included in the mortgage, provided it was subject and subordinate to the $12,000 note. The transaction was closed accordingly. The two notes were executed to the company and the mortgage securing them for $14,000. The company paid over to Leach $12,000, and indorsed, without recourse, the $2,000 note and delivered the same to Mrs. Edmonds with this agreement signed by it attached:
The mortgage was duly recorded. Thereafter, and between September 13, 1923, and March 1, 1924, the company sold to the several plaintiffs, and to others, shares or interest in the $12,000 note and mortgage securing it. To each purchaser the company delivered an instrument, called a First Mortgage Loan Participation Certificate, selling and transferring a proportionate share in the "First Mortgage Loan" of $12,000, giving a description of the mortgage and the book and page of its record. Appended was a receipt signed by the bank that it held the papers in the Leach loan of $12,000 for safekeeping and containing this guaranty:
"This bank further guarantees that the total amount of Participation Certificates outstanding, bearing its receipt for the above described papers, shall not exceed the sum of $12,000."
Thereupon for two years the interest was paid on the $12,000 note, and the holders of the participation certificates received their share. Then there was default in the payment of both interest and taxes. The company, after advising with the certificate holders, foreclosed the mortgage, and on January 26, 1927 bid in the farm for the benefit of plaintiff and the other certificate holders for the full amount due on both notes, including expenses of sale and delinquent taxes paid by the company. There was no redemption, nor did Mrs. Edmonds exercise the option given...
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