Cargill v. Thompson
| Decision Date | 22 June 1894 |
| Docket Number | 8714 |
| Citation | 59 N.W. 638,57 Minn. 534 |
| Parties | Wm. W. Cargill et al. v. Edward Thompson et al |
| Court | Minnesota Supreme Court |
Argued April 20, 1894
Appeal by defendants Edward Thompson and Ara D. Sprague, from an order of the District Court of Houston County, John Whytock J. made November 24, 1893, denying their motion for a new trial.
The plaintiffs, Wm. W. Cargill and Samuel D. Cargill, complained that defendant Thompson and wife, being the owners of a dam and water power at Hokah on Root River, on April 27, 1872 leased to White Bros. for twenty years, with right of renewal, the exclusive right to use therefrom 7,505 cubic feet of water per minute at a six foot head, they to pay $ 500 yearly rent. That on April 8, 1879, Thompson and wife made another lease to White Bros. for the unexpired term increasing the right to water to 10,000 cubic feet of water per minute under an eight foot head, they to pay an additional rent of $ 10 per horsepower, making $ 1,050 per year. That in these leases the Thompsons agreed to keep the dam reasonably tight and of sufficient height to produce a head of not less than eight feet of water at the flume of the mill and to construct and keep in repair the head race and clean it out from time to time, but did not warrant the supply of water in the river. That White Bros. on September 22, 1881, assigned both leases, and all their rights thereunder, to the plaintiffs. That on March 4, 1886 Thompson and wife conveyed the property to the defendant Sprague and assigned to him the rents, subject to the rights of the lessees, and that plaintiffs thereafter paid to him and he received the rent; that they used the water to propel their flouring mill at Hokah, known as the Crescent Mill; that the mill had a capacity of 250 bbls per day; that defendants failed to keep the dam at sufficient height and reasonably tight and in repair and failed to keep the head race clean, whereby they sustained great inconvenience and injury to their flouring business and asked $ 25,184 damages. The defendants demurred to this complaint but the demurrer was overruled and they appealed but the order was affirmed. Cargill v. Thompson, 50 Minn. 211. The action was then dismissed as to Orinda Thompson. The other defendants answered severally, stating among other things, that on the date of the conveyance to Sprague, he executed a defeasance to Edward Thompson providing that on his payment of $ 16,841.26 then owing by him to Sprague, together with six per cent interest and all taxes and expenses he would reconvey to Thompson and reassign the right to the rents. They further answered that plaintiffs had put in new machinery and greatly increased the capacity of the mill and the quantity of water required to run it and that all obstructions in the head race were caused by plaintiff's improper manner of drawing water therefrom and allowing ice to accumulate therein. The plaintiffs replied and the issues were tried May 10, 1893. The plaintiffs had a verdict for $ 7,500. Defendants moved for a new trial but were refused and they appeal.
Order reversed.
Benton, Roberts & Brown, Wells & Hopp and E. H. Smalley, for appellants.
Sprague was simply a mortgagee, whose only interest in the property was for the purpose of securing the payment of the debt Thompson owed him. He was not liable for breach of covenants of the lease to plaintiffs. And this is true whether he was in possession of the property leased or not. There is no privity of contract between plaintiff and Sprague. The only ground on which Sprague can become liable for a breach of the covenants contained in a lease made by Thompson is, that he comes into an estate in, and title to, the lands themselves by reason of a transfer from Thompson. Cargill v Thompson, 50 Minn. 211.
The only question then is, did Sprague, by his deeds and contracts with Thompson, become the purchaser of the land, or acquire a legal estate or title as owner. This deed in connection with the recorded defeasance and the unrecorded agreement which was expressly referred to in the recorded defeasance, constituted Sprague simply a mortgagee. Holton v. Meighen, 15 Minn. 69; Everest v. Ferris, 16 Minn. 26; Benton v. Nicoll, 24 Minn. 221; Blakeley v. Le Duc, 25 Minn. 448; Butman v. James, 34 Minn. 547; Marshall v. Thompson, 39 Minn. 137; Brinkman v. Jones, 44 Wis. 498; Scott v. Mewhirter, 49 Iowa 487.
The only cases which can be cited holding a mortgagee liable on covenants in leases upon land conveyed in the mortgage are those from jurisdictions where the mortgagee is still regarded as holding the legal title to the lands. This rule of the mortgagee as owner, is the English common law doctrine and is still adhered to in England and in some American states. Walton v. Cronly's Admr, 14 Wend. 63; Kortright v. Cady, 21 N.Y. 343; Wetherell v. Hamilton, 15 Pa. St. 195; Johnson v. Sherman, 15 Cal. 287.
In some of the cases just mentioned it is held or implied that a different doctrine might be applied to a mortgagee in possession, receiving the rents. This distinction is on the ruling peculiar to those states in which they still adhere partially to common law rule, that the mortgagee in possession has "an estate in the land." Teal v. Walker, 111 U.S. 242.
Pace v. Chadderdon, 4 Minn. 499, has since been expressly repudiated. Rogers v. Benton, 39 Minn. 39.
In California it is held that the mortgagee of a term in possession as assignee is not liable upon the covenants of the lease on the ground that the mortgage is a mere security and does not vest in the mortgagee any estate in the lands either before or after condition broken. Nor does possession by the mortgagee affect the nature of his interest; it does not change the relation of debtor and creditor or impair the estate of the mortgagor, but leaves the rights and interests of the party exactly as they existed previously. Johnson v. Sherman, 15 Cal. 287; Dutton v. Warschauer, 21 Cal. 609; Jackson v. Lodge, 36 Cal. 28.
The court admitted evidence of the meaning and construction, not of any technical term in the lease, but of considerable portions and clauses of the lease. The admission of this testimony taken as it was, and not confined to technical terms in the lease, but to whole portions of the lease itself, was excepted to by defendants and is of itself sufficient to entitle them to a reversal.
Special damages are only allowed when they may reasonably be supposed to have been contemplated by the parties in making the contract as the probable result of the breach. Wilson v. Reedy, 32 Minn. 256; Frohreich v. Gammon, 27 Minn. 476; Goebel v. Hough, 26 Minn. 252; Cushing v. Seymour, Sabin & Co., 30 Minn. 301; Williams v. Wood, 55 Minn. 323; Simmer v. City of St. Paul, 23 Minn. 408; Messmore v. New York Shot & Lead Co., 40 N.Y. 422.
The proper rule of damages is the difference between the rental value of the mill with the covenants fulfilled, and its value when they are not fulfilled for the time in question. Winne v. Kelley, 34 Ia. 399; Fort v. Orndoff, 7 Heisk. (Tenn.) 167; Pawaukee Milling Co. v. Howitt, 86 Wis. 270; Duffield v. Rosenzweig, 144 Pa. St. 520; Great Western Printing Co. v. Tucker, 73 Ia. 755; Griffin v. Colver, 16 N.Y. 489; Cassidy v. Le Fevre, 45 N.Y. 562; Stern v. Rosenheim, 67 Md. 503.
Plaintiffs cannot claim damages without having taken reasonable measures to decrease the amount of such damages. Paine v. Sherwood, 21 Minn. 225; Great Western Printing Co. v. Tucker, 73 Ia. 755; Fort v. Orndoff, 7 Heisk. (Tenn.) 167.
Losey & Woodward, Harries & Duxbury and E. C. Higbee, for respondents.
The so called defeasance as well as the unrecorded contract evince an intention of the parties to leave the fee and the possession in Sprague, even as between themselves, and secondly, that as between plaintiffs and Sprague the defendants are neither of them in a position to assert that the title was other than in Sprague. Upon its face this conveyance was a deed. Even as to subsequent purchasers the so called defeasance was not intended to operate as a notice that the title was other than in Sprague. This is evidenced from the fact that it was contemplated that he should make conveyances to purchasers. The undisputed facts clearly show this transaction a contract to reconvey, leaving the legal title in Sprague, even as between himself and Thompson. If our contention in this respect is correct, it ends the question of the liability of Sprague, for the covenants in the leases are those which run with the land and bind the grantee thereof by reason of the privity of estate. Shaber v. St. Paul Water Co., 30 Minn. 179; Leppla v. Mackey, 31 Minn. 75; Trask v. Graham, 47 Minn. 571.
But if we were to concede that this transaction was, as between the parties, intended to leave the title and fee in Thompson, and as between themselves to be regarded as a mortgage, still we contend that as between the plaintiffs and Sprague, he is still liable upon the covenants in these leases because he is estopped as against the plaintiffs to take such a position. As such mortgagee he is shown to have been in the possession, receiving the benefits and emoluments thereof, and as such mortgagee is liable upon the covenants in these leases. The right of the mortgagee to receive, collect and hold rents, by all the authorities, is dependent upon his possession. But the only way to take possession of leased premises is to take the rents. Chapman v. Porter, 69 N.Y. 276; Wood v. Whelen, 93 Ill. 153; Dawson v. Drake, 30 N.J.Eq. 601; Moffatt v. Smith, 4 N.Y. 126.
The construction of these leases was for the Judge and he so held and withdrew the consideration of them from the jury. The Judge had the right in the consideration of the question to bring to his aid books of science, standard...
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