East Grand Forks Federal Sav. & Loan Ass'n v. Mueller

• Decision Date: 01 June 1972
• Docket Number: No. 8758,8758
• Citation: 198 N.W.2d 124
• Parties: EAST GRAND FORKS FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff and Appellant, v. Arnold R. MUELLER et al., Defendants and Respondents. Civ.
• Court: North Dakota Supreme Court

Page 124

198 N.W.2d 124

EAST GRAND FORKS FEDERAL SAVINGS AND LOAN ASSOCIATION Plaintiff and Appellant, v. Arnold R. MUELLER et al., Defendants and Respondents.

Civ. No. 8758.

Supreme Court of North Dakota.

June 1, 1972.

Syllabus by the Court

1. Where the effective date of the repeal of the de novo statute was July 1, 1971, and the appellant served its notice of appeal and undertaking for costs in October of 1970, prior to the date of repeal of the de novo statute, demand for trial de novo was timely made.

2. An assignment-of-rents agreement contained in a real estate mortgage may be enforced prior to the foreclosure of the mortgage. Enforcement of such assignment of rents is not contrary to the provisions of Section 28--24--11, N.D.C.C., which provides that the debtor, under an execution or foreclosure sale of the property, shall be entitled to possession and rents, use, and benefits of the property sold from the date of the foreclosure sale until the expiration of the period of redemption.

Stokes, Vaaler, Gillig, Warcup & Woutat, Grand Forks, for plaintiff and appellant.

Garry A. Pearson, Grand Forks, for defendant and respondent Red River Realty, Inc.

STRUTZ, Chief Justice, on reassignment.

The plaintiff, East Grand Forks Federal Savings and Loan Association, the mortgagee, appeals from a judgment dismissing its action against the mortgagors, their successors in interest, and the tenant for recovery of rents claimed under a written assignment of rents contained in a real estate mortgage, which mortgage is in default.

The property described in the mortgage was owned by Theodore E. Jarombek and Theresa A. Jarombek, the mortgagors. They executed and delivered to the mortgagee a mortgage on Lot 10, Block 2, Dacotah Place Addition to the City of Grand Forks, which mortgage contained an assignment of rents. The mortgage was duly filed and recorded in the office of the register of deeds of Grand Forks County and has been in default during all times pertinent to this action.

The mortgagors did not answer the plaintiff's complaint, were not represented by counsel at the trial of this action, and are not parties on this appeal. The claimants in this action to the rental moneys paid on the property in question, which moneys have been deposited with the clerk of the district court of Grand Forks County, are the mortgagee, which claims such moneys under the assignment-of-rents clause in the mortgage, and the defendant and respondent Red River Realty, Inc.

The property described in the mortgage has been subject to several transactions since the mortgage in question was executed and delivered by the Jarombeks, as owners, on or about the 30th day of March, 1962. One of the provisions in the mortgage reads:

'5. If at any time the mortgagors shall be in default in performance of any of the agreements herein or in the said note contained, the Association shall have power and authority to remove the occupant and to take possession of the said real estate and to manage, control and lease the same even if it be a homestead, and collect all the rents, issues and profits therefrom or collect reasonable rent from the occupants if a homestead and shall then apply such income to pay all expenses of management and preservation of the property, taxes and assessments, reasonable and necessary repairs.'

Some time after the mortgage was delivered to the mortgagee, the mortgagors employed Red River Realty, Inc., a real estate brokerage firm in Grand Forks, to sell the property for them. Certain buyers were found, and on November 17, 1964, the mortgagors sold the property to Walter and Adeline Beglo under a contract for deed calling for monthly installment payments. The Beglos made the monthly installment payments for a number of years, but eventually they defaulted in payment of installments due for the months of April, May, June, July, and August of 1969. It would appear from the record that on or about August 8, 1969, the Beglos assigned their interest in the contract for deed to Red River Realty, Inc.

As a result of the default in payments by the Beglos, the Jarombeks began proceedings to cancel the contract which they had executed with the Beglos. Judgment of cancellation of contract was entered on April 13, 1970, which judgment provided for a ninety-day period of redemption. No redemption was made within such period, and the mortgagors regained the right to possession of the property.

Before entry of judgment in the action to cancel the contract for deed, Red River Realty, Inc., attempted to sell the property to Allen and Donna Brownell. The new purchasers applied for financing through the appellant mortgagee, but such sale never was consummated and the Brownells occupied the property for a time only as tenants. They made payments of rent directly to East Grand Forks Federal Savings and Loan Association, the mortgagee herein.

After it became apparent that they would be unable to secure financing to purchase the property, the Brownells vacated, and the property then was rented to the defendant Arnold R. Mueller. His family occupied the premises as tenants at the time this action was commenced.

The record discloses that default was made on payments on the mortgage in March of 1969. By September of 1969, the defaults totaled $529.42. A letter from the mortgagee to the tenant Mueller in September of 1969 notified the tenant that East Grand Forks Federal Savings and Loan Association, the mortgagee, was invoking its rights to such rents under the assignment of rents contained in its mortgage. The tenant, however, continued making his payments of rent to Red River Realty, which in turn deposited such rent money with the clerk of the district court pending the outcome of the action involving the cancellation of the contract for deed. The sum of $657.89, a portion of the amount claimed in this action, represents the rental payments for the period September 1969 through April 13, 1970. In addition, during the same period of time, Red River Realty collected $140 in rents from Mueller, which, through some oversight, was not deposited with the clerk of the district court. The claim for a total of $797.89, which the mortgagee is seeking to recover in this action, is based upon the theory that the mortgagee had invoked the assignment-of-rents provision of the mortgage which it held.

The trial court denied the mortgagee's claim to such rentals and ordered a dismissal of the complaint. In its memorandum decision, the trial court said:

'While East Grand Forks Federal Savings and Loan Association is the nominal plaintiff in the case at hand the real parties in interest are defendants, Theodore E. Jarombek and Theresa A. Jarombek, because any payment on the mortgage reduces their obligation as mortgagors. Under the circumstances the defense of Section 32--19--07, N.D.C.C., asserted by the Defendant, Red River Realty, Inc., is well taken.'

The court then points out that the plaintiff mortgagee had made no effort to foreclose the mortgage or to gain possession of the premises, and that the plaintiff therefore had no right to the rents which were paid on the premises.

The plaintiff has demanded a trial de novo, and in the oral argument in this court the right of the appellant to a trial de novo was questioned. The de novo statute, Section 28--27--32, North Dakota Century Code, was repealed by Chapter 311 of the Session Laws of 1971, which repeal became effective on July 1, 1971. The notice of appeal, with undertaking for costs, was served and was filed with the clerk of the district court on October 29, 1970. Thus, where the effective date of repeal of the de novo statute was July 1, 1971, and the appellant had served and filed its notice of appeal and undertaking for costs in October of 1970, the demand for trial de novo was timely made. Automobile Club Insurance Co. v. Hoffert, 195 N.W.2d 542 (N.D.1972).

At the outset of our consideration of this appeal, we would point out that the respondent Red River Realty, Inc., has conceded in its brief that the recent decision of this court in Skinner v. American State Bank, 189 N.W.2d 665, decided by this court in December of 1971, appears to overrule the trial court's decision, which was based upon the premise that a debtor in possession is at all times entitled to rents and profits from the property until after the expiration of the period of redemption. In Skinner, we held that an assignment-of-rents agreement given with a real estate mortgage was enforceable by the mortgagee prior to foreclosure of the mortgage, and that the provision of Section 29--24--11, North Dakota Century Code, which deals with rents and profits during the period of redemption, has no bearing upon the mortgagee's rights under the assignment-of-rents agreement prior to foreclosure.

The respondent now urges this court to re-examine its decision in Skinner in the light of Section 32--19--07, North Dakota Century Code. That section provides, in part:

'. . . Except as otherwise provided in sections 32--19--04 and 32--19--06, neither before nor after the rendition of a judgment for the foreclosure of a real estate mortgage or for the cancellation or foreclosure of a land contract made after July 1, 1951, shall the mortgagee or vendor, or the successor in interest of either, be authorized or permitted to bring any action in any court in this state for the recovery of any part of the debt secured by the mortgage or contract so foreclosed. It is the intent of this section that no deficiency judgment shall be rendered upon any note, mortgage, or contract given after July 1, 1951, to secure the payment of money loaned upon real estate or to secure the purchase price of real estate, and in case of default the holder of a real estate mortgage or land contract shall be entitled only to a foreclosure of the mortgage or the cancellation or foreclosure of the contract except as provided by sections 32--19--04 and 32--19--06....