First Nat. Bank v. Northwestern Trust Co., 28000.

• Decision Date: 11 July 1930
• Docket Number: No. 28000.,28000.
• Citation: 181 Minn. 115,231 N.W. 790
• Parties: FIRST NAT. BANK OF DETROIT v. NORTHWESTERN TRUST CO. et al.
• Court: Minnesota Supreme Court

231 N.W. 790

181 Minn. 115

FIRST NAT. BANK OF DETROIT v. NORTHWESTERN TRUST CO. et al.

No. 28000.

Supreme Court of Minnesota.

July 11, 1930.

Appeal from District Court, Becker County; Carroll A. Nye, Judge.

Action by the First National Bank of Detroit, by P. L. Klyver, as receiver, against the Northwestern Trust Company, trustee for the St. Paul Seminary under deed of trust of Mary T. Hill, and others, wherein defendant named filed a counterclaim. Finding for plaintiff, and, from an order denying its motion for a new trial, defendant named appeals.

Affirmed.

Boyesen, Otis & Faricy, of St. Paul, for appellant.

W. B. Carman and Johnston & Carman, all of Detroit Lakes, for respondent.

HOLT, J.

The defendant Northwestern Trust Company, trustee for St. Paul Seminary under deed of trust of Mary T. Hill, appeals from an order denying its motion for a new trial.

The controversy arises in this manner: In 1915, R. C. Madsen became the owner of the N. E. ¼ of the S. W. ¼ and the fractional government lot 3 to the west thereof and government lot 2 to the north thereof, all in section 11, T. 139, R. 41, Becker county, this state. He also owned a small tract in section 10 adjacent to the southwest corner of lot 3. Several mortgages were placed thereon, and four small parcels in the northeast corner of lot 2 were conveyed to different parties. Government lots 2 and 3 were bounded on the west and north by Little Floyd Lake. In 1917 he caused a strip of the lake front of about 2,000 feet in length and 233 feet in width running from the west boundary of lot 3 easterly and northeasterly to be platted as Madsen Grove into 34 lots, dedicating the streets to the public. The record does not show the size of the lots or from which end the numbering starts, but from the exhibits it is to be inferred that they front a street or road on the south and the lake shore on the north. In order to legally plat this strip, releases were obtained from the existing mortgages. Thereafter, in December, 1920, a mortgage for $2,617.46 was executed and recorded upon the lots in controversy to one Bilstad by Madsen. This mortgage remained an incumbrance of record until March, 1923. On March 1, 1921, Madsen, to secure his $5,000 note, mortgaged the land first above described, excepting the four small parcels theretofore conveyed by him to Hamilton, Sedberg, and Ohman in the northeast corner of lot 2, Madsen Grove not being mentioned, the mortgagee being the defendant Northwestern Trust Company. The mortgagor covenanted that the premises were free and clear of incumbrances. It was recorded March 3, 1921, at 3 p. m. This mortgage and debt the mortgagee thereafter sold and assigned to itself as trustee for St. Paul Seminary under deed of trust of Mary T. Hill. On March 1, 1921, Madsen, to secure $1,050, mortgaged to Merchants' National Bank of Detroit practically the same land as to the Northwestern Trust Company and subject to its $5,000 mortgage. This was recorded March 3, 1921, at 3:10 p. m. On March 1, 1921, Madsen, to secure $1,881.31, mortgaged to L. J. Norby practically the same described premises as in the mortgage to Northwestern Trust Company, and also specifically the lots in Madsen Grove now in dispute. This mortgage was made subject to $8,667.46 existing incumbrances, and was recorded at 3:20 p. m. March 3, 1921. The existing incumbrances are the Bilstad mortgage of $2,617.46, appellant's of $5,000, and the Merchants' National Bank's of $1,050. Through foreclosure of the Norby mortgage plaintiff claims title to nineteen certain lots in Madsen Grove.

The suit is to determine adverse claims to the lots mentioned. The complaint alleges that plaintiff is the fee owner in possession of the lots, describing them. The answer of appellant admits this, but as a counterclaim sets up and claims the mortgage of March 1, 1921, given to defendant Northwestern Trust Company, to be a lien thereon superior to the rights of plaintiff. The Northwestern Trust Company has answered only in its representative capacity as trustee, and it is assumed that as such it stands no better and no worse than the company individually, and there will be no need of keeping in mind a distinction between the two, and the answering defendant will be referred to hereinafter as appellant. The reply admits the execution of appellant's mortgage, but "alleges in that connection that it was not the intent of said parties that said mortgage should cover the premises described in plaintiff's said complaint and that said mortgage did not so cover said premises." The assignment of the mortgage by the defendant trust company to itself as trustee is admitted, but in connection with that admission it is alleged that at the time of said assignment said defendant had full knowledge "that said mortgage was not intended to cover and did not cover the premises described in the complaint." The finding was in effect that the mortgage was not a lien upon the lots described in the complaint, and that neither of defendants have any right, title, interest, lien, or claim thereon. There was no express finding that the parties to the mortgage did not intend the mortgage to cover the lots described in the complaint, but the memorandum attached to the findings makes clear that this was the basis of the decision, for it states: "Viewing the case from all of the facts and circumstances appearing in the evidence the Court has no hesitancy in finding that the mortgage relied on by the defendant trustee was not intended by any of the interested parties to cover the lands here in controversy."

The question is, Does the record contain competent evidence justifying the learned trial court to arrive at the conclusion just stated? R. C. Madsen gave the mortgage which is the source of plaintiff's title on the same day he gave the mortgage under which appellant claims; the latter being recorded twenty minutes before the former. There can be no doubt of the fact that the mortgagor did not intend the two mortgages to cover the lots in Madsen Grove. But that is not enough. The evidence must also show that appellant mortgagee did not intend that its mortgage should embrace lots in Madsen Grove. Upon the face of the mortgage it covers or conveys all of government lots 2 and 3, except the four parcels therein excepted, and those excepted do not include the lots in Madsen Grove claimed by plaintiff. The first contention of appellant is that oral testimony was not admissible to show that the parties did not intend to exclude any part included in the description. Although there was some oral testimony, it did not relate to any verbal expressed intention of either mortgagor or mortgagee—it related merely to the situation of the parties with respect to the title, the abstract furnished, the examination thereof by the trust company's attorneys, and the examination of the property by its agent pursuant to the understanding between the parties. We think all the evidence offered and received was properly admissible, if the rule is applicable which is stated thus in Witt v. St. Paul & Northern Pac. Ry. Co., 38 Minn. 122, 35 N. W. 862, 864: "The cardinal rule of construction is to ascertain and give effect to the intention of the parties to the deed; and to this end the court must consider all parts of the instrument, and the construction must be upon the entire deed, and not upon disjointed parts of it. And if the language is ambiguous and it is necessary in order to ascertain the intent of the parties, evidence of the circumstances, including the situation of the parties and of the property, and the state of the title, may be received."

Appellant contends the rule is not applicable because the mortgage itself creates no ambiguity—its description is clear. But, if ambiguity or uncertainty arises when an instrument is to be applied to the subject-matter thereof, evidence of extraneous circumstances may be resorted to. This thought was applied and expressed in Wilmot v. Minneapolis Auto Trade Ass'n, 169 Minn. 140, 210 N. W. 861, in these words: "The duty of courts is to apply contracts to their subject-matter and so effect the purpose of the parties. Their interpretation is incidental. To accomplish the main object, resort may and frequently must be had to the circumstances under which the contract was made, and, if there be need for resort to extraneous aids to construction, it is immaterial whether such need arises from an uncertainty in the instrument itself, or that being clear, standing alone, it ceases to be so, and ambiguity arises when the contract is applied to its subject-matter. In either case construction must follow, and resort must be had to the aids furnished by extrinsic circumstances. The prohibition of the law is not against their being used for interpretation, but against making them the instruments of contradiction of an expressed contractual intent. The old distinction between patent and latent ambiguities, never more than `an unprofitable subtlety' (Thayer, Preliminary Treatise on Evidence, 434), `so far as contracts are concerned, * * * may be wholly disregarded.'"

In case of a mortgage the problem is to apply the description to the land intended to be mortgaged. In this instance, Does an ambiguity arise, and, if so, do the circumstances already stated and those about to be mentioned clearly show an intent of the parties to appellant's mortgage to not include therein Madsen Grove? As usual, before this mortgage was executed,...