Mauzy v. Elliott

• Decision Date: 01 March 1946
• Docket Number: 31984.
• Citation: Mauzy v. Elliott, 146 Neb. 865, 22 N.W.2d 142 (Neb. 1946)
• Parties: MAUZY v. ELLIOTT et al.
• Court: Nebraska Supreme Court

22 N.W.2d 142

146 Neb. 865

MAUZY v. ELLIOTT et al.

No. 31984.

Supreme Court of Nebraska

March 1, 1946

Syllabus by the Court.

1. In point of legal operation each renewed lease is a new lease and the taking of it, in the absence of language clearly indicating a contrary intention, operates as a surrender of the old one except for the protection of legal interests carved out of it, which, once created, the law will not permit to be destroyed.

2. Notice of acceptance of an option to purchase real estate contained in a duly executed written lease is not required to be in writing or in any particular form in the absence of a requirement to that effect in the lease.

3. A mere option to purchase contained in a lease binds only the lessor for the period specified therein until accepted by the lessee. However, when appropriately accepted the option is merged in a completed contract of purchase which is thereafter effective and binding upon both parties, vesting equitable title in the lessee.

4. Where an option to purchase contained in a lease is duly exercised the relation of landlord and tenant ceases and that of vendor and purchaser arises. Thereafter the lessor cannot by breach of a covenant to convey, compel continuance of the relation of landlord and tenant for the purpose of creating a breach of covenant to pay rent in order to enable him to declare the option forfeited.

5. Upon the foreclosure of a mortgage, sale, and confirmation thereunder, if a surplus remains after payment of the mortgage debt and costs, the district court in the exercise of its equitable jurisdiction has full power, upon an application being made for a distribution of the surplus, to bring in all parties necessary to a determination of the ownership of the fund and to try and determine that question.

Kennedy, Holland, DeLacy & Svoboda, of Omaha D. O. Dwyer and W. L. Dwyer, both of Plattsmouth, and Harry R. Henatsch, of Omaha, for appellant.

Leon White & Lipp, of Omaha, and Walter H. Smith, of Plattsmouth, for appellee.

Heard before SIMMONS, C. J., and PAINE, CARTER, MESSMORE, YEAGER, CHAPPELL and WENKE, JJ.

CHAPPELL Justice.

This appeal involves primarily the distribution of moneys representing the proceeds received from the sale of real property in the foreclosure of a mortgage. Erma V. Elliott owned an acreage near Plattsmouth. On February 1, 1938, she mortgaged it to one Henry Mauzy. Her husband, Jess N. Elliott, joined in the mortgage. Both the mortgagor and the mortgagee were deceased before this litigation. On March 19, 1943, plaintiff, as administratrix of the estate of Henry Mauzy, filed suit to foreclose the mortgage, then in default. Albert J. Godwin, administrator with the will annexed of the estate of Erma V. Elliott, her husband, Jess N. Elliott, her children, the devisees in her will, and their respective spouses, together with Erna Lapidus and husband, Joe Lapidus, who were alleged to claim some interest in the property, were all made defendants. Defendant administrator answered plaintiff's petition alleging that as administrator he was entitled to receive any and all funds derived from a sale of the land under foreclosure over and above an amount sufficient to satisfy plaintiff's debt for the purpose of paying claims allowed against the estate. He specifically prayed for that relief, together with such other and further relief as might be just and equitable.

Defendants, Lapidus, filed answer and cross-petition denying generally but alleging that on March 16, 1942, they went into possession of the property under a written lease with Erma V. Elliott and Jess N. Elliott, her husband, whereby Erna Lapidus, lessee, agreed with them in part as follows: '* * * to pay * * * as rent * * * Three Hundred ($300.00) Dollars, payable $100.00 at signing hereof, receipt of which is hereby acknowledged; $100.00 on or before July 1, 1942 and $100.00 on or before November 1, 1942, and as part of the consideration for said payments lessee has option to purchase said premises during the term of this lease for $4000.00, in which event rentals paid are to be applied on said purchase price, and in case of exercise of said option lessors are to furnish abstract showing title free and clear of all liens and incumbrances and to convey by warranty deed. In case said option is not exercised during term of this lease then lessee has option of renewal of this lease including said option for an additional year on said terms and conditions by written notice to lessors sixty days prior to March 1, 1943.'

Cross-petitioners further alleged in substance that lessee exercised the option of renewal of the 1942 lease in the manner and within the time required, retained possession thereunder, and thereafter in 1943, having complied with the terms of the lease, exercised the option to purchase the property. Lessee reiterated in the cross-petition her previous exercise of the option to purchase and alleged that she was ready, willing, and able to perform as required. By reason thereof it was prayed that plaintiff's petition be dismissed, that specific performance be granted, and for such other and further relief as might be just and equitable.

Defendant administrator answered the cross-petition denying generally but admitting that cross-petitioners had been in possession of the property as tenants at all times since March 16, 1942. However, it was alleged that Erna Lapidus was holding over her term and had forfeited her right to enforce the option to purchase by reason of the fact that she had failed, neglected, and refused to pay the rent when due in 1943. The court was asked to find that Erna Lapidus had no further rights under the lease and also for such other and further relief as might be just and equitable. The cause was tried as if a general denial thereof had been filed.

On June 24, 1944, trial was had, the parties being present in person and by their respective attorneys. Counsel for the parties were given opportunity to file briefs and on November 25, 1944, the trial court entered a decree of foreclosure finding and adjudging that the mortgage was valid, in default, and a first lien on the property in the sum of $2,050, with interest on the principal sum of $2,000 at nine per cent from and after February 1, 1943. It was ordered if that sum was not paid to plaintiff within 20 days the property should be sold as upon execution, and the proceeds paid to the clerk of the district court to be retained and disbursed as thereafter ordered upon determination of the issues between the several defendants and Erna Lapidus, cross-petitioner, which issues were continued until further order of the court. There was no redemption as afforded and order of sale was issued December 16, 1944. Legal notice of sale was published and on January 22, 1945, the property was sold by the sheriff to Erna Lapidus for $5,500, which was paid to the clerk of the district court. On February 2, 1945, the sale was confirmed and deed ordered. With reference to all the proceedings heretofore recited there was and is no controversy and no appeal was taken therefrom.

This appeal involves only the supplemental decree of the trial court distributing the proceeds of the foreclosure sale. On February 2, 1945, the trial court entered a supplemental decree deciding the issues between the several defendants and cross-petitioner and distributing the proceeds then in the hands of the clerk of the district court. In that connection the court found generally that by reason of the lease, option for renewal, and purchase, together with timely exercise and acceptance thereof, Erna Lapidus was the equitable owner of all the right, title, interest, and equity of redemption of Erma V. Elliott, deceased, her heirs, devisees, administrators, and all persons claiming by or through any of them, except for the sum of $1152.96 which should be paid to defendant administrator for and on behalf of said estate and the heirs entitled thereto. The court also ordered that plaintiff should be paid costs in the sum of $141.54, together with $2,405.50, principal and interest due under the mortgage, and that Erna Lapidus should be paid her costs, together with $1,800 balance then remaining in the hands of the clerk of the district court which included credit for $300 rentals paid by her in 1942.

Defendants, Jess N. Elliott and the administrator, thereafter filed motion for new trial which was overruled. Only the administrator has appealed contending substantially that the supplemental decree was: (1) Void for want of jurisdiction; (2) that the trial court erred in finding that option to purchase was aptly exercised by lessee and in failing to find, in any event, that the option to purchase was forfeited by her failure to pay rentals in 1943; and (3) erred in finding that Erna Lapidus was entitled under the option if properly exercised in 1943 to credit for $300 paid as rent under the 1942 lease. We find that the latter contention has merit but that the other two cannot be sustained.

With reference to the first contention it is appellant's position that the cross-petition of defendants, Lapidus, prayed for specific performance of a contract to convey real estate made by a party deceased before conveyance and having been filed out of time the court lacked jurisdiction to enter an order that would be binding upon the heirs and devisees of Erma V. Elliott, deceased, because no publication was made as provided by section 30-902, R.S.1943.

At the outset it should be recalled that in the first instance this action was not one for specific performance of such a contract. It was a suit by the administratrix of the mortgagee's estate to foreclose a real estate mortgage wherein the mortgagee had died without...