Merchants' State Bank v. Sawyer Farmers' Co-Op. Ass'n

• Decision Date: 17 March 1921
• Citation: 182 N.W. 263,47 N.D. 375
• Parties: MERCHANTS' STATE BANK v. SAWYER FARMERS' CO-OP. ASS'N.
• Court: North Dakota Supreme Court

47 N.D. 375

182 N.W. 263

MERCHANTS' STATE BANK

v.SAWYER FARMERS' CO-OP. ASS'N.

Supreme Court of North Dakota.

March 17, 1921.

Syllabus by the Court.

Where a lease of a farm on shares contains a provision to the effect that title to and possession of all crops shall be in the lessor until the conditions of the lease have been complied with by the lessee and a division made of the crop, he (the lessee) has an equitable interest in the crops, even prior to the performance of the conditions and division of the crop; but such equitable interest is not superior to, and does not avoid or infringe upon, the rights of the landlord as reserved in such stipulation. The rights of both the landlord and tenant are measured by the terms of their contract, and such rights will be recognized and enforced, not in derogation of, but in harmony with, each other.

The provision reserving title to all crops in the landlord is effective, without filing the contract as a chattel mortgage. An assignee of the tenant is presumed to be acquainted with the terms and stipulations of the lease, and acquires no greater rights than the tenant had to transfer.

Appeal from District Court, Ward County; Leighton, Judge.

Action by the Merchants' State Bank against the Sawyer Farmers' Co-operative Association for conversion of wheat. A general demurrer was sustained, and plaintiff appeals. Reversed and remanded.

Grace, J., and Robinson, C. J., dissenting in part.Bagley & Thorpe, of Velva, for appellant.

Nestos & Herigstad, of Minot, for respondent.

CHRISTIANSON, J.

This action was brought in the district court of Ward county to recover damages for the alleged conversion of certain wheat. The complaint contained two causes of action. The defendant interposed a general demurrer to both causes. The trial court sustained the demurrer, and the plaintiff has appealed.

For a first cause of action it is averred, in substance: That the plaintiff during all of the year 1919 was the owner of certain lands in Ward county, in this state; that in the spring it leased such lands for that year, by a written contract or lease on the so-called “crop share plan,” to two men, named, respectively, Gordon Fix and F. J. Fix. That by the terms of said contract it was provided that the said Gordon Fix and F. J. Fix should not sell or remove, or suffer to be sold or removed, any of the produce of said farm or premises, of any kind, character, or description, until the division there, without the written consent of the plaintiff, and that until such division the title and possession of all the hay, grain, crops, and produce raised, grown, and produced on said premises should be and remain in the said plaintiff. That by the terms of said contract it was further provided that the plaintiff might deduct from the share of the crop due to the said Gordon Fix and F. J. Fix certain indebtedness owing to the plaintiff from one Anton Fix, the father of said Gordon Fix and F. J. Fix. That the contract further provided that the said plaintiff might deduct from the share coming to said Gordon and F. J. Fix any just costs or disbursements and any indebtedness owing from them to the said plaintiff. That the said Gordon Fix and F. J. Fix farmed the land described in such contract during the season of 1919, and raised 503 bushels of macaroni wheat and 585 and 30 pounds of D-5 wheat. That the plaintiff got its full share (one-half of all) of the macaroni wheat, with the exception of 4 bushels. That the D-5 wheat was all sold and the proceeds of the share of the crops stipulated to be turned over to said Gordon and F. J. Fix, amounting to $679.64, was turned over to the plaintiff, who applied $662.70 thereof on the indebtedness of Anton Fix in accordance with the stipulation in the contract to that effect, and applied the balance of $16.94 on advances made by the plaintiff to the said Gordon and F. J. Fix in connection with the threshing of the grain. That during the year the plaintiff advanced to the said Gordon and F. J. Fix, $220 in addition to paying their share of the threshing bill. That these items have not been paid. That the notes of Anton Fix, which were paid by the proceeds of the crop, were by the plaintiff delivered to Gordon and F. J. Fix, and received and retained by them without protest. That no division of the crop was ever made. That on October 17, 1919, Gordon Fix delivered to the defendant 127 bushels and 30 pounds of macaroni wheat. That plaintiff made demand on the defendant for such wheat, and that such demand was refused. That the defendant had no actual knowledge of the conditions contained in the farm contract. That said contract was at no time recorded or filed in the office of the register of deeds of Ward county.

The second cause of action constitutes a reaverment of the foregoing facts, and in addition thereto it is averred that on or about March 8, 1919, said F. J. Fix made, executed, and delivered to the plaintiff his certain promissory note in the sum of $220.63, payableOctober 1, 1919, with interest from date at the rate of 10 per cent. per annum. That at the same time and place, for the purpose of securing the payment of said note, said F. J. Fix executed and delivered to the plaintiff a certain chattel mortgage, whereby, among other things, he mortgaged to the plaintiff an undivided one-fourth interest in and to all crops of every kind sown, grown, or harvested during the year 1919 upon the premises in controversy. That said chattel mortgage was filed for record in the office of register of deeds of Ward county on March 9, 1919. That the plaintiff is the owner and holder of said promissory note and chattel mortgage, and that no part of the indebtedness evidenced thereby has been paid.

[1][2] The defendant contends that the provision in the contract reserving title in the plaintiff to all of Gordon and F. J. Fix's share of the crop was ineffective against it, for the reason that the contract was not filed as a chattel mortgage. That contention presents the principal, and determinative, question on this appeal. Defendant admits that this court, in McFadden v. Thorpe Elevator Co., 18 N. D. 93, 118 N. W. 242, ruled that such provision was effective without filing; but it contends that that decision was overruled by this court in Minneapolis Iron Store Co. v. Branum, 36 N. D. 355, 162 N. W. 543, L. R. A. 1917E, 298.

The question of the filing of such contract was not involved or decided in the Branum Case. The controversy there arose between the holder of a chattel mortgage and a general creditor, who had garnished an elevator company, which had received into its possession the tenant's share of the grain before any division had been made. Under former decisions of this court it had been ruled that the tenant, prior to division, had no interest in the grain to which a mortgage could attach. After due consideration we determined that such former rulings were erroneous. The decision in the Branum Case, however, was specifically restricted to the following propositions:

“(1) That instruments known as cropper's contracts or farm leases, like all other contracts, must be construed so as to carry into effect the actual intention of the parties thereto. One provision cannot be singled out and given an effect nullifying other provisions, but the contract must be construed as a whole, and the real intention of the parties as thus gathered must control.

(2) That where a lease of a farm on shares gives to the lessee a certain share of the crop, but contains a provision to the effect that title shall remain in the lessor until the conditions of the lease have been complied with by the lessee, he [the lessee] has an equitable interest in the crops, even prior to the performance of the conditions, which equitable interest may be mortgaged.

(3) That the decisions of this court in Bidgood v. Monarch Elevator Co., 9 N. D. 627, 81 Am. St. Rep. 604, 84 N. W. 561, and Herrmann v. Minnekota Elevator Co., 27 N. D. 235, 145 N. W. 821, in so far as they announce the doctrine that a lessee under such lease has no interest in the grain to which a mortgage lien can attach until after a division of the crop has been made are hereby overruled.”

36 N. D. 383, 162 N. W. 553, L. R. A. 1917E, 298.

The free and untrammeled right to make lawful contracts is guaranteed, not only by the Constitution of the state, but by the federal Constitution. Sections 1, 13, Const. N. D.; Fourteenth Amendment, Const. U. S.; 6 R. C. L. pp. 269, 270. The decision in the Branum Case was not intended to deny or infringe upon such right. The decision did not hold the provision reserving title in the landowner to be ineffective or void. If this court had so ruled, then, of course, the lessee would have been the legal owner of the share of the crop coming to him; but the decision, it will be noted, merely holds that the lessee under a contract containing such provision-

“has an equitable interest in the crops, even prior to the performance of the conditions (of the contract), which equitable interest may be mortgaged.” 36 N. D. 383, 162 N. W. 553, L. R. A. 1917E, 298.

This language at least impliedly recognized that, prior to the performance of the conditions of the contract, the theoretical legal title was, by virtue of the provisions of the contract, in the landlord. It will also be noted that the former decisions of this court were overruled only-

“in so far as they announce the doctrine that a lessee under such lease [one containing a provision reserving title to all crops in the landlord until the division thereof] has no interest in the grain to which a mortgage lien can attach until after a division of the crop has been made.” 36 N. D. 383, 162 N. W. 553, L. R. A. 1917E, 298.

The fact that the contract may or may not create the relation of landlord and tenant does not alter or affect the relative rights and obligations of the parties thereto. Those rights and obligations are still measured...