Morris v. Twichell

• Court: North Dakota Supreme Court
• Writing for the Court: BURR
• Citation: Morris v. Twichell, 63 N.D. 747, 249 N.W. 905 (N.D. 1933)
• Decision Date: 10 August 1933
• Docket Number: 6174

249 N.W. 905

63 N.D. 747

EDWIN B. MORRIS, Respondent, v. TREADWELL TWICHELL et al. C. B. LITTLE, Appellant

No. 6174

Supreme Court of North Dakota

August 10, 1933

Appeal from the District Court of Cass County, Swenson, J.

Affirmed.

Zuger & Tillolson, for appellant.

The mortgagee cannot, without consent, by executing and recording a release, cut off the right of a person who pays the obligation at maturity, under an agreement with the mortgagor that he shall be substituted in place of the mortgagor. Citizens Nat. Bank v. Wert, 26 F. 294; Stackerl v Heiser (S.D.) 216 N.W. 876.

It is not essential to subrogation by convention that the creditor shall be a party to the agreement between the debtor and a third party, providing that no intervening rights to the security have occurred; but subrogation by convention is not applicable where it would prejudice the rights of innocent parties. 37 Cyc. 369, 371, 373, 375, 474; Browden v Hill, 136 F. 821; Anderson v. Kain, 40 N.D 632, 169 N.W. 501; Norris v. German American State Bank, 38 N.D. 276, 165 N.W. 570; Harth v. St. Paul Cattle Co. 49 N.D. 467, 191 N.W. 615.

Intention is controlling in determining whether acceptance of quitclaim deed to holder of mortgage from grantee of property assuming mortgage results in merger of estates. First Nat. Bank v. Ramm (Mich.) 240 N.W. 32; Mackenna v. Fidelity Trust Co. 184 N.Y. 411, 77 N.E. 721, 3 L.R.A.(N.S.) 1068; Errett v. Wheeler, 109 Minn. 157, 123 N.W. 414, 26 L.R.A.(N.S.) 816; Murray v. O'Brien, 56 Wash. 361, 105 P. 840, 28 L.R.A.(N.S.) 998; Capitol Bank v. Holmes (Colo.) 95 P. 314, 16 L.R.A.(N.S.) 470; 16 L.R.A.(N.S.) 233 and notes.

Unless intention to merge is expressly stated, in many jurisdictions, the rule obtains that where there is an intervening incumbrance, it will be presumed, as a matter of law, that no merger was intended by the mortgagee in accepting from the mortgagor a conveyance of the mortgaged premises. Pugh v. Sample (La.) 49 So. 526, 39 L.R.A. (N.S.) 834; Rasmussen v. Stanfield (S.D.) 206 N.W. 475; Citizens Bank v. Peterson (Neb.) 210 N.W. 278; Anderson v. Thompson (Mich.) 195 N.W. 689; May v. Cummings, 21 N.D. 281, 130 N.W. 826; 20 Am. & Eng. Enc. Law, 590.

A deed from the mortgagor to the mortgagee in satisfaction of the mortgage debt will not merge title to defeat the senior incumbrance in favor of a junior incumbrance. Morgan v. Hammet, 34 Wis. 512; Bahrs v. Bastian (Wis.) 212 N.W. 292.

Conmy, Young & Conmy, for respondent.

The secret intention of the parties, however, if different from the expressed intention, will not prevail, as the law looks to what the parties said as expressing their real intention. 9 Cyc. 578; Harney v. Wirtz, 30 N.D. 292, 152 N.W. 803; Harvison v. Griffin, 32 N.D. 188, 155 N.W. 655.

When a mortgage debt is paid by one bound by contract to pay it, an assignment of it to him upon payment operates as a discharge. 2 Jones, Mortg. 384; 3 Pom. Eq. Jur. 1213; Johnson v. Walter, 60 Iowa 315, 14 N.W. 325; 1 Jones, Mortg. 740, 741, 943; Theisen v. Dayton, 47 N.W. 892.

Though equity does not favor a merger of a mortgage in the fee, and will save the parties to the transaction from injury yet it will not prevent a merger of the mortgage by assignment to one, who, as owner of the mortgaged premises, was primary debtor. Belk v. Fossler, 96 N.E. 15; Byles v. Kellogg, 34 N.W. 671; Ehrman v. Alabama Mineral Land Co. 109 Ala. 478, 20 So. 112; 27 Cyc. 1331; Barnett & Jackson v. McMillan, 58 So. 401.

Where one is apparently a joint principal, but in reality a surety, he will not be entitled to subrogation to the prejudice of an intervening security taken by a creditor from the principal, in good faith, and in ignorance of the suretyship. 2 Jones, Mortg. 432.

Where a mortgage was given for a joint and several note, the payment by one obligor and his release from personal liability would not subrogate him to the rights of the payee in the security. Henshaw v. Homeland Co. 170 P. 826; Bull v. Smith, 45 N.D. 613, 178 N.W. 426.

Burr, J. Nuessle, Ch. J., and Christianson, Birdzell and Burke, JJ., concur.

OPINION

BURR

Plaintiff commenced this action to foreclose a mortgage executed by the defendant Treadwell Twichell on the lands involved herein and in the complaint alleges the defendants claim interests in the land; but that these interests, if any, are subordinate to his.

The defendants answer admitting that Twichell gave the mortgage held by the plaintiff, but that the defendant Little is a holder, by subrogation, of a mortgage superior to that of the plaintiff. The defendant Little set forth this mortgage and asks for a decree of foreclosure of the same and for a judgment to the effect that his mortgage is superior to that of the plaintiff.

The trial court found in favor of the plaintiff and adjudged that the defendant Little had no right or interest under the mortgage which he claimed to be superior to the mortgage of the plaintiff.

From the judgment entered the defendant Little appeals demanding a new trial in this court.

An examination of the record shows:

In 1914 the owner of the real estate involved executed and delivered to the Travelers Insurance Company a mortgage to secure the payment of $ 20,000 which sum was due and payable in five years. This mortgage is known as the first mortgage.

In 1916 the owner of the land made a contract with the defendant Twichell giving to the latter an option to purchase the land by paying $ 10,000 in cash and executing a mortgage for the remainder of the purchase price "over and above existing incumbrances" -- agreeing to give a deed upon such payment being made and mortgage given. The contract was recorded December 1, 1916.

Twichell had made arrangements with Little whereby the latter advanced to Twichell "the sum of $ 10,000 used by him in the purchase of said real estate."

The owner became incompetent and the county court appointed a guardian. In 1917 T. gave written notice of the exercise of his option to purchase the land "upon payment . . . of the sum of $ 10,000. . . and my executing and delivering to him of a mortgage upon the said premises for the balance of such purchase price over and above the amount of the existing incumbrances thereon." Immediately thereafter T. filed in the county court a petition for conveyance of the real estate. A hearing was had and a decree entered directing the guardian to "make, execute and deliver to said Treadwell Twichell . . . a good and sufficient conveyance. . . free from lien or incumbrance other than existing mortgages of record and of a mortgage to be executed and delivered by said Treadwell Twichell as in such contract provided; upon the payment by the said Treadwell Twichell . . . of the sum of $ 10,000 and the execution and delivery by him. . . of a mortgage in terms as by said contract provided."

The first payment was made on the land, the mortgage now owned by the plaintiff and known as the second mortgage was executed "for the balance of the purchase price over and above existing incumbrances" and on January 24, 1918, was recorded. This deed recites that the owner of the land entered into a contract with T. whereby "he contracted and agreed to convey the premises. . . upon the performance of the conditions of said contract."

At the same time defendants entered into a written contract wherein it is stated that:

"Whereas C. B. Little, of Bismarck, North Dakota, advanced to the said Treadwell Twichell the sum of $ 10,000 used by him in the purchase of said real estate, and it is the purpose of the parties hereto that the said premises shall be owned by them jointly in undivided half interests, that the said Treadwell Twichell shall farm the same and that the said C.B. Little shall be repaid the one half of the sum so advanced by him with interest on all of the sum so advanced until such one half of said sum be repaid him."

"It is hereby agreed by and between the said Treadwell Twichell and the said C. B. Little, that the said C. B. Little is the owner of an undivided half interest in the said premises, subject to mortgage incumbrance thereon; and the said Treadwell Twichell hereby grants, bargains, sells and quit claims to the said C. B. Little, his heirs and assigns an undivided one half interest in the said premises hereinbefore described."

The contract further makes provision for the farming of the land by T. and how he shall be paid for his services out of the crops and how the remainder of the crop shall be sold and proceeds disposed of and the contract then says:

"The balance remaining from such one third share. . . shall be paid said C.B. Little, and credited as a payment upon such $ 10,000 advancement until the payments so made thereon aggregate the sum of $ 5,000. That until such time as the payments so made as hereinbefore provided to the said C.B. Little shall aggregate the said sum of $ 5,000 and interest upon the full sum advanced by him, this agreement shall be and constitute a mortgage and lien upon the undivided one-half interest in the said premises of the said Treadwell Twichell, securing to the said C.B. Little, his heirs and assigns, the payment by said Treadwell Twichell, his heirs or assigns, of any part of the said sum of $ 5,000 remaining unpaid to him together with interest as hereinbefore provided. That upon the said C.B. Little being paid the said sum of $ 5,000 and interest as hereinbefore provided, either from crop proceeds or by said Twichell or his assigns in other manner, then the within mortgage shall be void and of no further force. . . ." This contract was recorded in February 1918.

By March 1919 a difference of opinion arose between T. and the holder of the second mortgage, as to the effect of the terms of the note, and at that...