Mutual Benefit Life Insurance Company v. Canby Investment Company
| Decision Date | 17 November 1933 |
| Docket Number | 29,518 |
| Citation | 251 N.W. 129,190 Minn. 144 |
| Parties | MUTUAL BENEFIT LIFE INSURANCE COMPANY v. CANBY INVESTMENT COMPANY AND ANOTHER |
| Court | Minnesota Supreme Court |
Action in the district court for Lincoln county by plaintiff as mortgagee to recover cash rent due defendant Canby Investment Company, the mortgagor, under the terms of its lease with the defendant Kosberg, and also to recover possession of the mortgagor's share of crops due from Kosberg. Plaintiff's contention is that it is entitled to the rents and the proceeds from the sale of the grain for the purpose of paying taxes, insurance, and repairs which under the terms of the mortgage the mortgagor should have paid. The facts were stipulated. There were findings, Albert H Enersen, Judge, in favor of defendant Canby company, and plaintiff appealed from the judgment entered pursuant thereto. Reversed.
Mortgage -- rent -- mortgage provisions.
1. Provision of a real estate mortgage assigning rents to the mortgagee to reimburse him if he is compelled to pay taxes maintain insurance, and make necessary repairs on the mortgaged property held valid.
Mortgage -- rent payable under farm lease.
2. Contract to farm on shares, designated a "lease," where part of "rent" is to be paid in cash and part in grain, and where landowner takes from cropper a chattel mortgage on all crops to be grown on land that year, held to create relationship of landlord and tenant rather than that of joint adventurers; hence landowner and cropper are not tenants in common of crops grown on land, but tenant is the owner thereof and the share due the landlord is rent.
Mortgage -- rent -- mortgage provisions.
3. A clause in a mortgage giving the mortgagee the right to "have, demand, receive and receipt for any rents due" held to be a valid assignment of rents, since contingent interests, expectancies, and things resting in mere possibility only are assignable in equity. Such assignment operates by way of present contract to attach to the rent when it comes into esse.
Mortgage -- rent -- mortgage provisions.
4. A clause in a real estate mortgage assigning rents to the mortgagee is not such a mortgage on crops as to come within 2 Mason Minn. St. 1927, § 8359, which invalidates any mortgage on crops to be grown later than the season beginning May 1 next following the date thereof.
Fred Jensen, R. S. Lammers, J. V. Williams, Sweet, Johnson & Sands, and John R. Van Derlip, for appellant.
A. R. English and Clarence J. Donnelly, for respondent.
The defendant Canby Investment Company, a corporation, hereinafter referred to as the Canby company, is, and at all time important to the determination of this action has been, the owner of a certain tract of agricultural land situated in Lincoln county, Minnesota. The property is subject to a valid first mortgage, not given to secure any part of the purchase price, executed in 1925 and at present held by the plaintiff in this action. Under the terms of the mortgage defendant Canby company is bound to pay the taxes, insurance, and any assessments levied against the property and to keep the premises in a state of good repair. The mortgage further provides that upon the mortgagor's failure to do so the mortgagee shall "be entitled to have, demand, receive and receipt for any rents due or to become due from any tenant of said premises, or any part thereof, and apply the same to payment of such taxes, assessments, repairs or premiums of insurance." In December, 1931, defendant Canby company leased the premises to defendant Kosberg, and agreed to take as "rent" therefor "one-half share of all grains and vegetables; and $4.00 per acre for all hay, pasture and corn land." Defendant Canby company, in violation of the provision of the mortgage, failed to pay the taxes for 1930 and for the first half of 1931. These amounts total $250.72. The plaintiff paid the same and subsequently commenced this action, seeking first to replevin from defendant Kosberg the share of grain which he owes defendant Canby company under the aforementioned lease, and, second, to have judgment for the cash rent which defendant Kosberg owes defendant Canby company under the lease. The parties stipulated in writing that the sheriff might collect the cash rent due from Kosberg, seize and sell the grain, and hold the proceeds therefrom as well as the cash rent pending the outcome of this action. At the time of commencing this action the cash rent had not been paid, but defendants do not seriously question plaintiff's right thereto and take issue only on plaintiff's right to replevin the grain. The case was tried before the court without a jury upon wholly stipulated facts. The trial court denied plaintiff's claim and found for defendant. From judgment entered pursuant thereto plaintiff appeals.
The legal questions involved are, in the main, four:
(1) Is a provision of a mortgage valid which assigns rent to the mortgagee so that he may reimburse himself if he is compelled to pay taxes, to maintain insurance, and to make repairs on the mortgaged premises to keep his security intact?
(2) Was the relationship in this case between defendant Kosberg and defendant Canby company that of landlord and tenant, or was it that of joint adventurers so that the two are tenants in common of the crops raised on the land?
(3) Is the clause of the mortgage, above quoted, sufficient to amount to an assignment or pledge of rents to the mortgagee upon the happening of the contingency provided therein?
(4) Is such provision of the mortgage in violation of 2 Mason Minn. St. 1927, § 8359, which provides:
"Any provision in a mortgage on crops which by its terms shall mortgage or convey any crop to be grown later than during the season beginning May 1 next following the date thereof shall be void, except when the mortgage is given to secure a part or all of the purchase price or rent of the land upon which the crop is to be grown, * * *."
1. Concerning the first question there is no controversy in this state. What is now 2 Mason Minn. St. 1927, § 9572, providing that a mortgage is not a conveyance so as to entitle the mortgagee to possession without foreclosure, has been held effectually to prevent the mortgagor, at the time of executing the mortgage, from assigning rents to the mortgagee for the purpose of applying the came against the principal or interest of the mortgage debt. Cullen v. Minnesota L. & T. Co. 60 Minn. 6, 61 N.W. 818; Orr v. Bennett, 135 Minn. 443, 161 N.W. 165, 4 A.L.R. 1396; see Justus v. Fagerstrom 145 Minn. 189, 176 N.W. 645; Fidelity-Philadelphia Tr. Co. v. West, 178 Minn. 150, 156, 226 N.W. 406. An assignment of rents for the purpose of applying the same to the principal of the mortgage is a partial foreclosure. It is a clear evasion of the fundamental, and now statutorily enacted, principle of law that until the mortgage debt is due, until the mortgage has been foreclosed, and until the period of redemption has run, unless extraordinary circumstances justify the appointment of a receiver, the mortgagor shall be entitled to the possession, enjoyment, and full usufruct of the land. An assignment of rents to the mortgagee subsequent to the time of executing the mortgage is valid under certain circumstances, Farmers Tr. Co. v. Prudden, 84 Minn. 126, 86 N.W. 887, but that principle has no application in the present case, for here the assignment was concurrent with the execution of the mortgage. It is, however, a "species of waste" for the mortgagor to fail to pay taxes and assessments which accrue against the property and which, if unpaid, create a lien thereupon prior to that of the mortgagee, 2 Jones, Mortgages (8 ed.) § 849, p. 167; see Nielsen v. Heald, 151 Minn. 181, 186 N.W. 299, 26 A.L.R. 29; Fidelity-Philadelphia Tr. Co. v. West, 178 Minn. 150, 156, 226 N.W. 406. So it has long been settled that a provision of a mortgage assigning rents to reimburse a mortgagee who is compelled to pay taxes on the property to keep his security intact is valid and will be enforced. Cullen v. Minnesota L. & T. Co. 60 Minn. 6, 61 N.W. 818; Fidelity-Philadelphia Tr. Co. v. West, 178 Minn. 150, 226 N.W. 406; Peterson v. Metropolitan L. Ins. Co. 189 Minn. 98, 248 N.W. 667. Similarly, failure to pay insurance or to make repairs may constitute waste.
2. Defendants, while granting that plaintiff mortgagee may be entitled under the mortgage clause to the cash rents which Kosberg owes the Canby company, earnestly argue that plaintiff is not entitled to the defendant Canby company's share of the grain. Defendants contend that under the above mentioned farm contract they are joint adventurers, that they are tenants in common of the grain in question, and therefore that there is no rent to which this clause in the mortgage assigning rents can fasten itself or can apply. Such a result might follow if the premise were true. Certainly if the Canby company had farmed the land itself there would be no rent to which this clause of the mortgage could apply. Therefore, a clause such as is found in this mortgage is without meaning and effect as far as concerns a mortgagor who occupies and cultivates the mortgaged land. So also, if the Canby company had farmed the land jointly with another, the share of crops accruing to it might not be "rent" to which this mortgagee would be entitled. However, we find here that the relationship between the two defendants is not that of joint adventurers but rather is that of landlord and tenant, and hence that there is no tenancy in common of the crops. Defendants cite us to cases holding that under a contract to farm on shares the cropper and the owner of the land are tenants in common of any grain raised on the land until there has...
To continue reading
Request your trial