Roberts v. Friedell
| Decision Date | 07 July 1944 |
| Docket Number | No. 33772.,33772. |
| Parties | ROBERTS v. FRIEDELL et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Olmsted County; Vernon Gates, Judge.
Action by Arthur L. Roberts against William H. Friedell and others for specific performance of a contract for sale of realty and for judgment determining the persons entitled to the unpaid balance of the purchase price and determining that certain judgments against named defendant obtained by Joseph P. Brennan and others antedating the contract for deed should be declared not to constitute a lien upon the property. From a judgment for plaintiff, Joseph P. Brennan and the other judgment creditors appeal.
Affirmed.
Christensen & Ronken, Dansingburg & Plemling, and Desmond B. Hunt, all of Rochester, for appellants.
George, Owen & Brehmer, of Winona, for plaintiff-respondent and Richard D. Manahan, of Rochester, for defendant-respondent.
Plaintiff, as vendee under a contract for deed to certain hotel property in Rochester, sued for specific performance of the contract by defendants Hiller and Friedell, his vendors, and asked for judgment determining the persons entitled to the unpaid balance of the purchase price, and specifically determining that certain judgments against defendant Friedell, antedating the contract for deed, be declared not to constitute a lien upon the property. Friedell's creditors appeal from a judgment granting plaintiff the relief he asked.
The contract for deed was entered into on June 30, 1941. Defendant Florence Hiller was then the record owner of the property, subject to a mortgage in the sum of $50,000 in favor of Mayo Properties Association, executed by her and her husband, as well as by her father, the defendant Friedell, and his wife. The mortgaged property included not only the hotel property in Mrs. Hiller's name but other real estate owned by Friedell. According to the abstract records, Mrs. Hiller had acquired title to the hotel property from the Olmsted County Bank and Trust Company in February 1941. Plaintiff entered into possession of the premises on July 1, 1941, and has been in continuous possession ever since that time.
On October 15, 1941, defendant Brennan, the holder of a judgment against Friedell entered in the district court of Olmsted county in 1933, filed a notice of lis pendens in an action against Mrs. Hiller, Friedell, and others to obtain judgment that Friedell was the actual owner of the hotel property and that Mrs. Hiller held title to it in trust for Friedell's creditors. Besides Brennan, there were numerous other creditors holding judgments against Friedell, dated prior to the date of plaintiff's contract for deed. These creditors were joined as defendants in the action subsequently begun by Brennan. Roberts, however, was intentionally omitted as a defendant.
Having learned of the pendency of the Brennan action, plaintiff's attorney inquired of Brennan's attorney as to the nature of that action. On April 13, 1942, the latter wrote Roberts' attorney: Between the filing of findings and the formal entry of judgment, Brennan's attorney further assured Roberts' attorney by letter that "we have no inclination and no intention of interfering with anybody's right to this property except that of William H. Friedell, but perhaps we ought to keep each other informed." On August 15, 1942, judgment was entered in the Brennan action that Mrs. Hiller held title to the hotel property in trust for all the creditors of Friedell.
By his contract for deed, Roberts had agreed to pay $50,000 for the hotel property, $5,000 thereof to be paid in cash, $5,000 on or before January 1, 1942, and, in addition thereto, the sum of $600 each month, commencing August 1, 1941, with interest at 4½ percent per annum. The contract contained no express provision that Roberts, as purchaser, was to assume and pay the unpaid balance of the $50,000 mortgage, but he was granted that privilege and right by the following clause: "Parties of the first part hereby direct and authorize party of the second part to pay all the payments aforementioned to the Mayo Properties Association to be applied by said Association upon a note and mortgage owing by first parties to said Association and agree that evidence of payment to said Association shall be proof of payment of amounts becoming due under this contract for deed." Roberts in fact made all his payments to the Mayo Properties Association, which in turn applied payments upon the mortgage. Not until November 1, 1942, when an execution upon a judgment of appellants Nowell and Reid was served on Roberts, did he cease making payments. He then owed a principal balance of $32,692.39, less certain amounts paid for taxes. The amount remaining unpaid on the mortgage had been reduced to $27.012.85.
The trial court upon these facts directed judgment (1) that plaintiff, Roberts, be authorized and directed to pay Mayo Properties Association the full balance due on its mortgage; (2) that the balance of the purchase price be paid into court for distribution to such persons as the court might find entitled thereto; (3) that, upon such payment, the defendants Hiller and Friedell, and their spouses, deliver to plaintiff their warranty deed; and (4) that, upon payment and delivery of such deed, judgment be entered that none of the defendants (including Friedell's judgment creditors) has any right, title, interest, or lien in or upon the hotel premises.
Upon the filing of the court's findings, Roberts paid up the mortgage and filed a satisfaction thereof. He also paid into court the balance of $4,475.46 remaining due from him under his contract. Mrs. Hiller and husband and Friedell and wife executed and delivered a warranty deed to Roberts. The creditors, whose combined judgments exceeded $13,000 in amount, refused, however, to accept the $4,475.46 in release of their judgments, insisting that their judgments were valid and subsisting liens against the property in their full amount.
No claim is made that the $50,000 paid by Roberts was an inadequate price and did not represent the fair and reasonable value of the hotel property at the time of its sale to him. No evidence was offered that the real value of the property exceeded the consideration paid by Roberts, so as to render the conveyance to him partially voluntary. See, 24 Am.Jur., Fraudulent Conveyances, § 125. Nor is any claim made, nor could it fairly have been made, that the Mayo mortgage was not bona fide and entitled to priority over the judgment creditors.
"* * * A bona fide security upon real estate confers a right in or to the property as irrevocable as a perfect transfer, to the extent necessary to answer the purposes of security, and leaves the property in the grantor, and accessible to his creditors, subject to the lien." Smith v. Conkwright, 28 Minn. 23, 27, 8 N.W. 876, 877.
It was conceded at the oral argument in this court that the proceeds of the Mayo mortgage were used by Friedell and Mrs. Hiller in purchasing the hotel. Yet, the appellants urge that, notwithstanding the written assurances given Roberts to the contrary, they can compel him to pay not only the mortgage but also the full amount of their judgments, even though the combined total far exceeds the price Roberts contracted to pay.
1. Appellants seek to invoke the statutory rule that a judgment is a lien from the date of its docketing "upon all real property in the county then or thereafter owned by the judgment debtor," though title of record is not in him. Minn. St. 1941, § 548.09, Mason St. 1927, § 9400; 3 Dunnell, Dig. & Supp. § 5068; Emerson-Brantingham Imp. Co. v. Cook, 165 Minn. 198, 206 N.W. 170, 43 A.L.R. 41, and note; Lowe v. Reierson, 201 Minn. 280, 276 N.W. 224. That rule is qualified by Minn.St. 1941, § 501.10, Mason St. 1927, § 8089, which provides: "No implied or resulting trust shall be alleged or established to defeat or prejudice the title of a purchaser for a valuable consideration, and without notice of such trust." Under that statute, a judgment lien against property not in the name of the judgment debtor is subordinate to the rights of a purchaser under a contract for deed entered into by such purchaser in good faith and for a valuable and adequate consideration. Berryhill v. Potter, 42 Minn. 279, 44 N.W. 251; School District No. 10 v. Peterson, 74 Minn. 122, 76 N.W. 1126, 73 Am.St.Rep 337; 5 Dunnell, Dig. & Supp. § 8307. Appellants seek to avoid the effect of § 501.10 by urging that Roberts was not a bona fide purchaser for value, and that the court's finding to that effect was erroneous.
2. It may be conceded, without changing the result, that the fact that Friedell was in possession of the hotel when the contract for deed was entered into, coupled with the fact that he joined in the contract as vendor, was sufficient to constitute constructive notice to Roberts of any title or interest of Friedell in the property. See, Henderson v. Murray, 108 Minn. 76, 121 N.W. 214, 133 Am.St.Rep. 412. So, it may be conceded that Roberts, not having fully performed his contract for deed when the notice of lis pendens was filed in the Brennan action was, as of the date of filing that notice, affected with constructive notice of Friedell's title and put upon his diligence, irrespective of his previous good faith or lack of notice. But see, Parks v. Smoot, 105 Ky. 63, 48 S.W. 146. Notice, whether constructive or actual, did not, however, dispense with the necessity of establishing, by competent proof, that Friedell in fact did own the property and that Mrs. Hiller held the record title in trust for his creditors. Such proof is entirely lacking in the record before us.
Roberts was not a party...
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