Smith v. Grilk

• Citation: 250 N.W. 787,64 N.D. 163
• Decision Date: 31 October 1933
• Docket Number: No. 6187.,6187.
• Parties: SMITH v. GRILK et al.
• Court: United States State Supreme Court of North Dakota

64 N.D. 163

250 N.W. 787

SMITH

v.GRILK et al.

No. 6187.

Supreme Court of North Dakota.

Aug. 24, 1933.

Rehearing Denied Oct. 31, 1933.

On Petition for Rehearing.

Syllabus by the Court.

1. Where an appeal record shows that a party has no interest which would be affected by the appeal, such party is not a necessary party to the appeal.

2. The adverse party upon whom notice of appeal must be served, under section 7821, Compiled Laws of 1913, means the party whose interest in relation to the subject of the appeal is in conflict with the reversal of the order or decree appealed from, or the modification sought by appeal.

3. A lessee whose interest in litigation between a mortgagor and mortgagee is that of being acquitted of his obligation to pay rent by paying to the proper party is not a party adverse to the mortgagor.

4. Section 7762 of the 1925 Supplement to the Compiled Laws of 1913 (chapter 132, Laws of 1919), which provides that the debtor under an execution or foreclosure sale of his property shall be entitled to the possession, rents, use and benefit of the property sold from the date of such sale until the expiration of the period of redemption, is an expression of the public policy of the state.

5. An assignment of rents, either in a mortgage or contemporaneous contract, as further security for the indebtedness, and which is destructive of the rights of the mortgagor to possession, rents, use and benefit of the mortgaged property during the period of redemption, is invalid as violative of the public policy of the state as expressed in the statute.

6. It is held that that portion of section 6740, Compiled Laws of 1913, which recognizes the right of the mortgagor and mortgagee to contract regarding possession at the time of the execution of the mortgage and which was consistent with the earlier statutes giving to the purchaser at foreclosure sale the right to the rents and profits during the year for redemption, is wholly inconsistent with the policy of the later statute, and is by implication repealed by chapter 132, Laws of 1919 (1925 Supp. § 7762).

Appeal from District Court, Cass County; M. J. Englert, Judge.

Action by Minnie Hector Smith against Marion E. Grilk and others, as executors of the estate of Charles Grilk, deceased, and another. From the judgment rendered, the defendants, other than the American Amusement Company, appeal.

Reversed, and cause remanded in accordance with opinion.

CHRISTIANSON, J., dissenting.

Richardson, Thorp & Wattam, of Fargo, for appellants.

Conmy, Young & Conmy, of Fargo, for respondent.

BIRDZELL, Judge.

This is an appeal from a judgment in favor of the plaintiff in an action to foreclose a mortgage and is here for trial de novo. The question argued concerns only the rents during the period of redemption. It is the contention of the appellants that the mortgagor is entitled to the rents, while the respondent claims them under an assignment, and contends that a receiver was properly appointed for the purpose of collecting rent during the period of redemption.

[1] There is a motion by the plaintiff to dismiss the appeal. The basis of the motion is that the notice of appeal was not served upon the defendant, the American Amusement Company, as an adverse party. Section 7821, Compiled Laws of 1913. This defendant is hardly more than a nominal party. Its pleading and the record disclose that its interest in the litigation is solely to the end that it may pay the rent to the partylegally entitled to the same, and thereby be discharged of its admitted obligation. It is in no other respect interested in the foreclosure proceeding. It does not appear that this defendant can be prejudicially affected by any modification of the judgment regarding rents at the instance of the parties who alone are concerned with the right to them. Where the record shows that a party to the judgment has no interest that would be affected by the appeal, such party is not a necessary party to the appeal. See Galveston, H. & N. Co. v. House et al. (C. C. A.) 102 F. 112;U. S. v. Exploration Company, Ltd. (C. C. A.) 203 F. 387;Germain v. Mason, 12 Wall. 259, 20 L. Ed. 392;Williams v. S. C. Mining Association, 66 Cal. 193, 5 P. 85;Thompson v. Ellsworth, 1 Barb. Ch. (N. Y.) 624; 2 Hayne, New Trial and Appeal (Rev. Ed.) § 210; 2 Cal. Jur., §§ 120, 121, and 122.

[2][3] The term “adverse party,” within an appeal statute such as section 7821, Compiled Laws of 1913, has been well defined in the case of Thompson v. Ellsworth et al., 1 Barb. Ch. (N. Y.) 624, as follows: “The adverse party, * * * means the party whose interest in relation to the subject of the appeal is in conflict with the reversal of the order or decree appealed from, or the modification sought for by the appeal.” The record in the instant case shows that the amusement company has no interest whatsoever in relation to the subject of the appeal that is in conflict with the reversal or modification sought on this appeal. All the judgment gives it with respect to rent is an acquittal of its obligation upon payment to the proper party, and it will be equally acquitted of its obligation under the lease whether it pay the rent during the redemption period to the appellants or whether it pay to the respondent. The motion is denied.

The facts in this case, in so far as they affect the question at issue, are as follows: Charles Grilk, since deceased, in November, 1926, executed a mortgage to Minnie Hector Smith for $35,000, covering the property known as the Orpheum Theater in the city of Fargo. The property was leased to the American Amusement Company, a party defendant in this action. At the time the mortgage became due in November, 1931, there was due on it the sum of $31,000 principal. Concurrently with the execution of the mortgage and by a separate instrument, Grilk assigned to the mortgagee the rents, issues, and profits of the property, and to that end the existing lease. The assignment carried with it an express power to the mortgagee to collect the rents as they should become due, and it contained this stipulation: “* * * This assignment however to become effective only upon a default in the terms of the mortgage hereinafter mentioned and not otherwise.” The term of the attornment or assignment was expressed to be until the notes and mortgage “shall have been fully paid and satisfied,” and the document contained a power of attorney purporting to authorize the assignee to renew any and all leases and to make new leases or agreements in regard to the leasing of the premises as the assignee should think proper. The mortgage contained this provision: “And the said party of the first part hereby agrees that the holder of this mortgage in any action to foreclose it, shall be entitled without regard to the adequacy of any security for the debt, to the appointment of a receiver of the rents and profits of the said premises; and that the purchaser of said premises upon sale under foreclosure by advertisement or action, shall be entitled to immediate possession.” There is no controversy concerning rents. except as to those accruing during the period of redemption.

[4][5][6] Prior to the decree in foreclosure, the amusement company, with the express or tacit approval of the defendants, paid rent to the plaintiff. Upon the foreclosure sale the plaintiff bid for the property $27,423.40, leaving a deficiency judgment of $5,000. No question is raised here concerning any payments made prior to the foreclosure sale, but the appellants contend that that portion of the judgment appointing a receiver and directing the payment of rents to the receiver during the year for redemption is erroneous.

Section 6740, Compiled Laws of 1913, provides: “A mortgage does not entitle the mortgagee to the possession of the property, unless authorized by the express terms of the mortgage; but after the execution of a mortgage the mortgagor may agree to such change of possession without a new consideration. No person whose interest is subject to the lien of a mortgage may do any act which will substantially impair the mortgagee's security.”

Section 7762 of the 1925 Supplement to the Compiled Laws of 1913 (chapter 132, Laws of 1919) provides: “The debtor under an execution or foreclosure sale of his property shall be entitled to the possession, rents, use and benefit of the property sold from the date of such sale until the expiration of the period of redemption.”

The main contention of the appellant is based upon this statute. It is said, in substance, that it evidences a policy to secure to the mortgagor during the redemption period all the benefits of possession, including the rents and profits.

The history of our legislation concerning mortgages and their foreclosure shows that almost from the beginning a foreclosure sale affected the possessory right of the mortgagor.By section 11 of chapter 15 of the Session Laws of Dakota Territory for 1864-65, it was provided that no mortgagor should be entitled to retain possession of the mortgaged premises after the sale thereof, although having a year thereafter in which to redeem. Similar or analogous provisions remained in our statutes down to the year 1919. Hence, along with section 6740, supra, which was section 1733 of the Civil Code of 1877, there was also a provision to the effect that the purchaser from the time of sale until redemption, and the redemptioner from the time of his redemption until another redemption, was entitled to receive from the tenant in possession the rents of the property sold, or the value of the use and occupation thereof. Section 353, Code of Civil Procedure 1877; section 7762, supra. The two sections in their treatment of the right to possession were consistent. While the mortgage only created a lien and did not in itself entitle the mortgagee to possession, the statute expressly recognized as valid any provision in a mortgage that would give possession to the mortgagee in advance of...