Canton Lumber Co. v. Spears

Headnote

Mortgages—Right to Redeem.

By an agreement made in 1889, E., who held legal title to mortgaged real estate as trustee for an alien, deeded the same to K., on the understanding that the mortgagee should extend the time of payment for one year; that, in case of default, K. should deed the property to the mortgagee or his nominee, thereby avoiding the delay of foreclosure; and that if the mortgagor, or E., his agent, should procure a purchaser, K. would ■convey as they might direct, the mortgagee’s interest to cease absolutely ■on satisfaction of his debt. The new notes given by the mortgagor were not paid when due, and the mortgagee, instead of directing a conveyance, continued to collect interest up to October 1, 1893, and allowed the mortgagor to renew his notes. On October 20, 1893, the mortgagee directed the premises to be conveyed to plaintiff, who agreed to take a deed thereto on January 1, 1894, and a contract to that effect was made; but, before the latter date, K., at the direction of the mortgagor, conveyed the property to defendant, and from the proceeds of the sale tendered the mortgagee the full amount of his debt. Heidi, that defendant’s title was good, the executory contract with plaintiff not being such exercise of the mortgagee’s right to foreclose as to bar the right of redemption.

Appeal from circuit court, St. Lawrence county.

Action by Canton Lumber Company against James Spears and others. Prom a judgment dismissing the complaint as to defendants Spears and Kimball, and for separate bills of costs to each said defendants, plaintiff appeals.

Affirmed.

In May, 1889, Horace D. Ellsworth held title to sawmill property, as the trustee of Harry P. Grange, who was an alien. The property was subject to a mortgage of 85,000, of which a foreclosure was threatened. One David Rice, a friend of Harry P. Grange, thereupon purchased the mortgage in the interests of Grange. On the 29th day of May, 1889, an agreement was entered into by and between all the parties interested, which was evidenced by a certain instrument in writing executed by the defendant William H. Kimball and Horace D. Ellsworth. This agreement states that Ellsworth and his wife had that day delivered a deed of the premises to Kimball, who had accepted the same upon terms stated as follows: Rice was to hold the mortgage, and extend the time of payment thereof for one year. Grange gave his notes for the amount of the bond and mortgage, and agreed to pay the same as they fell due, to wit, a year from date. Kimball agreed, in case of default on the part of Grange, to convey the property to Rice, or to such person as he might nominate. If Grange made payment, Kimball was to convey the title as Grange directed. If Grange or his attorney, Ellsworth, should procure a purchaser for the property, Kimball agreed to convey as they might direct; provided, always, that the claims of Rice should be paid, or provided for in a manner satisfactory to him. The interest of Rice in the property was to cease absolutely upon satisfaction of the amount remaining unpaid upon his bond and mortgage. After the execution of these papers, Harry P. Grange and Ellsworth, as his agent, remained in possession of the mill for several years; in fact, until October, 1893. Grange did not pay off the bond and mortgage. Various and successive renewals of the notes which he had given to Rice under the provisions of the agreement of May 29, 1889, were executed by Grange, and accepted by Rice. The last note so given was dated October, 1892. Mr. Rice made no attempt to foreclose his mortgage. As late as July, 1893, he declared to Mr. Kimball, the holder of the title, that he did not want the property, and that all he did want was the payment of the indebtedness of Grange to himself, to wit, the sum of 85,000 and interest. On or about the 1st day of October, 1893, said Horace D. Ellsworth and the defendant James Spears entered into an agreement in writing, whereby the

said Ellsworth agreed to sell, and the said Spears agreed to buy, all the Grange sawmill property, with various appliances and belongings, for the sum of $5,500, $5,000 of which was to take up the mortgage held by Rice. The deed was to be delivered not later than the 14th day of October, 1803. Mr. Kimball was notified of this arrangement, and directed by Eliswortb to execute a deed to Spears. On the day named in the contract for the delivery of the deed (October 14, 1893), the parties came together, but Kim-ball declined to execute a deed until he should hear from Harry P. Grange as to his wishes in the matter. The time for the consummation of the contract was then extended by common consent until Kimball should communicate with Grange respecting the matter. Kimball began correspondence with Grange, who was a resident of Canada; but before he had received answer from him, and on or about the 20th day of October, 1893, Ellsworth executed a contract to sell the mill premises to the Canton Lumber Company, which agreed to purchase the same for the sum of $5,600, deed to be given on or before January 1, 1894. Along with the execution of the contract to the Canton Lumber Company, Ellsworth received direction from David Rice to convey to such company, bearing date October 20, 1893. On the 30th day of October, 1893, Kimball received a letter from Harry P. Grange, which consented generally to such a disposition of the property as might seem best to Kimball. Spears insisted upon his rights. Kimball consented to execute a deed to him, if he would purchase certain personal property not included in the contract, of which Harry P. Grange was the owner. To this Spears agreed. Thereupon Kimball notified Ellsworth of the conclusion he had come to, and Ellsworth acquiesced therein. The deed was then executed by Kimball and wife on December 4, 1893, and delivered to Spears, who thereupon paid the purchase price. Ellsworth informed Kim-ball that the amount remaining unpaid on Rice’s mortgage was a little less than $5,000. Out of the moneys paid by Spears, a draft for $5,000 was purchased, payable to the order of David Rice, to whom it was forwarded by mail. The draft was returned with the statement that Rice understood that his mortgage was to be satisfied by a deed to the Canton Lumber Company. Both purchasers claimed the mill, and right to possession thereof. Mr. Spears was finally locked out by the Canton Lumber Company. He thereupon began summary proceedings, which were stayed by the commencement of this action.

The opinion of Mr. Justice Landon is as follows:

David Rice, by taking, May 29, 1889, an assignment of the, Burnett bond! and mortgage, and extending the time of payment upon the additional security of the notes of H. P. Grange and the deed of the mortgaged premises to W. H. Kimball pursuant to the trust agreement of the same date, simply became a mortgagee with additional securities. The mortgaged premises became the primary fund for the payment of the debt, but there is tio agreement that Rice should not foreclose the mortgage, and, in case of a deficiency upon the foreclosure sale, resort to the notes of H. P. Grange, and; alsó to the bond accompanying the mortgage, to make good the deficiency. By the trust deed and agreement between Ellsworth and Kimball it was intended, in case of default in payment, that Rice should have the option to take title either to himself or his nominee directly from Kimball, without the expense and delay of a foreclosure. Had Rice exercised that option, and actually taken the title, either in person, or by his nominee, the title would have been good, and the mortgage debt satisfied, unless there had been such equities in favor of H. P. Grange or his creditors as would justify the court in decreeing a sale of the mortgaged premises, and, after paying Rice in full, awarding the surplus to H. P. Grange or his creditors. Suppose the mortgaged premises were worth $50,000 instead of $5,000, and Kim-ball had given Rice a deed therefor, it is easy to see that the court would have to interfere in order to do justice. The value of the equity over the mortgage debt does not affect the principle. The evidence shows that by the agreement of May 29, 1889, Rice did not accept the premises as payment, but took the assignment of the mortgage, notes, and said agreement as securities.

The plaintiff cites Jewett v. Brownell (Sup.) 4 N. Y. Supp. 764 , as authority

to the effect that Rice had nothing but the mortgaged premises to resort to. If in that case the plaintiff had had a bond and notes besides the stock, it would resemble this. The plaintiff sought to recover upon a promise, and the court held there was none. The rule is, once a mortgage, always a mortgage; that is, until it is replaced by something else, or extinguished. Rice therefore remained a mortgagee when he was tendered the amount of the mortgage debt, unless meantime he or his nominee, the plaintiff, had acquired actual title to the mortgaged premises, or the indefeasible right to acquire such title. Actual title he had not acquired, since Kimball never •conveyed to him or to the plaintiff. The single question, then, is whether Rice had acquired the indefeasible right to have ICimball give to him or his nominee, the plaintiff, a deed of the mortgaged premises. If so, then H. I*. Grange, or Ellsworth, whichever was the real party in interest, had absolutely forfeited beyond right of redemption the right to save the mortgaged premises by paying the mortgage debt. Let it be admitted that upon G range's default at the end of the first year, Rice’s right to direct Kimball to convey the property to him or to his nominee was complete. But he did not then give the direction; he was not obliged to give it, and probably did not want to give it. On the contrary, he continued to collect his interest up to October 1, 1893, and even allowed Grange to renew his notes. These acts meant that he was resting upon his right to acquire title, and not exercising it. So long as he rested upon it, so long he held the relation of a creditor holding securities, and so long Grange, as the beneficial owner of the equity of redemption, could redeem. Now, Rice gave Kimball, October 20, 1893, direction to convey to the plaintiff. Had he given the direction to convey immediately, it is possible that Grange’s right of redemption would then have been foreclosed, notwithstanding the previous disobeyed direction given to Kim-ball by Ellsworth in behalf of Grange, to convey to Spears. But Rice’s direction to Kimball to convey to the plaintiff must be construed in connection with plaintiff’s agreement to take the title, and that plaintiff did not agree to take before December 31, 1893. Of course plaintiff could not be compelled to take title before that date. Thus Rice’s direction to Kimball to convey was to convey on or before December 31, 1893, and, until actual conveyance, was executory, instead of executed. Rice might have countermanded it. He could not have sued Kimball for specific performance until after that •day. He thus postponed the act of foreclosure, and thereby kept open Grange’s right of redemption. While it was yet open, and on December 4, 1893, Grange, through Ellsworth, directed Kimball to convey to Spears. Kimball did so, and from the money thus realized offered Rice his pay in full, which Rice refused to accept. If this view is correct, the case is with the defendants without consideration of the other questions presented by counsel.

Much was said upon the argument in respect of the rights acquired by Spears, and also by the plaintiff, under their contracts, and the direction given by Ellsworth to Kimball to convey to Spears, and by Rice to Kimball to convey to plaintiff. But Spears and the plaintiff each made the contract with Ellsworth with full knowledge of the contingency upon which Kim-ball could convey upon the direction of Rice instead of Grange, or of Grange instead of Rice, and neither party acquired anything more than the contingent right to the title. Thus, if Spears should get the title and pay, or cause Rice’s mortgage to be paid before Kimball should convey, or be in -duty bound to convey to Rice’s nominee, then Spears’ title would be good. It was a race of diligence, and Spears came out ahead. It is true that Ells-worth signed the agreement with plaintiff; that is, he signed it in the interest of Rice. There is nothing in the agreement of May 29, 1889, that requires him to sign anything in case Rice should direct Kimball. Rice was the full master of his own directions, and Kimball was bound to obey them if the conditions of his obedience existed. If Ellsworth had not previously, in the interest of Grange, signed the contract with Spears, and given Kim-ball directions to convey, it might be urged, perhaps, that in signing the contract with plaintiff he was acting for Grange. Having already used his rightful power in favor of Spears, it is not easy to see that he had the right to bind his principal by an unnecessary and gratuitous act in direct hos

tility to his existing authorized act. If Ellsworth acted either for Spears- or for himself, he could not, after making the contract with Spears, impair, that contract without Spears’ consent. His contract with Spears was in force. When that contract matured,—October 14, 1893,—Spears was then ready to perform. The delay was compelled by the act of Kimball. Spears could acquiesce, and lose no rights. He did acquiesce, whether he agreed to or not; and it was open to him to take his deed whenever he could get it; and the act of Ellsworth in making the contract with plaintiff did not impair Spears’ rights. He was not a party. That Spears actually bought additional personal property, and paid for that in addition to paying for the mortgaged premises, is immaterial. He had the right to close his contract or negotiation for the title whenever he could close it, and submit to additional expense, if he thought best to do so.. The real contest here is between plaintiff and Spears. Spears obtained the title from those who had the right-to give it, while the right to give it in protection of the equity of redemption was still open. It may be that the plaintiff has ground to assert against Ellsworth that he deluded it with false expectations. But Spears did not. The plaintiff never had anything but a contingent right to the title, and the-contingency turned against - it. Judgment is directed for the defendants, with separate bills of costs to Spears and Kimball.

If any provision is necessary to secure cash payment of tire mortgage, with interest from October 1, 1893, to December 6, 1893, it may be inserted in the judgment, or entry thereof may be stayed until payment. Decision to-be submitted for signature.