Lawton v. St. Paul Permanent Loan Co. , 56 Minn. 353 ( 1894 )

Mitchell, J.

The defendant made a loan to one La Croix of $2,000, and took as security therefor from him a mortgage, with covenants of title. There being certain city assessments or tax titles on part of the mortgaged premises, defendant and La Croix, as part of the same transaction, executed the following written agreement: Exhibit C:

“Whereas, the St. Paul Permanent Loan Company has made a loan of two thousand dollars to Peter La Croix, and has taken as security therefor from said La Croix and ivife a mortgage upon the west half of lot fourteen, in block seven, of Marshall’s addition to West St. Paul, according to the recorded plat thereof, on ñle and of record in the office of the register of deeds of Ramsey county, Minnesota, and upon the undivided half of the east half of said lot; and

Whereas, certain city assessments or tax titles are held by the estate of Edward Langevin upon said undivided half of the east half of said lot:

Now, the said company, by agreement -of all parties, has retained in its possession five hundred dollars ($500.00) from the amount of said loan, said sum of five hundred dollars ($500.00) to be paid over to Henry C. James and A. M. Lawton whenever the title of said La Croix to said undivided half of said east half of said lot is free from all claims arising from the said or any assessment or tax titles, and said mortgage is made superior of record to any claims, or upon the-payment of said -mortgage in full; and, until the occurrence of one of said events, the said five hundred dollars is to be retained as security for the payment of said mortgage debt. [Signed]---.”

In accordance with, this agreement, the defendant retained $500 from the amount loaned. The title of the mortgaged premises has never been freed from claims arising under these city assessments or tax titles; but, on default in the conditions of the mortgage, the defendant, under a power, sold the premises, and itself purchased them for the full amount of the mortgage debt, — $2,000, interest and costs.

Plaintiffs, the parties named in the agreement, bring this action to recover the $500, claiming that the second or alternative condition upon which the money was to be paid over, to wit, “the payment of the mortgage in full,” has been fulfilled.

It is very clear that Exhibit C embodies a contract, and is not a mere receipt; and hence, so far as it is contractual in its character, it cannot be contradicted or varied by parol evidence, if the general rule is applicable.

Defendant’s counsel insists that as plaintiffs were not parties to the contract, and as it does not appear that La Croix, the promisee, owed any duty or was under any obligations to them, therefore the action is not one on the express contract, but one for money had and received. It is not necessary to determine which of these is the correct description of the character of the action, for in either case the rights of the plaintiffs originate in, and are founded upon, the written contract, which is at once both the basis and measure of defendant’s liability; and hence parol evidence was inadmissible to vary or contradict its terms, within the principle announced in Sayre v. Burdick, 47 Minn. 367, (50 N. W. 245,) and Minneapolis, St. P. & S. Ste. M. Ry. Co. v. Home Ins. Co., 55 Minn. 236, (56 N. W. 815.) All of the evidence offered by defendant, except as to circumstances which fullyappeared from the writing itself, was of this character, and hence properly excluded.

This brings us to the principal question in the case.

Defendant contends that the $500 stood as security for the performance of the covenants of title in the mortgage, which, of course,, passed to it as purchaser at the mortgage sale, and hence that it still has a right to hold the money until these covenants are fully performed.

On the other hand, plaintiffs’ contention is that the money stood an additional security for the payment of the mortgage debt, and that this has been as fully and as effectually paid by the sale of the premises as if paid in money. It seems to us clear that the express language of the contract is conclusive in favor of the contention of the plaintiffs.

Upon the facts recited and disclosed in the contract, we think the case stood precisely as if defendant had let La Croix have the full $2,000, and had taken from him some other collateral security for the loan, in addition to the mortgage. Defendant, in effect, held two securities. One of these had been sold, without reference to the other; and what the purchaser took was just what was sold, to wit, the land, and nothing more.

It can make no difference whether the purchaser at the mortgage sale was the mortgagee or a stranger. Both must be bidders on the same basis. Had a stranger been the purchaser, he would clearly have bid on the basis of the value of the land, as warranted by the covenants of title in the mortgage, without reference to any other collaterals held by the mortgagee, as security for the payment of the debt. He would have acquired no equitable interest in the other securities, even in case of a breach of the covenants of title in the mortgage. When the mortgagee becomes the purchaser, he stands in no different or better position than would any other purchaser. The doctrines of marshaling, or of the equitable assignment of, securities, have no application. After the mortgage sale, the defendant was no longer a creditor, but a purchaser, of the premises; the consideration which he paid representing the Value of the land, as warranted by the covenants, without reference‘to any additional securities which he held for the payment of the mortgage debt.

The case is not essentially different in principle from that of the purchaser of the equity of redemption in lands subject to a mortgage. See Brewer v. Staples, 3 Sandf. Ch. 579; Stevens v. Church, 41 Conn. 369; also, American B. & L. Ass’n v. Waleen, 52 Minn. 23, (53 N. W. 867.)

The supposed dilemma suggested at the close of the brief of counsel for defendant is predicated upon false premises. Had the mortgaged premises, because of the incumbrance of the tax titles, brought only $1,500, defendant would have had the undoubted right to retain the $500, notwithstanding that, after the foreclosure sale, the title might have been “freed from all claims arising from said assessment or tax titles/-’ The contract clearly contemplated that the title should be perfected before the enforcement of the mortgage, and not afterwards, when the defects in the title had done defendant all the harm they ever could do.

Judgment affirmed.

(Opinion published 57 N. W. Rep. 1061.)