Morrill v. Title Guaranty & Surety Co. , 94 Wash. 258 ( 1917 )

Chadwick, J. —

W. F. Guernsey, the appellant husband, in company with one Kincaid, under the firm name of Guernsey & Kincaid, obtained a contract to construct a part of the Pacific highway, known as state aid road No. 61, in King county. Under the law, the contractor is required to give a bond conditioned for the faithful performance of his contract. Respondent Title Guaranty & Surety Company became surety for Guernsey and Kincaid. This respondent will be referred to as the surety company. To secure it from possible liability upon the bond, it took a deed to a certain block of land situate at Vancouver, Washington. The deed was taken in the name of an employee, who is admitted to be a trustee for the company, A trust was declared in writing by appropriate words:

“Now, therefore, it is specifically understood and agreed that said conveyance and transfer was made for the express purpose of insuring the Title Guaranty & Surety Company against loss on the above contracts and as soon as the above contracts have been performed and all liability for loss has ceased, then the said The Title Guaranty & Surety Company, by its duly authorized agent, John R. Scott, shall redeed and reconvey unto said W. F. Guernsey and A. L. Guernsey, his wife, all the right, title and interest in and to all property conveyed by reason of the foregoing contract.”

The road contract was completed in September, 1911. The contractors had not met all the claims, and it coming to the knowledge of the surety company that the contractors had assigned all moneys due and to become due upon the contract to M. M. Morrill, a banker at Kent, Washington, it began an action in the Federal court to restrain the state from making further payments, and all others from disbursing any funds on hand until the right of the claimants and creditors could be ascertained. Thereafter all parties met, counsel being present, and it was agreed, in consideration of a dismissal of the suit and a release of the impounded funds, that Morrill should pay all claims and demands against road No. 61.

In June, 1912, Morrill took a mortgage from Guernsey and wife to secure an indebtedness growing out of Guernsey’s road contracts, in the sum of $5,270. This action was brought by the mortgagee, the wife of Morrill, to foreclose the mortgage. Issues have been framed between the defendants. We shall briefly state the facts and disputations out of which they arise. It is contended by appellants that, at the time it was stipulated that the injunction suit should be dismissed and Morrill engaged to pay all the claims arising out of road No. 61 contract, all the claims were listed and understood by all parties; that thereafter, in January, 1912, all parties and counsel for the company being present, all just and lawful claims against the firm of Guernsey and Kincaid were paid and discharged by Morrill; and that Guernsey then and there demanded a reconveyance of the property held in trust, and that counsel for the company said he would take the matter up with the home office. Other demands, oral and by way of letters, were thereafter made, and finally, on March 19, 1915, a formal written demand was made upon the company for a reconveyance of the property. The testimony clearly shows that the property had greatly depreciated in value since January, 1912, in consequence of a general slump in real estate values. Appellants pray for damages in the total sum of $7,822.50, for depreciation, loss of sale, and taxes and interest paid.

The company asserts that no demand for a reconveyance was made at the time of the settlement; that there was no understanding that all of the claims were known, and that it was impossible that it could be so, for Guernsey & Company, a company of which appellant husband was the manager, had defaulted on No. 69 state aid road, which abutted No. 61 on the south, upon which it was surety, the work on the two contracts having been carried on at the same time and as if it were one contract; that it was impossible to know whether all claims had been discharged on No. 61 until all had been discharged bn No. 69; that at no time prior to the actual taking of testimony in the instant case have the appellants satisfied or attempted to satisfy it that all claims upon No. 61 had been paid; that it had been put to an expense of $500 in the prosecution of the case in the Federal court, which it asserted as a claim against the trust deed; that it was not bound to reconvey so long as it had a bona -fide claim against the property, however ill founded; and finally, that no deed was. ever prepared by appellants and offered with a demand that it sign the same.

Were it necessary or permissible for us to rest oúr decision upon the two facts, whether all claims against No. 61 had been satisfied in January, 1912, that the company knew it, and that a demand for a deed had been made, we would unhesitatingly find for the appellants; but the law will not permit a substantial recovery even under the facts found by us.

'The contract was completed in September, 1911, and all cláims were paid in January, 19Í2. The legal title to the property is, and at all times has been, in appellants. All damages now asserted accrued subsequently to the time when the trust was discharged by the acts of the parties; and, under the well settled principle that one who has a cause of action shall not delay his cause that damages may accrue pending its submission to a court, a party so situate is not permitted to postpone his suit to his own profit. This rule applies with particular emphasis where a mortgagee refuses to release or satisfy a mortgage Avhen it is paid off or discharged. With seeming purpose to avoid such consequences, and to avoid speculative damages, the legislatures in many states have passed laws providing usually for a season of grace, after demand, a right of action and a statutory penalty. Jones, Mortgages (6th ed.), § 992 et seq.

Some states provide for actual damages in addition to the penalty, the rule under such statutes being that the penalty is substituted in lieu of exemplary damages. Swallow v. First State Bank, 28 N. D. 283, 148 N. W. 630.

• Our statute Drake's no provision for damages other than the penalty.

' “If the mortgagee shall fail so to do after sixty days from the date of such request or demand, he shall forfeit and pay tó the mortgagor- the sum of twenty-fire dollars, to be recovered in any court having.competent jurisdiction, and- said court, when convinced that said mortgage has been fully satisfied, shall issue an order in writing, directing the' auditor to cancel said mortgage, and the auditor shall immediately record the order and cancel the mortgage as directed by the court, upon the margin of the page upon which the mortgage is recorded, making reference thereupon to the order of the court and to the page where the order is recorded. [L. ’86, p. 117, § 2]” Rem. Code, § 8799.

The recovery permitted by the statute, although so denominated, is not strictly a penalty. It is intended as a compensation to the mortgagor as well as a punishment to the mortgagee. Engle v. Hall, 45 Mich. 57, 7 N. W. 239.

The effect of the statute is to substitute remedies. It postpones a right of action in the interest of peace. It provides á certain recovery in all cases in lieu of the uncertainties of the common law action. Our statute does not permit a recovery of “other damages” as some do.. It fixes the amount of the recovery whether the amount of the mortgage be great or small; whether actual damage be suffered at all, and although the satisfaction is- withheld in good faith. Collar v. Harrison, 28 Mich. 518; Shields v. Klopf, 70 Wis. 69, 35 N. W. 284; Renfro Andrews v. Adams, 62 Ala. 302; Williams v. Hendricks, 115 Ala. 277, 22 South. 439, 67 Am. St. 32, 41 L. R. A. 650.

By their own showing, appellants knew in January or in June, 1912, that all claims against road No. 61 had been paid. They knew of their right to institute an action sixty days after demand that the company furnish a reconveyance, which, under the circumstances, was a proper form of satisfaction and release. To permit them to recover would be to afford them a remedy for something the statute sóught to avoid, that is, the enhancement of damages by the lapse of time. ‘

There is no merit in the contention that appellants should have tendered a deed in form to be signed. The company was charged with a knowledge of the legal effect of "the deed; Where a deed is made to a trustee who holds title to secure a liability, either fixed or contingent, the trustee is held to the same rule that governs a mortgagee, and is charged with a duty to tender a satisfaction piece. 27 Cyc. 1415; Blumenthal v. Huerter (Ill.), 3 N. E. 425; Pearce v. Bryant Coal Co., 25 Ill. App. 51.

The company contends — inasmuch as it felt impelled to try an action in the Federal court, to which we have referred, and had paid the expenses of the suit and an attorney’s fee of approximately $500 — that a claim against the obligor for these items, if asserted in good faith, although ill founded in law, is a sufficient excuse for its delinquency in the satisfaction of the mortgage. By the better authority, this is not so. See cases supra. In Shields v. Klopf, supra, it is said:

“It is entirely competent for the legislature to impose a penalty for the refusal to discharge a mortgage, regardless of the good or bad faith .of the holder thereof. On the authority of Cohn v. Neeves [40 Wis. 393], we must look into the statute itself, which is general in its terms, to ascertain whether the legislature intended that it should be restricted in its operation to those wilfully offending against it. We find in sec. 2256 a satisfactory indication that the general language of the statute was intended to operate without restriction, and without regard to the good or bad faith of the holder of the mortgage. The statute gives to any person upon whom the demand is made to discharge a mortgage, seven days in which to determine whether he will discharge it or not. If the application of the statute is to be limited to those only who wilfully and knowingly refuse to discharge a mortgage, it is fair to presume that no days of grace would have been given. The seven days were undoubtedly given to enable the person upon whom such demand has been made, if he doubts whether the mortgage has been paid, to ascertain the facts for himself. After the expiration of that time he acts at his peril of the fact, and if the mortgage has been paid and he refuses to discharge it he is subject to the penalty of the statute.”

But granting the rule contended for, the claim must at least be colorable. To be colorable, it must arise out of the transaction as defined by the writing, or be within its contemplated range. Malarkey v. O’Leary, 34 Ore. 493, 56 Pac. 521. The claim now asserted arises out of an independent proceeding.

The cases relied on by appellants to sustain their theory of damage in no way bear upon the issues raised by the pleadings. They pertain to actions for breach of contract to convey, and specific performance of contracts. Damages are allowed for withholding some element of the title; whereas, in the case at bar, the deed with its declaration of trust made, in law and in equity, a mortgage. The full title, both legal and equitable, was in the appellants. Norfor v. Busby, 19 Wash. 450, 53 Pac. 717; Dane v. Daniel, 23 Wash. 379, 63 Pac. 268; Fischer v. Woodruff, 25 Wash. 67, 64 Pac. 923, 87 Am. St. 742; Hitchcock v. Nixon, 16 Wash, 281, 47 Pac. 412. The measure of damages in such cases is as defined by statute. Beyond it, the court cannot go.

But it does not follow that appellants are to be denied the relief to which they are entitled. The cross-complaint states a cause of action. Appellants have mistaken their measure of damages. The complaint would not have been demurrable for this reason. Howard v. Seattle Nat. Bank, 10 Wash. 280, 38 Pac. 1040, 39 Pac. 100. And we could send the case back with permission to amend. Under the statute, this is not necessary. It is provided:

“Judgment may be given for or against one or more of several plaintiffs, and for or against one or more of several defendants; and it may, when the justice of the case requires it, determine the ultimate rights-of the parties on each side, as between themselves.” Rem. Code, § 406.

See, also, Rem. Code, § 1737; Poledori v. Newman, 116 Cal. 375, 48 Pac. 325; Gunnell v. Emerson, 80 Mo. App. 322; Reade v. Street, 122 N. C. 301, 30 S. E. 124; Humphrey v. Thorn, 63 Ind. 296.

The only issue of fact between the parties is that of demand at a time prior to March 15, 1915. The company’s main dependence rests in the legal issue raised by its assertion of good faith in delaying a satisfaction.

With the facts, the law, and the parties before us, and to the end that ultimate right between the parties may prevail, we direct that the case be remanded, with directions to enter a judgment in favor of appellants for $25 and costs.

Ellis, C. J., Morris, Main, and Webster, JJ., concur.