Cousins v. Melvin F. Lanphar Co.

This is a suit for specific performance of a land contract. The facts have been stipulated. On February 26, 1938, the Highland Park State Bank as seller entered into an executory contract with plaintiffs for the sale of a house and lot in the city of Detroit for the sum of $6,250 with a down payment of $937.50 and the balance to be paid in monthly instalments of not less than $54 including interest with the proviso that the purchase price should be paid in full within 10 years from date.

The contract also provided:

"4 (a) That the bank or its assigns may at any time encumber said land by mortgage or mortgages to secure not more than the balance owing hereon at the time such mortgage is executed nor more than 50 per cent. of the purchase money paid and to be paid under this contract, which mortgage or mortgages shall be a first lien upon the land superior to the rights of the purchaser therein, provided notice of the execution of such mortgage shall be sent to the purchaser. * * *

"(d) If the title of the bank is now or hereafter encumbered by mortgage, the bank (if the maker of the mortgage) or its assigns shall meet the payments of principal and interest thereon as they mature * * * and in the event proceedings are commenced to recover possession or enforce payment of such mortgage because of the bank's or its assigns' default, the purchaser may at any time thereafter while such proceedings are pending encumber said land by mortgage securing such sum as can be obtained upon such terms as may be required and with the proceeds pay and discharge such mortgage * * * and when the sum owing hereon is reduced to the amount owing upon such mortgage or owing to [upon?] any mortgage executed under either of the powers in this contract enjoined, a conveyance shall be made in the form above provided with a covenant by the grantee to assume and pay the same. * * *

"(h) That the bank at its option may convert this land contract into a mortgage whenever the principal due hereunder has been reduced in an amount satisfactory to the bank, and the purchaser or any assignee of the purchaser agrees to accept a deed in fulfillment of the contract and to execute a mortgage on the bank's standard mortgage form for the unpaid balance owing on such contract, payable at the same time or times, and at the same rate of interest provided by said contract, and on like terms and conditions as set forth in said contract."

On May 29, 1944, the bank assigned its interest in the land contract and conveyed said land to defendant Melvin F. Lanphar Company; and at the same time, notified plaintiffs to make future payments to that company. On June 9, 1944, the Lanphar company mortgaged the premises to defendant Occidental Life Insurance Company of California for the amount of the unpaid balance of principal and interest which was $2,874.57. The mortgage provided for monthly payments of $54 with interest at the rate of 6 per cent. On the day that the mortgage was executed, defendant Lanphar company executed a quitclaim deed naming plaintiffs as grantees. The deed recited that plaintiffs assumed and agreed to pay the mortgage. Plaintiffs were not consulted in advance regarding the mortgage or the execution and recording of the quitclaim deed and have refused to be bound by the arrangement. On July 14, 1944, plaintiffs tendered to defendant Lanphar company the sum of $2,892.53 in full payment of the principal and interest owing on said contract and requested defendant to execute a deed in accordance with the terms of the land contract.

The trial court entered a decree reciting:

"1. That under the terms of the land contract involved in this cause the plaintiffs have the right and privilege of paying the full amount of the balance owing on said land contract, and that upon receipt thereof the said seller named in said contract and the defendants herein, as assignees of the interest of said seller in said contract, are obligated to convey said premises to said plaintiffs free and clear of all encumbrances.

"2. That under the terms of said land contract any mortgage placed on said premises, in addition to the ordinary mortgage provisions, must also contain a provision that the purchasers under said land contract, the same being the plaintiffs herein, shall have the privilege of paying any balance owing thereon whenever they may desire to so do.

"3. That the mortgage referred to in said bill of complaint is not in accordance with the terms of said land contract to the extent that it does not contain a provision permitting plaintiffs to pay the amount owing thereon at such time as they may desire so to do, and is therefore contrary to the rights of the plaintiffs herein, and to that extent illegal and unenforceable as a mortgage lien against said premises.

"4. That plaintiffs are hereby adjudged and decreed to have the right upon payment to said defendants of the amount owing on said mortgage to receive from defendants a full, complete and valid discharge of the same."

Defendants appeal and urge that plaintiffs, having entered into the land contract, consented to the grantor executing a prior mortgage upon the premises; that the burden of writing limitations into the consent given in the land contract rests upon plaintiffs; and that their interest is subordinate to the mortgage which meets the limitations expressed in the land contract.

When plaintiffs entered into the land contract, they agreed to make monthly payments of $54 or more. They also agreed that the bank or its assigns could encumber the premises by mortgage to secure not more than the balance owing on the land contract; and that when the amount due on the land contract equalled the amount of the mortgage, the land would be conveyed to the purchasers with a covenant by purchasers to assume the mortgage. In the case at bar, the mortgage when executed equalled the amount due on the land contract, but did not provide for payments in excess of $54 per month.

In Shapero v. Picard, 235 Mich. 481, we said:

"Consent to mortgage would carry with it the right to make a mortgage in form customarily adopted in conveyancing and universally recognized by the courts as valid."

In Dirr v. Hitchman, 260 Mich. 179, we said:

"In determining the equitable rights of the respective parties, the court is bound by the specific terms of their contract."

Plaintiffs and the bank contracted that the bank or its assigns could mortgage the premises to a third person. In the event that the premises were so mortgaged, the only condition of interest in the case at bar was as to the amount of the mortgage. No mention was made as to how and when the mortgage was to be paid. Plaintiffs had it within their power to name further conditions when the land contract was executed. They did not choose to do so. They may not now complain.

The decree of the trial court should be reversed and plaintiffs' bill of complaint dismissed, with costs to defendants.