Smith v. Grilk , 64 N.D. 163 ( 1933 )

In a petition for rehearing, counsel renew their contention that the appeal should be dismissed because notice was not served on the American Amusement Company. They state that the Amusement Company is adversely affected by the reversal to the extent that it does not now know what its rights and liabilities are and that, since no supersedeas bond was furnished on the appeal, the respondent is entitled to the rents until the judgment is reversed.

We believe it to be clear from the original opinion that the Amusement Company is fully protected by the original judgment to the extent that it might have paid rent in reliance thereon prior to knowledge of its reversal. When we said in the original opinion that the record showed the Amusement Company had no interest in relation to the subject of the appeal that was in conflict with the reversal or modification sought it was implied, clearly we thought, that the Amusement Company could with perfect safety comply with the judgment appealed from so long as it was not reversed and so long as it was not served with notice of appeal. The contest over the rents was and is as to whether for the redemption period involved, they rightfully belonged to the appellants or to the respondent. If pending a determination of that issue in this court they have been paid to the respondent, the respondent is of course obligated to return them or account for them upon a reversal of the judgment in her favor, but with this the Amusement Company is not concerned.

It is further suggested in the petition that if a supersedeas bond had been furnished by the appellant, the respondent would have been protected as to the "deficiency." By deficiency in this connection we presume counsel mean the difference between the amount of the judgment and the bid at foreclosure sale. We do not understand how a supersedeas furnished under § 7829 of the Compiled Laws of 1913, where the appeal was not taken until long after a sale of the premises under the judgment would have protected the respondent as to such deficiency or as to any rent collected under an erroneous judgment. It was optional with the appellants whether they would give a supersedeas bond or an undertaking for costs. Section 7829 gives an appellant the right to stay the sale of mortgaged premises by putting up a supersedeas bond conditioned to pay any deficiency. But where the sale has been had before an appeal is taken, such condition in the bond would be inappropriate.

Again counsel say "Because of the defendant Grilk's failure to put up a supersedeas bond we think we are entitled to the rents until our judgment is reversed." It is of course true that where a supersedeas bond is not furnished the judgment may properly be enforced pending the appeal, but it is equally true that if the judgment be reversed the appellant would be entitled to recover back whatever he had lost by reason of the interim enforcement of the erroneous judgment.

Counsel further state that owing to the fact that a deficiency judgment was obtained in the foreclosure proceeding they had filed no claim against the estate of the mortgagor and consequently in case of redemption the mortgagee will be "short because of reliance upon the court's decree" and suggest that equity should relieve against this situation. The difficulty with this position is that the respondent could not properly and safely rely upon the judgment to this extent until such judgment had become final, and it never did become final in the form in which the respondent says she relied upon it.

Furthermore, on this record we cannot say that the equities would require relief against such a situation, for the sole witness for the plaintiff testified in the court below that the property was not worth to exceed $25,000. Hence, if there is redemption from the sale, the plaintiff will receive more for the property than it was worth according to her own contentions.

The principal merit of the petition, however, is concerned with the propriety of the holding that § 6740 of the Compiled Laws of 1913, in so far as it recognizes possession during the redemption period as a legitimate subject of contract between mortgagor and mortgagee at the time of the making of the mortgage, is impliedly repealed by chapter 132 of the Laws of 1919. Our holding in this respect in the original opinion was made with full appreciation of the doctrine that repeals by implication are not favored. On account of the radical change of policy indicated by the 1919 statute and its utter inconsistency with the existence of a right to barter for the possession of the premises mortgaged during the year of redemption as a part of the security for the indebtedness, we were of the opinion that the two statutes could not possibly stand together as an expression of the policy of the state. Further reflection has but served to confirm our views in this respect.

Where a mortgage gives merely a lien by way of security there are strong reasons why the mortgagee is not entitled to possession and consequently not entitled to rents until such right is secured through a completed foreclosure, and the courts frequently refuse to give effect to rent clauses in mortgages which are designed to permit the automatic accrual of rents to the mortgagee upon default. See 45 Harvard L. Rev. 902, 903; 46 Harvard L. Rev. 492. These reasons are all the more cogent where a statute expressly confirms in the mortgagor during the year of redemption the right to the use, benefit, rents and profits of the property. In such case the policy of protecting him against the consequences of his prior inconsistent contract, to the extent of the rights confirmed in the statute, is too evident to be judicially ignored or disregarded. That this policy is gaining rather than losing favor in mortgage law is indicated by § 2, part 1, of the proposed Uniform Real Estate Mortgage Act, which has been approved by the National Conference of Commissioners on Uniform State Laws. In that act it is provided: "The mortgage gives no right to possession or to the rents and profits of the mortgaged premises to the mortgagee or purchaser at the foreclosure sale until it is foreclosed and the period of redemption has expired, even though the mortgage contains a conveyance, or agreement for possession by the mortgagee, or pledge of the rents and profits, or other provision to the contrary." Uniform Real Estate Mortgage Act, § 2 (2). See also Flower v. King,189 Minn. 461, 250 N.W. 43.

The petition for rehearing is denied.

BURR, NUESSLE and BURKE, JJ., concur.