Opinion
No. 4590.
Argued April 1, 1958.
Decided April 24, 1958.
1. Where a provision in a real estate mortgage entitled the mortgagee to pay all taxes, penalties and interest if the mortgagor failed to do so, the mortgagee was justified, on default of the mortgagor, in paying such assessment to prevent loss of its security or penalty interest payments and adding such charges plus interest to the mortgage debt where the tax appeared valid on its face.
2. The fact that such tax was alleged to have been erroneously assessed against someone other than the mortgagor did not render the mortgagee mere volunteer in paying the tax where it had no notice that any irregularity existed and stood to lose its security or to face litigation to establish its rights if it did not itself pay the tax.
PETITION, by Ralph and Mildred Garland to enjoin a foreclosure by the defendant, the Federal Land Bank of Springfield, and for a determination of whether certain payments made by the bank should be added to the mortgage debt of the plaintiffs. The case was submitted upon an agreed statement of facts, together with certain exhibits. The Court ruled as follows: "The court rules that the payments of taxes for five consecutive years by the bank, under all the circumstances, were proper payments and the amounts paid were and are proper charges against the mortgage loan." To this ruling the plaintiffs excepted. It was agreed that the tax payments for the years in question, including the penalties due and paid by the defendant to the town of Windham, were $991.51 and the penalty interest charged by the bank on the taxes amounted to $150, making a total of $1,141.51. The mortgage provided that the defendant could pay the taxes if the plaintiffs failed to do so and should also be allowed to add the amount paid for taxes "including all costs and expenses connected therewith" to the amount of the note, together with interest on such payments. The plaintiffs raised no question as to the accuracy of the defendant's account. The plaintiff Ralph was at all material times a disabled war veteran suffering from a 100% service connected disability and was entitled to an exemption of $3,000 from the town of Windham under RSA 72:35.
On or about February 6, 1950, one Evans bought the undivided half interest of Mildred in the property at an execution sale. Evans was never a resident of Windham but lived elsewhere at all material times, while the plaintiffs were the sole occupants of the premises throughout the period in question. However, during the time for which recovery by the bank is sought, the town assessed the taxes to Evans without objection by him so far as the record shows. The defendant as mortgagee received the notice required by RSA 80:28 of the sale of the property to the town of Windham for taxes in each instance and thereafter duly paid the. taxes and interest. The plaintiffs orally protested to the selectmen of Windham the assessment to Evans but without success. They took no further steps to protect their rights and they do not contest the validity of the tax sales in these proceedings. RSA 498:5.
The present deficiency is sufficient to warrant foreclosure whether or not the sum of $1,141.51 is properly chargeable to the plaintiffs. Other facts appear in the opinion. Transferred by Leahy, C. J.
John B. Ford (by brief and orally), for the plaintiffs.
Henry W. Shute (by brief and orally), for the defendant.
The issue before us is whether the payments of $991.51 for taxes and interest and the interest charges of $150 made by the defendant, the Federal Land Bank of Springfield, and totaling $1,141.51, are properly added to the mortgage debt of the plaintiffs, Ralph and Mildred Garland. The well established rule in these circumstances as lucidly expounded by Doe, C. J., in Morrison v. Manchester, 58 N.H. 538, 558, is that such charges are collectible because "the mortgagee is a creditor, justly entitled, by contract, to the payment of the original debt, without deducting from it the expenses of the land; and the land tax is an expense of the land." See also, Brown v. Simons, 44 N.H. 475; 36 Am. Jur., Mortgages, s. 347; RSA 80:19. The plaintiffs do not deny this principle but claim it is inapplicable here because the defendant was a mere volunteer and so cannot, recover from them, citing such cases as Clough v. Railroad, 77 N.H. 222, 251. The claim that the defendant was a volunteer rests on the premises that, while under the terms of the mortgage the bank had a right to pay all taxes necessary to preserve the property from a valid tax sale, these taxes were improperly assessed against Evans, a nonresident, as they should have been assessed against the plaintiffs. RSA 73:10. From this they argue that the taxes were illegal (Butterick v. Company, 59 N.H. 392) and the defendant has no right or obligation to pay them.
However, whether the assessment was illegal or not there are other considerations which are decisive against the plaintiffs' claim. So far as the record discloses, neither the plaintiffs nor anyone else ever notified the defendant that the taxes were improperly assessed or that any other illegality or irregularity existed. If material it may also be assumed, in the absence of denial by the plaintiffs, that the assessment by the selectmen was in accord with the information furnished them by the register of deeds of Rockingham County where the land was situated, pursuant to RSA 478:14. The tax appeared valid on its face and insofar as the defendant knew the property would be deeded for taxes (RSA 80:20) so that the defendant would lose its security or at least be subject to penalty interest payments (RSA 76:13; RSA 80:32) if the tax were not paid. In these circumstances the defendant was justified in paying the tax. 36 Am. Jur., Mortgages, s. 347; Williams v. Hilton, 35 Me. 547, 554, 555; see Bull v. Gowing, 85 N.H. 483, 486. Furthermore, the great weight of authority and we believe the better reason holds that a mortgagee need not at its peril permit a tax legal on its face to go unpaid, or also at its peril and at its own expense contest its legality whenever the mortgagor chooses to question it. Farmers Security Bank v. Martin, 29 N.D. 269; Federal Land Bank v. Brooks, 139 Fla. 506; annos. 84 A.L.R. 1366, 1372; 123 A.L.R. 1248, 1253.
Since the defendant stood either to lose its security or to face litigation to establish its rights if it did not pay the taxes, it obviously cannot be considered a volunteer to whom the plaintiffs owe no duty of reimbursement. City of Franklin v. Coleman Bros. Corporation, 152 F.2d 527 (1st Cir. 1945) cert. denied, 328 U.S. 844; see also, Clough v. Railroad, 77 N.H. 222, 251.
The question of the plaintiffs' remedy, if any now exists (see Duncan v. Jaffrey, 98 N.H. 305, and City of Franklin v. Coleman Bros. Corporation, supra), is not before us. This disposes of all exceptions of merit, but since the Superior Court must determine the final amount due the defendant (RSA 479:14) the order is
Remanded.
All concurred.