Opinion
No. 7,358.
Submitted March 29, 1935.
Decided April 11, 1935.
Real Estate Mortgages — Purchase of Mortgaged Property by Execution Creditor Prior to Expiration of Statutory Eight-year Period After Maturity of Debt — When Mortgage Lien Superior. Mortgages — Real Property — Status of Purchaser of Mortgaged Lands Prior to Expiration of Eight-year Period After Maturity of Debt. 1. One who by deed becomes the owner of all the right, title and interest in lands of the mortgagor at any time before the expiration of the eight-year period following the maturity of the entire mortgage indebtedness (sec. 8267, Rev. Codes 1921), does not become the owner of the property free and clear of the mortgage lien upon expiration of that period, where no extension agreement under section 8264 or affidavit of renewal under section 8267 has been filed or recorded. Same — Sale on Execution or on Foreclosure — Nature of Title of Purchaser. 2. On sale of real property under execution or decree of foreclosure the purchaser is substituted for and acquires all the right, title and interest of the judgment debtor in the property sold, leaving in the latter only the bare statutory right to redeem, which right is a personal privilege and not a property right and is not subject to levy and sale under execution. Same — When Mortgage Lien Superior to That of Purchaser on Execution Sale had Before Expiration of Eight-year Period After Maturity of Debt. 3. Where a judgment creditor of a mortgagor of real property purchased it at execution sale prior to the expiration of eight years after maturity of the mortgage debt provided for by section 8267, Revised Codes 1921, thus leaving in the judgment debtor nothing further that could be seized by process, he ceased to be a creditor and became a purchaser, and the mortgage debt not being barred under the general statute of limitations, the mortgage lien was prior and superior to the claim of such purchaser, irrespective of an alleged prematurely filed extension affidavit, or an extension agreement improperly executed.
Appeal from District Court, Richland County, Seventh District; Frank P. Leiper, Judge.
Mr. John G. Brown, Mr. L.V. Ketter and Mr. John C. Erickson, for Appellant, submitted an original and a supplemental brief; Mr. Brown and Mr. William A. Brown, of Counsel, argued the cause orally.
Messrs. Hildebrand Warren, for Respondent, submitted a brief; Mr. Raymond Hildebrand argued the cause orally.
The case of Reed v. Richardson, 94 Mont. 34, 20 P.2d 1054, settles the following points: (1) That a purchaser of mortgaged lands may invoke the general statute of limitations against the debt, but that if he would do so he must plead it; otherwise he waives the right. In the case at bar the statute was pleaded, but the agreed statement showed and the court found that the debt was not barred by the statute. (2) That a plea of the failure to file affidavit of renewal is not a plea of the statute of limitations as to the debt. (3) That one who purchases mortgaged land after the mortgage is recorded and before the expiration of the statutory eight-year period takes the land subject to the mortgage. In the case at bar Day purchased the mortgaged premises at the execution sale after the mortgage was recorded and before the expiration of the eight-day period. (4) That such a purchaser is not a subsequent purchaser under section 8267, Revised Codes 1921. In the case at bar the mortgage was in effect at the time of Day's purchase of the mortgaged premises under the execution sale. Hence he is not a "subsequent purchaser" or any person within the protection of the recording statute (sec. 8267). (5) That as to a person who is not affected by the mortgage recording Act (sec. 8267), the lien of the prior mortgage is not extinguished so long as an action may be brought on the principal obligation. In the case at bar an action could be brought on the principal obligation, and hence the mortgage lien as to Day was not extinguished. (6) That as between the parties the mortgage is good so long as the debt is kept alive, even after the expiration of the statutory eight-year period. (7) That the debt is not dead without the benefit of a plea of the statute of limitations. (8) That so long as the debt is alive between the mortgagor and the mortgagee the mortgage is still alive.
No distinction between this and the above cited case can be made which would warrant making a distinction between the legal rights of the parties. When Day took his title, it was subject to the mortgage by force of the law, the mortgage having been recorded and the statutory eight-year period not having elapsed. It is the condition of the title when it came to Day that is controlling. ( Ewell v. Daggs, 108 U.S. 143, 2 Sup. Ct. 408, 27 L.Ed. 682.)
It follows that even if no valid affidavit or renewal or extension agreement was filed the conclusions of the court that "In so far as Henry Thompson is concerned, the lien of the mortgage ceased to exist on the first day of January, 1931"; that "On the last mentioned date the defendant Day became the absolute owner of all of the right, title and interest of Henry Thompson in the above described premises — free and clear of the lien of the mortgage"; that the lien of mortgage "ceased to exist as against judgment credited to Day, in so far as Henry Thompson's interest is concerned," etc., are erroneous.
Upon failure of appellant either to extend or renew the mortgage, the judgment lien of the creditor Day became superior to appellant's rights. The facts before this court in the Reed-Richardson Case, relied upon by appellant, are so dissimilar from those here involved as to make mention of the Reed-Richardson Case unnecessary. The supreme court there had under consideration the rights of one who, during the existence of a mortgage lien, acquired rights in the property through negotiation and purchase. Such a party was, without question, a purchaser or encumbrancer. In the case at bar respondent Day was neither an encumbrancer nor a purchaser. He was an outright creditor. Section 8267, Revised Codes 1921, clearly draws a distinction between a creditor of the mortgagor and a purchaser or encumbrancer. In so far as a purchaser or encumbrancer is concerned, the section requires that they be subsequent to the rights of the mortgagor, whereas no such restriction or qualification is imposed against a creditor. In the Reed-Richardson Case the rights of a creditor were not involved. The party who took the second mortgage and who later took a quitclaim deed was either a purchaser or an encumbrancer. If he claimed under the deed he was, of course, a purchaser. If he claimed under the mortgage he was an encumbrancer. Whether he was an encumbrancer or purchaser, section 8267 required that he acquire his right in the land "subsequent" to the expiration of the lien of the mortgage.
The language employed in section 8267 is so clear, unambiguous and plain as not to require the aid of judicial construction in determining its meaning. That Mr. Justice Stewart in writing the opinion in Reed v. Richardson had no intention of applying the rule therein laid down to one occupying the status of a creditor is very evident from the fact that he stresses the fact that Richardson took title by foreclosure of the second mortgage and his quitclaim deed and by the following sentence: "One not a subsequent purchaser within the meaning of that section is not affected by it." Mr. Justice Anderson in writing the majority opinion in the case of First Nat. Bank of Whitefish v. Gutensohn, 97 Mont. 453, 37 P.2d 555, clearly recognizes the fact that a creditor who acquires title to the mortgaged premises during the duration of the mortgage lien is not in the same position as a subsequent purchaser or encumbrancer. We may in passing point out that if the rule in the Reed-Richardson Case is to be applied to the respondent Day, under the facts in this case, then it must necessarily follow that in construing the amendment made by the 1933 Legislative Assembly to section 8267 the same rule must be applied to all persons coming within the definition of the word "all" as used in the amendment. This obviously would mean a complete negation of the amended statute, rendering it completely ineffectual.
No question can be raised from the facts in this record as to the status of the respondent Day. He is an outright creditor. He owned an unsecured note, which he reduced to judgment. Upon this judgment he caused an execution to issue. A levy was made upon the property of the judgment debtor. The property was sold under execution and Day became the purchaser at the sheriff's sale. After the expiration of the year of redemption he received a sheriff's deed. His status from the moment he loaned the money to Thompson until the issuance to him by the sheriff of the deed was unchanged. It was and is that of a creditor. He claims, and is entitled to, the full force and benefit of section 8267, which has been held by all the decisions of this court to be not a recording statute, as appellant would have it appear, but a statute of limitations. ( Morrison v. Farmers' etc. State Bank, 70 Mont. 146, 225 P. 123; Skillen v. Harris, 85 Mont. 73, 277 P. 803; Jones v. Hall, 90 Mont. 69, 300 P. 232.)
The appellant, through failure to either renew or extend the lien of its mortgage by filing the affidavit provided by section 8267, or by entering into a valid extension agreement with the mortgagors as provided by section 8264, permitted its mortgage lien to expire. Day, a creditor, having acquired during the period of the existence of appellant's mortgage lien an interest in the property, automatically became invested with all of the right, title, lien, claim and interest of the defendant Henry Thompson the moment that appellant's mortgage lien expired.
This action was brought to foreclose a real estate mortgage. The defendants Henry Thompson and wife executed and delivered the mortgage in question to the Security Mortgage Company, a corporation, on certain lands in Richland county, to secure the payment of a promissory note in the sum of $2,000; both instruments being dated on October 15, 1917. By the terms of the mortgage and note the indebtedness matured on January 1, 1923. The mortgage was recorded on November 3, 1917. By written assignment the mortgagee on January 24, 1918, sold and assigned the mortgage, together with the note secured thereby, to the Minnesota Loan Trust Company; this assignment was duly recorded. Thereafter, on March 2, 1918, the latter company in turn sold and assigned the mortgage by an instrument in writing, and sold and negotiated the note unto the plaintiff herein. The written assignment was recorded on March 2, 1918. On November 16, 1927, the defendant mortgagors executed and acknowledged an instrument in writing purporting to extend the time of payment of the note and mortgage, so that the sum of $200 would mature on the first day of January of the years 1929, 1930, 1931 and 1932, respectively, and the balance of $1,200 on January 1, 1933. It was recited therein that the agreement was between the mortgagors and the Minnesota Loan Trust Company. The company did not join in the execution of this instrument. It was filed on the twenty-third day of January, 1928. Contemporaneously with the filing of the so-called extension agreement, there was recorded an affidavit made by one I.W. Chambers, reciting that he was the secretary of the Minnesota Loan Trust Company, and acting as the agent for the owner of the mortgage (describing it), and that the indebtedness was extended by the extension agreement. It further set forth the maturities of the principal according to the same schedule as found in the extension agreement. The mortgagors paid all the interest maturing prior to January 1, 1929, and $200 on the principal of the note.
The defendant Day commenced an action against the defendant Henry Thompson on July 24, 1929, on a promissory note. Thereafter, on September 12, 1929, after personal service on Thompson, a judgment was made and entered against him. Execution was issued on this judgment and the lands described in plaintiff's mortgage were sold thereunder to Day at the execution sale. On March 22, 1930, a sheriff's certificate of sale was issued on that date and filed. The sheriff's deed for the lands and premises was issued on April 20, 1932, and thereafter duly recorded.
After issue joined, the action was submitted to the trial court upon an agreed statement of facts. The defendant Day was the only party defendant who appeared in the action.
The trial judge found that all the right, title and interest of the mortgagor Henry Thompson in the mortgaged premises passed by the execution sale to the defendant Day, subject to his right to redeem and to the lien of the mortgage, and that no redemption was made. He further found that as to the interest in the lands so acquired by the defendant Day, the lien of the mortgage ceased to exist on January 1, 1931, and that on that date Day became the absolute owner of all the right, title and interest of Henry Thompson, free and clear of the lien of the mortgage. The court further found, concerning the interest of the wife of Thompson in the lands (she not having signed the note), that as between her and the mortgagee, the mortgage was still in force; that the debt for which the mortgage was given as security had not been paid, and that the statute of limitations had not run against it; that the plaintiff was entitled to a judgment against the defendants Thompson and wife for the sums set forth in the agreed statement of facts and to a decree of foreclosure, foreclosing all of the right, title and interest of Mrs. Thompson in the lands; and that the defendant Day was entitled to a decree adjudging that he was the owner of all the right, title and interest of Henry Thompson in and to the lands, free and clear of the lien of the mortgage as to such interest.
A judgment and decree was entered in accordance with these findings. The appeal is from the judgment on behalf of the plaintiff corporation; it has specified many errors in its brief. By all of them, however, it is sought to have this court review the ruling of the trial judge made in its finding that the mortgage had ceased to be a lien as against the defendant Day. This question again involves section 8267, Revised Codes 1921, the pertinent portion of which reads as follows: "Every mortgage of real property made, acknowledged, and recorded, as provided by the laws of this state, is thereupon good and valid as against the creditors of the mortgagor or owner of the land mortgaged, or subsequent purchasers or encumbrancers, from the time it is so recorded until eight years after the maturity of the entire debt or obligation secured thereby, and no longer, unless the mortgagee * * * within sixty days after the expiration of said eight years, file * * * an affidavit," setting forth certain facts. This action was commenced prior to the enactment of Chapter 104, Laws of 1933, amending the above section. Hence the amended law has no application here.
The learned trial judge, as disclosed by the order filed herein which contains his findings of fact and conclusions of law, adopted the view that the mortgage was never extended, under section 8267, by the recorded affidavit, in that it was prematurely filed, and that the extension agreement was insufficient to extend the mortgage under the provisions of section 8264, by reason of the fact that the same was not executed and acknowledged by the plaintiff or its duly authorized agent on its behalf.
Assuming that the trial court was correct in its conclusion that the extension agreement and affidavit of renewal were wholly ineffectual to extend the existence of the mortgage, nevertheless, under the facts in this case, that conclusion was not determinative of the right of the plaintiff to foreclose its mortgage as against the defendant Day.
The provisions of section 8267 have been many times before this court. The eight-year period referred to therein, as applied to the facts in this case, terminated on January 1, 1931. The defendant Day was a creditor of the defendant mortgagor Henry Thompson, prior to July 19, 1929. In September of that year, Day became a judgment creditor of that defendant, and in the year 1930, Day bought all of the right, title and interest of the defendant Henry Thompson in and to the mortgaged lands and premises at sheriff's sale under execution issued on his judgment, and received his certificate therefor.
We have twice held that one who by deed becomes the owner of [1] all the right, title and interest of the mortgagor at any time before the expiration of the eight-year period following the maturity of the entire mortgage indebtedness does not become the owner of the lands and premises mortgaged, free and clear of the mortgage lien, upon the expiration of that eight-year period, where no extension agreement pursuant to the provisions of section 8264, or affidavit of renewal pursuant to the provisions of section 8267, has been filed or recorded. ( Turner v. Powell, 85 Mont. 241, 278 P. 512; Reed v. Richardson, 94 Mont. 34, 20 P.2d 1054.)
Again we held in the case of First Nat. Bank of Whitefish v. Gutensohn, 97 Mont. 453, 37 P.2d 555, where a judgment creditor of the mortgagor within the eight-year period following the maturity of the mortgage indebtedness accepted a second mortgage in settlement of the judgment, and the first mortgage was neither extended under the provisions of section 8264 nor renewed under those of section 8267, that the holder of the second mortgage might not after the expiration of the eight-year period assert the invalidity of the first mortgage, by reason of section 8267, so long as the mortgage debt was alive.
Counsel for defendant Day argue that all of these cases are distinguishable from the one at bar upon the facts. It is urged that in this case Day was a creditor seeking to enforce collection of his debt by legal process, whereas in the cases of Turner v. Powell and Reed v. Richardson, supra, the defendant resisting the foreclosure of a mortgage had by voluntary conveyance as a purchaser become interested in the land, and in the Gutensohn Case, while the defendant had at one time been a creditor, he had by agreement changed his status to that of an encumbrancer. It is said that, under section 8267, three classes of persons are enumerated, viz., creditors, subsequent purchasers, and encumbrancers, and that in each of the cases previously decided by the court we were considering the rights of either purchasers or encumbrancers, and not creditors.
One who buys real property at execution or decretal sale is, [2] by the terms of section 9441, said to be the purchaser of the property. On a sale of real property under execution or decree of foreclosure, the purchaser is substituted for, and acquires all the right, title and interest of, the judgment debtor in the property sold (sec. 9441; Hamilton v. Hamilton, 51 Mont. 509, 154 P. 717; Lepper v. Home Ranch Co., 90 Mont. 558, 4 P.2d 722; Brown v. Timmons, 79 Mont. 246, 256 P. 176, 57 A.L.R. 1122; Libby Lumber Co. v. Pacific States Fire Ins. Co., 79 Mont. 166, 255 P. 340, 60 A.L.R. 1), leaving in the judgment debtor only the bare statutory right to redeem. ( Lepper v. Home Ranch Co., supra, and cases cited.) This right of redemption is a personal privilege and not a property right, and is not the subject of levy and sale under execution. ( Hamilton v. Hamilton, supra; State ex rel. Hopkins v. Stephens, 63 Mont. 318, 206 P. 1094; Dyer v. Schmidt, 67 Mont. 6, 213 P. 1117.)
The defendant Day having become the purchaser at the sale [3] within the eight-year period specified in section 8267, and having acquired all the right, title and interest of the defendant Henry Thompson in and to the mortgaged lands and premises, and no property right remaining in Thompson which could be seized by process, defendant Day ceased to be a creditor. He is now here asserting his rights, not as a creditor, but as a purchaser.
On the authority of our decisions cited supra, the mortgage was good and valid as against the defendant Day so long as the mortgage debt was not barred by the general statute of limitations. The trial court correctly found that the debt was not so barred, although the statute was pleaded. It was in error in finding that plaintiff's mortgage had ceased to be a lien good and valid as against the claims of the defendant Day, and should have found on the record in the case that the mortgage was prior and superior to the claim of defendant Day, and have caused to be entered a judgment in accordance with such finding.
The cause is remanded to the district court of Richland county, with direction to modify the findings and decree in accordance with the views herein expressed. The plaintiff will recover its costs on this appeal.
ASSOCIATE JUSTICES MATTHEWS, STEWART and MORRIS concur.
MR. CHIEF JUSTICE SANDS, being absent on account of illness, did not hear the argument and takes no part in the foregoing decision.