57 Minn. 534 | Minn. | 1894
Lead Opinion
Thompson being the owner of real estate on which was a water power, on Boot river, on April 27,1872, he and his wife executed a lease to E. Vining White and Cyrus A. White of the exclusive right to use from said water power, for twenty years from that date, 7,505 cubic feet of water per minute, at a six-foot head
It was agreed that in case of failure by Thompson to pay the taxes or the interest on the debt within one year after due, or to perform the other conditions of the contract, or to pay the principal sum when due, Sprague might declare the contract closed, and sell the premises at public vendue, after a notice of sixty-days publication in one or more newspapers, and on such sale to convey the premises free from any right of redemption; the proceeds of sale to be applied in payment of costs of sale, of the debt, with interest, and all sums .advanced for taxes, insurance, or otherwise; the surplus, if any, to be paid to Thompson, his heirs or assigns.
The plaintiffs insist these instruments evidence a conditional sale.
The plaintiffs basing their claim to recover against Sprague on the proposition that he is an assignee of Thompson, so as to be liable on his covenants running with the land, must take the entire transaction just as it was between the parties to it. That the conveyance was, and the instrument setting forth the conditions on performance of which it should be defeated was not, recorded, was no concern of respondents, because their rights in the property are antecedent to the conveyance. They claim no rights under or through or against it, and there can be no estoppel in their favor as to the character of the conveyance, for they have not rightfully done anything in reliance on it as an absolute conveyance.
As mortgagee, merely, Sprague was not liable to the plaintiffs upon the covenants in their lease. The mortgage created no privity between him and them. It passed no estate in the land, but gave only a lien. This has been decided so frequently by this court that we need not cite the cases.
Respondents claim, however, it is different with a mortgagee in possession; that he has such an estate as makes him liable upon the covenants running with the land.
The contract between Thompson and Sprague reserves to the former the right to the possession and enjoyment of the premises, except the rental arising from any lease of the same. The assignment by way of mortgage of such rentals to Sprague, his collecting the same, and his entry upon the premises from time to time to attend
What will constitute a mortgagee in possession was fully considered in Rogers v. Benton, 39 Minn. 39, (38 N. W. 765,) in which it was said, “The mortgagee must be in possession by reason of the assent or agreement of the mortgagor or his assigns that he have the possession under the mortgage, and because of it.” But whether the mortgagee’s relations to the title are in any way changed by his being in possession is a question we have never had before us. Upon this question, in the states where the rule is, as in this state, that the mortgage is only a security, — notably, in New York and California, — the courts differ. The courts in New York hold that although, when out of possession, both before and after default, the mortgagee has only a lien, when he is. in possession he has an estate, and is liable on the covenants running with the land (Astor v. Hoyt, 5 Wend. 603; Moffatt v. Smith, 4 N. Y. 126), the court in the former case saying: “When the mortgagee takes possession, he then has all the right, title, and interest of the mortgagor. Then he acquires, and the mortgagor loses, an estate liable to be sold on execution.” The decisions in that state merely state that to. be the case, but contain no reasoning to show how the result is brought about.
In California it is held that the interest of a mortgagee in possession is the same as that of one out of possession {Johnson v. Sherman, 15 Cal. 287; Dutton v. Warschauer, 21 Cal. 609), the court in the former case saying: “Nor can possession under the mortgage affect the nature of the mortgagee’s interest. It does not abridge or enlarge his interest, or convert what was previously a security into a seisin of the freehold. It does not change the relation of creditor and debtor, or impair the estate of the mortgagor, but leaves the rights and interests of the parties exactly as they existed previously.”
We think the decisions of the California court in accordance with the better reason. We do not see how the mere act of the parties, of going into possession, and consenting to or acquiescing in it, can have the effect to pass the mortgagor’s estate to the mortgagee. The latter, being let into possession under and because of the mortgage, is in only for the purpose of it, to wit, for security. There can be
An estate sufficient to have cast on it the burden of covenants running with the land will entitle the owner of it to the benefit of similar covenants, and e converso. In this state a mortgagee cannot, before foreclosure, maintain an action on the covenants in the deed to the mortgagor, though running with the land, because he is not the owner of the land with which such covenants run. We suspect the courts in New York would hesitate to hold that as soon as he gets possession he may sue upon or may release such covenants, which he certainly can do, if he has an estate that makes him the owner of them. We conclude that a mortgagee in possession is not subject to the burdens, nor entitled to the benefits, of covenants running with the land.
What was the effect of Thompson'vesting in Sprague, by way of security or mortgage, “the right to receive, collect, and hold all rentals” for the use of the property, including the rentals upon the lease assigned by White Bros, to plaintiffs?
We may assume that an absolute assignment of the rents for the entire term of the lease is in effect an assignment by the lessor of the lease itself, bringing the assignee in privity with the lessee; putting him, for the purposes and term of the lease, in the place of the lessor; subjecting him to the burdens of the covenants on the part of the lessor, and entitling him to the benefits of the covenants on the part of the lessee enforceable during the term. In
But an assignee of rents by way of mortgage can do none of those things, except to receive the rents, and apply them for the benefit of the lessor, towards satisfaction of his debt. His relation to them is the same as that of the mortgagee of the land towards the legal title, — that of one holding a lien; and, if he can maintain in his own name a suit to collect them, it must be as a trustee. He is not, therefore, an assignee, so as to be liable on the covenants in the lease.
There was no cause of action against Sprague. That, however, does not affect the defendant Thompson. There are various assignments of error which do affect him. There is one which is well founded. The plaintiffs called as a witness a hydraulic engineer, and were permitted to read to him extracts from the lease, — in one instance, as much as two folios, — and to ask him his judgment as to the proper meaning of the clauses; in other words, asked him to construe them. It was not for any witness, but was for the court, to construe them, in connection with the entire lease. If there were “words of art” used, it was proper for an expert witness to state the meaning of such words in the art. Such, for instance, is, in this lease, the term “head of water.” As that is a technical term in hydraulics, an expert might give its meaning. And as the clause in the lease, “head of not less than eight feet, measuring from the tail race of said mill, at its lowest stage of water,” suggests the question whether this means the lowest operating stage or stage when the water is being furnished to the mill, and it is being-operated, or means the stage when the mill is at rest, and but little water is running through the tail race, it was competent for an expert to state the rule, if there were any, for measuring to ascertain the head of water, — whether to measure from the surface of the water in the tail race when the mill is in operation, or to measure from the surface of the-water when the mill is at rest. And it was for the court, with such aids, to construe the clause.
Had the construction of the clauses given by the witness been
And, prima facie, construed by the words alone, the clause means-the lowest stage of water at any time, and without reference to whether the mill was running or not, though that apparent meaning might be modified by evidence of the character we have above indicated as proper.
There are many other matters presented by appellants, and, in view of a second trial, we will consider such of them as we think likely to arise on such trial.
The appellants claim that as, by the terms of the leases, the water-was to be used in propelling the Crescent Mill, — a mill existing when they were executed, — and as at that time the capacity of that mill was such that it could be successfully operated at a head, say, of" six feet, plaintiffs cannot complain for a failure to furnish the excess above that. There is nothing in the claim. The covenant was not to furnish enough water to run the mill in its then capacity,, but was absolute, — to furnish 10,000 cubic feet per minute, at an eight-foot head, or its equivalent. Plaintiffs had an absolute right
The question of the proper measure of damages is raised.
In the first place, the appellants contend that the rule of damages, or the redress of the lessees, in ease of failure to furnish the stipulated quantity of water, is fixed by the lease. The question on demurrer to the complaint, of which the leases are made a part, was passed on when the case was here before. 50 Minn. 211, (52 N. W. 644.) It was held that the clause in the lease limiting the lessees’ remedy to an abatement of rent in case there should not at any time, from any cause whatever, be a sufficient quantity of water to supply the stipulated amount, referred to a case of shortage of water when the dam was maintained at a proper height, and it and its adjuncts kept in the agreed state of repair, and free from obstructions. It follows from that construction of the lease that an action will lie for any damages caused by a failure to supply water through any neglect or omission of the lessor. The right to such damages would not depend on the good or bad faith of the lessor, but solely on his neglect or omission. Where a party to a contract is exposed lo injury by neglect of the other party to perform the covenants on his part, the injured party has no right to aggravate the damages, dther by affirmative acts, or by the neglect of ordinary care and reasonable precaution to avert or lessen the injury. We have found no case, however, which holds — and the proposition is unreasonable —that the duty of ordinary prudence to lessen the injury extends so far as to require of him to perform the covenants of the other party. Whether, in this particular case, ordinary prudence would have lessened the injury, and to what extent, and whether the party did what it required of him, are questions for the jury.
The principal question, however, on the matter of damages, arose on allowing profits that would have been made while the mill was, for want of water, unable to run. The court permitted the plaintiffs to prove that during that period they either had, or could have procured, wheat to keep the mill running to its full capacity, with 10,000 feet of water at an eight-foot head, or its equivalent; how
Taking as the test of the right to recover such profits the second branch of the rule in Hadley v. Baxendale, 9 Exch. 341, that the injured party has the right to recover such damages “as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it,” now universally approved, the first question is, is it to be reasonably supposed that, when making these leases, both parties had it in contemplation that these profits would, in whole or in part, be lost to the lessees, as the probable result of a breach by the lessor of the covenant to furnish the stipulated quantity of power?
The lessees took the lease for the purpose of engaging in the business of manufacturing flour; the power was leased for that purpose; and both parties knew that if the power were not furnished the business would be suspended or interrupted, and the lessees would consequently be deprived of - such profits as might have been made in the business but for the suspension or interruption. And the loss of such profits must have been in contemplation of both, as the probable result of a breach of the covenant to furnish the power. To bring the case within the rule, it was not necessary they should have had in mind the amount of profits, or the extent of the loss from the breach. It was enough that they must have contemplated loss of profits as the result of a breach.
Within the rule stated, the damages sought to be recovered must not be remote, nor speculative, nor contingent, but direct, and shown with certainty to have been caused by the breach. An illustration of too remote damages would have been furnished, had plaintiffs claimed that, in consequence of not receiving the profits on their milling business, they lost profits of other enterprises, which they might have entered on with the profits of their milling business.
In respect to the profits of the business, their loss might appear to have been due to some other cause than failure to supply water to the mill. But, if not due to any other cause, their loss was sufficiently direct. Although the loss is direct, the amount must not be left to speculation or conjecture, but must be proved with reasonable certainty. Absolute certainty, however, is not required.
But, profits lost being allowed as damages, no expenses of keeping and caring for the mill could be allowed, except sucli as were made necessary by the mill being idle, and as would not have accrued had the mill been running.
Order reversed.
Dissenting Opinion
(dissenting.) I agree with the majority of the court that, in this case, covenants which run with the land will not run with the rent alone. Whether such covenants will run with rent alone is a mooted question. See Wood, Landl. & Ten. § 310. In the cases in which it has been held that such covenants will run with the rent alone, the assignment of the rent gave the assignee as complete control during the term for which the rent was assigned as the assignor could give him. It put the assignee in the shoes of the landlord as completely as possible without a conveyance of the reversion. But the assignment of the rents to come due on the waterpower leases in this case did not do so. It was an assignment of rent issuing out of a mere easement, an incorporeal chattel interest in other respects like an incorporeal hereditament, while the lessor himself'still remained in the possession of the estate out of which the incorporeal interest issued. The lessor, remaining in exclusive possession of such estate, was alone in position to maintain the dam and head race, and keep them in repair, as he covenanted to do in the water-power leases.
But I dissent from the opinion of the majority that a mortgagee in possession is not liable on such covenants.. While the deed from Thompson to Sprague, and the two contracts between them, constituted a mortgage, and gave Thompson the right to possession as long as he performed the contract on his part, on his default it gave Sprague the right to take possession; and there is sufficient evidence in this case to make it a question for the jury whether or not Sprague did subsequently take possession with Thompson’s consent. The position of the majority seems to be that the assignment from the lessor which will create privity of estate between his tenant and his
Prior to said statute of 32 Hen. VIII. ch. 34, few covenants which ran with the land ran with the reversion, and the assignee or grantee of the landlord could neither sue the tenant, nor be sued by him; and whether a mortgagee in possession is in privity of estate with the tenant, so that he may sue or be sued on the covenants in the lease made by the mortgagor depends on the proper interpretation of that statute. In all of those states in which the mortgagee does not take the legal title, and has but a lien, a mortgagee not in possession is not an assignee under this statute, and cannot sue upon, or be sued upon, such covenants. The possessory right or estate of such a mortgagee in possession is somewhat anomalous. He has a legal right or estate, as distinguished from a mere equitable one, and his estate is a complete defense to an action of ejectment, and he can only be deprived of his possession by an action to redeem in a court of equity. Pace v. Chadderdon, 4 Minn. 499 (Gil. 390); Jones v. Rigby, 41 Minn. 530, (43 N. W. 390.) His possessory estate partakes somewhat of the nature of a leasehold estate, but is certainly of a higher character than any lease for years. It is more than a lease to the mortgagee, to terminate on payment of the
Since the case of Williams v. Bosanquet, 1 Brod. & B. 238, it has generally been held in England that a mortgagee taking the legal title is liable on the covenants in a lease, whether he takes possession or not. Tliis case was decided after much consideration, and after taking the opinion of all the judges. It goes very extensively into the question of the rights and liabilities of a mortgagee in such a case, and reviews the English authorities, and the distinctions made by the different cases. While it overrules Eaton v. Jaques, 2 Doug. 460, it also attempts to distinguish that case in the following language (page 260): “Eaton v. Jaques will stand on its own pe«culiar ground, which is that an assignment of a lease, taken by way of pledge or security, differs in this respect from an absolute assignment, so that entry and possession are necessary.” It seems to me that is exactly in point here.. In Williams v. Bosanquet it is conceded that possession, either actual or constructive, is necessary to bring the assignee within the statute; but it holds that in cases
In that case there was a default in the mortgage and the mortgagee was entitled to the immediate possession. It seems to me that on the authority of these cases a mortgagee in possession not having the legal title but a mere lien and the right to possession, is an assignee within the statute of 32 Hen. VIII. ch. 34 and should be held liable on covenants running with the land.
(Opinion published 59 N. W. 638.)