Harney v. Wirtz

Christianson, J.

This is an action for the foreclosure of a mortgage. The plaintiff obtained judgment in the court below for a foreclosure of the mortgage, and the defendant appeals from the judgment and asks for a trial de novo in this court. The only question presented in this case arises upon the construction of the mortgage sought to be foreclosed, which is in words and figures as follows:

This instrument was duly signed, witnessed, and acknowledged, and on the 14th day of June, 1904, was recorded as a real estate mortgage in the office of the register of deeds of Benson county, and also filed in .that office as a chattel mortgage.

On September 8, 1904, Lindeman gave a mortgage upon the land ■described in the mortgage above set forth, to the Minneapolis Threshing Machine Company to secure the payment of $3,085. This mortgage, .it is conceded, was a regular real estate mortgage in usual form, containing the stipulations, covenants, and conditions usually contained in .such mortgages in this state, including a good and sufficient power of sale. This mortgage was recorded in the office of the register of deeds •of Benson county on September 12, 1904, and was duly assigned by the mortgagee named herein, to the defendants, Wirtz Brothers, by a written assignment in regular form, dated June 14, 1907, and recorded in the office of the register of deeds of Benson county on August 14, 1907. It is conceded that this last mortgage was duly foreclosed in the manner provided by law, and a sheriffs deed duly issued thereon to the ■defendants, Wirtz Brothers, on the 6th day of October, 1908, and recorded in the office of the register of deeds of Benson county on October 13, 1908.

The plaintiff brought this action in equity to foreclose the mortgage .given to him by Lindeman upon the realty alone, — no foreclosure of the mortgage upon the chattels being asked for. The defendants, Wirtz Brothers, first demurred to the complaint on the ground that the complaint did not state facts sufficient to constitute a cause of action. The ■demurrer was overruled, and these defendants, thereupon answered, .stating, in substance, that they were the owners of the premises, and that the mortgage set forth in plaintiff’s complaint was only a chattel mortgage upon the personal property therein described, and did not constitute a lien on the realty, and also that the plaintiff had permitted the personal property to be dissipated and disposed of by Lindeman after the defendants, Wirtz Brothers, had notified the plaintiff to satisfy his mortgage out of the personal property. It will be unnecessary for us, however, to consider the latter defense, because in our judgment the controlling question — and really the only question presented for our consideration — arises upon the construction of the mortgage held by the plaintiff and sought to be foreclosed by this action. Does the instrument in question ccastitute a mortgage upon the land therein described; or does it only constitute a chattel mortgage? This is the prime question submitted to this court for determination.

(1) “The law furnishes certain rules for the construction of written contracts for the purpose of ascertaining from the language the manner and extent to which the parties intended to be bound; and those rules should be applied with consistency and uniformity; and it is not proper for a court to vary, change, or withhold their application. The first and main rule of construction is that the intent of the parties as expressed in the words they have used must govern. Greater regard is to be had to the clear intent of the parties than to any particular words which they may have used in the expression of their intent. If the words clearly show the intention, there is no need for applying any technical rules of construction, for where there is no doubt there is no room for construction.” 9 Oyc. 577.

(2-4) The law relative to the construction of contracts, as stated above, has been in substance enacted into, and become a part of, the statutory law of this state. Sections 5895-5921 of the Compiled Laws of 1913 furnish a complete guide for the interpretation of contracts.

Section 5896 provides': “A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful.” Section 5897 pi’ovides that, “for the purpose of ascertaining the intention of the parties to a contract, if otherwise doubtful, 'the rules given in this chapter are to be applied.” Among the rules governing the interpretation of contracts enumerated are the following: “The language of a contract is to govern its interpretation if the language is clear and explicit, and does not involve an absurdity.” Comp. Laws, § 5898. “When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone if possible, subject, however, to the other provisions of this article.” Comp. Laws, § 5899. “The whole of a contract is to be taken together so as to give effect to every part, if reasonably practicable, each clause helping to interpret the others.” Comp. Laws, § 5901. Section 5904 provides that words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning, unless used by the parties in a technical sense, or unless a special meaning is given to them by usage; and § 5905 provides that technical words are to be interpreted as usually understood by persons in the profession or business to which they relate unless clearly used in a different sense. “However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” Comp. Laws, § 5908. “Particular clauses of a contract are subordinate to its general intent.” Comp. Laws, § 5910. “Words in a contract which are wholly inconsistent with its nature or with the main intention of the parties are to be rejected.” Comp. Laws, § 5913. Section 5911 provides that when a contract is partly written and partly printed, the written parts control the printed parts. By applying the rules of interpretation provided by the Codes of this state, to plaintiff’s mortgage, we have no serious difficulty in reaching a conclusion in this case.

(5) The instrument in question has every element of a chattel mortgage, and in fact it is expressly labeled a chattel mortgage, not only at the top of the instrument itself, but also on the back thereof. There is absulutely nothing about the instrument to indicate that its purpose was to mortgage realty, unless the single clause, appearing as a part of the clause relative to crop mortgages, be so construed.

The name of the instrument, its appearance, and contents are those of a chattel mortgage. The whole nature, tenor, and purport thereof is that of a chattel mortgage. The main intention of the parties as manifested by the terms of the contract itself was to create a chattel mortgage. The term “chattel mortgage” has not only a technical and strict legal meaning, but has also a well-understood meaning in an ordinary and popular sense. In both instances, however, it is understood to refer to a mortgage upon chattels only; and it is never understood to mean a lien upon real property. The instrument under consideration was expressly named, “chattel mortgage.” We venture to say that not one person in a thousand signing the mortgage in question would have known that it was intended to mortgage realty. The instrument by its name, appearance, and general contents would unquestionably convey to the person executing it the idea that he was signing only a chattel mortgage. The granting clause in the instrument is: “That I ... by these presents do grant, bargain, sell, and mortgage unto the said James K. Harney, all the crops of every kind and description, including hay which had been or may hereafter be grown, sown, cultivated, cut, or harvested during the years of 1904, and until said debt is fully paid on the following described real estate, to wit: The Northeast quarter (N.E.¿) section thirty two (32) in township one hundred fifty-five (155) north,, of range sixty-nine (69) west of the 5th P. M. in Benson county, state' of North Dakota.” Then follows the statement: “That this mortgage^ is a charge and lien on said real estate until said debt hereby secured is' paid, and said lien may be foreclosed in the same manner as other mortgages on real estate.” Immediately following this statement is &■ continuation of the crop mortgage clause, providing that in case of failure to properly sow, cultivate, harvest, and care for said crop that the-mortgagee be authorized to do so, etc. It will be observed that the mortgage in question nowhere says that the mortgagor grants or' mortgages the realty. The provisions relative to the power of sale,, the conditions relative to default, and in fact all the conditions, and stipulations in the body of the mortgage are confined exclusively to the chattel property, and are those usually found in a chattel mortgage in this state, and by their plain and unmistakable terms can have no possible application to the realty . The habendum clause in the mortgage says: “To have and to hold all and singular, the personal property aforesaid, forever as security for the payment of the note and obligations hereinafter described.”

While it is true that the habendum clause is not of the same importance that it used to be, still “the habendum may limit, restrain, lessen, enlarge, explain, vary, or qualify, but not totally contradict or be. repugnant to the estate granted in the premises. . . .” 13 Cyc. 619. The whole of the instrument is to be taken together (§ 5901 Comp» Laws), and the particular clauses are subordinate to its general intent (§ 5910 Comp. Laws); and regardless of however broad may be the-terms of the contract, it extends only to those things concerning which it appears that the parties intended to contract (§ 5908 Comp. Laws), and the words in the contract which are wholly inconsistent with its. nature or with the main intention of the parties are to be rejected. (§ 5913 Comp. Laws). The instrument under consideration, when, so construed, is clearly what it is named, viz., a chattel mortgage, and nothing more, and does not in any sense constitute a mortgage on realty. An instrument almost identical in language was construed by this, court in the case of Mortgage Bank & Invest. Co. v. Hanson, 3 N. D. 465, 57 N. W. 345, to be a chattel mortgage. The reasons advanced. for the court’s decision in that case apply equally in this case. We consider that decision sound in principle, and entirely approve of the doctrine promulgated thereby.

(6 — 8) Upon the trial, the plaintiff introduced testimony relative to conversations had at and prior to the execution of the mortgage, to show that the plaintiff and Lindeman intended the mortgage set forth in the plaintiff’s complaint to be a mortgage, not only upon the personal property, but also upon the real property. This testimony was all objected to iipon proper grounds by the attorneys for the appellants. Respondent’s counsel contends that this testimony was admissible for the purpose of showing the intention of the parties. We are unable to agree with respondent’s counsel in this contention, and are satisfied that it is necessary to arrive at the intention of the parties from the instrument itself. Comp. Laws, § 5899; Miller v. St. Paul F. & M. Ins. Co. 26 S. D. 45, 128 N. W. 709. It is obvious that any intent or ideas existing in the minds of the contracting parties, or dependent upon oral understandings between them, was not in any manner made a matter of record by the recording of plaintiff’s mortgage. ■ The only notice with which defendants were chargeable was that given by the record itself: The question is whether or not the instrument involved mortgages both real and personal property or only personalty. To permit parol testimony to be admitted to add something to the mortgage which does not appear on its face, would be in effect to permit the plaintiff in this case to establish an oral mortgage on realty. There is no evidence that the appellants had any actual knowledge or notice of the mortgage, or of any intent on the part of the parties thereto not contained in the mortgage. All the evidence tends to show that the only notice the appellants had is such as was imputed to them from the records. If respondent’s position is sustained, the recording acts would be of no value. The records are notice of what is there shown, — no more, no less; and all persons are chargeable with knowledge of the facts shown by the records. Either the mortgage involved mortgaged the realty or it did not; and, as we view the matter, any secret intention in the minds of the parties can neither add to, nor detract from, the notice imparted to innocent third parties' by the record of the mortgage in question. “The secret intention of the parties, however, if different from the expressed intention, will not prevail, as the law- looks to what the parties said as expressing their real intention.” 9 Cyc. 578. “Parol evidence is not admissible to contradict or vary the terms of a mortgage. "When a contract is reduced to writing, the presumption is that the entire actual agreement of the parties is contained in it; and parol evidence as. to their negotiations or conversations prior to its execution is not admissible to vary or explain it.” 27 Cyc. 1136.

(9-12) Respondent’s counsel further contends that the mortgage is ambiguous, and that parol evidence was admissible to explain the ambiguity. It is true that parol testimony is admissible in certain cases to explain an ambiguity in a written instrument, but it has no application in this case. The rule (relative to admission of such evidence) was laid down by Lord Bacon, that a latent ambiguity may be explained by extrinsic evidence, but that a patent ambiguity may not. And although this general distinction has sometimes been criticised by the courts, and for that reason it is necessary to examine the statement closely in order to see what it really means and how far it is a correct exposition of law, still it has been very generally accepted by the courts as correct. A latent ambiguity is defined by Lord Bacon to be “that which seemeth certain and without ambiguity for anything that appeareth upon the deed or instrument, but there is some collateral matter out of the deed that breedeth the ambiguity.” The following definition of latent ambiguity is given by Cyc.: “A latent ambiguity arises when the writing upon its face appears clear and unambiguous, but there is some collateral matter which makes the meaning uncertain. . . . It is to be observed, however, that while parol evidence may be admitted in explanation where there is a latent ambiguity, it can do no more than explain the doubtful expressions of the instrument consistently with the relations of the parties and the other incidents of the contract. The rule that where an ambiguity is created by farol it may be removed by farol was never intended to violate the rule that a writing shall not be contradicted or explained by inferior testimony. If, therefore, when an ambiguity is created by parol, the instrument itself removes the ambiguity, it cannot be controlled.” 17 Cyc. 676. A patent ambiguity has also been defined as follows: “A patent ambiguity is an uncertainty that arises at once on the reading of the contract. We do not have to wait until some other fact is brought to our knowledge before the uncertainty is apparent, but the doubt is suggested at once and by tbe phrase itself. A patent ambiguity is one tbat appears on tbe face of the instrument, and tbat wbicb occurs when tbe expression of an instrument is so defective tbat a court of law which' is obliged to put a construction on it, placing itself in tbe situation of tbe parties, cannot ascertain what they meant. A patent ambiguity appears on tbe face of tbe instrument, while a latent ambiguity is raised by evidence.” Jones, Ev. § 473. Justice Story in discussing this proposition said: “Nothing is clearer than tbe general rule, — latent ambiguities may be removed by parol evidence,- for they arise from tbe proof of facts aliunde; and where tbe doubt is created by parol evidence, it is reasonable tbat it should be removed in tbe same manner. But patent ambiguities exist in the contract itself; and if the language be too doubtful for any settled construction, by the admission of parol evidence you create, and do not merely construe, the contract. You attempt to do that for the party which he has not chosen to do for himself; and the law very properly denies such an authority to courts of justice.” Peiscb v. Dickson, 1 Mason, 9, Eed. Oas. No. 10,911. “In other words, and more generally speaking, if tbe court, after placing itself in tbe situation in wbicb tbe parties stood at tbe time of executing tbe instrument, and with full understanding of tbe force and import of tbe words, cannot definitely ascertain tbe meaning and intention of tbe parties from the language of the instrument thus illustrated, it is a case of incurable and hopeless uncertainty; and tbe instrument is so far inoperative and void; and it cannot be sustained or rendered operative by the introduction of evidence which would necessarily have tbe effect of adding new terms to tbe writing.” 17 Oye. 682.

Black’s Law Dictionary says: “An ambiguity may be either latent or patent. It is tbe former, where tbe language employed is clear and intelligible and suggests but a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings. But a patent ambiguity is tbat wbicb appears on tbe face of tbe instrument, and arises from the defective, obscure, or insensible language used.” Anderson’s Dictionary of Law gives tbe following definitions: “Patent ambiguity: Such ambiguity as appears upon tbe face of the writing itself. Latent ambiguity : Where a writing is perfect and intelligible upon its face, but, from some circumstances admitted in proof, a doubt arises as to the applicability of tbe language to a particular person or thing. Ambigúitas patens is that which appears to be ambiguous upon the instrument. Ambiguitas láiens is that which seems certain and without ambiguity for anything that appears upon the instrument, but there is some collateral matter out of the deed that breeds the ambiguity.” Stroud’s Judicial Dictionary gives the following clear statement regarding the matter, viz.: “There are two kinds of ambiguity: First, where the ambiguity arises from the fact that the parties have expressed inconsistent intentions on the face of the deed. An ambiguity of this class is apparent to any person perusing the deed, even if he be unacquainted with the circumstances of the parties; and is called a ‘patent ambiguity/ Second, where no ambiguity is apparent to a person perusing the deed until, on obtaining evidence of the circumstances of the parties, it is discovered that there are several persons or things, or classes of persons or things to each of which a name or description contained in the deed seems to be equally applicable. An ambiguity of this class is called a ‘latent ambiguity,’ or an ‘equivocation.’ ”

The ambiguity arising in this case — if there is one — is an inherent uncertainty appearing on the face of the instrument, and arises from the defective, obscure, or insensible language used. It seems clear that no ambiguity exists which can be explained by parol. The only doubt existing in this case, if any, is as to the intention of the parties. This is not such an ambiguity as can be explained by parol. When the intention of the parties is clearly expressed, and a doubt exists, not as to the intention, but as to the object to which the intention applies, it is a latent ambiguity. The evidence offered by plaintiff was not to explain an ambiguity, but merely to add something to the contract. The purpose of the evidence was to convert a chattel mortgage into a real estate mortgage. This is not explaining an ambiguity, but varying the terms of a written contract and creating a new contract by parol entirely different and variant from the written contract. We are entirely satisfied that this evidence was wholly inadmissible. Comp. Laws, § 5889 ; First State Bank v. Kelly, ante, 84, 152 N. W. 125. “The description in the mortgage as to the property included therein and intended to be covered thereby is conclusive, and parol or extrinsic evidence is not admissible to contradict, add to, or vary the same by showing the intention of the parties in this respect to have been other than that expressed by the instrument.” 17 Cyc. 628. See also 27 Cyc. 1137; 9 Enc. Ev. 466, 467.

It is seriously contended by appellants’ counsel that the plaintiff is estopped from asserting that the mortgage is anything more than a chattel mortgage, — that the name, general form, and contents of the instrument are those of a chattel mortgage; that its appearance, in every respect, is such as would lead any person to believe it to be a chattel mortgage, and that plaintiff, having held the instrument out to be such, — under the familiar rules of estoppel, — will now be estopped to assert that the mortgage is anything but what he held it out to be; viz., a chattel mortgage.

Appellants’ counsel also earnestly assert that the form of the instrument is such that it is a mere trap whereby innocent persons may be led into giving mortgages on their lands while believing that they are only signing chattel mortgages, and that for that reason the contract, is unlawful and contrary to public morals, and is void as against public policy, under the provisions of § 5922, Compiled Laws. In view of what has already been said in this opinion, we find it unnecessary to pass upon the propositions thus advanced. It is clear to us that the instrument in question, when construed, as a whole, in accordance with the principles laid down in the Civil Code of this state for the construction of contracts is only a chattel mortgage, and that the parties intended to contract only concerning personal property. But, it also is, self-evident that if the mortgage involved herein should be sustained as a mortgage on realty, that it would, as appellant’s counsel assert, put a premium upon fraud and deceit, and enable unscrupulous persons- to obtain real estate mortgages under the pretext that they were taking chattel mortgages only. The persons who are compelled to give chattel mortgages in order to obtain credit would in a great number of eases prove easy victims in the hands of unscrupulous creditors, if this instrument were sustained as a mortgage on realty. The fact that no charge- of fraud or deceit is involved in this case does not alter the- result which, would naturally follow a decision sustaining the instrument under consideration as a real estate mortgage. The mortgage in question is either a mortgage on the realty or it is not. Its contractual effect would be the same whether the mortgagee was honest or dishonest. The same rules of law apply to all. There is no hardship in requiring that a person obtaining a real estate mortgage be required to use a form which will inform the party executing the same that he is mortgaging realty. We are satisfied that the instrument in question is only a chattel mortgage, and did not mortgage the realty, and that therefore the judgment of the trial court is erroneous. The District Court will therefore reverse its judgment, and enter judgment in favor of the appellants, as prayed for in their answer.

Mr. Justice Burke did not participate in the above, Honorable Chas. A. Pollock, Judge of the District Court of the Third Judicial District, sitting in his stead.

Case Details

Case Name: Harney v. Wirtz

Court Name: North Dakota Supreme Court

Date Published: Mar 31, 1915

Citation: 152 N.W. 803

Court Abbreviation: N.D.