37 F. 286 | U.S. Circuit Court for the District of Western Michigan | 1889
The bill in this cause was filed for the purpose of foreclosing a mortgage given to Daniel Sharpe, the complainant’s assignor, on the 11th day of August, 1880, by Brosnan and McKee, to secure the payment of the sum of $45,000, made payable in 12 installments of $3,750 each, on the 1st day of June in each year thereafter, with annual interest at 41 per cent, on the whole sum from time to time, unpaid, according to the tenor of a certain bond, of even date with the mortgage, from Brosnan and McKee to Sharpe. The mortgage was given to secure the purchase price for the plaster-mills property at Grand Rapids, and covered the whole plant. The Union Mills Plaster Company, having become incorporated, purchased the mortgaged property of Brosnan and McKee, and -by the terms of its purchase assumed and agreed to pay the mortgage debt to the complainant. The first two installments of principal, and the annual interest on the whole sum for the first and second years, were paid. On the maturing of the third installment, a further agreement was entered into between the complainant and Bros-nan and the plaster company, whereby the payment of it was deferred, and it was put at the foot of the other installments, to follow them as an annual installment; and the rate of interest was raised to 6 percent., but it was to be, and was, until 1888, in fact paid annually as before. Upon the same arrangement, the installments of principal due in 1884, 1885, 1886, and 1887 were turned behind the first deferred payment. By the terms of the obligations they were payable at the complainant’s office in Boston, but in fact the payments were never made there, and generally, if not always, they were made at or through a bank at Grand Rapids. Complainant’s incorporation was under'the laws of Maine, and its home office was at Portland, but it is alleged that it had also an office at Boston. It was stipulated in the mortgage that if any portion of the mortgage debt should remain unpaid for the period of 60 days
It also appears that the complainant paid the taxes on the mortgaged property for the year 1887, after they had been returned delinquent, and prior to the filing of the present bill. This it was authorized to do by the express provision of the statutes of Michigan, which gives the ■mortgagee the right to tack a payment so made to his debt, and extends the mortgage security to it. How. Ann. St. § 1137. And I am of opinion that the mortgagee may do this at any time after the mortgagor has made default, and suffered the property to be returned for the unpaid taxes. On the 12th day of November, 1888, the present bill was filed to foreclose the mortgage, the complainant declaring therein its election -to treat the whole debt as due, and praying relief accordingly. It is
That it is competent for parties to stipulate that on default in the payment’of an installment the whole may become due at the election of the payee, is well established, and courts of equity will give such stipulations effect when they have been fairly made, and the right of election fairly exercised. Noonan v. Lee, 2 Black, 499; Olcott v. Bynum, 17 Wall. 62. It will not, however, aid in the enforcement of such right where the conduct of the payee indicates artfulness, trickery, or stratagem in bringing on the technical conditions upon which he exercises the right. His purpose must have been open and honest, and advantage cannot be taken of any misleading produced by his own action, or (what is the same thing) the reasonable implication contained in it. Noyes v. Clark, 7 Paige, 179; Broderick v. Smith, 26 Barb. 539. In the present case, "while I do not find that there was a deliberate purpose to hold off the payment which was due in June, 1888, by stratagem, until the 60 days should have elapsed, still I am of the opinion that when the complainant was notified that the defendants were ready to pay the money at the place where it had usually been paid, and knew that the money
Another branch of the subject remains for consideration. A tender of the whole sum which was in fact due having been made, is the mortgage security as to the sum so tendered lost by the refusal to accept? It is the rule undoubtedly that a tender discharges the security. Moynahan v. Moore, 9 Mich. 9; Caruthers v. Humphrey, 12 Mich. 270; Potts v. Plaisted, 30 Mich. 149. But to produce such serious and heavy consequence the refusal must have been unqualified, and unaccompanied by any Iona fide claim of right, which was supposed by the party to justify, his refusal. The claim of right may have been one that could not be .supported as matter of law; still, if it was believed in, and was not wantonly put forward as a cover to a wrong purpose, it is sufficient to prevent the forfeiture of the security. So here, while it is clear enough that the complainant had no right to make it a condition of receiving payment, that the defendant should enter into stipulations about making repairs on the mortgaged property, still it may have been that it thought it had such right, and I do not find- such evidence of its bad faith in this regard as to justify a,declaration of forfeiture. Waldron v. Murphy, 40 Mich. 668; Post v. Springsted, 49 Mich. 91, 13 N. W. Rep. 370. It results from these considerations that the complainant’s bill is well filed for the foreclosing of the mortgage in respect of the installment of principal and the annual interest and the taxes for 1887. A question about costs may arise at the hearing.
It is shown that the plaster-works covered by the mortgage have not been operated for two or three years past, the defendant company having entered into a combination with other plaster companies at Grand Rapids to restrict production, and keep the price of the- product up to the rate agreed upon, and arranged with another member of the combination for the production of the Union Mills Plaster Company’s proportion, as allotted bji- the combination. The reason for this arrangement with the other company is said to be that the latter has such facilities that it can produce the plaster at a cheaper cost, and it is claimed that it is better for the defendant to pay what it does for thus furnishing its proportion, than to furnish the plaster from its own mills. The defendant’s mills and works have therefore remained idle, and have suffered from the decay
But it is claimed by the complainant—and, if the conduct which has thus far characterized the management of the affairs of the defendant company is to be continued, I think with strong reason—that the security is inadequate. While I am satisfied that some of the complainant’s witnesses have greatly, underrated the value of the mortgaged property/ still the impression left upon my mind is that it is quite doubtful whether in the present condition of affairs the property is adequate as security for the debt. Upon this aspect of the situation, the complainant prays for the appointment of a receiver to take the rents and profits, to the end that they may bo appropriated to the satisfaction of the mortgage debt; and there is thus presented a somewhat difficult, but very important, question, touching the practice of the federal courts in Michigan in mortgage foreclosure cases, which, so far as I am aware, has never been expressly decided in these courts, and that is whether, in view of the law in this state in regard to the rights and relations of the parties to a mortgage of real estate to the mortgaged property, as declared by statute and expounded by the supreme court of the state, the mortgagee may, upon showing that his security is inadequate, have an appropriation of the rents and profits to help out the deficiency. The statute (How. Ann. St. § 7847) takes away from the mortgagee the right to the possession until foreclosure is completed by sale, and the sale has become absolute by confirmation. And it was held in Wagar v. Stone, 36 Mich. 364, that this statute, by implication, secured to the mortgagor the rents and profits pending foreclosure, and that therefore an appropriation of them by the hand of a receiver for the benefit of the mortgagee deprived the mortgagor of a substantial right. Notwithstanding this decision, the federal court in this district continued the practice of appointing receivers in such cases and for such purpose in the same way as had been customary in the early equity practico, and a number of precedents have been found in which my predecessor made such appointments after the practice in the state courts had been settled the other wa,y. The matter does not appear to have been debated before him on any actual dispute shown by the record, but it cannot be doubted that so well informed a judge was cognizant of the ruling of the state court on the subject, and I am convinced that he followed the original practice upon the theory that it was a matter of practice merely, and that it was the duty
An offer is made in the answer to pay the amount of the installment, and the annual interest which remains unpaid, and the taxes of 1887, and this offer was repeated at the hearing of this motion. If this is done, the further prosecution of the bill for the purpose of foreclosure would, upon the views already stated, be quite fruitless; and the ques