I find myself in disagreement with my brethren. *Page 122
Defendant company held a $9,000 mortgage dated January 5, 1927, on a farm in Brown county of which farm plaintiffs were the owners until September, 1936, when they agreed to convey it to defendant Campbell in exchange for other real estate. The contract for the exchange resulted in a lawsuit in which plaintiffs obtained a decree of specific performance and a money judgment against Campbell in excess of $1,200. Thus Campbell became the owner of the fee to the mortgaged premises. It is as judgment creditors that plaintiffs are seeking recovery here. Of course they can have no greater rights than Campbell would have had. On February 7, 1934, during their tenure of the fee, the plaintiffs, being in default under the mortgage, made a contract with defendant company by which they gave it possession of the farm and assigned the owners' rights to the "crops, produce, and returns" therefrom and the right to, "collect all the rents, issues and profits therefrom" beginning as of March 1, 1933, with the right to lease the premises to any person it might select and out of the rentals to pay taxes, insurance, and such repairs and improvements as it might deem expedient and to apply the remainder on the mortgage. The right to foreclose at any time was preserved. The contract provided in part:
"In consideration of such grant of possession, the Company agrees that in the event its said mortgage is foreclosed, it will either bid at special execution sale held pursuant to foreclosure proceedings the entire amount of the mortgageclaimed, satisfying in full any judgment that may be obtained in such action, or upon acquisition of title to said realestate by Sheriff's Deed or otherwise, it will release any deficiency judgment obtained against the Owners, under or pursuant to foreclosure of its said mortgage." (Italics mine.)
The contract was evidently drawn with the Iowa practice in view and did not use language quite apt in relation to our procedure, but it is obvious that this paragraph offered the mortgagee two courses of conduct, each of which was in harmony with, and not in breach of, the contract. It might foreclose and bid in the *Page 123 property for the full amount of its debt, in which case it would receive a conditional conveyance of the premises for the payment of its debt and would continue to have a lien on the premises for the amount of the purchase price. 4 Dunnell, Minn. Dig. (2 ed. 1932 Supp.) § 6369. This court has said that the mortgagee who bids in the property has practically the same interest as before the sale. Fleming v. McCutcheon, 85 Minn. 152,156, 88 N.W. 433. Of course he has the additional right to title at the expiration of the redemption period. The mortgagee did not elect this first alternative but chose to follow the other, which contemplated a sale for less than the full amount of the claim with a deficiency surviving the sale. If this deficiency was put in judgment, as it might be in this state after a sale on foreclosure by advertisement (Stearns v. Carlson, 162 Minn. 469, 203 N.W. 212), the contract required that such judgment be satisfied when title vested in the judgment creditor. Title would not vest until the expiration of the year of redemption. 4 Dunnell, Minn. Dig. (2 ed. 1932 Supp.) § 6364, and cases cited. Therefore the obligation to release did not arise until the end of that period. It is contrary to the terms of the contract to say that there was a breach of contract by bidding less than the full claim. It is equally contrary to its terms to say that the deficiency is wiped out by such a bid. The second alternative specifically contemplates such a deficiency during the redemption period and specifically provides when a deficiency judgment shall be released at the end of that period if one is obtained. Other provisions support this construction. A following paragraph provides:
"The right of possession, together with the power and authority hereinabove granted to the Company, shall continue so long as the above described mortgage remains an enforceable lien against said real estate and during the period ofredemption under any foreclosure proceedings, unless this agreement is sooner terminated as hereinabove provided." (Italics mine.)
Further light on the intent of the parties is provided by an alternative to continued possession during the redemption period *Page 124 in the form of a right to a receivership, the receiver to manage and operate the premises, and:
"In the event said mortgage is foreclosed, the Owners agree that the Company, if it prefers, rather than stand on its right to hold and continue in possession of the mortgaged premises hereunder, shall be entitled to have a receiver immediately appointed to take possession of said premises, manage and operate the same, collect the income, rents and profits thereofduring the period of redemption, and apply the same to the payment of taxes, improvements, repairs, insurance, operating expenses, and upon the mortgage debt and upon any deficiencyjudgment remaining after the sale of the mortgaged premises." (Italics mine.)
While the mortgagee did not take advantage of this option, the parties could hardly have intended that the right to rents would be lost by not applying for a receiver. It is manifest that the general purpose of the contract was to protect the mortgagors from any personal liability over and above what might be realized from the land and to permit the mortgagee to manage the property and realize what it could to apply on its debt. Taking the contract by its four corners, it must be conceded that such was its intent. Do its detailed provisions at any place contradict this intent or has the company by its conduct forfeited any part of its contract right? I think not. It seems clear that the right to rents until the period of redemption expired was given to the mortgagee with the right to possession. It did not lose the right to these rents by its bid for less than the full amount of its claim. It would have lost that right only by bidding in the property for the full amount because the whole debt would then have merged into the amount required to redeem. Had the rents exceeded the deficiency it would have lost its right to the excess. After the period of redemption no recovery of the remaining deficiency could be had by virtue of the very terms of the contract since the mortgagor was entitled to a release. Defendant, recognizing that no deficiency survives the redemption period, has sought no judgment. Under Holt State Bank, by Veigel, v. Hamernes, *Page 125
171 Minn. 350, 214 N.W. 52, it may have lost its right to apply any of the rent on the taxes unless perhaps that right should be held to have been preserved by the contract. That does not affect the case because the rents are but $500 and the deficiency outside of taxes is over $1,600.
It strikes me that the error in the majority opinion lies in assuming that at once upon sale the mortgagor was entitled to a release of any deficiency judgment that might be entered. If that were the case there would be no use to provide for anything but a bid for the full amount. Why, then, provide for application of the rents during a receivership after foreclosure?
I think the judgment should be reversed and entered for defendant.