Borel v. Kappeler

California Supreme Court May 31, 1889 No. No. 11974Published

Before: Works

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Holding. The court held that the mortgagee was not contractually obligated to apply collected rents to the joint mortgage and that the mortgagors were estopped from challenging the application of rents to the second mortgage; however, the judgment was reversed due to the trial court's failure to make a finding on the disputed issue of the building's cost and the resulting credit amount.

Issues

Whether the mortgagee was required to apply collected rents to the joint mortgage rather than the second mortgage.
Whether the trial court erred by failing to make a finding on the issue of the building's cost and the corresponding credit due to the mortgagors.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“The first did not bind the mortgagee to collect and apply the rents.”

“The court fails to make any finding on this issue, and for this failure the cause will have to be reversed.”

Synopsis

Mortgage—Application of Rents and Profits — Estoppel, of Prior Mortgagor. — A mortgage containing a covenant that in case of default the mortgagee may enter and collect and apply the rente and profits to the indebtedness does not bind the mortgagee to collect and apply the rents; and when a second mortgage to the same mortgagee is made by one of the first mortgagors, upon his interest in the same premises, at the request of the other mortgagor, conferring on the mortgagee an immediate right to collect all rents and profits, and apply the net proceeds, after deducting a commission for collection, and all taxes, assessments, and insurance, towards the discharge of the second mortgage, the terms of the first mortgage are not violated by compliance of the mortgagee with the terms of the second mortgage, and if such application is made, and is known and consented to by the other mortgagor, who joined in the first mortgage, he is estopped from contesting the same.

Id.—Option to Mortgagee to Purchase — Cost of Building—Credit on Mortgage—Findings. —When a mortgage gives the mortgagee an option to purchase a third interest in a lease owned by the mortgagers, by paying one third of the cost of the building mortgaged, and such option to purchase was exercised, a direct issue as to whether the proper credit was given on the mortgage on account of the purchase is material, and a failure to find thereon is ground for reversal of a decree foreclosing the mortgage. If the complaint alleges the cost of the building, a finding that a credit for less than one third the cost alleged was made on the mortgage by agreement does not show a sufficient credit, and the judgment is erroneous as- to the difference and interest thereon.

Id. — Ascertaining Amount Due;—Appeal—-Error; not Appearing.— When, the record on appeal does not show affirmatively that certain items objected to as improperly included in arriving at the amount due on the mortgages in suit were in fact so included, the appellate court eannot enter upon an inquiry as to- such, items.

Works, J. —The appellant Joseph Scheerer was the owner of a leasehold interest in a lot of land, and the owner of the buildings thereon, and he and Lawrence Kappeler, the decedent of the other appellants, were the owners of a leasehold interest in a certain other lot of land, and the said Kappeler was the owner of certain personal property. They joined in a mortgage on all of this property, real and personal, to the respondent, to secure him for money to be advanced by him and used to construct a building on the lot held by said parties jointly.

The respondent advanced under the mortgage, as found [344]By the court, the' sum. of $52,512.89. The appellant Scheerer, after the execution of the mortgage above mentioned, gave his own mortgage to the respondent on both of said lots of real estate for the sum of fifteen thousand dollars.

The joint mortgage of Scheerer and Kappeler contained this clause:—

“Said Scheerer and Kappeler agree that out of the rents derived from the lease first above mentioned, there shall be paid to said Borel,* from and after the 1st of January, 1877, and from thence until all the moneys due under this agreement are paid, the sum of three hundred dollars per month, in said gold coin, on account of the indebtedness secured thereby, and that in case of any default in such payment, said Borel shall have the right to enter upon the premises described in such lease, and to demand all rents due said Scheerer and Kappeler, or either of them, and to apply the same to the satisfaction of such indebtedness.”

The second mortgage, given by Scheerer alone,nontains this covenant:'—

“That during the continuance of said mortgage the plaintiff shall have the right to collect all rents of the buildings erected on said land, and to apply the same, after a deduction of a commission of two and a half per cent for collection, to the payment of all interest due plaintiff, and of all sums paid by the plaintiff for rent of said land under said lease, or taxes, or assessments, or insurance, as aforesaid, and then, at his option, in reduction of the principal amount of said note.”

The complaint contains the following allegation: ■—.

“That at the time of the execution of said mortgage of Scheerer to plaintiff, said Kappeler was fully aware of all its provisions and of the facts of its execution, and that said fifteen thousand dollars was lent to said Scheerer by plaintiff, and said mortgage given by said Scheerer to plaintiff at said Kappeler’s express request and for said

Borel v. Kappeler

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