Bur v. Bong

The following opinion was filed January 12, 1915: Siebecicee, J. The plaintiff’s right to foreclose his mortgage, although the note secured by the mortgage is barred by — 502 — the statute of limitations, has been well established by the decisions of this court. Wiswell v. Baxter, 20 Wis. 680; Knox v. Galligan, 21 Wis. 470; Phelan v. Fitzpatrick, 84 Wis. 240, 54 N. W. 614; Duecker v. Goeres, 104 Wis. 29, 80 N. W. 91. The mortgagee under such circumstances is also entitled to recover interest on the principal sum if the note and mortgage provide for the payment of interest. Wiswell v. Baxter, supra. The defendants contend that the plaintiff has lost his interest and rights to their property by reason of their adverse possession of the premises as against him and all others claiming any interest therein. There is no dispute but that plaintiff obtained a valid mortgage covering an undivided one-ninth interest in lots 15 and 16 on July 18, 1893, which mortgage was duly recorded and remains unsatisfied of record to the present time. The mortgagor, Bong, defaulted in the payment of the sum of $150 of the original indebtedness and of the interest which accrued on the entire principal after the same became due, which the court found now amounts to $926.73. The circuit court found that there is due the plaintiff from the defendant Bong these sums, amounting to $1,676.63, and that plaintiff’s rights under these mortgages have not been cut off by adverse possession of the premises on the part of Bong or Bertha M. Holland. The general rule is that possession of the premises by the mortgagor is presumed to he in subordination to the rights and interests of the mortgagee or purchaser under foreclosure sale until it is shown that such possession was in fact adverse to the rights and interests of the mortgagee in the premises. Avery v. Judd, 21 Wis. 262; Wright v. Sperry, 25 Wis. 617; Seeley v. Manning, 37 Wis. 574. The mortgage being duly recorded when Bong deeded his interest in lot 15 to Schauer and he to defendant Holland, it requires some distinct act of denial on their part, of being in possession in subordination to plaintiff’s rights, to terminate — 503 — tbe acknowledged relation existing between tbe plaintiff as mortgagee and tbe mortgagor, Bong, and those bolding under bim to set adverse possession running. Tbe record of tbe mortgage is constructive notice to all subsequent purchasers of the mortgagee’s rights in tbe premises. , Under such circumstances tbe mortgagor and those bolding under bim continue to hold in subordination to tbe mortgagee’s rights, unless it be shown that their possession was in fact inconsistent with and adverse to tbe rights of tbe mortgagee. Maxwell v. Hartmann, 50 Wis. 660, 8 N. W. 103; Neilson v. Grignon, 85 Wis. 550, 55 N. W. 890; Erwin v. Lewis, 32 Wis. 276. Tbe evidence fails to show any facts, aside from plaintiff’s long delay in enforcing bis claim, which tend to show that tbe defendants bad entered into tbe possession of tbe premises and occupied them inconsistent with'and adverse to the rights of tbe plaintiff as mortgagee under bis recorded mortgage. Their possession could not, under tbe circumstances, become adverse except by positive and direct acts on their part sufficient to convey and bring to plaintiff’s notice their hostile possession as to bim. This, as tbe court found, is not established by tbe evidence, and therefore tbe claim that plaintiff lost bis rights under tbe mortgage upon this ground must fail. It is contended that tbe plaintiff by bis laches is precluded from enforcing tbe mortgage. In tbe case of Rogers v. Van Nortwick, 87 Wis. 414, 58 N. W. 757, this court declared that: “A court of equity applies tbe rule of laches according to its own ideas of right and justice, and tbe courts have never prescribed any specific period applicable to every case, like tbe statute of limitations; and what constitutes a reasonable time within which tbe suit must be brought depends upon tbe facts and circumstances of each particular case.” Tbe court also there quotes approvingly tbe following: “No rule of law is better settled than that a court of equity will not aid a party whose application is destitute of con — 504 — science, good faitb, and reasonable diligence, and will discourage stale demands, for tbe peace of society, by refusing to interfere where there have been gross laches in prosecuting rights, or where long acquiescence in the assertion of adverse rights has occurred.” In the recent case of Likens v. Likens, 136 Wis. 321, 117 N. W. 799, this court, referring to the nature and application of this defense, stated: “The defense of laches does not depend upon any statute of limitation, but is in the nature of an equitable estoppel, and operates as a bar upon the right to maintain an action by those who unduly slumber upon their rights. There is no fixed rule as to the lapse of time necessary to bar a suitor in a court of equity. Each case must stand upon its own particular facts. Great lapse of time, if reasonably excused and without damage to the defendant, has been ignored; while slight delay, accompanied by circumstances of negligence, apparent acquiescence, or change of defendant’s position, has been held sufficient.” Other cases in this court wherein the doctrine was involved and applied or rejected according to justice and right, under the facts and the circumstances of the case, are: Kropp v. Kropp, 97 Wis. 137, 72 N. W. 381; Cross v. Bowker, 102 Wis. 497, 78 N. W. 564; McCann v. Welch, 106 Wis. 142, 81 N. W. 996; Ludington v. Patton, 111 Wis. 208, 86 N. W. 571; Foote v. Harrison, 137 Wis. 588, 119 N. W. 291; Russell v. Fish, 149 Wis. 122, 135 N. W. 531. As respondent asserts, the fact that the statute of limitations has run against the debt evidenced by the notes is not a bar to an equitable action for enforcing the mortgage lien against the property; the plaintiff has the right to enforce it any time within twenty years. The action is equitable in its nature and, like all rights sought to be enforced' in our courts, it is subject to be defeated by the equitable defense of laches, as recognized in the .law. This question arose in McCann v. Welch, supra, and the court there, speaking through Justice — 505 — Dodge, said: “Courts of equity, however, are not dependent on statutes of limitation for their right to deny hearing to those who unduly have slumbered on their rights.” While express limitation statutes have somewhat modified the position of courts in equitable actions, nevertheless exercise of its judgment to deny relief in cases of unjustifiable delay to enforce a right is not taken away by such statutes. The reason sustaining the doctrine is that justice and right may require that a party be denied the use of the courts because he has negligently slept on his rights, thereby inducing a feeling of security in others that no adverse'claim exists, and that enforcement thereof under the circumstances leads to unconscionable and inequitable results between the parties to the transaction. Mere delay within the statutory period of limitation is not in itself considered sufficient to bar the enforcement of a right, but if gross neglect has operated to lead the other party into a position where enforcement of the asserted right would operate to prejudice the other’s beneficial interests, then equity charges the result to the negligent party and precludes him from asserting his right by refusing him the use of the courts to enforce it. The fact that plaintiff’s right arises out of a money demand and a mortgage which was given to secure it, and duly recorded, does not exempt him from the operation of such defense if under the facts and circumstances his conduct and long delay in asserting such right is without reasonable explanation and he apparently acquiesced in -the belief that no rights would be asserted under the mortgage, and such delay misled defendants to their prejudice, so that an enforcement of the mortgage would lead to unconscionable and inequitable results between the parties. The evidence in the case showing the relationship of the parties and their conduct in dealing with the matters in issue is not voluminous and clearly shows the facts surrounding the transaction and the relationship of the parties. ■ It appears that the defendant Bong, the mortgagor, defaulted in his pay — 506 — ment of $750 of the principal sum due on the notes evidencing his indebtedness to the plaintiff and that he at no time paid any interest due on the principal of the debt, which had been due over eighteen years, and that the interest due at the time of the trial, part of which had been due over nineteen years, amounted to'$926.73. As between the plaintiff, the mortgagee, and the defendant Bong, the mortgagor, the facts show nothing out of the usual relationship that exists between debtor and creditor aside from plaintiff’s delay in taking any steps to collect any interest whatsoever for this period of over nineteen years, nor had he taken any steps for eighteen years and over to collect the balance of $750 of the principal debt. Plaintiff’s explanation is that he is related to the defendant Bong and that he did not desire to press him for payment and believed Bong would pay some time. While this conduct is most extraordinary and does not readily harmonize with the idea that plaintiff regarded the claim against Bong as a subsisting one, yet there is nothing showing that this extraordinary delay in any way misled Bong to his prejudice. Bong knew that he owed the debt and that he was primarily liable therefor. It was his legal duty to take affirmative steps to pay the debt and he cannot, therefore, complain of plaintiff’s neglect to take any steps to enforce the mortgage security, nor can he, under the facts and circumstances, justifiably claim that such neglect of plaintiff misled him in the matter to his prejudice. The facts and the circumstances of the case showing the relationship of plaintiff and the defendant Mrs. Holland present a totally different situation. As above stated, the mortgage securing this debt embraces a one-ninth interest in lot 15, owned by Mrs. Holland since 1898. The recording of this mortgage operated to give Mrs. Holland constructive notice of its existence, though it appears she had no actual knowledge thereof until July, 1912. It must be assumed, then, that the plaintiff had the right to treat Mrs. Holland as — 507 — one baying notice of tbe existence of tbe mortgage. Tbe question then is, Do tbe facts show that plaintiff was guilty of laebes in enforcing bis rights under tbe mortgage against Mrs. Holland, as owner of lot 15, under tbe deed from Scbauer in 1898 ? Scbauer bad purchased Bong’s interest in this lot in 1897. There is nothing showing that these assigns of Bong agreed to pay tbe debt to tbe plaintiff, secured by tbe mortgage, or that they did not by reason thereof pay tbe full amount of tbe purchase price. This left Bong primarily liable for tbe debt to plaintiff and charged tbe plaintiff with tbe active duty of collecting it from Bong, who occupies tbe adjoining lot 16, one ninth of which is also embraced in this mortgage. Under these facts and circumstances Mrs. Holland owed no duty to plaintiff to pay tbe debt unless Bong, who was primarily liable, defaulted. These existing conditions and relations between the parties entitled her to rely upon tbe assumption, in view of tbe long delay, that plaintiff bad been paid by Bong and that in case of Bong’s default that plaintiff would have notified her within a reasonable time and have asserted bis claim under bis mortgage against her lot. This tbe plaintiff wholly neglected to do for upwards of eighteen years after tbe $750, unpaid balance of tbe debt, became due and after a continuous default in paying any interest for a period over nineteen years. Tbe plaintiff’s neglect to enforce payment of these demands against Bong and bis failure to assert any right to Mrs. Holland’s property, in effect amounted to an acquiescence by silence that no claim was existent against her property and furnished a substantial and good ground to induce a feeling of security on her part that this claim against her property bad been fully discharged by Bong and that it was no longer existent. Plaintiff’s long and unreasonable delay in failing to proceed against Mrs. Holland on Bong’s default seriously prejudiced her interest, in that it caused her to change her situation and relationship in tbe matter in very substantial ways to her injury, — 508 — if the mortgage be now enforced, through the cost of improvements, which she could have avoided had she been informed of Bong’s default, and by subjecting her property to the payment of an amount of interest on the debt in excess of the unpaid principal, which accumulated in the main after the notes given had become outlawed. We consider that the plaintiff was clearly guilty of laches as to Mrs. Holland and that an enforcement of his mortgage against her interest in lot 15 would lead to unconscionable and inequitable results as to her, and must therefore deny him the relief awarded by the circuit court granting a foreclosure and sale of Mrs. Holland’s interest in lot 15. By the Court. — The judgment appealed from is reversed as to the defendant Mrs. Holland, and the cause remanded with directions to.award judgment dismissing plaintiff’s complaint as to Mrs. Holland; and the judgment is affirmed as to the defendant Bong. Winslow, C. J., and Vinje, J., dissent. A motion for.a rehearing was denied, with $25 costs, on Eebruary 9, 1915.