City Lumber Co. v. Hollands

1. Usury — Equity—Foreclosure of Land Contract — Vendor and Purchaser — Contracts. Where complainant purchased property on which it held a mechanic’s lien, at foreclosure sale, and obtained a deed from the owner of the fee, in settlement of his right to redeem, also giving to the contractor and owner a lease in which an option to purchase and a bonus of $1,000 was included as a part of the purchase price to be paid by the vendee over and above the amount which would have been required to redeem at that time, complainant was entitled to foreclose the contract for the agreed consideration, and the amount claimed to be a bonus could not be treated as usurious. 2. Same — Deeds—Conveyances—Mortgage. Defendant’s deed to complainant conveyed an absolute title and he had merely an option of purchase and a lease; the transaction did not amount to a mortgage, legally or equitably. 3. Vendor and Purchaser — Equity—Foreclosure of Contract— Conditions — Decree. In a decree of foreclosure of a land contract in the provisions of which a default had occurred, the trial court properly included in the provision for redemption a con^ dition that the defendant should pay a prior mortgage, outstanding against the property, protecting the defendant’s rights by requiring complainant to deliver to defendant a discharge of the lien. 4. Same — Redemption—Insurance. Nor did the court err in allowing to the complainant only the amount of insurance necessary to protect its debt, although it had obtained a larger amount of insurance, on the real property and although the contract provided that the buyer should keep the buildings insured in manner and amount approved by the vendor. •5. Same — Redemption. A decree of the lower court foreclosing a contract of lease and option to purchase as a mortgage, treating the transaction as having been executed to secure an existing obligation, may be affirmed on appeal, except as to the provision for redemption which need not be for so long a time as in case of mortgage foreclosure.

Appeal from Wayne; Mandell, J. Bill by the City Lumber Company against Harry F. Hollands and others to foreclose a land contract. From a decree for complainant both parties appeal. The bill of complaint in this cause is filed for the purpose of obtaining foreclosure of a land contract dated January 19, 1912, covering a lot located at the northeast corner of Lincoln and Warren avenues, in the city of Detroit. It appears that in 1902 defendant Hollands had acquired title to the lot in question. Thereafter he started to erect buildings thereon, but, through lack of capital, seems to have met with many vicissitudes. In 1909 this complainant filed a bill to foreclose a mechanic’s lien, and in the same year Hollands filed a bill against one Peters, who had an interest in the premises. These suits were consolidated, and a decree fixing the rights of the parties was entered May 9, 1910. On August 2, 1910, a sale was had under said decree, and the complainant herein became the purchaser. On August 10, 1910, complainant received a deed from Mr. Peters, and executed a mortgage back to him in the sum of $4,798.38. Complainant then demanded possession of the premises from Hollands, which he refused, claiming the right to redeem from the sale under the decree. This dispute was adjusted as follows: Hollands executed and delivered to complainant a warranty deed of the premises, and complainant in turn executed a contract to Hollands agreeing to reconvey the premises to Hollands upon payment of certain sums therein specified, together with certain other sums which complainaht agreed to advance for labor and materials. Hollands did not agree to take the property and pay the various sums named. The contract, in effect, was an option and lease. The foregoing deed and contract were dated September 1, 1910. Complainant carried out its part of this contract, but defendant failed to comply with its conditions. Therefore in April, 1911, complainant sought by summary proceedings to recover possession of the premises. A judgment having been rendered against Hollands by the commissioner, he appealed to the circuit court. Oh October 25, 1911, this appeal was decided adversely to Hollands, whereupon he took out a writ of error to this court. On November 29, 1911, complainant filed a bill against Hollands for the purpose of enjoining him from intruding upon the westerly 69 feet of the lot in question. Hollands answered this bill, claiming that the contract was a mortgage, and that he was entitled to, and was in, possession; Matters were in this condition when, on January 19, 1912, the parties adjusted their differences and entered into the following agreement: “This agreement made this 19th day of January, 1912, by and between City Lumber Company, a Michigan corporation, party of the first part, and Harry F. Hollands, party of the second part, witnesseth: “Whereas, considerable litigation has been had and heretofore pending between the parties hereto' and certain contracts are now in existence between the parties hereto, now therefore the parties hereto mutually agree that in consideration of a certain land contract made and executed between the parties hereto and bearing date this day the parties hereto for themselves, their successors, heirs, and assigns hereby agree that all contracts, written and oral, and all understandings heretofore had respecting rights in any lands therein described or claimed by either party hereto are hereby canceled and destroyed and held void, and that all suits have been discontinued, and every understanding, written and oral, is merged into and settled by the making and executing of the land contract dated January 19th, 1912. (Provided, however, that the warranty deed heretofore executed by said Hollands to said City Lumber Company shall remain in full force and effect.) “In witness whereof the parties hereto have hereunto set their hands and seals this 19th day of January, 1912. “City Lumber Co. [Seal.] “By William N. McLennan, “Secty. & Treas. “[Corporate Seal of City Lumber Company.] “Harry F. Hollands. [Seal.]" The land contract referred to in the foregoing agreement was duly executed upon the same day. It provided for the conveyance of the land in question to Hollands upon payment of $14,158 (one-half within six months from date, and the balance within one year), together with interest at the rate of 6 per cent., taxes and insurance. Hollands agreed to complete the buildings upon said lot within six months and to pay the stipulated sums. Thereafter complainant furnished to Hollands certain materials, and loaned him certain moneys, to secure which on May 17,1912, Hollands gave to complainant his promissory note for $1,586.68, and assigned to it as further security his interest under the land contract. Hollands made default, and this bill was filed October 7, 1912. The court below found that the transaction amounted to a mortgage, ascertained the amount due, and decreed a foreclosure, providing a period of six months after sale during which defendant might redeem. From this decree defendant appealed. Complainant then filed a cross-appeal.