Case ID: ohio-st_27/html/0104-01.html
Source: Caselaw Access Project
Author: {"author": "Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

David Anderson v. German Lanterman and Francis Henry.
    1. A mortgagee in possession of the mortgaged premises, after condition broken, with the assent of the mortgagor, is presumed, until the contrary is shown, 'to occupy in his character of mortgagee; and as such is liable to account for rents and profits.
    2. Where a tenant in possession for a fixed term purchases outstanding past due mortgages on the premises, and after the expiration of his term continues in possession and in receipt of the rents and profits, such continued occupancy, until the contrary is shown, is presumed to be under the mortgagee, and not of a tenant holding over.
    3. An agreement between the mortgagor and the mortgagee, when the mortgage debt bears interest, that the latter shall use and occupy the mortgaged promises without being accountable for rents and profits, unless supported by a consideration, other than the forbearance to foreclose the mortgage, is not such a valid contract as will bar the right to an account for rents and profits.
    4. A judgment creditor of the mortgagor, in a proper caso for equitable relief, has the same right to such an account as the mortgagor.
    Error to the District Court of Mahoning county.
    This was an action in the nature of a creditor’s bill, brought by Lanterman, to subject lands of Henry to the payment of two judgments in his favor, one at January term, 1865, and one at September term, 1865, on which executions had been issued and levied on the land in question.
    • The petition alleges that Anderson is the owner by purchase of two described mortgages, one due in 1858 and one due in 1861, and has taken possession of the lauds and occupied the same “ since the-day of-, a. d. 1864;” that Henry owns the fee-simple of the land, and that the same can not be sold by reason of these mortgages.
    The prayer is that Anderson account for rents and profits; that the land be sold free of incumbrance, and the proceeds, with rents and profits, be applied to the payment of costs and plaintiff’s judgments, and the residue paid to Henry.
    Anderson, by answer and cross-petition, sets up three mortgages by Henry to different parties, which were at the October term, 1861, foreclosed, and order of sale made of the premises; also sundry judgments against Henry prior to the plaintiff’s, upon which executions had been returned unsatisfied. The mortgages and judgments amounted to over §3,900, which Henry had no means to pay, except this land. That on the 11th of July, 1862, he accepted an offer from Henry that if he would pay off these mortgages and buy up and release the judgments, he, Henry, would convey him the land, and thereupon he purchased said mortgages and judgments, and took possession of the premises with the assent of Henry, made improvements, paid taxes, etc., which is of more value than the rents and profits.
    He therefore prays for specific relief.
    Henry denies this contract to sell, and makes defenses to Anderson’s judgments ; also denies that he is indebted on one of these mortgages.
    Lanterman also denies this contract of sale, and puts in issue the 'judgments of Anderson. He also denies that Anderson took possession with the assent of Henry.
    The case was tried by the court, and the special findings are in substance:
    That there was no contract of sale to Anderson, nor was possession taken under such contract, but that up to June 1,1863, he was in possession as tenant of Henry.
    That Anderson’s three mortgages are the first liens, and Lanterman’s second.
    As to the character of Anderson’s possession, are the following findings:
    “ The court further finds that said Anderson was in possession of said premises from June 1,1862, to June 1,1863, under an agreement by which land was exchanged between them, by which Anderson occupied the land belonging to Henry, and Henry occupied an equal amount of land belonging to Anderson. That on said 1st day of June, 1862, it was agreed between the parties, Anderson and Henry, that, for the future occupation of the land,.he should not be liable to pay rents or account for use and occupation to the said Francis Henry, and that thereafter said Anderson occupied said premises until the trial at this term, with no demand made upon him for rents. The court further finds that the contract for the exchange or occupation and rents of lands as above stated commenced on the 1st day of June, 1862, and terminated on the 31st day of May, 1863, and that from the facts herein found said Anderson is liable to account for the rents and profits of said land, to apply on the amounts due defendant upon said mortgages. That from the said 1st day of June, 1863, said. Anderson has been in possession of said premises, and no. claim for rent has ever been made upon said Anderson by the said Francis Henry or by the said German Lanterman.”
    
      F. F. Hutchins, for plaintiff in error.
    
      D. M. Wilson, for defendant in error.
   Johnson, J.

Lid the court err in finding, as a matter of law, from the facts of this case, that Anderson was liable to account for rents and profits ?

To determine this we must look to the issues and admissions of the pleadings and the findings of-the court. If these facts warrant the judgment the court did not err.

Preliminary to the main question, and in answer-'to suggestions by counsel as to the form of the prayer for relief, and as to remark of the court to the effect that its judgment was based solely on the special findings, we may remark that this is a petition for equitable relief, and if the facts proved warrant such-relief the proceeding will be liberally construed to promote substantial justice.

Anderson does not in his defense deny that he is liable to account for rents and profits, but sets up a contract of purchase of the lands, and seeks specific performance thereof. The court finds against this contract, to which there is no exception.

By the terms of that contract, he was to buy up and release the judgments (not plaintiff’s), and pay off the mortgages. This he did not do, but purchased them in, and thereupon took possession of the land. The court finds that he still owned these mortgages, and that there was no contract of sale. Anderson seeks in his answer to avoid an account by offsetting taxes and improvements, which he says are more than the rents and profits. The fair inference from this is, that if the rents and profits exceeded the taxes and improvements he would be liable.

He does not even aver that he entered under his contract of purchase. He alleges that after purchasing these liens on the land he took possession with the assent and agreement of Henry. As to the terms of this assent and agreement he is silent. In what character he entered, whether as purchaser, mortgagee, or otherwise, he does not say,

That he was a mortgagee, and was in possession, is all we know from the pleadings, except the fact as alleged by Anderson that the taxes and improvements are more than the rents and profits. • Erom this state of the pleadings, considered alone, the.presumption of law would be that his possession was referable to his character of mortgagee.

Looking also to the findings of the court, we learn that 'there was no contract of sale; hence his possession was not that of a purchaser at any time; also that he was in as tenant of Henry from June 1, 1862, to June 1, 1868 ; that on June 1, 1862, Henry and Anderson agreed to an exchange of lands of equal amount for one year, and also agreed that thereafter Anderson should. not be liable for rents. This agreement was made June 1, 1862.

What was the consideration for this exemption from paying rent after June 1, 1863, does not appear, if there was any. Erom Anderson’s answer we learn that after the 11th of July, 1862, during his tenancy, he purchased these mortgages; so that after June 1, 1863*»he held over while owner of these mortgages under an agreement not to be liable for rents.

At the date of Anderson’s entry, June 1, 1862, he was not the owner individually of any claims on the land, but became such while a tenant, shortly before his term expired.

This raises the single question, what is the presumption of law as to the character of this occupancy after June 1, 1863 ? .

If there was no agreement between mortgagor and mortgagee to the contrary, the well-settled presumption is, in the absence of facts to destroy such presumption, that the mortgagee was in possession, under his mortgage, and as such liable to an account.

A mortgagee in possession is said to be the steward or bailiff of the mortgagor, and as such accountable to him or his assignee or mortgagee for the profits.

The rents and profits are de jure incident to the ownership of the equity of redemption.

In Cross v. Hepner, 7 Ind. 359, it was1 said a mortgagee entering into possession and taking the profits must be deemed to take them in his character as mortgagee. See also 1 Hill. Mort., chap. 16; Hite v. Irvin’s Adm’r, 287.

In the absence of this agreement, made at the time he took possession, that he was not to pay rent, Anderson would be regarded as a mortgagee in possession, and as such would be liable to account. The mortgagor, or any' subsequent lienholder, could compel him to account.

The presumption being that his possession was, in the absence of proof to the contrary, under his mortgage, creates a liability to such an account, without special averments that he was so liable. Civil Code, see. 129.

What is the effect of this agreement, that he should not be chargeable with rents and profits ?

Moore v. Degraw, 1 Halstead Ch. 346, is in point. Degraw had made three mortgages to his son, and a fourth to one Vannuis, and afterward rented the land to Moore, whose term would expire«May 1, 1845.

Before the expiration of this tenancy Moore purchased the three mortgages of his son, under an agreement with Degraw that if he would do so he was to pay no rent for the property, and should occupy until a sale under the mortgages.

On a bill afterward filed by Moore to foreclose these mortgages owned by him, Vannuis, as the holder of the junior mortgage, asked that Moore be compelled to. account.

This was resisted by Moore, and this contract was set up to bar an account.

It will be seen that this case is much like the one at bar. In each the tenant in possession purchased in outstanding mortgages during his tenancy, under an agreement with the mortgagor not to pay rent. Moore’s tenancy expired May 1,1845, and the court treats his possession after that date as under the mortgages.

As to this agreement not to pay rent, the court says : “ There is something singular in the idea of a mortgagor’s agreeing that if a person will buy the mortgage from the mortgagee, he may take possession of - the mortgaged premises, and hold them free of rent until they are sold ■under the mortgage, and that the interest on the mortgage should still continue to run against him. I can see no inducement or consideration for such an agreement. . . . The case must then be decided as if no such agreement existed.”

We think this decision is founded on sound principles of equity. If a mortgagee in possession seeks to avoid the well-settled rule in equity which holds him accountable for rents and profits while the interest on the mortgage debt is accumulating, he must show such an agreement as will exonerate him from that liability.

When it is once shown that he is a mortgagee, and is in possession of the mortgage premises, receiving the rents and profits, there arises an implied obligation to account.

He is presumed to be in as mortgagee, and the bui’den rests upon him to show a valid agreement that relieves him from the duty to account.

That agreement to be valid must have a consideration to support it.

If the consideration, express or implied, be a forbearance on the mortgage debt, then it becomes an agreement to pay the value of the rents, in addition to the lawful interest on the debt, for the use of the money — a contract grossly inequitable in most cases, as well as usurious in its character.

Such a contract would not be upheld on a bill by the mortgagor to redeem, and for equally strong reasons a subsequent lienholder is entitled to the same relief as the mortgagor.

The plaintiff' below was seeking to reach Henry’s interest in these lands to satisfy his judgment.

He had the right to be subrogated to Henry’s rights as owner of the equity of redemption, incident to which was the right to have an account for rents and profits. To determine the value of this equity of redemption the amount due on the mortgages must be ascertained, and this can not be done without- such an account as the court below ordered. Taking all the facts disclosed, we are clearly of the opinion that a case was fully made out which warranted the judgment of the court below.

It would have been inequitable and unjust to allow interest on the mortgage debt without charging him with rents and profits.

The judgment is affirmed.

Scott, Chief Judge, .Day. Whitman, and Wright, JJ., concurred.