Case ID: ky_77/html/0788-01.html
Source: Caselaw Access Project
Author: {"author": "JUDGE HINES", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Case 55 — PETITION EQUITY
    May 22.
    Woolley v. Holt.
    APPEAL FROM LOUISVILLE CHANCERY COURT.
    1. A mortgage is A mere security eor debt, and substantially both at law and in equity the mortgagor is the real owner of the property mortgaged.
    2. Rents of mortgaged property can be claimed by the mortgagee only by virtue of his contract with the mortgagor. They are not an incident, as between mortgagor and mortgagee, to a mortgage pledging the property by metes and bounds, and making no reference to the rents.
    3. When there are no intervening equities of other parties the court may, on it appearing that the mortgaged property is in danger of being lost, removed, or materially injured, or that the condition of the mortgage has not been performed, and that the property is probably insufficient to discharge the mortgage-debt, appoint a receiver, and subject the subsequently-accruing rents or profits to the satisfaction of the mortgagee’s claims.
    4. Where another than the mortgagee has acquired a legal or equitable interest in or title to the rents or profits prior to the appointment of a receiver, as provided in section 299 of the Civil Code, the mortgagee’s claim to such rents or profits will be postponed to that of the intervening claimant.
    
      5. In the absence op an express pledge op the rents to the mortgagee, his right to them is at best but an equity, only to be enforced in the manner and under the circumstances indicated by section 299 of the Code, and not then if another has acquired, for a consideration, a claim to the rents..
    P. B. MUIR POR APPELLANT.
    1. An assignment of a reversion does not, by common law, carry rent as an incident; neither does a partial assignment pass the rent under the statute. A mortgage is not an assignment; neither does it convey any title or estate in the land mortgaged. A receiver of a mortgaged reversion has no claim to the lease, which, before his appointment, had been sold to a meritorious purchaser.
    2. A mortgagee, who has no specific pledge of the rents and profits of the mortgaged premises, can not claim them as a legal incident to or a legal right growing out of his mortgage. (Douglass v. Cline, 12 Bush, 608; Hogsett v. Ellis,T7 Mich. 351; Ladue v. The Detroit & Milwaukee R. R. Co., 13 Mich. 394, and cases therein cited, to which the special attention of this court is called.
    3. The mortgagee has no title or estate in the land, but only a lien for the security of his debt. (Jackson v. Lodge, 36 Cal. 28; McMillan v. Richards, 9 Cal. 365; Goodman v. Ewer, 16 Cal. 461; Boggs v. Hargrave, 16 Cal. 559; Fogarty v. Sawyer, 17 Cal. 589; Dutton v. Warshauer, 21 Cal. 609; Davis v. Anderson, 1 Ga. 176; Ragland v. Justices, 10 Ga. 65; Elfe v. Cole, 26 Ga. 197; United States v. Athens Armory, 35 Ga. 344; Seals v. Cashier, 2 Ga., December, 1876; Hull v. Savill, 3 Iowa, 37; Chick v. Willetts, 2 Kan. 384; Caruthers v. Humphrey, 12 Mich. 270; Bryan v. Butts, 27 Barb. (N. Y.) 503; Thayer v. Cramer, 1 McCord (S. C.) Ch. 395; cases cited in 9 U. S. Digest, sec. 485, p. 159; City of Norwich v. Hubbard, 22 Conn. 594.)
    The fee remains in the mortgagor even after condition broken. (Thayer v. Cramer, 1 MeC. Ch. 395; see also 2 Eq. Digest, 294, secs. 20 and 24; Reynolds v. The Justices, 10 Ga. 6; Weeks v. Eaton, 15 N. H. 145; Hobson v. Rolle, 20 N. H. 41; Fenbish v. Goodwin, 25 N. H. 528; Southern v. Maudurn, 5 N. H. 420.)
    4. “ The possession taken by the receiver is only that of the court, whose officer he is, and adds nothing to the previously-existing title of the mortgagee. He holds pending the litigation, for the benefit of whomsoever in the end it shall be found to concern, and in the mean time the court proceeds to determine the rights of the parties upon the same principles it would if no change of possession had taken place.” (Fosdiek v. Schall, MS. opinion U. S. Supreme Court, March 10, 1879.)
    As Holt was not entitled to the rents as incident to his mortgage, the chancellor should have awarded them to Woolley, who had purchased and paid for them.
    
      BARR, GOODLOE & HUMPHREY and C. H. GIBSON for appellee.
    1. The fee-simple being mortgaged, that included the mortgagor’s right to the rents under the leasehold.
    If the mortgage simply conveyed Johnston’s reversion, the rents would go under the statute, unless there were words of reservation. (Secs. 7, 25, ch. 63, Gen. Stat.)
    2. A mortgage made after a lease by the mortgagor carries with it the rents on such a lease after foreclosure and sale. (1 Smith’s Le Ca., 4 Am. ed., pp. 310 and 602; Oastleman v. Belt, 2 B. Mon. 157, Syracuse City Bank v. Tallmer, 31 Barb. 205; 1 Hilliard on Mortgages; 209; Williamson’s adm’x v. Richardson, &e., 6 Mon. 605.)
    3. Johnston, the mortgagor, having by the mortgage conveyed the fee, is now estopped from claiming that he only mortgaged such reversionary interest in the property as he might have after the lease expired, and Woolley being his privy, and claiming under him, with notice of the mortgage, occupies exactly the same position that Johnston does. (Vallego Land Association v. Viera, 48 Cal. 572.)
   JUDGE HINES

delivered the opinion of the court.

William Johnston, in March, 1873, leased to Borden a parcel of land lying in the city of Louisville for the period of ten years. In July, 1874, he mortgaged the same land to appellee to secure the payment of a debt for $5,000, and in February, 1875, Johnston sold and transferred the lease to appellant. Subsequent to the transfer of the lease appellee brought suit to subject the land to the payment of the mortgage-debt, making appellant a defendant, and calling upon him to assert his claim, asking for the appointment of a receiver, and that the rents also be appropriated to the payment of his debt. The mortgage executed by Johnston to appellee was upon the land by metes and bounds, and made no reference to the lease to Borden. A demurrer was sustained to appellant’s answer, setting up the facts above mentioned, receiver appointed, and a decree directing, first, the sale of the land mortgaged by Johnston to appellee, and second, if the proceeds did not satisfy appellee’s claim, that the interest of appellant, as assignee of Johnston, in the lease to Borden, be sold. From that portion of the decree directing the sale of appellant’s interest in the lease this appeal is taken.'

The practical question to be considered is, whether appellant or appellee is entitled to the benefit of the lease to Borden.

. Since the adoption of our Civil Code, and under the date decisions of this court, the following propositions may be considered as established law:

First, that a mortgage is a mere security for debt, and that, substantially, both at law and in equity, the mortgagor is the real owner of the property mortgaged. Second, that the rents can be claimed by the mortgagee only by virtue of his contract with the mortgagor, and that they are not an incident, as between mortgagor and mortgagee, to a mortgage pledging the property by metes and bounds and making no reference to the rents, except as hereinafter indicated. Third, when there are no intervening equities of other parties the court may, on it appearing that the mortgaged property is in danger of being lost, removed, or materially injured, or that the condition of the mortgage has not been performed, and that the property is probably insufficient to discharge the mortgage-debt, appoint a receiver and subject the subsequently-accruing rents or profits to the satisfaction of the mortgagee’s claim. Fourth, where another than the mortgagee has acquired a.legal or equitable interest in or title to the rents or profits, prior to the appointment of a receiver, as provided in section 299 of the Civil Code, the mortgagee’s claim to such rents or profits will be postponed to that of the intervening claimant.

The mortgagee’s claim to the rents is inchoate, and its perfection dependent upon the happening of the contingency provided for in section 299 of the Civil Code. In the ease under consideration no claim to the rents was asserted by appellee, no application was made for a receiver and none appointed until after Johnston, for a valuable; consideration, had sold and transferred his interest in the lease to appellant, nor until some time after Borden had attorned to appellant.

In the absence of an express pledge of the rents to appellee his right to them is at best but an equity, only to be enforced in the manner and under the circumstances indicated by the section of the Code referred to, and not then if another has acquired, for a consideration, a claim to the rents. It was in the power of appellee to take a lien upon the .term, as well as upon the reversion, to secure his debt, and his failure to do so by the express terms of his contract or to take the steps provided for perfecting his equity by the appointment of a receiver until after Johnston had sold to appellee, leaves him without remedy, so far as subjecting the rents are concerned.

We are of the opinion that Douglass v. Cline, 12 Bush, 608, is conclusive of the principal point suggested in this case, and therefore deem it unnecessary to cite further authority.

Judgment reversed, and cause remanded with directions for further proceedings consistent with this opinion.