Case ID: walker_2/html/0067-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

TALBOT’S APPEAL.
    "Where property is Bold under proceedings on a mortgage, for less than the amount due thereon, a terre-tenant does not be-.ome personally liable, for the ¡rents and profits of the mortgaged premises, from the time proceedings were instituted on the mortgage.
    Appeal from the Court ,of Common Pleas of Chester County,' in equity; No. 139, July Term 1883.
    Charles H. Holden was an owner of a house and lot in "Washington, and on Oct. 13,1870, executed a note for $5,000 to John B. Wheeler. Wheeler indorsed this note to Thomas H. Talbot, the appellant in this case; Holden also executed a deed of trust to Daniel E. L. Eaton, to secure the said note. This deed was Recorded in the recorder’s office in Washington, on Oct. 15,1870, and about Sept. 30,1871, John Chester, the appellee, purchased the lot from Holden, who agreed to give him a title clear of incumbrances. Chester had the title examined, but, by mistake, the deed of trust to Eaton, was not discovered. Holden paid the interest for some two years after the sale to Chester, but on 13 ■Oct., 1874, the note became due and was not paid. Proceedings were then had, and the property was finally sold by the trustee, •on the 5th May, 1880, to Thomas H. Talbot for $5,000. . Hnder ■this sale Talbot proceeded, and recovered possession from Chester. After this, Talbot brought a bill in equity, in Chester Co., Penna., ¡against Chester, setting forth the aforesaid facts, with the further fact, that there was still an amount due on the note, to him, and that Chester had remained in- possession, after the sale by _ the trustee, and asked that Chester should be required to account for the rents and profits of the Washington property, from the time the note became due until he recovered possession. The court below held that he could not recover, and dismissed the bill, on May 7th, 1883, in the following opinion.
    Per Curiam. •
    Erom the findings of the master, with which we are • entirely •satisfied, but one question is presented for consideration, and that is, whether the plaintiff is entitled to an account against the •defendant for the use of the real estate during his occupancy thereof, after the maturity of the debt. The master finds that, •there was no resistance on the part of the defendant to the appointment of a new -trustee; and that the delay in the sale was not occasioned by any act of his, and .therefore if he is liable to-the plaintiff, such liability is not occasioned by any bad faith on his part, but -by reason of his use and occupancy of the property during the time mentioned.
    The premises had been conveyed by Charles II. Holden, the prior owner, to one Eaton, in trust, to secure an indebtedness to the plaintiff, Thomas H. Talbot. ' The trust-deed recited the loan of money by the plaintiff’ to Holden, and then in consideration of the debt, and to secure its payment, Holden conveyed, the property to Eaton, in trust, to permit Holden, his heirs or assigns, to occupy the lands, and take the rents and- profits thereof for his and their benefit, until default should be made in the payment of the debt and. interest; and in case of such default, then the trustee to sell and convey the land, and, after payment, of the debt, interest, and costs, to pay the remainder of the purchase-money, if any, to said Holden, his executors, administrators, and assigns ; or, if there shall be no default, then, upon the full payment of the debt, to reconvey the premises to said Holden, his heirs, or assigns.
    The defendant became the owner of the premises by purchase from Charles II. Holden, subsequent t.o the conveyance in trust as aforesaid, and entered -into possession thereof, made valuable improvements, and continued to reside thereon, until required to give up possession, by reason of the sale of the premises under the deed of trust, for the payment of the debt secured thereby.. He had paid to Holden a full price for the property* which was conveyed to him, as he supposed, clear of incumbrances, not'being aware, until some time thereafter, of the existence of the trust deed, which was not made known to him by Holden, and was overlooked, by his, Chester’s counsel, in the examination of the title.
    The .debt .owing, to the plaintiff by Holden was not fully paid by-the sale of the property, and he now seeks, to make the defendant (Chester) make good his loss.
    -As no privity of contract'' existed between the pláintiff and defendant,'-their-respective rights and liabilities must be determined by the interpretation of and effect given to the deed of trust. The property was situate in the City of Washington, where Holden resided, and where the deed of trust was made; and, in the construction of the deed, regard must be had to the laws of Maryland, in force in the District of Columbia.
    That instruments of the character of that in question, are equitable mortgages, is clear from the authorities. They are not- in form technical mortgages, but partake of their character, and the principles governing the construction of mortgages and remedies thereon, have to some extent application thereto.
    In equity, a conveyance, whatever form it may assume, will be .treated as a mortgage, whenever it appears to have been taken as a security for an existing debt or a contemporaneous loan; and no words or terms used in it will be allowed to change its character and cut off the right of redemption; and the inclination of the -courts in doubtful cases is so to treat it, and to allow the grantor to redeem. (Artz v. Grove 21 Md. 456; Hinkley v. Wheelwright, 29 Ib. 341; Wilson v. Russell, 13 Ib. 495.)
    In Pennsylvania, such instruments are treated as mortgages, and may be foreclosed by scire facias under the statute. (Colwell v. Woods, 3 Watts, 188; Kerr v. Gilmore, 6 Watts, 405 ; Brown v. Niekle, 6 Barr, 390; Corpman v. Baccastow, 3 Norris, 363.)
    The plaintiff, conceding the principles here stated, claims that, nnder the terms of the deed of trust the grantee, on condition broken, was entitled to possession, and to take the rents and profits ; and that the defendant having retained such possession after condition broken must account to' him for the use of the property during such retention.
    Was the plaintiff* or the trustee under the law applicative to. •to this trust entitled to possession of the premises in question ? In Bank of Commerce v. Lana-han, 45 Md. 396, a somewhat ■similar deed was held to be a deed of trust, and not a technical mortgage, and that upon default of payment, the grantee or those for whose use the trust was created could not-take possession of the estate, and apply the rents and profits to the discharge of their claims ; nor had they any right of foreclosure, such as a mortgagee would have under a technical mortgage, but that their only remedy was the enforcement of the trust by a sale of the property. In Charles v. Clagett, 3 Md. 82, a deed of real estate to a trustee, in trust that if the grantor paid certain indebtedness within-one year, the trustee should reconvey, if not that the trustee should sell and apply the proceeds to the payment of the debt, was held not to be a mortgage finder the statute requiring an affidavit as to the consideration of. the mortgage being' bona, fide.
    
    It would seem if the instrument is to be treated simply as a deed of trust, that the plaintiff or the trustee was not entitled to possession, but that the remedy for non-payment of the debt was, as expressed in the deed, to sell the property, and to pay the debt and interest of the purchase-money.
    But if the trustee was entitled to possession as under a mortgage, the right of possession would not carry with it a right to-the rents, issues, and-profits until actual possession was obtained. A mortgagor has a right to lease, sell, and in every respect to-deal with the mortgaged premises as owner, so long as he is permitted to remain in possession, and the mortgagee must recover the possession by regular entry by suit before he can treat the mortgagor or any person under him as a trespasser. The equity doctrine is, that the mortgage is a mere security for the debt, and not a chattel interest, and, until a decree of foreclosure, the mortgagor continues the real owner of .the fee. The mortgagee may, at any time, enter and take possession of the land, by ejectment or writ of entry, but he cannot make the mortgagor account for the past or bygone rents ; for he possessed in his own right, and not in the character of a receiver. (4 Kent’s Com'.,. Title Mortgage.) In Hoopes v. Wilson, 12 Tenn. 695, it is held, that a mortgagor or his assigns has a legal right to use and] occupy the land until the mortgagee asserts his right of entry* for the condition broken by action, or by actually taking possession. And in Cooper v. Davis, 15 Conn. 556, it is held that á, mortgagor before his right of redemption is foreclosed, continues; the owner of the mortgaged premises, not accountable for the-rents and profits, the mortgagee having merély a lien upon the-property, for the security of his debt, by virtue of which he may* obtain possession, and appropriate the pledge in payment of his debt; and in Massachusetts it is held that a mortgagor, so long as he remains in possession, or until actual entry by the mortgagee, may receive the rents and profits to his own use, and is not liable to account therefore to the mortgagee, and that a mortgagee cannot recover of the mortgagor or his assigns the value of the rents and profits accruing after the commencement of the action to obtain possession. (Fitchburg Manufacturing Co. v. Melvin, 15 Mass. 268; Gibson v. Farley, Ib. 280; Boston Bank v. Reed, 8 Pick. 459 ; Wilder v. Houghton, 1 Pick. 87; Kinsley v. Ames, 2 Met. 29.)
    The mortgagor cannot be considered a trespasser until after entry by the mortgagee : so that trespass for mesne profits cannot be maintained, that action being founded upon a disseizin done to him who recovers in a writ of entry. Wilder v. Houghton, supra, 4* Kent’s Com., Title Mortgage, First Smith’s Leading Cases, 667. Marg. Notes to Keech v. Hall, ibid. 667.; ibid. 697. Marg. Notes to Moss v. Gallmore; 2 Coot on Mortgages, 605. (70 Law Library) Clark v. Smith, 1 Casey, 137.
    And the same principle is recognized in Pennsylvania. There the mortgagee has no estate, property or interest in the land' until he takes possession ; nor has it ever been understood that a ' mortgagee can compel the mortgagor to pay him. the rent until ' entry. The mortgagee is the owner of the land, with the same power over it as any other tenant in fee with incumbrances or liens on the property. Myers v. White, 1 Rawle, 355. Kickert v. Maderia, ibid. 325. Michener v. Cavender, 2 Wr. 338. Witmer’s Appeal, 9 Wr. 463.
    In Phœnix Mutal Life Insurance Company v. Grant, McArthur, 220, — a case arising in the Supreme Court of the District of Columbia, the jurisdiction under which the ease under consideration arises, — it was held, that, where a mortgage or deed trust does not, in express terms, create a lien upon the rents and profits of the property, that a receiver thereof ought not to be appointed for the benefit of those interested upon an averment in the bill that the mortgaged estate, or that held in trust, Was an inadequate security, and that the grantor is insolvent; and that such averments afford no ground whatever for seizing upon the rents and profits before foreclosure or sale.
    We think it clear that the plaintiff is not entitled to have from the defendant an account of the rents or profits of the premises. The defendant was a bona-fide purchaser; and, in entering upon and occupying the premises until sale and conveyance by the trustees, he was not a trespasser or wrong doer, and had a right to possession during the period the premises wore thus occupied him. .
    The bill is dismissed with costs.
    Talbot tiren appealed to the Supreme Court, complaining of the action of the court in dismissing the bill.
    
      Thomas JB. Talbot and H. T. Cornwell, JEsqs. for appellant
    argued, that Chester would be liable for the mesne profits ; in an action of ejectment; Chirac vs Reinecker, 4 Wh. 280; The rents taken by the defendant, belonging in equity to the plaintiff as an indisputable security holder; Searle vs. Sawyer, 127 Mass. 491; Charles vs. Clagett, 3 Md. 93; Neilson vs. Lagow, 12 Howard, 98; Green vs. Biddle, 8 Wheaton, 76; Goodwin vs. Richardson, 11 Mass. 469; Fitchburg Cotton Co. vs. Melvin, 15 Mass. 268; Burden vs. Thayer, 3 Metc. 77; Bank of Utica vs. Finch, 3 Barb. Ch. 293; Cobel vs. Cobel, 8 Penna. 342; Clark vs. Abbot, 1 Md. Ch. 474. The trustee had a right to the immediate possession of the granted premises; Newhall vs. Wright, 3 Mass. 138; Wilder vs. Houghton, 1 Pick. 85; Kinsley vs. Ames, 2 Metc. 29; Page vs. Robinson, 10 Cush, 99; Guthrie vs. Kahle, 46 Penna. 331; Youngman vs. Railroad Co. 65 Penna. 285; Brown vs. Stewart, 1 Md. Ch. Dec. 87; Georgia’s Coal Co. vs. Detmold, 1 Md. 225. The power to sell, until it. is executed, makes no change in the effect of the instrument; it is a mere cumulative remedy ; Eaton vs. Whiting, 3 Pick. 484; Cormerais vs. Genella, 22 Cal. 116. Chester having record notice of the deed of trust, becomes bound, just as Holden was; Sadler’s Appeal, 87 Penna. 154. The case of Phœnix Mutual Insurance Co. vs. Grant, 3 McArthur; 223, cited by the court below, was the opinion of the minority and not the majority of the court, and is now properly reported in 106 U. S., 429. The bill in equity is the proper remedy for the appellant in this case; Dormer vs. Fortescue, 3 Atk. 129; Barnewall vs. Barnewall, 3 Ridge P. C., 24; Coventry vs. Hall, 2 Cases in Ch. 134; Wright vs. Chard, 4 Drewry, 673; Garth vs. Cotton, 1 Dickens, 183. The owner of a legal mortgage is entitled to the rents and profits, unless he has allowed the mortgagor to receive them ; and if he has consented, he can withdraw his consent; Gibson vs. Farley, 16, Mass. 280; Mayo vs. Fletcher, 14 Pick. 525; Russel vs. Allen, 2 Allen 42; Mirick vs. Hopkins, 118 Mass. 585. It is enough in Md. to give notice to the tenant; Clark vs. Abbot, 1 Md. Ch. 474. A bill by an equitable incumbrancer is equitable possession; Parker vs. Colcroft, 6 Maddock, 15 ; Larrabee vs. Larabee, 36 Maine, 440. This is a case of trust; and Chester held possession of this trust property, and it is not necessary under the law, that actual possession should be in the eestuique trust, to enable him to have an account of rents and profits; Legard vs. Hodges, 1 Vesey Jr. 477; Power vs. Bailey, 1 Ball & Beatty, 49; Hennessy vs. Bray, 33 Beav. 96; Kidney vs. Coussmaker, 12 Vesey Jr. 136; Pulteney vs. Warren, 6 Vesey Jr. 73; Astor vs. Turner, 11 Paige, Ch. 436; King vs. Wilcox, 11 Paige Ch. 589; Cortleyeu vs. Hathaway 11 N. J. Ch. 39; Dey vs. Dey, 26 N. J. Ch. 182; Heth vs. R. R. Co. 4 Grattan 482; Shuman’s Appeal, 27 Penna. 64; Green vs. Biddle, 8 Wheaton 1. The inability of the appellant to take actual possession of the trust property was no disqualification to his claiming in equity the account of the rents and profits, but, on the contrary, it is a qualification, and it is necessary to his success; Colman vs. Duke of St. Albans, 3 Vesey Jr. 25; Shaw vs. Adair, 1 Scho. & Lefroy, 261; Berney vs. Sewall, 1 Jac. & Walk., 627. In this case the trust deed was on record, before .Chester purchased and he was consequently a purchaser with notice. He remained in possession after the sale of the property, and should be held liable for the rents.
    
      William B. Waddell Esq. for the appellee
    argued, that a deed taken as security for money loaned, is but a mortgage; and cannot by any form of words, or other means, be converted into an absolute conveyance ; Colwell vs. Woods, 3 W, 188; Kerr vs. Gilmore, 6 W. 405; Heister vs. Maderia, 3 W. & S. 384; Kellum vs. Smith, 9 Casey 158; Guthrie vs. Kahle, 46 Pa. 331; Houser vs Lamont, 5 P. F. S. 312; Harper’s Appeal 14 P. F. S. 315; Sweetzer’s Appeal, 21 P. F. S. 264; Danzeisen’s Appeal 23 P. F. S. 65; Corpman vs. Baccastow, 3 Norris, 363. A mortgage in Penna. is now understood to be, only a bare security for the payment of the money, at most only a chose in action ; Craft vs. Webster, 4 R. 225; Ackla vs. Ackla, 6 Penna. 230; Moore vs. Cornell, 68 Penna. 322. In Penna. the mortgagee has no estate,, property, or interest in the land, until he takes possession of the property ; Myers vs. White, 1 R. 355; Rickert vs. Maderia, 1 R. 325; Wilson vs. Shoenberger, 31 Penna. 295; Asay vs. Hoover, 5 Pa. 35; Witmer’s Appeal 45 Penna. 463. The mortgagor is not. liable for the rents and profits, before his right of redemption is. foreclosed ; Cooper vs Davis, 15 Conn, 556; Gibson vs. Farley, 16 Mass. 280, Boston Bank vs. Reed, 8 Pick. 459; Kinsley vs. Ames, 2 Metc. 29; Higgins vs. York Building Co. 2 Atk. 107 Ex Parte Wilson, 2 Vesey & Beames, 252; Colman vs. Duke of St. Albans, 3 Vesey, 25; Bisphams Equity, section 157. An action of trespass for the mesne profits could not be maintained without proof of possession, and consequently could not be maintained before actual entry; 4 Kent’s Com. Section 58; Hatch vs. Dwight, 17 Mass. 289; Cooper vs. Davis 15 Conn. 556; Mayo vs. Fletcher, 14 Pick. 525; Wilder vs. Houghton 1 Pick. 87.
   The Supreme ‘Court affirmed the decree of the Common Pleas on Feb. 23, 1885, in the following opinion :

Per Curiam.

Under the law of this Commonwealth the instrument was-undoubtedly a mortgage. It was given to secure the payment of a note for the sum of five thousand dollars with interest,, executed by the mortgagor to the mortgagee.. The appellee was-the owner of the land covered by the mortgage, and charged with its payment. ■ In this state the mortgagee has no estate or property in the land until he takes possession thereof, unless a contrary intention appears in the mortgage. None such is shown here. It is a mere chose in action, and in substance only' security for the payment of the debt or obligation recited therein. The same rule appears to be recognized in Maryland ; Charles vs. Clagett, 3 Md. 82; Wilson vs. Russell, 13 Md. 494; Timms and wife vs. Shannon, 19 Md. 314 ; Artz and wife vs. Grove, 21 Md. 456. If the character of the instrument is doubtful, the inclination of the courts is to ti'eat it as a motgage, and allow the grantor to redeem ; Hinkley vs Wheelwright, 29 Md. 341; Bank of Commerce vs. Lanahan, 45 Md. 396.

When the mortgagor is suffered to remain in possession, he remains there as owner, and is not accountable for the rents and profits. The appellee who acquired the whole title of the mortgagor occupies the same high grounds. He was a purchaser in good faith. He was not a trespasser in entering on and occupying the premises prior to a sale and conveyance by the trustee. His possession was lawful. A knowledge of the trust acquired during the pendency of the proceeding did not make his possession tortious at that time. It follows notwithstanding the very able and ingenious argument of the appellant, we think the bill was properly dismissed.

Decree affirmed and .appeal dismissed at the costs of the appellant.

A motion for a re-argument was made, and refused on March 16, 1885.