Court Opinion

ID: 3432225
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:01:06.562755+00
Date Added: 2024-06-11T13:56:10.584420
License: Public Domain

I agree with the result reached by the majority in the above and foregoing opinion, but find myself impelled to disagree with part of the discussion adopted as a vehicle to carry them to their final conclusion.
It seems to me that the case can be disposed of by the use of long and well established principles laid down by this court, without entering new fields of thought or casting disparagement upon the theories embodied in our own pronouncements. Reference here is especially made to the fundamentals given as a distinction between: First, the rights of a tenant under a lease for the mortgaged premises, or those accruing to the vendee or pledgee of such lease, on the one hand; and second, the equities belonging to the holder of a chattel mortgage covering the crops or the interests arising in those products arising out of the receivership clause in the real estate mortgage, on the other. At this point, the majority say:
"The reasons which underlie the rights of a tenant in occupancy are not necessarily applicable to a chattel mortgagee. A contract of lease carries the right of possession to the lessee for the purpose of the tenancy. * * * This legal right is strongly supported by practical and equitable considerations which tend to the utilization of the land and to the avoidance of waste. * * * It is to the common interest of all that utilization be had. A tenant is often the only means of such utilization. His right to the renter's share of the crops is supported by strong equitable *Page 1223 
principles. He gives quid pro quo. He takes nothing which he does not himself produce out of the land."
The reason for my disagreement with the opinion is because it adopts that philosophy and its associations as the primary basis for the dividing line between the legal relationships mentioned. This ground for the objection becomes more significant when the quoted sentences are connected with other statements and declarations in the opinion growing out of that major premise (that is, the quotation and its correlated thoughts). That the tenant earns his compensation under the lease is no doubt true, and it may be conceded that, in so doing, he protects, rather than injures, the position of others interested in the land; yet that is not the chief line of demarcation, but rather, an argument substantiating the soundness of the true test to be applied in determining this controversy. Elaboration will tend to elucidate. Therefore, quite essential is a review of some of the underlying and well fixed rules herebefore recognized and confirmed by us.
Whatever may be the title of the receiver to or his interest in the rent proceeds in the case at bar, those rights did not come into being until the foreclosure proceedings and the application for the appointment of said official agent. Hatcher v. Forbes,202 Iowa 64; Lynch v. Donahoe, 205 Iowa 537; Keokuk Tr. Co. v.Campbell, 205 Iowa 414; John Hancock Mut. Life Ins. Co. v.Linnan, 205 Iowa 176; Hakes v. North, 199 Iowa 995. There can be added, in addition to the above, an avalanche of authorities to the same effect, many of which are set forth in the five citations. Quoting from Hakes v. North, supra, we find this language:
"We have held heretofore that such a provision [receivership clause] in a real estate mortgage * * * does not operate as a present lien upon the rents, profits, or growing crops of the mortgaged land. Such provision is a part of the remedy provided for the collection of the mortgage, and operates upon the personalty only upon and after the commencement of the foreclosure, and as a part of the procedure. * * * If, as we have held, the mortgage proviso [the receivership clause] under consideration created no lien before foreclosure, then it necessarily follows that it could have no retroactive effectafter foreclosure. *Page 1224 
Its operation must be prospective, and not retrospective."
Significant phraseology in Keokuk Tr. Co. v. Campbell, supra, is as follows:
"A pledge of the right of possession is, in substance, a pledge of the rents and profits. Walters v. Graham, 190 Iowa 481. A pledge of the right of possession confers upon the mortgagee no greater rights than a pledge of the rents and profits. The pledge of the rents and profits contained in the mortgage does not come into operation as a lien, — a lien because thereof `does not arise until action has been commenced to enforce collection of the debt.' * * * Up to the time suit is begun, the mortgagor is at liberty to lease the premises and to sell his right to the rents. Up to that time, the mortgagee, so far as the rents and profits are concerned, is merely a general creditor, without lien on them."
More recently, we said, in John Hancock Mut. Life Ins. Co. v.Linnan, supra:
"The right of the mortgagor to freely sell and dispose of crops grown upon the mortgaged premises, or to assign the rent therefor at any time prior to the commencement of an action to foreclose the mortgage and for the appointment of a receiver, has been repeatedly sustained by this court * * *. The lien, we think, attached upon the commencement of the action to foreclose and for the appointment of a receiver, and not immediately upon the default of the mortgagor."
In other words, at the time the real estate mortgage was executed, the rents and profits were not pledged, assigned, or conveyed in such a manner as to confer a present right thereto upon the mortgagee. Such mortgagee received thereby no right, title, or interest therein until: First, the mortgagor defaulted; and second, thereafter the holder of the mortgage instituted a proper proceeding for the appointment of a receiver, — and even then, not unless: First, the primary debtor was insolvent; and second, the incumbered premises were not of sufficient value to satisfy the lien. Said language of the real estate mortgage is an assignment or conveyance of the rents and profits upon a condition which must occur before effectiveness, and until that later contingency happens, the transfer of the rents and profits never becomes operative. And when ultimately the prerequisite *Page 1225 
is met, the enabling clause of the mortgage takes effect, not from the date of the instrument, but from the instant of commencing the suit and filing the application for the particular relief, and then only in the event the prayer is granted. As was said in Hakes v. North, supra:
"To say that the mortgagee may assert a seniority as of the date of his mortgage * * * is to say that [he] * * * had a lien upon such property all the time * * *. If, as we have held, the mortgage proviso under consideration created no lien before
foreclosure, then it necessarily follows that it could have no retroactive effect after foreclosure."
To the same effect are John Hancock Mut. Life Ins. Co. v.Linnan, supra; Lynch v. Donahoe, supra; Webber v. King, 205 Iowa 612;  Kooistra v. Gibford, 201 Iowa 275; Rodgers v. Oliver,200 Iowa 869; Whiteside v. Morris, 197 Iowa 211; First Nat. Bank v.Security Tr.  Sav. Bank, 191 Iowa 842.
So, the theory upon which the tenant acquires his rights under a lease covering land burdened with a real estate mortgage is because, at the time of the execution of the demise contract, the real estate mortgagee had no interest or equity in the rents, crops, or profits, rather than, as suggested by the majority, due to the fact that no one was harmed thereby, and the tenant earned his income. Thus, the lessee and the landlord's assignee take the subject of their respective contracts for the reason that, at the time, the real estate mortgagee has no interest in or to the same; and when once acquired in that way, said lessee or assignee continues to hold the paramount title, because the additional security furnished the real estate mortgagee under the receivership clause, like any other protection of like nature when it comes into effect, is subject to that which is prior.
Sheakley v. Mechler, 199 Iowa 1390, is not inconsistent with this theory, but, in fact, is harmonious therewith; for in that case the lessee acquired his interests after the real estate mortgagee had obtained his through an application for the appointment of a receiver. The doctrine that sustains this special concurrence also makes correct the pronouncement inSheakley v. Mechler, supra. If, then, the real estate mortgagee in the present controversy had no rights in the rents, crops, or profits at the time the chattel mortgagee acquired his contract, why should the *Page 1226 
former be permitted to say that the latter's agreement should not prevail in relation to the subject of this legal quarrel? I think it is superior, to the extent that it goes. Limitations therein, however, exist. And if the chattel mortgagee is to fail, it is because of the weakness of his own title, rather than the seniority of that belonging to the real estate mortgagee. Did the chattel mortgagee, when he made his agreement in 1926 for the 1927 crops, obtain any rights thereby? Manifestly he did, as against the real estate mortgagee, because that holder did not institute his proceedings for the appointment of a receiver until January 26, 1927. What interest did the chattel mortgagee thereby obtain? Not a lien on the crops, until they came into being. This may be conceded. Wheeler v. Becker, 68 Iowa 723; Luce v.Moorehead, 73 Iowa 498; Norris v. Hix, 74 Iowa 524; McMaster v.Emerson, 109 Iowa 284. See, also, First Nat. Bank v. Security Tr. Sav. Bank, supra; Whiteside v. Morris, supra; Weyrauch v.Johnson, 201 Iowa 1197.
Nevertheless, the chattel holder did, through that transaction, acquire something which, for want of a better name, can well be designated the assignment of the right to enjoy the potential lien until the actual materialized. During the interim of the potentiality some substantial right existed. See Thompson Yardsv. Richardson, 51 N.D. 241 (199 N.W. 863). That must be true, or the entire principle of mortgaging future rents would fail. Our very system of priorities furnishes the foundation for this declaration. Even for the purpose of analogy, considering as assignees the holder of the chattel mortgage during the potential period and the owner of the real estate mortgage after the appointment of the receiver, but before the crops are planted, yet the chattel mortgagee is first, because, as between two assignees, the first in time has the prior equities. OttumwaBoiler Works v. O'Meara  Son, 206 Iowa —.
How far, then, do the interests and rights of the chattel mortgagee extend? Clearly, to the crops which are to be grown by the mortgagor, and none other. McMaster v. Emerson, supra. But in the instant case, the mortgagor did not produce crops. Resultantly, there are none on which the chattel mortgage is a lien. Necessarily, then, the holder of that instrument must fail in this action, because his cause is predicated upon the assumption that there are crops covered by his chattel *Page 1227 
mortgage. Such not being the case, there can be no recovery. Obviously, this was because of the absence of crops belonging to the chattel mortgagor, rather than due to any superior title or right in the receiver under the real estate mortgage over and above the chattel mortgage. As is apparent, the chattel mortgagee cannot enter the farm for the purpose of planting, cultivating, and raising the crops. Relief here is predicated entirely on the right of the lien, if any, afforded by the chattel mortgage. On the other hand, the real estate mortgagee, through the receiver, pledged not only the rents, crops, and profits to be produced by the landlord, the mortgagor, but any of such personalty to be brought forth on the land, so long as the rights of third persons are not concerned. Moreover, in addition thereto, he was armed with a method of collecting the same: to wit, the right to evict, enter, etc. (even though this amounted to no more than a pledging of the rents). See Keokuk Tr. Co. v. Campbell, supra. We said, with regard to this, in Hakes v. North, supra:
"Such provision [receivership clause] is a part of the remedy provided for the collection of the mortgage, and operates upon the personalty only upon and after the commencement of the foreclosure, and as a part of the procedure."
Logic compels the conclusion that the holder of the chattel mortgage in this case must fail, and the real estate mortgagee, through the receivership, prevail, not because of a superior title in the latter, but for the reason that there is entirely lacking any ownership in or lien held by the former. Upon this basis, I would affirm.
There is not before us any of the following questions: First, the chattel mortgagee's right to proceed against his mortgagor for failure to produce the crops; or, second, his right to sue the receiver or the real estate mortgagee for preventing the mortgagor from carrying out his contract with the chattel mortgagee; or, third, the right of the chattel mortgagee, on the proper occasion, to successfully contest with the real estate mortgagee the privilege of the latter to obtain a receiver to take possession of the land on which the dual mortgagor would, except for the eviction, raise crops, and thereby make actual the otherwise potential lien of the chattel mortgagee.
MORLING and WAGNER, JJ., join in this special concurrence. *Page 1228