Court Opinion

ID: 4012219
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:16:20.091531+00
Date Added: 2024-06-11T13:58:18.545972
License: Public Domain

A petition for rehearing has been filed herein by plaintiff. We held in the original opinion, which appears in109 P.2d 463, that a mortgagee holding an *Page 351 
inferior lien has the right to purchase a superior lien, or purchase the property under such superior lien, without becoming a trustee for the benefit of the mortgagor. To the same effect as the cases cited in the original opinion are the following: Ten Eyk v. Craig, 62 N.Y. 406; Cornell v. Woodruff, 77 N.Y. 203; Williams v. Townsend, 31 N.Y. 411; Woodley v. Burch, 43 Mo. 231,234; Walthall's Executors v. Rives, Battle  Co., 34 Ala. 91, 97; Harrison v. Roberts, 6 Fla. 711; Shaw v. Youmans, 105 A.D. 329,94 N.Y.S. 178; Darcey v. Hill, 1 Vern. 49, 23 Eng. Reprint 302; Parkman v. Hansbury, 1 Dr.  Sm. 143, 52 Eng. Repr. 332; Simmons v. Henderson, 207 Ala. 692, 93 So. 624; Jones, Mortgages (8th ed.) Sec. 881; 41 C.J. 983. Counsel for the plaintiff in their brief on rehearing argue that the rule is different, if the mortgagee has gone into possession, as was true in the case at bar, and they cite 41 C.J. 615, where it is stated that a "mortgagee in possession is generally regarded as a constructive trustee." It will be found, however, upon examination of the cases cited, that the statement must be understood in a limited sense. They have no bearing on a situation such as that before us except Ten Eyk v. Craig, supra, which will be referred to later. We did not specifically refer to the point of a mortgagee in possession in the original opinion. Counsel had argued that the defendant's indebtedness was paid off some time during 1934 — in other words, that he then ceased to be a mortgagee. No theory such as advanced now was mentioned in their former argument, and we did not think it necessary, or it did not occur to us that it was necessary, to consider that phase of the case. A mortgagee whose indebtedness has been paid ceases to be a mortgagee, and hence, if he has possession he ceases, in a sense at least, to be a mortgagee in possession. However, we find it stated in Hubbell v. Moulson, 53 N.Y. 225, 229, that "in the absence of an agreement *Page 352 
between the parties there is no legal satisfaction of the mortgage by the receipts of rents and profits by a mortgagee in possession to an amount sufficient to satisfy it, and his character as mortgagee in possession is not divested until they are applied by the judgment of the court in satisfaction of the mortgage." We need not decide whether that is a correct statement, and shall assume that for some purposes at least the defendant in this case may be considered as still a mortgagee in possession, though his mortgage was paid, and shall inquire whether or not the fact of possession makes any difference in the conclusions which should be reached herein. We think not. Parties may, of course, by contract enlarge the duties of a mortgagee who goes into possession. But that is not the situation herein. It is difficult to see that if a mortgagee who is not in possession may purchase a prior lien, or the property under a sale thereunder, why he should be deprived of these rights by the mere fact of going into possession. We can not think of any consideration, legal or equitable, which would require the application of a different rule of law. A mortgagee who goes into possession does so not for the purpose of entering into any fiduciary relation with the mortgagor, but for the purpose of collecting his debt. Their interests are antagonistic; they clash. Of course, when the mortgagee takes possession, he takes upon himself certain responsibilities which he would not have otherwise — e.g., not to commit waste, to collect the rents — and so, in a limited sense, may be considered a trustee, but no good reason is perceived why he should be considered as such for the purpose of depriving him of the rights above mentioned which he had previously. The exact point was discussed and considered at great length in the case of Ten Eyk v. Craig, 62 N.Y. 406, where the court held contrary to the contention of plaintiff herein. The court cites Chalmondely v. Lord Clinton, 2 Jac.  *Page 353 
Walk. 183, 37 Eng. Reprint 527, 593, and Kirkwood v. Thompson, 2 D.G.J.  S. 613, 46 Eng. Reprint. 513. In the first of these cases the court stated that "no trust is expressed in the contract; it is only raised by implication in subordination to the main purpose of it; and after that is fully satisfied its primary character is not fiduciary. * * * The mortgagee when he takes possession is not acting as a trustee, but independently and adversely for his own benefit." In the latter of these cases the court stated that taking possession would make no difference in the relation of the parties; that "being in possession could only make a difference if it created an obligation between the mortgagee and mortgagor, which would not have existed if he had not been in possession. Nothing of this sort is suggested; no duty arises on being in possession except to account in a way onerous to the mortgagee." To the same effect see Duval v. P. 
M. Bank, 10 Ala. 636; King v. Insurance Company, 7 Cush. 1. We do not feel, either on the grounds of public policy or change of conditions since the time of these decisions, that we would be justified in departing from the rule there announced. It is approved in Jones on Mortgages (8th ed.) Sec. 881, and no cases to the contrary are found.
Counsel object to our statement in the original opinion that the defendant should receive reasonable compensation for looking after the property. We are aware, of course, that the courts are not in entire harmony on that point. 41 C.J. 616; 19 R.C.L. 336. A mortgagee in possession looks, it is true, after his own interest when he collects rents. But he does so ordinarily in a manner entirely different from that contemplated by the parties. The mortgagor promises to pay. Possession by the mortgagee is taken, ordinarily, only as a last resort, and not because the mortgagee wishes to do so, but to protect himself "in a way onerous" *Page 354 
to him, and rendered onerous by the default of the mortgagor. Hence, at times at least, it would be equitable to allow him compensation. If the argument of counsel for plaintiff is true, that the defendant's indebtedness was fully paid some time during 1934, then it follows that for more than half of the time during which the defendant looked after the property, he was not acting for his own benefit, but solely for the benefit of the plaintiff. Counsel argue that the point should be left open until the facts are all known. It was not suggested in the hearing of this case that the defendant had been negligent in any way in collecting the rent. However, the facts may not all be before us, and the original opinion will, accordingly, be modified to the effect that the defendant should receive a reasonable compensation for looking after the property, unless it appears that he has been negligent or was guilty of mismanagement in looking after the property.
Counsel devote a number of pages to the statement made by us in the original opinion that the finding of the trial court that Lot 3 was included in the contract of March, 1930, by mistake was correct. Whatever may be the importance thereof, the argument is out of place. No exception was taken to this finding by the plaintiff, and it is now too late to contend the contrary. Counsel now ask that plaintiff be permitted to amend its petition so as to permit the determination in this case as to whether or not the transaction of December, 1929, was a mortgage. We do not think, however, that we should order the enlargement of the issues in the case at this time.
Other points argued in the brief for rehearing were fully discussed in our original opinion. We see no just grounds for a rehearing, and it is accordingly denied.
Rehearing denied.
RINER, Ch. J., and KIMBALL, J., concur. *Page 355