Court Opinion

ID: 6519325
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:29:38.300012+00
Date Added: 2024-06-11T15:55:06.476401
License: Public Domain

SHARPE, J.
— Several questions arising in this suit have been passed on by this court on former appeals. See reports of the case in 103 Ala. 289, 120 Ala. 1, 127 Ala. 227. As a result of these adjudications and after the last remandment, the case stood in the chancery court for an accounting between complainant as a mortgagee in possession of mortgaged lands and the defendant Rebecca M. Pollard as a redemptioner. An account was stated by a special register to whom the matter was referred and to whose report both parties filed exceptions. One item reported on consisted of attorney’s fees allowed as part of (the mortgage debt under stipulations in the mortgage and made the subject of evidence taken on the reference. On the hearing -in the chancery court the original bill was against” objection amended so as to increase complainant’s claim for attorney’s fees. Thereupon after submission the court, after overruling some exceptions ito the report and sustaining others, restated the account and rendered a decree accordingly. From that decree both parties have appealed.
The case involves rules usually governing as between a mortgagee rightfully in possession of lands before foreclosure, and a mortgagor seeking to redeem, which we state so far as they seem to • be applicable here. In the absence of stipulations to the contrary the mortgagee if he has used the property himself must account to the mortgagor for its reasonable rental value. If he rents the land he is accountable for the rents received though they exceed the value of its use, since he is not allowed to profit from rents beyond their application to the mortgage debt. For loss of rents and profits he is liable to the extent the loss results from his willful de*162fault or gross ueg'lig'ence, which in such cases is defined as a failure to use reasonable care and diligence. Gresham v. Ware, 79 Ala. 192; Sloan v. Frothingham, 72 Ala. 589; Daniel v. Coker, 70 Ala. 260; Butts v. Broughton, 72 Ala. 294. Eor waste 'Committed the mortgagee’s liability is measured by the extent to which the land’s value is thereby diminished.—Perdue v. Brooks Bros. 85 Ala. 459. The mortgagee is entitled to credit for expenditures in making repairs and paying taxes and where there are charges for rents or losses such expenditures should be deducted from those charges.—Blum v. Mitchell, 59 Ala. 585. The mortgagee is not allowed to increase the cost of redeeming 'by reason of improvements as distinguished from repairs, or to be charged with rents or rental values in so far as they represent an increase from such improvements. These rules are de-dncible from the decisions of this court above cited together with the following among other- authorities: Adams v. Sayre, 76 Ala. 509; Dozier v. Mitchell, 65 Ala. 511; Barron v. Paulding, 38 Ala. 292; Hogan v. Stone, 1 Ala. 496.
Recurring to this case we state at the outset our conclusion that errors have 'entered into the accounting, to .an extent that renders necessary a reversal of the decree and a remandment for a re-statement of the account. Fruitful of error prejudicial to the respondent Mrs. Pollard was the theory adopted by the tidal court that the complainant Mortgage Company was entitled to credits for repairs of the mortgaged property and taxes paid thereon by its vendee E. S. Annistead and his vendee R. L. Armistead while they respectively held possession as such vendees. While complainant’s sale of the lands after Lts voidable purchase did not 'alter its status as a mortgagee in possession so as to destroy its right to credit for its expenditures properly made in that capacity, there is no rule of law or equity whereby it can be given the benefit of expenditure by others. Apparently the Armistfeads after their respective purchases made repairs and paid taxes, not for complainant, but for their own supposed benefit and so far as appears complainant *163lias been at no cost therefor. Its claim for credits therefor stands on no better footing than would a claim for like expenditures by a trespasser.
As against the complainant Mortgage Company there was error in charging it with items amounting ¡to $561 as money received by the Annisteads from the sale of timber cut from the lands. The cutting and taking of timber from the premises without the mortgagor’s consent, should have been ¡treated as waste permitted if not •committed, for which the Mortgage Company was responsible, hut not- as profits received by it. Its responsibility for waste is measurable not by what was received from sales of the timber but by the depreciation caused in the value of ithe land by its having been denuded of the timber.—Perdue v. Brooks, 85 Ala. 459. What such depreciation amounts to tire evidence in this record fails to show.
As shown in Dozier v. Mitchell, Gresham v. Ware and Sloan v. Frolhingham, supra, rules differing from those we have stated are applicable where the possession has been held and improvements made by a mortgagee or a third pei'son under a bona fide but mistaken claim of ownership. It is here contended that after the mortgagor Mrs. Pollard first answered the bill expressing her election to affirm the purchase made by complainant at its own sale, it has a righ/t to assume that election was final and that, therefore, it ought to be treated as a bona fide claimant of ownership and as being entitled to the benefit, in the accounting, of improvements since made and also to have protection under section 1540 of the Code which proxfides that “persons holding possession under color of title in good faith, are not responsible for damages or rent for more than one year before the commencement of the suit.” That contention cannot be sustained. As was held on the first appeal, Mrs. Pollard had a right to withdraw that election and disaffirm the foreclosure sale after the terms upon which the bill first invoked her action were changed by the bill’s amendment to others more burdensome. This, the Mortgage Company was bound to have known, and, therefore, it cannot escape accountability as a mortgagee in posses*164sion upon the theory that its purchase had been affirmed or by reason oí its having sold the lands to Armistead. Its action in transferring possession to Armistead as vendee carried to him the right as between them to collect rents for himself, and amounted to a voluntary abdication of the duty imposed 'by its relation to the mortgagor in respect of 'directing profits of the lands towards a reduction of the mortgage debt. It is, therefore, justly chargeable as for willful default in obtaining profits during Armistead’s occupation, and is not entitled to credit for improvements. On the other hand, the company’s liability for rents is not enhanced by reason of improvements, o>r by rents made and retained by the Armisteads, on their own account whether in excess of the rental value or not. To hold it liable as having received those rents would he to indulge an unnecessary fiction. What might be proper if the controversy were between the redemptioner and the Armisteads is not a matter to influence the decision of this case since their rights fire not here involved.
By whatever method such an account is stated, profit charges are to be fixed at their net value, or what remains after deducting the mortgagee’s proper expenditures for taxes and repairs, 'and such cost, whether of time or money, as the owner in possession acting providently would necessarily be subjected, to in making and collecting profits whether renting the land in one body or by parcels. Such charges are not measured strictly by what may be received as the result of factitious means, such as advancing- supplies to tenants or 'by what remains as the result of expenses the owner need not incur. Mrs. Pollard is not to be prejudiced because the mortgagee was a non-resident corporation and was compelled by that fact to pay agents for attention to rents.
When on default in paying instalments on the mortgage debt the mortgagee elected under terms of the mortgage to declare the whole debt due, all interest which had then accrued under the contract became due also. It was proper to carry into the account as part of the mortgage debt interest on the past due interest note from *165its maturity to the time of that declaration. ' There was nothing in the company’s subsequent -dealings with the mortgagor, or the land, to stop the running of interest in its favor on the debt it secured.
By deducting sums paid on taxes by the company from the rents and profits chargeable against it, the question raised as to whether it should be credited with interest on such sums will be properly disposed of.
No final decree haying been rendered settling the matter of attorney’s fees, amendment of the bill in respect of the amount claimed was allowable under section 706 of the Code. Services of counsel are to be allowed according to stipulations of the mortgage as construed on former appeals. We add to what was then said that services in resisting redemption are not to be allowed for except in so far as they may have been necessary to collect the sum really -due on the mortgage.
The chancellor might well have granted the motion to recommit the matter to the register, because the account was stated and the evidence was taken by him under wrong directions contained in the decree of reference, and also because the register ought to have reported the fact as upon a special finding instead of by appending what purports to be a stenographic report containing several hundred pages of questions and answers commingled with much more colloquy. The requisites of a ¡report in cases like the present are laid down in Mahone v. Williams, 39 Ala. 202. But whether to grant the motion to recommit, or to state the account itself, was within the court’s discretion.
This decision will result in eliminating from the case several questions of fact presented by this record, and as to several -others, we express no opinion, since they will remain for consideration on another reference, and, it may be, on new evidence.
The decree will be reversed on the appeal of the complainant Mortgage Company -and also on the appeal of Rebecca M. Pollard, and the cause will be remanded for further proceedings.