Court Opinion

ID: 6968073
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:57:26.711298+00
Date Added: 2024-06-11T16:08:41.637487
License: Public Domain

Mr. Justice Craig delivered the opinion of the court: It is first contended by appellant that the Illinois Steel Company, the mortgagee, having obtained its decree of foreclosure and sale and applied the proceeds, the mortgage has accomplished its purpose and is functus oficio,—that no further rights or equities can be enforced by the Illinois Steel Company. The claim of appellee is, that the provision in the mortgage authorized the appointment of a receiver by the court to collect the rents and profits during the period of redemption, and, as the sale under the foreclosure decree did not pay the debt, to apply them in payment of the deficiency. ¡The agreement in the mortgage is as follows: “Upon the filing of any bill to foreclose this mortgage, in anjr court having jurisdiction thereof, such court may appoint A. F. Knox, or any proper person, receiver, with power to collect the rents, issues and profits arising out of said premises during the pendency of such foreclosure suit, and until the time to redeem the same from any sale that may be made under any decree foreclosing this mortgage shall expire; and such rents, issues and profits, when collected, may be applied toward the payment of the indebtedness and costs herein mentioned and described.” Under this clause in the mortgage a lien is given, by express words, upon the rents and profits, and such an equitable lien a court of equity will enforce. Rents and profits are the subject of mortgage. Jones in his work on Mortgages (vol. 1, sec. 140,) says: “A mortgage may be made of rents under a lease, and although a right of entry be given to the mortgagee, the mortgage is a mere security, like any other mortgage of real estate, and the mortgagor remains the real owner until foreclosure and sale.” In section 771 he says: “A mortgagee has no specific lien upon the rents and profits of the mortgaged land unless he has in his mortgage stipulated for a specific pledgee of them as part of his security.” This was expressly stipulated in this mortgage given by the Ashley Wire Company to appellee. Had there been no deficiency after the foreclosure sale of the Ashley Wire Company property and plant, the rents would have belonged to the owner of the equity of redemption. Under the express agreement in the mortgage, there being a deficiency of $5316.50 after the sale, the Illinois Steel Company had an equitable right to have the rents and profits applied towards the payment of the deficiency decree, from the time of the foreclosure sale until the expiration of the time of redemption, and this right might properly be enforced on an application to the court to appoint a receiver. The contention by appellant in this case that the enforcement of this provision rests entirely in the sound discretion of the chancellor, is not tenable. The chancellor was authorized to act under this clause in the mortgage, and appoint a receiver for the collection of the rents and profits during the period of redemption, to be applied on the deficiency decree. In the case of Oakford v. Robinson, 48 Ill. App. 270, which is similar to the one at bar, the mortgage contained a clause authorizing- the appointment of a receiver, with power to take possession of the premises and collect the rents due and to become due thereon during the period allowed for redemption, and to apply the same in payment of any deficit should the premises prove insufficient to pay the amount secured by the mortgage. In the decision of the case the court said: “The rents and profits of the land, as well as the land, was pledged by the mortgag-e for the security and payment of the amount due the appellee. This authorized the appointment of a receiver, in the discretion of the court, without regard to the solvency of the mortgagor. (2 Jones on Mortgages, sec. 1516; 8 Am. & Eng. Ency. of Law, p. 284.) And such appointment was lawfully made, though by a decree subsequent to the original decree. (8 Am. & Eng. Ency. of Law, p. 239.) By the appointment of the receiver the appellants obtained an equitable lien on the rents and profits of the land during the statutory period allowed for redemption, if necessary for the full payment of any deficiency in the security. In support of this view, see 1 Jones on Mortgages, secs. 773, 774, 775; 2 Jones on Mortgages, sec. 1536; High on Receivers, secs. 643, 644; Beach on Receivers, sec. 532.” That a court of equity has power to appoint a receiver and grant equitable relief where there are no express words in the mortgage giving a lien upon rents and profits derived from the property, is conceded. In such a case, whether relief will be granted is dependent upon the facts and circumstances at the time the application is made. This court said in Haas v. Chicago Building Society, 89 Ill. 498 (at p. 502): “We find the decided weight of American authority to be in favor of the proposition that the court may, even when the mortgage does not by express words give a lien upon the income derived from such property, appoint a receiver to take charge of it and collect the rents, issues and profits arising therefrom. Such action will not be taken, however, unless it be made to appear the mortgaged premises are an insufficient security for the debt, and the person liable personally for the debt is insolvent, or at least of very questionable responsibility. A combination of these two things seems to be required in all the cases we have examined, and in one or more of the States it is held necessary still other elements should be conjoined to these before such procedure is justified.” Tested even by this requirement, if the mortgage did not give a lien by express words, or authorize the appointment of a receiver, the facts in the case at bar show that the court committed no error. The deficiency decree itself evidences the fact that the Ashley Wire Company’s property was insufficient security for the mortgage debt, and the facts established the allegation in the petition that the Ashley Wire Company, the mortgagor, was insolvent. Undoubtedly, a court of equity exercises a certain discretion, even where express words are used for the purpose of giving a lien on the income of the mortgaged property. The court must determine whether the language used in the mortgage is sufficient to give a lien on the income. In the one case the authority arises from the contract, the express words giving a lien on the rents and profits; in the other the court exercises its equitable powers under the facts and circumstances presented at the time the application to appoint a receiver is made. Appellant also contends that the final decree foreclosing the mortgage ought to have provided for a receiver to take possession of the rents and profits of the Ashley Wire Company pending the redemption; that a decree of foreclosure and sale, as to all questions that might have been adjudicated between the parties, is final. It could not be ascertained until after the sale whether there would be a deficit requiring the appointment of a receiver to collect the rents and profits during the time of redemption. Under the decree of foreclosure the property described in the mortgage was sold. The rents and profits to accrue during the period of redemption were not sold, and no order could be entered until it was ascertained at the foreclosure sale that the mortgaged premises were insufficient to pay the indebtedness evidenced by the mortgage. In Haas v. Chicago Building Society, supra, it was said (p. 506): “The necessity for the appropriation of the rents to the payment of the mortgage debt may frequently not appear until after both decree and sale. The amount due is often matter of dispute, and can only be determined by the decree, and what the property will sell for can only be ascertained with certainty from the result of the judicial sale. If an appropriation of the rents on the indebtedness is justified by the surrounding facts before sale, we see no good reason why the same and more weighty facts existing after sale may not warrant a similar procedure. The security, plainly, is not exhausted by the sale, for there is a fund included in it which is secondarily liable. It is true, the mortgagee has elected to foreclose and sell; but then he has pursued that remedy to the end and without getting satisfaction of his debt, and he may avail himself of any just and equitable means of collecting the residue,—not that he may have such extraordinary remedy in all cases of a deficit in the proceeds, but only where it is indispensably necessary for his protection, and just and equitable. We hold, then, both upon the principles of equity that lie at the foundation of the chancery court, and upon authority, a receiver may sometimes be allowed after decree and sale, and that a mortgagee does not, in all cases, exhaust his security by a foreclosure and sale. It is, however, a power that the chancellor will be slow to exercise except in an extreme case, and to prevent palpable wrong and injustice.” The cases of Seligman v. Laubheimer, 58 Ill. 124, Ogle v. Koerner, 140 id. 170, and Davis v. Dale, 150 id. 239, cited by appellant in support of its contention that a decree of foreclosure and sale extinguishes the mortgage and renders the mortgage functus officio, are decided on a state of facts entirely different from the facts in this case. In Seligman v. Laubheimer, after a sale for less than the debt, a junior mortgagee redeemed, and a petition was filed to order a re-sale to pay the balance due the first mortgagee. It was held that as to the property sold the mortgage was not operative and a re-sale could not be had. No question of a mortgage of rents accruing during the statutory period of redemption was involved. In Ogle v. Koerner the facts were the same as to the mortgage, the sale, and redemption by an assignee of a second mortgage, who was a party, as in the Seligman case. The tenor of the case as to its application here may be seen by the following quotation from the court’s opinion (p. 179): “A mortga.ge, or, as in this case, a deed of trust in the nature of a mortgage, vests in the party secured a lien upon the mortgaged premises. By virtue of that lien the mortgagee is entitled to have the mortgaged property sold under a decree of foreclosure and the proceeds of the sale applied to the payment of the debt secured. This is the mode provided by law for the enforcement of the lien, and when the lien has been once enforced by the sale of the property it has, as to such property, expended its force and accomplished its purpose, and the property is no longer subject to it.” In Davis v. Dale a mortgage was foreclosed. Pending foreclosure a receiver was appointed. The property was sold for the full amount of the debt, interest and costs, but the receiver was continued, as appears, unnecessarily. The court said (p. 243): “The only purpose of appointing a receiver at the instance of the mortgagee or cestui que trust under or trustee in the trust deed, is to preserve the security of the mortgage or trust deed, and apply the rents, issues and profits, when necessary, in discharge of the indebtedness; and it follows, necessarily, that where the property is bid off at the foreclosure sale for the full amount of the decree, interest and cost, as was here done, the necessity for continuing the receiver ceases, and he should be discharged and the possession restored to the owner of the equity of redemption. In any event, the possession of the receiver, and his receipt of the rents and profits arising from the property, would be for the benefit of the person entitled to the same, so that the parties acquired no additional right because the fund is in the hands of the receiver.” The question involved in this case, to-wit, where the property sold does not pay the mortgage debt, and where the mortgage has a provision that the rents and profits may be applied toward the payment of the indebtedness and costs, was not before the court in either of the cases cited by appellant. Here the receiver was properly appointed after the foreclosure decree and sale, as the security of the steel company was not exhausted by the sale. Moreover, the necessity for the appointment of a receiver and the collection of the rents and profits, and their application to the payment of the deficiency, did not appear until after the foreclosure decree and sale. Appellant also contends that the court erred in directing the receiver, in its several orders, to pay the taxes on the property of the Ashley Wire Company out of the funds in his hands derived from rents of the real estate. Appellant filed its bill to have the equitable assets of the Ashley Wire Company applied to the satisfaction of its judgment, and also to have these taxes paid by the receiver out of moneys collected by him. The bill alleges that said corporation defendant is and remains in the possession of its real estate and manufacturing plant, and while not worth the said mortgage indebtedness, is a valuable property, and ought not to be allowed to deteriorate in value or be greatly hazarded by neglect or want of care; that watchmen should be in charge, insurance should be kept up and taxes paid; that all this should he done in the interest of said corporation, its stockholders and creditors generally; that said corporation is without means to protect and preserve said property, keep up its insurance or pay the taxes, and is without means to preserve, care for and collect its equitable assets. The receiver was appointed on appellant’s motion, and its own solicitor’s name is recited in the order of the court December 26, 1893, inter alia: “That upon obtaining possession he properly care for all such property, to the end that it may not be wasted or deteriorate for want of proper care; that he keep the buildings and all improvements insured in responsible insurance companies in a reasonable amount, and that he pay all taxes and assessments legally levied upon such real estate.” This order of the court has never been rescinded, so far as the record shows. The order of March 11,1895, authorizing the receiver to pay the taxes of 1894, recites: “It is therefore ordered, ádjudged and decreed by the court that the said George W. Bush, as receiver, out of the moneys in his hands pay to the said township collector the personal property taxes assessed against the said Ashley Wire Company for the year 1894, being the sum of $669.12, taking proper receipt therefor, and that said receiver in the making of said payment, all parties in interest in open court consenting thereto, ” etc. On June 20, 1895, the receiver, by appellant’s counsel, presented his petition, and in the order of the court directing him to pay the taxes on the real estate the same order of consent appears. In Armstrong v. Cooper, 11 Ill. 540, this court said: “A decree made by consent cannot be appealed from, nor can error properly be assigned upon it. Even a rehearing cannot be allowed in the suit, nor can the decree be set aside by a bill of review.— 1 Barb. Ch. Pr. 373.” (Smith v. Kimball, 128 Ill. 583; Roby v. Title Guarantee Co. 166 id. 336.) These orders being made at the request of appellant, and by consent, it cannot question their validity. Objection is also made to the order of court directing the payment of the real and personal taxes for the year 1895 by the receiver. The amount paid was §1874.41. The order extending the receiver, on the petition of the Illinois Steel Company, was made June 20, 1895, authorizing him to receive the rents and profits, to be held by him subject to the order of court. The redemption from the sale under the mortgage foreclosure of the Illinois Steel Company against the Ashley Wire Company expired June 9, 1896. This money derived from rents belonged to the Illinois Steel Company by virtue of the specific lien in the mortgage, and the receiver having paid these taxes from funds belonging to appellee, appellant can not complain. Finding no reversible error in the record, and the decree of the court appearing to be equitable, the judgment of the Appellate Court is affirmed. Judgment affirmed.