Court Opinion

ID: 7119040
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:36:04.309012+00
Date Added: 2024-06-11T16:14:02.472815
License: Public Domain

Salinger, J.
(dissenting). I. The mortgagor and the mortgagee contracted that:
“A receiver shall be appointed to take possession and charge of the mortgaged premises at once, and to hold possession of same until the debt is fully paid, and until the time of redemption expires, and all rents and profits derived from the mortgaged premises shall be applied on the debt secured by the mortgage. ’ ’
And in the same contract, the mortgagors “relinquish all *361our contingent rights in and to said premises, including the right of dower and homestead, to the said grantee. ’ ’
It is idle to dwell on the fact that these mortgaged premises were a homestead. They were that when the contract was made, and, as seen, homestead rights were duly relinquished in advance. The case stands as if there were no homestead. Assume, for the sake of argument, that such a contract is harsh, and, if you please, unreasonable. The fact remains that one may refuse to lend unless such an agreement be first entered into. It is a plain contract, leaving no room for interpretation. The majority does not hold that this agreement can reasonably be construed to mean less than the appellant claims for it. "What it asserts is that, though the agreement plainly gives all that appellant claims, and though he loaned upon the faith of having it, he may not enforce it as it is written, but can enforce it only upon a showing of inadequate security and insolvency of the mortgagor. Is that a fair treatment of the contract? Without this contract, Section 3822, Code of 1897, authorizes a receivership if, among other things, it is made to appear that the property or its rents or profits are in danger of being lost or materially injured or impaired, and if the interest of one or both of the parties will be promoted by the receivership, and the substantial rights of neither unduly infringed. So much would be in the power of the court without statute, under well-established rules on the equity side. There was no good reason for making a contract such as was here made, and which leaves out danger to the property or to the rents and profits, and the insolvency of the mortgagor, unless it was mutually intended that the contract should give something which would not be obtained without it. The one thing which, without contract, would be lacking is the right to have a receiver without proof of insolvency, etc. That right is given by the contract provision for a receivership without mention of insolvency, inadequacy, etc. As said, it was utterly idle to make this contract unless it gave this one right. Ordinarily, courts do not give contracts an effect which makes them of no effect.
There can be a valid contract as to obtaining a receivership. It is said in Smith v. Sioux City N. & S. Co., 109 Iowa 51, at 56, that Hubbell v. Avenue Inv. Co., 97 Iowa 135, recognizes the *362right to contract as to the appointment of a receiver. To sustain the majority, it must be found that, while there may be contract authority for obtaining a receiver, it is against law to contract that there shall be a receiver on foreclosure; that he shall take possession and charge, and hold the mortgaged premises until the mortgage debt is fully paid, and until the time of redemption expires; and that all rents and profits shall be applied on the mortgage debt. The majority confesses its inability to support its position by authority. Unless its opinion becomes the law in this jurisdiction, it is probable that its position will never be supported by authority, for the simple reason that it is difficult to find decisions in courts of last resort declaring that, where one is at liberty to keep his money unless he gets such a contract as this, that, when he does obtain it and lends his money, he may not enforce such contract. No reason occurs to me why that should ever be held. Code Section 2922 sustains me by implication; for it provides that the mortgagor of real estate retains the right of possession thereto, “in the absence of stipulation to the contrary.” So does Myton v. Davenport, 51 Iowa 583, sustain me; for it holds that, if rents and profits are applied to the payment of the mortgage debt and necessary expenses, then there is no ground for the appointment of a receiver. Des Moines Gas Co. v. West, 44 Iowa 23, does not militate against my position. It merely holds that, if there is a probable right to recover, a receiver will be appointed, even if the mortgage does no more than to pledge the income, rents, and profits to the payment of the debt. The contract at bar does all that, and in addition provides that the receiver may hold possession until the debt is fully paid, and until the time of redemption expires. The case of American Inv. Co. v. Farrar, 87 Iowa 437, comes very close to holding that, where the mortgage in terms gives the right of possession before sale, or before the termination of the statutory right to redeem, or even if it does no more than .pledge the rents and profits, a receiver should be appointed.
True, many cases here and elsewhere may be found, holding that the receivership cannot be had without a showing of inadequate security and insolvency of the mortgagor. But each and all have no contractual stipulation on the subject. The dictum *363of Collahan v. Shaw, 19 Iowa 183, expressing donbt as to whether contract to take charge of a homestead pending a foreclosure finally can be enforced, rests himself upon the proposition that “the rents, the use, the enjoyment [of a homestead] cannot thus be appropriated against the will of the mortgagor. ’ ’ Manifestly, this dictum, even, gives the majority no support, because the appropriation here is not “against the will of the mortgagor,” but upon his written consent.
Though that is not needed, the fact is that the enforcement of this contract can inflict no substantial injury upon the mortgagor. Though possession be taken, and, if you please, rents and profits thereby created, this can work none but a sentimental injury to the mortgagor — cannot cause him material or tangible injury. If the event prove that the sum realized from taking possession during the year of redemption, plus what is realized from the sale of the premises, is as much or more than the mortgage debt and the expense of foreclosing, a restoration is automatically worked. If it becomes necessary to supplement the proceeds of sale with the rents and profits, then, of course, the debtor has suffered no injury: he has simply been compelled to perform his contract and to pay his debt. In no contingency can the seizure in the year of redemption work a payment of more than the debt. On the other hand, when foreclosure is begun,"say, for default in interest, there is always a possibility that, by the time the year of redemption has expired, property thought adequate may prove inadequate. If possession be not yielded, the creditor may lose. But though it be yielded, the debtor cannot lose.
When the mortgagee makes default, and in equity owes the payment of the debt, there would seem to be no good reason why he should be permitted to compel the creditor to wait for the receipt of the first dollar until a year after sale. The creditor may well insist, and therefore contract, that, if the mortgagor becomes in default, the creditor shall have the use of so much money as may be obtainable from immediate possession, acting as a trustee who is bound to make restoration if finally it appear that he is not entitled to retain any or all of the rents and profits, or the proceeds of having obtained possession.
*364In final effect,, the majority holds this: The statutes on homesteads forbid a contract that, if default be made on a mortgage duly pledging the homestead, the court shall appoint a receiver to take possession during the year of redemption, who shall apply the rents and profits to the mortgage debt, and that the court shall so appoint without inquiry as to whether the mortgagor is or is not insolvent, nor into whether the security is adequate. In my judgment, no case cited, or that can be cited, so rules, and no statute has such prohibition. No doubt such contract is or may prove harsh. But that affords no warrant for disregarding it.
II. The appellees pleaded:
“That the mortgage security for the payment of the debt secured by cross-petitioner’s mortgage is ample and sufficient to pay said debt, principal, interest, and costs, and that, by reason of said fact, said cross-petitioner has no right to the appointment of a receiver in this cause. ’ ’
This was an appreciation of where the burden of proof lies. So, appellee conceded that, if you grant that, despite contract, the debtor may not be interfered with as to possession or rents and profits, so long as he is solvent, or the mortgaged property is sufficient security, that that is matter which avoids the contract. If all else be granted, then there should be a reversal here because no evidence was adduced to support this plea. If the majority errs in nothing else, it does so in overlooking that, on its own theory, appellant was entitled to a receivership unless appellee proved said matter of avoidance which he pleaded as such. In any view, the appellant can enforce this contract unless it appears that the security is inadequate, etc. The majority defeats appellant because he failed to prove what it was the duty of his adversary to prove.
Passing that, the record quite suggests that the security is doubtful. The note secured by mortgage is for $200. It is dated March 5, 1917. It bears 7 per cent interest, payable annually, defaulting interest or defaulting principal to draw 8 per cent. It is shown that nothing has been paid except two $7.00 installments of interest, the last one paid on June 8, 1918. The property is Lot 5 in Block 3 in Lowe’s Addition to the city of Sigourney, Iowa. There is no evidence of its value. The lien *365of appellant has fifth pla.ce. The claims that have precedence over it are, respectively, one for $236.67, with interest at 8 per cent from October 7, 1912, with costs taxed at $28.30; a claim of $131.06, with interest from March 29, 1913, at 6 per cent interest on $96.79 thereof, and interest at 8 per cent on $34.27 thereof, and for costs taxed at $1.25; one for $195.35, with 8 per cent interest from May 10, 1915, and costs taxed at $7.50; and another for $1,366.17, with interest thereon at 8 per cent from the date of decree, with costs and attorney fees.
I would reverse.