Federal Land Bank of Louisville v. Schleeter

Fansler, C. J. —Appellant had judgment against appellees foreclosing a mortgage upon real estate. The land was sold to appellant under the decree. The purchase price was not sufficient to pay the judgment. After the sale, appellant filed a verified petition for the appointment of a receiver to collect the rents and profits upon the real estate during the year of redemption. It was alleged in the petition that, in addition to the deficiency, taxes had been permitted to become delinquent, and that appellees, Edward Schleeter and Mary Schleeter, were insolvent. Said appellees answered by *12 general denial, and that they were the owners of the real estate in question, and in possession and occupying the real estate as their home, and cultivating the entire tract of real estate, which is a farm, and that none of said land was leased or rented. By the terms of the mortgage the owners “convey and mortgage unto the party of the second part, its successors and assigns, the following described real estate, with its rents, issues and profits.” And there is a further provision that, upon the institution of foreclosure proceedings, the plaintiff shall be entitled to have a receiver appointed “to take possession and control of the premises, to collect the rents and profits, to put said premises in good repair, suitable for farming.” And there is a further provision to the effect that upon default the mortgagee shall “be entitled to enter into the possession of the said mortgaged premises and to collect the rents, issues and profits thereof and apply the same on the debt hereby secured.” The petition and answers were verified, and the facts alleged were not disputed. The court refused the petition for the receiver upon the theory, it appears, that,' while the mortgagee was entitled to have a receiver appointed to take charge of the rents and profits from the premises under the circumstances shown, if the premises were being occupied by a tenant, it was not entitled to that relief where the mortgagors were personally occupying the premises. Appellant earnestly contends that the mortgagor’s right to possession during the year of redemption depends upon the statute; that it is well settled that where mortgaged lands are in the possession of a tenant, and the mortgagor is insolvent, and the lands do not sell for enough to pay the mortgage debt, a receiver may be appointed during the year of *13 redemption; that the language of the statute does not permit of a distinction being made between lands personally occupied by the mortgagor and those in the mortgagor’s possession through a tenant, and that, therefore, the court erred in refusing to appoint a receiver. The statute is as follows: “The owner of the real estate or interest therein, sold as aforesaid, shall be entitled to the possession of the same for one year from the date of such sale.” §831, Burns 1926, §2-3919, Burns 1933, §623, Baldwin’s 1934. It is said in the case of Russell v. Bruce (1902), 159 Ind. 553, 555, 65 N. E. 585: “But it is equally well settled that in foreclosure proceedings an insolvent mortgagor or owner who does not redeem, and who holds possession by a tenant, as in this case, during the year for redemption, is not entitled to the rents and issues of the property as against a mortgagee purchaser whose judgment is not wholly paid; and in such case a receiver of the rents may be appointed after the sale, or before, upon proof of inadequacy of the security, and insolvency of the debtor.” The rule announced has been consistently adhered to since Merritt v. Gibson (1891), 129 Ind. 155, 27 N. E. 136. The court was divided in its opinion in the latter case. The entire court seems to have agreed that, where the mortgagor is in actual possession of, and is living upon and occupying, the mortgaged property, his insolvency, and the fact that the land did not sell for enough to pay the mortgage debt, will not afford a sufficient basis for the appointment of a receiver. The difference of opinion arose upon the question of whether or not a distinction can be made and a different rule applied in cases where the mortgaged property is in the possession'of a tenant. The majority opinion holds that where the mortgaged lánds were rented and in the pos *14 session of a tenant, and the mortgagor was shown to be insolvent, and the lands did not sell for enough to pay the mortgage debt, a receiver was properly appointed. The court did not expressly decide that a different rule would apply to cases where the mortgagor is personally occupying the land, but such, a distinction is necessarily implied, and in all of the cases since Merritt v. Gibson, supra, this court has carefully limited the rule that a receiver may be appointed during the year of redemption to cases in which the property is in the possession of the tenant, thus indicating an adherence to the view that a receiver may not be appointed where the mortgaged property is occupied by the mortgagor. Appellant relies upon the case of World Building, Loan and Investment Co. v. Marlin (1898), 151 Ind. 630, 635, 52 N. E. 198. Concerning the above-quoted statute, this court said: “We think it clear, therefore, that the possession for one year from the date of sale provided for in section 779 (767), supra, being section 2 of the redemption law of 1881, is not limited to the actual occupancy of the person named in said section, but means that he is entitled to possession in person or by tenant or grantee for such year; . . .” But the only question considered in that case was whether the mortgagor is entitled to the rent during the year of redemption if the land is occupied by a tenant, and the words “is not limited to the actual occupancy of the person named,” seem to imply that there was no question but that a mortgagor personally occupying the mortgaged land is entitled to possession during the year of redemption. The purpose of the statute was to protect the mortgagor in his possession during the year of redemption, and it seems never to have been doubted that, when he personally occupied, his possession would not be dis *15 turbed because of insolvency or inadequacy of the proceeds of the sale of the land to pay the mortgage, and we adhere to that view. With the question of whether or not the language of the statute permits of a distinction being made in cases where the property is occupied by a tenant, we are not concerned in the instant case. In none of the cases does the court seem to have given any consideration to the question of whether there were provisions for the appointment of a receiver in the mortgage, but such provisions can be of no controlling force since it is well settled that conditions in a mortgage tending to limit or defeat the right of redemption are void. Wilson v. Carpenter (1878), 62 Ind. 495; Turpie v. Lowe (1888), 114 Ind. 37, 15 N. E. 834. The statute providing for possession by the mortgagor during the year of redemption must be deemed a part of the redemption statute, and they must be construed together. The same public policy which forbids the defeat of the right of redemption by the terms of the mortgage must extend to the quoted section, and forbid the enforcement of any part of the agreement tending to limit the right to possession' therein provided for. There are cases where a court of equity may appoint a receiver pending the year of redemption, or even before foreclosure, but these cases involve the protection of the security. The mortgage and the statute construed together give the mortgagor the right to possession until default, judgment, and sale of the property, and for one year thereafter. No circumstance has been called to our attention which would justify the appointment of a receiver for the property during the year of redemption when it is in the actual possession of the *16 mortgagor that would not justify the appointment of a receiver before judgment. Judgment affirmed.