Gillett v. Romig

*334 Opinion of the court by HaiNER, J.: The record in this case discloses that the affidavit upon which service by publication was based, and which was made upon information and belief, was untrue, and that at that time, and long prior thereto, Myrtle Gillett was a resident of Kingfisher county, and by the exercise of the slightest diligence this fact could have been ascertained. . We do not wish to be understood as holding in this case that a mere defective affidavit, upon which service by publication is based, would be sufficient to render a judgment based upon it absolutely void, but when the evidence establishes the fact that the affidavit was false, and that the defendant at the time was not a non-resident of the territory, but in fact a lona 'fide resident of the territorjq and by the exercise of the slightest diligence such residence could be known to the plaintiff, and these facts are conclusively established by the evidence, it must follow as an irresistable conclusion that the judgment cannot be permitted to stand, for the reason that the court acquired no jurisdiction. In the former trial, the error committed by the court was this: That Harding being a grantee of the mortgage in possession, his right and his possession could not be disturbed by the mortgagor or his grantee, Myrtle Gillett, until the mortgage debt, and interest, and all proper charges were fully paid. In other words, the maxim that “he who seeks equity must do equity," applies and before the rights of Harding could be determined, and his possession disturbed, it devolved upon Myrtle Gillett, the grantee, of the mortgagor, to do full equity and these we think are the views of *335 the supreme court of the United States, as expressed in Romig v. Gillett, 187 U. S. 111. In this case the supreme court of the United States seemed to be of the opinion that the decision of the supreme court of Oklahoma was based merely upon the fact of the defective affidavit upon which the service by publication was had; but the decision of the trial court, as well as the decision of our court, was based upon a broader ground than the mere fact of a defective affidavit for service by publication; that is, that at the time the defective publication notice was had Myrtle Gillett was a resident of Kingfisher county, Oklahoma, and no evidence having been offered in opposition to this fact on the motion to set aside the foreclosure proceedings, therefore it must be taken as true. But the error that the trial court, as well as this court, fell into, was in dispossessing Harding before doing full equity in the premises. Mr. Justice Brewer, on page 116 of the opinion, says: “By virtue of the proceedings the mortgagee was put into possession — a possession which he transferred to the appellant, Harding. Under those circumstances what right has the appellee, a grantee from the mortgagor? The foreclosure was a proceeding in equity, although its various steps were prescribed by statute. Equitable principles must control the measure of relief. Even if the publication had been founded upon an affidavit perfect in form and the decree and all proceedings had been in strict conformity to the statute, yet by section 3955 the defendant would be let in to defend upon compliance with certain conditions. "Assuming that that section is not fully applicable because of the defect in the affidavit, yet the appellee comes into a court of equity seeking relief against the foreclosure of a mortgage. In such a ease there are almost always certain conditions of relief. If the mortgage be valid the rights of *336 the mortgagee and those claiming under him are to be protected.'” And again, on page 117, it is said: “She, (Myrtle Gillett) does not pretend in her affidavit that the mortgage was invalid or that it had been paid. She claims by a deed subsequent to the mortgage, and simply insists that she has not had her day in court, and therefore her rights, which, so far as appears, are only the rights of redemption, have not been cut off. Harding, as the grantee of the purchaser at' the foreclosure sale, stands in the shoes of the mortgagee. Bryan v. Brasius, 162 U. S. 415. As shown by the opinion in that case and cases cited therein, a mortgagee who enters into possession, not forcibly, but peacefully, and under the authority of a foreclosure proceeding, cannot be dispossessed by the mortgagor, or one claiming under him, so long as the mortgage remains unpaid.” The opinion then concludes as follows: “The decree of the supreme court of Oklahoma will be reversed and the ease remanded to that court, with instructions to set aside the order of the trial court, and to direct the entry of one which, without disturbing the possession of Harding, will give to the appellee the right to appear, plead and m'ake such defense as under the facts of the case and the principles of equity she is entitled to.” In other words, the appellant, Myrtle Gillett, was to have her day in court, and she was to be permitted “to appear, plead and make such defense as under the facts of' the case and the principles of equity she is entitled to.” On the other hand, Harding as the grantee of the purchaser at the foreclosure sale, and who stands in the shoes of Romig, the mortgagee, is to be fully protected, under the well-recognized principles of equity, to the end that full justice may be done to all the parties herein. *337 Since the decision of the supreme court of this territory and the decision of the supreme court of the United States in this case, our supreme court, in the case of Burke v. Malaby, 14 Okla. 650, has held that: “The provisions of sec. 48, civil code, Wilson’s Statutes, sec. .4246, requiring certain classes of civil actions to be brought in the county in which the subject of the action is situated, is, in so far as it relates to resident defendants, in irreconciliable conflict with the provisions of the act of congress, see. 10, organic act, requiring that ‘All civil actions shall be instituted in the county in which the defendants or either of them reside or may be found,’ and such provisions of the code are void as inconsistent with the laws of the United States. “An action affecting an interest in real estate in this territory where the real estate is situated in one county and the defendant resides in a different county, must be instituted in the county1' where the defendant resides.” But whether the foreclosure proceedings were absolutely void or merely voidable, or irregular and defective, one thing is sure, that the appellant, Myrtle G-illett, is entitled to have her day in court, and have her rights fully and finally adjudicated. It seems to us that the language of the supreme court of the United States that she has the right “to appear, plead and make such defense as under the facts of the case and the principles of equity she is entitled to,” is as broad and as clear as language could express it, and this is in harmony with the decision of the supreme court of the United States in the case of Terrel v. Allison, 88 U. S. 289, where Mr. Justice Field, speaking for the court, says: “It is a rule old as the law that no man shall be condemned in his rights'of property, as well as in his rights of person, without his day in court; that is, without being duly *338 cited to answer respecting them, and being beard or baying opportunity of being beard thereon.” And on page 283 tbe learned justice says: “Tbe old common-law doctrine of mortgages does not generally prevail in tbe several states of tbe Union. In most of them tbe mortgage is not regarded as a conveyance, but is treated as a mere lien or incumbrance upon tbe property .as security for the payment of a debt, or the performance of some other pecuniary obligation. But tbe owner of tbe property, whether the original mortgagor or bis successor in interest, has the same right to be beard respecting tbe existence of the debt or other obligation alleged before tbe ■propertjr can be sold, which at common law, tbe owner of tbe ■equity of redemption bad to be beard before the foreclosure •of bis equity could be decreed.” In this jurisdiction a mortgage upon real estate creates -only a lien in favor of tbe mortgagee, and neither the legal nor tbe equitable title passes to tbe mortgagee until after a valid foreclosure and a sale thereunder. Balduff v. Griswold, 9 Okla. 439. Section 3189 of the Statutes of 1893 provides as follows: “Every person having an interest in property subject to a lien has a right to redeem it from tbe lien, at any timo •after tbe claim is due, and before his right of redemption -'is foreclosed.” In vol. 3 (3 ed.) Pomeroy’s excellent treatise on-Equity Jurisprudence, section 1188, in construing statutes like ours, it is said: “The mortgage is not a conveyance, nor does it confer upon tbe mortgagee any estate in the land. It creates a lien •on tbe land, or, in apt language already quoted, ‘a, potentiality to follow the land by proper process and condemn it *339 for payment’ of the debt. The debt is the principal fact, and the mortgage is wholly incidental or collateral thereto, and intended to secure its payment. The right or interest of 'the mortgagee from being a legal estate is changed into an equitable right enforceable by an equitable proceeding; it is for all purposes and under all circumstances personal assets; it may be assigned, and passes to the mortgagee’s personal representatives on his death. The mortgagee is not entitled to possession of the mortgaged premises, and can maintain no legal action for their recovery, either before or after a breach of the condition; in fact, the mortgagor’s default produces no change in the relations of the parties or in the nature of their respective interests, except that the mortgagee thereupon becomes enabled to enforce his lien by a proceeding of foreclosure.” It is contended by appellees that the transfer of the land in controversy from the appellant, Myrtle Grillett, to Rush and Sanders pending this litigation, was void as against the rights of the mortgagee, and his grantee, Harding, who was in possession of the premises. But this contention, we think, is untenable, because Harding cannot hold the premises in controversy adverse to the rights of the mortgagor or his grantee, Myrtle Grillett. The rights of a mortgagee in possession are not adverse, and cannot be adverse to the rights of the mortgagor or his grantees. In vol. 20 A. & E. Enc. Law, page 975, the rule is thus stated: “The possession by either the mortgagor or the mortgagee of the land covered by the mortgage is not adverse as to the other, at any rate until after the mortgage is repudiated by the mortgagor, or the mortgagee has in some manner asserted an absolute title in himself to the property in his possession, or his claim is satisfied. In this respect the *340 relationship existing between them is analogous to that of a trustee and his cestui que trust.” In vol. 1, “Cyc.” page 1071, this rule is laid down: “So long as the relation of mortgagor and mortgagee exists, the possession of the mortgagee is not adverse to the mortgagor.” The possession of the mortgagee in this case, and his grantee, Harding, being based upon a foreclosure proceeding that is a nullity, in such circumstances their rights could not be adverse to the rights of the mortgagor or his grantees and their rights are to be determined merely as mortgagees in possession. Hence, we think the appellant, Myrtle Gillett, had the right to sell or transfer any interest she had in the premises pending the litigation, and that the conveyance to Rush and Sanders was valid and binding, and should have been recognized by the trial court. It was error for the court to refuse to permit Rush and Sanders to be made parties defendant, in order that their rights might be fully adjudicated in this action. But nothwithstanding the fact that appellant conveyed a part or all of her interest in the premises to Rush and Sanders, the statute gave her the undoubted right to continue the litigation in her name until it was finally terminated. And further she had the right to continue the litigation in her name for the purpose of protecting her vendor’s lien, and having her rights therein adjudicated, and also for the purpose of protecting her warranty of title to her grantees. It seems to us that the statute sets this question absolutely at rest. Section 40, page 768, code of civil procedure, Statutes of 1893, provides as 'follows: “In case of any other transfer of interest, the action may be continued in the name of the original party, or the *341 court may allow the person to whom the transfer is made, to be substituted in the action.” Our conclusion of this branch of the case is, then, that the appellant, Myrtle Gillett, and Rush and Sanders are not only proper but necessary parties to a full and complete determination of this action. But it is contended by the, appellee that it was not incumbent on Harding to look further into the proceedings of the court than the regularity of the face of the judgment itself; and that when he found it to be regular, unappealed from, and final, his title is good as against every one. This argument is fallacious, for the reason that it is based upon the assumption that the foreclosure proceedings were, in all respects, regular. He was bound to know whether the court had jurisdiction to render the decree, and this would require him to examine the service which was the basis of the decree. The record clearly discloses that the proceedings were at least irregular, and Harding was bound to take notice of the defects, and the insufficiency of the affidavit for publication upon which the service in this ease was based. But one questions remains, and that is the rights and liabilities of the mortgagee or his grantee in possession as to accounting for the rents and profits while in possession of the land without the consent of the mortgagor or his grantees. In Cook v. The Ottawa University, 14 Kans. 548, the supreme court of Kansas, speaking by Mr. Justice Brewer, lays down the following rule: “A mortgagee in possession is responsible for the rents and profits, is allowed for the ordinary repairs, but not for *342 permanent improvements placed npon the mortgaged premises merely for his convenience.” Pomeroy, in his work on Equity Jurisprudence, (3 ed.) vol. 3, section 1216, states this doctrine as follows: “The general duty of the mortgagee in possession towards the premises is that of the ordinary prudent owner. He must account, in general, for their rents and profits, or for their occupation value.”. And in section 1217 of the same volume it is said: “The mortgagee is allowed, and credited in his account, with the cost of all ordinary, reasonably necessary repairs made to the premises, and with all reasonable disbursements and expenses necessary for their proper management and protection. "Improvement: The mortgagee will be allowed for permanent improvements, increasing the value of the estate, if made with the consent or acquiscence of the mortgagor; but he cannot be allowed for such expenditures when made without the mortgagor’s consent. He is bound to keep the property without unreasonable deterioration, and is therefore credited with necessary repairs; but he has no right to enhance the value of the estate, and thus render it more difficult for the mortgagor to redeem.” Since Harding as grantee of the mortgagee and purchaser at the foreclosure sale stands in the shoes of the mortgagee, and is regarded as a mortgagee in possession, it is incumbent on him to account for the rents and profits derived fr.om the land, from the time he was put in possession thereof. The appellant, Myrtle G-iliett, or her grantee, has the right to redeem and to have these rents and profits applied to the payment of the mortgage indebtedness, which includes not only the principal sum of the indebtedness, but all accruing interests, taxes, assessments and other proper charges. *343 And, on the other hand, Harding should be allowed and credited in his account with the cost of all ordinary reasonably necessary repairs made to the premises, and with all reasonable disbursements and expenses necessary for the management and protection of the estate. And if any lasting improvements have been erected with the consent or acquiescence of the mortgagor, or his grantees, which increased the value of. the estate, just and proper allowance should be made therefor. While, as a general rule, the mortgagee, or his grantee, will not be allowed for permanent improvements which enhance the value of the estate, if made without the consent or acquiescence of the mortgagor or his grantees, this rule has been relaxed in its application to certain special conditions of fact by many American cases, as stated by Mr. Pomeroy, in his valuable note to section 1217, supra which hold that the mortgagee, or his grantee, is allowed for such improvements when made by him under the bona fide, but mistaken, supposition that he was the absolute owner of the premises, and that the equity of redemption had been barred. We think the answer and cross-petition of the appellant stated facts sufficient to constitute an equitable defense, under the well-recognized principles of equity, and therefore the court erred in sustaining the motions for judgment on the pleadings. The judgment of the district court is reversed, and the cause remanded with directions to overrule the motions for judgment on the pleadings, and to proceed further in consonance with the views herein expressed. Grillett, J., not sitting; all the other Justices concurring.