Federal Farm Mortgage Corp. v. Holm

PER CURIAM. Plaintiff has appealed from an order of the circuit court of Faulk County made upon the final report of the receiver who was appointed in a foreclosure proceeding to collect the rents and profits from the mortgaged premises. Plaintiff acquired a mortgage executed to the Land Bank Commissioner by Mathew Holm, now deceased, and his wife, Margaret Holm, to secure a note in the sum of $6,500, which mortgage was expressly subject to a first mortgage to the Federal Land Bank of Omaha in the *562 sum of $16,500. This action was commenced against the administratrix of the estate of Mathew Holm and others to foreclose the second mortgage. The mortgage contained the following recital: “In the event suit is brought in equity to foreclose this mortgage, the Court may appoint a Receiver to take and hold possession of said premises During The Course Of Such Proceeding, to collect the rents and profits therefrom for the benefit of the Mortgagee, to pay the taxes upon said premises, to keep the same in repair, and to apply the balance upon the mortgage indebtedness.” On March 15, 1937, an order was entered appointing H. L. Norton receiver of the premises with the usual powers of receiver in such cases. There was no appeal from this order and the receiver remained in possession and collected rents and soil conservation payments during the period of redemption. Judgment was entered on April 16, 1937, and the premises were sold for $5,341.10, leaving a deficiency of $2,000. Plaintiff was the purchaser at the foreclosure sale and after the expiration of the period of redemption received a deed. On May 17, 1937, plaintiff and the Federal Land Bank of Omaha entered into an agreement with Margaret Holm individually and as administratrix of the estate of her deceased husband wherein the mortgagees released Margaret Holm and the estate from personal liability in consideration of the assignment of 165 shares of stock in the James Valley National Farm Loan Association which stock had been pledged as additional security for payment of the Federal Land Bank loan. The receiver collected $318 as rent and soil conservation payments in the amount of $519.47 and expended $871.60 for seed grain. Defendant administratrix, prior to the commencement of this action, had leased the mortgaged premises! She agreed to furnish seed grain and to pay a specified portion of the expenses of harvesting and threshing. Funds were furnished by the plaintiff, the Federal Farm Mortgage Corporation, for the purpose of purchasing seed to enable the receiver to comply with the terms of the lease. On October 31, 1938, the receiver filed an amended *563 final report showing receipts of $837.47, disbursements of $891.75 and payment of lessor’s share of the expenses of harvesting and threshing by offsetting the cash rentals accruing under the terms of the lease. Objections were filed to the report and upon hearing the objections the court entered an order directing the payment of the amounts collected by the receiver to the administratrix of the estate of deceased mortgagor. Respondents contend that since- the receiver held the funds subject to final disposition by the court plaintiff cannot appeal from the order. Respondents' did not question the accuracy of the account rendered by the receiver and no appeal was taken by him. Whether or not the order of the court was a matter of concern to the receiver and from which order he could appeal, we need not determine. This appeal was perfected prior to July 1, 1939, and under the statute then in effect a party aggrieved had a right of appeal from a final order affecting a substantial right made upon a summary application in an action after judgment. §§ 3145 and 3168, Rev. Code 1919. We are satisfied that plaintiff was a party aggrieved and entitled to assert its claim to the funds collected, by the receiver. The fact that the receiver has not appealed does not affect the right of the plaintiff to assert its claim. A mortgagee has a mere lien upon the mortgaged premises and holds the same as security only for the debt or obligation. SDC 39.0204. If the rents and profits have not been pledged, it is the general rule that the owner of the equity of redemption is entitled to possession of the mortgaged premises and the rents and profits therefrom until execution of deed to purchaser at foreclosure sale. Knudson v. Powers, 56 S. D. 613, 230 N. W. 282; Hulseman v. Dirks Land Co., 63 S. D. 404, 259 N. W. 679. See also Bickert v. Cargill Elevator Co., 64 S. D. 112, 264 N. W. 817. Respondents contend that the provisions of the mortgage to the effect that the court in the event of foreclosure by action may appoint a receiver to take possession and collect the rents and profits for the benefit of the mortgagee did not give plaintiff a lien upon the rents and profits *564 arising from the premises, and that if the mortgage be otherwise construed the necessity for the appointment of a receiver ceased and he should have been discharged after deficiency decree was satisfied by a transfer of the shares of stock in the James Valley National Association. If it be conceded that respondents were entitled to the rents and profits of the premises until the time of redemption had expired and execution of the deed to the plaintiff, we do not think it follows that the estate of the deceased mortgagor was entitled to the rents and profits without reimbursement for amounts necessarily expended for seed to enable the receiver to comply with the terms of the lease entered into by defendant administratrix. The receiver in obedience to the order of the court and without objection on behalf of respondents took possession of the premises and continued to act without objection. The expenditure for seed grain would necessarily have been made if defendant administratrix had remained in possession, and should be paid from the amounts collected by the receiver. 53 C.J. p. 301 note 84. Dealing with a situation similar in many respects to the instant case, this court in Knudson v. Powers, supra, held that where the mortgagors had acquiesced in a receivership of the mortgaged property, they could not oppose the allowance of a reasonable compensation out of proceeds collected by him. Respondents contend that the receiver was not entitled to receive the payments made under the Soil Conservation and Domestic Allotment Act, 16 U.S.C.A. § 590a et seq., and that the receiver must be held to have possession of these funds as trustee for respondents. Under the provisions of this Act, payments for 1937 were made to .agricultural producers if they conformed with the practices determined by the secretary of agriculture to be necessary to effectuate the purposes of the Act. § 590h. The Act did not then contemplate that the proportion of the payments which a land owner was entitled to receive should constitute a gratuity. We can perceive no ground upon which respondents are entitled to the payments in .question without reimbursement for amounts necessarily expended for seed grain. *565 The extent to which the receiver contributed to these practices was determined by an agency of the Federal Government and payment was made'accordingly. If the receiver collected these payments as trustee for the use and benefit of respondents as contended by counsel, we think it would be inequitable to require him to account for these "funds to the respondents without deducting the amounts expended for seed. The respondents sustained no loss by reason of the receivership. A normal crop was not produced because of drouth, and the expenses incurred were more than the proceeds collected by the receiver. For the reason indicated the order of the lower court is reversed and the cause remanded for further proceedings not inconsistent herewith. SMITH, P.J., and POLLEY, ROBERTS, and RUDOLPH, JJ., concur. WARREN, J., dissents.