Planters Oil Mill v. Carter

Fish, C. J. (After stating the foregoing facts.) “Receivers are not appointed as matter of right, but to preserve rights.” “The power of appointing receivers and ordering injunctions should be prudently and cautiously exercised, and except in clear and urgent eases should not be resorted to.” Civil Code, ■§ 5477. The principal ground on which courts of equity are called upon to lend their extraordinary aid by the appointment of receivers over mortgaged property is the inadequacy of the security for the payment of the mortgage indebtedness. This inadequacy consists of two elements, viz., the insufficiency of the mortgaged premises per se as a fund for the payment of the debt, and the insolvency of the mortgagor or other person primarily liable for the indebtedness, whose duty it is to make good any deficiency in the security. Stated in general terms, the well-established rule, deducible from the clear weight of authority, is, that in all cases where the rents of the property are not specifically pledged as security for the debt, to entitle the mortgagee to a receiver for the mortgaged premises, and for the rents and profits, he must show, first, that the property itself is an inadequate security for the debt with interest and costs of suit; and, second, that the mortgagor, or other person who is personally liable for the payment, is insolvent, or beyond the jurisdiction of the court, or of such doubtful responsibility that an action against him for the deficiency would prove unavailing. High on Receivers, § 666. In the application of this [815] rule, the courts require satisfactory proof, both as to the inadequacy of the security and the insolvency of the mortgagor or other person liable for the debt; and unless both these conditions 'are shown to exist, no satisfactory cause is presented to warrant the interference of equity. Ib. § 667. See, to the same effect, Beach on Receivers, § 524; Alderson on Receivers, § 417 et seq.; and the many adjudicated cases cited by these authors. In the case at bar it is manifest that the plaintiffs, according to the evidence which we have •been at some pains to particularly set forth, did not show a clear and urgent case for a receivership over the mortgaged property in order to preserve their rights. According to the evidence of the plaintiffs themselves, who testified on the hearing, the mortgaged property was amply sufficient for the payment of all the mortgage indebtedness, as well as the taxes due on the property and any premiums for insurance that the mortgagees might advance. Indeed, if the notes payable to J. & J. S. Carter did not, in their hands, represent a valid indebtedness against the mortgagor, because of a failure of consideration (which is seemingly true), then the value of the mortgaged property was something like at least five times as great as the valid mortgage indebtedness. Moreover, under the evidence submitted in behalf of the plaintiffs, it could not be said that the mortgagor was shown to be insolvent. Again, it appeared that the mortgagor had leased the mill plant, and had transferred the lease to the mortgagees, in order that they might be entitled to receive whatever profits might accrue from the operation of the mill by the lessees, as further security for the mortgage indebtedness, and that the term of the lease had not expired. From the nature of the order passed by the trial judge, we assume that .he was of the opinion, from the evidence submitted to him, that the plaintiffs were not entitled to a receivership on the ground of the inadequacy of their security and the insolvency of the •mortgagor, but, as the mortgagor had suffered taxes to remain unpaid, and had failed to keep up insurance on the mill propérty, that a receiver should be appointed unless the taxes- should be paid and the. insurance procured by the mortgagor; Under the facts .of the.case, we can not concur in this view. There was a stipulation in the mortgage to the effect that the mortgagor should procure insurance on the mill property in a given amount, and should keep it up for the benefit of the mortgagees; and in the event-of its [816] failure to do so, then the mortgagees might have the property insured for a like amount, and the cost of insurance should become a part of the mortgage indebtedness. In view of this agreement, we are of the opinion that the failure of the mortgagor as to the insurance was not cause for the appointment of a receiver, as the mortgagees had the right, under the contract, to protect their security in this respect; especially when the excess of the value of the property over the indebtedness is considered. The exact point was before the Supreme Court of Idaho in the case of Eureka Mining etc. Co. v. Lewiston Navigation Co., 12 Idaho, 472 (86 Pac. 49), and it was held: “Where a mortgage provides that the mortgagor shall keep the property insured, and that in case he fails to do so the mortgagee may insure, and that all sums paid by the mortgagee for insurance shall become a part of the mortgage debt and be secured by the mortgage lien, a failure to insure by the mortgagor will not amount to such waste of the security as to authorize the appointment of a receiver to take charge of the property.” In Ray v. Carlisle, 125 Ga. 316, it was held: “Even if the claims of the plaintiff were of such character that the property in controversy was either legally or equitably charged with their payment, the fact that the building is uninsured, and in the event of its destruction by fire the land could not be sold for a sum sufficient to pay the amount claimed by the plaintiff, does not constitute such a ‘ manifest danger of loss or destruction’ of the property as would warrant the appointment of a receiver to take charge of the same and impound the rents therefrom.” In view of the evidence, showing the value of the mortgaged property so largely in excess of the valid indebtedness secured by the mortgage, the mere fact that the mortgagor suffered the State, county, and municipal taxes to the amount of $366.13 to accumulate and remain unpaid did not authorize the appointment of a receiver. It was not made to appear that the security of the mortgagees would manifestly be impaired, even if a portion of the mortgaged property should be sold for taxes. It was not shown that the property was' of such character that the executions could not be levied upon some separable part thereof which could be sold without interrupting the operation of the mill. Judgment reversed. All the Justices concwr.