Hall v. Mobile & Montgomery Railway Co.

MANNING, J. This cause is brought before us upon a cross-appeal. It was here before upon a contention different from the one now raised. The question is, whether or not the Mobile & Montgomery Baiküay Company, purchaser of the property of the Mobile & Montgomery Bailroad Company, is bound in equity to pay rent for the real estate in controversy, during the time it had the possession and use thereof, to the holders of the unpaid notes executed for the purchase-money, by the railroad company, to Mr. Perry. Counsel for appellants, the holders of these notes, insist that the railway company is liable for such rents, not exceeding the interest that annually accrued upon the notes. A restatement of some of the facts, will aid us in the solution of the question. When Mr. Perry conveyed the real estate, lately constituting the depot and its appurtenances, in Mobile, of the Mobile and Montgomery Bailroad Company, to that corporation, he expressly reserved in the deed what was called therein “a vendor’s lien” upon the property, to secure the payment of the notes given for the price; and he took back from the company its irrevocable letter of attorney, authorizing Perry, or the transferrees to whom he should negotiate the notes, to sell, from time to time, so much of this property as should be necessary to pay them. The title he conveyed to the company was not conveyed back to him by a mortgage in regular form. But he was clothed with a power to sell it as an attorney in fact of the company, and in its name, for the purpose of paying the notes. Now, what was the nature of the interest in the real estate [22] in question, that tbis transaction created in Perry ? If it made him, in effect, a mortgagee, and the possessory right of the company was substantially that of a mortgagor, counsel for appellant concede, as we understand, that the company, or the purchaser from it, would not be accountable for the rents until possession of the property was taken, or at least demanded by the mortgagee. But it is contended that Perry had only a vendor’s equitable lien, and therefore, the rule in relation to mortgaged property, was not applicable. Whether a different rule would be applicable, if that were so, we need not inquire. It appears to us that by the provisions of his sale, Perry acquired an equitable mortgage. In the new and valuable work of Jones on Mortgages, it is said : “ There are as many kinds of equitable mortgages, as there are varieties of ways in which parties may contract for security, by pledging some interest in lands. Whatever the form of the contract may be, if it is intended thereby to create a security, it is an equitable mortgage; ” that is, of course, if it is not a legal mortgage.' — § 162. And again he says, upon the authority of adjudged cases : “An express reservation, in a deed, of a lien upon the land conveyed, creates an equitable mortgage ; and when the deed is recorded, every one is bound to take notice of the incum-brance. Thus, where land was sold, and for the purchase-money several promissory notes of the purchaser were taken, and these were described in the deed of conveyance and expressly made a lien upon the lands conveyed, a purchaser on execution obtained only on equity of redemption subject to such lien. — Id. § 228. , And in regard to the difference between a vendor’s equitable lien and an equitable mortgage, the same author says : “A lien for the purchase-money expressly reserved by the vendor in his deed of conveyance, is a lien created by contract not by implication of law. It is a contract that the land shall be burdened with a lien until the note is paid. It is really a mortgage. Thedien then becomes a matter of record when the deed is recorded. It is not waived by the taking of other security, as is the case with an ordinary vendor’s lien. It is governed by the same rules that a mortgage is. It passes by an assignment of the note secured by it. It is foreclosed as a mortgage; and there is the same right of redemption for a limited period after the foreclosure sale.”— § 229. And of a like lien reserved in a deed of conveyance, Justice Bbadley of the Supreme Court of the United States, says, it “is equal to a mortgage,” and “the purchaser has the equity of redemption, precisely as if he had received a deed [23] and given a mortgage for the purchase-money.” — King v. Young Men’s Association; 1 Woods, 386. These passages are directly applicable to the deed executed by Perry, which is under consideration in this case. The notes for the purchase-money are particularly described in it, and a vendor’s lien to secure payment of them, is expressly reserved. The security thus provided by the contract of the parties, is an equitable mortgage. And it is the first case which has come under our observation, of an equitable mortgage, to which a ipower of sale was annexed. This power is conferred by the letter of attorney executed by the company to Perry ; and it was intended to pass and be available to the transferrees, respectively, of the several notes. But owing to the number of them, and the variety and opposition of their interests, if not also to other difficulties, the exercise of this power became so embarrassed, that the aid of a court of equity was properly invoked, to obtain a sale under its direction. In this suit, therefore, Mr. Hall and the other holders of the notes stand as mortgagees. The assignment of the notes, carried to them the security, provided for their payment. The Mobile & Montgomery Bailway Company, purchaser of the rights and interests of the Mobile & Montgomery Bail-road Company, acquired the mortgagor’s equity of redemption. And because the property in question, which is subject to some older incumbrances, is not of sufficient value to pay the notes — those mortgagees, appellants in this cause, claim rents of the railway company, at least to an amount not exceeding the annual interest on the notes. But why should the railway company’s obligation depend upon, or to any extent be regulated by the interest that acr crued on these notes ? With the mortgagor’s notes or the interest due upon them, one who purchases his equity of redemption in the mortgaged property, without any stipulation on his part to pay them, need have nothing whatever to do. They are not the measure of any liability which the law casts upon him; for he does not by his purchase become personally liable for the mortgage-debt. He may give up the property at any time in satisfaction of the lien. — Jones on Mort. § 7H8, and cases referred to. Even if the purchaser of an equity of redemption take a. deed of it, which expressly declares it to be conveyed subject to a specified mortgage, he does not thereby become liable for the mortgage-debt. To create such a liability, there must be words which clearly import that the grantee assumed the obligation of paying the debt. — § 748, and cases cited. But there is- nothing in the transfer in this case, from [24] the railroad company to the railway company, which obliges the latter to pay any debt of the former company to anybody. The learned counsel for appellant, Hall, spoke of the railway company, as if it were a mere voluntary grantee of the property, almost as an intruder without any right, legal or equitable. In this he was incorrect. That company was composed of the holders of the bonds of the railroad company. It owed them money to a very large amount. And being unable to obtain payment, they purchased with these bonds all its railroad property and rights of property under the mortgage made to secure payment of them. Between the two companies, at least, there was an ample and valuable consideration. And the railway company acquired all the property and rights, to their fullest extent, of the railroad company, without, as we have seen, becoming responsible for its debts. What were its rights in respect to the rents in question ? So long as a mortgagor is allowed to remain in possession, he is entitled to receive and apply to his own use the income and profits of the mortgaged estate. He is not liable for rent. Nothing in the law of mortgages is better settled than this. Although the mortgagee may have the right to take possession upon a breach of the condition, if he does not exercise this right he cannot claim the property. And this is true of a railroad as well as of any other property. If the mortgagees want it, they must take possession of the property, or pending a bill to foreclose the mortgage, apply for the appointment of a receiver. And even a receiver, when appointed, cannot recover income then in the hands of an agent of the.mortgagor, which accrued before the receiver was appointed. — Noyes v. Rich, 52 Maine, 115. See, also Railroad Company v. Cowdrey, 11 Wallace, 481. Appellant’s counsel has very forcibly and earnestly presented his views of the abstract rights of the parties to this cause. We cannot adopt those views and apply them as rules of law, without departing from some of the best established principles in the law of mortgages, and attempting to navigate narrow seas without regard to the charts made after numerous and careful explorations, by which our course should be guided. In respect to the extracts from the reports of the President of The Mobile & Montgomery Railway Company, to the stockholders, and from the accounts of the corporation : they certainly show that it was supposed, by some of the company’s officers, that it was its duty or interest to pay the notes executed to Perry. But these extracts relate to ma,t25 ters and things done witbin the corporation, and in respect to which the members might well express their views, and the corporation retain a record of them, without contracting thereby liabilities to third persons. And a corporation, like an individual, may change its purposes, without violating any legal duty to others. Counsel for appellants did not himself think that the proceedings referred to amounted to an assumption of the railroad company’s debt to his clients, and therefore, did not claim that it was bound to pay the principal of that debt; yet the extracts they have produced refer as much to the principal as to the interest. The latter is as much a part of the company’s debt as the former, and as distinct an assumption of it as of the principal, would be necessary to make the railway company personally liable for it. The chancellor committed no error in the particulars indicated by the assignment of error, and his decree must be affirmed.