King v. Housatonic Railroad

Hovey, J. The proceedings below were upon a scire facias, to recover certain rents due from the defendants as lessees of the New York, Housatonic & Northern Railroad Company. The lease reserving the rents was executed on the 26th day of February, 1872, and was for the term of five years from the 1st day of March then next, when the defendants entered into possession under the lease. Subsequently, on or about the first day of October, 1872, the lessors, being the owners of the leased premises, mortgaged the same, with other p'roperty situate in the state of New York, to secure the payment of certain bonds of the mortgagors, amounting to the sum of two million dollars, to David S. Dunscomb and Erastus F. Mead, as trustees for those who might become holders of the bonds. .The principal of the bonds was made payable on the first day of October, 1892, and the interest semi-annually on [233] the first day of April and the first day of October in each year, upon the presentation and surrender of the interest warrants or coupons which were annexed to the bonds. And the mortgage expressly authorized the mortgagees, after six months’ default in the payment of interest, to enter into and take possession of the property mortgaged and receive the rents, income and profits thereof. Soon after the execution of the mortgage the bonds passed into the hands of bond fide holders for value, and still remain outstanding and unpaid. The mortgagors having made default in the payment of interest more than six months prior to the 15th day of March, 1875, and interest to a large amount being then due and unpaid, the mortgagees on that day gave notice thereof to the defendants and demanded of them the rents then due and thereafter to become due under their lease. Five days after-wards the plaintiff commenced a suit by foreign attachment against the mortgagors, the New York, Housatonic and Northern Railroad Company, and attached the rents then due, amounting to the sum of $2,215.60. In that suit the plaintiff recovered judgment, took out execution, placed the execution in the hands of a proper officer, and the officer, by virtue of the execution, on the 23d day of December, 1875, made demand of the present defendants of the sums contained in the execution and of any estate of the New York, Housatonic and Northern Railroad Company in their hands, but the defendants refused to comply with the demand. And on the 21st day of February, 1876, the suit upon which the proceedings below were had was brought. The court below rendered judgment in favor of the defendants; and the question is whether in so doing the court erred. It is a well settled principle of the common law that the grant of the reversion of an estate expectant on the determination of a lease for years, passes to the grantee the rents reserved in the lease as incident to the reversion. Co. Litt., 151, 152; 2 Bl. Comm., 176; 4 Kent, 354. The consent of the tenant, expressed by what was called his attornment, was, however, necessary to the perfection of the grant in England, until the fourth year of the reign of Queen Anne; but in that [234] year a statute was passed which made the grant effectual without attornment. And since that time notice of the grant to the tenant has been sufficient to entitle the grantee to demand and recover the rents. Birch v. Wright, 1 T. R., 384; Lumley v. Hodgson, 16 East, 99. Where the grant is by way of mortgage, the mortgagee, though entitled to the rents as incident to the reversion, may take them or not at his election. If he elects not to take them, as he generally does so long as his interest is paid, he may forbear to give notice to the tenant, and in that case the mortgagor is authorized to collect the rents and appropriate them to his own use. But if the mortgagee elects to take the rents and gives notice of his election to the tenant, he then becomes entitled to all the rents accruing after the execution of the mortgage and in arrear and unpaid at the time of the notice, as well as to those which accrue afterwards. But the rents in arrear at the time the mortgage was executed belong to the mortgagor. The leading authority for this doctrine is the case of Moss v. Gallimore, Doug., 279. The decision in that case seems to have settled the law in England. 2 Cruise Dig., 84; Birch v. Wright, supra; Trent v. Hunt, 9 Exch., 14. And its soundness, in view of the relations of a mortgagor and mortgagee of a reversion to each other and to a tenant in possession under a lease prior to the mortgage, cannot well be questioned. In commenting upon the decision, the learned English editor of Smith’s Leading Cases observes that it “is upon a point which seems so clear in principle that, were it not for its general importance, it would, perhaps, be matter of surprise that any case should have been deemed requisite to establish it.” 1 Smith’s Lead. Cas., 698. It is true, as suggested by counsel for the plaintiff, that the court, in making that decision, was governed by the provisions of the statute of Anne. But the principle embodied in that statute, and enforced in the case of Moss v. Gallimore, has been adopted by the courts of last resort in many of our sister states (4 Kent, 165); and was expressly sanctioned and approved by this court in the case of Baldwin v. Walker, 21 Conn., 168. In that case one Stoddard, being the owner of [235] an undivided half of certain real estate, leased it to the defendant for a term of years and afterwards mortgaged it to the plaintiff. The defendant had notice of the mortgage, but refused to pay to the plaintiff the rent due under the lease; and the plaintiff sued in an action of covenant to recover it, and judgment was rendered in his favor. The case then came to this court upon a motion for a new trial, and also upon a motion in error. Both motions were unsuccessful, and the judgment below was affirmed. Church, C. J., in giving the opinion of the court, after referring to the lease, and declaring that as between Stoddard the lessor and the defendant the lease must be treated as an effective one and as leaving when made a x'eversion in Stoddard, says: — “By his mortgage to the plaintiff this reversion, as a subsisting legal interest, was coxxveyed or assigned to the plaintiff, unless he elected to treat it as void. This he has not done, but claims, as he may, his right as mortgagee or assignee to the rent incident to such reversionciting 2 Cruise’s Dig., 111; Moss v. Gallimore, Doug., 279; 2 Swift Dig., 179; Fitchburg Manuf’g Co. v. Melvin, 15 Mass., 268. The leaxmed judge then obsexwes that, “if the lease had beeix executed after the mortgage to the plaintiff, he could not as mox’tgagee, perhaps, have any remedy for the recovery of this rent, without attornment, for want of legal priority.” That case is decisive of the one at bar and fully sustains the coui’t below in the judgment which it rendered in favor of the defendants. The judgment must, tlxerefox’e, be affirmed. In this opinion the other judges concurred.