Schaeppi v. Bartholomae

Mr. Justice Hand delivered the opinion of the court: The appellant, Paul Schaeppi, has assigned as error, and Emil R. Haase, the receiver, has assigned as cross-error, the action of the superior and Appellate Courts in refusing to approve said receiver’s report, and the only question discussed in this court is the legality of the order of the superior court directing the receiver to pay said sum of $152.23 to George Bartholomae, instead of to appellant, Schaeppi. The sole objects of the several trust deeds sought to be foreclosed in this proceeding were to secure the payment of the several sums of money mentioned therein, and in case of foreclosure and sale during the time of redemption the grantor in the trust deeds was entitled to the possession of the premises and to receive the rents, issues and profits thereof. If, however, the' premises were inadequate security, the person liable to pay the indebtedness insolvent, the person in possession of the premises committing waste, or other equitable grounds were shown and any part of the decree of foreclosure was not satisfied by the sale, the court in which the foreclosure suit was pending might, through a receiver, and not otherwise, appropriate the rents, issues and profits arising from the premises during the period of redemption for the purpose of paying the portion of the indebtedness which was not satisfied by a sale of the premises. The result of the foreclosure proceedings was to merge said trust deeds into the decree, and the purchaser at the foreclosure sale held under the decree and not under the trust deeds, and after a sale such purchaser was entitled only to such rights as were conferred upon him by the statute, which were (1) a right to a certificate of purchase; (2) a right to a deed of the premises at the expiration of fifteen months from the date of sale, in case no redemption of the premises was made; and (3) in case of redemption, to receive back the purchase money,.with interest, and any taxes he had paid upon the property during the period of redemption. It is urged, however, that by virtue of the provision found in the Bartholomae trust deed, the person entitled to a deed under the foreclosure sale, in case no redemption took place, was expressly granted the rents during the period of redemption, and that no redemption having taken place and a deed having been made to George Bartholomae, he was entitled to the rents arising from said premises during the period of redemption. We cannot accede to this contention. The provision with reference to rent, found in the trust deed, was a covenant between the grantor in the deed and the cestui que trust, and prior to the foreclosure sale was merged in the decree of foreclosure, (Davis v. Dale, 150 Ill. 239; Lightcap v. Bradley, 186 id. 510; Haigh v. Carroll, 209 id. 576;) and the purchaser at said sale took title under the decree, and he can claim no right by virtue of said provision found in the trust deed with reference to- rent. In Davis v. Dale, supra, the trust deed provided that the grantors should pay the taxes and assessments levied upon the property described in the trust deed, and should not suffer the premises, or any part thereof, to be sold or forfeited for any tax or assessment, and that upon default in the performance of any of the covenants of the trust deed the trustee, or any person appointed by the court, might take possession of the premises, collect the rents, issues and profits, and apply the same toward the payment of taxes, etc. A bill was filed to foreclose the trust deed, and a decree of foreclosure and sale was made and the premises were sold by the master to the complainant for the full amount of the decree. A receiver had been appointed upon the filing of the bill, who remained in possession of the premises during the period of redemption, and upon his final report coming in, he was ordered by the court to pay the taxes upon said premises, which had accrued during the period of redemption, under the provisions of said trust deed, out of the rent in his hands which had been earned during that period. That decree, upon appeal to the Appellate Court for the First District, was reversed, and upon a further appeal to this court the judgment of the Appellate Court was affirmed, and it was held that the only, object of the appointment of the receiver was to preserve the security and to collect and apply the rents and profits to the payment of the indebtedness secured by the trust deed, and that the indebtedness having been satisfied by a sale of the premises, there was no occasion for the continuance of the receivership, but as the grantor was entitled to the rents and profits arising from the premises during the period of redemption, the receiver would be treated as having been in possession of the premises for his benefit. It was, however, urged that the complainant, who was the purchaser at the foreclosure sale, was entitled to have the taxes which had accrued during the period of redemption, paid out of the rents earned during that period by virtue of the provisions of the trust deed. In reply to that contention the court, on page 243, said: “The contention of counsel for appellant that in some way the purchaser at the master's sale acquired equities, under the clauses and covenants of the trust deed, for the payment of taxes by the grantor, is equally untenable. By virtue of the lien created the mortgagee or cestui que trust had the right to have the security foreclosed and the property sold and the proceeds applied in payment of the secured debt. But when this has been done and the lien enforced by a sale of the property and the proceeds applied, the mortgage or trust deed has expended its force and the property is no longer subject to its provisions. (Ogle v. Koerner, 140 Ill. 170; Seligman v. Laubheimer, 58 id. 124.) Nor does it in any way affect the result that the holder of the secured indebtedness becomes the purchaser at the sale, whether he be the mortgagee or cestui que trust, or not. By becoming the purchaser a new relation created by the statute exists, in nowise dependent upon any privity of contract between the purchaser and mortgagor.” In Lightcap v. Bradley, supra, the court held that upon the foreclosure of a trust deed in the nature of a mortgage all the rights and liabilities growing out of the trust deed are merged in the decree, and that upon a sale of the premises under the decree the only interests of the purchaser at the sale are those rights which are evidenced by the certificate of purchase. In Haigh v. Carroll, supra, a trust deed was foreclosed upon a leasehold interest. One of the complainants purchased the premises at the foreclosure sale for the entire amount of the decree. A receiver had been appointed, who remained in possession of the premises during the period of redemption. He paid out of the rents collected by him from the property, something like $7000 for ground rent, taxes, insurance, etc. The trust deed provided that any rents that might be collected, less a commission of five per cent for collecting, after the foreclosure sale and before the time of redemption had expired, should be paid to the purchaser of the premises at the foreclosure sale. On a contest over the approval of the master’s report it was held that, notwithstanding said provision in the trust deed, the rents did not pass to the purchaser at the foreclosure sale, but that they belonged to the owner of the equity of redemption; that all the complainants were entitled to was to have their debt paid, and that all the purchaser was entitled to were such rights as he acquired by the certificate issued to him upon the sale. It could there have been urged, as it is urged here, that by virtue of the provisions of the trust deed the purchaser should receive the rents during the period of redemption, as he must be held to have bid more for the premises than he would have bid but for such provision, and that he should be protected in his bid by being decreed the rents collected during the period of redemption. It is, however, clear, that whatever rights the purchaser obtained at the foreclosure sale were represented by the certificate of purchase, and that the rents did not pass to him by virtue of said certificate; that his rights as such purchaser were created by the statute, and were in nowise affected by the provisions of the trust deed; which were merged in the decree of foreclosure. In the Haigh case, on page 581, it was said: “Reliance is placed upon that provision of the trust deed to the effect that during the period of redemption the rents of the mortgaged premises shall be paid to the purchaser at the foreclosure sale. So far as that provision is concerned the sale satisfies the mortgage and renders all its provisions inoperative. They were effective only for the purpose of securing satisfaction of the mortgage debt. When that purpose was accomplished their force was entirely spent.” And again: “The rights of the complainants under the trust deed were at an end, and as the purchasers had no right to the possession or rents until' the certificate of purchase had ripened into a deed, it is apparent that no right existed by which either the complainants or the purchasers could control the money arising from rent during the redeiirption period.” The debt secured by the Bartholomae trust deed, with the éxception of $540.92, was satisfied by a sale of the premises. That amount, with interest, out of the rents in his hands arising from the premises, was tendered to the executor of Phillip Bartholomae by the receiver, which paid the Bartholomae foreclosure decree and was a satisfaction of that indebtedness. The holder of such indebtedness having received payment thereof must be satisfied, and the purchaser of the premises covered by the Bartholomae trust deed, no redemption having taken place, having received a deed for the premises, has received all that under the statute he is entitled to, and must also be satisfied. The balance remaining in the hands of the receiver, to-wit, $152.23, under the decree, is overplus, and should be paid to the appellant as the holder of the junior encumbrance. The judgment of the Appellate Court and the order of the superior court will be reversed, and the cause will be remanded to the superior court for further proceedings in accordance with the views herein expressed. .Reversed and remanded.