First National Bank v. Adam

Hpton, P. J. The errors in substance in this record complained of and which we are called upon to examine, are briefly these: First. It is claimed the trial court erred in the allowance to Wm. Adam of a sum of rent too large and for a longer time than was proper or lawful; in giving the allowance so improperly made to Adam priority over the claim of apjiellant in the distribution of the proceeds of the property embraced in the trust deed of Aug. 19, 1884, and in denying the appellant’s claim of priority thereto; in allowing Adam his costs in full out of the fund produced by such sale and in allowing costs against the appellant. Second. That the trial court also erred in allowing to Geo. W. Hyde, one of the appellees, too large a sum or amount for rent accrued and accruing under the lease from him to Beibling of date August 1, 1881, and in the directions given to the receiver in the decree as to the basis of settlement and payment of such rent. Third. That the trial court erred in denying the claim of appellant to all the outstanding notes under the trust deed of March 5, 1883 (except the note held by Maria E. Hillman), a collateral security for appellant’s claims against Beibling, and in the order made for the distribution of the proceeds arising from the sale of the property in that deed of trust described in favor of Bobert Pilcher, one of the appellees. The lease from Adam to Biebling of the water power, out of which this contention in part arose, which was duly placed of record October 10, 1878, contained this, among other provisions: “Meaning and intending hereby to give the said party of the first part, his heirs, executors and administrators or assigns, a valid and first lien upon any and all goods, chattels or other property belonging to the said party of the second part (Biebling), as security for the payment of the rent in the manner and at the time thereinbefore mentioned, anything therein contained to the contrary notwithstanding.” It will be observed that the Joliet paper mill, upon the execution of the above mentioned lease, was erected upon premises entirely owned by Adam, in and to which the lessee, Biebling, had but a leasehold interest, and the buildings subsequently erected thereon were placed upon the foundation erected and existing upon such leasehold estate prior to the execution of the lease, the buildings not being attached to such foundation, and that it was explicitly agreed that such mill buildings and machinery therein to be placed were to be the property of the lessee, Biebling, upon which the lessee was to pay taxes. The taxes upon the realty was to he paid by the lessor, hy the express condition of the léase. The contention of the lessor that this was but a chattel interest, seems fully established. By the express provisions of the lease the lien of the lessor for the payment of the after-accruing rent (contained in the lease of July, 1877, and that of July, 1879), was to extend to and embrace “any and all goods, chattels and other property belonging to the lessee.” It will be further observed that in the mortgage deed of ti’ust executed by Biebling to the appellant, bearing date August 19, 1884, out of which this contention has in greater part arisen, this Joliet paper mill and Biebling’s—appellant’s grantor’s—interest therein, is covenanted to have been “a leasehold interest in the real estate the rein described, and the owner, possessor and occupant of the paper mill therein situate, with appurtenances, etc.” Under these facts we feel constrained to hold, the rent due the defendant Adam under the leases before mentioned was a valid lien on the Joliet paper mill and fixtures therein, in possession of the lessee at the time of executing the mortgage to appellant, and prior in time, and superior in equity and right to that of the appellant, acquired under and by virtue of the said mortgage deed of trust. That as a condition to the foreclosure in equity of its mortgage trust deed on Biebling’s leasehold estate and fixtures, the appellant bank must be subordinated to the equitable lien of Adam to receive his rent from the property so mortgaged. It is hy the terms of the lease itself that such lien was created and preserved, and the appellant bank could acquire no rights to the property covered thereby, except subject to such lease, of which it had notice, or at least such notice as must be held sufficient to put it upon inquiry, which must have resulted in notice to the appellant of all the rights of Adam. Hence the decree of the Circuit Court holding the lease an equitable mortgage, was, in our judgment, correct. 1 Jones on Mortgages, Sec. 162-168; Story’s Equity Jurisprudence, Sec. 1231; Ketchum v. St. Louis, 11 Otto (U. S.), 101, 308; Evans v. Mayo, 6 Ill. App. 121 and 340; Peckham v. Haddock, 36 Ill. 45 and cases cited; Chadwick v. Clapp, 69 Ill. 121. That the appellant was charged with notice or put upon inquiry by which full knowledge of all the facts would have been obtained, see Burt v. Coleman, 89 Ill. 368, and cases cited; Citizens Bk. v. Dayton, 116 Ill. 204, and cases cited. Conceding, for the purpose of argument, that the lease from Adam to Riebling was not properly acknowledged, and a description of the property therein entered upon the docket of the justice as claimed by appellant, that would not, if true, determine the claim of appellant to the extent contended for in the case at bar. The 51st section of the conveyance act provides that “Deeds, mortgages and other instruments of writing relating to real estate shall be deemed from the time of being filed for record, notice to subsequent purchasers and creditors, though not acknowledged or proven according to law. And Sec. 38 of the same act provides that the term “real estate,” as used in that act, shall be construed as coextensive in meaning with lands, tenements and hereditaments, and as embracing all chattels real.” In Willoughby v. Lawrence et al., 116 Ill. 20, it was held that a lease of certain real estate was a chattel real, and although not acknowledged or proven according to law, was entitled to record, to give notice of such leasehold interest of the lessor therein named; and that a contract by the lessees conveying the use, for certain purposes, of the fences and buildings upon the land, involving a right of way over the land for its enjoyment, was an instrument in writing relating to a chattel real, and as such was entitled to record, and that such record affected subsequent purchasers and creditors with notice. Reed v. Kemp, 16 Ill. 445; Dandy v. Chambers, 23 Ill. 369; McCann v. Day, 57 Ill. 101; Harris v. Johnson, 31 N. J. Eq. 174. The claim for rent due Adam -which was allowed by the court below, consisted of two items, the one for the sum of §1,908.67, being for the rent accruing from March 5, 1886, to January 1, 1887, on which last named date Adam issued his distress warrant against Riebling, levied the same upon the 'paper mill with all its machinery, fixtures and appurtenances, from thenceforth entirely dispossessing his tenant, Riebling, therefrom. The other item was for rent claimed to be due Adam from January 1,1887, to June, 1887, amounting to the sum of 81,255. This, it will be seen, was for rent claimed from the time the tenant, Riebling, was dispossessed by Adam, being the time the property (paper mill) was actually in the possession of the receiver, which was, by agreement of the parties, from February 8,1887, or when he actually took possession, March 8, 1887. The appellee, Adam, purchased the “ Joliet Paper Mill,” its machinery and appurtenances, at sale by the receiver on the 25tli of June, 1887, for 83,500. This item of 81,255, which was allowed Adam in the court below, is now especially objected to as being unjust and inequitable, in that, for that period in which the rent is claimed to have accrued, the lessee, Riebling, was not liable for any rent, and hence for that period no rent was due Adam. We are of the opinion that this last named item was improperly allowed to Adam, and for the obvious reason that Adam in fact dispossessed Riebling on the 1st of January, and lie never after that time was let into the possession of the leasehold interest or any part thereof, and the receiver, who took it only a short time before the sale to Adam, could make no use of it. The law in this State is well settled, that when the landlord deprives his tenant of the possession of the rented property he can not recover rent during the time the tenant was so dispossessed, and such loss of possession by the tenant, even if the lease has not wholly terminated, may be recouped in a suit to recover the rent. Hayden v. Smith, 63 Ill. 430; Lynch v. Baldwin, 69 Ill. 201; Merrian v. Fetsen, 81 Ill. 62, and cases cited. The bank, as the assignee under the mortgage deed of trust, after condition broken, where the court has jurisdiction to make an equitable adjustment, may interpose the same defense. There is no pretense that Riebling consented to allow such claim for rent after Adam took possession, or after the property was in the possession of the receiver; and to charge him with the rent, when he was prevented from making any possible use of the leasehold propert y, would, it seems to us, be rank injustice, and more especially so in this case, as Adam himself was responsible for this state of affairs. We think, under the circumstances in evidence in this case, that Kiebling was allowed the full control for disposition of the six notes of date March 5, 1883, of the series of fifteen, for §1,000 each, and that the appellee Pilcher had the right and was entitled to receive his pro rata share, even of the note he purchased of Mrs. Socliner, and the $145 surplus. The taking of the notes as collateral was the same and with like effect as a purchase, in this case, to the extent of the debt thereby secured. As to the claim that the court below erred in the matter of allowance to Hyde for rent of his water power from February 1, 1887, we hold that allowance was not erroneous. The court was justified, we think, from the evidence, in its finding that Kiebling used the water power under the lease to the extent of 132 horse power. The decree will be reversed and the court below directed to disallow the claim of Adam for rent, amounting to $1,255, and allowed appellant as above stated. The apportionment of costs as fixed by the court below was so largely in its discretion, that we will not interfere with its exercise. The decree of the court below as to the claims of Pilcher and Hyde is approved and the costs in this court will be equally divided between appellant and the appellee Adam. The decree is reversed and the cause remanded to the Circuit Court with directions to modify its decree in conformity with the views above expressed. Heversed and remanded with directions.