Myton v. Davenport

Beck, Ch. J. — I. The defendant George L. Davenport executed a mortgage to Charles E. Putnam to secure the separate claims held by eleven persons against the mortgagor, amounting in the aggregate to over twelve thousand dollars. Plaintiff held a claim of seven hundred and eighty-four dollars andtforty-six cents, which was secured by this mortgage. Prior mortgages had been executed by Davenport upon the property, consisting of city lots upon which were valuable buildings, used for business purposes. The prior incumbrances amounted to more than seventy-five thousand dollars. The rents of the property, which amounted to a large sum [584] per month, were collected under the supervision of Mr. Putnam and paid to him, and by him disbursed in payment of interest, taxes, insurance, and expenses of managing the property and collecting the rents, except a portion which was paid to the family of Davenport, who, after the execution of the last mortgage, had conveyed one of the lots to his wife, and the other to his two daughters. The rents received by Mr. Putnam during the time he has had control of the property, two years and three months, amounted to twenty-one thousand nine hundred and forty-five dollars, and the sums paid to the family of Davenport amounted to one thousand seven hundred and fifty dollars. The balance of the rent was appropriated as above stated. Davenport gave his whole time and attention to the care of the property, and received no- other compensation than the payments made to his family. He is insolvent. Mr. Putnam has paid plaintiff upon his claim, secured by the mortgage, two hundred and seventy dollars out of the rents. The plaintiff asks in his petition that the mortgage be foreclosed, and that a receiver be appointed to take charge of the property and collect and disburse the rents. The grounds upon which the appointment of a receiver is asked are as follows: First, the property is inadequate to pay plaintiff’s mortgage and the prior mortgages; second, thg mortgagor is insolvent; third, the taxes upon the property are unpaid, and a part of the premises have been sold for the taxes and have not been redeemed; fourth, the interest upon the mortgages remains unpaid, and- is accumulating by compound. interest; fifth, the rents are not applied'to pay the interest and taxes, but are diverted to other purposes, as the support of the family of Davenport. 1. homsase : receiver. ' . II. It is insisted by defendants’ counsel that “the law and practice of this State in respect to mortgages do not authorize the appointment of a receiver to collect the rents and profits for the benefit of the mortgagee, pending a foreclosure suit, on the ground of the inadequacy in value of the mortgaged premises to pay the debt [585] and the insolvency of the mortgagor, when the mortgage neither specifically pledges the rents and profits as security, nor authorizes the mortgagees to take possession before foreclosure.” It must be admitted that this position has strong support, in view of the provisions of the statute of this State relating to mortgages and foreclosures. Under the statutes of this State the mortgagor retains the legal title and the right to the possession of land mortgaged. Code, § 1938. A foreclosure can only be had by an action in the court wherein judgment is rendered for the amount due, and a decree is entered directing the sale of the land. A special execution is issued and the sale thereon is subject to redemption, as in cases of sales under general execution. It is expressly provided that until the expiration of the time for redemption the ■defendant in execution is entitled to the possession of the property. See Code, §§ 3319, 3321, 3102. Now, if the mortgagor has the right to the possession of the land up to the time his statutory right of redemption, after sale expires, without regard to the value of the land or his solvency, it is difficult to see that such right will not be violated by turning him out of possession by the appointment of a receiver before his right and title are divested by a deed made under the foreclosure sale. But we think the questions here raised need not be determined in this case. 2 ____ • III. It cannot be claimed that there would be any ground for the appointment of a receiver in case the rents and profits of the land are applied to the payment of the mortgage debt, and necessary expenses incurred in the management and care of the property. It clearly appears in this case that the rents of the property are so applied. The only items of expenditures by Mr. Putnam, which have not connection with the management of the property, the payment of taxes and insurance, are those paid to the family of Mr. Davenport. But it is clearly shown that Mr. Davenport’s services in taking care of the property have been worth the money paid his family. If these services were [586] rendered by another the law would require him to be compensated. We see no reason why Mr. Davenport, having rendered the services, may not receive the compensation. No injustice is done plaintiff or any other persons thereby. IY. It is charged that taxes remain unpaid, and that one of the lots has been sold for taxes. One of the senior mortgagees made an arrangement with Mr. Putnam to pay the taxes; another took an assignment of a tax sale certificate. It would have been well to have paid the taxes and not to have permitted the property to go to sale. But plaintiff ought not to complain, as he received a part of the proceeds of the rent, which, probably, ought to have been applied in payment of the taxes. It does not appear that the title of the property sold for taxes is in danger of being divested. It is to be presumed that the parties concerned will not permit this to happen. It is doubtful, indeed, whether plaintiff, and those secured by the mortgage which he seeks to foreclose, being junior incumbrancers, would realize anything upon the sale of the property. But be this as it may, the rights of plaintiff are not alone to be considered. The senior mortgagees are content with the management of the property, and do not demand a change. We think, under the circumstances, equity would not interfere upon the application of plaintiff, a junior mortgagee, holding a comparatively small claim secured upon the property. The plaintiff can pursue his remedy by foreclosure. We are confident that no loss will result to him from the present management of the property pending his action. We are very clear that the record presents.no grounds upon which a court of equity may justify the appointment of a receiver, thus taking the property out of the hands of the person chosen by its owners to manage and control it. The order of the judge of the District Court appointing a receiver is Reversed.