Logan-Moore Lumber Co. v. Bowersock

The opinion of the court was delivered by Johnston, C. J.: In this foreclosure proceeding the claims of the parties and the priorities of their liens on two city lots were adjudicated. Upon a former appeal the judgment was affirmed except as to a small amount. (Lumber Co. v. Bowersock, 100 Kan. 328, 164 Pac. 156.) After the remand of the case and the modification of the judgment, the plaintiff caused an order of sale to be issued under which a sale of the property was made, one lot for $4,500 and the other for $4,750. The sale was confirmed and distribution of the proceeds ordered in accordance with previous findings and adjudication of the several liens. As to lot 7 it had been adjudged that J. D. Bowersock had a first lien upon it for $4,153, the plaintiff lumber company, a second lien for $537,- and Mrs. M. G. Bowersock, a third lien for $300. This lot was sold for $4,500. As to lot 8 the judgment was that J. D. Bowersock had a first lien [136] on it for $3,751, the lumber company a second lien for $229.34, and Mrs. Bowersock a third lien for $300. The sale price of this lot was $4,750. The proceeds of the sale were insufficient to discharge the costs, charges and liens adjudged against the lots, and hence the court required J. D. Bowersock to account for rentals received by him while in possession of the property. The former owner and mortgagor had abandoned the property and J. D. Bowersock had obtained possession of it and had received as rentals $40 per month on each of the lots. Upon an accounting it was. found that after allowing J. D. Bowersock, the mortgagee in possession, for payment of taxes, insurance, repairs and other expenses, properly chargeable against the rentals, there remained in his hands $1,250, and it was ordered that this be applied first to the balance due on the first lien held by him, secondly, on the second lien of the lumber company, and then upon the claim of J. D. Bowersock that was postponed to the lien of the lumber company, and the balance, if any, on the lien of Mrs. Bowersock. The defendants contend that the court erred in requiring the application of the rentals to the payment of plaintiff’s second lien in preference to the subsequent ones held by them. It is urged that as mortgagees in possession they had the rights of Brown, the mortgagor, who if he had not abandoned the property would have been entitled to the possession and use of it until a foreclosure and sale had been effected. They therefore insist that under the doctrine of the application of payments they had a right to apply the rentals, which would have been Brown’s and as to the payment of which he had given no directions, upon their later liens as they might see fit. • First, it may be said that Mrs. Bowersock was not held to be a mortgagee in possession. According to the findings J. D. Bowersock only was in possession of the property, and his wife did not have the rights of a mortgagee in possession. He was in possession of the property under and by virtue of his mortgage, and the mortgagor was not claiming an equity of redemption, but had, as we have seen, abandoned the property. The taking of possession is a method of payment and is one of the remedies afforded mortgagees to obtain satisfaction of their liens. There being specific liens on the property, J. D. Bowersock did not have the right to dispose of the rentals [137] as he saw fit, but it was the duty of the court to make an application of them. The other encumbrancers had an interest in the property of the same character as his own, although subsequent to his first lien. Equity requires that he should account to the holders of the subsequent liens according to their rank for any surplus that remained of the. rentals after satisfaction of his earlier lien. In Gordon v. Lewis, 10 Fed. Cas. 5613, it was said: “But the case of Archdeacon v. Bowes, 13 Price, 353, 373, seems to me fully to justify this proceeding; as it also conclusively establishes the right of a second mortgagee, after the satisfaction of the first mortgage, to claim from the first mortgagee, after notice, all the rents and profits, which have not been paid over or accounted for, to the mortgagor, so far as they are necessary for the satisfaction of the second mortgage.”(p. 811.) In Hatch v. Falconer, 67 Neb. 249, it was held that: “It is the duty of a mortgagee' in possession to account to subsequent mortgagees for the full and fair rental value of the premises while controlled by him.” (Syl. ¶ 2. See, also, 27 Cyc. 1252.) After the rendition of judgment M.. G. Bowersock asked permission to offer in evidence a deed from the mortgagor, purporting to quitclaim his interest to her, the deed having been found in the possession of a third party, but how it came into his possession was unknown. No error was committed in refusing to reopen the case and admit the paper in evidence. It must be held that an equitable and proper distribution of the rentals from the property was made by the court and hence its judgment is affirmed.