Schroeder v. Arcade Theater Co.

— 98 — The following opinion was filed July 13, 1921: Doerfler, J. We will first take up the issue raised by the answer of the Theater Company and as contained in question No. 1 set forth in the preceding statement of facts. A deed of trust in this state is a mere security for money advanced under the bond issue, and in legal effect is nothing more than a mortgage. Hoyt v. Fass, 64 Wis. 273, 279, 25 N. W. 45. In fact, in the instant case, the trust deeds are characterizéd as mortgages. It has been held in this state that the title remains in the mortgagor, and the mortgagee holds the mortgage as such, as mere security for the debt. So stringent is this rule that it has often been held by this court that a deed in fee simple absolute, given merely to secure a debt, with a parol defeasance, is nothing more nor less than a mortgage, leaving the title in the grantor and giving to the grantee a mere security for his debt, to be enforced like an ordinary mortgage (Schriber v. LeClair, 66 Wis. 579, 586, 29 N. W. 570, 889; Wis. Cent. R. Co. v. Wis. River L. Co. 71 Wis. 94, 36 N. W. 837; Central Trust Co. v. Burton, 74 Wis. 329, 43 N. W. 141); also that the. right of the mortgagee who has got peaceable possession of the premises after condition broken, to retain them until his debt is paid, is founded upon his equitable right to be paid without being put to the cost of a suit, and not upon any title in him. Brinkman v. Jones, 44 Wis. 498, 512. “By the common law, at first, mortgages became absolute deeds, if the terms of the defeasance were not strictly performed on the day; but courts of equity succeeded iti establishing an equity of redemption of the mortgagor in the land, which remained an equity in him until the mortgage was duly foreclosed by process of law. Courts were astute'-.in protecting this equity of redemption, and leaned strongly against all agreements between the mortgagor and mortgagee which abridged it. ‘Once a mortgage always a mortgage’ became a maxim. Therefore, when provisions began to be inserted in deeds which enabled the mortgagee ü> de — 99 — stroy at once this equity of redemption, courts looked upon them with suspicion, if not with aversion, as devices intended to oppress and injure mortgagors, who are, from the nature of the case, more or less in the power of mortgagees.- But, notwithstanding all opposition, the use of trust deed's has steadily increased, until they are common in England and in nearly all the states. They are regulated by statutes, and are under the jurisdiction of courts of equity, which can -interfere, by injunctions, prohibitions, orders, and decrees, to prevent oppression and remedy abuses. A large proportion of the mortgage deeds of real estate now contain powers of sale in case of default, and the laws régulate and protect them.” 2 Perry, Trusts, § 602c. “Especially until condition broken, a trust deed does not divest the estate of the mortgagor. He can convey the estate, subject to the mortgage; he may make a second mortgage ; the estate may be attached for his debts; the mortgagor is considered as having all the rights and powers of an owner, except so far as it is necessary to hold otherwise in order to give effect to the mortgage. The interest of the mortgagor may be levied upon and seizin delivered by the officer; in which case the creditor will hold in fee, subject to the mortgage. The same principles apply to the rights and title of the grantor in deeds of trust.” 2 Perry, Trusts, § 602;. The foregoing statements are made under the authorities cited to show the legal effect of the execution of a trust deed in this state with respect to the interests of the mortgagor and the mortgagee. Trust deeds, particularly in recent years, have become a very popular security in this state, and but few large mortgages are now executed excepting they are in the form of a trust deed. In fact, this can be considered the age of trust deeds in this state as elsewhere, and hardly a day passes during the present period of economic readjustment but we read or hear of the flotation of a large bond issue in railroad, industrial, real estate, or other enterprises, and a very large percentage of the securities held by the people, at large who make such investments for economic purposes are in the form of bonds secured by trust deeds executed to trustees. — 100 — It has also become a matter of common knowledge that at the present time, where as one of the results of the great war housing conditions have become very oppressive and facilities to furnish homes for the masses have become scarce, and where office space for professional men and others is at a great demand, and where rentals have been raised by landlords in many instances far in excess of the requirements of the situation, numerous corporations and individuals have become interested and engaged in the erection of tenement, apartment, and office buildings intended to house and accommodate a vast number of our population in need of such accommodations, and corporatipns have also sprung up, actuated by a spirit of civic pride and righteousness, to build homes to be leased to the masses, and in almost every instanceühe moneys are raised by the flotation of large bond issues; and these facts have been recognized in a large measure by statutes in our state, which authorize the issuance, regulation, and sale of these bonds under the supervision and authority of public bodies such as the railroad and insurance commissions of the state. These bonds are purchased by trust companies, bond and stock brokers, and other similar institutions and individuals, and are resold in a large measure h> the rank and file of the people, who invest in the same in accordance with their means. It is true that the issuance of bonds and the execution of trust deeds is of comparatively recent origin and that the growth of this practice has kept pace in a large measure with the enormous expansion of our commercial and industrial interests. Bond issues are to be encouraged rather than discouraged, for they afford an opportunity for frugal investors and the people at large to invest their savings in remunerative and successful enterprises and bring in closer contact the investors, who in a large degree are employees, with the institutions by whom they are employed, and so have a tendency to bring about a mutuality of interest and a better understanding between employers and employees generally. From what has preceded it will readily be seen that the — 101 — question as to whether a mortgage in the form of a trust deed, when once executed, shall continue to be a fixed lien and hold its place as a first or second mortgage in accordance with the date of its execution and recording, becomes a matter of great importance not only to the investor but also to the borrower. To a large extent the salability of the bond issue depends upon the fixed and unshakable security of the trust deed, which is of prime importance to the investor. • To the borrower, this same consideration becomes of great importance, for upon the existence thereof depends his ability to float the bonds and to raise the necessary money for the purpose of which the bond issue has been designed. Therefore the general rule has been evolved, and is a fixed one in contemplation of law, that a fixed legal right under a mortgage cannot be impaired by any equity subsequently arising, although there is an apparent exception to this rule in the case of operating expenses, having practical application with respect to railroads, and also one pertaining to employees, who are frequently given preferred claims by statutes. 2 Elliott, Railroads, § 500. And it is held that “The priority of a first mortgage is not affected by the fact that the road was completed or part of it wholly built by money obtained by means of a junior mortgage, nor are unsecured claims of contractors or materialmen who have furnished money or material for building or repairing it entitled to priority over, a prior mortgage.” 2 Elliott, Railroads, § 500. “And a mortgage trustee has no power to agree that an unsecured debt or a subsequent mortgage debt shall be paid in preference to the first-mortgage bonds.” 2 Elliott,. Railroads, § 500; Duncan v. Mobile & O. R. Co. 2 Woods (U. S. C. C.) 542; Hollister v. Stewart, 111 N. Y. 644, 19 N. E. 782; Colorado & S. R. Co. v. Blair, 214 N. Y. 497, 108 N. E. 840. “A trustee has no authority to waive defaults or otherwise deprive bondholders of their rights.” Hollister v. Stewart, supra. Thus it will be seen from the citations and authorities that — 102 — the courts have carefully guarded and protected the interests of bondholders secured by a mortgage or trust deed, and have generally and quite universally accorded them the priority which was originally contemplated by the issuance of such bonds and the execution of such trust deeds or mortgages. The floating of a bond issue is generally accompanied with the issuance of a prospectus, by which the investors are fully apprised of the nature of the security offered, the location and value of the property intended to be mortgaged, the object and purpose of the erection and construction of the building-or buildings, the rental value of the building, the industry or business project to be accommodated by the erection of the building, and many other incidental facts involved in the matter of the security of the proposed bond issue. In a vast number of these bond issues the property which it is intended shall form the basis of the security consists of buildings designed to be leased in whole or in part for manufacturing purposes, for tenements, for office and for commercial purposes. In the instant case the building known as the Berlin Arcade Building was originally designed to be used for office and store purposes, and in fact the building was erected for that purpose, and the bonds were issued and negotiated in order to furnish a fund out of which to pay for the building to be used for that purpose, and for no other purpose. It is also true that the investors in these bonds had in view this purpose for which this building was to be used, the location of the building, the construction of the same, and the rentals to be derived from the building, all of which elements, to a large degree, formed the basis upon which the value of the property was> fixed and determined and the security of the bond issue estimated. If there was one thing over and above all others that investors in these bonds had in mind, whether they invested in the first-mortgage bonds — 103 — or in the second-mortgage bonds, it was the fact that the investment and the lien constituted by the respective trust deeds or mortgages would be and would constitute a fixed lien or security which could be defeated only by such considerations as arise by virtue of the terms of the trust deed or the law; as, for instance, unpaid taxes or failure to pay or meet the obligations under the ninety-nine-year lease, with respect to rentals thereunder or other obligations assumed thereby. The trustee, under the provisions of the trust deed, in some respects represents the bondholders, in other respects the mortgagor, and in still other respects both bondholders and mortgagor. “The powers of trustees under deeds of trust, and of .mortgagees under mortgages with power of sale, depend entirely upon the terms of the deeds. Such powers are created by and exist in the deeds, and of course they exist in the terms in which they are created, and in no others. They are to be exercised by the trustees in pais. They are wholly matters of convention and contract between the parties, and not of law or jurisdiction. They can be <N-ercised because they are conferred by one party upon another, and not because the law or the courts have conferred or authorized them. The statutes in some of the states have regulated their execution, but such statutes do not create the powers themselves.” 2 Perry, Trusts, § 602g. “The trustee, or mortgagee with the power of sale, holds the lands in trust for the purposes for which the trust deeds are made, which purposes are generally specified in the deeds thereof.” 2 Perry, Trusts, § 6021. A further legal doctrine must be borne in mind, and that is that the provisions of a mortgage are not personal to the party named in it as mortgagee, but are for the benefit and security of the real owner of the debt secured thereby. 27 Cyc. 1045, and note 56. So that from the foregoing it becomes quite clear that in order to ascertain and determine the rights of a trustee under a trust deed or mortgage it is necessary to look to and — 104 — examine closely the provisions of the trust deed, for under such trust deed there is created not only the very office of the trustee but also his various duties, obligations, and powers. The bonds and the interest thereon are made payable to the trustee, who for that purpose is constituted the agent to receive the money and to distribute it among the bondholders upon presentation of the bonds or the interest coupons. As has been said in Connell v. Kaukauna, 164 Wis. 471, 496, 159 N. W. 927, 160 N. W. 1035: “The authority of the trustee to act. for the bondholders is prescribed and limited by the terms, of the trust deed, and a payment to the trustee merely as trustee cannot be held to be payment to the bondholders, unless made when and as prescribed by the terms of the bond.” Miller v. Mitchell, 58 W. Va. 431, 52 S. E. 478; Kransz v. Uedelhofen, 193 Ill. 477, 62 N. E. 239; Fortune v. Stockton, 182 Ill. 454, 55 N. E. 367; Schroeder v. Wolf, 227 Ill. 133, 81 N. E. 13. The bonds may be registered as to the payment of principal upon the books of the trustee, and in performing the o5ice of registrar the trustee represents both the mortgagor and the bondholders. In the event that the building upon the premises is destroyed by fire the insurance moneys shall be paid to the trustee, and the trustee shall thereupon hold said sum so derived from insurance and pay the same to various contractors, materialmen, and laborers in accordance with the certificates of the architect of the building, and in doing this the trustee repi'esents both the interests of the mortgagor and of the mortgagee. In the event of the failure of the mortgagor to keep the buildings properly insured, or in the event of his failure to pay the taxes or in any other respect to comply with the provisions of the trust deed, the trustee, under certain circumstances, shall have the right to declare the whole amount of the mortgage debt, both principal and interest, due, and — 105 — to foreclose the trust deed or mortgage, and with respect to this provision the trustee represents the bondholders. He is also authorized, upon conditions broken, to enter into and upon the premises and to possess the same, and thereafter collect the rents, issues, and profits derived from the building, and in that regard he is the representative both of the mortgagor and of the bondholders. In the event of the failure of the mortgagor to pay the rent due upon the ninety-nine-year lease or to pay the taxes upon the property, the trustee is authorized, under the terms of. the trust deed, to pay such rent and to pay the taxes in order to save and protect both the interests of the mortgagor and the bondholders. The trustee may also raise and borrow money on the security of the mortgage lease and premises, or. upon any sublease, for the purpose of paying off any sum due for interest, rental, insurance, taxes, or other charges payable by the lessee under the ninety-nine-year lease, and in doing this he acts both as the representative of the bondholders and of the mortgagor in order to protect the mortgaged property from forfeiture under the terms of the lease. And upon conditions broken, if the trustee takes possession of the mortgaged property, under the terms of the trust deed he is authorized first to sell the real estate; second, to apply so much of the proceeds of the sale as is necessary to the payment of the debts secured by the deeds; and third, to account for and pay over the balánce, after paying the expenses of the trust and the sale, to the grantor or mortgagor, his legal representatives or assigns. The foregoing are but a few of the rights, powers, duties, and privileges of the trustee as defined by the trust deed, and they tend to show the appreciation on the part of the contracting parties of what it was intended to make clear by the foregoing, that the creation of such rights, powers, duties, and privileges depends upon the trust instrument. — 106 — The delicate position in which a trustee, therefore, is placed by the trust deed, in and by which he is required and obligated to act in a dual capacity, also becomes clear, and in the execution of his obligations and powers under the law it is incumbent upon him to use the utmost good faith towards all parties in interest. He must act impartially for every person who has any rights in the estate. 2 Perry, Trusts, § 602o. In vain do we search through the provisions of these trust deeds to find any authority vested in the trustee to enter into any lease with a tenant or tenants of the building, or .to ratify or confirm any lease, or to consent to any lease, either orally or in writing, before conditions broken. It is true that upon conditions broken on the part of the mortgagor an entirely different situation arises. Under the terms of the trust deed the mortgagor, is then authorized to enter into and upon the mortgaged premises, take possession of the same, manage and control the same, recognize, make, or alter leases, or to enter into any agreements within the purview of the trust deed the situation may demand. While it is a fact that under the provisions of the first paragraph of the trust deed proper the mortgagor conveys and assigns to the trustee, etc., all its right, title, and interest in, to, and under said lease (meaning said ninety-nine-year lease) and to any and all future income, rents, and revenue from the lease and leased property and any part thereof, such assignment and transfer is intended to be made effective only in the event of conditions broken, for a subsequent provision of the lease expressly provides that until default shall be made and continued by the mortgagor in the payment of the principal and interest of any of the bonds secured by the trust deed, or until default shall be made and continued in respect to some act, thing, obligation, or agreement required to be done, performed, or kept by the mortgagor as in said lease provided, the mortgagor shall be permitted to possess, manage, use, and enjoy the said mort — 107 — gaged property and the improvements, appurtenances, rights, and privileges, and to take and use the incomes, revenues, rents, and profits thereof, as if the mortgage had not been made. Furthermore, it must be conceded that the trust deed does not in express terms, before conditions broken, authorize the trustee to lease any of the property covered by the ninety-nine-year lease, or the buildings thereon, or to accept or demand an assignment of the 'ninety-nine-year' lease, or of any of the subleases^ or of the rents, issues, and profits derived from any of said leases, excepting only in so far as he, is authorized to act in order to prevent a forfeiture of the ninety-'nine-year lease pursuant to conditions broken by the mortgagor of the terms of said lease. We now come to the lease executed by the Real Estate Company to the Theater Company. This lease contemplated structural changes in the building of the Real Estate Company. The walls of the building were to be removed, ceilings raised, floors lowered, entrances changed, and other material and structural changes were contemplated. It was therefore an act of wise precaution on the part of the representatives of the Theater Company to confer with the trustee in order to fully present to him the plans in detail with respect to such contemplated changes. Such conferences were held, and, it appearing to the satisfaction of the trustee that such changes would not be detrimental to the interests of the bondholders, he expressed his satisfaction .with respect thereto. The terms of the proposed lease were also submitted to the trustee, and he examined the same and found ho objections thereto, and expressed his satisfaction therewith. The bondholders were vitally interested in hav- ' ing no changes made in the building of a structural nature that would endanger the stability of the building, for had the building been endangered by reason of such changes the same would have constituted waste and would have vitally and materially affected the interests of bondholders.' Every effort was made on the part of the representatives of the — 108 — Theater Company to obtain the written consent of the trustee to this new lease with the Theater Company. Such consent was refused, indicative strongly of the position which is made apparent on the part of the trustee that he did not intend to bind himself as trustee, or the interests of the bondholders, to said lease. In fact, it is difficult to conceive of any situation or circumstance which would make the trustee’s position as he made it manifest, clearer than was done by his refusal to either, join in the lease or to give his written approval or consent to the document. Piad he done so, he would nevertheless have failed to bind the interests of the bondholders, for the reason that his authority vests almost exclusively in the provisions of the trust deed, and, no such authority having been granted or vested in him, the interests of the bondholders could not have been bound. A careful examination of the lease with the Theater Company will disclose the fact that it contains no provision whatsoever intended to bind the bondholders or even the trustee. It must also be borne in mind that at the time of the execution of the lease with the Theater Company there had been no default by the mortgagor of the conditions of the mortgages and that the Real Estate Company was in possession of the premises.. The evidence does not disclose, nor has the claim been made, that any of the bondholders at any time had any knowledge whatsoever of the proposed execution of said Theater Company lease; nor is there any evidence or claim that such bondholders were notified thereof subsequently, so as to lay the possible foundation on the part of such bondholders to a ratification or confirmation of such lease. -True, the trustee, upon the execution of the lease with the Theater-Company, received a large amount of money, aggregating about $15,000, which amount he disbursed to contractors and others engaged in the making of the necessary changes in the building to accommodate the theater. In making — 109 — these disbursements the trustee acted primarily in the interests of the mortgagor, as is made evident by the f.act that the object and purpose of placing this money in the trustee’s hands for disbursement was to provent the filing of liens and the incumbering of the mortgagor’s interests. The mortgagee’s interest could not have been affected by the filing of contractors’, materialmen’s, or. laborers’ liens. A bond was also executed to protect persons on the premises from personal injury during the construction of the theater and to also protect occupants of the theater. The execution of this boqd was suggested by the trustee and was solely for the benefit of the mortgagor and of the Theater Company. So that it must have appeared to the bondholders, at the time of the execution of the Theater Company lease, that the property was in the possession of the Real Estate Company. The bondholders had no notice of the lease or of any changes with respect to the collection of the rents and of the proposed alterations in the building. There is nothing in the situation which justified any alarm on the part of the bondholders. Every one is familiar with the floating of bond issues of the nature of the one in question. These bonds are sold to numerous persons, who look for their security to the mortgaged property. Bondholders as a rule do not interest themselves in the collection of rents, and first become apprehensive when a default occurs in the payment of principal or interest. So that it is readily deducible from the foregoing: 1. That no authority was vested in the trustee to subject the interests of the bondholders to the Theater Company lease. 2. That the bondholders had no knowledge of the changes in the building designed to accommodate the Theater Company. 3. That the bondholders had no knowledge of the assign'ment of the rentals of the Berlin Arcade Building. — 110 — 4. That they did not ratify or confirm said lease so as to subject, their security to said lease. So that the findings of the circuit court, .wherein it substantially found that the matters and things the trustee did with respect to the lease of the Theater Company were not done for the purpose of jeopardizing the lien of the bondholders, and that the lease of the Theater Company did not become, a prior lien to the lien of the bondholders, are well sustained by the evidence and by all the surrounding facts and circumstances in the case. It is claimed by counsel for the Theater Company that under the rule as laid down in 16 Ruling Case Law, p. 599, § 77, and cited in Jones, Mortgages (5th ed.) § 782: “Though the general rule is that a subsequent lessee of mortgaged property, talcing under, a lease from the mortgagor, takes subject to' the mortgage, yet where the mortgage, in express terms or by clear implication, authorized the mortgagor to make leases for the benefit of the mortgagee, a lease made in pursuance of such authority is binding on the mortgagee and those claiming under him,” the lease to the Theater Company was such a lease as was contemplated by the parties to the trust deed to be made by the mortgagor for the benefit of the mortgagee, and is therefore binding upon the mortgagee, and- subjects his security to the prior rights of the lease. The doctrine as above stated, and contained in Ruling Case Law and in Jones on Mortgages, is founded principally upon the decision in the case of Sammons v. Kearney P. & I. Co. 77 Neb. 580, 110 N. W. 308, 8 L. R. A. n. s. 404. A careful examination of the facts in the Sammons Case will reveal a radical distinction or difference between that case and the instant case. In the Sammons Case the plaintiff appealed from a, decree of the lower, court in an action brought to foreclose a mortgage, by which decree the plaintiff’s mortgage lien was made subject to a certain lease -or-contract executed by the mortgagor to the defendant, North — 111 — western Electric Heat & Power Company. It appears that the general nature of the business of the defendant Kearney Power & Irrigation Company is the owning; constructing, and operating of canals, reservoirs, dams, and other works for irrigation and water-power purposes, including the power to lease its own property and to acquire by purchase such canals, reservoirs, and other works for irrigation and water-power purposes, including the power to execute mortgages or deeds of trust to secure such bonds as may or shall be issued by the company in furtherance of the objects of its incorporation. On the 15th day of July, 1898, the defendant Kearney Company executed and delivered to a trustee a mortgage on certain of its property and rights to secure a bond issue of $150,000 in bonds of $500 each. On the 1st day of November, 1899, the mortgagor entered into a contract in writing with the Northwestern Electric Heat & Power Company, whereby, for a consideration therein named, the latter was given the right to take water from the canal in question for a period of fifteen years, with the privilege of a renewal of the contract on the same terms for an additional fifteen years, for the purpose of furnishing power for its electrical machinery. Default was made in the payment of the interest on the bonds, and on the 9th day of September, 1903, Sammons, who was the owner and holder of 239 of the 274 bonds disposed of, brought an action to foreclose the mortgage. The Northwestern Electric Heat & Power Company was permitted to intervene and settle its rights under the contract with the defendant Kear-ney Power' & Irrigation Company, the' mortgagor. The court found in favor of the plaintiff and ordered a decree that the property should be sold subject to the rights of the intervener, Northwestern Electric Heat & Power Company,' under its contract with the mortgagor, and that such contract should be binding upon the purchaser at such sale. From this decree of the lower court, ordering a sale of the mortgaged property subject to the contract of the North — 112 — western Electric Heat & Power Company, the plaintiff Sam-mons appealed. On the appeal the principal question to be determined was: Did the court err in providing in the decree that the sale thereunder should be subject to the rights of the intervening company under its contract with the mortgagor ? The court in its opinion first recites the general rule as heretofore stated, and then proceeds as follows: “The foregoing rule is easily recognizable, as it is grounded on the general rule applicable to all mortgages that an interest subsequently acquired by a third party in the mortgaged property is subject to the mortgage; but the question is whether the facts in this case bring it within that rule.” In substance, the mortgage in the Sammons Case, among other things, covered, first, all the property of the mortgagor of every character; second, it was intended to cover not only such things in action, contracts, leases, claims, and demands as existed when the mortgage was given, but all such as the mortgagor might thereafter acquire; third, it also provided that all the things in action, contracts, leases, claims, and demands as the mortgagor might subsequently acquire, should be duly assigned to the mortgagee as further security for. the mortgage debt. In construing the trust deed and the contract above specified, the court in its opinion in the Sammons Case further said: “But, when the construction of a contract becomes necessary, it is permissible to look beyond the language of the contract, and to take into account the nature of the subject matter, the condition and situation of the parties, and the facts and circumstances surrounding the transaction. The mortgagor was a corporation, and one of the purposes of its organization was to lease water rights. It was the owner of a plant, designed to serve that purpose, but which, as the record shows, yielded no revenue save such as might be derived from the sale or Easing of water rights. The bonds, - by their terms, were made to run for a period of twenty — 113 — years, and the interest thereon is payable semi-annually. Now, taking into account these facts and circumstances in connection with those provisions of the mortgage herein-before set out, it is too clear to admit of argument that the parties to the mortgage at the time it was made, contemplated that the mortgagor’s plant covered by the mortgage should be maintained as a going concern, because in no other way could it meet the interest on the bonds from time to time, to say nothing of the discharge of the principal debt when it became due.” The opinioñ further proceeds with the idea-that at the time when these water rights were leased it was contemplated by the parties that the lessee would necessarily be obligated to expend a large amount of money in improvements for its business, and that the trust deed or mortgage contained a provision that, upon default of the mortgagor, the mortgagee could declare the whole amount of the bonds and interest due and payable and immediately commence foreclosure proceedings, and thus deprive the lessee of his investment, unless it be held that the mortgage when originally made contemplated the execution of these contracts and leases for the benefit of the mortgagee. In the case at bar the trust deed was executed to run for a period of five years. It was contemplated at the time of the execution of such trust deed that at the end of this period there would be a refunding of the mortgage debt; so’.that, it could not have been contemplated that during such period of five years the principal of the mortgage debt would be paid out of the rentals or profits of the building. The five-year period of the trust deed in the instant case constituted an unusually short term for a bond issue of that kind, and was no longer than the usual period for which mortgages in considerably smaller amounts are executed. The very fact that the bond issue covered so short a period of time, in itself was indicative of the fact that the parties at the time of the execution thereof did not contemplate — 114 — subjecting this bond issue to the provisions of a long-term lease such as the Theater Company lease. Furthermore, there is no provision contained in the trust deed or mortgage in the instant case whereby all the profits and rents derived from the leased property are to be paid and assigned to the mortgagee for his benefit. Under the trust deed in the instant case the mortgagor, until conditions broken, was to continue in the uninterrupted possession of the leased premises and enjoy the rents, issues, and profits thereof. On the other hand, in the Sammons Case all the property of the lessee or. contractee, including leases, contracts, rentals, profits, etc., of every nature and description, was assigned and transferred to the mortgagee, and it does not appear, as far as the reading of the opinion in the case is concerned, that the mortgagor, in the Sammons Case was entitled to possession and enjoyment of the mortgaged property, and of the rents, issues, and profits thereof, until conditions broken. Furthermore, in the Sammons Case the leases and the trust deed, respectively, covered terms which would expire at or about the same time, strongly indicative of an intention on the part of the parties to make the mortgage subject to the provisions of such lease. It is also clearly inferable from the provisions of the Sammons trust deed and lease or contract that it was contemplated by the parties that the principal amount of the trust deed would, during the period thereof, be fully paid by the rentals, issues, and profits derived from the lessees and others of the mortgaged property. It also appears clearly that in the Sammons Case, where valuable water rights were leased, it was contemplated, in order to make use of the provisions of such lease, that the expenditure of a large sum of money would be necessary on the part of the lessee in order' to obtain the full advantage of the leased rights. And above all things it appears from the Sammons Case, and is so stated in express language, that the-facts and circumstances in connection with the pro — 115 — visions named m the trust deed or mortgage are such that by necessary implication the parties to the mortgage at the time it. was made contemplated that the mortgagor’s plant covered by the mortgage should be maintained as a going concern for the benefit of the mortgagee. It was not claimed in the Sammons Case that the mortgage gave express authority to the mortgagor to make the contract- or lease under which the intervening company claimed superior rights to that of the mortgagor, but it was claimed that such rights followed from the terms of the trust deed or mortgage by necessary implication. And the court very rightly said in its decision in the Sammons Case that the solution of the question is to be found in the familiar rules of construction applicable to the facts in that case, rather .than in precedents, resting as they must on instruments differing materially from that under consideration. It is contended on the part of counsel for the Theater Company that injustice may be done to their client resulting from the investment of a large sum of money in the reconstruction of the building in order to accommodate the theater, which money to a large extent, under the decree as entered by the lower court, would constitute a loss. That fact is to be regretted, and it is also to be regretted that the proper officers of the Theater Company and of the Real Estate Company did not see fit to enter into an agreement wherein and whereby it would be stipulated that the mortgaged property was to be sold and bids invited, so that title might be conveyed either free from the lease or subject to the lease, in accordance with the bids received upon such sale. It is not too late now to enter into such a stipulation, and it would appear to us that the interests of all parties would be subserved thereby. However much we may sympathize with the Theater Company in its present deplorable condition, we nevertheless must also take into consideration the status of the bondholders and the rights.which they contemplated at the time of the purchase of the bonds. Their — 116 — interests were first in point of time. It was always within the power and the province of the Theater Company and its officers to make a careful study and examination of the trust deeds in question and thereby reasonably satisfy themselves as to their rights thereunder. Such examination, from the evidence, has apparently been made by counsel for the Theater Company. Realizing the situation, the Theater Company saw fit to proceed with the expenditure of a large sum of money, notwithstanding the open and direct refusal of the trustee to join in the Theater Company lease or to approve of the same in writing, which is not at all decisive upon the legal aspect of this case, but very persuasive, and almost conclusively decisive, of the fact in this case that the Theater Company and its officers concluded to take their chances of the mortgagor avoiding a default and thus securing to themselves the benefits of the full term of the Theater Company lease. We are therefore of the opinion that the doctrine of the Sammons Case, and as cited by Jones on Mortgages and in Ruling Case Law, has no' application to the case at bar. In view of what has been said, it is unnecessary to take up and treat further the claim made by the attorneys for the Theater Company under which it is contended that the plaintiff is estopped from insisting-upon the priority of. the trust deed or mortgage over the lease. The real party in interest is not the trustee but the bondholders. The latter had no knowledge of the Theater Company lease or of the changes made to accommodate the Theater Company, and, the trustee ñot having authority in the premises, the bondholders .cannot be held as bound and cannot be deemed estopped.. . By all- the authorities we have been able to find, pertinent to the subject, it is held that, in order to authorize the trustee to subject the trust deed to a lease subsequently made, the right must be contained in the provisions of the trust deed either by express language or by necessary implication, and, — 117 — such language not being contained in the trust deed, in question, the result follows that the trust deed in question is not' subject to the lease. Other authorities confirming this position are Sands v. Kaukauna W. P. Co. 115 Wis. 229, 91 N. W. 679; Haven v. Adams, 4 Allen (86 Mass.) 80; Ellis v. Boston, H. & E. R. Co. 107 Mass. 1. It is further contended by the Theater Company that the mortgagor assigning the rents to the mortgagee, and both the mortgagor and mortgagee notifying the tenant of such assignment, and the tenant paying the total rents accruing under the lease to the mortgagee, as disclosed by the tincon- • tradicted evidence, was an attornment and established the relation of landlord and tenant between the mortgagee and the tenant. The law of attornment does not apply as between the tenant of a mortgagor and the mortgagee in states where the legal title of the mortgaged premises does not pass to the mortgagee. The status of the mortgagor and mortgagee with respect to mortgages and trust deeds has heretofore been fully set forth, under authorities cited. The doctrine is stated in 2 Jones, Mortgages (7th ed.) § 778: A ttornment ineffective zvhere mortgage is mere lien. “But in a state where a mortgage is regarded as conveying no title to the mortgagee', and the right of possession; until foreclosure and sale is assured to the mortgagor, by statute, it has been held there is nothing to rest an attornment upon and that the doctrine has no application. The verbal agreement of a tenant to pay rent to the mortgagee does not continue the existing tenancy, simply putting the mortgagee in place of the mortgagor as landlord; but it is a new undertaking and must be valid as a new agreement if valid at all. In such states a mortgage by the lessor does not carry the reversion in the leased premises so as to entitle the mortgagee to recover rents; though the mortgagee may, of course, secure the right to the rents by an assignment contained in the mortgage. In such states, the tenant cannot repudiate his tenancy under, the mortgagor and acknowledge a tenancy — 118 — under the mortgagee, until after the mortgage has been foreclosed and the period of redemption has expired.” In a Michigan case (Hogsett v. Ellis, 17 Mich. 351) it is said: “If it be said that, though the mortgage does not give the mortgagee the right to possession against the will of the mortgagor, yet, by the consent of the mortgagor and the tenant, he may be let into possession, and thus acquire the right to rent; so, I reply, may any other person not holding a mortgage acquire, in the same way, the right to possession, and the right to rent, by any valid agreement to that effect. But, in both cases alike, I think it would depend upon the contract as such, which might be made between them, and not upon the doctrine of attornment.” In connection with this doctrine of attornment we must reiterate what has been repeatedly heretofore said, that neither under the express terms of the trust deed or mortgage, nor by necessary implication, did the trustee have the right or authority to do anything before conditions broken that would jeopardize the interests of the bondholders with respect to the lien acquired at the time of the execution of the trust deed. As to the status of the Theater Company and the mortgagee after conditions broken, and after entry on the part of'the mortgagee, a different situation exists. It is said in Gartside v. Outley, 58 Ill. 210, 214, 215: “It is in the power of the mortgagee, on entry for conditions broken, where the property has been leased subsequent to the making of a mortgage, to treat the tenant as a trespasser and bring ejectment, even without notice, or the mortgagee may elect to recognize the lessee as his tenant. The authorities all agree in holding, where the mortgagee has entered for conditions broken, or received rents of the tenant, that the ■ relation of landlord and tenant will be created between the parties. . . . The question of the time for which it will be considered that the tenancy is created by the fact that the mortgagee received rents of the lessee, whether for the entire period of the unexpired lease, or for only a shorter period, is a question of more difficulty of — 119 — solution. The generally received doctrine seems to be that the receipt of rents by the mortgagee will only create a tenancy from year to year, in analogy to the rule where the tenant holds over after the expiration of the lease. The doctrine proceeds upon the ground that the lease is inoperative as to the mortgagee, and 'is terminated by the act of entry. The rule of the common law is well established, that the mortgagor cannot, without the consent of the mortgagee, execute a lease that will prevail against the rights of the mortgagee, and it has been uniformly held that the entry of a mortgagee puts an end to the lease. Keech v. Hall, 1 Doug. 2. Upon principle, therefore, something more is required than the mere receipt of rents from the lessee, to make valid the lease for the unexpired term as against the mortgagee. In Doe ex dem. Hughes v. Buckner, 8 Carr. & Payne, 566) Patterson, J., held that if the mortgagee instead of turning out the lessee elects to take him as his tenant, the mortgagee does not thereby set up the tenancy for the entire unexpired term of the lease, but only from year to year. The case of Thunder v. Belcher, 3 East, 449, holds the same doctrine, that the receipt of rents will only create a tenancy from year, to year, as between the lessee and the mortgagee. We find that these cases have been quoted by nufnerous text-writers and the doctrine established does not seem to be questioned. Hilliard, Mortgages, p. 235, § 231; Taylor, Landl. & T. § 120; Platt, Leases, p. 171.” While the doctrine as set forth in the Gartside Case, supra, undoubtedly is the accepted doctrine of the authorities on the subject, under that very doctrine it would appear to us that when in the year 1916 the trustee, after conditions broken, took possession of the mortgaged property and collected the rents, issues, and profits thereof, including the rents from the Theater Company, and immediately followed • such acts by a foreclosure proceeding in the instant case, that he thereby made manifest his intention of not treating the Theater Company as a trespasser, but of treating it as his new tenant under a lease to expire upon the sale of the property under foreclosure proceedings. Having covered all of the various points made in the brief — 120 — of counsel for the Theater Company and having arrived at a conclusion adverse to the contentions of such company, we will now take up the consideration and determination of question No. 2, above set forth. It is contended by the trustee for the second-mortgage bondholders and by the individual bondholders, defendants herein, and by the Real Estate Company and its receiver, that, among other things, the trustee retained over $22,500 out of the proceeds derived from the sale of the bonds secured by the first trust deed or mortgage for his own individual purpose and for other purposes foreign „to the provisions of such trust deed or mortgage, under and pursuant to which such proceeds were to be used solely in the erection and construction of the building-; that he also converted to his own use, or wrongfully disbursed and expended, a large sum of money derived as interest on the first-mortgage bonds and by way of rentals and income from the tenants in the Arcade Building (and that he otherwise violated his trust in other particulars, with respect to which it is toot necessary at this time to go into detail) in the administration of his trust,, all to the great damage of such defendants, on account of which such defendants have in the course of the trial demanded that said Schroeder be impleaded individually in order to enable such defendants tO' compel him to account for such maladministration personally, etc., and an offer of proof was made by such defendants in order to substantiate such allegations. With respect to the issues raised by such defendants, among other things the court found, in addition to the findings already hereinbefore set forth, as follows: That Schroeder, acting as trustee under both the first and second mortgages, purchased the mortgaged prerifises at tax sales for the years 1915 and 1916 for the city and county taxes, and out of the rents collected, after taking possession as trustee, repaid himself for redemption moneys. — 121 — That plaintiff entered into the possession of the mortgaged premises as trustee, with the mortgagor’s consent, on October. 11, 1916 (which was the day of the commencement of this action). That Schroeder, as trustee, had advanced for the benefit of said mortgage bondholders various interest payments aggregating $23,000, and is entitled to be subrogated in that sum. That $4,000 is a reasonable solicitors’ fee to be paid to the plaintiff’s attorneys. The court also in such findings allowed the plaintiff, as trustee, for the collection of the rents an amount equal to three per cent, as stipulated in the mortgage, and also allowed him an additional fee as trustee in renting, making repairs, managing, and otherwise caring for the mortgaged premises and property and for performing other duties devolving upon him as trustee, and found such sums as reasonable. As conclusions of law the court found that the counterclaims of the defendants Real Estate Company and Benjamin Leaf green, the counterclaim of the defendant Esben-shade as executrix, the counterclaim of the defendant Hum-mel, and the counterclaim of the defendant Leidig as trustee^ should be dismissed; and judgment pursuant to such findings was thereupon duly entered and docketed. Schroeder, as trustee, was the plaintiff in the action. As an individual he was not a party, and in law could not be considered a party unless he was impleaded in his individual capacity. The mere fact that he was a party in a representative capacity does not authorize proceedings against him in an individual capacity unless he is first joined as an individual. In other words, in contemplation of the law Schroeder as an individual and Schroeder in a representative capacity are deemed two distinct entities. “A bill cannot unite distinct demands against the same defendant, where his liability upon one is individual and upon the other is in a representative capacity; but the rule — 122 — is confined to the presentation of distinct demands and does not extend to cases where defendant is otherwise a proper party in both capacities.” ■ 16 Cyc. 255. So that we must conclude that Schroeder as an individual was not.before the court. Of course the rule is well recognized that a failure to use reasonable diligence or an abuse of his discretionary powers renders a trustee under a trust deed personally liable to the party injured, for the damages done. Jones, Mortgages, § 1771. As already stated,, the application to implead Schroeder individually was not made to the lower court until after the trial of the issues had proceeded for a period of about two weeks. It must not be understood that it is our opinion that Schroeder as an individual would not have been a proper party; on the contrary, it is our opinion that had the court seen fit, even at that stage of the trial, to suspend the trial for the purpose of impleading Schroeder and of thus enabling an accounting and a final adjudication of the issues presented by the defendants, it would have exercised a proper and a wise discretion, in view of the provisions of secs. 2610 and 2656®, Stats., which are intended to give the trial court very broad powers, not only in the calling in of parties but in the molding and adapting of the pleadings so as to finally dispose of all branches of the controversy. Swanby v. Northern State Bank, 150 Wis. 572, 577, 137 N. W. 763; Doherty v. Doherty, 131 Wis. 375, 111 N. W. 478; Carney v. Gleissner, 62 Wis. 493, 22 N. W. 735. Sec. 2610, Stats., among other things provides that “A defendant who shows by affidavit that if he be held liable in the action, he will have a right of action against a third person npt a party to the action for the amount of the recovery against him, may, upon due notice to such person and to' the opposing party, .apply to the court for an order making such third person a party defendant, in order that the rights.of all parties may bp finally settled in one action, and the court may in its discretion make such order.” — 123 — Sec. 2656a, among other things, provides: “A defendant . . . may have affirmative relief against a codefendant, or a codefendant and the plaintiff, or part of the plaintiffs, or a codefendant and a person not a party, or against such person alone, upon his being brought in; but in all such cases such relief must involve or in some manner affect the contract, transaction or property which is the subject matter of the action.” Attention is called to the fact that in and by that portion of sec. 2610 quoted the interpleader is made discretionary with the .court. The portions of the sections above referred to have been repeatedly construed by this court and the right to interplead has been held discretionary. Ertel v. Milwaukee E. R. & L. Co. 164 Wis. 380, 384, 385, 160 N. W. 263; Kresge v. Maryland C. Co. 154 Wis. 627, 631, 143 N. W. 668; Schmuhl v. Milwaukee E. R. & L. Co. 156 Wis. 585, 586, 146 N. W. 787; Hemenway v. Beecher, 139 Wis. 399, 402, 121 N. W. 150; Swanby v. Northern State Bank, 150 Wis. 572, 137 N. W. 763. Furthermore, it has been repeatedly decided by this court that an order, denying a motion to bring in a person who may be a proper but is not a necessary party is not appeal-able. Reinhart v. Fire Asso. 93 Wis. 452, 67 N. W. 701; Cook v. Menasha, 95 Wis. 215, 70 N. W. 289; Wechselberg v. Michleson, 105 Wis. 452, 81 N. W. 657; State v. Wis. T. Co. 134 Wis. 335, 341, 113 N. W. 944; Schmuhl v. Milwaukee E. R. & L. Co. 156 Wis. 585, 146 N. W. 787. So that, with respect to said question No. 2, we answer, first, that, inasmuch as it was'discretionary with the court to have either impleaded or denied the impleading of Edward Schroeder individually, in refusing to permit Schroeder to be impleaded the court acted within its rights and exercised its discretion; and secondly, that, the court having exercised its discretionary rights, an appeal from the ruling of the court does not lie. — 124 — It is contended by counsel for the Real Estate Company and for Leaf green that the foreclosure action was prematurely brought for four reasons, namely: a. Because no' meeting of the bondholders declaring a default and directing the trustee to enter and foreclose the mortgage was ever held. b. Because no six months’ notice in writing of the alleged default under the ninety-nine-year, lease was given. c. Because no six months’ notice was given of the intention to declare the whole amount due for nonpayment of interest or any other alleged violation of the terms in either one of the trust deeds. d. Because, there was in fact no interest due and unpaid at the time the foreclosure was begun. We will first take up the contention under paragraphs a, b, and c. Article 6 of the trust deed provides: “In case such default shall be made in the payment of any interest.on any of the bonds issued hereunder and shall continue for the period of six months after payment of such interest shall have been duly demanded in writing, or in case default shall be made in the payment of the principal of any of such bonds when the same shall become due or be declared due and payable as in this mortgage provided, or in case default shall be made in the performance of any other agreement or stipulation herein or in said lease contained on the part of the mortgagor and lessee, or either of them to be kept and performed, then and in either or any or every such case it shall be lawful for the trustee, and upon a requisition in writing signed by the holders of not less than one third in amount of the bonds then outstanding, and adequate indemnity against all costs, expenses and liabilities to be by -him incurred, it shall be the duty of the trustee to proceed to enforce the rights and liens of the bondholders under this mortgage, either by the foreclosure,” etc. It will thus be seen from the portion of article 6 above quoted that for a default in the payment of interest upon the bonds it is necessary that the same shall continue for — 125 — a period of six months after a payment shall have been duly demanded in writing before the trustee can commence any action to foreclose the mortgage on that account. However, it is clear from the subsequent provisions of said article 6 that where default shall be made in the payment of principal, or in case default shall be made in the performance of any other agreement or stipulation, which would include a default pursuant to failure to pay taxes on the property, the trustee is authorized to proceed with the foreclosure of the mortgage; and the subsequent provision of said article 6, above referred to, makes this clear, because it provides in express terms that “upon a requisition in writing, signed by the bondholders, . . . and upon adequate indemnity having-been given,” etc., it shall be the duty of the trustee to proceed with foreclosure or some other remedy provided for in the trust deed. It is clear, therefore, that said article 6 first on the given default extends and grants the right to the trustee to foreclose of his own motion, if he so desires, and becomes compulsory upon the requisition of the bondholders and the furnishing of security as is so provided in said trust deed. Article 4 of the trust deed provides: “ ... or in case the mortgagor . . '. shall fail to' observe, keep, or perform any condition of said lease, then and thereupon the principal of all bonds secured by this mortgage shall at the election of the trustee immediately become due and payable. Provided that a majority in interest of the holders of all such bonds issued hereunder and then outstanding may in writing or by a vote of such majority at a meeting duly held as herein provided, at any time after such default or failure, declare, or instruct the trustee in such case to declare, that upon the expiration of said period after such default and demand, or immediately after such failure to- insure, the said principal shall become immediately due and payable as aforesaid, and the same shall thereupon become immediately due and payable; or'such majority may, in like manner, waive or instruct the trustee to refrain from making such election and declaration on such terms and — 126 — conditions as such majority may deem proper, and may annul or reverse the previous election made or action taken by the trustee in that behalf, whereupon said principal sum shall immediately cease to be due and payable.” Under and pursuant to said article 4 of the trust' deed, therefore, the trustee had authority, upon failure of the mortgagor to observe or keep or perform the conditions of said lease, among which was the obligation to pay taxes, to elect to and to declare the whole amount of the principal of said bonds due. However., the bondholders at all times retained the right to waive such default and to insist that the trustee refrain from'making such election and declaration of default. The notice of election of the trustee to declare the whole amount of the first-mortgage bonds due assigned as reasons the failure to keep the covenants and conditions of the ninety-nine-year lease requiring the payment of taxes, and the default on the part of the mortgagor in the payment of the taxes for the years 1914 and 1915. So that it is apparent that said trust deed gave the right to the trustee to declare the first-mortgage bond indebtedness due for breaches of the terms of the ninety-nine-year lease without a meeting of the bondholders.as a condition precedent. It is true that there is a provision in the ninety-nine-year lease that any successor in interest of the lessee must be given notice by the lessor, in writing, of the fact that he has not performed the covenants of the lease and that such successor in interest has six months after such notice in writing in which to perform. No such notice was ever given, and the notice,given by the trustee on October 2, 1916, being the notice of default for payment of taxes, etc., is the only notice that was given with respect to any failure on the part of the mortgagor. This notice last referred to is a notice expressly designed to be for the benefit of the lessee under the ninety-nine-year lease, being the mortgagor under the trust deed, and is contemplated to be given and can be given — 127 — only by -the lessor. Such provision in the ninety-nine-year lease inures to the benefit of the lessee, or mortgagor under the trust deed, and prevents any action on the part of the lessor in the form of proceedings to forfeit the ninety-nine-year lease on account of such conditions broken- on the part of the lessee during the six months’ period. Inasmuch, however, as a failure to pay the taxes' under the ninety-nine-yea'r lease was expressly made a default, upon the happening of which, under the provisions of the trust deed, the trustee was authorized to proceed by election to declare the whole amount of the principal of the bonds due by foreclosure, the trustee was fully authorized to proceed with his declaration and foreclosure, notwithstanding the aforesaid provision in the ninety-nine-year lease. It is also claimed that there was in fact no interest due. and unpaid at the time the foreclosure was begun, and it is claimed that every interest coupon that had matured before foreclosure had been discharged and paid by Schroeder. The evidence, however, shows that Schroeder had advanced the interest to the bondholders and held the coupons as' security for the advancements, and that he is entitled to be subrogated to the rights of the coupon holders, and the court so found. The evidence also .shows that Schroeder held these coupons and that they were not marked “canceled,” and Schroeder’s books as trustee do not show the payment of the interest on the coupons. The evidence also shows that-Schroeder kept two accounts with the Berlin Arcade Company, one an account of moneys advanced on its account by him personally, and another account which shows his receipts and expenditures as trustee, entered on the books as “Edward Schroeder, special,” and that from time to time, when there were moneys received as income from the mortgaged premises, it would be transferred from the Edward Schroeder, special, account in part payment of the indebtedness shown in the personal account of Schroeder. — 128 — It also appears that Schroeder had in this way advanced for the benefit of the Real Estate Company an amount to be paid to the bondholders for interest on the bonds in the sum of $23,000, as the result whereof foreclosure on the trust deed was delayed for a period of two years. It would be inequitable and unjust under the circumstances, therefore, not to subrogate Schroeder for' the payments so made to the interests of the bondholders under these coupons, and we hold that the circuit court in so doing should be sustained. It is further contended by counsel for Leaf green and the Real Estate Company that the current income up to the time of the foreclosure was in a sum greater than the amount necessary to discharge all previously maturing interest payments. SchroedeEs books, having been introduced in evidence, clearly controvert this claim and show that the mortgagor, the Real Estate Company, was always indebted to the plaintiff, and that the advancements of Schroeder for the benefit of the mortgagee up to the time of the trial amounted to the sum of $24,875. On April 15, 1914, the defendant Leafgreen, then owning substantially all thej capital stock of the mortgagor, and the plaintiff, Schroeder, made an agreement in writing which among other things recited and provided the following: First, the execution of the first trust mortgage and the fact that $125,000 of the first-mortgage bonds were all outstanding; second, the indebtedness of the mortgagor to Schroeder for insurance premiums, for $1,243.04; third, the holding by Schroeder of gast-due interest coupons from first-mortgage bonds, aggregating $5,400.94, plus interest; fourth, the default by the mortgagor in the payment of the 1912 and 1913 taxes; and fifth, the accruing of additional interest on the mortgage and quarterly rent payable by the mortgagor under the ninety-nine-year lease on May 1, 1914. It was therefore agreed that,' in order to raise the above moneys then due and in the future accruing and to secure — 129 — Schroeder moneys owing him, the mortgagor, pay to Schroeder $4,500 in cash, to be 'applied: (a) In payment of semi-annual interest on first-mortgage bond coupons maturing May 1, 1914. (b) In payment on account of taxes and assessments for the year 1912. (c) In payment of quarterly rent owing Maria Niemann (the lessor under the ninety-nine-year lease), on May 1, 1914. “If above sum is insufficient, Schroeder to advance sufficient money to make up deficiency.” Then the agreement provides for an assignment to Schroeder of all rent moneys accruing from mortgaged premises, etc. The moneys collected by Schroeder were, to be applied by him as follows: 1.' Wages for janitor and elevator man and charwoman, not exceeding $115 monthly. 2. Semi-annual interest and quarterly rent becoming due May 1, 1914. 3. Taxes and assessments, general and special, due or to become due. 4. All subsequent instalments of interest on first mortgages. 5. Rent under ninety-nine-year lease and taxes and assessments. “When items 1 to 4 are paid, any surplus to be applied to the payment of sum due Schroeder, as recited in the first whereas preamble above for expenditures for taxes and amounts due on past-due clipped coupons.” When the foregoing sums are paid the agreement was to terminate. Schroeder was not bound by any fixed order of payments, but could apply moneys as by him deemed advisable, excepting only that nothing should be paid on ác-count of moneys due Schroeder personally until interest, rent, taxes, assessments, and wages had been paid. — 130 — The mortgagor also agreed to defray all costs and expenses to operate the building, except for moneys to be paid out of rentals as above recited, and that it would make up any deficiency on account of any or all the above obligations if the rentals and income were insufficient. The foregoing agreement is set forth in the answer of the Real Estate Company and of the defendant Leafgreen. This agreement amounts to a clear confession on the part of the Real Estate Company and Leafgreen, its principal stockholder, that at the date of said agreement, namely, April 15, 1914, there was a large indebtedness of the mortgagor to1 Schroeder; that there was no property in the hands of said plaintiff out of which such indebtedness at that time could be paid; and absolutely precludes the idea that there were unexpended portions of the proceeds of the first-mortgage bonds available at that time out of and from which these various obligations could be paid. It also appears that the $22,500 alleged to be the unex-pended portions of the proceeds of the first-mortgage bonds had been paid out in liquidation of obligations created by the mortgagor before Leafgreen became a stockholder and officer of the Real Estate Company, and that the mortgagor and Leafgreen knew of these facts at the time of the execution of said agreement of date of April 15, 1914. Schroeder testified that from April 15, 1914, to October 11, 1916, Leafgreen had an office in the Berlin Arcade Building and that Schroeder consulted him with respect to all of the expenditures, and that Leafgreen never made any objections with reference to the same. And it further appears, as the result of cross-examination of Schroeder on the trial by one of the defendants’ counsel, that he testified that the whole proceeds of the sale of the first-mortgage bonds were paid out upon the written directions of the mortgagor. If that be true, and there is testimony to substantiate it, notwithstanding the provisions in the first trust deed or — 131 — mortgage, wherein and whereby the proceeds of the first-mortgage bonds were to be all expended in the erection and construction of the building, such provision was modified by the mortgagor and Schroeder, and they, being the only parties interested, had a perfect right to make such modification. It also appears from the testimony in the case that after the execution of the trust deeds in question the mortgagor, and Leafgreen made á contract for the construction of the building whereby Leafgreen obligated himself to furnish all the material and do all the work to finish and complete it for $151,000, of which Leafgreen received $102,000, proceeds of the first-mortgage bonds, $30,000 in second-mortgage bonds at face value, and $19,000 in notes of the Real Estate Company. Additional expenditures were made, making the total cost of the building the sum of $193,000; and Leafgreen testified that $172,657 went into the building and that he still had coming to him for extras the sum of $21,157. From the foregoing it would also appear quite conclusively that the contract last above referred to not only made it possible to complete the building without applying all the proceeds of the first-mortgage bonds for that purpose, but this agreement is also strongly indicative of an understanding by and between the mortgagor and the plaintiff, and tends to prove, that the balance of the first-mortgage bonds not expended in the erection of the building was disposed of for the purpose of paying the various items which the testimony shows were paid and which constituted the sum of about $22,500. Let us now consider what the status of the trustee under the second trust deed and second-mortgage bondholders is in this case. With respect to the alleged illegal expenditures and appropriations of the proceeds of the first-mortgage bonds and of other alleged misappropriations, the first-mortgage bondholders are directly interested. — 132 — “In the foreclosure proceedings, the trustee represents the first-mortgage bondholders, and it has been held that such trustee may sue to foreclose the mortgage without joining the bondholders. And where a bill in equity is filed by the trustees for the foreclosure of a mortgage, the individual bondholders are not necessary, nor, as a rule, even proper parties to the suit.” 2 Elliott, Railroads, § 508; Central T. Co. v. Burton, 74 Wis. 329, 336, 43 N. W. 141; sec. 2607, Stats. Article 6 of the trust deed also provides: “No holder of any bond or coupon hereby secured shall have the right to institute suit, action, or proceeding, in equity or at law, for the foreclosure of this mortgage, or. for the execution of any trusts thereof, or for the appointment of a receiver, or for any other remedy hereunder;” and further provides that such right shall vest exclusively in the trustee. The first-mortgage bondholders, not having participated in a modification of the trust agreement with respect to the application of the proceeds of the first-mortgage bonds, would undoubtedly have had the right, upon a proper pleading in that regard, to have enforced an accounting on the part of the trustee for the alleged improper expenditure of the amount of the first-mortgage bonds. Evidently, however, the first-mortgage bondholders considered the security ample to protect them, and therefore no application was made by them or by any of them intended to effectuate such purpose. On the contrary, they have seen fit to rely solely upon the security of the first trust mortgage and the property covered thereby, and this was and is their, undoubted privilege. The second-mortgage bondholders'were contented to and did accept a second mortgage upon the leasehold interest of the mortgagor and the buildings thereon, subject in all respects to the lien of the first mortgage. The obligation provided for in the first trust deed or mortgage, wherein and whereby it is agreed that the proceeds of the first-mortgage bonds shall be used exclusively for the erection and con — 133 — struction of the contemplated building, constitutes an agreement between the mortgagor "and the first-mortgage bondholders, and is a personal agreement with the first-mortgage bondholders which in no manner inures to the benefit of the second-mortgage bondholders, and does not constitute an agreement running with the land so as to enable the second-mortgage bondholders to take advantage of the same. This agreement between the mortgagor and the first-mortgage bondholders was not one made for the benefit of a third party, namely, the second-mortgage bondholders, and in order to entitle the second-mortgage bondholders to the benefit of such agreement there must be on the .part of the original parties to the contract a clear intent to effectuate that purpose. 2 Elliott, Contracts, § 1413. Such intent not being made manifest from the wording of the first trust deed, such provision in the first trust deed becomes a personal covenant, if anything, and does not inure to the benefit of the second-mortgage bondholders. Hartung v. Witte, 59 Wis. 285, 18 N. W. 175; 7 Ruling Case Law, p. 1112, § 29. Therefore it becomes evident that the second-mortgage bondholders must rely, first, upon the equity in the leasehold estate after the satisfaction of the claims of the first-mortgage bondholders; and secondly, they have the right, in the event of an amount being realized upon such sale which is inadequate and insufficient to pay the amounts due them in whole or in part, to obtain a deficiency judgment against the mortgagor, which amount they must collect either from the receiver of the mortgagor in the receivership. proceedings, as a general creditor, or, in the event that such receivership proceedings be discontinued or not made effectual, to sequestrate, upon proper proceedings, all the property of the said mortgagor hot sold or disposed of under the foreclosure proceedings. It follows, therefore, from what has heretofore been said that the trustee under the second trust deed or mortgage and the second-mortgage bondholders, except as herein stated, — 134 — have no interest whatsoever in this foreclosure proceeding, and that their counterclaims for affirmative relief were properly denied and dismissed. The Real Estate Company also has appeared in this action, filed an answer and cross-complaint, and in law is authorized to participate in the litigation. Any proceeds, however, derived from this litigation, over and above what is necessary to satisfy the claims of lienholders, belong to and are the property of the receiver. The direction of the litigation in behalf of the mortgagor, and the control thereof, therefore, rests in the receiver, and the policy and remedies pursued by him must necessarily govern. The receiver interposed an answer in and by which he puts the plaintiff to his proofs, alleges that all the holders of the outstanding bpnds are necessary parties to this action, and asks that the equities of the several parties to the mortgaged premises be ascertained so that the receiver may determine the amount necessary to redeem from the liens as so established. He further asks that only one judgment of foreclosure be entered, and expressly reserves the right to litigate in a separate action the issues in an action then pending in the circuit court for Milwaukee county, brought by the receiver against Edzvard Schroeder and others and designed to recover damages on account of misconduct on the part of the trustee and misappropriation of funds. It having been found by the court below that the amount of the principal of the bonds on both the first and second mortgages is due, together with the interest and other items, such as taxes, etc., and there being ample evidence to sustain such finding of the lower court, and one judgment having been entered as prayed for by the plaintiff and the defendant Leidig and the receiver, the judgment of the lower court must be affirmed. Counsel for Leidig, trustee, etc., also contends that he has the right to compel the plaintiff in this action, by the judgment of the court, to marshal and apply all of the assets — 135 — available to the trustee for the first-mortgage bondholders, and to compel the trustee to first satisfy as much of the claim of the first-mortgage bondholders out of such assets, other than the leasehold interest and the buildings thereon, as such assets will pay, before resorting to the mortgaged property; and he also claims the right of subrogation of the trustee for second-mortgage bondholders to the rights of the trustee for the first-mortgage bondholders with respect to such assets, exclusive of the mortgaged property. The’ doctrine of marshaling of assets is an old equitable doctriné, well recognized in this and other states, and should be applied wherever available and where the same does not work hardship or inequity to the interests of the first-mortgage bondholders. As is said in 6 Pomeroy, Eq. Jur. (3d ed.) § 865: “The equitable remedy of marshaling securities, with that of marshaling assets, depends upon the principle that a person having two funds to satisfy his demands shall not, by his election, disappoint a party having but one fund.” It appears from the testimony in this case that the plaintiff has but one property out of which to satisfy the claim of the mortgage bondholders, and that is the mortgaged property. The balance of the- assets coming into the hands of the trustee have all been expended, either rightfully or wrongfully, so that in reality there is not more than one fund or one property out of which the plaintiff can satisfy his claim. What the mortgagor retains is a mere claim of cause of action. Under these circumstances the doctrine of thp marshhling of assets is not applicable, for the reason that the claim arising for misappropriation of the proceeds of the first-mortgage bonds and for misconduct of the trustee is one which may involve the trustee in litigation. - A paramount creditor, such as the trustee in this case, cannot be compelled to exhaust in the first instance a mere personal remedy. 26 — 136 — Cyc. 930, 931; Palmer v. Snell, 111 Ill. 161; Wolf v. Smith, 36 Iowa, 454; Boone v. Clark, 129 Ill. 466, 21 N. E. 850; Walker v. Covar, 2 S. C. 16. Objection is also made by counsel for the second-mortgage bondholders and the receiver that the court erred in allowing Schroeder to reimburse himself for moneys advanced by him in the construction of a bowling alley. There is ample evidence in the case to prove that these expenditures were made upon the direction and under the supervision of' Leaf green, who was at that time the president of the Real Estate Company and the owner of practically all the stock 'of such company, and that it was understood and agreed between the mortgagor and Schroeder that Schroeder should be reimbursed for all moneys expended" by him personally on that account. A solicitor’s fee of $4,000 was allowed to plaintiff’s attorneys by the court. There is ample evidence to sustain the finding of the lower court that such allowance was reasonable. We appreciate the efforts and labor connected with this foreclosure and the trial of the action and the knowledge and experience requisite for that purpose. The allowance made for the receiver is also' reasonable, and the evidence fully warrants it. There is no charge made in this case that there was collusion between Schroeder, the trustee, and the first-mortgage bondholders, and the purchase in good faith of the first-mortgage bonds by their holders, and the payment at par therefor, is unchallenged. • By the Court. — The judgment of the lower court is affirmed.