American Freehold Land Mortg. Co. v. Pollard

• Decision Date: 13 May 1902
• Citation: 32 So. 630,132 Ala. 155
• Parties: AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED, v. POLLARD. POLLARD v. AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED.
• Court: Alabama Supreme Court

32 So. 630

132 Ala. 155

AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED, v. POLLARD.

POLLARD v. AMERICAN FREEHOLD LAND MORTG. CO. OF LONDON, LIMITED. ^[1]

Supreme Court of Alabama

May 13, 1902

Appeal from city court of Montgomery; A. D. Sayre, Judge.

Bill by the American Freehold Land Mortgage Company against Rebecca M. Pollard. From the decree, both parties appeal. Reversed.

Knox &amp Bowie and Watts, Troy & Caffey, for appellant.

John G Winter, Geo. F. Moore, R. S. Teague, and E. F. Jones, for appellee.

SHARPE J.

Several questions arising in this suit have been passed on by this court on former appeals. See reports of the case in 103 Ala 289, 16 So. 801; 120 Ala. 1, 24 So. 736; 127 Ala. 227, 29 So 598. As a result of those adjudications, and after the last remandment, the case stood in the chancery court for an accounting between complainant as a mortgagee in possession of mortgaged lands and the defendant, Rebecca M. Pollard, as a redemptioner. An account was stated by a special register to whom the matter was referred, and to whose report both parties filed exceptions. One item reported on consisted of attorney's fees allowed, as part of the mortgage debt, under stipulations in the mortgage, and made the subject of evidence taken on the reference. On the hearing in the chancery court, the original bill was against objection amended, so as to increase complainant's claim for attorney's fees. Thereupon, after submission, the court, after overruling some exceptions to the report, and sustaining others, restated the account, and rendered a decree accordingly. From that decree, both parties have appealed.

The case involves rules usually governing as between a mortgagee rightfully in possession of lands before foreclosure, and a mortgagor seeking to redeem, which we state so far as they seem to be applicable here. In the absence of stipulations to the contrary, the mortgagee, if he has used the property himself, must account to the mortgagor for its reasonable rental value. If he rents the land, he is accountable for the rents received, though they exceed the value of the use, since he is not allowed to profit from rents beyond their application to the mortgage debt. For loss of rents and profits, he is liable to the extent the loss results from his willful default or gross negligence, which in such cases is defined as a failure to use reasonable care and diligence. Gresham v. Ware, 79 Ala. 192; Sloan v. Frothingham, 72 Ala. 589; Daniel v. Coker, 70 Ala. 260; Butts v. Broughton, 72 Ala. 294. For waste committed, the mortgagee's liability is measured by the extent to which the land's value is thereby diminished. Perdue v. Brooks, 85 Ala. 459, 5 So. 126. The mortgagee is entitled to credit for expenditures in making repairs and paying taxes, and, where there are charges for rents or losses, such expenditures should be deducted from those charges. Blum v. Mitchell, 59 Ala. 535. The mortgagee is not allowed to increase the cost of redeeming by reason of improvements as distinguished from repairs, or to be charged with rents or rental values in so far as they represent an increase from such improvements. These rules are deducible from the decisions of this court above cited, together with the following, among other authorities: Adams v. Sayre, 76 Ala. 509; Dozier v. Mitchell, 65 Ala. 511; Barron v. Paulling, 38 Ala. 292; Hogan v. Stone, 1 Ala. 496, 35 Am. Dec. 39.

Recurring to this case, we state at the outset our conclusion that errors have entered into the accounting to an extent that renders necessary a reversal of the decree and a remandment for a restatement of the account. Fruitful of error prejudicial to the respondent Mrs. Pollard was the theory, adopted by the trial court, that the complainant mortgage company was entitled to credits for repairs of the mortgage property and taxes paid thereon by its vendee, E. S. Armistead, and his vendee, R. L. Armistead, while they respectively held possession as such vendees. While complainant's sale of the lands after its voidable purchase did not alter its status as a mortgagee in possession so as to destroy its right to credit for its expenditures properly made in that capacity, there is no rule of law or equity whereby it can be given the benefit of expenditures by others. Apparently, the Armisteads, after their respective purchases, made repairs, and paid taxes, not for complainant, but for their own supposed benefit and, so far as appears, complainant has been at no cost therefor. Its claim for credits therefor stands on no better footing than would a claim for like expenditures by a trespasser.

As against the complainant mortgage company, there was error in charging it with items, amounting to $561, as money received by the Armisteads from the sale of timber cut from the lands. The cutting and taking of timber from the premises without the mortgagor's consent should have been treated as waste permitted, if not committed, for which the mortgage company was responsible, but not as profits received by it. Its responsibility for waste is measurable, not by what was received from sales of the timber, but by the depreciation caused in the value of the land by its having been denuded of the timber. Perdue v. Brooks, 85 Ala. 459, 5 So 126. What such depreciation amounts to the evidence in...