Boteler v. Leber

• Decision Date: 23 February 1933
• Citation: 164 A. 572
• Parties: BOTELER v. LEBER et al.
• Court: New Jersey Court of Chancery

164 A. 572

BOTELER

v. LEBER et al.

Court of Chancery of New Jersey.

Feb. 23, 1933.

Syllabus by the Court.

1. In this state the common-law rule that a mortgage in fee creates an immediate estate in fee simple in the mortgagee subject to defeasance by payment of the mortgage money according to the condition of the mortgage prevails, except that the right to entry and possession is postponed until default.

2. Where possession of the mortgaged premises is taken through the medium of a receiver appointed in foreclosure proceedings, the receiver is ordinarily entitled to collect all rents accruing after his appointment.

3. Where rent of mortgaged premises is paid in advance of the time stipulated in the lease for its payment, and a transfer of the reversion takes place thereafter, but before the time stipulated for such payment, the tenant is not protected as against a transferee who purchases without knowledge of that fact.

4. The right to rents and profits of land follows the legal title and right to possession.

5. A tenant who pays rent in advance of the rent day named in his lease, after default on a mortgage pledging "rents, issues and profits" in the usual form, is liable to a rent receiver appointed in foreclosure proceedings for all such advance payments which, under the terms of the lease, accrued after the receiver's appointment.

Suit by Bessie Bell Boteler and another, as trustees under the last will and testament of Elijah S. Boteler, deceased, against Mildred H. Leber and others. On petition of the receiver.

Decision in accordance with opinion.

Julius Stein, receiver, of Newark, pro se.

BERRY, Vice Chancellor.

The bill in this cause was filed, and an order to show cause why a receiver of rents should not be appointed advised and served, on November 22, 1932, and a receiver was appointed November 29, 1932. At the time of his appointment, Holmes and Von Schmid held a lease for a portion of the mortgaged premises at a rental of $90 per month, payable on the 1st day of the month. The receiver demanded the rent due December 1st and it was refused, the tenants claiming that they were not liable to the receiver as they had already, on October 1, 1932, paid their landlord, the mortgagor, four months' rent in advance and they produced a receipt and canceled check showing such payment.

The question here presented is whether or not the tenant is protected with respect to such advance payment as against the receiver. While the rule applicable to this controversy is not uniform in the several states, the weight of authority is to the effect that where rent is paid in advance of the time stipulated in the lease for its payment, and a transfer of the reversion takes place thereafter, but before the time stipulated for such payment, the tenant is not protected as against the transferee who purchases without knowledge of the fact, 16 R, C. L. 917, title Landlord and Tenant, § 423; note to Glidden v. Second Avenue Investment Company (Minn.) L. R. A. 1915C, 190. at page 233; and this appears to be the English rule. De Nicholls v. Saunders, L. R. 5 C. P. 589 (Eng.)1870; 39 L. J. C. P. (N. S.) 297; Cook v. Guerra, L. R. 7 C. P. 132, 41 L. J. C. P. (N. S.) 89. The variation in the rule as applied in the different jurisdictions is dependent largely upon the prevailing doctrine relating to mortgages. Where the common-law doctrine that a mortgage conveys the legal title prevails, a mortgage of land taken subject to a lease carries the reversion so as to entitle the mortgagee to all rents subsequently accruing. But where the rule is that a mortgage is merely a lien, a security, the law is to the contrary and the mortgagee does not become entitled to the rents until he becomes entitled to possession after decree in foreclosure. 16 R. C. L. 918, title Landlord and Tenant. § 425. See, also, Jones on Mortgages, vol. 2 (Sth Ed.) 361, §§ 978, 981, 982; 19 R. C. L. 564, title Mortgages, § 373; 42 C. J. 128, title Mortgages, § 1704; Martin v. Martin, 7 Md. 308, 61 Am. Dec. 364; Massachusetts Hospital Life Insurance Company v. Wilson, 10 Mete. (51 Mass.) 126; Fitchburg Cotton Manufactory Corporation v. Melven, 15 Mass. 268; Henshaw v. Wells, 9 Humph. (28 Tenn.) 568. In other words, the right to rents and profits of real estate follows the legal title and the right to possession. 19 R. C. L. 319. Where the mortgage entitles the mortgagee to possession and thus to the rents and profits, the tenant is not protected for such advance payments. 16 R. C. L. p. 918, title Landlord and Tenant, § 425. But he is protected in jurisdictions where the right to possession does not follow the mortgage, Grether v. Nick, 193 Wis. 503, 213 N. W. 304, 215 N. W. 571, 55 A. L. R. 525; although even in such jurisdictions if the advance rent is paid in anticipation of foreclosure, and by connivance between the mortgagee and tenant to defraud the mortgagee, the tenant is not protected. Gaynor v. Blewett, 82 Wis. 313, 52 N. W. 313, 33 Am. St. Rep. 47. But it has been held that advance payments of rent pursuant to a bona fide...