Emil Kiewert Co. v. Juneau

• Decision Date: 02 February 1897
• Docket Number: 420.
• Citation: 78 F. 708
• Parties: EMIL KIEWERT CO. et al. v. JUNEAU et al.
• Court: U.S. Court of Appeals — Sixth Circuit

78 F. 708

EMIL KIEWERT CO. et al. v. JUNEAU et al.

No. 420.

United States Court of Appeals, Sixth Circuit.

February 2, 1897

Bill to foreclose a mortgage, in form a deed, executed for the purpose of securing an indebtedness then due, and further indebtedness then contemplated. The mortgagor in August 1888, was indebted in the sum of $1,590 to the complainant the Emil Kiewert Company, a corporation of the state of Wisconsin. To secure this he made an absolute deed of conveyance to Emil Kiewert, president of said corporation. It is conceded that this conveyance was intended to secure the debt then existing, and such further indebtedness as should from time to time be created, to the Emil Kiewert Company. It was understood that the said company, or Emil Kiewert as trustee, should take possession of the premises, make necessary repairs, and apply proceeds of rents first to costs of repairs, taxes, and expenses, and remainder, from time to time, upon the indebtedness intended to be secured. This relation lasted more than four years, when some misunderstanding as to the state of the accounts resulted in the filing of this bill and a cross bill by Juneau, who claimed, upon a true accounting, to have overpaid his indebtedness. The matters involved were referred to a special commissioner, who was directed to state an account, charging the complainant with all rents actually collected, and all which by proper diligence might have been collected. The report found that the mortgagor was chargeable with rents aggregating $9,322.42, including interest. He also found that Juneau was chargeable with an indebtedness, including interest, of $9,293.57, leaving a balance due Juneau of $28.91. Each party filed exceptions to this report. The principal ground of exception taken by the complainant was that the mortgagee had been erroneously charged with rents not collected aggregating about $3,362.34. This exception was in part sustained, the circuit judge, on the facts, holding that the failure to rent out the premises was the mutual fault of the complainant and defendant, and that the loss should therefore be divided between them. It was therefore directed that the accounts should be altered so as to charge complainants with but one-half of the net loss resulting from failure to rent out the mortgaged premises. This operated to credit complainants with $1,818.83, that being one-half the loss of rent, with interest. Deducting from this the balance of $28.91 found in favor of Juneau left the latter indebted in the sum of $1,789.92, as due June 1, 1894. All other exceptions were overruled. Both parties have appealed, and assigned as error the overruling of their several exceptions to said report.

Fred Scheiber, for Emil Kiewert Co. et al.

Birney Hoyt, for Juneau et al.

Before HARLAN, Circuit Justice, and TAFT and LURTON, Circuit Judges.

After making the foregoing statement of facts, the opinion of the court was delivered by LURTON, Circuit Judge.

The mortgaged property consisted of a block of three two-story business houses, situated in the small village of Ironwood Gogebic county, Mich. The lower rooms were fitted up for business purposes, and the upper story was adapted for separate use as apartments or offices. Elisha Juneau, the owner and mortgagor, had kept a saloon in one of them, and continued to do so for much of the time embraced in the accounting. For the room so occupied, he, for a time, paid rent to the agent of the complainant company. The complainant corporation had its place of business in the city of Milwaukee, Wis., and Emil Kiewert, its chief officer, and the trustee under the mortgage in question, also resided there. Under the circumstances, we shall treat this as if a mortgage made direct to the mortgagee, the holder of the legal title being the president of the mortgagee company. The object of the mortgage was to enable the mortgagee to collect current rents from tenants then in the property, or such as should succeed them, and apply the net receipts on the debt of Juneau then existing, or which might be thereafter created during its existence. Neither the complainant nor Emil Kiewert, the trustee, ever personally occupied any part of the premises. The great distance between the residence of complainants and the location of the mortgaged property made it necessary to intrust the renting and care of the property to a local agent. To this end, one Otto E. Karste, a resident banker, was made the agent of the trustee, and intrusted with the care and rental of the mortgaged premises. The actual rents collected and accounted for up to the close of the account stated by the special commissioner aggregated $3,879.10, excluding interest. Parts of the premises were from time to time vacant and unoccupied. Expert evidence was taken as to what would be a reasonable rental for the unoccupied premises. This the commissioner fixed at something in excess of $3,000, and reported that the mortgagee had not exercised due and reasonable diligence in respect to keeping said premises rented out, and was therefore liable for the rents which by such diligence he ought to have realized. The exception of complainants to this charge was so far sustained by the court below as to divide equally the loss consequent upon the nonrenting of a part of the premises between the mortgagee and mortgagor, the court being of opinion that the fault was mutual.

There are a great many peculiarities about this case which made the relation between the complainants and the mortgagor, Juneau quite exceptional. Juneau himself occupied one of the houses and paid rent regularly for a time. For the remainder of the period the house he occupied is excluded from consideration, inasmuch as he himself was in possession. Karste, the agent of complainants, was a business man of character, and testified that he was unable to obtain acceptable tenants for...