Hartford Realization Co. v. Travelers' Ins. Co.

• Decision Date: 18 July 1933
• Citation: 167 A. 728,117 Conn. 218
• Parties: HARTFORD REALIZATION CO. v. TRAVELERS' INS. CO.
• Court: Connecticut Supreme Court

167 A. 728

117 Conn. 218

HARTFORD REALIZATION CO. v. TRAVELERS' INS. CO.

Supreme Court of Errors of Connecticut.

July 18, 1933

Appeal from Superior Court, Hartford County; Newell Jennings, Judge.

Action by the Hartford Realization Company against the Travelers' Insurance Company for an injunction to restrain defendant from collecting rents alleged to be due to plaintiff and for an accounting. Judgment was rendered for plaintiff on trial to the court, and defendant appeals.

Error judgment set aside, and cause remanded.

James E. Rhodes, of Hartford (Warren Maxwell, of Hartford, on the brief), for appellant.

A. S Bordon and Joseph Klau, both of Hartford, for appellee.

Argued before MALTBIE, C.J., and HAINES, HINMAN, BANKS, and AVERY JJ.

MALTBIE, Chief Justice.

On October 10, 1924, Pasquale M. D'Esopo mortgaged to the defendant, to secure a note for $600,000, a large business block in the central portion of the city of Hartford. The note provided that interest should be paid semiannually, that $10,000 should be paid annually upon the principal beginning October 10, 1925, and that the mortgagor should pay all taxes upon the premises and keep the buildings insured. Neither note nor mortgage contained any provision that, upon default on the payment of any interest or installment, the due date of the note should be accelerated, but the mortgage did contain these provisions: " As further and additional security for the performance of the terms and conditions of this mortgage, and for the payment of the amounts stipulated in the note secured thereby, the grantor hereby agrees that in case of default in any of the payments stipulated in said note, and so long as such default continues, the grantee is hereby authorized and empowered, by its servants, Agents, or Attorneys, to enter upon the mortgaged premises and to collect and receive the rents therefrom, and to apply the same to the payment of amounts due upon said note. And for this purpose, and in case of such default the Grantor hereby assigns, transfers and sets over to the Grantee, the rents accruing from said premises during the period of such default. Nothing contained in the foregoing provision shall impair or affect any right or remedy which the grantee might now or hereafter have, were it not for said provision, but the remedy therein given shall be in addition to any others which the grantee may have hereunder."

The only installment of principal which was paid was that due October 10, 1925, and thereafter the defendant did not insist upon the payment of installments of the principal, but all interest due was paid as provided in the mortgage including that due October 10, 1932. The equity in the property after several conveyances became vested in a private banking company, Pallotti, Andretta & Co., Inc. In December, 1930, this company was restrained from further business by the bank commissioner, and in January, 1931, a receiver was appointed for it. On January 12, 1932, John L. Bonee became receiver in succession to others previously appointed. Thereafter and before the next installment of interest became due, Bonee had an interview with L. Edmund Zacher, the president of the defendant, in regard to the mortgage and particularly with respect to any action by the defendant upon default in the payment of installments of the principal; and Zacher told him he would not bother him for a couple of years. Relying upon the assurance so given him, Bonee as receiver paid the interest due April 10, 1932, and that due October 10, 1932, amounting in each instance to about $18,000, and also made an arrangement with the tax collector of the city as to taxes upon the property under which before December 29, 1932, he paid taxes to the amount of $18,000. Bonee, believing this property the most valuable asset of the banking company, applied all available income to pay the interest and taxes upon it, making no tax payments upon a number of other pieces of real estate in his hands as receiver. Before December 29, 1932, the receiver had expended more than $38,000 in excess of the receipts from the building in paying interest and taxes, making repairs, and discharging other obligations, and, had these not been paid by him and had the defendant foreclosed its mortgage, it would have had to discharge them. The property at the time this action was brought was appraised at a fair market value of $800,000.

The plaintiff was organized, with the approval of the superior court in the receivership proceedings, to take over the assets of the banking company for the benefit of its stockholders, who composed about 70 per cent. of the depositors of the banking company. On December 29, 1932, under order of court, most of the assets in the hands of the receiver were sold and transferred to it; and as a part of the transaction the receiver transferred to the plaintiff by bill of sale back rent due from tenants of the building amounting to about $14,000 and also all rights or causes of action to which he as receiver was entitled. The plaintiff entered into possession of the building at noon December 29, 1932. Bonee had employed John B. Murphy to manage the building and collect the rents and he was so acting and maintaining an office in the building for that purpose on that day. At 3 p. m. on the same day the defendant, without notice to or demand upon the plaintiff, engaged Murphy as its agent and directed him to instruct tenants not to pay rent to the plaintiff. Murphy continued thereafter to maintain an office in the building and notified the tenants as instructed by the defendant: and they were also notified by the defendant by letter to pay rent either to it or to Murphy as its agent. Thereafter the defendant collected rents from the tenants including some that were overdue on December 29, 1932, and was continuing to collect rent at the time this action was tried. On December 30, 1932, the plaintiff notified the defendant and Murphy that it regarded the defendant's action as illegal and would hold it liable for any rents collected. On January 26, 1933, this action was brought, seeking an injunction to restrain the defendant from collecting rents and an accounting by it of rents collected which were due on December 29, 1932, or became due during the month of January, 1933. The trial court concluded that the defendant's entry into possession of the building was by constructive force and against the objection of the plaintiff and constituted an ouster of it, that the method pursued by the defendant was not that required by law, and that it was not entitled to collect any rent due on December 29, 1932. It gave judgment enjoining the defendant from collecting rents from tenants in the building and for an accounting of rents collected as demanded in the complaint. From this judgment the defendant has appealed.

The complaint alleges that the defendant by its servants and agents has established offices in, and assumed entire control of the employees and maintenance of, the building and that its acts have resulted in the plaintiff being ousted of possession. Under these allegations we must regard the plaintiff as having ousted the defendant from the premises and itself taken possession of them. Under the theory of mortgages which we have always followed in this state a mortgagee gets the legal title to the property and, in the absence of an agreement or other circumstances debarring him from so doing, is entitled to possession. Desiderio v. Iadonisi, 115 Conn. 652, 654, 163 A 254. He may assert this right against a mortgagor in possession by an action of ejectment. Chamberlain v. Thompson, 10 Conn. 243, 251, 26 Am.Dec. 390. In Rockwell v. Bradley, 2 Conn. 1, it was held that no notice to the mortgagor or demand for possession was necessary as a precedent to the bringing of the action, and in Wakeman v. Banks, 2 Conn. 445, this position was reaffirmed. If a mortgagee has a right to take possession of the mortgaged property, it follows that he has an immediate right of entry, which, unless he violates some other principle of law, he may assert without bringing an action. Clark v. Beach, 6 Conn. 142, 151; 2 Swift's Digest, 169. In McKelvey v. Creevey, 72 Conn. 464, 467, 45 A. 4, 5, 77 Am.St.Rep. 321, we stated that, except for a limited purpose, the mortgagee's title is considered to be personal estate and mere security, but added that he was regarded as holding the legal title for certain purposes, mainly to enable him to obtain possession of the property " by ejectment or otherwise." If a mortgagee, having the right of possession, can peaceably occupy the premises and is permitted peaceably to retain them, he may do so without bringing any action. The limitation upon that right, aside from such as arises out of some agreement, waiver, estoppel, or the like, consists in the fact that entry cannot be made or possession...