Hastings v. Wise

• Decision Date: 12 March 1931
• Docket Number: 6732.
• Parties: HASTINGS et al. v. WISE et al.
• Court: Montana Supreme Court

297 P. 482

89 Mont. 325

HASTINGS et al. v. WISE et al.

No. 6732.

Supreme Court of Montana

March 12, 1931

Rehearing Denied March 26, 1931.

Appeal from District Court, Judith Basin County; John G. Huntoon Judge.

Action by Alice O. Hastings and others against Milton R. Wise and another. From an order appointing a receiver pendente lite defendant appeals.

Affirmed.

Merle C. Groene, of Lewistown, for appellants.

William M. Blackford, of Lewistown, and Murphy & Whitlock, of Missoula, for respondents.

GALEN J.

This action was instituted on September 11, 1929, by Alice O Hastings et al. against Milton R. Wise and Edna W. Keller, to foreclose twenty-one separate real estate mortgages. A receiver was appointed pendente lite, and the cause is now before us on appeal from the order appointing the receiver.

The only question presented by the defendants' assignments of error is whether the court erred in making the appointment.

The petition for the appointment was based upon three principal grounds, viz.: (1) That the rents and profits are pledged in the mortgages; (2) that the conditions of the mortgages have not been performed; and (3) that the mortgaged property is insufficient to discharge the mortgage debt. Each of the mortgages contains the following provision: "It is agreed that if the mortgagor or maker or makers of the obligation secured by this indenture shall fail to pay the principal or any interest as the same become due, or any taxes, assessments or insurance as required, or otherwise fail to comply with any one or all of the conditions of this mortgage, then all of said debt secured hereby shall become due and collectible and all rents and profits of said property shall then immediately accrue to the benefit of the said mortgagee."

1. Our statute specifically authorizes the appointment of a receiver in mortgage foreclosure proceedings when it appears "that the condition of the mortgage has not been performed, and that the property is probably insufficient to discharge the mortgage debt." Section 9301, Rev. Codes 1921. And the word "property" as employed in the statute is defined to include "rents, profits, or other income, and the increase of real or personal property." Id. § 9302. Showing within the statute was attempted to be made by the plaintiffs in their verified petition for the appointment of a receiver, whereby it is made to appear that the conditions of the mortgage have not been performed, in that the principal of the notes, amounting to the sum of $30,944.30, became due and payable on April 1, 1929, and that no part of the principal sum has been paid; that interest was due and payable annually on the indebtedness at the rate of 7 per cent., yet no interest has been paid on the notes representing the indebtedness since April 1, 1926, and that the principal indebtedness plus interest past due amounted to the sum of $40,114; and further that the defendants have allowed the taxes to become delinquent for the year 1929, and that the same, with penalty and interest due thereon, amounted to the sum of $1,922.55; that the mortgaged lands are insufficient security for the payment of the debt remaining unpaid, taxes and costs and expenses of this foreclosure action, it being alleged that the property which comprises 2,045 acres is not worth to exceed $12.50 per acre, or a total of $25,562.50, whereas the indebtedness amounted to more than $40,000. Affidavits were attached to the petition by real estate men who are familiar with the land and land values in the vicinity to the effect that the lands involved "taken as a whole are not worth to exceed $12.50 per acre or a total of $25,562.50."

We need go no further than the statute (section 9301) and the decisions of this court in justification of the court in making the order appointing a receiver in this case, if the mortgages remained unaffected by the bar of the statute of limitations (section 8267, Rev. Codes 1921), a subject which will later be given consideration.

In the case of Long v. Devereux Co., 87 Mont. 198, 286 P. 402, 405, this court had before it a clause identical with those contained in the mortgages now before us, and it was held that, while the mortgage did not create a lien on the rents, issues, and profits, "the prevailing rule is that if a mortgagee desires to avail himself of the right to rents and profits pledged by a mortgage upon real estate without the right of immediate possession of the land, he must claim them by invoking the aid of a court of equity for the appointment of a receiver to take possession of the rents and profits. This right is conferred by section 9301, Revised Codes of 1921."

"Rents and profits are as much property as the estate out of which they arise, and as such are equally the subject of a mortgage." 41 C.J. 375. The mortgagors, even after default, and although the rents and profits were mortgaged, could remain in possession of the lands and collect the rents and dissipate them, and the mortgagees would be powerless to prevent it, unless a receiver was appointed to collect and impound the rents pending foreclosure. And where, as here, the rents and profits together with the lands are pledged for the payment of the debt, then, upon default in payment and foreclosure, the rents and profits are, as is the land, primarily liable for the payment of the debt. The contract of the parties governs, and it is a matter of indifference that the mortgagor may be solvent. It is a lawful contract which the courts will enforce in extinguishment of the indebtedness.

The editor of a very exhaustive note in 4 A. L. R. p. 1416, dealing with the subject, states the rule applicable in accordance with our views, as follows: "Where the parties have expressly contracted for a lien upon the rents and profits, there seems to be no valid reason for depriving the mortgagee thereof because of the fact that the mortgagor is solvent, and the debt may be collected by execution on other property of the mortgagor. Nor should the conditions that there must be danger of loss, waste, destruction, or serious impairment of the property, sometimes prescribed as conditions precedent to the appointment of a receiver, be regarded as material where there is such a stipulation."

In foreclosure proceedings where, as here, it appears that the mortgage contains a stipulation pledging the rents and profits, and that it is reasonably necessary to impound the rents and profits in order to protect and secure the enforcement of the mortgage debt, an application for the appointment of a receiver should ordinarily be granted, regardless of the solvency or insolvency of the mortgagor, unless the latter is able to satisfy the court that the mortgaged property, exclusive of rents and profits, is ample security for the payment of the debt.

Unless the right of possession is given to the mortgagee by the terms of the mortgage, there is no way whereby to make the pledge of the rents, issues, and profits effective, save and except by involving the aid of a court of equity for the appointment of a receiver, as was done in the case before us. Here the showing made clearly indicates the probable loss of the rents and profits if a receiver were not appointed, and that the rents and profits were pledged by the terms of the mortgage contract, which could only be made effective by taking possession, and, since the mortgage did not authorize the mortgagee to take possession, it could only be accomplished by the appointment of a receiver.

2. But it is contended that the court abused its discretion in appointing a receiver because it appears from the pleadings that no affidavit of renewal of the mortgages was made and filed within eight years and sixty days from the maturity of the entire debt, as provided by section 8267 of the Revised Codes of 1921.

It appears that all of the mortgages were executed April 1 1909, to William O. Straw, were recorded April 14, 1909, and that the date of the maturity of the indebtedness was ...