Huguley Mfg. Co. v. Galeton Cotton Mills

• Citation: 94 F. 269
• Decision Date: 16 May 1899
• Docket Number: 798.
• Parties: HUGULEY MFG. CO. et al. v. GALETON COTTON MILLS et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

94 F. 269

HUGULEY MFG. CO. et al. v. GALETON COTTON MILLS et al.

No. 798.

United States Court of Appeals, Fifth Circuit.

May 16, 1899

W. R Hammond and John M. Chilton, for appellant.

B. F Abbott and P. H. Brewster, for appellee.

Before PARDEE, McCORMICK, and SHELBY, Circuit Judges.

SHELBY Circuit Judge.

On January 1, 1884, the Alabama & Georgia Manufacturing Company executed a mortgage or deed of trust to J. J. Robinson and two others to secure $65,000 of bonds issued by it that day. Subsequently the property embraced in the mortgage was sold under a decree of a state court subject to the mortgage. Under this sale the Huguley Manufacturing Company became the purchaser and owner of the property, subject to the incumbrance of the mortgage for $65,000. It was placed in possession of the property. A bill was filed in the circuit court of the United States for the Northern district of Georgia to foreclose the mortgage, a decree of foreclosure rendered, and on appeal to this court the decree was reversed. 13 U.S.App. 359, 6 C.C.A. 79, and 56 F. 690. The decree of foreclosure being vacated by reversal, the circuit court granted a petition on the part of the Huguley Manufacturing Company to restore it to the possession of the property, upon condition, however, that it pay into court $10,000, which had been paid by the purchasers under the now vacated foreclosure sale. This condition the Huguley Manufacturing Company did not comply with, but resisted. It took another appeal to this court, and the decree of the circuit court was affirmed. 30 U.S.App. 683, 19 C.C.A. 152 and 72 F. 708.

At the first foreclosure sale the property was purchased for the bondholders, who organized a corporation under the name of the Galeton Cotton Mills. This corporation was placed in possession of the property under the first decree of foreclosure, and held the same pending the appeal, and after the reversal of the decree, and upon the second foreclosure became purchasers again, and have remained continuously in possession, operating the mills on the property. The Galeton Cotton Mills were in possession of the property under the first decree of foreclosure for a period of three years and eight months. The real controversy in the present litigation is about the rents of the property during this period. The net rents have been ascertained to be $28,334. At the last foreclosure sale a balance was left due, after applying the net purchase money to the mortgage debt, of $33,414.21. The Huguley Manufacturing Company contends that the possession of the purchasers at the foreclosure sale, the decree afterwards being reversed, was illegal and wrongful, and that in stating the account of reference the company was not to be treated as a mortgagee in possession, but that a stricter rule should be applied on the accounting, and that the rents are the property of the Huguley Manufacturing Company, and should be paid to it. The Galeton Mills, on the contrary, contends that its possession was not tortious, but legal, that it should be treated and charged only on the accounting as a mortgagee in possession, and that the net rents should not be paid to the Huguley Manufacturing Company, but should be applied to the payment of the amount left unpaid on the mortgage. These are the only substantial questions in the case. The material assignments of error relate either to the statement of the account before the master, or the application of the rents to the payment of the mortgage debt. We are relieved from stating these questions and the facts relating to them more minutely by the opinion of the learned judge who rendered the decrees appealed from in the circuit court. 89 F. 218-231.

1. The possession of the purchasers at the first foreclosure sale was not wrongful in the sense that such possession made them trespassers. The decree was rendered by a court having jurisdiction of the case. The mortgage foreclosed was valid. The decree was binding, and not subject to collateral attack. It was valid and effectual to place the purchasers in possession, and to protect them in possession till it was reversed. 2 Jones,Mortg. (5th Ed.)§§ 1587, 1588. It was reversed by this court, and the circuit court then granted an order of restitution, but upon condition that the Huguley Manufacturing Company would pay into court the sum of $10,000, which had been paid by the purchasers at the date of their purchase. This court, on appeal, affirmed this condition. The Huguley Manufacturing Company did not pay the $10,000, and so were not entitled to the possession by the terms of the order made by the circuit court and affirmed by this court. From its inception the possession in question was sanctioned by a decree of the court having jurisdiction of the parties and the property. The reversal of the decree does not make the purchasers under it trespassers. The purchasers in this case, on the facts stated, are entitled to the benefit of the equitable rules governing mortgagees in possession, and the account should be stated and the rents applied by...