Lowell v. Doe

• Decision Date: 18 July 1890
• Citation: 44 Minn. 144,46 N.W. 297
• Parties: LOWELL v DOE ET AL.
• Court: Minnesota Supreme Court

44 Minn. 144

46 N.W. 297

LOWELLvDOE ET AL.

Supreme Court of Minnesota.

July 18, 1890.

(Syllabus by the Court.)

1. The statute declaring that a mortgage of real property shall not be deemed a conveyance, so as to enable the mortgagee to recover possession without foreclosure, does not abrogate the power of the court to appoint a receiver of such property in an action to foreclose the mortgage, when that becomes necessary for the protection of such equitable rights of the mortgagee as do not rest upon the common-law principle of a legal estate transferred by the mortgage.

2. The appointment of a receiver of valuable hotel property sustained, upon the grounds that the mortgagors had allowed the hotel business to be discontinued, the property being especially valuable for that purpose; that the closing of the hotel would depreciate the value of the property so as to become insufficient security for the debt, the mortgagors being insolvent; that the insurance stipulated by the mortgagors to be maintained for the security of the mortgagees was being jeopardized by such disuse; and that taxes were allowed to become delinquent contrary to the stipulations of the mortgage.

3. The homestead rights of mortgagors in the mortgaged property are subject to the ordinary legal and equitable rights of the mortgagees as such.

Appeal from district court, Washington county; MCCLUER, Judge.

J. N. Castle, Fayette Marsh, and C. P. Gregory, for appellant.

Searles & Gail, for respondent.

DICKINSON, J.

This is an appeal by the defendants from an order appointing a receiver of mortgaged real estate pending this action to foreclose the mortgage. The mortgaged premises consist of two lots in the city of Stillwater, upon which stands a large building erected for the purposes of an hotel, and adapted to that use. For many years the property has been used for that purpose. It is the largest, and the principal, hotel in the city of Stillwater. In December, 1887, the property was purchased by the defendant Mary F. Doe and her husband, Alpheus K.; and, to secure payment of a part of the purchase price, they executed to the vendor a mortgage on the property for the sum of $20,000, payable three years thereafter, with interest payable semi-annually. The sale also included the furniture and fixtures in the hotel, to secure the purchase price of which a chattel mortgage was given upon the property for $6,000, payable in one, two, and three years. This plaintiff has succeeded to the ownership of these mortgages. This action to foreclose the real-estate mortgage was commenced in December, 1889, for default in the payment of interest due in June, 1889. By the terms of the mortgage, the mortgagors agreed to keep the property insured for the sum of $10,000, for the benefit of the mortgagee, and to pay all taxes and assessments on the property. The use of the property as an hotel was continued by the mortgagors, or under them, until November, 1889, when that use was discontinued, and the hotel closed, for the reason, as assigned by the defendants, that the business had become for the time unprofitable, by reason of general business depression, and a diminution of hotel patronage generally. They alleged, however, that they intended to reopen the hotel in the early part of the year 1890.

Upon this interlocutory proceeding for the appointment of a receiver, it is considered that the case, as presented to the district judge, warranted the conclusion by him that the mortgagors were insolvent; that the mortgagors had no such purpose, as would probably be carried into execution, to reopen the hotel; that the property was more valuable for hotel purposes than for any other; that the discontinuance of that business, and the closing of the hotel, for a considerable time, would result in a depreciation of the value of the property to such an extent that it would become insufficient security for the mortgage debt, even if the security would be otherwise adequate; that, by reason of the closing of the hotel, the insurance which had been effected for the benefit of the mortgagee was likely to be canceled, and that it had been in part canceled; that it may be difficult to procure other insurance, if the use of the property for the purposes for which it is adapted should not be resumed, even if the defendants were disposed to observe the stipulation of the mortgage in this respect, and procure other insurance; that taxes on the property for the year 1888 had been suffered to become delinquent. According to the established principles of equity jurisprudence, unaffected by modern changes in the legal rights of mortgagors and mortgagees, the case is one which would have justified the appointment of a receiver pending a suit for foreclosure, if for any reason the legal right of the mortgagee to recover the possession of the property should be unavailable. 2 Jones, Mortg. §§ 1516, 1517, 1521; Beach, Rec. §§ 418, 518, 521; High, Rec. §§ 643, 646.

But the contention here is that, since the change which has been effected in the legal relations of mortgagors and mortgagees, the former have an absolute right to the possession of the mortgaged property until their title shall...