Powell v. Voight

• Decision Date: 14 June 1932
• Docket Number: No. 20918.,20918.
• Citation: 348 Ill. 605,181 N.E. 403
• Parties: POWELL et al. v. VOIGHT et al.
• Court: Illinois Supreme Court

348 Ill. 605

181 N.E. 403

POWELL et al.

v.VOIGHT et al.

No. 20918.

Supreme Court of Illinois.

April 23, 1932.

As Modified on Denial of Rehearing June 14, 1932.

Error to Second Branch Appellate Court, First District, on Error to Circuit Court, Cook County; Hugo M. Friend, Judge.

Suit by Burton S. Powell and another against Phineas D. Voight and another wherein Harry E. Hobbs was appointed receiver to take possession of the mortgaged premises pending foreclosure, preserve the same, and collect the rents. On certiorari to review a judgment of the Appellate Court for the First District (261 Ill. App. 127), affirming a decree of the Circuit Court in the matter of the report of the receiver.

Judgment of the Appellate Court affirmed.

Francis E. Hinckley, of Chicago (Frank C. Rathje, of Chicago, of counsel), for plaintiff in error.

M. D. Dolan, of Chicago (B. A. Cummins, of Chicago, of counsel), for defendants in error.

ORR, J.

This court granted certiorari to review a judgment of the Appellate Court for the First District (261 Ill. App. 127) affirming a decree of the circuit court of Cook county concerning the report of a receiver in a foreclosure proceeding. The principal issue involves the legality of certain disbursements made by the receiver.

Harry E. Hobbs was appointed receiver in the foreclosure of a third trust deed executed by Phineas D. and Mayme L. Voight, wherein Burton S. Powell and William T. Webster were complainants. On June 7, 1926, the real estate involved in the proceeding was sold to Powell, and on June 16 a deficiency decree was entered against the Voights for $3,959.99. Prior thereto, on January 19, 1926, Hobbs, the plaintiff in error, had been appointed receiver by the court, with the usual directions to take possession of the premises, preserve the same, and collect the rents. When the deficiency decree was entered, it provided that the receivershipwas to continue during the redemption period, ‘with like powers as heretofore conferred,’ until the further order of the court. The receiver remained in possession and collected the rents during the redemption period, and without authorization of the court he paid out of the receivership funds the sum of $17,068.69 in discharge of principal and interest on the first and second mortgages and taxes. Of this sum $1,837.50 was paid for principal and interest on the second mortgage prior to the sale, and the balance of $15,231.19 was paid after sale for principal and interest on the first and second mortgages and taxes. When the receiver filed his account, the Voights, as judgment debtors under the deficiency decree, and Ethel Scanlon, claiming to own the equity of redemption, filed objections thereto. The matter was referred to a master in chancery, who, after a lengthy hearing, recommended in his report that certain allowances should be made for expenses and disbursements of the receiver and that he should be charged for the remaining amounts collected by him. The master recommended the disallowance of the sum of $1,837.50 claimed by the receiver to have been paid by him as principal and interest on the second mortgage prior to the entery of the decree of sale, and also the disallowance of the $15,231.19 paid out by the receiver for taxes and as principal and interest on the first and second mortgages after the sale, and that the receiver should be charged interest at 5 per cent. on such sums from the dates of such payments. He further recommended that the receiver be charged with the costs of the proceedings. The circuit court entered a decree in conformity with the master's recommendations, which the Appellate Court affirmed.

The receiver contends that the rents during the pendency of the foreclosure proceeding and throughout the period of redemption were pledged by the trust deed to secure not only payment of the principal and interest but to secure the principal and interest accruing upon prior incumbrances and taxes which became due after the sale, and that there was an express contract of the parties that the receiver discharge these obligations. By the provisions of the third deed of trust the Voights agreed to pay two prior incumbrances, one for $53,000 and the other for $36,500, and the interest thereon; that in case of failure the receiver, when appointed, was to have the option of paying the prior indebtedness out of rents received, and it was provided that the receiver might disburse the rents collected in the payment of all taxes, special assessments, principal, and interest on prior incumbrances, and that all such payments might be made subsequent to the entry of a decree of sale and without regard to whether the taxes became liens prior or subsequent to the entry of the decree of sale. The law seems clear that the owners of the equity of redemption are entitled to have the deficiency, where one exists, paid out of the rents and profits of the premises during the redemption period. A pledge of rents during the redemption period is not extinguished by a foreclosure and sale, and the owners of the deficiency judgment, as well as the judgment debtors, are entitled to have it satisfied out of such rents. Prussing v. Lancaster, 234 Ill. 462, 84 N. E. 1062. During the redemption period the rents belong to the owner of the equity of redemption, and cannot be appropriated to the purchaser at the sale, either directly or indirectly. Davis v. Dale, 150 Ill. 239, 37 N. E. 215;Bogardus v. Moses, 181 Ill....