Windom National Bank v. Reno
| Decision Date | 15 July 1927 |
| Docket Number | 26,068 |
| Citation | 214 N.W. 886,172 Minn. 193 |
| Parties | WINDOM NATIONAL BANK v. ALBERT RENO AND OTHERS; C. W. GADD, INTERVENER |
| Court | Minnesota Supreme Court |
Defendant D. E. Kulp and the intervener appealed from an order of the district court for Jackson county, Haycraft, J approving the final account of the receiver appointed in an action to foreclose a mortgage. Reversed with directions.
When appointment of receiver in mortgage foreclosure cannot be questioned.
Where a receiver in a mortgage foreclosure action has been appointed by an order ex parte, but the owner thereafter moves the court to vacate the order of appointment and fails to appeal from the order denying his motion, the propriety or validity of the appointment cannot be questioned in subsequent proceedings.
How directions in order of appointment of receiver must be construed.
The directions in the order appointing him must be construed in harmony with the law pertaining to mortgage foreclosures. So construed, he was not authorized to pay taxes or interest on prior encumbrances falling due subsequent to the sale, for the purchaser at the sale bought subject to such taxes and interest.
When income during year of redemption could not be applied to payment of taxes or interest.
Neither the mortgagor nor his grantee had covenanted to pay taxes or interest on prior encumbrances, and no income derived from the property during the year of redemption could be applied to the payment of taxes or interest on prior liens.
Receiver may prevent waste, when.
Nonpayment of taxes and interest on prior mortgages when considered with insolvency of the owner and his omission to pay such charges out of the income of the property constitutes waste, to prevent which a receiver may rightfully apply the rents and profits received prior to the foreclosure sale.
Mortgages, 27 Cyc. p. 1630 n. 50 New; p. 1631 n. 62; p. 1633 n. 77 New; p. 1732 n. 14 New.
Receivers, 34 Cyc. p. 250 n. 51.
See note in 26 A.L.R. 33; 36 A.L.R. 609; 19 R.C.L. 560; 3 R.C.L. Supp. 956; 5 R.C.L. Supp. 1038; 6 R.C.L. Supp. 1128.
Karl L. Rudow and E. H. Nicholas, for appellants.
O. J. Finstad, for respondent.
The appeal is from an order approving the final account of a receiver appointed in an action to foreclose a mortgage. The facts having a bearing upon the matters presented by the appeal are these:
There was a $15,000 first mortgage upon a 240-acre farm in Jackson county, Minnesota, when in January, 1922, the owner, Albert Reno, gave a second mortgage to plaintiff to secure the payment of $5,564. Thereafter Reno conveyed the farm to D. E. Kulp of Iowa, subject to mortgages of record. There was no covenant to pay taxes or interest on the first mortgage in the second mortgage. The deed to Kulp was not recorded, when on February 16, 1925, plaintiff, because of default in the condition of its mortgage, brought this action to foreclose, and filed notice of lis pendens. A receiver for the rents and profits was appointed upon an ex parte application. Kulp thereafter appeared and moved to vacate the order appointing the receiver. The motion was denied. He answered. One Gadd, who claimed to have an assignment from Kulp of the landlord's share in the crops and rent for 1925, filed a complaint in intervention. At the trial of the action both Kulp and Gadd appeared and consented to a decree foreclosing the mortgage; but it was agreed that the disposition of the rents and profits collected by the receiver should be determined later. Pursuant to the decree the mortgaged premises were sold on November 28, 1925, to plaintiff, its bid being for the full amount of its debt, including the costs of the foreclosure. The sale was confirmed December 7, 1925. Thereafter and in October, 1926, the disposition of the rents and profits collected by the receiver came on for hearing and was not concluded until in December after the year of redemption from the sale had expired. The receiver had charge of the farm during two cropping seasons -- the one of 1925, prior to the sale; and the one of 1926, while the period of redemption was running. The court approved of the disposition made by the receiver of the proceeds of the 1925 rent and crops not only as to interest which fell due and was paid by him upon the first mortgage prior to the sale, but also upon interest and taxes accruing thereafter. For instance, in January, 1926, the receiver paid over $1,000 in such interest and taxes, and filed an affidavit of such payment so as to tack the same to the amount required to be paid on redemption in case someone should desire to redeem. The court also ordered that the receiver might retain some $200 out of the proceeds of the 1926 crop and rent to reimburse himself for what the income for the previous year did not cover.
Appellants attack the jurisdiction of the court to appoint a receiver on the ground of certain irregularities -- the order being dated on February 16, one day before the lis pendens was filed, and the summons and complaint with the order not being filed until some days later. It is apparent that some confusion of dates occurred because of the fact that the judge and plaintiff's attorney did not reside in the same county, and the action was brought in still another, and the attorney and court sent the documents by mail. But the irregularities cannot avail appellant Kulp, for he appeared generally and moved to vacate the order appointing the receiver. The motion was heard on the merits and denied. There was no appeal. He is concluded, and may not now question the regularity or propriety of the appointment. The record does not disclose any proof of Gadd's claim to the rents and profits of the farm, and he intervened after Kulp's motion to vacate the appointment...
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