Zimmermann v. Walgreen Co.

• Decision Date: 05 June 1934
• Citation: 255 N.W. 534,215 Wis. 491
• Parties: ZIMMERMANN ET AL. v. WALGREEN CO.
• Court: Wisconsin Supreme Court

215 Wis. 491

255 N.W. 534

ZIMMERMANN ET AL.

v.WALGREEN CO.

Supreme Court of Wisconsin.

June 5, 1934.

Appeal from a judgment of the Circuit Court for Milwaukee County; Chas. L. Aarons, Circuit Judge. Affirmed.

Action by Buildings Development Company and Harry Zimmermann, as trustee, to recover from the defendant Walgreen Company rent for a store occupied by the defendant under a lease. Plaintiffs recovered judgment, and defendant appealed.Quarles, Spence & Quarles, of Milwaukee, and Markheim & Allie, of Chicago, Ill. (J. V. Quarles, of Milwaukee, of counsel), for appellant.

Poss, Toelle & Schuler, of Milwaukee (Benjamin Poss and J. P. Brazy, both of Milwaukee, of counsel), for respondents.

FRITZ, Justice.

The plaintiff, Buildings Development Company, is the owner of a building erected on land occupied under a 99-year lease, with the proceeds of bonds secured by a mortgage in the form of a deed of trust, dated March 28, 1927, to Ernest Greenebaum, Jr., as trustee. The plaintiff Harry G. Zimmermann is the successor, as trustee, to Greenebaum. The defendant, Walgreen Company, occupied a store in that building under a lease from the Buildings Development Company, which is dated August 22, 1927, and is for a term ending January 31, 1949; and it was in undisturbed possession under that lease at the time of the trial. It had paid the agreed rent up to May, 1933, and this action was brought to recover the amounts which accrued under that lease for May and June, 1933.

The mortgage to Greenebaum, as trustee, provided that, in the event of default, “it shall be lawful for the trustee or the person who may be appointed by the Court to execute this trust as receiver or otherwise, forthwith (either with or without process of law), to enter upon and take immediate possession of the premises and property aforesaid, and said trustee may use, operate and manage the same, if desired, by such agents, servants, and attorneys as he may select, from time to time, at the expense of such trust estate, to preserve, manage and maintain the said premises, subject to the lien of these presents, and may pay any and all rent, taxes or assessments, and likewise from time to time, at the expense of said trust estate, may make all necessary repairs, rebuildings, or renewals thereto that may seem to said trustee to be judicious, and may receive and collect the earnings, income, profits or rents of said premises and property and all parts thereof, and may pay therefrom all proper costs, charges and expenses of so taking, holding and managing said premises and property, including reasonable compensation for such trustee, his servants, agents and attorneys.”

The Buildings Development Company defaulted in May, 1932, and Greenebaum, as trustee, commenced a foreclosure action, in which neither the Walgreen Company nor any of the tenants occupying under leases from the Buildings Development Company were joined as parties. In that action, by consent of the trustee and the Buildings Development Company, the court, on May 27, 1932, ordered that pendente lite, the Buildings Development Company “collect all rents, income, issues and profits from the said mortgaged premises and disburse the same solely for the proper and necessary maintenance and operation of said mortgaged premises and the performance of said mortgagor's obligation under the above mentioned deed of trust pursuant to which said first mortgage building and leasehold gold bonds were issued, and to keep an accurate account of the same and in such form and place as to be available for examination by this Court upon further order.”

No further order has been entered in that action. On October 26, 1932, the Buildings Development Company, by an indorsement on the Walgreen Company lease, assigned to Greenebaum, as trustee, all of its right, title, and interest in and to that lease and the rent thereby reserved; but the court's order of May 27, 1932, was neither vacated nor modified, and under and pursuant thereto the Buildings Development Company continued to manage the building, and collect and disburse the rents, etc. On December 15, 1932, when some of the bondholders sought by garnishment to secure a preference as to rents owing by tenants, the attorneys for Greenebaum, as trustee, by letter advised the Walgreen Company that the Buildings Development Company had assigned the lease to Greenebaum, as trustee, as collateral, and that payments of rent to the Buildings Development Company would release the Walgreen Company from all claims on the part of the trustee for payments so made. That statement that the lease was assigned as collateral is not contradicted. On June 13, 1933, before the commencement of this action, Zimmermann, as trustee, in writing authorized the attorneys for the plaintiffs herein to represent him, as well as the Buildings Development Company, because their interests were not in conflict.

The trial court held that the defendant was liable under its lease, and directed a verdict in favor of the plaintiffs for an amount which represented the rent and sundry charges payable under the terms of the lease for the premises occupied by the defendant up to the time of the commencement of this action. The judgment which was entered accordingly provides that “Zimmermann as trustee * * * and Buildings Development Co. * * * do have and recover from Walgreen Co.” the amount specified.

[1] Defendant contends that its lease, and its obligations thereunder, were terminated by the trustee's taking possession of the building under title prior and paramount to that of the defendant, as lessee. In respect to that contention it must be noted at the outset that neither the trustee nor the Buildings Development Company ever actually occupied or attempted to take actual possession of the leased premises to the exclusion of the defendant herein. On the one hand, the Buildings Development Company, as conservator of the building and the income therefrom, by virtue of the court's order of May 27, 1932, in the foreclosure action, or, on the other hand, the trustee, as assignee of the lease, merely became intrusted, for the purpose of operating the building and conserving the income to pay the Buildings Development Company's obligations under the trust deed, with such constructive possession as had been vested theretofore in the Buildings Development Company, as the landlord of the defendant. Neither the court's order, nor the assignment of the lease as collateral, deprived the Buildings Development Company, as mortgagor, of its legal title under its 99-year leasehold, or enlarged the landlord's rights, in view of the lease held by the defendant, from mere constructive possession to actual possession, so as to deprive the defendant, as lessee under the Buildings Development Company, of its right under its lease to continue in the actual possession of the premises described in that lease.

[2][3][4] It is the settled law of this state that the legal title and right of possession does not vest in the mortgagee, but continues in the mortgagor until terminated by a sale on foreclosure, or by contract between the parties, and that even when a receiver is appointed in a foreclosure action to prevent waste, the collected rents and income of the mortgaged land do not belong to the mortgagee or to the receiver, but they are conserved and applied on the mortgage debt for the mortgagor's benefit. Likewise, as is stated in a note in 14 A. L. R. 664, “Whether a lease of real estate previously mortgaged is terminated by a foreclosure action and sale is held by the majority of the decisions to depend on the joinder of the lessee as a party to the foreclosure action”; and it has been held in a number of cases that such termination does not occur until the premises are actually sold on foreclosure in such action. See Prudence Co. v. 160 West Seventy-Third St. Corp., 260 N. Y. 205, 183 N. E. 365, 86 A. L. R. 361;Metropolitan L. Ins. Co. v. Childs Co., 230 N. Y. 285, 130 N. E. 295, 14 A. L. R. 658;Bushe v. Wolff (Sup.) 171 N. Y. S. 253;Greenwald v. Schustek (Sup.) 169 N. Y. S. 98;Ellveeay Newspaper Workers' Building & Loan Ass'n v. Wagner Market Co., 110 N. J. Law, 577, 166 A. 332;Id., 112 N. J. Law, 88, 169 A. 692;Virges v. Gregory Co., 97 Wash. 333, 166 P. 610.

The decisions of this court, upon which the defendant relies on this appeal, are not inconsistent with the conclusions stated above. The statement by Justice Downer in Mariner v. Chamberlain, 21 Wis. 251, 254, on which defendant relies, that “the order of a court of equity appointing a receiver and requiring a tenant to deliver possession to him, when he takes possession under it, as effectually ousts the tenant during the possession of the receiver, as the execution of a writ of possession on a judgment at law; and the same effect must be given to it as a protection or defense to the tenant in an action by his landlord for rent accruing during such possession of the receiver,” was proper and correct in so far as it was applicable to the federal court order and the facts in that case. However, it must be noted that the federal court order appointing a receiver, to which Justice Downer was referring, was not being reviewed by this court, and that Justice Downer did not say that that order was correct in point of law; or that, if it had been reviewed on appeal, instead of the tenant surrendering possession thereunder, it would have been held valid and effectual to oust the tenant during the unexpired period of the lease, under which he was not in default. That federal court order was made in an action to foreclose a mortgage given by Mariner before he gave a lease to Chamberlain, and both Mariner and Chamberlain were parties in that action. Neither moved to have that order vacated, but Chamberlain, with the knowledge of Mariner, surrendered possession to the receiver pursuant to that order. Subsequently, Mariner sued Chamberlain in the state court...