American Freehold Land Mortgage Co. of London v. Turner; American Mortgage Co. of Scotland v. Simmons; Land Mortgage Investment and Agency Co. of America v. Turner

American Freehold Land Mortgage Co. of London v. Turner. American Mortgage Co. of Scotland v. Simmons. Land Mortgage Investment and Agency Co. of America v. Turner. Bills in Equity by Mortgagees, as Purchasers at Sale under Poiver, for lieeeiver of Rents and Crops. 1. Sale under power in mortgage; purchase by mortgagee. — A sale oí lands under a power in a mortgage, in substantial compliance with its'terms, cuts off the equity of redemption as effectually as a decree oí foreclosure, leaving nothing in the mortgagor but the statutory right of redemption, and the right to disaffirm the sale if the mortgagee himself became the purchaser at the sale without express authority given by the mortgage; but, if the mortgagor elects to dis-affirm the sale on that account, his election must be accompanied with an offer to redeem by paying the amount due. 2. Rents accruing after sale under power in mortgage; when purchaser is entitled to receiver. — The purchaser at a sale under a power in a mortgage is entitled to the rents subsequently accruing, even though he be the mortgagee, and was not authorized to purchase; and if the mortgagor and his tenants refuse to attorn to him, fire insolvent, and are disposing of the crops, he is entitled to a receiver. 3. Herds of -mortgaged lauds after foreclosure; attachment against crops. When lands subject to a lease are conveyed by mortgage, the mortgagee succeeds to all the rights of the mortgagor as lessor, and the lessee becomes his tenant without attornment (Code, § 1823); but; when the lease is made by the mortgagor after the execution of the mortgage, it is subordinate to the mortgage, and the mortgagee may recover the possession and the rents after the law-day; yet, if the lessee refuses to attorn to him after foreclosure under the power, denying his right to the rents, the mortgagee can not enforce his lien on the crops by attachment (Code, §§ 3056-59-61), being neither the landlord nor his assignee. Appeals from-tbe Chancery Court of Madison. Heard before tbe Hon. Thomas Cobbs. Tbe opinion of tbe court in these three cases states all tbe facts material to an understanding of tbe points decided. Tbe complainant in each case was a foreign corporation, and alleged compliance with tbe constitutional and statutory provisions authorizing such corporations to do business in Alabama. Each of tbe bills prayed an injunction to restrain tbe several defendants from cutting timber, or otherwise committing waste on tbe lands involved in the suit; and a temporary injunction was granted by Hon. Wm. H. SimpsoN, of the City Court of Decatur. Each of tbe bills also prayed tbe appointment of a receiver of tbe rents and crops, alleging that the defendants were each insolvent, and that they were disposing of the crops. Daniel H. Turner, tbe principal defendant in each case, filed an answer to tbe allegation of bis insolvency, in these words: “Respondent owns property of value more than sufficient to pay bis debts, if be could realize its value, but be has not tbe money to pay bis debts now due.” “Respondent has not tbe cash money now to pay bis debts, but whether be will be able to pay them or not depends on what can be realized by tbe sale of bis interest in real estate owned by him, and in tbe collection of debts and claims due him. Respondent’s property, at a fair valuation, and tbe debts due to him, are more than sufficient to pay tbe debts which be now owes.” Tbe several causes being submitted to tbe Chancellor on motion for tbe appointment of a receiver, and numerous affidavits being filed as to tbe value of tbe land involved, be overruled and refused tbe motion; and this decretal order is here assigned as error in each case. Humes & Shepeey, and D. I. "White, for appellants. Tbe foreclosure of a mortgage, by sale under a power given in it, cuts off tbe equity of redemption as effectually as a decree of foreclosure, leaving in tbe mortgagor nothing but a statutory right of redemption..— Gomer v. Shehan, 74 Ala. 458. This principle applies when tbe mortgagee becomes tbe purchaser at tbe sale, though not authorized by tbe terms of tbe conveyance; and while tbe mortgagor may disaffirm tbe sale in such case, be can only do so by offering to do equity — that is, by offering to pay tbe amount due, costs, &c. Amer. F. L. Mortgage Go. v. Seioell, 92 Ala. 168. As purchaser at tbe sale under tbe power, tbe sale not having been disaffirmed, tbe complainant is entitled to tbe rents after-wards accruing, and may recover them by action at law. Kirkpatrick v. Boyd, 90 Ala. 449; Coffey v. Hunt, 75 Ala. 236; Tubb v. Fort, 58 Ala. 279; English v. Key, 39 Ala. 113; Westmoreland v. Foster, 60 Ala. 448. Being entitled to tbe rents, tbe statutory lien on tbe crops attaches, and it is immaterial whether tbe statutory remedy by attachment extends to tbe case — in either case, tbe complainant is entitled to a receiver of tbe rents and crops, under tbe facts of tbe case. — Ashurst v. Lehman, Durr & Go., 86 Ala. 370; West-moreland v. Foster, 60 Ala. 449; Beach on Receivers, § 494; Tubb v. Fort, 58 Ala. 261. D. D. Shelby, contra. No danger of damage or injury to tbe real estate is shown, and no case can .be found, English or American, where a receiver was appointed in aid of an ejectment at law, unless injury to the property was shown— that is, injury to the improvements, fixtures, ores, &c. Pfeltz v. Bfeliz, 14 Md. 376; Talbot v. Scott, 4 Kay & J. 96; Jordan v. Beall, 51 Geo. 602; High on Receivers, 483, note; lb. §§ 554-5; Beach on Receivers, §§ 494, ,521, 528. When a mortgagee becomes the purchaser at his own sale, not being authorized by the terms of the deed, his only remedy is a bill to require the mortgagor to elect whether he will affirm or disaffirm the sale; and in such a suit a receiver will not be appointed. — McLean v. Presley, 56 Ala. 211; McGall v. Mash, 89 Ala. 487; Tyler v. Herring, 19 Amer. St. Rep. 289, note; Cunningham v. Rogers, 14 Ala. 149. The mortgagee, as such, has no right to the rents and profits, and he has no better right as a purchaser at his own sale. Downs v. Hoplcins, 65 Ala. 508; Beach on Receivers, § 554; 2 Jones on Mortgages, §§ 1144, 1886; McHan v. Ordway, 76 Ala. 347; In re Tall. Man. Go., 64 Ala. 568. [MAJORITY — COLEMAN, J.] COLEMAN, J. -These several causes were submitted and argued by counsel as one case, and have been so considered and determined. The object of the bill was to have a receiver appointed with authority to collect and hold the rents or mesne profits accruing from certain lands until the final determination of a suit in ejectment, which was then pending, and instituted by the plaintiff against the landlord and tenants for the recovery of the land. The averments of the bill show that, in' April, 1886, Daniel H. Turner executed his mortgage with power of sale upon the lands to complainant, and that by virtue of this power, after the law-day had expired, the mortgage was foreclosed on the 6th day of July, 1891, at which sale the mortgagee became the purchaser. There was no provision in tbe mortgage wbieb authorized the mortgagee to purchase at his own sale. After sale and purchase, possession was demanded of the mortgagor, and also of the tenants, and demand was also made of the tenants that they attorn to the purchaser as their landlord. These demands were refused. Suit in ejectment was then instituted to recover the land. The averments of the bill show that the relation of landlord and tenant between the mortgagor and the other defendants began after the execution of the mortgage, and existed at the time of the foreclosure. It is further averred that the mortgagor and the other defendants are insolvent, and are making away with the crops, and that unless a receiver is appointed, complainants will lose the rents to which they are entitled as owners of the land by virtue of their purchase at the foreclosure sale. The answer of the defendant Turner to the allegation that he is insolvent is evasive, and wholly insufficient as a denial.' The bill was confessed by the tenant defendants. There are many affidavits in this record, as to the value of the land; those on the part of the complainants placing the value of the land below the amount of the debt secured by the mortgage, and those by the mortgagor fixing the valuation in excess of the debt. We are unable to perceive the relevancy of these affidavits. The bill is not filed to foreclose the mortgage, and for the appointment of a receiver to secure the rents during the foreclosure suit. The foreclosure was effected by the sale under the power given in the mortgage. It is not pretended that the sale was void. The value of the land is not a question in the case. A foreclosure under a power of sale cuts off the equity of redemption as effectually as a decree of the court. When the mortgagee becomes a purchaser at his own sale, the mortgagor may avoid the sale and redeem in a court of equity; but to do this, he must do equity. It is only upon the offer to do equity that a chancery court will set aside the foreclosure sale. A mere averment in the answer that. the sale is voidable as to the respondent, and that he elects to avoid it, without more, is wholly insufficient. It requires either an original or a cross-bill, offering to pay the debt secured by the mortgage, to entitle the mortgagor to have ■ the sale set aside. The authorities are collated in American Freehold Land Mortgage Co. v. Sewell, 92 Ala. 168. So long as the foreclosure sale stands, and no affirmative legal steps are taken to avoid it, the purchaser, although he is the mortgagee, must be regarded as the owner of the land. Not being competent to make a conveyance to himself, his title as purchaser may be only equitable, and, standing alone, might be insufficient to support ejectment; but, by -virtue of his title as mortgagee, both the legal and equitable title becomes united in him, and constitutes a perfect title, subject only to the right of the mortgagor, seasonably expressed in a court of equity, to be let in to redeem. — 92 Ala., supra. If plaintiff is entitled to recover rents or mesne profits in his ejectment suit, and is in danger of losing them by reason of the insolvency and misconduct of the mortgagor and the tenants, and the law furnishes no adequate protection and remedy to the plaintiff to prevent .the loss in the meantime, it was the duty of the Chancery Court to appoint a receiver, with authority to collect and hold the rents until the final determination of the suit at law. Does the statute give the mortgagee, or a purchaser at a mortgage sale, a right to the writ of attachment against the crops grown on the. premises, to secure the payment of the rents and mesne profits which are recoverable in a suit in ejectment? It is well settled now that fealty and rent are incident to the reversion, and pass with it. When lands subject to a lease are conveyed, the grantee succeeds to all the rights of the grantor, and the lessee becomes the tenant of the grantee without attornment. This rule resulted from the passage of a statute in the reign of Queen Anne, which abolished the rule that attornment by the tenant was necessary to the validity of a conveyance of the reversion. Prior to that time, on account of the duties and obligations of a tenant to his landlord other than the payment of rent, it was not permissible to impose upon a tenant a landlord without his consent. Section 1823 of the present Code is declaratory of the same principles. — English v. Key, 39 Ala. 116; Otis v. McMillan, 70 Ala. 52. Under a conveyance of a reversionary interest, the contract rights of a lessee which vested anterior to the conveyance are unaffected by the conveyance. The grantee can not enter, or sue in ejectment, or terminate the unexpired lease. His conveyance is subordinate to the lease. A mortgagor in possession of the mortgaged lands is the owner, against all persons and for all purposes, except as against his mortgagee ; but as. to him, there being no reservation of right to the possession or to the rents in the conveyance, he is a mere tenant at sufferance. The mortgagee may enter, or bring ejectment to recover possession. But, if he does not enter, o'r bring ejectment, or give notice that he claims the rents, the mortgagor is entitled to the rents. All payments of rent by his tenants to the mortgagor, before entry or notice, will be sustained. After- tbe law-day of tbe mortgage, tbe tenants of tbe mortgagor wbo bave become sucb after tbe execution of tbe mortgage are not tbe tenants of tbe mortgagee. Tbe mortgagee’s relations to tbe tenants of tbe mortgagor, under such, circumstances, are entirely different from those wbicb exist between a lessee and bis tenants and a mortgagee of tbe leased premises where tbe mortgage was made after tbe contract of lease and tenancy, and before tbe lease bad expired. In tbe former case, tbe lease is subordinate to tbe mortgage; in tbe latter, the mortgage is subordinate to tbe lease. Tbe mortgagor may claim the rents after tbe law-day, and after notice may recover tbe rent wbicb accrues thereafter; but tbe right to recover rents in sucb cases does not grew out of tbe relation of landlord and tenant. It is tbe right to recover for tbe use and occupation of bis premises, tbe value of wbicb is fixed by tbe rental agreement, where be gives notice that be will claim tbe rents. Tbe tenants, by attorn-ing to tbe purchaser or mortgagee, may create, as between them, tbe . relationship of landlord and tenant; but, if tbe tenants refuse to do so, and deny bis right to tbe possession or tbe rents, there is no contract of tenancy, express or implied. Tbe lien given by statute is an incident to tenancy created by contract, express or implied. Under tbe statute, it may be enforced by attachment at tbe suit of tbe landlord, or bis assignee; but tbe right of attachment to enforce tbe landlord’s lien is not given by the statute to one wbo has no relation of privity, or contract with tbe tenant. These conclusions are fully sustained by tbe following authorities : Drakeford v. Turk, 75 Ala. 340 ; Coffey v. Hunt, Ib. 236; Tucker v. Adams, 52 Ala. 254; Scott v. Ware, 65 Ala. 180; Otis v. McMillan, 70 Ala. 49; Comer v. Shehan, 74 Ala. 452; Kirkpatrick v. Boyd, 90 Ala. 449. Sectons 1879 and 1880 of tbe Code read as follows: Section 1879 : “Where real estate, or any interest therein, is sold under execution, or by virtue of any decree in .chancery, or under any deed of trust, or power of sale in a mortgage, the same may be redeemed by tbe debtor from tbe purchaser, or bis vendee, within two years thereafter, in manner following.” Section 1880 : “The possession of tbe land must be delivered to tbe purchaser, within ten days after tbe sale thereof, by tbe debtor, if in bis possession, on demand of tbe purchaser or bis vendee. If tbe land is in tbe possession of a tenant, notice to him by tbe purchaser, or bis vendee, of tbe purchase, after tbe lapse of ten days from tbe time of tbe sale, and that it has not been redeemed, vests tbe right to tbe possession in him, in tbe same manner as if snob tenant bad attorned to him.” These two sections were first adopted in tbe Code of 1852, and constitute a part of tbe system declaring and regulating tbe relation of a defendant debtor and tbe purchaser, after bis land has been sold under execution, and of a mortgagor and purchaser at mortgage sale, and tbe exercise of the statutory right of redemption. Section 1880 declares, that if tbe land is in possession of tbe debtor, on demand be must deliver it to tbe purchaser. “If in tbe possession of a tenant, notice to tbe tenant vests tbe right to the possession in him, in tbe same manner as if tbe tenant bad attorned to him.” The latter clause was not intended to create tbe relation of landlord and tenant between tbe purchaser and tbe tenant of tbe mortgagor. To so bold would lead to tbe conclusion, that a mortgagor, by a letting subsequent to tbe mortgage, could invest bis tenant with a greater interest than be himself possessed. Followed out, it would enable tbe mortgagor, by a long lease for an inconsiderable consideration, to.defeat entirely tbe security of tbe mortgage. We have uniformly held, as tbe authorities cited above show, and to which many others might be added, that a mortgagor is a mere tenant at sufferance of tbe mortgagee, who may treat him and bis tenants as trespassers, and evict them at pleasure. This could not be tbe case, if tbe law legally imposed tbe relation of landlord and tenant. So, contracts relative to tbe mortgaged property, subsequent to tbe mortgage, by every principle of law are subordinate to it, and tbe mortgagee’s right of entry. Tbe provision that notice by tbe purchaser to tbe tenant “vests tbe right to tbe possession in him in tbe same manner as if such tenant bad attorned to him,” was intended to cut off from tbe tenant any defense against tbe right of tbe purchaser to tbe possession of tbe property. "When a contract of tenancy has expired by its own provisions, tbe landlord is vested with the right to tbe possession, and tbe tenant can not dispute tbe right. So, when tbe relation of tenancy is entered into after tbe execution of a mortgage, and tbe mortgage is foreclosed, and tbe land is in possession of tbe tenant, notice to him under tbe statute terminates tbe tenancy, and vests in tbe purchaser tbe possession as completely as if such tenant bad attorned to tbe 'purchaser instead of bis landlord, and tbe contract of lease bad terminated by its own limitations, instead of having been terminated by tbe notice given by tbe purchaser to the tenant. Tbe tenant can not dispute tlie right to tbe possession in tbe one case any more tban in tbe other. Tbe statute was never intended to invest in a tenant of tbe mortgagor a greater estate tban tbe mortgagor possessed. "Under tbe principles declared in tbe foregoing authorities, and our constriction of sections 1880-81 of tbe Code, it follows that plaintiff bad no right to tbe writ of attachment, and it is evident that tbe remedy offered plaintiff by a court of law under tbe facts of tbe case was wholly inadequate to secure him tbe collection of any rents or mesne profits which might be awarded him for tbe detention of bis property in bis ejectment suit. "We think tbe case made by tbe bill and answer of Turner,, considered in connection with tbe decrees pro confesso against tbe tenant defendants, entitled tbe complainants to the appointment of a receiver. Reversed and remanded.