267 Mass. 453 | Mass. | 1929
This case comes before us on a report from the Superior Court. G. L. c. 231, § 111. It was heard on an agreed statement of facts, in substance, as follows: On January 31, 1928, the New England Bond and Mortgage Company, hereinafter called the Mortgage Company, was the holder of a second mortgage on certain real estate, consisting of land and a garage thereon, located on Stoneholm Street in Boston. The first mortgage was given to secure a bond issue. Both the first and second mortgages were in default. On January 31,1928, the Mortgage Company made a formal entry for the purpose of foreclosure, under G. L. c. 244, § 1.
On February 1, 1928, the plaintiff, hereinafter called the Garage Company, as owner of the equity of redemption filed a bill of equity in the Superior Court against the Mortgage Company attacking the validity of the second mortgage, questioning the amount due thereon, and praying that the Mortgage Company be restrained from proceeding with its foreclosure. At the hearing on an order of notice returnable February 8,1928, a stipulation was entered into between the parties under the direction of the court, which provided, in substance, that until further notice the treasurer of the Garage Company should collect all moneys due or to become due the Garage Company and expend the same (1) “for the payment of actual operating expenses,” and (2) “to the payment of the balance due the New England Bond and Mortgage Company or the payment of bills owed by Chamberlain Garages, Inc., provided such payments are offered [approved?] in writing by counsel for the New England Bond and Mortgage Company,” and that “in the meantime the advertisement of the foreclosure is to be discontinued and no new notice published pending determination by the Court.” It is to be observed that this stipulation had already been filed in the court on February 3, 1928.
■ On March 8, 1928, certain alleged general creditors of the Garage Company brought an intervening petition alleging, in substance, that the Mortgage Company was claiming an excessive amount as due on its mortgage and was threatening to deprive the Garage Company of its entire equity in the property through a foreclosure of its mortgage. Upon the prayer of the petition, that a receiver be appointed to take charge of the assets of the Garage Company and that the Mortgage Company be restrained from attempting to foreclose its mortgage or from interfering with the conduct of the receiver in the administration of the assets and affairs of the company, the presiding judge at a hearing had on March 16, 1928, against the objection of the Mortgage Company, appointed a receiver of the Garage Company “to marshall the
The receiver immediately took possession of the property and continued in possession until August 1, 1928. During his occupation he conducted the business of the Garage Company with the same manager and staff of employees and along the same lines as it had hitherto been conducted. During the operation of the business the receiver, pursuant to the order of the Superior Court, made a payment to the city of Boston of $2,250 on account of taxes assessed for the year 1927. Other than this payment he made no payments on account of taxes, and no payments on account of principal or interest due on either the first or the second mortgage. No request was made to the court by any party in interest that the receiver be ordered to make any such payments and no order was issued by the court of its own motion. No payments were received by the Mortgage Company from any source after January 31, 1928. After the payment of all expenses of operating the business, the receiver now has in his hands $7,421.70, which represents the balance of receipts from the business after payment of expenses, except that in said balance is included $1,000 received from the sale to the Mortgage Company of unmortgaged personal property in the garage. The original bill and the intervening petition were heard on their merits “some weeks after the appointment of the receiver,” the case being tried by counsel for the receiver on behalf of all parties plaintiff. “The court found the mortgage held by the mortgage company to be in all re
On May 19,1928, the Superior Court allowed the petition of the holder of the first mortgage to foreclose his mortgage. After one continuance the foreclosure sale was held on July 17, 1928, and the property was sold subject to all unpaid taxes, outstanding tax titles, municipal hens, and assessments, if any, to the Mortgage Company for $290,100. The above mentioned continuance had been obtained by the Mortgage Company upon the voluntary payment of $10,000 on account of overdue interest and principal on the first mortgage. The purchase price was paid by the Mortgage Company and a foreclosure deed was given it on August 1, 1928, at which time the receiver surrendered possession. Of the purchase price, $2,809.17 represented a surplus over the amount due on the first mortgage, including expenses of foreclosure and counsel fees. This amount was paid to the receiver by the first mortgagee and under the order of the court was subsequently paid over to the Mortgage Company. There is still’ a deficiency due the Mortgage Company, including interest, in excess of $75,000; and the claims of the unsecured creditors are largely in excess of the balance, $7,421.70, remaining in the hands of the receiver. The Mortgage Company made a demand upon the receiver for the payment of the entire balance in his hands, and, upon the refusal of the receiver to make such payment, petitioned the Superior Court to make such an order; the petition was dismissed and the case reported.
Upon the above facts the position of the receiver is that the fund in his hands, regardless of its source, should be distributed pro rata among all creditors of the estate, and that the Mortgage Company has no prior lien thereon; and he takes the further position that such prior lien, if it exists, “would not extend to that portion of the fund which is derived from sources other than storage charges.” These positions are posited upon the fact that the mortgage covered the real estate of the Garage Company only, and did not by its terms
The Mortgage Company was the legal owner of the real estate, and when in actual possession took the rents and profits in that character. The Garage Company and its creditors had a right of redemption only in equity; and their right to an account is only incident to the right to redeem. Seaver v. Durant, 39 Vt. 103. Wilcox v. Cheviott, 92 Maine, 239. The basic question here to be decided is, Was the Mortgage Company by reason of the stipulation, in actual possession of the mortgaged real estate when, at the suit of creditors of the Garage Company, the receiver was appointed with the powers above stated?
The fact that the foreclosure proceedings, entry and sale, were discontinued on the filing of the stipulation of the parties on February 3, 1928, the stipulation recognizing the right of the Mortgage Company to the fruits of possession and providing that all money due or to become due should be paid
It is to be noted that the receiver in the pending case was appointed upon the allegations in the original bill in equity, which were adopted by the intervening creditors, to the effect that an injustice was threatened by the Mortgage Company in wiping out a valuable equity through the enforcement of an illegal and unconscionable mortgage; and it is especially to be observed that the judge, after a hearing on the merits, found that the mortgage held by the Mortgage Company was in all respects valid and that the amount claimed was correct, and dismissed the bill as against the Mortgage Company. It is to be further marked that the bill of complaint did not allege that the Mortgage Company in possession of the property through its agent, the Garage Company, was insolvent, was guilty of mismanagement, fraud or waste, and there is nothing in the agreed facts to indicate that such was the fact. While the appointment of the receiver operated under the interlocutory decree as a sequestration of the rents and profits accruing after the date of the order, it was equitable that the court should have restored the Mortgage Company to its status quo when it dismissed the bill of complaint and the petition of the intervening creditors.
On all the facts the Mortgage Company should be entitled to receive the entire net proceeds in the hands of the receiver,
Decree accordingly.
