72 Vt. 429 | Vt. | 1900
December 10, 1883, the defendant Jed P. ■Clark executed to the orator a primary mortgage of a farm in Milton, Yt., to secure the payment of $4,000. September 8, 1892, he executed a mortgage covering the same farm, to the defendant Henry O. Clark, to secure the payment of more than $13,500. March 21, 1893, the orator, with neither actual nor ■constructive knowledge of the mortgage to Henry O., was about to foreclose his mortgage, whereupon Jed P. fraudulently induced him to accept a conveyance of the farm, by quitclaim deed, as payment of his mortgage debt, and in discharge of his mortgage.
As to the orator, the transaction was held to be a fraud,' when the case was before this court as reported in Howard v. Clark, 71 Vt. 424, the quitclaim deed was decreed to be null ■and void, and the orator’s mortgage and mortgage debt were reinstated and decreed to be in full force. The question now pre■sented is, whether, under the circumstances, upon redemption by the second mortgagee, the orator shall be compelled to account as mortgagee in possession, for the rents and profits of the farm. He took possession of it under the quitclaim deed, and after-wards contracted to sell it to one Murray who went into posses
The general rule is that a mortgagee in possession must account for rents and profits when the sum due in equity is determined in a foreclosure proceeding ; and ordinarily the mortgagor’s right to such an accounting is incident to his right of redemption. Seaver v. Durant, 39 Vt. 103; Hubbell v. Moulson, 53 N. Y. 228. But such an incident is not inseparable; for the right to an account may be extinguished by a release,.or an accord and satisfaction ; or the neglect of the mortgagor in asserting his claim, may have been such as to render it unfair for him to insist on an account covering the whole time of possession, and unjust to the mortgagee to be compelled so to account. Russell v. Southard, 12 How. 139.
In Wright v. Parker, 2 Aik. 212, and in Hunt v. Tyler, 2 Aik. 235, there being no evidence as to the value of the rents and profits, it was held that no account thereof should be taken while the mortgagee was in possession, nor of the interest on the debt during the same time..
In the case at bar, the defendant Henry 0. Clark contends that the orator should account for the rents and profits not only during the time he was personally in possession of the premises, but also during the time of the possession by Murray and by Teach-out. The orator contends that he has been greatly injured by the fraud practiced upon him by the mortgagor, by reason whereof, to be obliged to thus account would be so inequitable and unjust as to preclude the mortgagor from the benefits of such an accounting; and that as a subsequent mortgagee, in respect to his right to redeem a prior mortgage, stands in the same situation as the mortgagor, Henry O. is precluded therefrom.
It is true that a subsequent mortgagee, in this respect, stands in the same situation as the mortgagor, and is bound to pay the same sum in redemption that the latter would have to pay. ' 2 Jones on Mort. sec. 1118; Harrison v. Wyse, 24 Conn. 1, 63 Am. Dec. 151. JBut we think the orator’s position is otherwise unsound. In the principal case, the court said that in granting relief to the orator, the mortgagor must, as far as possible, be restored to his rights with the privilege of redeeming the premises by paying the orator the sum found due in equity upon his mortgage with costs of suit; and in the decree, the orator’s
If rents and profits could be recovered in a separate action brought for that purpose against a mortgagee in possession, there would be more force in the contention that such accounting cannot be had of the orator covering the time of the possession by Murray and by Teachout; but a- separate action therefor will not lie. They can be recovered only in equity, and as an incident to the right to redeem. Chapman v. Smith, 9 Vt. 153; Seaver v. Durant, 39 Vt. 103; Dewey v. Brownell, 54 Vt. 441.
The orator in the last named case brought foreclosure proceedings, and the sum due in equity was established without his making any claim for repairs and improvements, and the same was paid within the time limited therefor. Subsequently, he brought his bill in the case referred to, praying for a decree that the defendant pay for the repairs and improvements. It was held that the decree in the foreclosure proceedings was conclusive upon the question of the sum due in equity, and that the bill could not be maintained. And it is said by Williams, Ch. J., in Chapman v. Smith, supra, that the decree is alike conclusive as to the account for rents and profits.
In White v. Maynard, 54 Vt. 575, the mortgagee conveyed the mortgaged premises by warrranty deed to a third person, and ^t was held that the mortgagee must account for the rents and
For the same reason, if a mortgagee in possession transfers his mortgage to a third person who seeks to f orclose it, such third person takes the mortgage subject to the equities existing in favor of the mortgagor against the mortgagee, at the time of the transfer; and in ascertaining the sum due in equity, he must account for the rents and profits received by the mortgagee, as well as by himself. Ackerson v. The Lodi Branch R. R. Co., 31 N. J. Eq. 42.
The question then arises, upon what basis shall the accounting be had ? The ordinary rule is laid down in Sanders v. Wilson, 34 Vt. 318, thus : “ A mortgagee in possession is only bound to account for what he receives or might receive from the mortgaged premises by the use of fair, reasonable diligence and prudence, and if the premises are rented, and rents lost by the failure of a tenant, without fault of the mortgagee, he is not held liable to account. But when the mortgagee himself occupies, and especially when the premises are a farm in cultivation, upon which labor and expenditure are to be bestowed, to produce annual crops, and profits, the mortgagee will be charged with such sums as will be a fair rent for the premises, without regard to what he may, in fact, have realized, as profits, from the use of it.”
Sometimes, however, in order to do justice between the parties in adjusting the equities, it becomes necessary to take into consideration other important elements.
In the case at bar, when the orator contracted the premises to Murray, and when he sold and conveyed them to Teachout, he supposed and had reason to suppose that the fee was in himself with no incumbrance on the property. Teachout took a conveyance of the same, by warranty deed, believing he was thereby getting an absolute title, and he sold building lots from a part of the farm ; and cottages, one double house, and perhaps other buildings, were erected on the premises either by Teach-
Under these circumstances, permanent improvements were made in good faith by those holding under the orator, believing they had an absolute title to the property, and to allow the subsequent mortgagee seeking to redeem, to have the benefit of such improvements without making compensation therefor^ would be inequitable and unjust.
Mr. Washburn in his work on real property, vol. 2, at page 583, says: “ The rules upon this subject do not seem to be uniform. In some of the states a mortgagee is allowed to charge for beneficial and lasting improvements. And this is sometimes the case even in England. And such would probably be uniformly the rule where the mortgagee in making such improvements supposed himself to be the absolute owner, or the person who made them was an innocent purchaser, or did it by consent and agreement of the mortgagor.”
In Jones on Mort. sec. 1127, it is said : “The ordinary rule in respect to improvements is that the mortgagee will not be allowed for them further than is proper to keep the premises in necessary repair;” but (sec. 1128) “when the mortgagee makes permanent improvements, supposing he has acquired an absolute title by foreclosure, upon a subsequent redemption he is allowed the value of them, especially if the mortgagor has by his actions to any extent forwarded the mistaken belief * * * *. In like manner, a purchaser in good faith from the mortgagee in posses
But as the orator or those holding under him, have had the benefit of the rents and profits of the permanent improvements, they are not entitled to interest on the value of them; and the value should be placed at such sum as the improvements made before the decision of this court in the principal case, enhanced the value of the premises, and not at their cost, in case the cost exceeds the added value by reason thereof. Hadley v. Stewart, 65 Wis. 481.
Nor should the orator account for the rents and profits of such improvements. He should only account for such rents and profits as would have been received from the property without the permanent improvements. 1 Wash. Real Prop. 630 ; Bell v. Mayor of New York, 10 Paige, 49; Moore v. Cable, 1 Johns. Ch. 385; Montgomery v. Chadwick, 7 Iowa 134.
All taxes paid upon the property exclusive of permanent improvements, by the orator or any one holding under him, may properly enter into the accounting in the orator’s favor. 2 Jones on Mort. sec. 1134.
In the accounting had before the master, the rents and profits were included only for the time the orator was personally in possession of the premises,- and the questions of improvements and taxes paid, were not taken into consideration.
The decree, therefore, will be reversed, and cause remanded with mandate to recommit the report, that an accounting may be had upon the basis herein indicated.