| Ill. App. Ct. | Apr 9, 1910
delivered the opinion of the court.
There can be no question that rents and profits are the subject of mortgage. “The doctrine is understood to be that everything which may be considered as property, whether in the technical language of the law denominated real or personal property, may be the subject of mortgage, as advowsons, rectories, tithes. * * * Bents, also, and franchises may be made the subject of mortgage.” Supreme Court in Curtis v. Root, 20 Ill. p. 522, citing 1 Powell on Mort., 17, 18.
“Bents and profits are the subject of mortgage. Jones in his work on mortgages (Vol. 1, Sec. 140) says: “A mortgage may be made of rents under a lease, and although a right of entry be given to the mortgagee, the mortgage is a mere security, like any other mortgage of real estate, and the mortgagor remains the real owner until foreclosure and sale.” First Nat’l Bank v. Ill. Steel Co., 174 Ill. p. 148.
There certainly can be no successful claim made that the rents and profits of the lands in question were not mortgaged by Townsend to Wilson. Wilson was given the power and authority by the express terms of the mortgage to enter upon the premises to collect all rents and profits thereof; and, also, to have a receiver appointed pending foreclosure proceedings and until redemption to collect the rents and profits thereof and apply them to the extinguishment of taxes, assessments, attorney fees, debt, costs and expenses, etc. Our courts have held that a clause in a mortgage authorizing the appointment of a receiver to collect rents and profits upon foreclosure, such as in this case, is in effect a mortgage of the rents and profits accruing until redemption period has expired. First Nat’l Bank v. Ill. Steel Co., 72 Ill. App. 640" date_filed="1897-12-17" court="Ill. App. Ct." case_name="First National Bank of Joliet v. Illinois Steel Co.">72 Ill. App. 640 and 174 Ill. 140" date_filed="1898-06-18" court="Ill." case_name="First National Bank v. Illinois Steel Co.">174 Ill. 140; McLester v. Rose, 104 Ill. App. 436; Lancaster v. Prussing, 139 Ill. App. 46; Bagley v. Ill. Tr. and Sav. Bank, 199 Ill. 76" date_filed="1902-10-25" court="Ill." case_name="Bagley v. Illinois Trust & Savings Bank">199 Ill. 76.
Under such a clause a receiver will be appointed to collect the rents and profits; and said receiver’s duty, in case of a deficiency upon sale, is to collect rents and profits up to the redemption period to pay such deficiency, and the court appointing such receiver should so order. Montrose and McHugh’s title to this property was subject to the mortgage in question, and their right to the rents and profits, under the mortgage and under their deed, was secondary to that of Wilson. They, had accepted a deed expressly so declaring, that is, that the grantor’s warranty and their right under the deed were subject to said mortgage. Oakford v. Robinson, 48 Ill. App. 270" date_filed="1892-10-17" court="Ill. App. Ct." case_name="Oakford v. Robinson">48 Ill. App. 270.
It was not discretionary with the court either to appoint the receiver, or to order the funds in his hands as proceeds of rents applied on the deficit after sale. It was a matter of right of both Townsend and Wilson to have this done. First Nat. Bank v. Ill. Steel Co., 174 Ill. 148; Niccolls v. Peninsular Stove Co., 48 Ill. App. 320.
It was not only Wilson’s right to have the rent funds applied to extinguish this deficit, but it was Townsend’s right. It is true that Montrose and McHugh did not expressly agree to pay this mortgage debt so far as this record shows, and that they are not personally liable for the mortgage debt, by reason of their deed being subject to the mortgage. No personal judgment could be entered against them, under the evidence in this record, for the debt of Townsend. But their implied agreement with Townsend, by accepting the deed with that proviso that it was subject to the mortgage, was that the land and the rents and profits mortgaged to Wilson should stand good for that debt and be charged with that debt as against any right they received by virtue of the deed. Their action in this case in claiming these rents simply amounts to a breach of their contract and they have no standing in law or equity in their claim to the rents. It makes no difference whether Wilson is, or is not, complaining in this matter at the action of the court. He, too, owed a duty to Townsend to see that these rents were applied on this deficit by virtue of his relations with Townsend as mortgagee, after full notice that Townsend had conveyed the land subject to the mortgage. "While he might not be forced to litigate this question at his own expense, still, Townsend was entitled to notice, at least, that such an order was about to be, or had been, made by the court so that Townsend could protect himself by appeal or otherwise, before the rents already paid to "Wilson were turned over to Montrose and McHugh.
From all the orders made up to the time of this final order, Townsend would naturally suppose a receiver was appointed to collect rents, not for Montrose and McHugh, but to extinguish the deficit, the real purpose of such receivers. "While parties in court must usually take notice of all the proceedings in a case; yet in this case, the mortgagee should either have defended this question to the end, or have notified Townsend so he ■could do so, and while the funds were in court.
We think that Wilson was entitled to a judgment against Townsend for the amount of the deficit. Wilson had a right to sue at law at the same time he begun his foreclosure suit, and obtain a judgment at law even for the whole debt, and we see no reason why he could not take a judgment for the deficit in the chancery court immediately after the deficit is known after sale. It was Townsend’s right, however, to have the rent proceeds applied to the extinguishment of the deficit, and the remainder of said proceeds, if any, after such deficit was extinguished belonged to Montrose and McHugh after all taxes, expenses, etc., were paid including the receiver’s fee.
For the reasons indicated the order of the chancellor ordering said proceeds of rent, etc., to be paid to Mont-rose and McHugh, and in refusing to allow said deficit to be paid therewith, is reversed, and the cause is remanded with directions to the chancellor, that an order and decree be entered in said cause that the said receiver shall pay to said Wilson, mortgagee, the amount, of said deficit and the costs of said execution; that said Wilson, mortgagee, shall then enter satisfaction in full of said judgment against said Dick Townsend, including the costs of said execution; and that said Montrose and McHugh shall immediately pay back to said receiver sufficient of said proceeds of rents paid them to entirely satisfy and pay said deficit including the costs of said execution. A judgment in this cause for the costs in this court in prosecuting this writ of error, will be entered in favor of plaintiff in error against the defendants in error, Montrose and McHugh.
Reversed and remanded with directions.