Lambrecht v. Lee , 264 Mich. 56 ( 1933 )

On April 1, 1930, the defendant Robert Schomberger and Annie, his wife, executed a mortgage on certain real estate in the city of Detroit to Union Guardian Trust Company, as trustee, in the sum of $10,000, to secure the payment of 23 promissory notes of $400 each, payable monthly thereafter, and one for $800, payable April 1, 1932. This mortgage contained an assignment of the rents, income, and profits of said property, pursuant to the provisions of Act No. 228, Pub. Acts 1925 (3 Comp. Laws 1929, §§ 13498, 13499). It was made subject to a mortgage thereon to the Mutual Benefit Life Insurance Company, dated September 12, 1928, in the sum of $60,000.

On October 27, 1932, the bill of complaint herein was filed. In it the plaintiff alleged that on January 28, 1931, the Union Guardian Trust Company resigned as such trustee and Kora D. Diehl was appointed to act in its stead, and that said Kora D. Diehl afterwards resigned and plaintiff was appointed his successor by the majority of the note-holders; that there is default in the payment of the last 12 of said notes, amounting to $5,200, and interest thereon from April 1, 1930; that, in accordance with the provisions in said mortgage, he entered upon the premises and served the tenants and occupants with notice of default and his intention to collect the rents therefor, and filed notice thereof in the office of the register of deeds; that the defendant David C. Lee has interfered therein and refused to permit him to make such collections, and that by reason of the provisions in said mortgage he is entitled to have a receiver appointed to collect such rents, profits, and income. In his prayer for relief he asks for specific performance of this provision in the mortgage and for the appointment of a receiver —

"to take possession and charge of the said promises and every part thereof, to operate and manage the same, to collect and receive all rents and income therefrom, and to apply the net profits thereof in accordance with the terms and provisions of said trust mortgage and the order of this court."

On the day the bill was filed, the trial court made an order for the defendants to show cause on October 31, 1931, "why a receiver should not be appointed in accordance with the prayer in said bill of complaint." The practice thus indulged in is difficult to understand. The appointment of a temporary receiver was not prayed for in the bill, and no petition therefor was filed in the court. The issue as to whether a permanent receiver should be appointed could not be determined until the answer was filed and proofs submitted if it contained denials of the material allegations in the bill. The answer was filed on November 5th. In it the defendant (Lee) alleged under oath:

"That the original insertion of the name of the Union Guardian Trust Company as alleged trustee was a mere scheme and device born in the fertile brain of Kora D. Diehl, the general manager of the Madison Investment Company, for the purpose of evading the ejectment statute of the State of Michigan."

On November 7th the court made the order here appealed from denying "plaintiff's motion for a receiver."

Pursuant to Court Rule No. 69 (1931), appellant states the question involved as follows:

"Does Act No. 228, Pub. Acts 1925 (3 Comp. Laws 1929, §§ 13498, 13499), apply to a trust mortgage when all the outstanding mortgage bonds are held by one corporation, and when the individual acting as successor-trustee under the mortgage, is in a sense, an agent of the corporation owning the bonds?"

In referring to this statute, it was said in Security TrustCo. v. Sloman, 252 Mich. 266, 273:

"It was designed for the benefit of holders of obligations under trust mortgages, usually the general public who rely on others for financial guidance, and is to be given effect to that end."

On its face this instrument contains all of the elements of a trust mortgage.

"No particular form of words, however, is required to create a trust, and whether one exists is to be ascertained from the intention of the parties as manifested by the words used and the circumstances of the particular case." 26 R. C. L. p. 1180.

If the loan in this case was made by the Madison Investment Company to the mortgagors and the name of the trust company as trustee was inserted in the mortgage for the sole purpose of securing to the investment company the rights of a trustee under Act No. 228, then it was not a trust mortgage in fact and might not have been enforced by it as such.

The record contains a reply to defendant's answer, filed after the order was made, denying many of the allegations therein and particularly that charging that the insertion of the name of the trustee was a "mere scheme and device" for the purpose of evading the ejectment statute. An order of the court permitting it to be filed was made.

Whether the present plaintiff is entitled to the rents and profits and the appointment of a receiver to collect and disburse the same is dependent upon the proofs to be submitted on the hearing. It could not be determined upon the allegations in the bill and denial thereof in the answer. Kowalski v.Guaranty Trust Co., 224 Mich. 118.

The order of the trial court denying plaintiff's right to a receiver is set aside, without costs, and the cause remanded for a trial upon the merits of the issues presented by the pleadings.

CLARK, NORTH, and WIEST, JJ., concurred with SHARPE, J.