Baker v. Hill , 100 Md. 130 ( 1904 )

This is an appeal from an order of the lower Court, sustaining exceptions to an account of the auditor, distributing the estate of the Washington and Baltimore Building and Loan Association, and disallowing the claim of the appellant.

The facts are undisputed. In 1897 the Rapid Transit Construction Company of Baltimore City borrowed from the appellant the sum of eleven thousand dollars, and secured the same by a mortgage upon certain real estate. The mortgage does not appear in the record, but it is conceded that it contains the usual covenants, among them that until default the mortgagor should remain in possession of the mortgaged premises. On the 9th of December, 1897, the Rapid Transit Company conveyed the said real estate, subject to the mortgage, to the Washington and Baltimore Loan Company. The taxes for the year 1901 being due and unpaid, the Tax Collector of Baltimore County sold five acres of the tract to John H. Stirn, who was the tenant, for the sum of $290.50. On the 13th day of October, 1902, the last-mentioned corporation was by an order of the Court placed in the hands of the appellees, as receivers, with power to take possession of its property, c., until the further order of the Court. On the fifth day of December, 1902, the appellant filed her petition, and the Court ordered that she have leave to pursue and exercise all of the rights and remedies in her vested by the terms and provisions of the mortgage; whereupon she proceeded to foreclose, and on the fifteenth day of January, 1903, became the purchaser of the mortgaged premises for the sum of $10,200, an amount not sufficient to discharge the mortgage debt. Subsequently the appellant redeemed the land that had been sold for the taxes of 1901 by the payment to Stirn of the sum of $290.50, with interest thereon at the rate of ten per cent and the costs.

On the 12th December, 1902, the receivers collected from the tenant the sum of $300 on account of rent for the year 1902; and on the 22nd December, the balance of the said annual rent, the further sum of $200, amounting in all to the sum of $507.22.

The appellant prayed the Court to pay to her out of this sum the sum of $301.26 paid by her in the redemption of the property, as stated, and also the residue of the rent collected on account of the taxes for the year 1902.

The Court in sustaining the exceptions to the auditor's report, overruled and disallowed her claim, and from its order she has appealed.

From this statement of the facts of the case it is clear that the right of the mortgagor to collect the rents (those then accrued or thereafter to accrue, as long as the receivership continued), ceased on the appointment of the receivers; and by virtue of the authority and direction of the Court passed to them. But the latter did not by their appointment become the assignees of the property. They were only entrusted with the care of it; and it was then in custodia legis "to await the ultimate disposal thereof by the Court, according to the rights and priorities of the parties concerned." Gaither v. Stockbridge,67 Md. 225.

Notice to the tenant, therefore, not to pay the rent to the mortgagor but only to the mortgagee would have been wholly unavailing by reason of the fact that the rents and profits, being within the order of Court, could only have been paid to the receivers. Such notice, therefore, under the circumstances could only be effectual as being one of those "slight acts" referred to in Barron v. Whiteside, 89 Md. 463, sufficient for the mortgagee to manifest his intention or his purpose to collect the rents himself. But that was not the only means by which that intention could be manifested; for that purpose only "slight acts" are necessary. The payment of the rent on the 5th and 22nd December to the receivers might therefore exonerate the tenant from further liability, but cannot be regarded as the equivalent to payment of the mortgagor. The receivers having no estate in the property cannot in any sense be regarded as standing in the place of the mortgagor. The mortgagee also was restricted by the appointment of the receivers. The rents and profits, being in the custody of the Court, she could not exercise any of her rights under the mortgage without the leave of the Court first obtained. In the case of Gaither v. Stockbridge, supra, where alandlord sought to exercise his right to distrain upon property in the possession of the Court, this Court said it was the settled practice to order the receiver to pay the arrears of rent out of the proceeds of the property, or "to permit the landlord to proceed with his distress notwithstanding." There is no hard and fast rule however that required the landllord in that case, or requires the mortgagee in this, to be confined to a selection of some particular one of the various modes of relief he may have, under the penalty of losing his claim in case he does not secure adequate and full relief in the particular one he may have chosen. On the fifth of December, the same day on which the receivers collected the first installment of rent, the appellant filed a petition, setting forth the default of the mortgagor in the payment of his debt and the interest thereon, as required by the provisions of the mortgage, and praying for leave to foreclose and "for other relief." This petition was presented to the Court on the 28th November but was not then signed, "owing to the fact the receivers asked the Court to delay the signing" for four or five days. It thus appears that eight days before any part of the rent had been collected, the receivers received notification that the appellant was about to ask leave to pursue her rights and remedies under the mortgage. This order was passed on the day the payment of the first installment of rent was made. It provided that the appellant be "authorized and directed to pursue and exercise all of her rights and remedies in her vested by the terms," c., of the mortgage. The rights she was thus authorized to exercise were those, viz.; to foreclose, ask for the appointment of a receiver and to re-enter. But that the Court had already taken possession of the property by the appointment of the receiver she might have pursued them all at once. Barron v.Whiteside, 89 Md. 460.

One of these she immediately proceeded to exercise; she foreclosed the mortgage, and on the 2nd day of February asked the Court, while the fund was yet intact, to award it to her in payment of the overdue obligations of the mortgagor. She was fully entitled to all the protection the Court could legally and equitably confer upon her. The bill was filed for the dissolution of the corporation on behalf of all creditors who would join the proceedings and contribute to its expenses. The appellant as one of the creditors had appeared in the cause and placed her rights in the care and protection of the Court. It would seem to be clear therefore that the fund sought to be affected is now in the hands of the receivers, liable to be pursued by the mortgagee to the same extent as if it still remained in the hands of the tenant. This case may therefore be assimilated to one where the mortgaged premises, being an insufficient security for the debt, a Court of equity may appoint receivers to take charge of them and the rents and profits; and in such case the mortgagee will be given ample protection.Kountze v. Hotel Co., 107 U.S. 395.

So, in Barron v. Whiteside, supra, this Court said, "In order to put an end to the authority of a mortgagor to collect the rents, it is only necessary for the mortgagee to manifest his intention to do so. For this purpose slight acts will be deemed sufficient, and in Boyce v. Boyce, 6 Rich. 302, where, as here, the mortgaged property was in Court a claim for the rents made to the Court by a party to the suit in the progress of the cause was all that was required."

It follows from what we have said that, there being an insufficiency in the proceeds of the sale of the property on foreclosure, the appellant is entitled to have the rents collected by the receivers after the 28th November, 1902, applied to make good the deficiency. The auditor's report should therefore have been confirmed.

Order, in so for as it sustains the exceptions to the accountreversed, and the said report of the auditor is hereby finallyratified and confirmed, the costs to be paid by the receivers outof the funds still in their hands.

(Decided December 1st, 1904.)