Clise v. Burns , 175 Wash. 133 ( 1933 )

There are two questions in this case, one of law and one of fact, the latter being possibly one of mixed law and fact.

The first question is whether a mortgagee in possession is entitled to receive the rents, issues and profits accruing under the mortgage in a case where such rents, issues and profits are specifically covered by the mortgage. The second question is whether the mortgagee in this case was, under the facts presented, "in possession" at the time that the action was commenced.

Taking up the first question, it appears to have been early settled in this state that the rights of a mortgagee in possession will be protected by the court. Peterson v.Philadelphia Mortgage Trust Co., 33 Wash. 464, 74 P. 585;Sloane v. Lucas, 37 Wash. 348, 79 P. 949; Sawyer v. VermontLoan Trust Co., 41 Wash. 524, 84 P. 8; Gravelle v. Canadian American Mortgage Trust Co., 42 Wash. 457, 85 P. 36.

From these decisions, some uncertainty may have resulted as to the exact nature and extent of the protection that the courts would give to mortgagees in possession. If there ever was any such uncertainty, however, it has been dispelled by recent decisions, which, by differentiation, point out the true rule and its applicability. Those decisions are cited and relied upon by the parties to this action. Western Loan Building Co. v.Mifflin, 162 Wash. 33, 297 P. 743; State ex rel. Allen v.Superior Court, 164 Wash. 515, 2 P.2d 1095; State ex rel.Gwinn, Inc., v. Superior Court, 170 Wash. 463, 16 P.2d 831.

The Gwinn case, supra, an En Banc decision, pointed out the distinction between the other two cases, a distinction which, it seems to me, is applicable and controlling here. As stated in the Gwinn case, the Allen case foreclosed the question of the validity of an executed agreement to place the mortgagee in possession of the mortgaged premises prior to foreclosure and sale; that, on the other hand, the Western Loan Building Co. case foreclosed the question of the enforcibility of an executory agreement to place the mortgagee in possession of mortgaged property prior to foreclosure and sale. Thus it will be seen that, as the law now stands, the question in each case is whether the agreement to place the mortgagee in possession is an executed or an executory agreement. Under the first instance, the right of possession prior to foreclosure and sale prevails; in the second, it does not.

So, then, the only question left is whether the mortgagee in this case was in possession by virtue of an executed agreement, or is merely seeking to gain possession by virtue of an executory agreement.

By the specific terms of the mortgage, or deed of trust, the mortgagor agreed to deliver to the trustee the actual, physical, sole and exclusive possession of the premises immediately upon completion of the building to be constructed thereon, with the right in the trustee to collect the rents, income, issues and profits of the mortgaged premises, and to apply them to the payment of all expenses of management and operation, repairs, ground rental, taxes, assessments, etc., and the balance to be paid into a sinking fund.

The application for the appointment of a receiver came before the trial court entirely upon affidavits. No testimony was taken. According to the prevailing opinion, it was alleged in the complaint

". . . that respondent's predecessor was in complete control of the building as required by the deed of trust and did receive all income from the property and did employ and distribute the same as set forth in the deed of trust."

The answer of the appellant Prudential Securities, Inc., which is the only answer in the record, controverted that allegation. Respondent's affidavits supported his allegation. The affidavit of the appellant Niblett, the former owner of the fee, and the affidavit of the appellant Stimson, the present owner, at least conceded that respondent was entitled to possession on condition that the ground rental was kept paid by him, and the other provisions of the trust discharged. The affidavits on behalf of appellant Prudential Securities, Inc., asserted the right of the latter to receive the rentals by virtue of its leasehold interest which it acquired from the original lessor. The affidavits of the respective parties are reciprocally contradictory, either positively or else inferentially.

With this situation before it, the trial court ordered "that a receiver be appointed pendente lite in the nature of a custodian to manage the property, collect the rentals, income and profits therefrom until date of sheriff's sale." The order of appointment provided that the status quo of the property should be preserved pending the litigation, and that the receiver and his attorney should act without compensation.

In my opinion, that was a wise, practical and provident disposition of the matter as it then stood before the court. Whether the trustee was in possession under the terms of the deed of trust, was a matter to be finally determined, and presented some very delicate questions, both of law and of fact. To deny the appointment of a receiver pendente lite permits the appellant Prudential Securities, Inc., to collect and dispose of the rentals in the meantime; to grant the receivership would permit the impounding of such rentals until the rights of the parties could properly be determined.

I think that the court's action was correct and proper, and therefore dissent from the majority opinion.

BEALS, C.J., and TOLMAN, J., concur with STEINERT, J.