Kelso v. Norton

The opinion of the court was delivered by Pollock, J.:

Without so deciding, let it be' conceded for the purposes of this case, as found and determined by the trial court, that the original summons was not sealed with the seal of the court, and was therefore absolutely null and void, and may be so declared in this purely collateral proceeding. Also, let it be conceded, as a consequence thereof, that no jurisdiction was obtained over the person of the defendants in the foreclosure action, and that all subsequent proceedings, including the decree, sale, and sheriff’s deed, weré likewise void. What, then, are the rights of the parties? Can this action be maintained and can the judgment entered be upheld?

It was found by the trial court that, after the sale of the premises and the execution and delivery of the sheriff’s deed, the purchaser at the sale, Kelso, believing himself to be the owner, took and retained possession of the mortgaged property. Is this finding sufficient in law to constitute Kelso “a mortgagee in possession” ? At common law, a mortgagee was entitled to possession anc|l to recover possession from the mortgagor upon condition broken. In this state, by force of statute, a mortgage retains but few, if any, of its common-law attributes. It is a mere security contract, incident to the debt. The mortgagor, both before and after default, is entitled to the possession of the premises. The only legal right of the mortgagee *783 is to foreclose the equity of redemption and obtain a decree of sale in satisfaction of his debt. While such are the legal rights of the mortgagor and mortgagee in this state, it does not follow that these legal rights may not be changed or waived by agreement, express or implied. If the mortgagor consents to the mortgagee’s taking possession of the premises for the better-security of his debt, and the mortgagee does take possession, it is clear that the possession thus taken will constitute “a mortgagee in possession.”

In the case at bar, the foreclosure proceedings being, as we have heretofore conceded, abortive and void, the mortgagors were under no legal obligation to yield possession to the mortgagee, but might have stood upon their legal rights and refused to surrender possession until a valid foreclosure decree and sale were obtained and a deed and writ of assistance based thereon had issued to place the purchaser in possession. Upon this legal right, however, they did not insist, but acquiesced in the proceedings had and the possession taken thereunder by the purchaser. Hence, they and those claiming under them must be held to have waived their legal right to possession of the mortgaged premises and to have assented to the possession taken by the mortgagee as purchaser at the sale. This is the precise point ruled on in Rogers v. Benton, 39 Minn. 39 , 12 Am. St. Rep. 613 . It was there held:

“Though an attempted foreclosure be abortive as such, it may take effect as a transfer of the rights of the mortgagee to the purchaser at the sale, and to thos.e who claim under him by conveyance of the interest in the premises apparently acquired by such purchaser at the foreclosure sale.

“If the purchaser at such sale, or his assign, go into possession of the mortgaged'premises with the *784 assent of the mortgagor, under the rights supposed to have been acquired under the foreclosure sale, he will be deemed a mortgagee in possession." ■

In the opinion it was said :

“It follows necessarily from this that a mortgagee, even after condition broken, has no right or remedy except to foreclose his mortgage; that he cannot, merely under his mortgage, either recover or maintain possession of the mortgaged premises. The only logical rule is that, to constitute ‘ a mortgagee in possession,’ the mortgagee must be in possession by reason of the agreement or assent of ^he mortgagor or his assigns that he have the possession under the mortgage and because of it. The right to take possession under his mortgage being taken away, nothing remains but to foreclose, or else make some arrangement for his better security with the owner of the fee. Having no right to take possession under his mortgage, the mortgagee can get none, except by the agreement or assent of the one who owns that right. This, of course, need not necessarily be express. It may be implied from circumstances. Where the mortgagor expressly abandons possession, his assent that the' mortgagee might go into possession under his mortgage might well be implied, especially when he allows him to remain in possession for a considerable léngth of time without objection. But, after all, the assent, express or implied, of the mortgagor, that the mortgagee may take possession under or because of his mortgage is of the essence of ‘ a mortgagee in possession.’

“This assent is .conclusively proved in the present case. Benton, by his permanent removal from the state, abandoned all personal occupancy or possession. Conant demanded the possession from Mrs. Benton under his mortgage, or by virtue of rights supposed to have been acquired under its foreclosure. She surrendered possession in pursuance of that demand, knowing, as she herself testifies, that Conant was coming in under the mortgage, and that her husband knew it too; and after this entry the Conants, and *785 those claiming under them, were allowed to remain in possession over ten years, without objection or assertion of any right in themselves by the mortgagors, or any one claiming under them. The fact that Conant claimed the right to the possession under his foreclosure, and threatened legal proceedings to obtain it, and that Mrs. Benton may at that time have supposed that he had that right, does not alter the legal aspect of the case, or render Mrs. Benton’s act any less a voluntary surrender of the possession to Conant as mortgagee. Mrs. Conant and those claiming under her had therefore the rights of ‘ mortgagees in possession’.”

In Cook v. Cooper et al., 18 Ore. 142 , 22 Pac. 945 , it was held:

“If, for any cause in the foreclosure suit, the proceeding is ineffectual to foreclose the mortgage, and the mortgagee purchases at a sale under such void proceedings, and enters into the possession under such sale, his relation to the mortgaged premises is that of a mortgagee in possession.”

To the same effect is Miner v. Beekman et al., 50 N. Y. 337 ; and many other cases of that and other states, where, by force of statutory provisions, the mortgage does not operate as a conveyance, or grant the right to possession of the mortgaged premises, but is only a security for the payment of the debt, may be cited in support of the position here taken. It therefore must be. held that Kelso, as mortgagee and purchaser at the invalid foreclosure sale, was entitled to. receive whatever protection the law throws around a mortgagee in possession.

What, are such rights ? Will an action in the na-. ture of ejectment by the heirs of the mortgagor lie to dispossess him of the property until his mortgage debt is paid ? Or, will the heirs of the mortgagor seeking to reclaim the property be required to resort *786 to an action to redeem the property from the mortgage debt, in which action the amount of the debt and all the equities of the parties may be fully investigated, determined, and decreed ? It is contended by counsel for plaintiff in error that ejectment will not lie, but that plaintiff, as heir at law, must resort to an action to redeem. Is this contention sound ?

Upon this proposition there would seem to be a lack of uniformity in the authorities. While in many cases, under facts somewhat similar to those found in the case at bar, it seems that this, court has permitted recovery in an action of ejectment of mortgaged premises against the mortgagee in possession, yet, an examination of these cases will show that the point here presented was neither urged nor determined. (Richards v. Thompson, 43 Kan. 209 , 23 Pac. 106 ; Le Comte v. Pennock, 61 id. 330, 59 Pac. 641 ; Seeley v. Johnson, 61 id. 337, 59 Pac. 631 ; Kager v. Vickery, 61 id. 342, 59 Pac. 628 , 49 L. R. A. 153, 78 Am. St. Rep. 318 .) Hence, the decisions therein are not conclusive of the point presented.

It has always been the rule of this court that a defendant in ejectment, even under a general denial, may interpose any defense which he may have, either in its nature legal or equitable, tending to rebut the right of plaintiff to the possession of the premises, or tending to establish the right of defendant to possession. (Hall’s Heirs v. Dodge, 18 Kan. 277 ; Wicks v. Smith, 18 id. 508; Clayton v. School District, 20 id. 256; Armstrong v. Brownfield, 32 id. 116, 4 Pac. 185 ; Chandler v. Neil, 46 id. 67, 26 Pac. 470 .) This rule, however, does not obtain in the federal courts and in those states where the distinction between actions at law and suits in equity is preserved. (Fenn v. Holme, 21 How. 481 , 16 L. Ed. 198 ; Hooper et al. v. Scheimer, 23 id. *787 235, 16 L. Ed. 452 ; Lessee of Smith et al. v. McCann, 24 id. 398, 16 L. Ed. 714 ; Foster v. Mora, 98 U. S. 425 , 25 L. Ed. 191 ; Land and Iron Co. v. Thoney, 89 Mich. 226 , 50 N. W. 845 ; Paldi v. Paldi, 95 id. 410, 54 N. W. 903 ; Moran v. Moran, 106 id. 8, 63 N. W. 989 , 58 Am. St. Rep. 462 .) Hence, in those jurisdictions, the equitable right to withhold possession peaceably obtained until payment of the mortgage debt cannot be interposed as a defense in the ejectment action, such defense being not a legal but an equitable defense. (Humphrey v. Hurd, 29 Mich. 44 ; Newton v. McKay, 30 id. 380.) In this state all distinctions between actions at law and suits in equity are abolished by section 10 of the code (Gen. Stat. 1901, §4438). Hence, such equitable defense is, under our practice, admitted.

It being shown by the findings made from the evidence that defendant Kelso is “a mortgagee in possession,.’ ’ can the plaintiff and her defendant brother recover possession of the premises in ejectment without payment of the mortgage debt ? It is conceded that the mortgage debt has not been paid. It is admitted that at common law, where the mortgage operates as a conveyance of the title to the property, defeasible upon condition of payment of the mortgage debt, a mortgagee obtaining peaceable possession under his title thus conveyed by the mortgage cannot be ejected, and only a suit by the mortgagor, his heirs, or those holding under him, subject to the mortgage, will lie. Such is undoubtedly the law. But it is insisted by counsel for defendant in error that such is not the rule in those states where a mortgage does not operate as a conveyance of the property, but is a mere incident to the debt secured. This is the legal effect of a mortgage in this and most states of the *788 union. The question- arising for our determination, therefore, is, What is the true rule in those jurisdictions where the distinction between actions at law and suits in equity is abolished, and by statute the mortgage conveys no title, but is a mere incident to the debt ? A decision coming close to a determination of this question was made in this court in Cross v. Knox, 32 Kan. 725, 736 , 5 Pac. 32 , in which it was said:

“The relation of the defendant to the tract of about twenty-two acres of land to which the plaintiff holds the equity of redemption is that of a mortgagee in possession, and he cannot be dispossessed by an action at law, and the only means for. lawfully obtaining the possession the plaintiff has, is by a redemption of the land from the lien of the mortgage. She had the right to bring suit in equity to redeem, and this suit was properly brought for that purpose. (3 Pom. Eq. Jur. §§1189, 1190.)”

Mr. Jones, in his work on Mortgages, fourth edition, section 674, says:

“A mortgagor cannot maintain, ejectment against the mortgagee in possession so long as there is any question whether the mortgage debt has been paid in full, or there remains any question of account to be settled between the parties. He must resort to a bill to redeem. . . . Even in states where a mortgagee has no right to take possession until foreclosure is absolute, if the mortgagor voluntarily puts the mortgagee in possession, his possession is rightful, and ejectment cannot be brought against him unless some action is previously taken which will terminate his right and render his continuance in occupancy wrongful.”

Again, at section 702, the same author says:

“It has already been noticed that in several state's the mortgagee’s right, before forclosure, to maintain ejectment against the mortgagor, or to recover possession in any way, has been taken away by statute. *789 . . . But even under such, statutes it is generally held that a mortgagee, who has gone into peaceable possession of the premises after a default, cannot be ejected by the mortgagor while the mortgage remains unsatisfied.”

In the case of Cook v. Cooper et al., supra, it was held:

“ Under section 326, Hill’s Code, a mortgagee is precluded from recovering possession of the mortgaged premises after forfeiture by action; but if he can obtain possession of such premises in any lawful or peaceable mode, that is, without force, he may retain possession of such premises, as against the mortgagor or any person claiming under him subsequent to the mortgage, until his mortgage debt is paid.”

In the case of Spect v. Spect, 88 Cal. 437 , 26 Pac. 203 , it was held :

“A mortgagor who has placed his mortgagee in possession of the mortgaged premises cannot maintain ejectment against him while the debt for which the mortgage was given remains unsatisfied, even though an action by the mortgagee for the recovery of the debt is barred by the statute of limitations.”

In the opinion it was said:

‘ ‘ Whenever a mortgagor seeks a remedy against his mortgagee, which appears to the court to be inequitable, whether it be to cancel the mortgage as a cloud upon his title, or to enjoin a sale under the power given by him in the security, or to recover from the mortgagee the possession of the mortgaged premises, the court will deny him the relief he seeks, except upon the condition that he shall do that which is consonant with equity.

“ In accordance with these principles, it is a settled rule that a mortgagor cannot maintain ejectment against his mortgagee until the debt is paid. (Phyfe v. Riley, 15 Wend. 248 , 30 Am. Dec. 55 ; Hubbell v. Moulson et al., 53 N. Y. 225, 13 . Am. Rep. 519 ; Fee v. *790 Swingly, 6 Mont. 596 ; Roberts v. Sutherlin, 4 Ore 220 ; Cooke v. Cooper, 18 id. 142; Frink v. LeRoy, 49 Cal. 314 ; Tollman v. Ely, 6 Wis. 244 ; Brinkman v. Jones, 44 Wis. 512 ; Sahler v. Signer, 44 Barb. 614 ; Madison Av. Bap. Ch. v. Oliver St. Bap. Ch., 73 N. Y. 82 ; Den v. Wright, 7 N. J. L. 175, 11 Am. Dec. 546 ; Wells v. Van Dyke, 109 Pa. St. 335 ; Duke v. Reed, 64 Tex. 705 ; Jones on Mortgages, § 715.)

“The debt is not satisfied or paid by mere lapse of t time. The statute of limitations is a bar to the rem-¿ edy only, and does not' extinguish, or even impair,: the obligation of the debtor. It is available in judicial proceedings only as a defense, and can never be asserted as a cause of action in his behalf or for conferring upon him a right of action. It is to be used as a shield, and not as a sword.”

In the case of Bryan v. Brasius, 31 Pac. (Ariz.) 519, Chief Justice Gooding, in rendering the opinion, said :

“But it is claimed by appellant that the debt se-j cured by the mortgage was barred by the statute of j limitations at the commencement of this action, and-, therefore need not be paid. I do not think a court’ of equity would ever allow the statute to have that* effect. It would be so inequitable and shocking to all sense of right that a court exercising equitable powers, as this court does, and recognizing equitable defenses in an action of ejectment, would never dis turb the possession of a mortgagee in peaceable and quiet enjoyment under legal proceedings, valid or invalid, until the mortgage debt was paid .and all other requirements of equity fully met.”

The above cases arose in states in which the mortgage was of similar legal effect as in our own. Of like import, see Newell on Ejectment, 11; 3 Pomeroy’s Equity Jurisprudence, section 1189 ; Hildreth v. James, 109 Cal. 299 , 41 Pac. 1038 ; Van Duyne v. Thayre, 14 Wend. (N.Y.) 234 ; Phyfe v.Riley, 15 id. 248 ; Miner v. Beekman et al., 50 N. Y. 337 ; Fee v. Swingly, 6 Mont. 596 , 13 Pac. 375 ; Johnson v. Sandhoff, 30 Minn. 197 , *791 14 N. W. 889 ; Stark et al. v. Brown, 12 Wis. 572 ; Den v. Wright et al., 2 Hals. (N. J.) 175 ; Duke v. Reed, 64 Tex. 705 .

In no jurisdiction where an equitable defense may be interposed to an action in the nature of ejectment for the recovery of real property do we find a different holding. Whether the mortgage there operates as at common law to convey a defeasible title, or as a mere security contract incident to the debt, does not change the rule. In neither case will the mortgagor, or one claiming under him by conveyance subsequent to the mortgage, or by operation of law, be permitted to maintain ejectment against one shown to be a mortgagee in possession of the premises, whether or not, at the time the action is brought to recover possession, the statute of limitations would bar an action by the mortgagee to foreclose his mortgage. Not only is this the law in other jurisdictions having similar statutory provisions with relation to the legal effect of mortgages and the defenses which may be interposed in actions of ejectment, but it so accords with that which is just, right and equitable between the parties in this and all other cases where some technical defect in legal proceedings is relied on to obtain a nullification of such proceedings, and so accords with the acts and acquiescence of the parties therein for many years, that the rule commends itself to our judgment as sound and wholesome. We therefore hold, uponrthe findings made, plaintiff in error to be “a mortgagee in possession,” entitled to retain such possession until the mortgage debt is paid or adjusted. This action of ejectment cannot be maintained against him.

Whether, in the light of the findings made, the heirs, if so advised, may maintain their action to redeem the property from the mortgage debt, is not be *792 fore us for decision, and we do not decide it. Such action, of necessity, would involve a determination of the question whether the sheriff’s deed under which plaintiff in error took possession is an absolute nullity, and subject to be so declared in a purely collateral action, and other questions which we have found it unnecessary to consider or determine in this case.

It follows that the judgment must be reversed, with directions to enter judgment for defendant Kelso, on the findings. It is so ordered.

All the Justices concurring.