Summary
Appeal from tlie chancery court of Bolivar county. Harmon, Chancellor.
The appellee, Estell, on the 28th December, 1866, sold to the appellant, Myers, a certain tract of land in Bolivar county, with some personalty, for $71,000, of which there was paid in cash $31,000. The balance of the purchase money was evidenced by three promissory notes of the vendee, one for $5,000, due February 1, 1867; one for $17,500, due January 1, 1868, and the third for $17,500, due January 1, 1869. The deed to Myers acknowledged receipt of the entire purchase money, and, to secure payment of the notes above mentioned, Myers gave to Wilson, trustee, a deed conveying two-thirds of the land sold, and expressing on its face that it was given as “ additional security.” This trust deed provided that, if the notes were not paid, the trustee might, eighteen months after the maturity of the last note, advertise and sell the property to raise the money wherewith to discharge the notes. In October, 1867, Myers conveyed the remaining third of the lands to John W. Myers, as a trustee for his children.
After the lapse of the eighteen months, Wilson, the trustee, at the request of Estell, the cestui que trust, advertised the lands conveyed to him according to the exigency of the deed; and, not being specially authorized by the deed to take possession, instituted an action of ejectment to recover the possession of the lands for the purpose of securing the rents arising out of them during the year 1870. He subsequently demanded of Estell a fee of $1,000 for his services prior to the sale of the lands, which Estell declined to pay. Afterward, at the solicitation of Myers — the bill charges, “ by combination and collusion with Myers”— he dismissed the action of ejectment, and refused to sell the lands as he had advertised.
Myers took rent notes from his colored tenants pending these proceedings, and sent them to C. E. Clark, of Memphis, to whom, without consideration, he assigned them. The complainant alleged that this was done to conceal his assets; the respondent, that it was done to raise funds to compromise with his creditor and discharge the lien debt.
The bill alleges that the lands are inadequate to the payment of the debt; that to accomplish this the application of the rents is necessary; that it was plainly anticipated at the time of sale this should be done; that the trustee and the grantor in the deed have combined and colluded together to hinder, delay and defraud the complainant, and that, by their collusion and fraudulent combination, they have deprived him of his legal rights in the premises.
The testimony taken in the cause shows that the lands embraced in the trust deed are not worth exceeding the sum of $28,000, and the letters of Myers, filed, that they are not worth more than $20,000. The other facts developed in the pleadings and evidence are not referred to, because the questions therein arising were not decided by the court.
The chancellor appointed a receiver to take possession of the entire tract of land, as well that conveyed by the trust need, as that upon which the complainant had no express lien and of the rent notes transferred to C. E. Clarke.
The case was twice argued before the court, after the first argument and opinion was read reversing the decree of the chancellor in toto. Afterwards, on a re-argument, the opinion was modified, affirming the decision of the chancellor in so far as it applied to that part of the property upon which the appellee had an express lien, and reversing it as to the third, upon which the complainant contended that he had a vendor’s lien, and as to the rent notes assigned to C. E. Clark.
The bill must lay a found.ati.on for the appointment of a receiver by stating the facts which show its necessity or propriety. Yause v. Woods, 46 Miss. 127, citing Tomlinson v. Ward, 2 Conn. 396.
The complainant can have no relief except upon the case as made by the bill, and the defendant is not obliged to meet a case made by the proof but not stated in the bill. 2 S. & M. 108 ; 23 Miss. 64; 24 ib. 134; 28 ib. 156; 31 ib. 261, 265; 33 ib. 141; 35 ib. 246; 41 ib. 531; 45 ib. 364.
All evidence in support of facts, not relied on in the bill or answer, is irrelevant and inadmissible. Gres. Eq. Ev. 159, 161; 1 Yern. 484; 11 Yes. 240; 12 ib. 477; 2 Ball & B. 47; 1 Russ. & Myl., 527; 2 Stockt. (N. J.) 497; 6 Johns. 543.
I. Keeping these familiar rules in view, we insist that the court below erred in appointing a receiver of that part of the land embraced in the deed of trust.
The rule is well settled in England, that if the first mortgagee neglect to take the precaution of an agree-v ment with the mortgagor for the appointment of a receiver, he cannot obtain such appointment by order of the court, but must eject the mortgagor at law. Such a mortgagee, having the legal title, has nothing to do but to enter and take possession. Coote on Mortgages, 595-596, (18 Law Lib.); 3 Dan. Ch. Pr. 1950, 1953, 1961; Adams Eq. 267 (122), 673 (353); Story Eq. Jur. 2, § 843; Berney v. Sewell, 1 Jac. & Walk. 627; Brookes v. Greathead, ib. 176; Quarrel v. Beckford, 13 Yes. 377; Codington v. Parker, 16 ib. 469 ; Huguenin v. Beasley, 13 ib. 105; Bryan v. Cormick, 1 Cox, 422; Dalmer v. Dashwood, 2 ib. 378; Phipps v. Bishop of Bath and Westminster, 2 Dick. 608 ; Archdeacon v. Bowes, 3 Austr. 752; Yance v. Burnett, 2 Bro. C. C. (158); Metcalfe v. Puloutoft, 1 Yes. & Bea. 180; Lloyd v. Passingham, 3 Mer. 696; Whitmore v. Parks, 3 Humph. 99.
Rents attach de jure to the owner of the equity of redemption. Gordon v. Lewis, 2 Sumner, 153. And where they are not expressly mortgaged they belong to the mortgagor; and the mortgagee has no right to them unless he obtains possession of the land, and then he receives them as the bailiff or steward of the mortgagor, and must account. 1 Hilliard on Mort. 199, § 27 ; ib. 448, § 1.
The authorities show that courts of equity will interpose in favor of an equitable mortgagee against a legal mortgagee who refuses to take possession, because such equitable mortgagee has no remedy at law.
But a legal mortgagee, who has not taken care to provide for keeping down accruing interest by securing a lien on the rents and profits, is never entitled to a receiver without alleging and proving that the property is an insufficient security, and that the mortgagor is insolvent. Both these conditions must concur, and no case can be produced to the contrary. 1 Hilliard on Mort. 474-5, § 45.
Such is the settled rule in Michigan. Brown v. Chase, Walker Ch. 43; Payne v. Atterbury, Harring. Ch. 419. And in Maryland. Kip v. Hanna, 2 Bland. Ch. 31. And also in New York. Bank of Ogdensburgh v. Arnold, 5 Paige, 40; Jenkins v. Hinman, 5 ib. 310; Sea Ins. Co. v. Stehbins, 8 ib. 565; Astor v. Turner, 11 ib. 436; Shotwell v. Smith, 3 Edwards Ch. 588; Warner v. Gouverneur’s Ex’rs, 1 Barb. (S. C.) 36.
In Bank of Ogdensburgh v. Arnold, 5 Paige, 40, it was conceded that the mortgagor had died insolvent, and the receiver was denied on the ground that the debt was not due, and that the mortgage contained no express pledge of the rents and profits.
And this case is referred to in Bortelyeu v. Hathaway, 3 Stock. 41, as being the first case in New York establishing the rule that a receiver will be appointed where the premises are an insufficient security and the mortgagor is insolvent.
But this doctrine is not universally received. It is rejected in New Jersey, where there has always been an able chancery court. .
In Best v. Schermier, 4 Halst. Ch. 154, a junior mortgagee, besides his mortgage, took an assignment of the rents and profits. A prior mortgagee obtained an injunction and a receiver, which were discharged on motion. The chancellor said: “ I have uniformly denied applications to appoint receivers of rents, made on filing foreclosure bills. I have considered that the mortgagor is entitled to the rents while he is possession by his tenants. I am satisfied that the contrary practice was inconsistent with what is now well understood to be the nature of a mortgage and led to great .oppression. The view I have taken was sustained by the court of errors'in the case of Sanderson v. Price.”
This case of Sanderson v. Price is reported in 1 Zab. 637. The mortgagee brought ejectment against a lessee of the mortgagor, after the date of the mortgage. Shortly before recovery in ejectment, the tenant surrendered the possession. • The mortgagee then brought an action against the tenant for mesne profits from the service of the declaration in ejectment to the date of the surrender. And it was decided against the mortgagee on the ground that he had no right to the rents until after he took actual possession of the premises.
That was case at law, and a similar decision had been made in Loudus v. Yansickle, 5 Halst. 313, where it was held that neither the mortgagor nor his tenant, under a demise subsequent to the mortgage, was com- . pellecl to account or pay rent to the mortgagee.
In Price v. Smith, 1 Green Ch. 516, the same rule was expressly held to prevail in chancery. “If the mortgagor is the owner of the fee, and may lease the premises (as the chancellor holds he is), and cannot himself be made answerable for the rents while he is in possession, why should his tenant ?
That this is settled law, see 2 Washb. Real Prop. 130 (532), § 30.
Again, in Cortelyeu v. Hathaway, 3 Stock. Ch. 40, where the inadequacy of the security and the insolvency of the mortagor were both proved and admitted, the chancellor held that both these conditions concurring were not sufficient to justify a receiver, without the additional equitable circumstances existing in the case, to wit: the violation by the purchaser of th eequity of redemption of the agreement, under which he was put in possession, that he would reduce the debt one-fourth, and his evident purpose to abandon the property after he had reaped the crop.
In this case, the complainant was the fourth mortgagee, with all the advantages of an equitable mortgage only. And when the chancellor speaks of “ bad faith in misappropriating the rents and profits,” he evidently means where there is a stipulation ■ on that subject which has been violated; for the other New Jersey cases cited show that the rents and profits belong to the mortgagor until the mortgagee obtains actual possession.
II. The court erred in appointing a receiver of the one-third of the land which was not embraced in the deed of trust.
This was done on the idea that the complainant, in addition to his deed of trust on his part, had also an implied equitable lien as vendor on the whole land for the unpaid purchase money.
The vendor’s lien arises by implication of law from the presumed intention of the parties, and is independent of any contract; and it is held to exist in all cases unless a contrary intention appears. Walton v. Hargraves, 42 Miss. 26, 27. But,
1. The vendor’s lien is confined to sales of land, and will not arise where real and personal property are conveyed by one deed, under an entire contract, for one and the same consideration. James v. Bird, 8 Leigh, 610; McCandlish v. Keen, 13 Grat. 615-629.
In this case, the bill, the deed, the answer and testimony of both parties show that the real and personal property was all sold in a lump for a round price, no particular price being fixed ■ on , any part of the property.
2. There is no affirmative proof of any intention to retain the lien, and it is settled that where a bond is given for the purchase money, and a mortgage on part of the land, the intention is clear that the lien shall not extend over the rest; and also that, where a lien by mortgage is taken for a part of the purchase money, there is no implied lien for the residue. 1 Lead. Cas. Eq. 268, 272, 273 (3d ed. 356, 364, 365); Copper v. Spottiswoode, Toml. 21; Bond v. Kent, 2 Yern. 281; Hughes v. Kearney, 1 Sch. & Lef. 135; Little v. Brown, 2 Leigh, 353; Brown v. Gilman, 4 Wheat. 256, 290, 291; Fish v. Howland, 4 Cond. R. 456; 1 Paige, 20, 31; Phillips v. Saunderson, S. & M. Ch. 462; 2 Sug. Yend. 66, 67; Adams Eq. 279 (128); Fonda v. Jones, 42 Miss. 794.
3. It is admitted by the pleadings that no lien or incumbrance was expressly retained on the one-third omitted from the deed of trust.
The question of lien or no lien is always one of intention, to be collected from circumstances which have taken place. Adams Eq. 279 (129); Fonda v. Jones, 42 Miss. 794.
III. The court erred in appointing a receiver of the notes given to Myers by his lessees for rent, secured by mortgage on their crops, and in requiring him to deliver them to the receiver.
The bill alleges that these notes and liens had been transferred to C. E. Clark, of Memphis, to whom Myers was not then indebted; but it does not deny that the transfer was in good faith and for value.
The answer states that they were transferred to the firm of Clark, Ely & Co., of Memphis, as security for supplies and as a basis of credit for advances, etc.
The decree recites that they were then “in the hands of Clark, Ely & Co.”
Clark, Ely & Co. are not made parties, and yet Myers is required to deliver to the receiver these securities, that have thus been transferred to and are held by these persons out of the jurisdiction of the state of Mississippi. The error is apparent; but if authority were wanted, it is at hand. “ Where a mortgagee has not taken a specific pledge of the rents and profits, he has no equitable right to them against the assignee of a chattel mortgage from the tenant to the mortgagor to secure the rent.” 1 Hilliard on Mort. 199, § 27.
The main question to be determined in this cause is: Did the chancellor exercise a “ sound discretion” when he appointed a receiver ?
The law as to the ajopointment of receivers is now well settled in our state. Applications for this purpose, it is said, are addressed to the “ sound discretion ” of the court, and this discretion is to be exercised as an “auxiliary” to the attainment of the ends of justice. The administration of this “ preventive justice ” results in and is intended for the security of all parties concerned. The possession of the receiver is not adverse or in hostility to the rights of the defendant; it is the possession of the court, held “ equally for the greater safety of all the parties.” Ordinarily, to justify such appointment on the application of a complainant, he must show that he has a clear right to the property itself; or that he has a lien upon it; or that it constitutes a special fund to which' he has a right to resort for the satisfaction of his claim. And that the possession of the property by defendant was obtained by fraud; or that the property itself, or the income arising from it is in danger of loss from the neglect, waste, misconduct or insolvency of the defendant. As against a mortg'agor, when the entire debt is due, a receiver will be appointed to collect the rents of the mortgaged premises at any time after the filing of the bill, if the property is not of sufficient value to pay the mortgage debt. At law, the mortgagee is the owner of the property; and even where nothing but a pure vendor’s lien exists, the vendee is not, in equity, the owner adversely to it. He is treated as a trustee for the vendor until the purchase money is paid. Hence, it follows that in all cases where the property itself is insufficient to discharge the lien the vendor can claim to have the rents paid to a receiver pending’ the controversy. 1 Hilliard on Mort., ch. 23, §§ 1-2, 10, etseq; Mays v- Bose et ah, Freeman Ch. 718; Whitehead, Ex’r v. Wooten et al., 43 Miss. 527; Walton v. Hargroves, 42 ib. 27; Bank of Ogdensburgh v. Arnold, 5 Paige, 40.
The facts of this case to which we are to apply these principles of law may be briefly stated. Estell sold the lands set out in the bill with some personalty to Myers for seventy thousand dollars, thirty thousand cash, and forty thousand dollars in one, two and three years from the day of sale. These deferred payments were evidenced by the promissory notes of Myers, which are carefully drawn and minutely described in the deed from Estell. So clear and exact is the description, that any one upon the most cursory reading of the deed could identify the notes filed with the bill as being those given for the land. Thus, the unpaid purchase money is certain and fixed, due directly to the vendor, and the world, by registration of the deed, has constructive notice of the fact. The very instant Estell sold and conveyed this land, his lien as a vendor attached for all the unpaid purchase money. And though this lien is said to be an “ implied lien,” it is in equity held and treated as a mortgage, both because an express mortgage creates no higher interest than a lien, and because tbe mode of enforcing it and tbe general right and remedies incident to it, are substantially similar to those created by an express mortgage. The doctrine of equity is, that a vendor of real estate, without receiving payment of the purchase money, has a lien for so much of it as remains unpaid. This lien always exist prima fade on the land sold, and the burden of proof is on the vendee to show that it has been intentionally displaced or waived expressly or impliedly by the consent of the parties. If, under all the circumstances, it remains in doubt, then the lien attaches. Had the contract between the parties terminated with the delivery by Estell of his deed, and by Myers of the notes, there could be no difficulty in the case at all. The entire debt is due and the property not worth as much by $15,000. 1 Hilliard on Mort., ch. 23, §§ 1-2; 2 Story Eq. Jur., § 1224; Walton v. Hargroves, 42 Miss. 19.
It is objected, however, that Estell took from Myers a trust deed upon two-thirds of the property sold, and that having thus “ carved ” out his own security, his vendor’s lien is extinguished. This objection is predicated of the decision of this court in Clower v. Rawlings, 9 S. & M. 128, and Dodge v. Evans, 43 Miss. 579. Neither one of these cases sustains this view. The rule that for a party carving out his own security, the law will not create another in aid, is said to be of early authority; but this general statement of a rule, in arguing, is not decisive of the issue presented in the cases. In the first, the point was, that after retaining the lien, by withholding the deed of conveyance for nearly two years, the vendor had delivered a deed to the vendee upon an agreement that his vendee should, by a mortgage of the identical land conveyed, raise money to pay the balance due the vendor. This, the court say, was an act evincing a determination to abandon the equitable lien; had the vendor designed to retain this lien, it would have defeated the effort to obtain from the bank the loan to be secured by the mortgage, one of the objects of which was to raise money to liquidate the balance of the purchase money. This, then, was in law a waiver, and to that extent the decision is proper. In the latter case there was no adjudication of the point. ' The court simply decides that in a bill to enforce the equitable lien it is not necessary to state that the vendor did not take security for his debt. In their argument the court goes no further than to say that, if the vendor takes collateral security, as a bond or note, with a surety or indorser, or a mortgage or pledge, he has elected his security and will be taken to waive that which the law would imply. And then thé case of Clower v. Rawlings is cited as sustaining the court; this we have seen was only decisive of one point, and that the point of waiver. If it decided anything as to mortgage or pledge, it was that the delivery of a deed upon an agreement that the vendee was, by a mortgage to a third party, to raise money to pay balance due to-the vendor, was an abandonment of the lien. In other words, the taking of a mortgage upon land sold is an “ intentional displacement ” of the vendor’s lien, or a “ waiver ” of the equitable lien upon the land, and the vendor must look to his mortgage; but here let us observe the whole land was to have been mortgaged.
The trust deed given by Myers is somewhat singular. After reciting the sale and purchase, it states that the deed is given as additional security. The trustee was only authorized to sell eighteen months after the maturity of the last note, and was not authorized to take possession of the premises. Besides this, the vendee only conveys to the trustee tAvo-thirds of the identical property sold him. It may be admitted that the execution of this trust deed Avas a displacement pro tanto of the equitable lien, and that Estell was bound to look to it with a view to subject this two-thirds interest to the payment of his debt. But, even then, it by no means follows that it displaced the vendor’s lien upon the remaining third of the property. The law always presumes an intention to retain the lein, and this presumption must run all through the transaction. Judging the parties by their acts, we should say that the equitable lien upon the third of the property not embraced in the trust deed remained intact. It is for the vendee to show that by taking a trust deed upon two-thirds of the property — all of which was bound — the vendor abandoned his lien upon the remaining third. Certainly the two are not inconsistent. The question is not that of a collateral security; or a distinct and independent security; or a mortgage or pledge of other property. The trust deed upon two.-thirds of the property is not necessarily inconsistent with, or in opposition to, the lien already existing upon the whole. It presented no other security; it offered nothing in addition to what was already bound; it simply changed the mode in which the lien was to be enforced, and that, too, in the interest of the vendee. The land was the thing, the security Estell had for the payment of his debt; and, to adopt the hypothesis of the'defendant’s solicitors, the mere taking of the trust deed upon two-thirds of the land amounted to a legal displacement, or an intentional waiver of the lien then resting on the whole. In other words, the binding by express mortgage of two-thirds of what was bound already by a lien equal in dignity, necessarily destroyed the lien resting upon what was not in fact expressly mortgaged. This scarcely appears to be a reasonable proposition. The trust deed does not so state the contract. It gave no collateral, or distinct and independent security. It did not create a lien, or give a security where neither existed. Estell’s vendor’s lien existed in full vigor before the trust deed was executed, and that deed, at best, could not have an operative legal effect beyond the displacement of the lien as to the property mortgaged. The intention to retain the vendor’s lien existing through the whole transaction still exists as to the third not mortgaged. 1 Hilliard on Mortgages, ch. 23, § 37, et seq.
The cases in which this question has been discussed are peculiarly uncertain and inconsistent, but a careful examination of all the authorities will, we think, establish this to be the law upon the subject. The law presumes an intention to retain the lien, and imposes on the vendee the burden of proving the contrary. To discharge the lien, there must be some affirmative act done by the vendor to waive it, or evincing a manifest intention to rely no longer on it. The taking by the vendor of “ collateral security,” either in property or the engagement of some third person, or a distinct and independent security for the purchase money, have been held to discharge the lien, which otherwise the law would imply it his favor. The taking of security, hence, affords no more than a presumption, under some circumstances, of an intentional waiver of the lien, and not as conclusive of the waiver. In such cases the burden of the proof is on the vendee to show that the vendor agreed to rest on that security and to discharge the land. Even the taking of a distinct and independent security, as of a mortgage on another estate, or a pledge of other property, is not conclusive evidence that the vendor’s lien upon the property sold is waived.
The whole drift of all the authorities is this: that the vendor must have taken some collateral security or some express mortgage or pledge, either of the whole of the property sold or some other property, before he will be held to have waived or abandoned his lien. In no case has it ever been held that the taking of an express mortgage upon two-thirds of the land sold,' and that exclusively in the interest of the vendee, was a displacement or waiver of the lien upon the third not expressly mortgaged. In Lewis v. Beatty, 32 Miss. 8, the high court simply decided that a vendor who only gave a title bond did not have the equitable lien which the law implies in favor of the vendor generally, because he held in himself the whole legal title. This case, therefore, does not change the view we have taken above. 2 Story Eq. Jur., § 1226, et seq.; 1 Hill. Mort., ch. 23, §§ 37, 38, 40; Glower v. Bawlings, 9 S. & M. 127; Johnston v. Union Bank of Tennessee, 37 Miss. 533; Fonda v. Jones, 42 ib. 794; Dodge v. Evans, 43 ib. 579.
As to the two-thirds of the property conveyed in trust to Wilson, there can be no doubt that the chancellor was right in appointing a receiver. The property is not worth the mortgage debt; the comjdainant has an express lien upon it, and the entire debt is due. But there are other circumstances in the case that absolutely necessitated the appointment of a receiver. Wilson, the trustee, and trusted agent of both parties, accepted the trust, and thereby legally and in conscience bound himself to sell the propepty as soon as the exigency stipulated in the deed arose. At the request of the cestui que trust, Estell, he advertised the property for sale, as required by his solemn engagement, but, when the time arrived, fraudulently declined to sell. The bill distinctly charges this fraudulent combination between the trustee and Myers, and the testimony clearly establishes it. If anything was needed beyond the letter of Wilson to Estell, demanding a compensation of $1,000 for services before they were rendered, would suffice; this fraudulent combination itself would be sufficient. There is, however, another ground relied upon as warranting the appointment of a receiver to take possession of, not only the two-thirds of the property mortgaged, but the whole of it. The bill charges that it was the distinct agreement and understanding between the parties at the time the large indulgence set out in the trust deed was given, that Myers should cultivate the plantation from year to year and employ the annual profit and income arising therefrom in the payment of Estell’s debt. The answer admits by not denying it, and the proof sustains this averment of the bill. Myers has never so applied the rents, but has positively misapplied them. It is charged in the bill, not denied in the answer, and sustained by the proof, that the land and the annual rents and profits arising from its use and occupation constitute a special fund to which the complainant has a right to resort for the satisfaction of his claim, by express agreement between the parties, made at the time of sale. This income is being lost annually by the misconduct and neglect of the appellant. These two facts combined would warrant the appointment of a receiver, even if the appellee had no lien at all. How much more strongly would the rule apply when he has an express mortgage on two-thirds of the land and a vendor’s lien upon the remaining third ?
■ It is insisted that the consideration of the notes was for personalty as well as realty, and it is not known how much or what proportion of the balance due Est-ell was for personalty. Therefore, that there is not a fixed amount due appellee for his land, and in accordance with the decision of the high court in Paterson v. Edwards, 29 Miss. 7, the motion should have been denied to this extent. In that case, in arguing, the court say that to create a vendor’s lien, there must be a debt for the unpaid purchase of land to a fixed amount due directly to the vendor, but the point decided was, that when the obligation consisted of a collateral covenant, the vendor’s lien did not attach. This, because a violation of the collateral covenant gave rise to an action that sounded in unliquidated damages, and the amount had to be ascertained by a verdict of a jury. The point, however, if good at all, as a defense, does not appear upon the face of the papers. It is for the appellant to show that some part of the note sued on represents the value of personalty sold. And even then we submit that the appelles’s lien would not be affected. Some $30,000 in cash were paid to appellee when the sale was consummated, and this would first be applied to the payment of the amount due for the purchase of the personalty. 1 Story Eq. Jur., § 459 c. Besides this, appellee has a trust deed upon two-thirds of the property to secure the whole debt, and this exhausted, the residue of the purchase money left unpaid, is chargeable upon the remaining third of the property. The agreement between the parties, made at the time of sale and purchase, that the rents should annually be applied to the payment of appellee’s debt, will of itself sustain the appointment of the receiver by the chancellor. If there was any merit in the point suggested, it could readily be met by invoking the old legal maxim: Id cerium est quad cerium reddi potest. And this would, practically extended, justify the assertion' that all of the purchase money left unpaid, after exhausting the security of the trust deed, would be held a lien upon the third of the property not expressly mortgaged.
On the re-argument of the cause, the solicitor for the appellant insisted upon the propriety of the first opinion reached by the court upon the authorities previously cited, and in an elaborate review of all the former decisions of the court, endeavored to show that the causes, decided went off upon a defect in the notice required to be given by the party applying for a receiver, and that the case of Hill v. Robertson, simply decided that a receiver will he appointed when the legal grounds are laid showing its necessity for the security of the mortgagee. In reference to the special facts in the case to which attention was called by the court, Mr. Ellet contended, that there was ño argument to apply the rents of the property to the payment of mortgage debt, the bill simply charging that it was “plainly anticipated” this should be done; that the charge as to a fraudulent combination between Myers and Wilson, to prevent either a sale under the trust deed or the recovery of possession at law by ejectment, was destitute of foundation in fact; that the advertisement of the land and the institution of the action of ejectment were premature, if days of grace were allowed upon the notes and counted; and that Myers could not be dispossessed unless his children and the trustee representing them, were made parties to the suit, which was not done.
The application for a receiver in this case rests, not on the grounds which seem to have been alone considered by the court, but also upon these grounds:
1. The insufficiency of the property to pay the debt, as shown by the deposition of Myers contained in the record,, the deficiency being about $22,000, and the insolvency of Myers, as shown in his letters, in which he states that he never will be able to pay the mortgage debt.
2. The failure on Myers’ part to apply the rents and profits arising from the property to the payment of the mortgage debt, as was fairly anticipated when the property was sold, and the long extension of credit given, and the fraudulent misapplication of the same.
3. The fraudulent combination between Myers and Wilson, trustee, preventing either a sale of the property under the trust deed or the recovery of possession under the action of ejectment at law
4. The sale of the mortgaged property for taxes.
By adopting the statement contained in Judge Ellett’s brief, the court has been led into error. The court say it may be added: “ That Myers, in his answer, says the property is worth the debt, and there is no proof on the point.” There is, however, proof, not only of this, but also of Myers’ insolvency. In his letter of July 12, 1869, he writes: “Times have changed so much since I made the purchase of the property, on which I reside, from you, that it will be impossible for me ever to pay the price agreed on. * # * I am willing to pay you $10,000 on the 1st of March next, and $10,000 on the 1st of January, 1871.” In his letter of July 28, 1869, he says: “ It will be a long time, I fear, before lands, the best improved, will bring more than $25 or $30 per acre. # * * This would give you $17,775, or at $30 per acre, would give you $21,330.” After proposing a partnership, as a settlement of the debt, he says: “ This shows you that I do not think the land is worth more than I offer you.” Hence, he offers $20,000 in full settlement of the debt.
In reference to mortgages, the incident of rents and profits, in fact, is regarded as being better than the property mortgaged; and if it be now conceded that mortgagees are not entitled to these rents and profits pending a litigation on their mortgages, these deeds become a snare instead of a protection. It is a known fact that, in the great uncertainty of things existing at the present time, the rents and profits of lands for five consecutive years are worth more than the land itself. Nay, more, it is impossible to say what the land is worth. It has no fixed marketable value. A judgment or decree for an inconsiderable amount will sweep the most valuable landed property in the state; but while this is so, rents are known, and the prospective income therefrom arising for a succession of years may be readily determined. So that the reason on which the old adjudications as to receivers are based, has completely ceased to exist.
If the present case were to turn wholly upon the cases referred to by the court, we think the appointment of a receiver fully warranted. The proof of Myers’ insolvency and of the inadequacy of the mortgaged property is ample and conclusive. And this, coupled with the allegation that the rents are indispensably necessary, in order to pay the mortgage debt, would seem to make out a perfect case for relief. We think, however, and respectfully suggest, that the view taken of the subject by the court, on the authority of the cases in New Jersey, New York, and Michigan, in opposition to the decisions of our own court, is incorrect. There can be no doubt that in the states named, the courts have decided in ordinary cases of foreclosure, that the insolvency of the debtor and the inadequacy of the property, combined, must be established to justify the appointment of a receiver; but this rule does not apply to cases in which there was an agreement that the rents and profits should be applied to the payment of the mortgage debt. This is the- rule announced in several of the cases cited by the court; but the reason assigned is, that the mortgagee has the right to a recovery of possession by an action at law, and the perception, from the time of his right of entry, of the rents, and that his remedy in that behalf is plain, adequate and complete. If any other reason was necessary, it could readily be discovered in this, that in these very states, after exhausting the property mortgaged, the creditor is entitled to a judgment for the deficiency. So that in these states, the mortgagee can himself recover in ejectment in the first instance without resorting to the machinery of a court of equity, and directly secure the rents. The English cases proceed upon the same idea, and they deny the appointment of a receiver, for the reason that the mortgagee may enter the premises and secure the rents. While this is true, however, we insist that our state adjudications are much better considered, and more satisfactory. In the case of Hill v. Robertson, 24 Miss. 368, the court in effect decide that mere insufficiency of the mortgaged estate, is enough to sustain the appointment of a receiver. They say: “ The debt in this case is very large and bearing’ interest. Equity not only looks to present security, but to security which Avill be sufficient when the final decree shall be pronounced. The property may have been sufficient to accomplish the original design of the parties to pay the debt and interest at maturity; but it by no means folloAvs it will continue sufficient for that purpose. To do so, it must increase in value in proportion as interest accumulates on the debt. This is not to be expected, as the income is not employed for this purpose. The property, for its increase in value, must depend upon the fluctuations of the market; and other causes would aid but little without a judicious investment of the annual income. Independent, however, of the plain case made by the pleadings and proofs, the complainant may rest his claim to a receiver upon another point; upon the maturity of the debt and a failure to pay, the legal title became absolute in the complainant. The legal title draws to it the right of possession, which, if enjoyed, would give the income of the property to the mortgagee to keep down the annual interest; and the surplus, if any, to apply to the principal.” The court say further: “ Upon this failure to pay, the legal estate vests in the mortgagee, as an.incident to Avhich is the right of possession, which is necessary to be enjoyed either by the mortgagee himself, or managed for his benefit by the court, to meet the debt which the laAv creates in the shape of interest, and which we must suppose was not provided for in the mortgage, but it could only accrue by a breach of contract on the part of the debtor in failing to pay at the time stipulated; and the law presuming that every man intends to perform in good faith his contracts, would not presume that the mortgage was more than a sufficient security for the principal and interest to maturity of the debt.” This decision made in 1852, and acquiesced in ever since, we submit ought to be adhered to more vigorously now than ever. The reasoning is more satisfactory, and the conclusion better, than in these cases decided by courts in other states, where property values are fixed and laws for the recovery of debts are more speedy and certain. If the mortgagee is entitled to the possession at law, why' not appoint a receiver at once ? What use is there for sending him to another tribunal for that relief which a court of chancery may readily administer by the appointment of a receiver?' Why impose upon the mortgagee two suits, when one alone is necessary ? Why not prevent circuity of action and multiplicity of suits at once ? The case of Hamblin v. Percival, Marble et al., 24 Miss. 586, contains the same doctrine, as does also that of Whitehead v. Wooten, 43 Miss. 523. And, while it is true that this last class went off on the insufficiency of the notice for the appointment of a receiver, the general doctrine is canvassed fully, and a safe conclusion reached. One of the grounds for the appointment of a receiver is stated to be the fraud of the mortgagor, and this applies to the case at bar. In the case of Yause v. Woods, 46 Miss. 129, the court say: “ If the property was worth more than the debt, there would be no reason to put the case in the custody of a receiver, unless the defendants were committing waste and deteriorating its value. The court will not interfere for a mortgagee, except upon the ground that the property is insufficient to pay his debt, and, therefore, pending litigation he should have the rents and income.” This case also went off on the insufficiency of the notice, but the court at the same time say: “We have thought it proper to refer to these general principles which govern the jurisdiction of the court.” The same doctrine is laid down in the case of Mays v. Hose, et ah, Freeman Ch. 718.
We have, therefore, in our state, an unbroken series of cases, in all of which the same adjudication has been made, and in none of which is the vieAV taken by the court in this case sustained. It would appear improper, therefore, to reverse the decree of a chancellor which proceeded upon a firm reliance on the decisions of the last resort in the state. If chancellors and judges cannot be controlled and directed by the opinions of our OAvn supreme court, to what courts may they resort for guidance ? The argument ab inconvenienti in this is irresistible. Right or wrong, proper or improper, the law has been so adjudicated, and it is much better to adhere to it than to change it.
But we do not think the cases referred to by the court sustain the decision as it respects the present controversy, and will refer to them briefly. The case of Best v. Schermier, 2 Halst. (N. J.) 154, was one in which the prior mortgagee claimed the rents and profits against a junior incumbrancer, holding from the mortgagor an assignment of the rents and profits, and who, for aught that appeared, had an adequate security in his first mortgage. The proceeding was merely to foreclose the mortgage. In Hamburg Manufacturing Co. et al. v. Edsell, 3 ib. 298, the property in controversy was in the hands and possession of trustees for creditors, and the motion for a receiver Avas made because the trustees denied the trust in favor of the Hamburg company. They admitted the trust created by the words of the agreement between the agreeing creditors. The court say: “ A denial of the trust Avould not, of itself, make the appointment of a receiver necessary on the establishment of the trust. Where there is no ground for the apprehension of loss by permitting the property to remain in its appropriate use in the occupancy of him who has the use of it, and his ability to respond for its use is admitted, and he is one of the persons who has been ordered in the cause to account before a master for the rents and profits that may have been received, I see no good end to be attained by the appointment of a receiver for the purpose of taking charge of the property.” But on page 301 the court expressly say: “ If the case stood now as it did when it passed from my hands before,' there would be a ground for the appointment of a receiver, arising from the constructive fraud by which the property got into the hands of L’Hommdieu, who, it may be remarked, was decreed by the appellate court to be a trustee in possession for creditors generally.”
In Cortezan v. Hathaway, 3 Stock. (N. J.) 39, the court say, the rule as to the appointment of receivers in New York does not apply in the state of New Jersey. They deny a receiver to the first mortgagee because of his plain remedy at law; but in this very case they say: “ When there is any act on the part of the mortgagor * * which shows fraud on his part, or makes him chargeable with bad faith in misapplying the rents and profits for other purposes than that of keeping down the interest or the incumbrance, in such cases the court may very properly appoint a receiver.” The facts are almost identical with those of the case at bar.
The case of Weaver v. Gouverneur, 1 Barb. 38, decides, that when the mortgagee has failed to take a lien on the. rents and profits to keep down interest on his debt, a receiver will only be appointed in cases when the property is an inadequate security for the debt, and the mortgagor is insolvent. In Bank of Ogdensburgh v. Arnold, 5 Paige, 40, the inadequacy of the property was held to be a sufficient reason for the appointment of a receiver. On page 41, the court say: “ The mortgagees have no specific lien on the rents of the mortgaged premises until the mortgage debt becomes due, so as to entitle them to a foreclosure of their mortgage. As it is alleged that the father of the defendants died insolvent, they are of course liable to his creditors in equity for whatever comes to them by descent from him as his heirs at law, whether in the shape of rents or otherwise.” And this was a strong point in the case — not the insolvency of the parent, but the insolvency of the heirs at law was the question at issue. As they were not insolvent, and were liable to account for rents, the court denied the receiver. In Lea Insurance Company v. Stebbins, 8 Paige, 567, there was no sufficient proof of the insufficiency of the mortgaged property to pay the debt, and the only ground relied on was that. The case of Astor v. Turner, 11 Paige, 436, decides that the insufficiency of the property and the insolvency of the mortgagee must both appear before a receiver will be appointed. In Brown v. Case, Walk. (Mich.), the mortgagor was a bankrupt, and there was no proof of the insufficiency of the property to pay the debt. In Payne v. Atterbury, Harring. Ch. (Mich.) 614, the court say: “Nothing can be clearer, both in law and equity, and from natural justice, than that the complainant (mortgagee) is entitled to the rents and profits from the time his title accrued; and the case is still stronger where there are large outstanding incumbrances, and no part of the rents and profits is applied to keep down the interest, and the defendant is totally irresponsible, and is holding over against his own deed. In such a case the complainant is entitled to a receiver.”
We have thus gone on all the cases cited by the court to sustain its decision, and a careful analysis of the facts in each case makes it manifest that not one of them bears any similarity to the case at bar; and all of them, in so far as they do bear upon the only point noticed by the court as being decisive of this .case, are wholly at war with the settled practice in this state.No questions of expediency are suggested why this change in policy should be made, but there are abundant reasons for a contrary adjudication. That the court of last resort should stand by its decisions is a principle conceived in wisdom and strengthened by a steady adherence on the part of the judges, the world over; and to depart from this settled principle will destroy that stability and uniformity in the administration of justice which the present condition of our country imperatively demands.
The case presents a very simple ground for the appointment of a receiver. That the security for the debt is a deed of trust makes no difference, and the court has well said, in the opinion delivered in this case : “It was held in Wolf v. Dowell, 13 S. & M. 108, and repeated in Carpenter, Ex’r v. Bacon, 42 Miss. 50, that deeds in trust are of the same sort of security as a mortgage, subject to the ' application of the same principles. Both are pledges as indemnity for the ■debt. The distinguishing difference is, that one communicates a power of sale, whilst the other ordinarily does not.” This is the view taken by Hilliard in his work on Mortgages (2 Hill.. Mort. 16, 18, 450, 451 n), and conclusively demonstrated in the following authorities: Erskine v. Townsend, 2 Mass. 693; Nugent v. Riley, Mete. 117; Eaton v. Whiting, 3 Pick. 484; Shaw et. al. v. Norfolk Company Railway, 5 Gray, 162; King v. Longworth, 7 Ohio, 231; Stanhope v. Mannier, 2 Eden, 197; West Branch Bank v. Chester, 11 Penn. St. 282; Balf v. Lord, 2 D. & W. 480. See 2 Red. Railw. 463-480, foot note, where the question is fully discussed.
In this case, however, there, is no difference at all. The distinguishing difference referred to by the court has ceased to exist. The fraudulent conduct of the trustee, in refusing to execute after accepting the trust, leaves the instrument to all intents and purposes, as a pure mortgage in the hands of Estell, and it must be so regarded by the court. The facts relied on, therefore, are briefly these: The grantor and trustee, by a collusive arrangement between them, have prevented the cestui que trust from receiving the legal benefits arising under the trust deed, from having a sale of the property and recovering possession under the deed, and thereby securing the rents and profits; the property is a scanty security for the debt, and the debtor never will be able to pay it; the land has been sold for taxes, and the entire mortgage debt was due when the bill was filed. . If the decision of the court, as rendered, be maintained, the grantor in the deed of trust will' secure the benefit of his own wrong, and be allowed to take advantage of his fraud. It is no answer to say, as was done in New York and New Jersey, the cesiui que. trust had a plain remedy at law, because his legal remedies have all gone and been destroyed by the combination between Myers and Wilson. Can it be asserted that when a party, by fraud, injures another and deprives him of a legal right, a court of chancery is powerless to grant relief? All our ideas of justice lead to the conclusion in this case, that it was the duty of the chancellor to seize the property, through a receiver, and do just exactly that which would have been done had the trustee discharged his plain duty, especially when the default on the part of the trustee was occasioned by the fraudulent arrangement above alluded to. What would have been the result if Wilson had sold according to his advertisement, and suffered the prosecution of the action of ejectment ? The property would have passed into the possession of the cestui que 'trust, or other purchaser, in the summer or fall of 1870, and the rents and profits during that year, and all successive years, would have been secured to him. By affirming the decree of the-chancellor, just exactly the same result would be reached. If Myers could give a supersedeas bond, and bring his case up to this court, he could readily have enjoined the sale of the property under the trust deed, and this pretense in justification or excuse of his. fraudulent combination with Wilson is too barefaced to be discussed.
The court say, in commenting on the tenor of the trust deed: “He, Wilson, is invested with the legal title, with a power to communicate it to the purchaser to raise the money value of this property, and not for the purpose of using it to obtain possession, that he may pay the debts out of the income;,” but precisely the same objection would apply to a mortgage either with or without the power of sale. In all such cases, the idea is to sell the property to pay the debt, and yet there is the legal title which is to be used for the payment, of the debt and to be availed of in all its incidents for that purpose. This legal title draws to it the possession of the property, and the rents and profits as incidents to that possession. And this seems to have induced the statement by the court, that “ if the trustee, however, should obtain possession by suit, or voluntary surrender, of course he should account for the rents.” As Judge Fisher remarked, in Hill v. Robertson, supra, the parties contemplated that the land mortgaged was worth the principal of the debt, but must be presumed to have intended a payment of the notes as they matured. On default in the payment of the notes, it must be held that they considered the rents and profits as the fund to keep down the accruing interest.
But the very reasons stated by the court, in concluding their argument on the first branch of this case, as warranting the appointment of a receiver, exist in all their rigor. The value of the property is inadequate to pay the debt — the debtor is insolvent — and the property is in danger of absolute loss by the sale for taxes. And beyond all these, there is fraud, conspiracy and collusion charged and proven.
We have not thought proper to assail the opinion of the court, in so far as it denies to Estell the vendor’s lien on the undivided third of the property not mortgaged. We had pressed the point, that it existed until intentionally displaced, or expressly or by necessary replication waived; and that the taking of a trust deed on two-thirds of the property sold, could not, on principles of logic, displace the lien which rested on the other third. We submit, however, to the opinion of the court in that respect as being sustained by reason, and the adjudications of our own court.
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
