Downs v. Hopkins, Allen & Co. , 65 Ala. 508 ( 1880 )

BRICKELL, C. J.

— The assignments of error raise a _ single question : whether a mortgagee, in possession under a purchase at his own sale, by virtue of a power in the mortgage, can be made to account to a junior mortgagee,' electing to avoid the sale, for rents and profits during the continuance of his possession. It is not questioned, that a sale, in which the mortgagee was vendor and vendee, is voidable at the mere election of any party having interests and rights which could be injuriously affected by it, seasonably expressed. Nor can it be doubted, that a biil in- equity by a junior mortgagee, to be let in to redeem, is an appropriate mode of manifesting the election on his part; or that, in view of.the particular facts of this case, the election was made seasonably. — Charles v. Dubose, 29 Ala. 367; Robinson v. Cullom, 41 Ala. 693.

_ If, without a sale under the power, in the exercise of the right of possession, an incident to the legal estate, the mortgagees had entered, their accountability to the junior mortgagee, for rents and profits during the term of their possession, would not be a matter of controversy. — Moore v. De Graw, 1 Halst. Ch. 346; Gordon v. Lewis, 2 Sumner, 143; 2 Jones’ Mort., § 1114; 1 Hill. Mort. 417. Profit for themselves, from the possession of the premises, they can not be allowed to derive, so long as the relation of mortgagor and mortgagee continues. Therefore, whenever there is a redemption by any party entitled to redeem, a mortgagee in possession must apply the rents and profits in reduction of his mortgage debt, subject to an allowance for all proper expenditures which, as tenant, in possession, he may have made. The principle upon which the mortgagee, in possession as mortgagee, is made accountable for rents and profits, and compelled to apply them in reduction of the mortgage debt, for the ease of the owner of the equity of redemption, is, that he stands in the relation of a trustee, and they form a trust fund, primarily applicable in payment of the mortgage debt. A court of equity makes that application of them, so soon as they are received. Payment of the mortgage debt is the full measure of the right of the mortgagee, in a court of equity. This is all which he may exact of the mortgagor ; and a second mortgagee, coming in to redeem, stands in the same situation as the mortgagor — is entitled to tbe benefit of all payments he may have made, and to all allowance for rents which ought to be made to him. — Harrison v. Wyse, 24 Conn. 1.

"When, at the election of the junior mortgagee, the sale of the mortgaged premises was avoided, the avoidance had relation to the day of sale, restoring the parties to the condition in which they then were, leaving the mortgagees in possession simply as mortgagees, and not as purchasers under the power of sale. In possession as mortgagees, it was equitable that the rents and profits should be applied in reduction of the mortgage debt. They could not be allowed to retain them for their own profit.

The decree of the chancellor is reversed, and the cause remanded.

Stone, J. not sitting.