Tiger v. Sellers

HUXMAN, Circuit Judge

(dissenting).

I find myself unable to agree with the majority.

Under the strict rule, one may become a mortgagee in possession only when he takes possession either under the terms of the mortgage or with the consent of the mortgagor, either express or implied. Under' the more liberal rule, it is sufficient if possession is acquired peaceably and legally. The basis of the more liberal rule is the application of sound equitable principles and considerations. In Stouffer v. Harlan, 68 Kan. 135, 74 P. 610, 613, 614, 64 L.R.A. 320, 104 Am.St.Rep. 396, the Kansas Supreme Court said:

“We conclude that the true rule is that, when the mortgagee is in possession of the mortgaged premises after condition broken, he may not he dispossessed without a payment of the mortgage debt, unless his possession was acquired under such circumstances that he ought not, in equity, to be permitted to retain it.”

In Leinbach v. Dyatt, 117 Kan. 265, 230 P. 1074, 1077, the same court said:

“Before possession can be given effect to strengthen a mortgagee’s claim, it is essential that such possession should have been acquired in some lawful manner, and without resort to means which equity cannot countenance.”

Applying these equitable principles, it has been held that a mortgagee who purchased at a void or illegal foreclosure sale and went into possession of the premises, could not be dispossessed without payment of his mortgage. Stouffer v. Harlan, supra; Hays v. Tilson, 18 Tex.Civ.App. 610, 45 S.W. 479; Browne v. King, 111 Tex. 530, 235 S.W. 522; Nellis v. Minton, 91 Okl. 75, 216 P. 147.

In Jaggar v. Plunkett, 81 Kan. 565, 106 P. 280, 25 L.R.A.,N.S., 935, the Kansas Court applied these principles to a void tax sale, and held that one who purchased at a tax sale which was void for failure to comply with statutory provisions and who went into possession and thereafter acquired a mortgage on the premises could not be ousted from the premises without the payment of the mortgage, even though the tax deed under which he went into possession originally was void.

I agree that in the Neel case the Oklahoma Court approved the liberal doctrine announced in these cases. The doctrine of the Neel case is that a mortgagee in possession whose mortgage remains unpaid will not be ousted when he has strong equities in his favor. These equities were present in the Neel case. The statement of facts in that case justifies the conclusion that the mortgagee was in possession with the implied consent of the mortgagor, otherwise there is no basis for upholding the possession. It cannot be assumed that the Oklahoma Court intended to hold that a mortgagee whose mortgage is in default and who finds the premises unoccupied may simply walk in, take possession, and become a mortgagee in possession.

The fact that the mortgage debt remains unpaid or that an action to foreclose the mortgage is barred are not equities which will be considered in determining the nature of the mortgagee’s possession. The equities that will control must relate to the manner in which possession was acquired— such as where the mortgagee in good faith purchased at a foreclosure sale, a tax sale, or other judicial proceeding conducted in good faith and at which he parted with a valuable consideration.

I agree with Judge Phillips that the assignment of rents was void because not approved by the county court. It is to be noted that the instrument assigning the rents did not purport to give the mortgagee the right to the possession. It merely authorized him to collect the rents and apply them on the mortgage debt. At the time this assignment was executed, appellant was in possession of the premises through his tenant and remained in such possession until his tenant left the premises, when appellee, without authority or right, took possession through his tenant, whom he placed on the premises. When his tenant left, appellant again went into possession.

We then have this, situation: Appellee invokes the benign principles of equity to support a possession which at best can be justified only by an assignment of rents which did not give the right to possession and which we have held in any event to be void. We deny him the right to retain the rents expressly assigned in the instrument, but give him the far more valuable right, to take possession of the premises thereunder, notwithstanding that both stem from the same void instrument.

Equity should not countenance a possession which finds support only under a contract made in contravention of express statutory provisions passed for the specific purpose of protecting incompetents who are incapable of safeguarding their interests in just such transactions. Such a possession is not only devoid of equities, but in my view is most inequitable.

For these reasons, I respectfully dissent.