Scott v. Hotchkiss

Temple, J.

This action was brought to foreclose a mortgage executed by defendant Hotchkiss. The mortgage contains a provision that in case of default and the commencement of an action to foreclose, on the filing of a complaint, in foreclosure, or at any time thereafter, “ the court shall, if requested by the plaintiff, name some disinterested person as receiver and shall authorize such person as receiver to take possession of the mortgaged premises and collect the rents and profits, and to apply them to the satisfaction of such judgment, and to sell said premises in the same manner as lands are sold upon execution, and to continue in possession of such premises and to collect the rents and profits until the premises are redeemed from such sale or until title is vested in the purchaser.”

The mortgage was not accompanied with an affidavit as required in mortgages of growing crops, and was not recorded or indexed as a chattel mortgage.

After the mortgage Hotchkiss sold and conveyed the land to defendant Fountain, subject to the mortgage, but it was found that Fountain had no actual notice of the provision in the mortgage in regard to the appointment of a receiver.

The mortgage was executed in 1891. In 1892 Millard entered upon the land as tenant of the mortgagor, and continued in possession as such tenant up to the time of the commencement of this action and the appointment of a receiver herein. Each year he has cultivated the land in wheat, barley, and hay, rendering as rental one-fourth the crop—delivering the same in the field, the grain in sacks and the hay in bales. Millard had no actual knowledge of the mortgage until after he took the lease, and no knowledge of the provision in regard to a receiver until the commencement of this action.

This action was commenced in February, 1895. As to the condition of things when a receiver was appointed, the court found as follows: “ That there is growing upon said premises a crop of wheat and hay, as follows: sixty acres of summer fallow, twenty acres of winter-sown, and about one hundred acres of volunteer. That said crop was put in by the defendant Millard, and was, except twenty acres of wdnter-sown, put in prior to December 1,1894. That the defendant.Millard furnished all of the necessary seed, labor, and teams used in putting in said crop. That is it customary, in leasing farming lands, such as the mortgaged premises, in the vicinity of said premises, where they are leased for a share of the crop, to reserve one-fourth of all grain and hay grown on the premises as rental, the grain to be delivered in sacks and the hay in bales, to the lessor on the leased premises, the other three-fourths of the crop to be retained by the tenant as compensation'for the labor, seed, use of teams and machinery, and other necessary expenses incurred by him in producing the crop, excluding the harvesting, baling, sacking, and piling the same. In the production of such crop, the relative value of the use of. the land to the value of the labor, seed, use of teams and machinery, and other necessary expenses of the tenant, is as one-fourth is to three-fourths; and, of the crops so growing on said premises, at least three-fourths thereof in value and quantity are the result of defendant Millard’s industry and capital, except that the labor and expense incurred in harvesting, sacking, threshing, baling, and piling said entire crop would come out of said three-fourths.”

The appeals are separately taken. Millard claims three-fourths of the crop, contending that the right to rents and profits is all that is granted in the mortgage, and all that, according to equity, can be recovered by plaintiff.

Fountain contends that this provision in the mortgage conferred no rights whatever, and that he, Fountain, is entitled to the rent reserved.

The general subject here under consideration was discussed in the late case of Simpson v. Ferguson, 112 Cal. 180. It was there held that growing crops could be mortgaged only as provided in section 2955, et seq., of the Civil Code. They are, therefore, not covered by an ordinary real estate mortgage. While growing they are real estate, and are included in the mortgage. But if the mortgagor is in possession, he is entitled to the rents and profits, and to the crops if harvested' before foreclosure and the transfer of title thereby to a purchaser.

In Simpson v. Ferguson, supra, the court quoted approvingly from Sexton v. Breese, 135 N. Y. 387. In that case, the mortgagor, subsequent to the mortgage, sold a growing crop of wheat, and then delivered possession of the land to the mortgagee. It was- held that the mortgagee in possession took subject to the rights of the purchaser of the crop, and that the fact that the mortgagee was entitled to the rents and profits did not matter. He was not, therefore, entitled to the crop, which was in part the result of the labor of the mortgagor. Practically the same thing was decided in West v. Conant, 100 Cal. 231, and in Freeman v. Campbell, 109 Cal. 360.

These cases clearly establish the proposition that the court erred in appointing a receiver to take possession of the crop as against the tenant. He is entitled to his share of the crop, which was wrongfully taken from him by the receiver.

The case of Fountain must be discussed on different lines. It has been held both here and in other states that the stipulation in the mortgage that a receiver may he appointed and directed to take possession, and collect the rents and profits, enlarges the rights of the mortgagee—at least as against the mortgagor. Unless such a clause in a mortgage gives the mortgagee an interest in the growing crop, or in the rents and profits, I do not see how it can affect the rights of others, or authorize a court of equity to appoint a receiver. No stipulation can confer jurisdiction upon the court to appoint a receiver in a case where the court has no such authority given by law. It is not .necessary to decide the matter in this case, however, because there is an averment that the security is insufficient. In such case, the court is authorized to appoint á receiver (Code Civ. Proc., sec. 564), and take and hold the rents and profits to secure the debt. (See, also, Montgomery v. Merrill, 65 Cal. 432.)

The purchaser from Hotchkiss is in no better position in regard to this matter than Hotchkiss would have been.

It is to be noticed that it is expressly found that the rent reserved in the lease to Millard is fair and adequate, and represents the value of the use and occupation, as well as the actual rent of the land. The mortgagee, under the very terms of the mortgage, was not entitled to more than this.

As to appellant Fountain, the judgment is affirmed, but as to defendant Millard, the judgment is reversed, and the cause is remanded for further proceedings in accordance with this opinion.

McFarland, J., and Henshaw, J., concurred.

Hearing in Bank denied.