JACOBS v. REAL ESTATE MORTG. TRUST CO.

JACOBS v. REAL ESTATE MORTG. TRUST CO.
1926 OK 620
249 P. 930
122 Okla. 1
Case Number: 17079
Decided: 07/13/1926
Supreme Court of Oklahoma

JACOBS et al.
v.
REAL ESTATE MORTG. TRUST CO.

Syllabus

¶0 1. Mortgages -- Foreclosure -- Right of Mortgagees to Receiver--Invalidity of Order of Appointment Based on Contract Provision. Subdivision 2 of section 518, Comp. Stats. 1921, defines the conditions under which a receiver may be appointed on application of mortgagees; when suit is brought to foreclose the mortgage. The rights of the mortgagee to have a receiver appointed cannot be given by a contractual provision in the mortgage. Such provision, though not expressly prohibited by the statute, is contrary to public policy in that the statute points out when such extraordinary remedy may be granted by a court of equity. An order appointing a receiver because of such contractual provision is without the power of the court and should be set aside on motion.
2. Same--Right to Receivership for Collection of Rents. A clause in a mortgage on real estate which assigns the lease on the same as further security for the payment of the mortgage indebtedness merely gives a lien on same. Unless such condition is shown to exist as that the indebtedness is probably insecure, a receiver to collect rent should not be appointed. Without such a clause, if it is made to appear that the property is probably insufficient to discharge the mortgage debt, a receiver will ordinarily be appointed and the rents conserved to make further secure the indebtedness. Such a clause creates no obligation on the courts to appoint a receiver, but its jurisdiction depends upon the provisions of the statute.

Ellis A. Robinson and Quincy J. Jones, for plaintiffs in error.
Mason, Honnold, Carter & Harper and Walter L. Barnes, for defendants in error.

BRANSON, V. C. J.

¶1 On the 20th day of November, 1925, the Real Estate Mortgage Trust Company, a corporation, trustee, and Oliver D. Schnaare, as plaintiff, sued the plaintiffs in error, Louie Jacobs and Fanie Jacobs and others, for judgment on certain promissory notes aggregating approximately $ 38,000, interest, costs, etc., and to foreclose a mortgage or deed of trust on certain property located in the city of Tulsa which the said plaintiffs held as security for the indebtedness. Attached to the petition was the mortgage or deed of trust which, among its numerous provisions, states:

"It is further agreed that upon the breach or any promise, agreement, covenant, condition, etc., * * * the whole sum secured hereby shall at once and without notice at the option of the second or third party or either of them, become immediately due and payable * * * and immediately upon the filing of the petition for foreclosure the holder thereof shall be entitled to a receiver, to the appointment of which the first party hereby consents, which appointment may be made before or after the decree of foreclosure. * * *"

¶2 On filing the petition, the plaintiffs filed a motion for appointment of receiver, and an order was made by the trial court appointing a receiver in which it is recited:

"Now on this the 3rd day of December, 1925, the same being a regular court day of the present term of court, this cause came on for hearing upon the motion and application of plaintiffs for the appointment of a receiver herein for the property described in plaintiffs' petition. Upon consideration of which motion, it appears to the court that the mortgage sued on in this cause provides for the appointment of a receiver upon the filing of a suit to foreclose said mortgage and that the mortgage contains the provision that immediately upon the filing of a petition for foreclosure, the holder of said mortgage shall be entitled to a receiver to the appointment of which the defendants consent. It is therefore ordered, adjudged, and decreed by the court that plaintiffs' motion for a receiver herein be granted." etc.

¶3 This order appointing a receiver was made without notice. Thereafter, and on December 14th, the defendants, Louie Jacobs and Fannie Jacobs, who are plaintiffs in error here, filed a motion which, omitting the formal parts, recites:

"Comes now the above named defendants, Louie Jacobs and Fannie Jacobs, and moves the court to set aside and vacate the order heretofore made herein, appointing a receiver for the property of the defendants for the reason that said order is not issued according to law; was made without notice and the court had no jurisdiction to appoint a receiver in this cause."

¶4 On hearing this motion, the trial court, after evidence hereinafter summarized was adduced, made a statement:

"This is the question involved, whether or not people can sit down and contract under the statute we have here--under the general statute on receivership--whether the people can sit down and contract and agree in the mortgage for the appointment of a receiver to take possession of the property."

¶5 It appears from this that the stipulation above quoted was the matter primarily considered by the trial court which moved its action in denying the motion to vacate the order appointing a receiver, and the first question presented here is, Did the trial court acquire jurisdiction to appoint a receiver solely by reason of such a stipulation contained in the mortgage? Section 7402, Comp. Stats. 1921, defines a lien as being a charge imposed upon specific property as security for the performance of an act. Section 7411, Comp. Stats. 1921, provides that notwithstanding an agreement to the contrary a lien or a contract, for liens transfers no title to the property subject to the lien. Section 518, Comp. Stats. 1921, on receivers, provides certain condition under which receivers may be appointed. The sixth subdivision of said section is an omnibus clause to the effect that receivers may be appointed in all other cases heretofore authorized by the usages of courts of equity.

¶6 Subdivision 2 of said section provides for appointment of receivers under certain conditions in mortgage foreclosure suits. It says:

"In an action by a mortgagee for the foreclosure of his mortgage and the sale of the mortgaged property, where it appears that the mortgaged property is in danger of being lost, removed, or materially injured, or that the condition of the mortgage has not been preformed and that the property is probably insufficient to discharge the mortgage debt."

¶7 We think that these statutes declare the public policy of the state and define the conditions under which the courts may take charge of property through a receiver. They exclude the exercise of the power of the court to appoint a receiver in cases other than as enumerated in the statutes, except where the matter falls under the sixth subdivision as pointed out above. It will be noted in the second subdivision of the statute that when the mortgagee brings suit for the foreclosure of a mortgage and the mortgaged property is in danger of being lost, removed, or materially injured or that the condition of the mortgage has not been performed and the property is probably insufficient to discharge the mortgage debt, he is entitled to have a receiver appointed. This section cannot be construed to authorize a receiver where a suit is brought and the property primarily liable to discharge the indebtedness is not in danger of being lost, removed, or materially injured, unless it further appears that the property is probably insufficient to discharge the mortgage debt. The court acquires jurisdiction to appoint a receiver only upon showing that the situation is such that failure or refusal to appoint one would probably work an injury to the plaintiff. Parties cannot, by consent, contract or by stipulation confer jurisdiction upon a court not authorized by law. Model Clothing Co. v. First National Bank of Cushing, 61 Okla. 88, 160 P. 450; Hobbs v. German-American Doctors, 14 Okla. 236, 78 P. 356; 34 Enc. Law & Procedure 106. Where the statute authorizing the appointment of a receiver sets forth the conditions under which the jurisdiction of a court can be invoked for that purpose, such conditions must be shown to exist before the court can act, and an agreement of the parties on the subject has no bearing upon the situation, neither is it persuasive upon the court to appoint or refuse to appoint Finch v. Flanagan, 208 A.D. 251, 203 N.Y.S. 560; Hazeltine v. Granger (Mich.) 7 N.W. 74; Couper v. Shirley (C.C.A.) 75 F. 168; Bothman v. Lindstrom, 221 Ill. App. 262; Durband et al. v. Ney et al. (Iowa) 196 Iowa 574, 191 N.W. 385; Aetna Life Ins. Co. v. Broeker (Ind.) 166 Ind. 576, 77 N.E. 1092 and cases therein cited.

¶8 In the above cited case of Durband et al. v. Ney et al., the court said:

"A stipulation in a mortgage for the appointment of a receiver in the event of foreclosure does not enlarge the rights of the mortgagee, since a court of equity may under the statutes appoint a receiver with or without a stipulation, and may refuse to appoint one in a given case even though the mortgage provides for one."

¶9 In the above cited case of Finch v. Flanagan, the court says:

"A receivership in foreclosure is an extraordinary remedy. A receiver is the agent of the court. * * * To justify the appointment of a receiver on the application of the mortgagee it must appear that the mortgaged premises are an inadequate security for the debt and that the parties personally liable for the debt are insolvent."

¶10 In the said case of Couper v. Shirley, the court, after discussing the fact that under statutes similar to ours a mortgage is a mere security for a debt and the mortgagee is not entitled to rents and profits until he gets possession under a decree of foreclosure, stated that a stipulation such as here involved was contrary to public policy and was not binding upon the mortgagor, and although not expressly prohibited by law, yet, like all contracts opposed to the public policy of the state, it cannot be enforced. The court in effect further said the parties to the mortgage have no power to bind the courts independently of any equitable condition which might have been shown to exist by a contract or stipulation made between them. We think that the authorities, when properly considered, are to this effect. But the defendant in error, in the second place, contends that said quoted clause from the mortgage assigning the lease upon the premises as further security for the debt unquestionably authorized the court in appointing a receiver to collect the rents and conserve the same. We think that this position is untenable from the authorities above cited. Under the evidence adduced in this case, which was not disputed, the defendants, or plaintiffs in error here, testified that the mortgage sought to be foreclosed approximated $ 38,000; that the property was of the reasonable value of $ 94,500. Defendant further testified that he was not insolvent; that he was worth, above his debts and liabilities, approximately $ 350,000, and although he owed some outstanding indebtedness, that such did not, in any wise, impair the securities held by the plaintiff. This evidence was undenied.

¶11 In the above cited case of Aetna Life Ins. Co. v. Broeker, the Supreme Court of Indiana, among other things, said:

"The appointment of a receiver is a remedy. It is a part of the procedure of courts of chancery to conserve and enforce equitable rights; but it is not an equity in itself, and parties cannot bargain concerning the exercise of the jurisdiction."