Matthews v. Memphis and Charleston Railroad Company/Opinion of the Court

The contention of the appellant is that, having obtained a decree for the value of the hotel and improvements built by John W. Scruggs upon the lands of the railroad company, with damages for the appeal, and interest, to be paid upon the surrender by her of the hotel and improvements to the railroad company, she was entitled to the payment of her decree, with interest, and as long as the railroad company failed to pay the decree, was not chargeable with the rents or the value of the occupancy of the premises while she retained possession. We cannot assent to this claim. It appears, from the agreement to submit to arbitrators, that both parties-the railroad company on the one hand, and John W. Scruggs and Narcissa, his wife, to whom he had conveyed his leasehold and improvements, on the other-had agreed that the property should be surrendered to the railroad company, and that, in pursuance of the original contract between John W. Scruggs and the railroad company, the latter was to pay the value of the improvements. It was mainly to fix the value of these improvements that the reference to arbitrators was made, and it was agreed that on the payment of the sum so fixed Scruggs and his wife should surrender the property to the railroad company, and the amount so fixed should 'be a lien on said property.' The arbitrators decided that on the payment of the sum awarded by them, Mrs. Scruggs should deliver the possession of the hotel to the railroad company. In her bill filed to enforce this award, Mrs. Scruggs prays that the railroad company may be compelled to pay the award, and that 'her lien for the same on said property may be enforced.' The court in which her bill was filed made a decree to the effect that Mrs. Scruggs had a lien on the property for the amount of said award, with interest thereon from January 21, 1871, ordered its payment within 30 days, and in default of payment directed that the property should be sold and the proceeds applied to the payment of the amount due on the award. This decree was in all respects affirmed by the supreme court of Mississippi.

We think that upon these facts Mrs. Scruggs must in equity be treated as if she was a mortgagee in possession. All the parties and the chancery and supreme courts have treated the sum awarded Mrs. Scruggs as a lien upon the property, and it was decreed, and no one disputed, that she was entitled to retain possession until her lien was discharged.

Treating her as a mortgagee in possession, she is accountable for the net rents and profits of the estate. If her possession was by tenant, she is accountable for such net rents and profits as she could with reasonable diligence have received. Moore v. De Graw, 1 Halst. Ch. 348; Benham v. Rowe, 2 Cal. 387; Kellogg v. Rockwell, 19 Conn. 446; Harrison v. Wyse, 24 Conn. 1; Reitenbaugh v. Ludwick, 31 Pa. St. 131; Breckenridge v. Brook, 2 A. K. Marsh. 335; Tharp v. Fitz, 6 B. Mon. 6; Anthony v. Rogers, 20 Mo. 281.

There is no equity in the contention of Mrs. Scruggs that she should receive interest on the debt secured by her lien, and not account for the rents and profits of the property on which her lien rested while it was in her possession.

She says that the railroad company might have had immediate possession by paying the amount of the award. So any mortgagee in possession might say that the mortgagor could take possession on paying off the mortage debt; but this does not excuse the mortgagee from accounting for the rents and profits of the mortgaged property received by him.

It appears that the railroad company had ground for refusing to pay the sum awarded by the arbitrators as the value of the property. The only question submitted to the arbitrators was the true construction of the contract between John W. Scruggs and the railroad company, and the value of the property, or rather, as the arbitrators understood it, the value of the improvements placed by John W. Scruggs on the land of the railroad company. They were not authorized to adjust and settle the accounts between the railroad company and Scruggs. When, therefore, Mrs. Scruggs filed her bill to enforce the award, it was admitted by her counsel that the matter of the ground rent was not included in the award, and that the same ought to be deducted from the amount awarded by the arbitrators, and that she should be permitted to set off as against such rents any amount due by the railroad company for board of employes, the said amount to be adjusted by reference to the master of the court.

The award did not, therefore, settle the controversy between the parties. The railroad company was justified in refusing to pay the award until the deductions therefrom, to which it was admitted that it was entitled, should be ascertained, and in defending the suit brought by Mrs. Scruggs to enforce the payment of the entire award. While this litigation was pending, the rents and profits actually received in cash by her were $10,514, and she herself occupied the premises in person for two years.

The court below found that there was due the railroad company, by reason of rents incurred by Mrs. Scruggs and the occupancy of the premises by her, the sum of $17,414.50. The testimony in the record fully sustains this finding. As Mrs. Scruggs insisted that she should have interest on the amount decreed her by the chancery and supreme courts of Mississippi, she was not entitled also to claim the rents of the premises.

The case, therefore, stands thus: The railroad company was indebted to Mrs. Scruggs in the sum of $31,666, which was a lien upon the premises, and Mrs. Scruggs was in possession. On the other hand, the amount of the decree and interest, it was admitted, were subject to be reduced by the ground rents due to the railroad company. Mrs. Scruggs, who was shown to be insolvent, was proceeding to collect by execution the full amount of her decree, with interest; the railroad company was compelled, in order to protect itself from loss, to file the bill in this case to have the decree credited with the amount due for the ground rents. While this litigation was pending, Mrs. Scruggs received in cash rents to the amount of $10,514, and occupied the premises herself two years. She was clearly liable to account for the rents received by her, and for a reasonable rental while the premises were actually occupied by her. The court below did not charge her with a dollar for which she was not accountable. So far, therefore, as the decree relates to the controversy between her and the railroad company, it is a just and proper decree.

It remains to consider that part of the decree by which the debt claimed by J. H. Viser was ordered to be paid out of the money due from the railroad company on the decree in favor of Mrs. Scruggs. After the bill of interpleader, filed by the railroad company, Viser filed his cross-bill against the company and Mrs. Scruggs, in which he alleged that on May 11, 1869, John W. Scruggs and Narcissa, his wife, executed to him a mortgage upon the leasehold and improvements thereon, known as the Scruggs House, of which said Narcissa was then the owner, to secure a note dated the same day as the mortgage, made by them for the payment to him of $5,000, 12 months after date, and prayed that the railroad company might be compelled to pay to him, out of the moneys due from it to Mrs. Scruggs, the amount due him on said note and mortgage. This relief was resisted by Mrs. Scruggs on the ground that at the date of the note and mortgage she was a feme covert, and incompetent, under the law of Mississippi, to incumber her property for her own or her husband's debts. In the suit which Mrs. Scruggs brought in the chancery court of Alcorn county to enforce the award of the arbitrators, Viser, who had been made a party defendant, had filed his answer and cross-bill, setting up said note and insisting that the mortgage given to secure it was a lien on said property. Upon appeal to the supreme court of Mississippi, that court decided that the mortgage was a good lien on the income of the property covered thereby. Viser v. Scruggs, 49 Miss. 705.

The property covered by the mortgage was represented by the decree rendered in favor of Mrs. Scruggs against the railroad company for $31,666. The income of the decree represented by the interest was, as appears by the report of the master, ample to pay the demand of Viser.

There was no application of the income until the court made the final decree in this case. There were then two funds, the principal and the interest of the decree. Viser had a lien on the interest, and the demand of the railroad company was payable out of either principal or interest. Following, therefore, the practice of courts of equity in marshaling securities, (Aldrich v. Cooper, 8 Ves. 394,) the court directed the payment of Viser's lien out of the interest. In doing this no injustice was suffered by Mrs. Scruggs. The method adopted for calculating the amount due on the decree was according to the established rules in such cases. The debt due Viser was clearly proven. It was payable out of a fund which in effect was in possession of the court, and the court was right in ordering it to be paid. It is contended for Mrs. Scruggs that the debt of Viser could only be satisfied by laying hold of the corpus of the property by a receiver, and through him collecting the income and applying it. But in this case there was no necessity for a receiver, for the property and its income were virtually in the hands of the court. The appointment of a receiver was. under the circumstances of the case, unnecessary and impracticable. The property was a decree of court, of which a receiver could not take possession. Complaint is made by appellants because the decree of the circuit court for the payment of Viser's demand was rendered, not only against Mrs. Scruggs, but against the sureties on the refunding bond given by her. It is said that the bond was payable to the railroad company, and the court was not justified in rendering a decree in favor of Viser against the sureties. The bond took the place of $10,000 which was virtually in possession of the court to do with as justice and equity might require. The court disposed of the sum payable on the bond as if it had been so much money in the registry of the court. It is true, the bond was payable to the railroad company. But the amount decreed to be paid to Viser was deducted from the sum due the railroad company on the refunding bond, and the appellants have no ground of complaint.

We are of opinion that the decree of the circuit court was in all respects right, and it must therefore be affirmed.

FIELD and MATTHEWS, JJ., did not sit in this case, and took no part in its decision.