Wil

fendant in error, Marmor, was made a party defendant as one claiming to own the equity of redemption secured to him by sheriff's deed arising out of a sale to Marmor as judgment creditor. Williams, the mortgagor under plaintiff in error's mortgage, claimed to own the equity of redemption. The circuit court found, however, that Marmor was owner of the equity of redemption. Williams appealed to this court from that part of the decree holding Marmor to be the owner of the equity of redemption in the property, and on that appeal this court affirmed the decree in that respect. Williams v. Williston, 315 Ill. 178, 146 N. E. 143. Marmor contended in the circuit court that he was entitled to have certain rents collected by Williams, amounting, after the payment of expenses, to $7,955.88, applied on plaintiff in error's mortgage, on the ground that Williams was a mortgagee in possession at the time he collected the rents, and was therefore bound to so apply them for the benefit of Marmor as junior lienor. The circuit court found against this contention, and Marmor appealed to the Appellate Court for the First District, and that court reversed the decree of the circuit court in that regard, holding that Marmor, as a judgment creditor with a lien on the equity of redemption, and later as owner of the equity of redemption, was entitled to have the sum of $7,955.88 credited on the mortgage foreclosed by plaintiff in error. The cause comes here by certiorari.

While the facts of this case were. set out in Williams v. Williston, supra, it is necessary, in order to understand the issue here involved in this somewhat complicated set of circumstances, to again state them.

On May 28, 1914, George J. Williams executed his note for $40,000, payable in five years to his own order, and indorsed by him, and to secure the payment of this note executed, with his wife, a trust deed of the premises to Charles S. Williston, as trustee. This note and trust

deed came into the hands of plaintiff in error as collateral for an indebtedness which at the time of the foreclosure amounted to $45,000 with interest. In September, 1914, George J. Williams and his wife conveyed the premises, subject to this trust deed, to Leo Marion, and took back notes amounting to $8,500, the payment of which was secured by a trust deed as second mortgage on the property. Marion subsequently sold the premises, and the same by mesne conveyances later were conveyed to Samuel Meyerowitz subject to the two incumbrances. By reason of default in payment of the notes secured by the second mortgage, Williams on October 28, 1918, filed a bill to foreclose the same, and plaintiff in error was appointed receiver, took possession of the property, and collected the rents until September 28, 1920. On August 6, 1920, a decree of foreclosure and for sale was entered on the second incumbrance for the sum of $11,034.50, and on sale on September 3 following, Williams purchased the equity of redemption for $10,000 and took a deficiency decree for the balance. Between September 28, 1920, and December 20, 1921, Williams was in possession and collected rents on the premises, the net amount of which is, as we have seen, $7,955.88. Thereafter, by agreement entered into by plaintiff in error as mortgagee of the first lien, Meyerowitz, the owner of the equity of redemption, and Williams, the latter was to remain in possession and collect rents, and certain money was paid to Meyerowitz, who executed a quitclaim deed to Williams, which he placed in escrow. The agreement stated that it was made for the purpose of settling all differences and relieving the property of incumbrances. By its terms Meyerowitz had until the 1st of May, 1921, to pay certain specified amounts and execute a first mortgage on the property for $35,000 and to take the property cleared of any other incumbrance. The contract also provided that, in case

he did not exercise that option by the 1st of May, the quitclaim deed was to be delivered to Williams, and Meyerowitz's interest therein extinguished. Meyerowitz did not exercise his option, and the quitclaim deed to the equity of redemption was delivered to Williams, who had it recorded on June 6, 1921. On September 26, 1921, which was after the twelve months in which the owner of the equity of redemption might redeem from the sale of the property under the second mortgage, defendant in error, Marmor, obtained a judgment by confession against Marion, the mortgagor in the mortgage which had been foreclosed. On October 25, 1921, Marmor redeemed by placing in the sheriff's hands the amount necessary to make redemption from the master's sale of September 3, 1920. Williams on that day surrendered his certificate of sale to the sheriff and took down the redemption money. Thereafter, no further redemption being made, on December 30, 1921, a sheriff's deed was delivered to Marmor. When Marmor on September 26, 1921, secured a judgment against Marion, Williams was in possession of the property collecting the rents and had title to the equity of redemption by a deed from Meyerowitz, made in pursuance of the agreement of December 13, 1920, herein before referred to. He had been in possession collecting the rents since September 28, 1920, and the main question in this case is as to the character of his possession. The Appellate Court held that Williams' possession during the time in which the rents in question accrued was that of a mortgagee, also holding that he was, in fact, the owner of the first mortgage in which he appears as mortgagor, for the reason that he had it up as a pledge, only, with plaintiff in error who filed the bill to foreclose it. The Appellate Court was of the view that, being, in fact, the owner of the first mortgage, Williams was a mortgagee in posses

sion, and liable to account to junior lienholders. It is not contended that a mortgagee of a prior mortgage in possession of the property is not bound to account for the rents and profits, but the contention is that Williams did not have such possession of the property.

Mortgage-duty

for rents.

liability of

It is the rule that, if one takes possession as a mortgagee of a prior mortgage he must account for the of mortgagee rents for the bene- to account fit of junior lienholders, even though he later acquires the equity of redemption by purchase. The character of his possession at the time he enters determines the application of the rule. Strang v. Allen, 44 Ill. 428; 2 Jones, Mortg. 7th ed. § 1118; Harrison v. Wyse, 24 Conn. 1, 63 Am. Dec. 151; Clark v. Paquette, 67 Vt. 681, 32 Atl. 812. In order to charge a mortgagee with rents and profits for the benefit of a junior mortgage it must be shown that such mortgagee occupied the premises as mortgagee. If the mortgagee came into possession under a title derived from the mortgagor, or in any method other than as mortgagee, he is not chargeable with the rents and profits of the mortgaged premises. The reason underlying the rule requiring a mortgagee in possession to account for the rents and profits is that possession is not an incident to the rights of a mortgagee, and when he receives the profits arising from such possession he holds them not for his own benefit but for the benefit of the mortgagor, and must account therefor. A junior mortgagee who by reason of his lien stands in the place of the mort-right of junior gagor may enforce mortgagee to accounting. accounting to the same extent that such accounting might be enforced by the mortgagor. Plain v. Roth, 107 Ill. 588; Gaskell v. Viquesney, 122 Ind. 244, 17 Am. St. Rep. 364, 23 N. E. 791;

an

mortgagee

entering other

wise than as such.

Hart v. Chase, 46 Conn. 207; Van Duyne v. Shann, 41 N. J. Eq. 312, 7 Atl. 429; 2 Jones, Mortg. 7th ed. §

1114.

If George J. Williams had possession and collected the rents by any authority other than as mortgagee in possession he is not required to account for the rents. Rents and profits are the incidents

and profits.

of possession of the -right to rents equity of redemption, and may be collected by the owner thereof until the period of redemption expires. At the time of the foreclosure sale under the second mortgage, on September 3, 1920, Meyerowitz was owner of the equity of redemption and had a right to the rents and profits. Certainly, it could not be said that from the date of the sale under the second mortgage to September 26, 1921, when Marmor secured his judgment against Marion, Marmor occupied the position of a junior lienholder, with the right to enforce such an accounting for rents as the owner of the equity of redemption might have had. He had no claim at all against this property at that time, and was in no wise interested in the rents collected prior to his judgment. Meyerowitz had the equity of redemption, and he is not seeking to have this rent money applied to the plaintiff in error's mortgage. By the agreement of December 13, 1920, referred to, Meyerowitz consented to the possession of the property by George J. Williams and his collection of the rents. Williams went into possession on September 28, 1920, while plaintiff in error was receiver of the property, and appears to have done so by permission of plaintiff in error. By the agreement of every one interested in the property on December 13, 1920, the receivership of plaintiff in error ceased and the possession of Williams was ratified and continued in him. There is nothing in the record that tends to establish that Williams was in possession as mort

gagee after the making of the agreement on December 13, 1920. In fact, that agreement disproves any such possession, and, on the contrary, shows him to be in possession through an agreement with the owner of the equity of redemption. If he became a mortgagee in possession it must have been between September 28, 1920, when he took possession and began the collection of the rents, and December 13, 1920, when the agreement referred to was made. Defendant in error contends, and the Appellate Court held, that Williams went into possession as a mortgagee. The record does not so show. It does show that he

went into posses- -person in sion through the possession not sufferance of plain- mortgagee. tiff in error, who was then receiver.

Since the receiver was the only one entitled to possession Williams had no right to take possession as mortgagee. Meyerowitz did not object to Williams' possession between September 28 and December 13, and it is evident that his possession then was by mutual agreement of the receiver and the owner of the equity of redemption, and not as mortgagee. It would avail nothing to say that he went into possession as mortgagee under the second mortgage, since that mortgage debt, including the deficiency decree, had been fully paid and discharged for some months when Marion borrowed the money for which defendant in error took the judgment which formed the basis of his redemption. We do not understand this to be the contention of defendant in error or the holding of the Appellate Court. As we understand it, defendant in error contends, and the Appellate Court held, that Williams is in fact the owner of the $40,000 mortgage, and was therefore a mortgagee in possession under that mortgage. Certainly, it cannot be said that Williams was both mortgagor and mortgagee of the $40,000 mortgage. Plaintiff in error held the mortgage as a pledge

-pledgee as mortgagee.

for a debt which was by the decree of the circuit court herein shown to be more than the amount of the mortgage. So far as the right to enforce the mortgage by foreclosure is concerned, plaintiff in error was the mortgagee in that mortgage and had full right to foreclose. Anderson v. Olin, 145 Ill. 168, 34 N. E. 55; Loewenthal v. McCormick, 101 Ill. 143; Hosmer v. Campbell, 98 Ill. 572. It is therefore incongruous to say that a mortgagee in possession under the first mortgage had received this large amount of rents which should be applied on his mortgage, when, as a matter of fact, the mortgagor under that mortgage received the rents and the mortgagee received no benefit whatever of the collection of such rents.

We are of the opinion, therefore, that it cannot be said that George J. Williams was in possession as a mortgagee. He was not mortgagee of the prior lien. The junior lien had been discharged and Williams was in possession, first, by sufferance of the receiver and owner of the equity of redemption; second, by agreement with the owner of the equity of redemption; and third, by the quitclaim deed of such owner. In no one of these three capacities did his possession impose upon him the duty to account to any one for the rents other than was specified in the agreement of December 13, 1920. Certainly, possession of Williams

to warrant an order of court requiring plaintiff in error to rebate his mortgage to the extent of such rents, which were not collected or received by him. The Appellate Court therefore erred in reversing the decree of the circuit court.

Defendant in error has assigned cross-errors complaining of the refusal of the Appellate Court to reverse the order of the circuit court concerning the appointment of the Chicago Title & Trust Company as receiver without bond. There was no error in the action of the Appellate and Circuit Courts in this matter. The statute was complied with in the appointment Receivers of the Chicago Title absence of bond & Trust Company as such receiver without bond. Defendant in error was not entitled to have the receiver discharged and the property turned over to him. The Chicago Title & Trust Company was appointed in the place of a receiver previously duly appointed, owing to the request of defendant in error for the appointment of a different receiver.

-validity.

The judgment of the Appellate Court is reversed for errors assigned, and the decree of the Circuit Court is affirmed.

Petition for rehearing denied June 2, 1926.

I. General rule, 139.

II. Nature of mortgagee's possession:

a. In general, 141.

III.-continued.

I. General rule.

This annotation, in discussing the accountability of a mortgagee in possession for rents and profits, takes no account of the varying rules existing in different jurisdictions and at different periods of time as to the right of a mortgagee to possession and as to the extent of the right of redemption. It assumes the taking of possession and the existence of a right of redemption from the mortgage or from a foreclosure sale thereunder, and from that situation considers the duty of the mortgagee to account.

For nearly three centuries it has been the rule, recognized without dissent in England and in all American jurisdictions which have passed on the question, that a mortgagee in possession of the mortgaged premises must, in the event of a redemption, account to the redemptioner for the rents and profits accruing during his occupancy. This rule finds support in every case cited in the course of this annotation, and is so thoroughly established that no effort has been made herein to collate the cases which merely announce it in passing without attempt to apply

it.

The reason underlying the rule is that the mortgage does not entitle the mortgagee to possession, and the profits of the possession are consequently received by him as trustee for the mortgagor. Anglo-California Bank v. Field (1908) 154 Cal. 513, 98 Pac. 267. And see the reported case (WILLIAMS V. MARMOR, ante, 132).

The rule "rests upon the reasonable doctrine that while the mortgagee is the holder of the legal title to the mortgaged premises, he holds such title, nevertheless, subject to the equitable right of the mortgagor to pay the debt and thus destroy or put an end to his legal title; and that the mortgagee is entitled to no more than his debt which the mortgage was intended to secure. Hence it is that, when the mortgagor desires to redeem from a

mortgagee who has been in the possession of the mortgaged premises under his mortgage, he has the right, in a court of equity, to call upon the mortgagee to account for the amount received by way of rents and profits, for the purpose of determining how much, if anything, is required in order to discharge the mortgage debt." Gaskell v. Viquesney (1889) 122 Ind. 244, 17 Am. St. Rep. 364, 23 N. E. 791.

"No doubt can exist touching the obligation of a mortgagee in possession to allow a credit on his mortgage for rents and profits received by him, or, in the absence of rents or profits, to allow a credit for a fair amount as occupation value. The assertion of the duty of the mortgagee to allow that credit, whether the claim be made by a subsequent mortgagee or by the mortgagor, cannot be regarded, in strictness, as either an independent set-off or recoupment. The duty to allow the credit flows from a status of a mortgagee in possession, and is of the same nature as a payment on the mortgage; the claim of right to a credit is merely a matter of ascertainment of the amount due on the mortgage. When a mortgagee is or has been in possession as mortgagee, the ascertainment of the amount of the credit flowing from that possession, though unliquidated, becomes a necessary part of the foreclosure suit; an action at law to establish the claim is not necessary." Doyle v. Di Medio (1926) N. J. Eq., 132 Atl. 854.

The rents and profits attach de jure to the ownership of the equity of redemption. Gordon v. Lewis (1835) 2 Sumn. 143, Fed. Cas. No. 5,613.

And the mortgagee's right is merely to see that they are applied to the debt. Childs v. Hurd (1889) 32 W. Va. 66, 9 S. E. 362.

In Denby v. Mellgrew (1877) 58 Ala. 147, it was said, as a basis of the rule, that when the mortgagee comes into equity to foreclose he must account for rents and profits as a doing