490, 62 S. W. 445; Conaway v. Thomas (1924) 101 Okla. 227, 224 Pac. 965. In Pollard v. American Freehold Land Mortg. Co. (1903) 139 Ala. 183, 35 So. 767, the rule was stated as follows: "The sums it so received are to be taken as measuring its liability to account to the mortgagor for the rental values of the lands for those years, unless such sums were materially less than such values, and it is made to appear that the company's failure to contract for and realize fair rental values was due to wilful misconduct or default, or gross negligence on its part. Some expressions of this court have led to more or less confusion in the interpretation and application of the rule just stated. Thus, in Gresham v. Ware (1885) 79 Ala. 199, it is said: 'On a bill to redeem, a mortgagee in possession will not be held accountable for anything more than rents actually received, unless there has been wilful default or gross negligence, which in such case is the measure of reasonable diligence;' and so, on the former appeal in this case in (1902) 132 Ala. 162, 32 So. 630, it is said that in such case the mortgagee is liable for the rents received, and that 'for loss of rents and profits he is liable to the extent the loss results from his wilful default or gross negligence, which in such case is defined as a failure to use reasonable care and diligence.' The expressions to which we refer are those we have italicized. It appears at a glance that they might well be construed to mean that any want of reasonable care and diligence in the premises, though amounting to simple negligence only,-mere inadvertence, is the equivalent of wilful misconduct or of gross negligence within the intent and purview of this rule. That is not the law, and it is not the idea intended to be conveyed by the language we have quoted. An accurate statement of the doctrine would be this: When a mortgagee holds possession of the mortgaged premises he is chargeable with the fair rental values of the property. The fair rental values, generally speaking, are such as an owner of ordinary prudence could secure by the of exercise reasonable diligence. When the mortgagee leases the premises and reserves and receives rent therefor, prima facie he has acted with reasonable care and diligence, and therefore prima facie he will be charged only with the rent he has so received. All which is to say that, in the absence of proof of wilful default or gross negligence, the rent received by the mortgagee in such case is to be taken as measuring the result of the exercise of due care and diligence, and beyond such result he cannot be charged. To charge him as rental. value a sum in excess of what he has received as rent, upon the ground that an ordinarily prudent and diligent owner would have received such larger sum, would be to charge him upon the same considerations which obtain where the lands have not been rented at all, and to give no operation or effect whatever to the presumption, which the law indulges until it is shown that the sum is less than the rental value, and that his failure to secure such larger amount was due to his gross negligence or wilful default, that the sum received was all that reasonable care and diligence could have secured." The mortgagee's liability for rent for other than that received must rest on "actual negligence." Emil Kiewert Co. v. Juneau (1897) 24 C. C. A. 294, 47 U. S. App. 394, 78 Fed. 708. Illustrations. The fact that the rents received are less than the full rental value of the property does not of itself show negligence. Brown v. South Boston Sav. Bank (1889) 148 Mass. 300, 19 N. E. 382. A mortgagee is not negligent in renting the property to a single tenant instead of a number of croppers, the latter method, while more remunerative, involving considerable expenditure in advances and a large amount of personal supervision. Pollard v. American Freehold Land Mortg. Co. (Ala.) supra. A mortgagee in possession will not be charged with negligence in failing to check more closely the returns of a tenant leasing on shares, merely on conflicting opinion evidence as to what Jught to have been raised. Moshier v. Norton (1881) 100 III. 63. A mortgagee will not be charged with the rental value during a time when the premises were without a tenant, where it appears that the acts of the mortgagor prevented the renting of the property. La Forest v. William L. Blake Co. (1905) 100 Me. 218, 60 Atl. 899, wherein it was said: "The plaintiff was incensed because possession was taken by defendant, and instead of aiding, as he could have done, or even acquiescing in the efforts made to render the mill productive, he pursued a course calculated, if not designed, to prevent any profitable leasing of the premises. Instead of complaining of the defendant in this regard, he has himself to thank for the nonproductiveness of the property." A mortgagee is not responsible for failure to collect rent from the wife of the mortgagor, who did not join in the mortgage, and who was allowed to occupy a house on the premises after the mortgagee took possession. Taft v. Stetson (1875) 117 Mass. 471. In Hays v. Christiansen (1921) 105 Neb. 586, 181 N. W. 379, it was held that a mortgagee in possession was not negligent in failing to rent a building on the premises. It appeared that he received and refused four offers,two from persons who were financially irresponsible, one from a person who demanded very extensive improvements, and the fourth from a person who intended to use it for a purpose which might interfere with the existing use of other parts of the premises, and demanded a five-year lease. A mortgagee in possession of hotel property has been held not to be chargeable with additional profits which might have been made by operating a bar on the premises. Curtiss v. Sheldon (1892) 91 Mich. 390, 51 N. W. 1057. Where the mortgagee lives at a distance and manages the premises through an agent, while the mortgagor lives in the vicinity, the failure of the mortgagor to complain is a strong circumstance to show that there is no negligence in the agent's management. Moshier v. Norton (Ill.) supra. So, in Stevens v. Payne (1891) 42 Ill. App. 202, it was said: "The mortgagor residing near the property, with opportunity of knowing how the farm was rented and managed, should have taken an interest in it, afforded his aid and advice, and communicated any cause of dissatisfaction to the mortgagee. Stevens lived in Vermont and his agent resided in Chicago, distant from the property. During the first three years the land was mostly rented on shares, for one third of the crop, which was the usual share of the landlord. The renting those years was managed by a subagent, living where the property was located, and afterward it was rented by the Chicago agent for cash. There is no evidence that the mortgagor ever took any interest in the renting or management, or ever communicated any suggestion of a better method to Stevens or his agent." Where the mortgagor co-operates with the agent of the mortgagee in renting the property and collecting the rents, and makes no complaint, but on the contrary, receives and indorses the reports made by the agent to the mortgagee, he is estopped to charge the mortgagee with any sum other than that actually received. Emil Kiewert Co. v. Juneau (1897) 24 C. C. A. 294, 47 U. S. App. 394, 78 Fed. 708. In Froud v. Merritt (1896) 99 Iowa, 410, 68 N. W. 728, the mortgagee was held to be responsible for rents lost through the failure of a tenant to pay. Where a mortgagee in possession permits a notoriously insolvent tenant to remain for eighteen months, he is rents chargeable with the which should have been collected. Miller v. Lincoln (1856) 6 Gray (Mass.) 556. A mortgagee in possession has been charged with the full amount of the rent, where he remitted a part on account of misfortune to the tenant, it appearing that the tenant was solvent and that the entire amount could have been collected. Carroll v. Tomlinson (1901) 192 Ill. 398, 85 Am. St. Rep. 344, 61 N. E. 484. In Conaway v. Thomas (1924) 101 Okla. 227, 224 Pac. 965, the court stated the facts and its holding as follows: "It is our opinion that the evidence is sufficient to justify the conclusion that the defendant was guilty of gross neglect in that regard. The defendant testified that he sold the property to a man by the name of Thomas, who remained in possession of the property for several years, and paid no part of the consideration and no rent during that time, and that he regained possession of the property only after he had brought a suit to recover possession thereof, and after much delay in getting the case to trial. The testimony of the plaintiff was to the effect that, while the defendant had charge of the property for the purpose of renting it for her, he sold it to Thomas without her knowledge or consent, and, in view of that testimony, we are of the opinion that he was guilty of gross negligence in the handling of the property which had been intrusted to him by the plaintiff." So, in First Nat. Bank v. Currie (1924) 105 Okla. 175, 232 Pac. 94, the court said: "Here is a bank as mortgagee in possession of real estate of its debtor, and in possession of an assignment of the rents to be collected and applied upon the indebtedness. By writing letters the tenant is induced to account for a sufficient amount of the rents, which, together with other collateral, is sufficient to satisfy the indebtedness, but, by its failure to put forth the effort to collect all the rents due, as a bank ordinarily does in the collection of even small accounts due it, a large portion of the rents due are not collected, but lost to the mortgagor. We think it was a failure to exercise that care and diligence banks ordinarily exercise in their own affairs of slight importance, and constituted gross negligence. The conclusion is irresistible that the bank felt secure, and therefore did not put forth the proper effort to collect the rents, and did not afford plaintiff an opportunity to collect them." Negligent delay in completing a building, whereby a lease was for feited, has been held to subject a mortgagee to liability for the rent thereby lost. National Bank v. United Handin-Hand & Band of Hope Co. (1879) L. R. 4 App. Cas. (Eng.) 391- P. C. Refusal to lease to a responsible tenant has been held to make the mortgagee liable for the rent thereby lost. Anonymous (1682) 1 Vern. 45, 23 Eng. Reprint, 298. Causing loss of rent by attaching unduly restrictive conditions to a lease has been held to be neglect. White v. London Brewery Co. (1889) L. R. 42 Ch. Div. (Eng.) 237 - C. A. In Mills v. Day (1910) 206 Mass. 530, 92 N. E. 803, it was found that "the defendant did not exercise due diligence therein, but was negligent and careless, and, with almost no recompense, permitted the occupancy of the farm by parties of no financial responsibility for long periods, and did not in good faith act as a prudent man in handling the same." The master further found that the defendant's account "was not kept in the regular course of business, but was apparently made up from memory and such records as the defendant could find at the time of the trial." c. Liability for use and occupation. Where a mortgagee occupies the premises personally, and not by a tenant, he is liable for the fair rental value for use and occupation. United States. Dexter v. Arnold (1834) 2 Sumn. 108, Fed. Cas. No. 3,858. Illinois. 82 Ill. App. 17. Dyer v. Brown (1899) Kansas.-Walter v. Calhoun (1913) 88 Kan. 801, 129 Pac. 1176. Kentucky. Bowen v. Boughner (1920) 189 Ky. 107, 224 S. W. 653. Montana. Toole v. Weirick (1909) 39 Mont. 359, 133 Am. St. Rep. 576, 102 Pac. 590. New Jersey. Brown v. Berry (1918) 89 N. J. Eq. 230, 108 Atl. 51. West Virginia. Liskey v. Snyder (1909) 66 W. Va. 149, 66 S. E. 702. "When a mortgagee takes possesssion of the land conveyed to him by the mortgage, he must account to the mortgagor for the 'highest fair rent, and he becomes responsible for all such acts or omissions as would, under the usual leases, constitute claims on an ordinary tenant,' because by his entry and possession he makes himself 'tenant of the land,' and it is but just and reasonable that he should be held liable for its rents and profits to the mortgagor. Morrison V. McLeod (1841) 37 N. C. (2 Ired. Eq.) 108; Hinson v. Smith (1896) 118 N. C. 503, 24 S. E. 541; Gammon v. Johnson (1900) 127 N. C. 53, 37 S. E. 75; Jackson v. Hall (1881) 84 N. C. 489; Green v. Rodman (1909) 150 N. C. 176, 63 S. E. 732." In Walter v. Calhoun (Kan.) supra, it was said: "In the accounting between the parties Calhoun claimed credit for the rental value of the land. Anderson wanted to allow only what he claimed to have received from the sale of the crops. As a matter of law he was chargeable with the reasonable value of the use of the land. While the amount which he actually received as rents would be some evidence of the reasonable value, it is quite obvious that it would not be conclusive against the mortgagor. The mortgagee in possession must account for the rents and profits, and is chargeable with the reasonable value of the use and occupation of the premises." But a brief occupancy for the purpose of completing certain work on the premises in a manner beneficial to the mortgagor will not charge the mortgagee for use and occupation. Kellogg v. Rockwell (1849) 19 Conn. 446. Where the mortgagee occupied the property for the purpose of preventing deterioration and in an effort to sell it, collected no rents, and was not guilty of neglect in failing to do so, it was held that this possession was beneficial to the mortgagor, and that he should not be charged for use and occupation. Young v. Omohundro (1888) 69 Md. 424, 16 Atl. 120. A mortgagee who has merely a constructive possession of vacant and unimproved lots is not chargeable for use and occupation. Peugh v. Davis (1885) 113 U. S. 542, 28 L. ed. 1127, 5 Sup. Ct. Rep. 622. If the mortgagee uses the property for agricultural or business purposes, he is to be charged merely the rental value, without regard to the profits made by him or the fact that he makes no profits. Barnett v. Nelson (1880) 54 Iowa, 41, 37 Am. Rep. 183, 6 N. W. 49; Holmes v. Holt (1913) 90 Kan. 774, 136 Pac. 246, affirmed on rehearings in (1914) 92 Kan. 254, 139 Pac. 1030, (1914) 93 Kan. 7, 142 Pac. 369; Sanders v. Wilson (1861) 34 Vt. 318; Liskey v. Snyder (W. Va.) supra. "When the mortgagee himself occupies, and especially when the premises are a farm in cultivation, upon which labor and expenditures are to be bestowed, to produce annual crops and profits, the mortgagee will be charged with such sums as will be a fair rent for the premises, without regard to what he may, in fact, have realized as profits from the use of it. The rule is founded in sound policy, for the reason that the particular items of expenditure, in labor or otherwise, as well as the profits received, are wholly within the knowledge of the mortgagee, and, if he is not disposed to render a full and honest account, it would be impossible for the mortgagor to show them, or to establish errors in the mortgagee's account." Sanders v. Wilson (1861) 34 Vt. 318. Where the mortgagee of a business takes possession and carries on the business, he is chargeable with the fair rental value of the premises, though his business operations thereon result in a loss to him. Engleman Transp. Co. v. Longwell (1880; C. C.) 48 Fed. 129. If the mortgagee occupies the premises and grows a crop thereon, the crop belongs to him, and he must account for the rental value of the property. Craig v. Burns (1922) 65 Mont. 550, 212 Pac. 856. The rental value of farm property, for the purposes of the rule just stated, was defined in Liskey v. Snyder (1909) 66 W. Va. 149, 66 S. E. 702, as follows: "The true annual rental value of land is not the value of all the farm products which can possibly be realized from its use, when the land is stocked, farmed, and managed with the greatest skill and industry, but it is the price which a prudent and industrious farmer can afford to pay for its use, after taking into consideration the probable amount and the market value of his crops, and the probable injuries thereto resulting from the ordinary changes of climate and season." And see Miller v. Peter (1915) 184 Mich. 142, 150 N. W. 554, wherein the court determined the rental value of a tract of land used for truck farming. But it has been held that where the terms of a mortgage require the mortgagee, on taking possession, to keep a business on the premises in operation, he is chargeable only with the net profits resulting from a reasonably prudent operation of the business, and not with the rental of the premises. Briggs v. Neal (1903) 56 C. C. A. 572, 120 Fed. 224. IV. To whom accountable. The accounting of a mortgagee in possession being in aid of redemption. and attaching de jure to the ownership of the equity of redemption (Gordon v. Lewis (1835) 2 Sumn. 143, Fed. Cas. No. 5,613), a junior lien holder having a right to redeem may compel an accounting by a first mortgagee in possession [Downs v. Hopkins (1880) 65 Ala. 508 (second mortgagee); Hatch v. Falconer (1903) 67 Neb. 249, 93 N. W. 172 (junior mortgagee); Parker v. Child (1874) 25 N. J. Eq. 41 (junior mortgagee); Mallalieu v. Wickham (1886) 42 N. J. Eq. 297, 10 Atl. 880 (subsequent judgment creditor); Bunce v. West (1883) 62 Iowa, 80, 17 N. W. 179 (junior mortgagee); Spurgin v. Adamson (1883) 62 Iowa, 661, 18 N. W. 293 (junior mortgagee)]. And see the reported case (WILLIAMS V. MARMOR, ante, 132). "This right to compel an accounting for rents and profits extends, also, to a junior encumbrancer. He may com pel a senior mortgagee, who has been in possession under his mortgage, to account to the same extent and in the same manner as the mortgagor might compel an accounting. His right to compel such an accounting does not rest upon any obligation of the senior mortgagee to him, for there is no contract between them, but it rests upon the fact that the senior mortgagee is under obligation to the mortgagor to account, and that, by reason of his junior lien he has the right, in equity, to stand in the place of the mortgagor and compel the application of the rents and profits to the satisfaction of the senior mortgage. The junior mortgagee has no right, therefore, to compel an accounting where the mortgagor has no such right, for it is through the mortgagor, and the equity existing between him and the senior mortgagee, that he is enabled to compel an application of the rents and profits to the satisfaction of the senior mortgage." Gaskell v. Viquesney (1889) 122 Ind. 244, 17 Am. St. Rep. 364, 23 N. E. 791 (limiting the case of Murdock v. Ford (1861) 17 Ind. 52, to cases wherein the equity of redemption has not been extinguished). In Moore v. Degraw (1846) 5 N. J. Eq. 346, it was said that a junior mortgagee is entitled to the aid of the court in having rents and profits received by the first mortgagee applied in satisfaction of the first mortgage. Where one tenant in common redeems, the mortgagee is liable to him for the full amount of rents and profits. Whetstone v. McQueen (1902) 137 Ala. 301, 34 So. 229. An assignee of the equity of redemption may compel an accounting. McConnel v. Holobush (1849) 11 III. 61. A mortgagee in possession is not accountable for rents and profits to the holder of a vendor's lien junior to the mortgage, there being no privity of contract. Sollie v. Outlaw (1921) 206 Ala. 332, 89 So. 561. A first mortgagee who takes possession under a conveyance from the mortgagor is not bound to account to the junior mortgagee. See supra, II. d. |