Statement of the Case.

stating that he held the proceeds of the draft for $1800, less certain sums deducted therefrom, and, also, the draft for $3475, subject to the order of the court.

John W. Thompson filed a petition praying leave to intervene for the protection of his interests. This petition was afterwards withdrawn, and he instituted an original suitthe second of the above named causes-against Bradley, Shepherd, the Trust Company, the trustees in Shepherd's deed of November 15, 1876, William Thompson, the trustee in the deed of March 10, 1873, and Nathaniel Wilson. From the pleadings and evidence in that suit it appears that Thompson holds Shepherd's two notes of $7000 and $8000, on which, at the time he sued, there was due a balance of $11,677.28, with interest at the rate of 8 per cent per annum on $8000 thereof from March 10, 1875, and on $3677.28 from June 22, 1875. These notes constituted the indebtedness referred to in the deed of trust to William Thompson, to secure the payment of which, Bradley and Shepherd, with the consent of the latter's trustees, executed the writing of June 21, 1877. Thompson's suit was consolidated with the one brought by Shepherd.

On the 18th of January, 1880, the restraining order made August 2, 1877, in Shepherd's suit, was set aside; and, on the 28th of February, 1880, the property having in the meantime been sold under Bradley's deed and purchased by the Commissioners of the Trust Company- leaving due on Bradley's notes more than $11,000-the receiver was directed to deliver possession to the Commissioners, who were authorized to apply for, collect, and receive the rents, issues and profits of the property thereafter falling due.

The amount of rent collected by the receiver, less his commission, was $787.50. The amount in the hands of Wilson, including the draft for $3475, was $4675.

The final decree was of the character indicated in the beginning of the opinion. In respect to the draft for $3475, the decree required Bradley, Shepherd, Taylor, Bacon and Cross to indorse the same, and directed its collection by Wilson, and the payment by him to Thompson of the proceeds, together

Opinion of the Court.

with the balance in his hands of the $1800 draft. It was further ordered that the $787.50 in the hands of the receiver be paid to the trustees of Shepherd.

Mr. William H. Mattingly for Shepherd. Mr. A. C. Bradley was with him on the brief.

Mr. Enoch Totten for the Freedman's Savings and Trust Company.

Mr. H. H. Wells and Mr. Martin F. Morris for Thompson.

MR. JUSTICE HARLAN, after stating the case, delivered the opinion of the court.

What rights did the Trust Company acquire, under Bradley's deed, in respect to the income or rents of the mortgaged property, accruing after the execution of that instrument? This is the principal question presented for our consideration, and will be first examined.

In Gillman v. Ill. & Miss. Tel. Co., 91 U. S. 603, 616, the question was as to the disposition of certain earnings of a railroad, accruing after a decree of foreclosure and sale, and before the purchaser at the sale was let into possession. The first, in point of time, of the mortgages conveying the property to secure the company's bonds, provided, among other things, that it might remain in possession and operate the road, enjoying the revenues thereof, until default occurred in paying the interest or the principal of its bonds at maturity; and if such default continued six months, or if the company failed to set apart, deposit, and apply certain moneys, as required by the mortgage, then the trustees might, and it should be their duty, to enter upon and take possession of and, by agents, operate the mortgaged property. The second mortgage contained substantially the same provisions. After the decree of foreclosure and sale was passed, a judgment creditor of the company, proceeding under the local law, garnished, in the hands of the company's agents at its various stations, moneys received by them from the operation of the road, the company

Opinion of the Court.

having been permitted to remain in possession up to the time of the sale under the decree. The trustees in the mortgage claimed that these moneys should be applied in payment of the balance remaining unpaid on their mortgage bonds. This claim was denied. The court-following the previous case of Galveston Railroad v. Cowdrey, 11 Wall. 459-said: "It would have been competent for the court in limine, upon a proper showing, to appoint a receiver and clothe him with the duty of taking charge of the road and receiving its earnings, within such limit of time as it might see fit to prescribe. It might have done the same thing subsequently, during the progress of the suit. When the final decree was made, a receiver might have been appointed, and required to receive all the income and earnings until the sale was made and confirmed, and possession delivered over to the vendee. Nothing of this kind was done. There was simply a decree of sale. The decree was wholly silent as to the possession and earnings in the meantime. It follows that neither, during that period, was in any wise affected by the action of the court." Again: "It is clearly implied in these mortgages that the railroad company should hold possession and receive the earnings until the mortgagees should take possession, or the proper judicial authority should interpose. Possession draws after it the right to receive and apply the income. Without this the road could not be operated, and no profit could be made.

If the mortgagees were not satisfied, they had the remedy in their own hands, and could, at any moment, invoke the aid of the law, or interpose themselves without it. They did neither.”

In American Bridge Co. v. Heidlebach, 94 U. S. 798, 800, the mortgage included the rents, issues and profits of the mortgaged property, so far as it was necessary to keep it in repair, and pledged such rents, issues and profits to the payment of the interest on the mortgage bonds as it matured, and to the creation of a sinking fund for the redemption and payment of the principal. In the event of a continuous default for six months in meeting the interest, the trustees, upon the written request of the holders of one-half of the outstanding bonds, were authorized to take possession of the mortgaged

Opinion of the Court.

premises, and receive all rents and claims due and to become due to the company. In a contest between the trustees and a judgment creditor, as to which was entitled to certain moneys in the hands of the mortgagor, the decision was in favor of the creditor, the court saying: "In this case, upon the default which occurred, the mortgagees had the option to take personal possession of the mortgaged premises, or to file a bill, have a receiver appointed, and possession delivered to him. In either case, the income would thereafter have been theirs. Until one or the other was done, the mortgagor, as Lord Mansfield said in Chinnery v. Black, 3 Doug. 390, was 'owner to all the world, and entitled to all the profit made.""

In Kountze v. Omaha Hotel Co., 107 U. S. 378, 392, it was held that a bond given on appeal with supersedeas, from a final decree of foreclosure and sale, did not cover rents and profits, or the use and detention of the property, pending the appeal. The court said that "in the case of a mortgage, the land is in the nature of a pledge; and it is only the land itself the specific thing—which is pledged. The rents and profits are not pledged; they belong to the tenant in possession, whether the mortgagor or a third person claiming under him. The taking of the rents and profits prior to the sale does not injure the mortgagee, for the simple reason that they do not belong to him. But perception of rents and profits is the mortgagor's right until a final determination of the right to sell, and a sale made accordingly."

It is, of course, competent for the parties to provide, in the mortgage, for the payment of rents and profits to the mortga gee, while the mortgagor remains in possession. But when the mortgage contains no such provision, and even where the income is expressly pledged as security for the mortgage debt, with the right in the mortgagee to take possession upon the failure of the mortgagor to perform the conditions of the mortgage, the general rule is that the mortgagee is not entitled to the rents and profits of the mortgaged premises until he takes actual possession, or until possession is taken, in his behalf, by a receiver, Teal v. Walker, 111 U. S. 242; Grant v. Phoenix Life Ins. Co., 121 U. S. 105, 117; or until, in proper

Opinion of the Court.

form, he demands and is refused possession. Dow v. Memphis Railroad Co., 124 U. S. 652, 654. See also Sage v. Memphis and Little Rock Railroad Co., 125 U. S. 361.

The principles announced in these cases are decisive against the claim of the Trust Company to the rents of the property represented by the two drafts delivered by the United States to Wilson. Bradley's deed pledged the property, not the rents accruing therefrom, as security for the payment of his notes. It is true, it provides, generally, that the mortgagor may remain in possession and receive rents and profits, until there is default upon his part. But the only effect of that provision was to open the way to compel him to submit to a sale and thereby lose possession. The deed did not give the mortgagee or the trustees the right, immediately upon such default, to take possession and appropriate the rents of the property. It only gave the trustees authority, when such default occurred, to sell upon short notice, and, in that way, oust the mortgagor, and suspend his right to further appropriate the income of the property. Even if the deed had expressly pledged the income as security for the debts named, the mortgagor, according to the doctrines of the cases cited, would have been entitled to the income, until, at least, possession was demanded under the deed; or until his possession was disturbed by a sale under the deed of trust or, in advance of a sale, by having a receiver appointed for the benefit of the mortgagee. As was said in Kountze v. Omaha Hotel Co., 107 U. S. 395, "courts of equity always have the power where the debtor is insolvent, and the mortgaged property is an insufficient security for the debt, and there is good cause to believe that it will be wasted or deteriorated in the hands of the mortgagor, as by cutting of timber, suffering dilapidation, etc., to take charge of the property, by means of a receiver, and preserve not only the corpus, but the rents and profits, for the satisfaction of the debt. When justice requires this course to be pursued, and it is resorted to by the mortgagee, it will give him ample protection."

In the present case, it appears that prior to the time fixed for the sale under Bradley's deed of trust, and before the Trust Company filed its cross-bill asking, among other things, for a