Newport & Cincinnati Bridge Co. v. Douglass, trustee, &c. road company, the trustee, and the purchaser of the bonds. The trustee acts for the railroad company, and for the benefit of the bondholders also. Not deriving any benefit from the mortgage, nor from the purchase of the bonds, he has the right to decline to act until provision is made for compensation for his services and expenses incurred, including reasonable compensation to his counsel, out of the trust-estate. Tenth. As to appellant Cochran, the successor of Lees. 1. Conceding that the mortgages to Green and Douglass are plain mortgages of the corpus of the property, and that there is no express pledge in them of the earnings of the railroad before or after the default, yet, by the appointment of the receiver, the possession of the mortgagor was divested in favor of the mortgagee; and no contract of such mortgagor amounting to an assignment of earnings can have the effect thereafter that is, a mortgagor, after the execution of a mortgage, has no control over the rents or earnings except for such time as he rightfully remains in possession. The right of disposition ceases on the mortgagees taking possession or having a receiver appointed. (The Syracuse Bank v. Tallman, 31 Barb. —; Howell v. Ripley, 10 Paige, 43; Astor v. Turner, 11 Paige, 337; Lofsky v. Mauger, 3 Sandford, 69; New York Life Ins. Co. v. Glass, 50 How. Pr. 88; Finch's adm'r v. Houghton, 19 Wisconsin, 170.) So also a receiver may be appointed over a tenant of the mortgagor (Keep v. R. R. Co., 6 Chicago Legal News, 101), and that too even where he has paid rent in advance. (Henshaw v. Wells, 9 Humphrey, Tenn. 568.) The Civil Code gives the mortgagee the right to his receiver. (Sec. 229; Huston, Johnson, &c. v. Stone, MS. Opinion, 1876, and Douglass, &c. v. Cline, &c., 12 Bush, 608.) The appointment of a receiver by an equitable mortgagee is an equitable ejectment. Douglass, &c. v. Cline, &c., 12 Bush, 608; Hill v. Robertson, 24 Miss. 375.) A mortgage including tolls amounts to nothing as to such tolls until possession taken, or, at least, demand made. (Galveston R. R. Co. v. Cowdrey, 11 Wallace.) CHIEF JUSTICE LINDSAY DELIVERED THE OPINION OF THE COURT. Prior to the year 1866 the Lexington & Frankfort Railroad Company had encumbered its property by a conveyance in the nature of a mortgage executed and delivered to Harrison & Hawkins. Of this mortgage indebtedness there remains unpaid $25,000, which has been due since July 1st, 1874. Prior to the same year the Louisville & Frankfort Railroad Company had encumbered its property by a mortgage to secure Newport & Cincinnati Bridge Co. v. Douglass, trustee, &c. the payment of the principal and interest of certain municipal bonds loaned it by the city of Louisville. One hundred of these bonds, aggregating $100,000, remain unpaid, and will mature on the 1st day of January, 1881. Said company had also encumbered its property by a subsequent mortgage to Guthrie and others, and of the indebtedness incurred under this mortgage there remains unpaid $35,000, which will mature July 1, 1878. Pursuant to a legislative grant these two companies undertook to build, and did build, from Lagrange, in Oldham County, to Newport, in Campbell County, a branch railroad, and under the same authority jointly executed and delivered to Norvin Green a deed of trust bearing date January 1, 1867, conveying their joint roads and all their rights of property and franchises, including their right to construct this branch road, and also said road when constructed, to secure the payment of a joint bonded indebtedness then about to be contracted of $3,000,000. Said companies were afterward consolidated under the name of the Louisville, Cincinnati & Lexington Railroad Company, and in April, 1870, this company mortgaged all its property to George L. Douglass to secure the payment of a bonded indebtedness of $1,000,000 which it then proposed to create. And on the 1st day of April, 1873, said company mortgaged all its property, real and personal, together with its rights, privileges, and franchises, present and future, "and also all the tolls, income, rents, issues, and profits, and alienable franchises of the party of the first part connected with its railroads, or relating thereto, including its rights and franchises as a corporation which may have been consolidated into the said Louisville, Cincinnati & Lexington Railroad Company, including all the rights and franchises of such several railroad corporations." Only a small number of bonds were sold under this mortgage. The three deeds to Green, Douglass, and Lees each contained Newport & Cincinnati Bridge Co. v. Douglass, trustee, &c. the stipulation that in case of default in the payment of interest on the bonded debt for a specified time the bondholders might elect to treat the principal as due and payable, and the trustee might take possession of and operate the company's roads and receive the tolls, incomes, and earnings. Default was made, and all the necessary preliminary steps having been taken, Douglass, the trustee named in the mortgage bearing date April 1, 1870, instituted his action in the Louisville Chancery Court on the 25th day of July, 1874, and sought to have the mortgaged property sold, and in the meantime to have the roads, rolling stock, etc., placed in the hands of a receiver and operated for the benefit of the mortgage creditors. He made the representatives of the creditors secured by each of the senior mortgages defendants to his action. Green made his answer a cross-petition, and joined with Douglass in his prayer for specific relief. September 21, 1874, the mortgaged property was placed in the hands of a receiver. Pending the preparation of the cause a considerable sum of money accumulated in his hands, and numerous unsecured creditors of the company, having judgments and returns of nulla bona, instituted their actions in the chancery court and sued out and levied orders of attachment on this fund. A large number of persons having claims against the insolvent corporation or its property had themselves made parties to the litigation. The cause was finally heard, and from the judgment of the chancellor, rendered on the 1st day of July, 1876, these appeals are prosecuted. The court preferred the bondholders, secured by the mortgages executed in 1870 and prior to that year, to the attaching creditors in the distribution of the fund in the hands of the receiver, and the complaints of the appellants based on this ruling, will be the first question considered. 1. It was held by the majority of this court in the late case of Douglass, &c. v. Cline, &c. (12 Bush, 608) that the trustees Newport & Cincinnati Bridge Co. v. Douglass, trustee, &c. in the deeds to Green and Douglass did not take the necessary steps to secure to the beneficiaries in those mortgages the earnings, incomes, rents, and profits of the mortgaged property by taking possession of and operating it by themselves, their agents, or special receivers, and for the purposes of these appeals we need not again consider that question. We are further of opinion that the appellees are not entitled to this fund by virtue of the mere fact that they are mortgagees. When, as under the ancient English rule, the mortgagee was deemed the owner of the mortgaged property, the mortgagor having only the right to redeem or perform the condition of the mortgage at an appointed time, it was naturally held that the mortgagee or owner was entitled to the rents, profits, and issues of his own property. This rigid rule has been gradually relaxed through the persistent encroachments of courts of equity until we have at length reached the point at which the real contract entered into between the parties will be carried out according to its true intent and spirit, and this, by treating it as well at law as in equity as a security for the payment of money, or an indemnity against liability incurred by the mortgagee for the benefit or at the instance of the mortgagor, the conveyance to be void when the stipulated condition shall be performed. In this state we have never regarded the mortgagee as the owner of the mortgaged property, and it is doubtful whether at any time a court of equity would for his benefit decree a strict foreclosure and bar the mortgagor's equity of redemption without a sale of the property. (2 B. Mon. 205.) But inasmuch as the deed of mortgage invested the mortgagee with the legal title to the thing pledged, he could recover possession by action at law against the mortgagor after his failure to perform the condition; and hence equity would in many instances interfere to secure for him the rents, profits, and issues of the mortgaged estate, even when he had failed to Newport & Cincinnati Bridge Co. v. Douglass, trustee, &c. enforce his legal right to the possession. But whether he entered at law or secured the rents, profits, and issues by contract or notice to the mortgagor, or his tenants after forfeiture, they were applied to the satisfaction of the mortgage debt, and as soon as that was extinguished the title and right of possession with all its incidents at once reverted to the mortgagor. We thus see that the absolute right to take the rents and profits resulted from and was dependent upon the legal right of the mortgagee to oust the mortgagor from the possession. This legal right was lost with the adoption of the Civil Code of Practice. The mortgagee can not now prevail in an action at law against the mortgagor who is the real owner of the mortgaged property. To an action at law for possession the mortgagor may answer and rely on the fact that he is the owner of the mortgaged premises, and that his title is merely in pledge for a specific purpose, and on his motion the cause will be transferred to the equity side of the docket, where the security of the complainant can and will be made available for all the purposes of his lien, and the defendant at the same time be protected against the unnecessary hardships which frequently resulted from the old rule of treating the mere lienholder as the owner of the estate. Having no longer the absolute right to possession, the mortgagee does not now have the absolute right to its incidents the rents, issues, and profits of the thing mortgaged. He may secure these incidents by express contract, but if he fails to do this he must reach them through a proceeding in equity; and the Civil Code of Practice, which so far impaired his remedy at law, gives him in lieu thereof the right, through a receiver in equity, in a proper state of case to have them intercepted and held for his security. Section 329, Civil Code, provides that "in an action by a mortgagee for the foreclosure of his mortgage and sale of the VOL. XII.-46 |