[495]

Mr. Enoch Totten, for Trust Company:
The attempted transfer to Shepherd of the
lease, made by Bradley to the United States,
is void.

Section 3737, Rev. Stat.; Wheeler v. U. 8. 5
Ct. Cl. 504; McCord v. U. S. 9 Ct. Cl. 156;
Francis v. U. S. 11 Ct. Cl. 638.

The assignment, dated June 21, 1877, is an
attempted assignment of a claim against the
United States, and is therefore void.

Section 3477, Rev. Stat.; U. S. v. Gillis, 95 U. S. 407 (24:503); Erwin v. U. S. 97 U. S. 392 (24:1065); Spofford v. Kirk, Id. 484 (24:1032).

pointed, in the first of the above-named causes,
receiver of said premises with authority to col-
lect the rents due and to become due for
use and occupation of the same by the United
States.

The final decree awarded the proceeds of the
two drafts to Thompson, appellee in each of
the causes, and the money in the hands of the
receiver to the trustees of Shepherd. Of that
decree both the Freedman's Savings and Trust
Company and Shepherd complain.

This controversy has been greatly tangled by an unusual number of pleadings, affidavits, motions, rules and orders. But the facts, so far as it is necessary to state them, are as fol

Where the rents belong to the mortgagee, as
against the mortgagor in possession, the fact
that a receiver was not appointed is immate-lows:
rial.

Dow v. Memphis & L. R. R. R. Co. 124 U.
S. 653 (ante, 565); Teal v. Walker, 111 U. S.
251 (28:418) Fosdick v. Schall, 99 Ú. S. 251 (25:
342).

The courts of equity in foreclosure suits,
when the security is insufficient, will seize the
rents due and uncollected as well as those to
become due.

Lofsky v. Maujer, 3 Sandf. Ch. 69; Howell
v. Ripley, 10 Paige, 47; Argall v. Pitts, 78 N.
Y. 242; Wyckoff v. Scofield, 98 N. Y. 475.
A new party may be brought in by a cross
bill.

Brandon Mfg. Co. v. Prime, 14 Blatchf. 371.
Shepherd was clearly in contempt in collect-
ing the rents in violation of the order of March
18, 1878. Wilson was too.

Hull v. Thomas, 3 Edw. Ch. 238; Skip v. Harcood, 3 Atk. 564; Wellesley v. Mornington, 11 Beav. 181; High, Inj. § 1435.

Messrs. H. H. Wells and M. F. Morris, for Thompson:

A mortgagor's real estate is not liable for rent while in his possession. Until the mortgagee takes possession, the mortgagor is entitled to all the profits.

American Bridge Co. v. Heidelbach, 94 U. S. 798 (24:144): Galveston, H. & H. R. R. Co. v. Cowdrey, 78 U. S. 11 Wall. 459 (20:199); Gilman v. Illinois & M. Tel. Co. 91 U. S. 603 (23:405); Chinnery v. Blackman, 3 Doug. 391; Kountze v. Omaha Hotel Co. 107 U. S. 378 (27:609); Teal v. Walker, 111 U. S. 242 (28:415).

The assignment to Thompson of the claim against the United States was not void.

U. S. v. Gillis, 95 U. S. 407 (24:503); Erwin v. U. S. 97 U. S. 392 (24:1065); Spofford v. Kirk, Id. 484 (24:1032); Goodman v. Niblack, 102 U. S. 556 (26: 229); Hobbs v. McLean, 117 U. S. 567 (29:940); Bailey v. U. S. 109 U. S. 432 (27: 988).

Mr. Justice Harlan delivered the opinion of the court:

The Freedman's Savings and Trust Company (to be hereafter called the Trust Company) sold and conveyed this property to A. C. Bradley; and for the unpaid purchase money the latter executed his five several notes for $2,400, $2,650, $2,900, $3,150, and $5,900, payable in one, two, three, four and five years from June 9, 1873, with interest at 8 per centum per annum, payable semi-annually.

For the purpose of securing the payment of those notes Bradley, by deed of trust, in the nature of a mortgage, duly recorded on the 18th of June, 1873, conveyed the property to John W. Alvord and George W. Stickney, together with "all the improvements, ways, easements, rights, privileges, appurtenances and hereditaments" appertaining to the same, and "all the estate, right, title, interest and claim whatsoever, either at law or in equity," of the grantor in the premises, in trust to permit Bradley, his heirs or assigns, to use and occupy the premises, and take the rents, issues and profits thereof to their sole use and benefit, "until default be made in the payment of said notes or any of them, or any installment of interest due thereon, or any proper cost, charges, commission, half commission or expense in and about the same;" and upon the further trust, such de- [496] fault having occurred, to sell the property at public auction, after at least twenty days' notice of the time, place, and terms of sale, and convey the same in fee simple to the purchaser.

Prior to the execution of this deed, Bradley, by a formal instrument in writing, to which the Postmaster-General was a party, had leased the premises to the United States, at an annual rent of $4,200, for the term of three years from June 5, 1873, with the privilege to the government of extending the term for two additional years. On the 27th of August, 1874, he conveyed to Alexander R. Shepherd; and, on the 21st of November of the same year, gave written notice to the Postmaster-General of Shepherd's purchase. He also assigned and transferred the lease to the latter, with authority to collect the rent.

It should be stated in this connection that in his purchase Bradley really represented Shepherd, the latter verbally assuming to pay the notes given to the Trust Company.

These consolidated causes involved the con-
flicting claims of the parties: first, to the pro-
ceeds of two drafts, one for $1,800, and the other
for $3,475, issued by the United States Treasury
in payment of the rest of lot four, square three
hundred and seventy seven, with the improve-
ments thereon, in the City of Washington, and On the 15th of November, 1876, Shepherd
made payable to the order of A. C. Bradley, to made a conveyance to George Taylor, Henry
the use of Alexander R. Shepherd, to the use of A. Willard (who was succeeded by Peter F.
George Taylor, Peter F. Bacon, and Samuel Bacon), and Samuel Cross, of a large amount
Cross, trustees; second, to a balance of $787.50 of property, including the premises in controver
in the hands of A. C. Bradley, who was ap-sy, in trust to secure his three notes of $100,000

[497]

[498]

On the 18th of March, 1878, the case was heard on the motion of the Trust Company for a receiver and an injunction, and an order was made enjoining the complainants "from collecting or receiving any moneys or other thing of value from the United States on account of the lease made between the United States and A. C. Bradley, and bearing date June 6, 1873, for the premises involved in this cause.'

each. That conveyance contained a covenant | Ghan and Clark; and that a receiver be ap-
upon the part of Shepherd that all the rents, pointed to collect the rents due from the
profits, issues, and proceeds of the trust proper United States on account of the use and oc-
ty coming to his hands should be applied by cupation of the premises.
him solely to the benefit and advantage of the
creditors whose debts were secured by the deed.
The rent reserved for the year ending June
30, 1876, not having been paid, Shepherd caused
suit to be brought in the court of claims, in the
name of Bradley, against the United States, to
the use of Taylor, Bacon and Cross, trustees.
In that suit judgment was rendered against the
government for only $1,800, and was affirmed
by this court at its October Term, 1878. Brad-
ley v. U.S. 98 U. S. 104 [25: 105]. Pending the
appeal in that case a second suit was brought
for the rent reserved for the years ending June
30, 1877, and June 30, 1878. But the decision
in the first suit rendered the further prosecu-
tion of the second suit unnecessary.

On the 12th of March, 1879, the Trust Company, by petition, asked the appointment of a receiver to take charge of the property and to collect the rents during and after its occupancy by the government, and that Shepherd and his co-complainants be enjoined from receiving from the United States any of said rents.

On the 10th of May, 1879, the cause was heard upon the matters embraced in that petition, and on motion of the Trust Company, and with the consent of the other parties, Bradley was appointed receiver in the cause. He was directed to take charge of the property, and collect the rents therefor, "excepting, however, the rents accrued and to accrue from the 6th day of June, 1878, to the 1st day of July, 1879, which have been or are to be collected and received by the said Alexander R. Shepherd or his assigns." It was further ordered that the parties be enjoined from applying for or receiving any moneys due or to become due

In consideration of the indebtedness describ-
ed in a deed executed by Shepherd, March 10,
1873, to William Thompson, as trustee, Brad-
ley and Shepherd, by writing, dated June 21,
1877, pledged the demand against the United
States for use and occupation of these premises,
as security for the payment of said indebtedness
with interest thereon at the rate of 8 per cent
per annum until paid; and, in the same instru-
ment, "covenanted and agreed that any draft
or check issued in payment or part payment of
said claim shall be indorsed and delivered to
the trustee named in said trust, and the pro-
ceeds thereof, less all proper costs and charges,
be applied to the payment of the said indebted-on
ness, with interest as aforesaid, or to so much
thereof as the sum or sums of money so re-
ceived is or are sufficient to pay." To this
pledge and agreement the trustees named in
Shepherd's deed of the 15th of November, 1876,
gave their written assent.

account of the use and occupation of the premises, save and except the rents for the period just named.

Subsequently, upon the petition of Bradley,
as receiver, Nathaniel Wilson was made a party
to the cause-he having, in his capacity as an
attorney, received the proceeds of the draft for
The premises having been advertised to be $1,800 issued by the United States in discharge
sold on the 3d of August, 1877, under the deed of the judgment for the rent of the premises for
of trust of June 18, 1873, because of default the year ending June 30, 1876, and a draft for
in the payment of interest and principal, Shep-the rent accruing after that date and up to
herd and the trustees in the deed of November
15, 1876, instituted August 2, 1877, a suit in
equity, being the first named of the above
causes, to enjoin the sale. The ground alleged
for the injunction was the pendency of a suit
brought by Mrs. McGhan and Edward Clark, John W. Thompson filed a petition praying
her trustee, Clark v. Freedman's Sav. & Trust leave to intervene for the protection of his in-
Co. 100 U.S. 149 [25: 573], which involved the terests. This petition was afterwards with-
title of the Trust Company to the property drawn, and he instituted an original suit-
conveyed to Bradley, and by the latter to Shep-the second of the above named causes-against
herd. A temporary injunction of the charac-
ter asked was granted. The Trust Company
answered the original bill. It also filed, Octo-
ber 25, 1887, its cross bill against the plaintiffs,
in which, after alleging the insolvency of
Shepherd and Bradley, its fear that the prop-
erty would not sell for enough to pay the debts
secured by the mortgage, and the taxes on it,
and asserting the right of its creditors to have
the rents thereof applied to its claims, in pref-
erence to the debts held by other creditors of
Shepherd, it prayed that Shepherd, Taylor,
Cross, and Bacon be perpetually restrained
from applying for or receiving any rents or sums
of money due from the United States on sc-
count of the use and occupation of the prem-
ises, until the final determination of this cause
and of the equity suit brought by Mrs. Mc-

June 6, 1878. Wilson appeared and answered,
stating that he held the proceeds of the draft [499]
for $1,800, less certain sums deducted there-
from, and also the draft for $3,475, subject to
the order of the court.

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 $7,000 and $8,000, 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 $8,000 thereof from March
10, 1875, and on $3,677.28 from June 22, 1875.
These notes constituted the indebtedness re-
ferred to in the deed of trust to William Thomp-
son, 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.

[500]

[501]

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 mean time been
sold under Bradley's deed and purchased by
the Commissioners of the Trust Company-vendee. Nothing of this kind was done. There
leaving due on Bradley's notes more than
$11,000 the receiver was directed to deliver
possession to the commissioners, who were au-
thorized to apply for, collect, and receive the
rents, issues and profits of the property there-
after 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 $3,475, was $4,675.

the progress of the suit. When the final de-
cree was made, a receiver might have been ap-
pointed, and required to receive all the income
and earnings until the sale was made and con-
firmed, and possession delivered over to the
was simply a decree of sale. The decree
was wholly silent as to the possession and
earnings in the mean time. It follows that
neither, during that period, was in anywise af-
fected by the action of the court." Again: "It
is clearly implied in these mortgages that the
railroad company should hold possession and re-
ceive 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

The final decree was of the character indi-
cated in the beginning of the opinion. In re-
spect to the draft for $3,475, 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 Thomp-moment, invoke the aid of the law, or inter-
son of the proceeds, together with the balance
in his hands of the $1,800 draft. It was fur-
ther ordered that the $787.50 in the hands of
the receiver be paid to the trustees of Shepherd.
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 con-
sideration, and will be first examined.

pose themselves without it. They did neither."
In American Bridge Co. v. Heidelbach, 94 U.
S. 798, 800 [24:144] 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 crea
tion 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 re-
quest of the holders of one half of the out-
standing bonds, were authorized to take pos-
session of the mortgaged premises, and receive
all rents and claims due and to become due to
the company. In a contest between the trus-
tees 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 Mans-
field said in Chinnery v. Blackman, 3 Doug.
391, was 'owner to all the world, and entitled
to all the profit made.""

In Gilman v. Illinois & M. Tel. Co. 91 U. S.
603, 616 [23: 405, 410], 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 pos-
session 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 con-
tinued six months, or if the company failed
to set apart, deposit, and apply certain moneys
as acquired 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 pro-
visions. After the decree of foreclosure and
sale was passed, a judgment creditor of the In Kountze v. Omaha Hotel Co. 107 U. S. 378,
company, proceeding under the local law, gar- 392 [27:609, 615], it was held that a bond given
nished, in the hands of the company's agents on appeal with supersedeas, from a final de-
at its various stations, moneys received by them cree of foreclosure and sale, did not cover rents
from the operation of the road, the company and profits, or the use and detention of the
having been permitted to remain in possession property, pending the appeal. The court said
up to the time of the sale under the decree. that "in the case of a mortgage, the land is in
The trustees in the mortgage claimed that these the nature of a pledge; and it is only the land
moneys should be applied in payment of the itself-the specific thing-which is pledged.
balance remaining unpaid on their mortgage The rents and profits are not pledged; they be-
bonds. This claim was denied. The court-long to the tenant in possession, whether the
following the previous case of Galveston, H. & mortgagor or a third person claiming under
II. R. R. Co. v. Cowdrey, 78 U. S. 11 Wall, 459 him. **The taking of the rents and profits
[20:199]-said: "It would have been compe-
tent 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 describe. It might
have done the same thing subsequently, during

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 de-
termination of the right to sell, and a sale made
accordingly."

It is, of course, competent for the parties to

[502]

[503]

provide in the mortgage, for the payment of | pany, the pledge of such rents by himself and
rents and profits to the mortgagee, even while Shepherd, his assignee, for Thompson's benefit,
the mortgagor remains in possession. But did not violate any right secured to it; for as
when the mortgage contains no such provision, we have shown, until a sale was bad, pursuant
and even where the income is expressly pledged to the deed of trust, and possession taken un-
as security for the mortgage debt, with the der such sale, it had no right, by the terms of
right in the mortgagee to take possession upon the deed, to take the income of the trust prop-
failure of the mortgagor to perform the condi-erty. So that, if a receiver had been appoint-
tions of the mortgage, the general rule is that ed immediately upon the filing, October 25,
the mortgagee is not entitled to the rents and 1877, of the cross bill of the Trust Company,
profits of the mortgaged premises until he and if all the rents represented by the two
takes actual possession, or until possession is drafts of $1,800 and $3,475 had been collected
taken in his behalf, by a receiver; Teal v. by the receiver, they would still, in virtue of
Walker 111 U. S. 1242 [28:415]; Grant v. the assignment of June 21, 1877, by Bradley
Phoenix L. Ins. Co. 121 U. S. 117 [30:909]; or and Shepherd, have belonged to Thompson, as
until, in proper form, he demands and is re-between him and the Trust Company; unless,
fused possession. Dow v. Memphis & L. R. R.
Co. 124 U. S. 652, 654 [31: 565, 566]. See also
Sage v. Memphis & Little Rock R. R. Co. 125
U. S. 361 [31: 694].

as contended, the transfer by Bradley to Shep-
herd of the lease to the United States and their
assignment for the benefit of Thompson, are
absolutely void, for every purpose, and as to
everybody, under the provisions of the statutes
relating to the transfer and assignment of con-
tracts with or claims against the United States.
It is insisted by the Trust Company that the
transfer by Bradley to Shepherd of the lease of
June 6, 1873, was void under section 3737 of
the Revised Statutes, which provides: "No
contract or order, or any interest therein, shall
be transferred by the party to whom such con-
tract or order is given to any other party, and
any such transfer shall cause the annulment
of the contract or order transferred so far as the
United States are concerned. All rights of ac-
tion, however, for any breach of such contract
by the contracting parties are reserved to the
United States."

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 de- This provision was brought forward from an fault occurred, to sell upon short notice and, Act of Congress, approved July 17, 1862, entiin that way, oust the mortgagor, and suspend tled "An Act to Define the Pay and Emoluhis right to further appropriate the income of ments of Certain Officers of the Army, and for the property. Even if the deed had expressly Other Purposes." 12 Stat. at L. 596. In the pledged the income as security for the debts original Act it immediately followed a section named, the mortgagor, according to the doc- providing "that all contracts made for, or ortrines of the cases cited, would have been en- ders given for the purchase of goods or supplies titled to the income, until, at least, possession by any department of the government, shall be [505] was demanded under the deed; or until his promptly reported to Congress by the proper possession was disturbed by a sale under the head of such department, if Congress shall at deed of trust or, in advance of a sale, by hav- the time be in session, and if not in session, ing a receiver appointed for the benefit of the said reports shall be made at the commencemortgagee. As was said in Kountze v. Omaha ment of the next ensuing session." We are of Hotel Co. 107 U. S. 395 [27:616], courts of opinion that, whatever may be the scope and equity always have the power where the debt-effect of section 3737, it does not embrace a or is insolvent, and the mortgaged property is lease of real estate to be used for public puran insufficient security for the debt, and there poses, under which the lessor is not required to is good cause to believe that it will be wasted perform any service for the government, and or deteriorated in the hands of the mortgagor, as has nothing to do, in respect to the lease, exby cutting of timber, suffering dilapidation, cept to receive from time to time the rent etc., to take charge of the property, by means agreed to be paid. The assignment of such a of a receiver, and preserve not only the corpus lease is not within the mischief which Congress but the rents and profits, for the satisfaction of intended to prevent. Although a lease, such as the debt. When justice requires this course to Bradley made, is a "contract," in the broadest be pursued, and it is resorted to by the mort- sense of that word, we are not prepared to hold gagee, it will give him ample protection." that it is of the class of contracts, the transfer of which or of any interest therein is prohibited by section 3737.

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 [504] receiver of the rents of the mortgaged property, Bradley and Shepherd, with the consent of Shepherd's trustees, had pledged the rents of the property as security for Thompson's debts. As Bradley's deed of trust did not pledge the rents as security for his notes to the Trust Com

It is also contended that the assignment made on June 21, 1877, by Bradley and Shepherd is void under section 3477 of the Revised Statutes, which provides that "all transfers and assignments made of any claim upon the United States, or of any part of it or share thereof, or interest therein, whether absolute or conditional, and whatever may be the con