Real Property – Mortgages – Liability of Mortgagee of Lessee’s Term for Rent
Respondent leased a building to South Texas Kitchens, Inc., for a term of five years. The lessee became indebted to petitioner and, being unable to meet this obligation, transferred its business assets and lease to petitioner as security. Petitioner was authorized to manage the business and to apply all proceeds to discharge the indebtedness, the transfer to terminate when the debt was fully paid. Petitioner went into possession of the premises and operated the business for about six months, paying the rent during that period. It then vacated the property and ceased making rental payments. Respondent sued petitioner and the lessee in an action for rent and recovered a judgment against both. On appeal by petitioner only, held, reversed. A mortgage is only a security device and does not vest all of the mortgagor’s title and estate in the mortgagee. A mortgagee in possession of the mortgaged premises is not an assignee of .the lease and thus is not liable on the covenant of rent. Amco Trust, Inc. v. Naylor, (Tex. 1958) 317 S.W. (2d) 47.