Case ID: ky_64/html/0335-01.html
Source: Caselaw Access Project
Author: {"author": "\n      JUDGE HARDIN \n      JUDGE WILLIAMS", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CASE 83 — PETITION EQUITY
    FEBRUARY 21.
    Sandford vs. Farmers’ Bank, &c.,
    APPEAL PROM KENTON CIRCUIT COURT.
    1, Notwithstanding the mortgagor directed the property (encumbered real estate) to be levied on by the sheriff, and was present at the sale, and made no mention of the encumbrance, he is not estopped from asserting his right of redemption. (Sec. 1, art. 15, chapter 36, 1 Slant. Rev. Stat. 488; Forrest vs. Phillips, ¿'c., 2 Met., 197.)
    2. The purchaser at 'a sheriff’s sale of encumbered real property having paid for the same in depreciated currency, when the property is redeemed must receive his “purchase money” back again in the same kind of currency he paid, or its equivalent at the date of payment, with interest after the rate of ten per centum per annum from date of payment until refunded. (Stapp vs. Phelps, 7 Dana, 301.)
    Stevenson & Myers, For Appellant,
    CITED—
    
      Section 1, art. 15, 1 Slant. Rev. Stat., 327.
    2 Met., 196; Forrest vs. Phillips.
    
    7 Dana, 296, 301; Stapp vs. Phelps.
    
    Carlisle & O’Hara and R. M. Carlisle, For Wade,
    CITED—
    7 Dana, 233 ; Yancy vs. Halladay.
    
    5 J. J. M., 569; Lyne vs. Bit. of Kentucky.
    
    10 B. Mon., 263 ; Beall vs. Barclay.
    
    10 B. Mon., 157; Grace vs. Mercer.
    
    8 B. Mon., 542 ; Tom Davis vs. Tingle.
    
    6 B. Mon., 113; Brothers vs. Porter.
    
    4 J. J. M., 588; Major vs. Deer.
    
   JUDGE HARDIN

delivered the opinion of the majority of the court:

On the 30th day of January, 1857, the appellant, C. B. Sandford, and his wife, and B. W. Foley and wife, executed a mortgage to James G. Arnold of a building and lot on Madison street, in the city of Covington, known as the “Magnolia property,” owned by Sandford and Foley jointly, to secure Arnold in his liability as a co-surety with Foley for Sandford, in a note to the Farmers’ Bank for fourteen thousand dollars.

Afterwards, on the 17th of October, 1865, the sheriff of Kenton county, having in his hands an execution in favor of the bank against Sandford, Foley, and Arnold, for the balance of said debt of four thousand five hundred dollars, with interest from the 17th day of June, 1862, levied the same on one undivided half of said property as belonging to Sandford. Pie also appears to have levied another execution in favor of J. T. Chambers, for about eight hundred dollars, against Sandford and another, in the same manner on the property. And, on the 4th day of November, 1865, the sheriff proceeded to sell Sandford’s undivided half of the property, which was appraised by persons selected for the purpose at ten thousand dollars, and the appellee, W. E. Wade, became the purchaser of ninety-five feet of said lot, fronting on Madison street (the entire lot being one hundred and two feet front upon said street) for six thousand four hundred and eleven dollars and sixty-eight cents, the amount of said two debts and costs.

Sandford brought this suit on the 6th day of December, 1866, charging that Wade had only acquired alien on the property to the extent of his bid, with ten per cent, thereon, and praying to be permitted to redeem the property.

The circuit court having dismissed the petition, Sand-ford has brought the case to this court.

As the sale was not made subject to the mortgage merely, but of Sandford’s interest in the property, sold absolutely, the first and most important question is, whether Sandford is concluded by the sale or estopped from asserting a right of redemption by any act of his. connected with the sale.

It appears, from the testimony of the sheriff, that he made the levy by.the direction of the appellant, and also of Arnold, the mortgagee, and that Sandford told him there was no encumbrance on the property. Both Sand-ford and Arnold were present at the sale; but what they understood or intended should be the effect of the sale upon the right of Sandford to redeem the property, does not fully appear. It is proved that Sandford remarked, at the time, that he intended to redeem the property.; and it does not appear that either he or Arnold made any false representation to Wade, or did' any act calculated to lull him in regard to the existence of the mortgage, which was of record, unless their presence and failure to announce the fact of the encumbrance of the property by the mortgage could be so construed.

By the 1st section of article 15 of chapter 36, Revised Statutes (vol. 1, 488), regulating sales of encumbered prop erty under execution, the right which a purchaser shall acquire under such sales is expressly defined to be “ a lien on such property for the purchase-money, and interest after the rate of ten per centum per annum, from the day of sale until paid, subject to the prior encumbrances.”

In Forrest vs. Phillips, &c. (2 Metcalfe, 197), where Phillips, the defendant in an execution, had, in writing, requested and directed the sheriff to levy the execution “ upon the undivided interest of said Phillips of, in, and to, five hundred acres of land,” and to “ sell the same under said execution,” but without disclosing the fact that it was encumbered by a mortgage of record, this court said:

“Phillips was not bound to notify the sheriff of the existence of the encumbrance, because, as already intimated, the registration of the mortgage, in 1850, had furnished constructive notice of its existence, and it would be going much too far, to say that the failure of Phillips to give to the sheriff additional notice of a fact which he must be presumed to have known at the time the levy was made, must be deemed conclusive or even prima facie evidence of a fraudulent purpose on the part of Phillips.

“ But suppose the latter had been guilty of a positive fraud, by representing to the sheriff that the property surrendered was clear of all encumbrance, what penalty would he have incurred thereby, and what additional rights would such fraud on his part have invested the purchaser with, in view of the provisions of the statute which has been quoted ? The case before us, as presented by the record, does not demand an answer to these questions; but we are by no means prepared to admit that the consequences would be such as are contended for in argument here.”

It can scarcely be pretended that this record presents as strong a case against the appellant for the application of the doctrine of estoppel as that supposed by the questions suggested by the court in the case referred to.

While we recognize the principle, in its fullest extent, that one who willingly induces another to purchase property in ignorance of his title*, or who stands by and knowingly permits another to purchase property to which he sets up title, will be estopped to assert such title after-wards against the purchaser, it seems to us, for obvious reasons, the rule should not be applied in any case in which the facts constituting the estoppel are not satisfactorily established.

Although, according to the sheriff’s recollection, the appellant, at some stage of the transaction, represented the property to him to be unencumbered, and this may have induced him to make the levy on the absolute property instead of the equity of Sandford, as the law required, yet it is by no means certain, according to the sheriff’s testimony, that the appellant’s meaning was not misunderstood by him, and that the latter did not really mean to inform him that the property was not encumbered by other claims than those embraced by the executions. But however this may have been, he does not appear to have made any representation at the sale, or to Wade, calculated to mislead him, and the latter may .as well be presumed to have bid at the sale, with the knowledge of the mortgage which the law presumed him to have, from its registration, as from any inference he may have drawn from the presence and silence of the appellant, especially as the appellant is shown to have labored under the impression himself that the sale being made was of a character which admitted of his right to redeem the property.

An important change in the law in relation to the sale of encumbered property under execution has been effected by the provisions of the Revised Statutes above referred to ; as, under the previous law, the purchaser of property subject to an encumbrance might perfect his title by discharging the encumbrance. A sound and enlightened policy, no doubt, dictated this change as necessary to prevent frauds on the one hand, and the sacrifice of the rights of debtors on the other. But the security thus intended to be given to the rights of defendants in executions would be much impaired if allowed to be defeated by evidence of an estoppel so uncertain and inconclusive as that which is relied upon to sustain the judgment in this case.

Upon the whole, we are of the opinion that Wade, by this purchase, acquired no greater right than a lien on the property for the purchase money paid, and interest at the rate of ten per cent, per annum from the day of sale until paid.

The only remaining question is, whether the currency tendered in court, being such as was paid by Wade on his purchase, is such as he should accept in discharge of his lien on the property, or if it is no,t, whether he is, or was, when the currency was paid in court, entitled to demand the nominal amount of the depreciated paper currency paid by him to be refunded or returned in gold.

It was decided by this court in Stapp vs Phelps (7 Dana, 301), and we see no reason why the principle there laid down is not applicable to this case, that, to preserve and enforce the right of redemption, no formal tender was necessary when the property was claimed absolutely by the vendor, and all right of redemption was resisted. Wade does not, therefore, stand in an attitude to favor his resistance of the right of redemption in a court of equity, on the ground merely that the tender was informal or irregular, and as he paid the purchase price in depreciated currency, it would'seem inequitable and unjust to compel repayment to him of the nominal amount in that which is of greater intrinsic or legal value.

It may be said, however, that, as a majority of this court has, in a late case, decided against the constitutionality of the currency.known as “United States legal tendel’ notes” as a lawful tender in the payment of debts payable in money, according to the laws of this State, and as the statute prescribing the mode of redeeming the property, so far as the purchaser is concerned, provides that it shall be done “ by paying the purchaser his purchase money, with ten per centum per annum interest thereon,” the nominal amount paid by Wade as “purchase money” must be repaid to him in gold and silver; in other words, that the court cannot regard the fact that the payment was not made in gold and silver, but in a depreciated paper currency.

In the case of Stapp vs. Phelps, 7 Dana, supra, where land had been conveyed as security for the nominal sum of one hundred dollars advanced, which was shown to have been advanced in Commonwealth’s paper, a depreciated currency, this court sustained the claim of the grantor to redeem his land upon the payment of the money; but instead of requiring the nominal amount of the debt and interest to be paid in gold and silver, as is insisted upon in this case, it directed “ that a decree may be rendered, requiring the defendant to reconvey the land conveyed to him with costs, upon the complainant’s repaying to the defendant the value of one hundred dollars in Commonwealth's paper, at the date of the deed, with interest thereon.”

We adhere to the opinion heretofore announced by the majority of this court, that the paper currency referred to is not a lawful tender in the payment of debts ; and if it be conceded that the principle is applicable to this case, it may be necessary, on the return of the cause, to ascertain, by reference to a commissioner, the value of the currency paid by Wade when it was paid, with interest thereon, at the rate of ten per centum from the time of its payment.

And although, as the liability to repay the purchase money is one imposed by the statute, and does not arise out of a contract between the parties as an ordinary debt, we doubt the right of Wade to require payment in a currency of greater value than that which he paid for the property. The court below will, on the return of the cause, ascertain the value of the depreciated paper paid by him at the time it was paid as aforesaid, with interest thereon as aforesaid, unless he shall elect to receive payment in the currency known as the legal tender notes of the United States, or that which may be equivalent to it in value; in which case he will be entitled to so receive the sum paid by him, with interest at the rate of ten per cent, per annum, from the time of the payment until the deposit was made of the fund in court, and such legal interest as has accrued thereon since.

But in case no such election shall be made, the court will require the appellant, within a reasonable time, to pay to Wade the valué of the currency paid by him as purchase money as aforesaid, with interest thereon, at the rate of ten per cent, per annum, from the time it was paid by him as aforesaid until paid to him, and permit the appellant to withdraw the fund deposited in court with the interest which may have accrued thereon.

Wherefore, the judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.

JUDGE WILLIAMS

dissenting from the opinion of the majority of THE COURT, DELIVERED THE FOLLOWING OPINION:

Arnold having indorsed for Sandford to the Farmers’ Bank for a large amount, took a mortgage on Sandford’s undivided half interest in the Magnolia House in Covington to indemnify himself against loss.

The bank having obtained a judgment and execution against Sandford and his surety, Arnold, Sandford gave up to the sheriff to be levied on the mortgaged property, which the sheriff caused to be valued, and Wade became the purchaser at execution sale at two thirds or more of the valuation sum.

Sandford then filed his petition to redeem the property from Wade, and tendered into court the sum bid by Wade, with its accumulated interest, in United States legal tender notes.

The court having dismissed his petition, he seeks a reversal. The mortgage to the surety, Arnold, as has often been decided by this and other courts, inured to the benefit of the bank as principal.

Had Sandford given up the property to be levied by written indorsement, and had the bank, with the consent of Arnold, persisted in making the sale, Sandford would have had no right to redeem from Wade, the purchaser, according to the decisions of this court in Mercer vs. Tinsley (14 B. Mon., 274); Moore vs. Simpson (3 Met., 349). But conceding that as the surrender to the sheriff was by parol, Sandford still has the right to redeem, what are Wade’s rights as execution purchaser, and what are Sandford’s responsibilities ?

The mortgagor, Sandford, owed the bank as execution creditor a debt which he could only extinguish by paying its full amount in dollars, regarded by law as money and a legal tender, this being the mortgage debt. When Wade purchased under the execution and extinguished it, he became Sandford’s creditor, and, by subrogation, entitled to all the equities and liens of the mortgage ; and Sand-ford is under precisely the same responsibilities to him as were created by the mortgage, judgment, and execution, and he could acquire no new equity against Wade which he did not possess against the bank; and therefore he can discharge the same debt now held by Wade only in the same legal currency which he could legally have forced the bank to take.

His legal responsibility to Wade grows out of the payment of the execution and mortgage debt to the bank by Wade ; and it matters not to him when, how, or in what manner Wade discharged this debt.

He can no more inquire into whether Wade paid one kind of currency or another, or whether he substituted his own note to the bank, or whether he paid it in cattle, cash, notes, or land, and if in these, whether at a high or low price, than could an obligor in a note inquire at what price and for what consideration an assignee may have purchased the note of the assignor, and avail himself of the benefit of the assignee’s purchase by way of reducing the amount of the note. Wade, by his purchase, paid the debt of Sandford to the bank, and thereby obtained the rights of the bank to the debt, and is entitled to be repaid in just such currency as the law would have required him to pay on the execution. Had Wade paid the bank a house and lot, could Sandford inquire into the real value of these, and reduce his liability thereby ? or could he have required Wade to receive from him a house and lot, either of these would be just as legal and reasonable as to inquire into what kind of currency Wade paid the bank.

The case of Stapp vs. Phelps (7 Dana, 300) has nothing to do with this case. That case was a contest between the mortgagor and mortgagee in equity, and the whole principle is stated by the response of the court as follows: “ It is competent to impeach, by parol proof, any deed, bond, bill, or other instrument, however absolute on its face, given to secure a usurious loan of money.” And it has always been held in this State, that, as between mortgagor and mortgagee, the consideration may be inquired into to ascertain whether a usurious loan was attempted under a denial of consideration or otherwise; and if the real consideration be a loan of depreciated currency, it will be deemed usurious, and its real value only decreed.

But in this case no contest as to the amount or value of the original debt to the bank is or can be raised, because that debt had been adjudicated and an execution thereon levied on the property, and it sold by virtue thereof, and it is now too late for Sandford to impeach it.

It is therefore clear, that as a majority of this court, in Griswold vs. Hepburn (2 Duvall), held that the act of Congress making said treasury notes a legal tender was unconstitutional, and that nothing but gold and silver coin could be made a legal tender or money, that, until that case shall be reversed by the supreme court of the United States, or overruled by a majority of this court, the execution creditor nor the execution purchaser can be compelled to receive anything in discharge of this debt not a legal tender and by law money.

And although I dissented from the opinion of the majority of the court in that case, and believe that said act of Congress is constitutional, and that said treasury notes are a legal tender, and that the supreme court of the United States will so adjudge, and will reverse said case, yet, until this is done, or this court shall overrule said cause, Wade, no. more than any other creditor, can be compelled to receive them. Section 1, article 15, chapter 36, 1 Stanton’s Revised Statutes, 488, provides, that when the defendant in an execution shall have owned the legal title to any real or personal estate, and has created a bona fide encumbrance thereon before an execution has created a lien on the same, the interest of the defendant in such property may be levied on and sold, subject to the encumbrance, and that “ the purchaser at the sale shall acquire a lien on such property for the purchase money, and interest after the rate of ten per centum per annum from the day of sale until paid, subject to the prior encumbrances.” Now it is most manifest that this sale, under the bank’s execution, was not the sale provided in this statute, because it was not an attempt to sell the mortgagor’s interest in the property subject to the mortgage encumbrance, but was a sale of the property to extinguish the mortgage debt.

The reason why Sandford may now redeem is, that the property was not leviable to pay the mortgage debt, as has often been decided by this court; and having done nothing which the law regards as an estoppel, he still has the right to redeem.

The case provided for in the statute is when the execution may legally be levied on the defendant’s interest and sold, subject to the prior encumbrance, not to extinyuish it; and the purchaser holds his lien subject to the prior encumbrance, and not the title, by reason of its extinguishment.

In a purchase under execution, as provided in the statute, the purchaser acquires a legal right thereby, and a legal lien, with a right to demand ten per cent, per annum interest; this is not the lien that Wade acquired by the execution sale to extinguish the mortgage debt; but he, by subrogation, acquired the lien of the execution creditor who held the mortgage debt; he having paid the debt, becomes invested with the rights and equities of its former holder, and is entitled to all the rights and equities under the mortgage, judgment, and execution not extinguished by the execution sale, but nothing more; therefore, he is not entitled to ten per cent, per annum interest.

Sandford has the right to redeem by paying the execution creditor his debt in that kind of currency which the law would have compelled the execution creditor to receive ; or, he has a right to demand a foreclosure of the mortgage and a sale of a sufficiency of the mortgaged property to pay this debt and thereby relieve the remainder, if any, from the encumbrance; and his prayer for general relief should have been granted; therefore, the judgment dismissing his petition was erroneous, and should be reversed.