Case ID: tex_6/html/0087-01.html
Source: Caselaw Access Project
Author: {"author": "Hemphill, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Howards v. Davis.
    Where property was conveyed to a trustee for the benefit of a married woman and her children, the married woman giving her promissory notes for the purchase-money, and the trustee' executing a mortgage to the vendor to secure the payment of (he notes, reciting that they were given for the purchase of the land? Held, That the whole was to be considered as one transaction, and that the rights of the parties were the same as if there had been but one instrument, in which all had joined.
    Until payment, the vendor has the best right, the superior title; if the contract is executory, on default of payment he may consider the purchase abandoned and treat and hold the property as his own, and as possessing the entire interest; if the contract is executed, he has a lien for the purchase-money without a mortgage; if, however, a mortgage bo simultaneously taken, where the contract is executed he in efFect holds the estate in his previous right, subject to bo divested on payment, or subject to such relief to the vendee as iml.v be afforded under the special teims of the contract or under judicial proceedings instituted to foreloso the mortgage. (Note 2(>.)
    Where property was conveyed to a trusteo for the benefit of a married woman and her children by her then husband, the ma ried woman giving her promissory notes for the purchase money, and the trustee executing a mortgage to the vendor with power to sell in ease of failure of payment; the payment not being made, the vendor sold the property under the power in the mortgage; the married woman and her children claiming the land, the purchaser at the last sale sued them to quiet this title: Held, That the representatives of the husband were not necessary parties, and that there was no necessity for the appointment of another trustee, the former being dead.
    A mortgagee with a power to sell may purchase at his own salo or procure another to purchase for him; and if there be no circumstance indicating unfairness, fraud, oran attempt to stiflo competition, so as to secure the land at a price below its value, the sale cannot bo impeached. (Note 27.)
    If a defendant in a suit to quiet title, disclaims any title to the property, and the plaintiff fails to prove any pretensions of claim before suit brought, the plaintiff has no cause of action. Ihn where the defendant sets up a claim to the property, in his answer it is unnecessary for the plaintiff to prove previous pretensions.
    Parol evidence is admissible to show, notwithstanding the usual acknowledgment of the receipt of the purchase-money in a deed, that the purchase-money was not paid; and where the deed was made to a trustee, the cestui que trust giving her notes for the purchase-money and the trustee executing a mortgage to secure their payment, all by/Iifferent instruments, parol evidence was admitted to connect them and show that they all constituted orie transaction. (.Note 28.)
    Error from Galveston. The defendant in error, who was plaintiff in the court below, brought this suit to quiet his title to a tract of land described in the petition. The petition alleged that the land had originally been sold and conveyed by the plaintiff to one John D. Harvey, to be held in trust for the use and benefit of Elizabeth G. Howard, wife of Taliafero T. Howard, and such children as she then had or might thereafter have by the said Taliafero T. Howard, and who were the plaintiffs in this writ of error; that simultaneously with this conveyance the said John D. Harvey executed a mortgage or trust deed of the land, to secure the payment of three several notes of hand given by the said Elizabeth G. Howard for the purchase-money; and that iu tho event of failure by the said Elizabeth G. to pay the notes when they severally fell due, the plaintiff was authorized to re-enter upon and sell the lands at public sale, after giving sixty days’ notice, &o.; that the notes or first of them not being paid at maturity, sale of the lands was made, and one John D. Claiborne became the purchaser for the benefit of the plaintiff, and subsequently reconveyed the land to him; that afterwards tho said Elizabeth G: and'her husband Taliafero T. Howard determined to abandon the contract for the purchase of tile land, and that finally it was arranged that the plaintiff should surrender the notes, and that the said sale and notes should be canceled ; and that this arrangement was made between the petitioner, and Taliafero and Elizabeth his wife with the consent of John D. Harvey, the said trustee ; that there was no reconveyance except through "the transfers made under the sale by virtue of the power in the deed of mortgage; that the deed of conveyance to Harvey as a trustee, the mortgage executed by him to secure the payment of tho promissory notes, and the promissory notes, were all parts and parcels of the same transaction, yet the defendant, imagining that by the delivery tip of the promissory notes they had a legal advantage,'against equity and without conscience pretended to claim the said premises, and by their pretended claim occasioned a' cloud to hang over his title; that they intended as lie believed to bring a suit at some future day.
    Tho petitioner prayed that the defendants might be decreed to have nothing in the premises, and that they might be estopped from setting up any claim (hereto; that the title might be decreed to be in the petitioner; and that he might be quieted in his possession.
    Elizabeth G. Howard was appointed guardian ad litem to the infant defendants.
    The defendants demurred to the petition, and for special causes of demurrer—
    1st. That the representatives of Taliafero Howard should have been a party.
    2d. That a trustee should have been appointed in the place of Harvey, deceased, and should have been made a party*
    3d. That it did not appear that the parties liad any authority to cancel the conveyance.
    4th. That no cancellation in writing was alleged.
    5th. That the purchase of the property at the trust sale by Claiborne for the use of the plaintiff was illegal and void.
    In case the demurrer was overruled, the defendants answered—
    1st. That the recital of the receipt of the purchase-money iu the deed of conveyance estopped tho plaintiff from denying its payment.
    2d. They admitted the execution of the deed to Harvey; alleged Harvey was dead ; and that they were ignorant of the execution of any mortgage or deed of trust from Harvey to the plaintiff.
    3d. That the plaintiff was estopped by the deed of conveyance from contending that Harvey had any power to make any such mortgage or deed of trust as that set forth in the plaintiff’s petition.
    4th. Tho defendants denied all the allegations of the petition not herein expressly admitted.
    
      The demurrer was overruled and the case was submitted to the court without a jury. The defendants took a bill of exceptions, which embraced all the testimony, aud recited that the defendants excepted to all of it except the conveyances from the plaintiff to Harvey, from Ilarvey to the plaintiff, from the plaintiff to Claiborne, and from Claiborne to the plaiutiff.
    Tiie plaintiff' proved that his deed of conveyance to the trustee, Ilarvey, and the mortgage by the said Ilarvey were executed at the same time, aud as part and parcels of one transaction ; that, the three promissory notes executed by the said Elizabeth G. Howard formed and constituted the only consideration for the sale of the land ; that the husband and wife entered into aud continued the possession until December, 1843, when the notes being unpaid, the land was advertised and sold in conformity with the directions prescribed for that purpose in the mortgage; that the land was purchased at the sale for the benefit of (lie plaintiff for two thousand two hundred dollars, this being the highest and best bid, and more than any one else would give for the premises; that subsequent to tiie sale Tallafero Howard aud Elizabeth his wife, with a full knowledge of the facts, finding they were unable to pay for the land, proposed to cancel the contract; that the amount of purchase-money which had been paid should he considered as rent; that they would deliver quiet and peaceable possession of the promises to the plaintiff, and that the plaintiff should deliver up the notes of the Elizabeth G., and that the sale should be canceled; that they did deliver up the quiet aud peaceable possession of the premises, aud he had continued to hold the same since December, 1843; and that, with the consent of the husband and wife, the trustee and the plaintiff, the sale was canceled, but there was no reconveyance, except such as ivas effected under the sale by virtue of the power in the mortgage; that the original contract or agreement for the sale was made by and between the plaintiff and Taliafero Howard ; and that the deed of conveyance, mortgage, and promissory notes were executed to carry the sale into effect and to secure the imi'chasc-money. The defendants did not introduce any evidence.
    The decree, after reciting the appearance of the defendants, Elizabeth G. and William Howard, ambalso the appearance of the minor defendants, by their duly' appointed guardian ad litem, and the appearance of the plaintiff by attorney, proceeded to overrule the demurrer, and, on the evidence, adjudged the legal and equitable title in the premises to be and to have been at aud before the'instltution of the suit in the plaintiff; that he be quieted in his possession; that all clouds hanging over his title by reason of the claim of the defendants be removed.
    The plaintiffs in error assigned for error: 1st. That the court below erred in overruling the demurrer of the defendants, because—
    1. The'legal estate in the premises having rested in John D. Ilarvey, trustee for the use of the defendants, the representative of • said Ilarvey should have been made a defendant, (he being dead,) or another trustee should have been appointed and made a party.
    2. That said Taliafero Howard should have been made a defendant, or if dead, that his administrator should have been made a defendant.
    3. That although the petition alleges there was a cancellation of the original contract of sale aud deeds, it does not allege that such cancellation was in writing the only mode in which it could have been made.
    4. The cancellation is alleged to have been made by said Harvey, Taliafero, aud Elizabetli G. Howard, who had no authority to make it, for the petition shows that the land was conveyed by plaiutiff to said Ilarvey as trustee for the use of Elizabeth G., wife of Taliafero, aud the children of said Taliafero and Elizabeth G., who are alleged to be minors, and were unable to consent to the cancellation.
    ■ ñ. Because the petition shows that at the sale, whish is alleged to have been made h.v the plaintiff as trustee, the land was purchased by Claiborne for his (the plaintiff’s) use, when he had no right to purchase, directly or indirectly, and the land is shown to have been sold for much less than the original consideration.
    
      C. Neither the said Harvey nor Taliafero nor Elizabeth G. had authority to make any agreement that would affect the interest of said minors in said land.
    7. Because tlie petition shows that there liad been some payments made towards the pnrcliase-money, which the parties in disregard of tlie interest of the minors agreed should be considered as rent for tlie use of tlie land by said Taliafero and Elizabeth G.
    8. Because the petition shows no cause of action against the minor.-! nor against Elizabeth G. and William Howard. If there was neither any legal nor equitable title in them as alleged, then the plaintiff had no cause of action against them.
    2d. Tlie court below erred in admitting parol testimony to vary, explain, and change the deed from tlie plaintiff to John D. Harvey in trust for the use of defendants, which deed was absolute on its face and admits tlie full payment of tlie purchase-money.
    3d. Tlie agreement between plaintiff Taliafero and Elizabeth G. Howard to cancel the contract did not cancel it; but to vest the laud again in I he plaintiff, a reconveyance must have been made.
    4-tii. The sale alleged to have been made by plaintiff under tlie deed of trust from I-Iarvey to him was a nullity, because at said sale the laud was bought in by a third party for tlie use of tlie trustee, and at a price much less than tlie original purchase-money.
    5th. The evidence does not show that the minor defendants nor the other defendants have ever been divested in a legal manner of their interest in the land.
    
      W. Alexander, for plaintiffs in error.
    I. The mere cancellation of a deed executed under the statute of frauds will not suffice; there must be a reconveyance. (Hart. Dig., p. 454; 2 Bl. Comm., 300; Sug. on Powers, 400; Gilbert Eq. It., 235; 2 Cha. It., 52; G East It., 80; 4- B. & A. R., 405.)
    II. Femes covert and infants cannot concur in a breach of trust or acquiesce in a release. The cestui que trust must be neither feme covert nor infant, and must be fully conversant of all the facts, and must be apprised how those facts would be dealt with if brought before a Court of Equity. (Lewin on Trusts, G43.)
    III. Neither trustees nor those who claim under them with notice can sustain an interest derived from a breach of trust. (2 Hovenden on Frauds, 4S4.)
    IV. The deed from Davis to Harvey appointed a trust executed. (White & Tudor’s Leading Cases in Equity, 10 and 18.) Equity has cognizance only of executory trusts. (Boldwin’s C. C. R., 422.)
    V. ‘‘It is a general rule in equity, admitting, however, óf some exceptions, that a person cannot be a trustee for himself.” (Preston on Estates, 327.)
    VI. In equity, persons coming into possession of trust properly with notice of the trust are considered as trustees. (1 Pet. R., 309; 2 Madd. Oil., 103; 1 Sell. & Lef., 202.)
   Hemphill, Ch. J.

The principal question involved in this cause is whether the deed, mortgage, and promissory notes are all to be considered as parts of the same transaction, and what is the legal effect of their being so considered.

That they were all executed simultaneously is clearly established by tlie evidence. The deed and mortgage are expressly stated to have been executed at one and the same time, and as part and parcel of tlie same, transaction. That the promissory notes were also given at the same time is obvious. The mortgage is based upon the notes, and they are proven to have been tlie consideration of the sale, and it is so slated in tlie mortgage. Now, it is a well-established principle that two deeds or writings executed at tlie same time between the same parties and in reference to • the same subject-matter are to he taken as parts o£ the same contract and as formina: one entire agreement. (2 Bibb R., 610; 4 Mass. R., 569; 4 Phillips Ev., 1421; 15 Johns. R., 457; 3 Wend. R., 233.)

A familiar instance of fclie principle is that of a deed of defeasance which is said to form with the principal deed but oiie contract although it be by a distinct and separate instrument.

Mr. Justice Spencer thus illustrates the rule in the case of a mortgage by a separate instrument for the purchase-money at the execution of the conveyance : ‘‘The substance of a conveyance where land is mortgaged at the same time the deed is given is this: the bargainor sells the'land to the bargainee on condition that he pays the price at the stipulated time; and if lie does not, that the bargainor shall be rcseized of it free of the mortgage; and whether this contract is contained in one and the same instrument, as it well may be,.or in distinct instruments executed at the same instant can make no possible difference.”

He proceeds further to state that Courts of Equity have relieved the mortgagor against the accident of non-payment at the stipulated period; and that courts of law have considered the interest of the mortgagor as liable to be sold on execution. But this does not interfere with the question how the contract between the parlies is to be viewed with reference to themselves when the equity of redemption is gone and forfeited. This course of decision in New York-is the more important as it has long been the settled law of that State that a mortgage is a mere security for mouey, and the mortgagor is deemed seized of the fee as to all persons except the mortgagee and his representative. (See dissenting opinion of Thompson, Ch. J., in same case, i5 Johns. B., 404.)

The seizin of the mortgagor in the case cited from 15 Johns. R., 404, and in 4Mass. R., 506, was held to bo transitory but for an instant: “that lie took an absolute estate in fee and instantaneously rendered back a conditional one in fee.”

The deed and the mortgage are to be considered as but parts of one assurance, and tlie vendor consequently retained the power of selling the lands on default of payment of the purchase-money. He conveyed the land to the trustee for the use and benefit of the defendants, but with an exception or reservation in his own favor.

The powers of a trustee over trust property need not be discussed. That his mortgage to secure the purchase-money given at the time of the conveyance to himself as trustee would be valid and binding on the property seems very clear. The whole should be regarded as one transaction, and tiie conditions of the mortgage be considered as incorporated in the conveyance. The legal estate might pass momentarily to the trustee, but would immediately revest in the vendor, with the condition, substantially, that it should be extinguished on the payment of the purchase-money. It might be contended, though it. lias not been argued, that in this aspect the vendor would hold the property affected by the trust. This might in a certain sense be conceded, but the trust could become effectual and operative in the cestui que trusts only by the. payment, of the purchase-money. This condition entered into its creation, and is an essential clement of the trust. Until payment, the vendor lias the best right, the superior title. If the contract were executory on default of payment-, ho might consider the purchase abandoned, and treat and hold the property as his own and as possessing the entire interest. If the contract were executed, he would have a lien for the purchase-money without a mortgage, but with that executed simultaneously with the deed he would in effect hold the estate in his previous right, subject to be divested on payment, and with such relief to the vendee as may be afforded under the special terms of their contractor under Judicial proceedings instituted to foreclose the mortgage. In this case the vendor was empowered to sell the land in satisfaction of the debt. This power lie might legally reserve to himself, tho.ugh under the circumstances a Judicial foreclosure'would have been more advisable. It would at least have saved the necessity of this suit.

Were it conceded that the defendants, even after the sale under the power, liad any equitable interest in the property, yet it could be sustained' and perfected only by payment of the stipulated price. They have not claimed any such interest in their answer. They have not attempted to make any such right available by offering payment of the purchase-money. They do notpromise performance of the indispensable condition, upon which .alone any interest they might claim in the property could be sustained. Had they made such claim and oiler they would have deserved and received the most serious consideration.

The special grounds of exception, that the proper parties are not made to the suit, cannot be sustained. The only parties who can claim any interest under the conveyance are made parties.. The husband of the defendant Elizabeth or his representative is not a necessary party to this suit. Had the land been paid for, or had title vested according to the contract, his creditors, if any, might have instituted an inquiry to ascertain from what source the purchase-fund was derived. But such inquiry is not material to the purposes of this suit, and no end could bo attained by making him a codefeudant.

Another special ground of demurrer is that the land was purchased (at the sale under the power) for the benefit of the plaintiff, and that he liad no right to purchase, directly or indirectly; and.the land is shown to have been sold for mnch less than the original consideration.

That a trustee cannot be the purchaser of a trust estate without leave of the court is an established rule in equity. A mortgagee is a trustee, but in a qualified sense. He does not hold for the benefit of others, but for himself. He is a cestui que trust as well as trustee. He has an interest in the property. It is pledged expressly to secure his claim; and were he deprived of the power to purchase he might suffer great loss by its sale at a low price. He lias an interest ttiat the bid shall amount to his incumbrance, and that the property be not 'sacrificed to the injury as well of the mortgagor as the defeat of his own claim, as this may be the only fund for the discharge of his debt. Sales at foreclosures, whether under a power or by decree, are open and public and are made afier long notice; and it is to the interest of the mortgagor that the mortgagee should enter into tiie competition at the sale.

In "Bergen v. Burnett (1 Caines’ Cases in Error) Justice Kent intimated a doubt whether the rule that a trustee could not purchase at a sale of the trust property would apply to the case of a trustee who was also a cestui que trust.

In Slee v. The Manhattan Company it is said by one of the judges that the trust under a mortgage has never been held to create an incapacity in the mortgagee to become a purchaser; and that where the sale was fair and.in good faith the case has not occurred wherein the mortgagor has succeeded in setting aside the sale; that the greater part of the purchases under such powers of sale are and always have been made for the mortgagee. (10 Johns. R., 185.)

Hilliard, in Ills Treatise on Real property, states the rule to be that if upon a sale under a power the mortgagee himself purchases, the sale is voidable in equity for good grounds, though not absolutely void.

The sale in this case appears to have been made fairly and in good faith. The land having been advertised for sixty days was sold at public outcry. The bid by Claiborne was the highest and best bid, and more than any one else would offer for the premises. Ho circumstance indicates unfairness, fraud, or an attempt to stifle competition, so as to secure the land at a price below its value; and we are of opinion that the bid for the mortgagee was valid, and that lii.s right under the sale cannot be impeached. (Erskine w. LeBaum, 3 Tex. R.)

Another ground of exception to the petition is that it showed no cause of action, inasmuch as it was averred by the plaintiff that there was neither legal nor equitable tide in the defendants.

The object of the suit is not to divest the defendants of rights; it is for the pui-pose of quieting the plaintiff’s title, and presupposes its validity, but that lie is disquieted and his title disturbed by the alleged vmconscicntious claims and pretensions of the defendants. His purpose is to have those claims judicially declared to be unfounded. Had the defendants disclaimed any title to the property, or any such pretensions as are ascribed to them, the. plaintiff would have had no cause of action, and the petition should have been dismissed.

Note 26.—Estes v. Browning, 11 T., 237; Edwards v. Atkinson, 14 T., 373; Robertson v. Paul, 10 T., 472; Hill v. Still, 19 T., 76; Secrest v. Jones, 21 T., 121; Scarborough v. Arrant, 25 T., 129; Baker v. Ramey, 27 T., 52; Lovejoy v. Roberts, 35 T., 605; Rogers v. Green, 35 T., 730. lie who asks a rescisión of a sale of land where he has secured a large portion of the purchase-money, is subject to the maxim that he who asks equity must do equity; he must have offered to restore the consideration-money which he had received. (Roeder v. Robson, 20 T., 754; Thomas v. Beaton, 25 T. Supp., 318; Roberts v. Lovejoy, 25 T. Supp., 437; Harris v. Catlin, 37 T., 581.) The vendor in an executory contract for sale of land should tender a deed «and make demand of the purchase-money before bringing suit against his vendee for the land. (Gregg v. English, 3S T., 139.)

Note 27.—Goodgame v. Rushing, 35 T., 722.)

Note 28.—Gibson v. Fifer, 21 T., 260. Where several instruments relate to the same subject-matter they will be construed as one instrument. (Dunlap v. Wright, 11 T., 597; Eppinger v. McGreal, 31 T., 147; Taylor v. Hudgins, 42 T., 244.)

Upon the whole, wc see no error in the judgment, and.it is ordered that the , same be affirmed.

Judgment affirmed.