Case ID: johns-ch_3/html/0332-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Denning and others against Smith and others.
    
      January 22, and March 9.
    Though by the act authorizing the loan of moneys, &c. (sees. 31. eh. 216) the mortgagor, after a default of payment, loses all equity of redemption, and the Commissioners become seised of an absolute estate in the premises; yet the Commissioners are trustees for the People to the amount of the mortgage debt and interest, and, for the mortgagor, in respect to the surplus | and the mortgagor as well as the People, has a right to demand of the Commissioners a faithful execution of the trust.
    
    The notice of sale, according to the true construction of the-aet, must’eontinue to ho fixed up at three public places, and be advertised in a public newspaper of the county, from eight days after the 4th Tuesday oi May, to the third Tuesday of September, or the time of sale.
    And where, on a default of the mortgagor, the Commissioners caused the mortgaged premises to he sold, without giving due public notice of the sale, pursuant to the act and under circumstances denoting ‘fraud and collusion, on the part of one of the Commissioners, the Sale Was set aside, am! the deed executed by the Commissioners ordered to be delivered up to be cancelled^ and the proceedings in an action of ejectment brought by the purchaser, to be stayed by a'perpetual injunction.
    BILL, filed 22d of September, 1815, stating that the plaintiff, • William Denning, on 'the '6th of February, 1812, obtained a judgment in the S. C. against Henry Pers'en, on a bond conditioned for 777 dollars and 79 cetits. That II. P. and his two "sons JL. ánd J., being indebted to the •plaintiff, Joseph Klein,' in 400 dollars, gave him a mortgage on lot No. 11, and pártof lot No. 14, containing 125 acres situate in Cairo, in Greene, county; arid the mortgage Was recorded the 13th of February, 1812. That J. K. had also a’judgment against them, docketed the 1st of February, 1812, for one thousand dollars ; and he was the assignee of another judgment against them, docketed the "13th of January, 1812, for 750 dollars, in favour of J. De Witt. Executions were issued on the judgméht, in favour of' W. D. arid J.K., by virtue of which the sheriff seised and sold a parcel of land in Cairo belonging to H. P. and also the lots and parcels above mentioned, and W. D. and J. K became the purchasers at the sheriff’s sale, and reeeived a deed for the same from the sheriff, dated 23d of April, 1812. That ion the 15th of December, 1813, W. D. and J. K. sold and conveyed to the other plaintiffs, .Moses Austin, and William Sturges, the land so purchased at the sheriff’s sale, for 3,500 dollars, and received them mortgages to secure the purchase money. That on the 21st of September, 1814, it was discovered by the plaintiffs, for the first time, that Henry Persen had, on the 5th or 6th of July, 1808, mortgaged one of the lots of land so purchased by the plaintiffs, to two of the defendants, Stoddard Smith, and Abraham Hollenbeck, Commissioners for loaning moneys, in the county of Greene, under the act of the legislature, passed the 11th of April, 1808, for securing the payment of seventy-jive dollars, loaned by the said Commissisoners to H. P.
    
    That by the 15th section of that act, it was declared, that if any borrower should neglect to pay yearly, on the first Tuesday in May, or within twenty-two days thereafter, the yearly interest due, the Commissioners should be seised of an absolute estate in the land mortgaged, and the mortgagor should be utterly precluded and barred of all equity of redemption. Yet, as well by the equity of the statute, as by the several provisions of it, in particular, the Commissioners are trustees for the beneficial interest of the borrower and his assigns, to whom they are directed to pay the surplus, after the mortgage moneys are deducted.
    That by the 19th section of the act, it is declared, that if the mortgagor, his heirs, or assigns, should, at or before the sale of the Commissioners, pay the mortgage money, payable on the first Tuesday of May preceding, and the costs, the Commissioner shall accept thereof, and permit the owner, or his heirs or assigns, to take possession of the land, and hold it, until a further default. That by the 20th section of the act, the surplus money, if any, after paying the mortgage debt and costs, should be paid to the mortgagor, his heirs or assigns. That by the 17th section of the same act, the Commissioner are directed. within eight days after the last Tuesday of their attendanee, aforesaid, yearly, to cause advertisements to be fixed up in, at least,- three of the most public places in the county, and in one of the public newspapers, describing the quantity and situation of the lands, and giving notice that on the third Tuesday in September, they would be sold at the court house, at auction, &c. That by the 32d section of the act, on the last day of their meeting yearly, they are to enter whose mortgages are foreclosed," and the number and sums of them, and also enter the orders for, and copies of the advertisements, for sale, and places at which they are set up, and who set them up, and the names of the purchasers, and the prices, and to whom the overplus belongs.
    That the plaintiffs, as assignees of the estate of II. P. in the land mortgaged, have an interest in the compliance of the Commissioners with these provisions of the act. That the value of the premises mortgaged by' H. P. to the Commissioners was three thousand dollars. That the defendants, fraudulently, &c. and in order to devest the plaintiffs of their interest, by surprise, did not advertise the said land according to the act, by the notice inserted in the newspaper, called the Catskill Recorder ; that part of lot No. 14, as described in the notice, contained about fifteen acres; lot No. 11, which is not mentioned in the notice, contains about 110 acres. That the notice, among other things, stated, “ one other tract of land in Canton, now Cairo, part of lot No. 14, containing 125 acres;” that the direction in writing by the defendant, Smith, to the printer, was to insert the notice in his paper for three weeks, and put an advertisement on the court house door, and he thought the inside the best, on account of damage. That in two other notices, the land was described, as follows: “ One other tract of land situate in Canton, now Cairo, lot No. 11, and part of lot No. 14, near Person’s mills, containing 125 acres, mortgaged by 
      Henry Persen, 6th of Julyand one of the said notices was directed to he put up on the back of the writing desk of James M‘Vichar, in his store in Coxsackie ; and the other on the outside of the inner door of the house of Jibijáh Reed, in Greenville. That no other notices were given by the defendants. That at the premises mortgaged there was a toll bridge, grist and saw mills, a manufactory of cloth, and a distillery, and in the same town, a large village and church. That Greenville and Coxsackie, were remote from the premises. That the Commissioners conducted the sale in a secret and clandestine manner; that the front door and windows of the courthouse were shut, and thefrontdoor locked. That only two persons were present beside the defendants. That it could not be discovered that any business was transacting in the court house, unless the door is open. That the Commissioners would not give any information to the two by-standers of the identity and situation of the lot; that they bid only 340 dollars, and the same was struck off to the defendant, William Judson. That the Commissioners well knew the situation and value of the premises, and the defendant, Judson, attended the sale at their request; that the said lot was put up for sale out of the order in which it was advertised; that the Commissioners executed a deed for the lot to Judson, who has brought an action of ejectment against the plaintiff Sturges which is now pending. Prayer for general relief, and for an injunction. The defendants in their answer denied any knowledge of the debts of H. P. and his sons to the plaintiffs W. D. 8f J. K., or of the judgments and mortgage, or the assignment to W. D. fy J. R. or of the sale and deed of the sheriff, Sf c. or when the plaintiffs first knew of the mortgage to the Commissioners; but they averred that J. K. was informed of the mortgage long before the sale. They admitted the loan office mortgage of the 125 acres of land in Cairo, by if. P. to secure the payment of 15 dollars with interest. That the interest due in May, 1814, not being paid, the Commissioners waited the time allowed by the act, and gave foe notice stated in the bill. That the notice on the inside of the court house door was more likely to be preserved, and as likely to be seen, as if it had been on the outside. That they did not know that there was any error or defect In the notice published in the newspaper, and that lot No. 11. was omitted by mistake. That the notice was put up in the two usual places, and in the usual manner; and they denied any secresy or collusion in the sale; that A. Cook and J Bellamy, both bid at the sale. That they do not recollect whether the outer door of the court house was open or not; that several persons were present when the sale commenced; that they gave every information in their power, as to the lot, and the defendant Smith read from the book the description of the mortgaged premises. That the defendant Judson, did not attend the sale at the request of the Commissioners; that the sale was conducted in the usual manner; and they denied all collusion with Judson. They admitted the deed to him by the Commissioners, and that he had brought an action of ejectment against the plaintiff S.
    
    
      January 22.
    
      March 9.
    Twelve witnesses were examined on the part of the ' plaintiffs, who proved the material facts charged in the bill;, and the substance of their evidence is stated in the opinion of the court.
    The cause came on to be heard in January last.
    
      Van Burén, (Attorney General) and J. V. D. Scolt, for the plaintiffs.
    
      Van Vechten and Van Dyck, for the defendants.
    
      
      
        Webster’s ed. L. N. Y. vol. 5 p.392 sess. 31 ch. 216.
    
   The case stood over for consideration to this day, when the following opinion was delivered.

The Chancellor.

1. The first and most essential object of inquiry in this case is, how far the provisions-of the statute have been disregarded or violated by the Commissioners in the sale in question. It will accordingly be necessary to examine all the circumstances of the notice and sale, to ascertain this matter of fact.

.The commashcToms under 31? ch.’ 21&) are, in case of default on the part oi the mortgagor, whereby they became seized of the premises clear of the equity of redemption, trustees for the people to the amount due on the mortgage,"and for the mortgagor, a-to the surplus, in case of sale.

A tract of land in the town of Cairo, in Greene county,” of the value of 3,00.0 dollars, and upwards, was mortgaged to the defendants, Smith and Hollenbeck, as Commissioners under the act of the 11th of April 1808, (sess. 31 ch. 216.) to secure the repayment of a loan of 75 dollars. The interest of 5 dollars, 25 cents, due thereon in May, 1814, being unpaid, the Commissioners, by reason of the default, became forthwith, according to the declaration and words of the act, “seised of an absolute, indefeasable estate in the lands, &c. to the uses in the act mentioned, and the mortgagor, his heirs and assigns, were utterly foreclosed and barred of all equity of redemption.” They were directed in such case to sell, the lands on the third Tuesday in September following, at the court house of the county, and after retaining the principal and interest of the mortgage, and the costs, not exceeding 3 dollars, the remainder of the moneys, if any, were to he paid to the mortgagor, his heirs or assigns.

The sale was to be made in pursuance of public notice, and the Commisioners were directed, in case of such default, and within eight days after the 4th Tuesday in May, “to cause advertisements to be fixed up, at no less than three of the most public places of the county, describing the quantity and situation of the lands, and giving notice of the sale on the 3d Tuesday in September, by way of public vendue, to the highest bidder, and they were also to cause such notice to be given in, at least, one of the public newspapers in the county.”

The seisin of the Commissioners, free and clear of the equity of redemption, was nevertheless, as public agents or trustees for the People of the' state, to the amount of the mortgage money, and for the mortgagor and his representatives, in respect to the surplus. The right of the mortgagor, and his assigns, to the surplus moneys, notwithstanding the statute bar of the equity of redemption, was explicit"ly declared in the act; and the State and the mortgagor were equally entitled to demand a due and faithful performance of the trust, with which the Commissioners were thus clothed.

We must so construe the act as to give effect to all its provisions'. The mortgagor, after the default, has no legal, (9 Johns. Rep. 129. 14 Johns. Rep. 362.) and, probably, no equitable title, which can be directly enforced, as against the land itself. But he has a valid and deep interest in the execution of the Commissioners’ trust. The State has no interest beyond the amount of their loan. All the surpuls moneys belong to the mortgagor; and we are not willing to presume such a fearful and lamentable defect of justice as the case would present, if a mortgagor could not call in question a fraudulent or irregular sale by which he was deprived of his surplus.

Let us then recur to the proofs, to see in what manner the directions of the statute were complied with.

One of the advertisements was fixed up in the village of Greenville, about seven miles northerly from the lands, in the store of Abijah Reed, and another was fixed up on the back of the writing desk of James JM’ Vichar, standing on the counter in his store at Coxsachie, about 15 miles easterly from the lands. ’ ■

The selection of these two places does not appear to have been made under the exercise of a sound discretion, and, when taken in connection with many other circumstances, it forms a very material item in the mass of testimony, going to impeach the impartiality and integrity of the sale.

The act required the notices to be put up in three “ of the most public places” in the county; the object, doubtless, was to diffuse, as widely as possible, the knowledge of the sale, and of the cause, and the subject of it. The step was absolutely requisite in order to do justice to the parties concerned in the land, and in the moneys to arise from it; and it was a duty peculiarly pressing in this case, in respect to the mortgagor, considering the very great disproportion between the value of the pledge and the debt charged, and the general severity of the- provision, foreclosing at once, upon default, all right and equity of redemption. The Commissioners were bound to use diligence and judgment in selecting the public places best calculated to bring the notice of sale home to the ° mortgagor, and to all who were most likely to enter into' ,, competition for the purchase.

The notice of the msT’to i» ]^-cup 'pi^es, Xuld^be ‘put UP "V t.hos,c places best cat-» pniated to bring-home the notice of sale to the "°1iffgperscms likely"" attend as putcbilBers'

But here the Commissioners selected two country stores, at a great distance from the land, while it is proved that the premises were adjoining a turnpike road, and had on and adjoining them, mills, factories, and a toll-bridge, xvhich rendered them a place, of great notoriety. It is also shown, that Smith, one of the Commissioners, had frequently passed by the land, and must have been acquainted with it. It is very extraordinary, that a place of such noteas the land itself, should not have occurred to the Commissioners as very suitable for a notice. Or if the land should not have been deemed one of the most fit public places, the village of Cairo, which is within the distance of a mile and a half of the premises, was a place of great notoriety. It is at the junction of three turnpike roads,- and has a number of stores and taverns, and’ is the most central village in the county, and where county business is transacted. Why omit such a village as this, so near the lands, and resort to distant places? I apprehend no sufficient reason can be assigned.

The third notice xvas directed to be Up on the court house door. This place was, no doubt, judiciously selected. It is, in many instances, the place required by statute authority. Thus the notice of the sale of mortgaged premises by thp mortgagee, under a power captained ÍW the mortgage, and the notice given by insolvent debtors, must be fixed upon the outward door of the court house of the county; and the notice of the general election of Got vemor and Senators, is to he given by the sheriffs in the same way. In the very loan office act, under which the sale was made, the Commissioners, were to fix up notice of their appointment, &c. at the court house. But there was a very peculiar direction given as to this notice-In the letter from the defendant Smith to Crosipell, directing this notice to be put up on the court house door, he adds, “ the inside, I think, is best on account of damage;” and it was, accordingly,, affixed up pn the inside , of the door. There is no evidence in the ease, of any damage having occurred in former pases, by putting the notice-on the outside of the court housp door; it is proved that notices are usually put up on the outside of the door, and-we have no proof that they had ever before been put up on the inside. The proof in this case is, that notice- on-the inside of the door would not be visible when the door is open, (as it no doubt is_ on all public occasions,) because the door swings against a wall. This concern in a. public officer about damage to the notice, and assigning it as a reason for departing,, in this particular case, from, the usual, and probably from the universal practice, is a very suspicious circumstance, and looks like premeditated wrong.

Tee act further directed that notice was also to be given, in at least one of the public newspapers in the county; and the notice in this case was directed to be published ini the Catskill Recorder, for three weeks.

One objection to this notice was the limitation qf it to three weeks.

The act does not prescribe, in express terms, the length of time the notices were to remain fixed up, or continued in the paper. It only declared when they were to be-given, viz. within eight days after the 4th Tuesday in May, and when the lands were to be sold, viz. the 3d Tuesday in September. But I think the true construction of the act is, that, the notices fixed up in three public places, xvere to continue “fixed up” until the sale. In a subsequent para■graph of the act, when a new or resale of the lands is to be made, the act requires at least “ six weeks notice” of the sale to be given, in the manner before directed. This more explanatory provision as to the continuance of notice was necessary, because the time of first announcing the notice was not fixed, and it comes powerfully in aid of . • i the construction given to the prior section. If the Com missioners might direct the notices to remain fixed up only three weeks, they might in the exercise of their discretion, limit the time to three days. The act left discretion with them on this point. The time when the notices were first to be put up, and the time of sale being declared, there was no need of any further provision, as the notice xvas, doubtless, intended to occupy the intermediate time. In the absence of proof to the contrary, we might presume, that the notices fixed up in the three public places remained up until the sale, but xve have certain proof that the newspaper notice xvas only for three xveeks, by the express direction of Smith.

The notice 0f tofteTruTcoiv I*™ should be ed'ujTat1 three p£biished in a PubI!c the county, “*0m aD“ a*ter the expiration from the fourth I&fyfuntil the sq^mba3, ory/™®cofJca*8 not

This notice ought to have been commensurate in point of time with the others.

The words of the act are, that the Commissioners shall also cause, “ such notice” to be given, in at least one of the public newspapers; and it meant a notice that xvas to correspond, in description and duration, with the notices to be “ fixed up” at the public places. If the Commissioners had a control over the duration of the newspaper notice, they had equally a control over its commencement, and it might have been deferred until the day of the sale. “ Such notice,” here meant the same notice with the others, in every material point, and the duration or length of the notice, is always the most material part of if.

The notice th™Lme oftiie Mortgagor jmd description of the quantity and situation foreclosed, and t0 s° '

Having slated the facts as to the time and place of the notice, we proceed next to examine the contents of the notice, as to the description of the land.

In the notices fixed up at Greenville and Coxsackie, the premises were described as being in Cairo, and as being “ ^°- U- and part of lot No. 14. near Per serfs mills, containing 125 acres, mortgaged by Henry Persen.” In the other notice, on the court house door, and in the news- ; . paper, the premises were described as a tract of land in Cairo, “part of lot No, 14. containing 125 acres.” The name of the mortgagor was here omitted, and the lands in lot No, 11. omitted, which contained about 110 acres, while the lands in lot No. 14. were but 15 acres. The omission of the mortgagor’s name and of the number of the lot in the advertisements in Catskill, where the agent of the owner under the mortgagor resided, was a most unfortunate circumstance, and is calculated exceedingly to increase our apprehensions. It was also an omission, fatal, in any view, to the legality of the notice., Indeed it appears from the testimony of Samuel Haight, the agent of the plaintiff Denning, that if he had discovered from the advertisement of the Commissioners in the newspaper, (and which paper he took,) that the lands mortgaged by Henry Persen were included, he would have satisfied the demand.

Upon such notices the sale was made. There were very few bidders attracted by the notice. The sale was made in the lower entry of the court house, while the front door and wipdows were shut; and when the Commissioners were asked for an account of the lands, by one of the solitary by-standers, they referred him to the loan office books, and gave no further explanation.

The lands in question were purchased by the defendant Judson, for about 340 dollars; and it appears, that he came that day from his house in Coxsackie to Catskill, and, probably, for the purpose of such a speculation.

if the commissioners abuse their trust, this court will afford relief either by saíe‘nma8¡etting ™edem¡ commissioner6 aca?“Dt for the difference between the sum for which the land was sold, and its real value at

á. All these combined, warrant conelusion, that the Commissioners grossly departed from the letter and spirit of the act, in the advertisement and sale of the lands. Some subsequent circumstances were ed upon the argument, as evidence of the disposition or design of the Commissioners, or one of them, in this transaction. But I forbear to enlarge on that point. The abuse of trust appears to me to have been too palpable to be denied, and too grievous to be endured. There was a want of due discretion in the selection of the public places, at which two of the advertisements were fixed up. There was an abuse of discretion in putting the notice on the inside of the court house door, where it would probably be concealed from the public; and it was so singular and extraordinary a precaution, as to afford an inference of unwarrantable and fraudulent views. There was a defective notice as to time, in being confined to three weeks, in the Catskill Recorder, and still more defective as to description, by totally omitting the mention of one entire lot, containing the most part of the lands that were sold. And, lastly, the sale itself was attended with singular circumstances, calculated to exclude observation and competition. There was, upon the whole, so manifest a vio_ , . iation of the intention and directions of the act, and so ... , , . -. , , great an injury m consequence of it, has been inflicted upon such of the plantiffs as were entitled to the surplus moneys, that I cannot bring myself to doubt of the right of the party to relief. The only difficulty consists in settling the mode and extent of the relief to be afforded. The sale must either be set aside as null and void, and an opportunity afforded to the plaintiffs to redeem, under the 19th • « , i z-x • ♦ n section of the act, or the Commissioners must account tor the difference between the price that the lands sold for, and their actual cash value at the time. To allow the sale to stand, and to afford no relief to the plaintiffs, would (as the evidence strikes me,) leave a stain on the justice of the country. Sales of real property by public officers of one description or another, have become so frequent, and have excited such active cupidity, and such a spirit of speculation, that there is very great danger of injustice, unless we support strictly the checks and guards provided by law against abuse.

A special anetrictty“pursued, and a purchaser is presumed to know such authority, when it is given by a public statute; and if he purchases, where the authority is not pursued, it is at his peril.

I should have no difficulty, if that was the only alternative presented, to hold the Commissioners responsible for 6 breach of trust in the sale of the lands, and make them answer in damages. The case of The Charitable Corporation v. Sutton, (2 Atk. 400.) would fully justify me, in going to that extent. “ I will never determine, said Lord Hardwicke, in that, case, that a court of equity cannot lay hold of every breach of trust, let the person be guilty of it in a private or public capacity.” But I think the more .appropriate remedy in this case is, to declare the sale void. It was not a sale under a judgment, or decree of a court of justice, where the purchaser has a right to presume every thing to have been legally done. In Lloyd v. Jones, (9 Vesey, 37.) Lord Eldon seems to have been of opinion, that mere irregularity, without making düt a case of fraud or collusion of some sort or other in the purchaser, was not sufficient to affect him. Lord Bedesdale, in Bennett v. Hamill, (2 Sch. and Lef. 566.) adopted the same idea, but the doctrine was applied in both cases to irregularity in a decree, and those cases have no analogy to the present. Here was a special trust to be executed by the Commissioners of loans, for the benefit of the State, and of the party entitled to the surplus, and all their authority to sell was under the statute prescribing the mode. If the sale by the Commiss ioners would be valid, upon a short or defective notice, it would be valid without any notice; and this surely cannot be maintained. A special authority must he strictly pursued, and- every purchaser is to be presumed to know that special authority, in this case, for it is contained in the act; and if he purchases in a case in which that special authority was not pursued, he purchases at his peril. The notice, which omitted altogether lot No. 11, and which was put up under an extreme abuse of discretion, if not with a fraudulent design, on the inside of the court house, was before the eyes of the purchaser as he stood in the inside of the court house hall, and ignorance of the defect and irregularity cannot be pretended,

The most advisable and proper remedy for the case appears to be, to declare the sale void, and to order the deed to be delivered up and cancelled, and to continue the injunction of the action of ejectment. This will be reinstating the parties in their rights, as they stood prior to the sale.

The defendant Judson, does not put himself forward as a bona fide purchaser, without notice of any irregularity. He knew all that the Commissioners knew. He only joins with them in their general allegation, that “they did not know that there was any deficiency or error of description of any kind, in the notice published in the newspaper.” But they do not say when they did not know of the defect. Did not Judson know of it before the sale l That he does not deny. Besides, the ignorance is confined to the newspaper notice; and it is proved that the same notice was affixed upon the inside of the court house door. If a purchaser wishes to rest his claim on the fact of being an innocent, bona fide purchaser, he must deny notice, even though it be not charged, and'he must deny it positively, not evasively; he must even deny fully, and in the most precise terms, every circumstance from which notice could be inferred. (Cason v. Round, Prec. in Ch. 226. Brace v. Marlborough, 2 P. Wms. 491 See also 1 Johnson’s Ch. Rep. 302. and the cases there cited.)

I cannot entertain any doubt of the jurisdiction of the court being competent to afford the requisite relief. The jurisdiction is necessary to help the cestui que trusts, who have been defrauded or unduly deprived of the surplus moneys, which were to arise from a fair and regular sale, They were compelled to resort to this court, as they had no title at law, and the legal title rested in the Commissioners, free of the ordinary equity of redemption. They could not have made any defence at law; all their right was a claim to the surplus fund, on a sale within the statute; so far the. Commissioners were trustees for them; and in that view the plaintiffs have an equitable interest to be protected. To vindicate that equitable right, the plaintiffs were obliged to apply to this- court; and I conclude, with entire conviction, that the sales by the Commissioners, to be valid, must be made in conformity with the act, and that they cannot dispense with any of its directions,

I shall accordingly, declare, that the sale in question was made without the due public notice required by law, and under circumstances denoting a fraudulent intent on the part of the defendant Smith, and that it be adjudged null and void; and that the deed executed by the Commissioners to the defendant Judson, be delivered up and cancel-led ; and that the action of ejectment in the bill mentioned be perpetually enjoined; and that the defendants, Smith and Hallenbeck, pay to the plaintiffs their costs of suit,, to-be taxed.

Decree accordingly.