Case ID: sc-eq_7/html/0598-01.html
Source: Caselaw Access Project
Author: {"author": "Colcock, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Lowndes and I’On v. Chisholm.
    A surety entitled to all the securities given by the principal. The court will relieve from a mistake of law. as well as of fact. The mortgagor is the owner of the land, by act of 1791 ; but on a judgment at law being obtained against him, without foreclosing the mortgage and execution issued, nothing but the equity of redemption can be sold j and where a purchaser bought thinking he obtained the fee-sfltnple. the court set aside the sale on account of the mistake, but ordered him to account for rents while in possession. Relief is given in cases of mistake, where the mistake was clearly one of law. The purchaser under the mistake considered as a mortgagee in possession, and must account for rents and profits. The sureties to a bond, to secure which the principal gave a mortgage, are entitled to the benefit of a foreclosure and sale of the mortgaged premises, they having paid the debt. - They are entitled to the benefit of all the securities given by the principal. The court of equity has the power to order sales on a credit. It must not be governed by an arbitrary discretion. Sale set aside and resale ordered; notice of one month to be given, and a credit of nine months, with personal security. All just allowances to be made to the defendant for necessary repairs, management and improvement. Defendant’s costs at law and inequity allowed.
    In June, 1806, George Chisolm sold to William S. Hasell, a wharf in Charleston for the sum of 848,000. The purchase money, except §22,000 was paid up. For the residue of §22,000, Hasell gave seven bonds, viz :
    1 bond payable 30th of June, 1807 for §4,400 1 “ “ “ “ 1808 “ 4,400
    1 “ “ “ “ 1809 “ 4,400
    1 “ “ “ “ 1810 “ 1,400
    1 “ “ “ “ 1811 “ 400
    1 bond with J. B. I’On as surety, 1810 “ 3,000
    1 “ “ W. Lowndes “ 1810 “ 4,000 — 822,000
    To secure the payment of these bonds, Hasell gave Chisolm a mortgage on one-half of the wharf. On the 30th of August, 1806, Chisolm assigned the two bonds on which Mr. Lowndes and Mr. I’On were sureties to the State Bank, as well as so much of the mortgage as relates to the said Bonds, and guarantied the payment.
    Hasell having mortgaged one moiety of the wharf as above mentioned, sold the other moiety to Abraham Motte, and paid nothing on the bonds. All the bonds, except those assigned, were put in suit at law by Chisolm, and a judgment recovered on the 17th of February, 1810, and the undivided moiety of the wharf belonging to Hasell was taken in execution and sold by the sheriff under a Ji. fa. upon the judgment without any foreclosure of the mortgage, and purchased by ChisoIm*for §15,000. In March, 1811, Mr. Chisolm filed a petition in the court of equity for Charleston district, for a partition of the wharf, against Motte and wife and their trustees. A writ of partition issued, and the commissioners certified that the property could not be divided, and recommended a sale. They certified also that Mr. Chis-olm had offered to accept whatever was due of the purchase of Hasell and release his moiety, and recommended that time should be allowed to effect this arrangement. The report was confirmed, but no arrangement was effected. The court ordered a sale and the property was sold by the master in Novemver, 1811, to make partition between Chisolm and Motte, and Chisolm became the purchaser at $55,000.
    The State Bank sued Lowndes and I’On on the bonds to which they were sureties, recovered judgment and received satisfaction of them. This bill was filed by them against Chisolm, claiming to stand in the place of the Bank, and to have the proceeds of the mortgaged property applied to pay them in their proper proportion, and insisting likewise that the equity of redemption was not foreclosed, and that the mortgaged premises in Chisholm’s possession were liable to them as mortgage creditors standing in the place of the Bank.
    On the part of complainants, Mr. Motte testified to improvements made by Hasell on the wharf, to the amount of $12,000. That the sheriff’s sale was for cash, and 10 per cent, to be paid down. That he would have bid but was prevented because he could not pay the cash. That it would have sold better if it had been put up in parts — but the whole undivided moiety of Hasell was offered at one time. He had no objection to the sheriff’s title, but was prevented from buying by want of funds. It was also proved by Motte that Hasell was in North Carolina at the time of the judgment and sale, and was ^totally an insolvent man. When the sheriff sold the undivided moiety L in June, 1810, he offered the fee-simple of the property and not the mere equity of redemption for sale. Chisolm and his counsel acting under the same impression, meant to sell the entire interest of Hasell.
    The chancellor’s decree (Chancellor DeSaussüre) declared that the complainants had a right to stand in the place of the Bank, and to receive a proportionable part of the mortgaged property of Hasell, and ordered Chisolm to account for the rents and profits of the wharf. It ordered him also, as standing in the place of Hasell, to pay to the complainants their principal, interest and costs, or the mortgaged premises to be sold (nothing but the equity of redemption having been previously sold by the sheriff,) and the proceeds applied to satisfy the complainants, and also to pay him (Chisholm) so much as was remaining due to him on his mortgage from Hasell.
    From this decree the defendant appealed on the grounds:
    
      First. That the doctrine assumed in the decree was that Chisolm could not lawfully apply the mortgaged property towards the bonds which were secured by the mortgage alone, a position not to be supported by principle or authority.
    
      Second. That the decree declared that the complainants were entitled to the same remedy against Chisolm which the Bank, to whom he assigned the bonds, would have been entitled to. But that this was wholly inverting the situation and rights of the parties, and making Chisolm the obligee (who took a bond from Hasell wherein the complainants were bound as joint obligors) guarantee them the sureties against Hasell, the principal.* And if this decree could stand, no man could assign a bond if the relation of principal and L surety existed among the obligors, without making himself liable to pay back the money if the surety should pay it.
    
      Third. That if relief were granted on the ground that the mortgage was still a subsisting lien, equity required that the parties should be put in statu quo. The sale should be annulled and Chisolm considered as a mortgagee in possession.
    
      Fourth. That the property was put up by the sheriff and bought in by Chisolm, under the opinion, on all sides, that the mortgage was thereby extinguished; and to compel him to hold the property subject to the mortgage would be forcing on him an entirely different contract, which would be inequitable and unjust.
    
      Fifth. That the acquiescence of the complainants in the sale of Hasell’s property, and the peculiar circumstances of the case were a bar to relief.
    
      Sixth. That upon the case made upon the bill and answer and evidence, the bill should have been dismissed with costs.
    April 5th, 1827.
    Petigru, Attorney General, for the appellant.
    There is nothing in the merits of this case, so far as the sheriff’s sale and the defendant’s purchase, to distinguish it from an ordinary sheriff’s sale. The questions of law arising are, first, that the complainants were entitled to be subrogated to the rights of the Bank, to whom their bond had been assigned. The defendant not only transferred the mortgage as a collateral security, but added his personal guarantee. It would involve the contradiction of a creditor guarantying the security of his debtor against his liability.
    The next objection is, that the equity of redemption only could be sold. That was all the interest which Hasell had in it. The legal ^ee was ⅛ Chisolm. He *was competent to consent to the sale of it. That would be doing Hasell a favor. If parties act upon a deed it is good in equity although not at law. Coop. Rep. 103. There can be no doubt that the defendant acted in the belief that he could dispose of the fee.
    Ford, contra.
    It is unimportant what were the intentions of the defendant. The court will look to the consequences, rather than to the motive of action. There is then no doubt that the defendant did use a legal process, the effect of which is, if his cause prevails, to secure the wharf to himself exclusively in a manner which renders it impossible for others interested to interpose their claims. The legal effect of the sale was to put the defendant in possession as mortgagee, and as such he was liable to account for rents, &c. 2 Ves. 99, 104 — • 156. If one assign a debt, the securities pass by such assignment. 3 Johns. Cha. Rep. 322. There is also in this case an express assignment of the security to the Bank; and no act that he could do would divest them of that right. The purchaser at sheriff’s sale stands in the place of the defendant. The mortgagee in possession is trustee to the mortgagor. I Johns. Cha. Rep. 550. 2 Fonb. 257, 261. The equity of redemption may be sold under a fi. fa. and nothing else can be sold : of course, the land still stands chargeable with the debt. Nor will the mortgagee’s bidding at the sale alter the thing’. I Caine’s Rep. 47. 10 Johns. Rep. 481. 4 Johns. Rep. 151, 222. The equity of redemption is a title in equity. 1 Vern. 190. 1 Mad. Cha. 414, 415. Nor can any agreement between the parties change the character of the mortgage. Once a mortgage, always a mortgage. 1 Vern. 8. 1 Vern. 418. The right of redemption is not confined to the mortgagor. Any one who has acquired an interest may come in and redeem. Chancellor Kent says, there never was a case in which *the mortgagee can foreclose without the decree of the court. Hart v. Ten Eyck, 2 Johns. Cha. Rep. 101,. 125. The court will not order or decree a foreclosure until the whole sum is due and forfeited, and then they will allow the party time (six months) to redeem. 2 Johns. Cha. Rep. 63. 2 Vent. 365. 1 V,ern. 232. 3 Johns. Cha. Rep. 467. The court will, under circumstances, enlarge the time to foreclose ; and in the case of Edwards v. Cunliffe, 1 Mad. Rep. 287, it was enlarged a fourth time. When a part of the debt is due, the court will decree a sale of part of the property if it is capable of division. 2 Johns. Cha. Rep. 486. 4 Johns. Cha. Rep. 534. The property here was capable of division, and by this mode of proceeding, the complainant has been deprived of all these advantages. A mortgagee in possession is bound to account, and that although he entered believing he had a right, and that the equity had been foreclosed. 1 Mad. 269, 278. If a creditor take a mortgage from his debtor, his personal surety is entitled to the benefit of it, and the creditor shall be entitled to it if he pays the debt. Hayes v. Ward, 4 Johns. Cha. Rep. 123, 413. Hampton v. Levy, 1 M’Cord’s Cha. Rep. 107.
    Toomer, the same side.
    The fee cannot be sold but under a decree or order of foreclosure. It is true, that if the mortgagee purchases, the fee and the equity of redemption are united in the same person, and there is no one to complain. In Hunt v. Rousmanier, 8 Wheat. 211, 215, the court say, that they have found no case in which a plain and acknowledged mistake in law has not been relieved against.
    King, in reply.
    When this property was sold, the sale was made according to the understanding of the law at that time, as laid down in the case of the Executors* of Ash v. Executors of Livingston, 2 Bay, 81. Relief may be granted where a person has acted L under an erroneous construction of law. Bacon’s Law Tracts, 280. Pothier, 387, et passim. 2 Bro. Cha. Rep. 250. Onions v. Tyrer, 1 P. Wms. 345. 1 Yes. and Beam. 168. 16 Yes. 72, 84. 1 Binney, 27, 37. Parrot v. Parrot, 14 East, 423. 2 Desaus. Rep. 529. 7 Johns. Cha. Rep. 394. 2 Pothier, 444. The statute of limitation was not pleaded.
   Curia, per

Colcock, J.

The principal ground now made does not seem to have been much considered below. I am, in the first place, constrained to think that the case has been unnecessarily encumbered with the fact, that the bonds to which the complainants were sureties had been assigned to the bank, and with a great deal of argument founded on that fact, when it can have no possible bearing on the rights of the complainants. Their equitable claim to the aid of this court arises out of the original contract made by their principal with the defendant, and their subsequent payment of the two bonds to which they were sureties. To whom they were paid was not a matter which could either increase or diminish their equitable claim, nor could the fact of the bonds having been assigned create any other right than that which they had before.

The first, and the important question in the case is, whether the defendant is bound by the purchase at the sale made by virtue of the execution ? It is said that he could acquire no more than the equity of redemption under that sale; but yet that he must be held accountable for the fifteen thousand dollars which he bid for the property, under a supposition that he was buying the fee-simple. And this position is maintained by attempting to show that a court of equity never relieves against a mistake at law, though it will always relieve against a*mistake of fact. Now, without attempting to investigate the propriety of this distinction, as being generally well founded, it is obvious that cases may arise in which it becomes the duty of a court of equity to relieve against the consequences of a mistake at law as well as against those of a mistake of fact. The law is sometimes doubtful. A sudden and important alteration of the well established doctrine on any particular subject, by a crude undigested act of the legislature, oftentimes produces such uncertainty as to render it extremely difficult to know wrhat the law is, until the proper tribunals shall have given the act some exposition. And this certainly was the situation of the country, in relation to the act of 1791, until the decision ex parte the city sheriff.

The act of 1791 declared that the mortgagor was the owner of the land, notwithstanding the conveyance to the mortgagee, and says the land is only to be considered as a pledge. Now under that state of things it was supposed that the interest of the mortgagor might as well be disposed of by a sale under execution as by the usual mode of foreclosing the mortgage in equity, or by the mode prescribed by the act, which applied only to some particular cases; and it is admitted that in this case the defendant thought he was selling the fee. And it has been further stated, and not contradicted, that he was confirmed in such opinion by that of one of the most distinguished members of the bar. Be that as it may, there was, to say the least of it, some confusion created by the act of 1791 and the subsequent act of 1797; and although the conduct of the defendant has been complained of as hard and rigorous, 1 confess I can discover nothing in it which should preclude him from the benefit of that relief which has been afforded in many cases of a similar kind. His debtor failed to comply with his contract, and he sought the remedy which *the law gave him, and it is evident, meant to use it in legal form. His debtor had left the State. There is no evidence of any overtures of accommoda. tion. What then was the rational conclusion? I think no other could be drawn from the circumstances, than that the property was abandoned by the debtor. Had there been a regular foreclosure either at law orin equity, there would have been no ground left for this application. But it is well established that relief is given in cases where the mistake has been clearly one of law. And the authorities relied on put the matter beyond all doubt, if indeed it could be doubted at this day. The only case on which I shall make any particular comment is that of Hunt v. Rousmanier, 8 Wheat. 215, in which the point is expressly decided in the opinion delivered by Chief Justice Marshall, in which he refers to some of the English cases which have been relied on in the argument and says, “although we do not find the naked principle that relief may be granted on account of ignorance of law asserted in the books, we find no case in which aplain and acknowledged mistake in law is beyond the reach of equity,” and surely no case can prove more clearly that such mistake is not beyond the reach of law, than the case of Landsdown v. Landsdown, Mosely’s Rep. 346. The ignorance in that case was that the complainant was entitled as eldest son to the estate; and yet relief was afforded in so plain a mistake.

It being determined then that the defendant is not to be held liable on the purchase made under the execution, it follows of course that the original debtor, William S. Hasell, is still entitled to the equity of redemption, and the defendant is to be considered as a mortgagee in possession, and as such liable to account for the rents and profits.

But as no claim is set up by the mortgagor, it becomes a question whether the complainants are entitled* to any and what relief; and on this part of the case it is certainly not necessary, after the decision in the case of Hampton v. Levy, 1 M’Cord’s Cha. Rep. 107, that much should be said. The equitable claim of a surety to all the securities given by the principal to his creditors is now too well established and two familiar to need anv illustration. The sureties in this case had a right to rely and no doubt did rely on the mortgage as operating as a counter security in their favor, to the amount of whatever the land would bring at public sale. 1 say public sale ; for as all contracts are supposed to be made in reference to the law of the land, they had a right to calculate that, if their principal failed to pay the debt, the mortgage would be foreclosed according to law; and in such case it was well known that the property would be sold at public sale and on a reasonable credit; for notwithstanding all that has been said against the exercise of this power by the court of equity of “selling on credit,” it seems to be now too well established to admit of any doubt; and therefore both the defendants and complainants may be considered as contracting with reference to this power of the court — a power which it is not pretended the court can exercise to an arbitrary extent, any more than any other discretionary power (of which there are an infinite number vested in all the higher courts both of law and equity.) The property not having been disposed of then according to law, if on an account taken it should appear that the debt is not yet paid, the mortgage is to be considered as foreclosed and the property must be sold on a credit. On this part of the case we concur with the chancellor; but we do not conceive that the defendant is in any event liable to refund the money paid by the sureties. If the rents and profits of the wharf and the proceeds of the sale cover the bonds to which they are sureties, it is well; but if not, they must sustain the loss, *for their equity extends no further. Whether the property when brought to the hammer should sell for its value or for a less sum was a risk which they the sureties took upon themselves.

It is therefore ordered and decreed, that the sale made by the sheriff of Charleston district, of a moiety of the wharf mentioned in the pleadings, be set aside, and that the said moiety of William S. Hasell in the wharf be sold by the master of this court, giving one month’s notice, and on a credit of nine months, -with personal security if required by the master, in the manner directed by the 44th rule of the court. And it is further ordered that the master do take an account of the rents and profits of the wharf, and that the defendant George Chisolm be charged with one moiety of the rents and profits as a mortgagee in possession. All just allowances to be made to the defendant for necessary expenses of repairs and management and improvement, after which the proceeds to be applied in the first place to the interest due, to be calculated according to the contract, and to his (defendant’s) costs at law and in equity; and in the next place to the satisfaction of the principal due to the defendant on the bonds of William S. Hasell in his hands, of which an account is also to be taken— and that the balance which may be still due to defendant (if any) be paid in the first place out of the moneys arising out of the sale of the property, and the surplus if any there be, to be then applied to the repayment to the complainants of the sums paid by them and the interest which has since accrued.

Decree modified.