#### *Chowning v. Cox and al.*

February, 1823.

*Mortgage*— What *Constitutes*— Conveyance *to*Creditors in Trust.† — Where a conveyance of real estate is made to a creditor, in trust to satisfy his own demand, such conveyance is not to be considered as a deed of trust, but as a mortgage, to which the right of redemptiou is incident.

Same-Sale under — Equitable Relief — Parties.—But if a sale is made by the creditor, under these circumstances, and the grantor comes into a court of equity for relief, the court will not decree in his favor, unless he makes the purchaser under the sale, a party.

This was a suit brought in the Williams-burg chancery court, and afterwards removed to the Fredericksburg district.

William Chowning, filed his bill against Peter P. Cox and Elizabeth Thompson, stating the following case: that on the 18th day of November, 1803, an agreement was made between the complainant, and the said Elizabeth Thompson, by which the latter agreed to sell and convey to' the complainant, a tract of land in the county of Westmoreland, called Laurel Grove, in consideration that the complainant would pay certain debts due from the said Elizabeth Thompson, set forth in the agreement, together with a sum of money to herself, making in the whole, 8761.: that one of the debts to be paid by the complainant, was c;ue to Peter P. Cox, and secured by a deed from the said Elizabeth to the said Peter, dated the Sth of August, 1801, conveying the same tract of land, and stating the consideration to be $1,500; with a condition that the said Peter should hold the said land in trust, to secure the payment of the said sum, with interest: that at the time of entering into agreement aforesaid, the complainant understood that there was a mortgage on the said land to the said Cox, and nothing more: that the complainant made several payments under his agreement, was put into possession of the *115land, and was preparing, by great exertion, to pay the purchase money, and exonerate the land *from this incumbrance, when in 1806, after he had paid the said Cox, the sum of 3001. 8s. in part of his debt, he was informed that the title to the said land, was doubtful: that in consequence of this information, the complainant filed a bill of injunction against Cox and Thompson, and one who, as the complainant was informed, claimed title to some part of the said tract of land: that the injunction was granted, and after-wards dissolved: that immediately after the dissolution of the injunction, the said Peter P. Cox undertook to sell the said land, without giving any warning to the complainant, or requiring payment of the balance due, and the said land was put up to public sale, and bought by a certain ; whether on his own account or that of the said Cox, the complainant did not know: that the deed to Cox, can only be considered as a mortgage, because there is no particular person named as trustee, ■who might act impartially between the debtor and creditor: that the-trust is uncertain and equivocal, as there is no covenant on the part of Cox, to receive payment from the grantor, and to release her, or re-convey the land: that if the deed is a mortgage, the proceedings of the said Cox, are illegal and improper: that he knew of the agreement between the complainant and Elizabeth Thompson, and had received from him two payments under that agreement: that Cox has caused the whole tract to be sold to pay the balance due; and threatens to1 bring an ejectment against the complainant. He, therefore, prays that the said Cox, and Elizabeth Thompson, may be made defendants: that he may be permitted to redeem upon paying the principal and interest due to the said Cox; and that the latter may be compelled to release all his claim to the said land, &c.

The defendant Cox answered, that the $1,500 lent to the said Elizabeth Thompson, 'wete not his own, but the money of his wards, the children of his brother; to secure the payment of which, the deed of trust mentioned in the bill was executed: that he advertised the said land *for sale, in pursuance of the deed of trust; but the sale was injoined at the suit of the complainant, under pretence that the said Elizabeth Thompson’s title to the said land was defective: that the injunction was afterwards dissolved, and the land again advertised for sale on the premises: that the complainant and many others attended; when the complainant, before the sale commenced, asked the respondent if he would receive from him eleven or twelve hundred dollars, and give a longer time for payment of the balance: that the respondent, induced by the distress of the complainant’s family, agreed, that if the said sum was paid in one hour, he would give a longer time for the balance: that the respondent waited at least three hours, and did not commence the sale, until he was informed by the complainant, that he had been disappointed in obtaining the money: that the sale , was then commenced, and several persons made bids for the land, but no one on account of the respondent: that the land was purchased by Mr. William Taylor for 6261. for himself, and not for the respondent; who offered to let the complainant have it, if he would pay the sum he had bid for it in eight or ten days: that the said deed was always treated by the complainant and Elizabeth Thompson, as a deed of trust, and not a mortgage: that the respondent admits, that he has received from the complainant, the sum of 3001. 8s. in part of the sum due, which, with interest, leaves a balance due to this respondent’s wards, of 2721. 13s. 8d.: that as to the title of the said Elizabeth to the said land, he believes it to be unimpeachable, &c.

The answer of Elizabeth Thompson, confirms the answer of Cox as to the consideration of the deed of trust: that she considered it as a deed of trust, and not a mortgage: that the complainant, in his treaty with her for the purchase of the said land, urged a reduction in the price, because the said Cox might, at very short notice, sell the land: that her title is undeniable: that since the sale, the said Cox .as trustee, has paid the respondent $400, *for which sum the complainant shall have credit in his -contract for the sale of the land to him, and the balance, if any, she will pay to him, on his producing evidence that he has paid or secured the payment, to Forbes and Whit-lock, according to his agreement with her; but if the deed aforesaid shall be considered a mortgage and not a deed of trust, she hopes that she may be paid the amount due to her by the agreement, and that the *116debt to' Forbes and Whitlock, may be also paid.

The chancellor referred the accounts between the parties to a commissioner, to ascertain the balance remaining unpaid in the hands of the defendant Cox, of - the sales of the land in the bill mentioned, and the amount due from the plaintiff to the defendant Thompson, &c.

The commissioner reported a balance unpaid in the hands of Cox, of 2531. 16s. 3d.; and that *Williamt*Chowning was indebted to Elizabeth Thompson, in the sum of 1661. 3s. 9d.

The chancellor decreed, that the complainant’s bill should be dismissed as to so much thereof, as seeks to be relieved against the said sale: that he and his heirs, should be forever barred of all title in the said land; and that the defendant Cox, after reserving out of the sale of the said land, the amount reported by the commissioner to be due to him, do pay to the defendant Thompson, the sum of 1201. with interest thereon from the first day of January, 1804, until paid; and that he do pay to the plaintiff the sum of 2531. 16s. 3d. with interest from the 29th day of May, 1812, until paid, &c.

From this decree, William Chowning appealed.

Wickham, for the appellant.

Leigh, for the appellee.

For the appellant, it was contended-1. That the deed was in fact a mortgage, " and that a creditor could not be a ^trustee for his own benefit. 2. That Cox was not authorised by the terms of the deed, nor by the principles of equity, to sell more land than was necessary to pay the debt due from Elizabeth Thompson to- him. The cases of Davidson v. Wait,(a) and Turner v. Turner,(b) were referred to, as analogous to the present case.

The counsel for the appellee replied, that Cox proceeded to sell the land with the perfect knowledge of Chowning, and without objection on his part: that as to Cox being creditor and trustee, Mrs. Thompson frequently recognized his character as trustee; and it is proved by the deed itself, that he was not the real creditor, but that the money borrowed, was that of his wards. But admitting that he was 'the creditor, there is no principle or authority which forbids the union of the two characters in the same person. No unfairness in the sale is proved or even alleged, in the present case. The case of Moore’s ex’r. v. Aylett’s ex’r. &c.(c) The deed authorised and directed Cox to sell the whole land.

*

For sequel of principal case, see Taylor v. Chowning. 3 *Leigh*654, 663.

†

Mortgages — Sale by Mortgagee under Power — Validity. — A trustee, In a deed of trust to secure creditors, being the agent of both parties, debtor “and creditor, ought to be an impartial person, and generally the creditor is supposed not to be such a person, and will,not he permitted to act as trustee, especially in regard to real estate, thtfugh the deed provide for his doing so. Gordon v. Cannon, 18 Gratt. 401, citing principal case. Thus, a sale made by a mortgagee under a power given him. without the intervention of a court of equity, independently of a statutory provision, is void. King v. Tuscumbia, C. *&*D. R. Co., 14 Fed. Cas. 556, Case No. 7808, citing principal case as authority. But the debtor may sanction and confirm a sale even of real estate, made by his creditor as trustee, and will be considered as having done so by being present at the sale and making no objection. Gordon v. Cannon, 18 Gratt. 401.

In Floyd v. Harrison, 2 Rob. 162, the principal case is discussed at some length. Baldwin, J., in delivering his opinion, said (p. 1781: “That case *(i. e.*the principal case) is a departure from the English doctrine now well settled, (1 Lomax’s Dig. 322; Coote on Mortg. 128). that a mortgagee may sell the property after forfeiture, under a power given for that purpose in the mortgage deed; a doctrine recognized in New York, and the practice there regulated by statute. 4 Kent’s Comm. 141. In *Chowning*v. *Cox,*it was decided for reasons lucidly and *cogently*stated, that the mortgagee could not thus, by his own act, foreclose the equity of redemption. But that decision has no application to the case before us. Here there was no forfeiture, and no foreclosure; no forfeiture, because the right of redemption was not limited in point of time; and no foreclosure, because the sale was not made to enforce a forfeiture. It was made by the mortgagee, not in that character, not as a creditor coercing the payment of his debt, but as a trustee appointed to possess, control, manage and dispose of the estate, with unlimited discretion, not merely for his own benefit, but for that of the grantor likewise. There are no considerations of j ustice or policy against the exercise of such a power, in which the grantor must he considered as giving his tacit concurrence; as much so as if he were present at the sale, and acquiescing therein; which according to Taylor v. Chowning, 3 Leigh 654, (the supplement to *Chowning*v. *Cox)*renders a sale by the *mortgagee*valid, though made by way of foreclosure.”

Allen, J., said, p. 183, that the doctrine of the principal case may be inconvenient, and an unnecessary interference with the rights of adult parties; but that the case had been recognized since as law, and *115very recently in Breckinridge v. Aula, 1 Rob. 148; and that he was not disposed, when there was but a bare court sitting, to disturb it. The judge said further that the distinction taken by Judge Baldwin between the case at bar and the principal case seemed to him to be unsubstantial; that, whether thesalebe made to enforce the forfeiture after the ■day of payment is passed, or to raise money in pursuance of a power conferred in the instrument, it equally militates against the principle which lies at the foundation of the rule — the power of the creditor over his debtor, and the incompatibility of a due exercise of the powers and duties of a trustee, with the relation of creditor. Stanard, J., who concurred with Baldwin, J.. said that he did not intend to bring in question the authority of the principal case, having strict regard to its particular circumstances, and the limitations on its doctrine deducible from the sequel of that case, Taylor v Chowning, 3 Leigh 654, but that he would call attention to the fact that the doctrines settled In England and recognized in New York, seems to have been wholly overlooked by counsel and court in the argument and decision of *Chowning v.*Cox, and that, though this consideration might not warrant the reversal of the principal case, it is most cogent to limit its authority to the particular case then in judgment; and forbid the application of general remarks used therein, or argumentative expansions of general principles inferred from it, to other cases as within the reason of that case.

See further, monographic *note*on “Mortgages” appended to Forkner v. Stuart, 6 Gratt. 197; mono-graphic *note*on “Deeds of Trust” appended to Cadwallader v. Mason, Wythe 188.

Trust Deeds — Cloud on Title — Duty of Trustee. — On this snbject, see principal case cited in Spencer v. Lee, 19 W. Va. 188, 195; *foot-note*to Wilkins v. Gordon. 11 Leigh 547, containing excerpt from Spencer v. Lee, 19 W. Va. 188; Rossett v. Fisher, 11 Gratt. 499; Hartman v. Evans, 38 W. Va. 676, 18 S. E. Rep. 814; *foot-note*to Hogan v. Duke, 20 Gratt. 244, containing extract from Hartman v. Evans, 38 W. Va. 679, 18 S. E. Rep. 814; *foot-note*to Lane v. Tidball, Gilm. 130; monographic *note*on “Deeds of Trust” appended to Cadwallader v. Mason, Wythe 188.

(a)

2 Munf. 527.

(b)

3 Munf. 66-6?.

(c)

 1H. & M. 29.

JUDGE CABELL,

February 13. — delivered the opinion of the court.*

This case presents the general question, whether a deed executed by a debtor conveying land to his creditor, and purporting to constitute him the trustee for selling the land, and applying the proceeds of sale to the payment of the debt- due to himself, can be regarded otherwise than as a mere mortgage, to which the right of redemption is incident: or, in other words, whether a creditor thus constituted a trustee, can, by the mere authority derived from the deed, and without resort to a court of equity, sell the lands so- as to bar the rights, of the debtor, and those claiming under him.

*Where a third person, disinterested and indifferent between the parties, is constituted the trustee, it cannot now be questioned that he possesses the powers claimed for the creditor in this case. We do not mean to insinuate that the court has gone too far in confirming these powers, and in sanctioning the summary proceedings to which they give rise: but we are of opinion, that it has gone far enough; that it has gone as far as the purposes of convenience and justice require; and that it cannot go farther, without opening a door to fraud and oppression. Although there is no decision which bears, expressly, on the point before us, yet the principles frequently declared in relation to the powers and duties of trustees in general, are utterly incompatible with the due exercise of those powers and duties by the creditor. Some of these principles will be found declared in the case of Lane v. Tidbal.(d) .It is there said, among other things, that a trustee, in a deed of trust, is to' be considered as the agent of both parties; and that he ought to act impartially between them, &c. It is '’surely not necessary, for the purpose now before us, tc proceed farther in the enumeration. It must frequently happen, that the time, the place, and the' manner of selling, will present questions of serious difficulty, and of great importance to the parties. The sum really due, at the time of sale, may also admit of much controversy. On all these points, as well as many others that might be mentioned, the interests of the parties may be, and frequently are, at direct variance; and to refer them, for adjustment, to the will of one party only, would be contrary to the clearest principles of natural justice. That any man should execute a deed conferring such powers, with a belief that the deed will be obligatory on him, affords another proof of the maxim, that the borrower is a slave to the lender. This is one of those cases in which it becomes necessary to protect men from the effects of their own folly or imprudence. *We are all, therefore, of opinion, that the deed in the record mentioned, did not give the power to sell the lands, so as to bar the right of redemption.

In pronouncing this opinion, we wish to be understood as confining ourselves to the case before the court, which is a case of real property. How far the same principle may, or may not, be applicable to a case of personal property, we wish to be understood as giving no intimation.

On these principles, if there were no other persons than the debtor and creditor, interested in this controversy, the court would not only reverse the decree, but provide for a sale under the directions of the court of chancery. But the person who purchased under the former sale, and who *117has the legal title, has not been made a party. Had he been before the court, he might have given a different aspect to the cause. He might have shewn, that although the sale cannot be justified on the sole ground of the powers derived from the deed, yet it ought to be confirmed in his favor, in consequence of the subsequent acts of the appellant. He ought, therefore, to have been a party; and the chancellor erred in pronouncing a final decree, without affording an opportunity to bring him before the court.

[t is proper to observe, that if the decree were free from the objection aforesaid, we should still have to reverse it for error against the appellee, Cox. The decree is erroneous, even on the principles on which it professes to proceed. The land sold for 6261 There was due to Cox the sum of 3721. 3s. 9d. which lie is directed to retain; of course, he ought not to have been subjected to pay more than the balance, viz. 2531. 16s. 3d. Yet he is decreed to pay that balance to the appellant; and the farther sum of 1201. to the appellee Thompson, with interest from January, 1804.

The decree is therefore reversed, and the cause remanded for farther proceedings, pursuant to the principles now declared.

*

Judge Brooke absent from indisposition.

(d)

 Gilmer’s Rep. 130.