Case Name: ANN STODDARD, Plaintiff and Respondent, v. CHARLES DENISON, Defendant and Appellant
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1869-12-04
Citations: 2 Sweeny 54
Docket Number: 
Parties: ANN STODDARD, Plaintiff and Respondent, v. CHARLES DENISON, Defendant and Appellant.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 32
Pages: 54–66

Head Matter:
ANN STODDARD, Plaintiff and Respondent, v. CHARLES DENISON, Defendant and Appellant.
[Decided December 4, 1869.]
A mortgage of chattels is a sale on condition. The legal title is vested in the mortgagee, subject to the mortgagor’s right to perform the condition.
After default, such legal title bécomes absolute, leaving a mere equity of redemption in the mortgagor.
Such equity can be disposed or got rid of only by an action in equity to foreclose, or by a sale under the power contained in the mortgage; or, possibly, by lapse of time.
Where a mortgagee takes possession of the mortgaged property, it will, if of sufficient value, be deemed a satisfaction of the debt until the equity is foreclosed. It will not, however, extinguish the mortgagor’s right to redeem.
To extinguish the equity of redemption, by a sale under the power contained in the mortgage, it must be a fair and bona fide sale.
The mortgagee has no right, by any unfairness, to sacrifice the property, and deprive the mortgagor of a surplus over the debt, which, by an openly conducted sale, might arise. Per Monell, J.
A mortgagor’s only remedy is by action to redeem. He cannot maintain an action at law, under any circumstances. Per Monell, J. Hot even where the mortgaged property has been wrongfully and unfairly disposed of.
In an action by a mortgagor against a mortgagee, to recover damages for an unfair sale of the property, where it appeared that the property was the furniture of a hotel, distributed among a large number of rooms, and which the mortgagee had sold under the mortgage, chiefly in bulk, for a sum much less than what it would have brought if it had been sold in suitable lots, it was held the action could not be sustained. The action should have been to redeem.
Relief in equity can be granted ex cequo et bono, only upon payment or tender of the whole debt. Therefore, where, upon an unfair sale, less than the whole debt was realized, a tender of the residue of the debt must be made to lay a foundation for an action to redeem. Per Monell, J.
In an equitable action to redeem, the court can give complete relief; and where the mortgagee, by disposing of the property, has prevented a redemption, reparation may be made in damages.
Before Barbour, C.J., Monell, and Freedman, JJ.
Appeal from a judgment.
The action was to recover damages for wrongfully selling personal property under a chattel mortgage.
The plaintiff, to secure the payment of a sum of money on demand, gave to the defendant a mortgage upon certain personal property, mentioned and described in a schedule thereto annexed. It contained an agreement, on the part of the mortgagor, that in case of default in payment, it should be lawful, and the mortgagee was authorized and empowered, to enter upon the premises; to take away, and to sell, and dispose of the property for the best price that he could obtain, and out of the moneys arising therefrom to retain and pay the sum mentioned, and all charges touching the same, rendering the surplus, if any, to the mortgagor’s representatives or assigns. Until default the mortgagor was to remain in possession of the property.
The mortgage became due, and remaining unpaid, the defendant took possession of the mortgaged property, and also of certain other property not included in the mortgage, but which he claimed under the mortgage, and sold the same at public auction.
On the trial, before Mr. Justice Freedman and a jury, it was proved that the mortgaged property, together with other property of the plaintiff not included in the mortgage, was taken possession of under the mortgage by one Mealio, under a special power of attorney from the defendant. The property taken consisted of the furniture of a hotel, and was distributed among some seventy rooms. An advertisement of the sale was posted and published in one newspaper once before the sale.
On the day of sale an auctioneer employed by the defendant’s attorney proceeded to sell. In many respects the evidence of the manner in which the sale was conducted was conflicting.
On the part of the plaintiff it was shown that, with one or two exceptions, the property was not sold separately, or in parcels, or even in small lots; but the contents, more or less, of each room were sold collectively, or in one lot or parcel.
The defendant’s witnesses testified that the sale of the entire contents of rooms was confined to the bedrooms. There was also a difference in the evidence in respect to the number of persons present at the sale. The auctioneer and the attorney of the defendant testified that from thirty to forty persons attended the sale; that they endeavored to sell the property in lots or parcels, or separately, and could not get any bids, and were obliged to sell the entire contents of a room. But, on the part of the plaintiff, it was shown that she requested the attorney and auctioneer to sell separately, or in small lots, and they refused. The contents of each room were put up and sold in one lot.
There was some evidence that the property covered by the mortgage, and also of the property not included therein, was together worth about $3,500; the value of the latter property was estimated at about $500.
The sale realized only about $670. The evidence in respect to most of the matters in dispute was conflicting.
A motion was made to dismiss the complaint on the following grounds:
First. Because on default in payment the title to the property vested in the mortgagee, and he could dispose of it as his own in any manner he saw fit.
Second. That the action should have been to redeem, after first offering to pay the debt.
Third. That the defendant was not liable for the acts of the attorney or auctioneer.
The motion was denied and the defendant excepted.
There were some requests to charge the jury embracing, substantially, the same proposition as was contained in the third ground for the nonsuit. And also the further request to charge that the defendant is not liable for property not included in the mortgage, unless it was taken and sold with his knowledge or under luis direction.
The requests were refused and defendant excepted.
The court charged the jury that the mortgage transferred the legal title to the property to the mortgagee, subject only to be defeated by performance of the condition. That upon failure to perform, such title became absolute, notwithstanding the provision for a sale. That if the defendant had only taken possession of the property, the plaintiff could still redeem. That the defendant was not bound to sell; he might have kept the prop erty, subject to the mortgagor’s right of redemption, but if he sold he was bound to obtain the best possible price; and if he did not choose to sell the entire property together, he was bound to offer it in such lots and parcels as were calculated to bring the highest price.
It was left to the jury to determine whether, under the evidence, the property was sold in a manner calculated to bring the highest or best price.
They were separately instructed in regard to the property not included in the mortgage, that if they believed there was any such property, which could have been easily separated from the mortgaged property, the defendant had no right to sell such property, and the plaintiff was entitled to recover its value.
Exceptions were taken to several parts of the charge.
The jury gave the plaintiff a verdict for $1,492.
The defendant appealed.
Mr. Erastus Cooke for appellant.
By default in the payment of the mortgage, the title to the property vested absolutely in the defendant (Champlin v. Johnson, 39 Barb., 608, and cases there cited; Talman v. Smith, ib., 390).
The judge’s charge so laid down the rule in terms, but followed it up with a qualification which deprived the principle of its very essence. It was that this absolute title consisted only of the right to reduce the property to possession and to hold it, subject to a right of redemption by the mortgagor. This qualification reverses the rule governing all the adjudged cases. Until forfeiture, the title is in the mortgagee, subject to the condition of payment when due. After forfeiture, the title is absolutely in the mortgagee. The right to dispose of property is an important element of ownership. To say that a man is absolute owner of property but has no right to sell, give, or barter it away when he pleases, is a contradiction of terms.
Welles J., in Talman v. Smith (39 Barb., 393), said, in reference to the case then under consideration: “ When Sawyer (the mortgagor) was in default in not paying the note, to secure which the mortgage was given at its maturity, the Spencers (mortgagees) had a right to take the property into their possession, and dispose of it at their pleasure. The right of the mortgagees to the property as the legal owners, etc., was as perfect upon the failure of the mortgagor to perform the condition of the mortgage, as it would have been in case they had sold it under the mortgage and become the purchasers at such sale.”
This language certainly does not justify the ruling in the case at bar, that the defendant could go only so far as to reduce the mortgaged property into his possession, until a regular sale under the power contained in the mortgage.
If the case last cited means any thing, it is that the mortgagee has the same rights in respect to the property before a sale under the power, as after such sale, and a subsequent purchase by himself.
Dane v. Mallory (16 Barb., 46) holds distinctly that the mortgagee, after forfeiture, may sell the mortgaged property at private sale, “just as he might sell any other property to which he had an absolute and unqualified title ” (per Gridley, J., 53).
The judge before whom this case was tried fell into the mistake of treating the mortgagee, after forfeiture, as pledgee of the goods rather than as absolute owner (40 Barb., 189, 190).
The mortgagor, after default, has no legal right to the property. The equity of redemption is not an aggressive right until established by a court of equity on a bill filed to redeem (Dane v. Mallory, 16 Barb., 50).
In the complaint, the facts upon which he claims that his right of redemption should be established, must be set forth, and the money due must be ready and offered to be paid, and then the court may fix the terms on which the plaintiff shkll redeem, in view of all the facts and circumstances of the case; but until the right of redemption is thus established, the mortgagor in default has no right upon which he can predicate an action at law in respect to the property (Chamberlain v. Martin, 43 Barb., 607, 608).
Even tender of the money due on the mortgage, after default, gives the mortgagor no right to maintain an action for the property (Brown v. Bennet, 8 John., 96; Olcott v. Tioga R.R. Co., 40 Barb., 180).
The whole scope of the charge was wrong. The case was submitted on an erroneous principle, and, therefore, a new trial should be granted.
Mr. Nathan Comstock for respondent.

Opinion:
By the Court:
Monell, J.
If this action can be sustained at all, I think there was sufficient evidence to go to the jury,, upon the two principal questions of fact, namely, as to whether the sale was conducted in a manner calculated to produce the best price, and as to the amount of damages.
In respect to the property claimed not to have been covered by the mortgage, there is no doubt of the plaintiff's right to recover. There was evidence to support the claim, and it was properly submitted to the jury.
Hor have I any doubt that the defendant, if otherwise liable, must be held responsible for the acts of his agent, whom he empowered to take and sell the property; and such responsibility extends to all the property the agent took under the mortgage, and to the manner in which he disposed of it.
The evidence bearing upon the question, as to whether the sale was made in a manner calculated to produce the best price, and also upon the question of damages, was conflicting. But, as I think it was sufficient to go to the jury, we cannot disturb their verdict.
The mortgaged property consisted of household furniture, the contents and fixtures of a bar, and other property used in a hotel. It was distributed among some seventy rooms in a five-story building; most of them being used as bedrooms, and containing the usual bedroom furniture. There were parlors containing the usual parlor furniture, and bar-rooms, and dining-rooms, each with the furniture usual to such rooms.
The evidence of the plaintiff and her witnesses showed that she requested to have the property sold separately, which was refused, and it was sold collectively, the entire contents of room by room throughout the house. On the part of the defendant much of this was denied, leaving it in doubt whether the property could have been sold separately at all.
The plaintiff testified that she had purchased the property at the time it was put into the hotel, and stated the aggregate price she had paid for it; and there was other evidence of value. But, as my conclusion is arrived at upon the law of the case, no further reference to the facts is necessary.
We are now brought to the question whether this action can be maintained at all, and the question is presented in two aspects :
First. Does the title of a mortgagee, on default, become so far absolute as to deprive the mortgagor of all right or interest in the mortgaged property % and, second, assuming that it does not, and that there is a remaining right or interest in the mortgagor, can such right be enforced in an action at law?
I think the first branch of the inquiry can be correctly answered in the negative.
A mortgage of personal chattels is a sale on condition. The legal title to the chattel is vested in the mortgagee, subject to the right of the mortgagor to perform the condition. Until default there is no doubt of the mortgagor's right to perform, and upon performance to reinvest himself with the legal title.
In Corlelyon v. Lansing (1 Caine's Cases in Error, 202), it is said the title passes, with a condition of a defeasa/nce / in Charter v. Stevens (3 Denio, 35), it is said the mortgage transfers a defeasible title to the property mortgaged; and in Mattison v. Backus (1 N. Y. R., 297), the interest of the mortgagor is called " a right of redemption only." Until default, therefore, the legal title of the mortgagee is subject to defeasance, upon performance of the condition by the mortgagor. Upon breach of performance such title becomes absolute at la/w. If any right thereafter remains in the mortgagor, it is a mere equity of redemption. That such right to redeem remains to the mortgagor seems to be well settled (see Patchin v. Pierce, 12 Wend., 62, and cases there cited).
Nelson, J., says, " Notwithstanding the forfeiture and perfection of title in the mortgagee in such a case, I have always supposed, and have no doubt, that in equity, upon well-settled principles, the mortgagor has the right to redeem." And Story says, although the title becomes absolute at law, equity will interfere to compel a redemption (Story on Bailments, § 287; Fuller v. Acker, 1 Hill, 475 ; 1 Parsons on Contracts, 453; Mattison v. Backus, 1 N. Y. R., 297). I shall have occasion to refer to several other cases on this subject, when I endeavor to ascertain what are the remedies of the mortgagor.
It is evident, then, that the absolute title, which a mortgagee acquires after forfeiture, which term is so frequently used in the cases, is an absolute legal title; and that, notwithstanding default, there is a right, or, as it is called, an equity of redemption remaining in the mortgagor.
The respective rights and interests of the parties, therefore, are—the legal title is vested in the mortgagee, subject to an absolute right of redemption upon performance of the condition; upon breach of the condition the legal title becomes absolute in the mortgagee, leaving a mere equity in the mortgagor.
The legal title becoming absolute or perfect in the mortgagee, and he having taken possession of the mortgaged property, let us see how the equity of the mortgagor may be disposed or got rid of.
In Charter v. Stevens (ubi supra), two remedies are suggested. The court say the mortgagor was not divested of all interest in the property, for he still had (after default) an equity of redemption which the Court of Chancery would protect and enforce. " On the other hand the mortgagee might go into chancery to compel a speedy redemption, or to foreclose that right; and the same object might be attained by a fair public sale of the property, on due notice to the mortgagor." That case also holds that no more property can be sold than is sufficient to satisfy the mortgage debt, etc. These' remedies are also recognized in Patchin v. Pierce (supra). Nelson, J., after asserting the continuance of this equity in the mortgagor after default, says: " It seems, however, that the right to redeem may be foreclosed with- • out judicial proceedings, by a sale of the property as in the case of a pledge upon reasonable notice to the mortgagor." Tender of the money after forfeiture (he says) does not operate to reinveskthe title in the mortgagor, so as to enable him to recover at 1cm, and this is sustained by the vice-chancellor, and approved by the chancellor, in Rogers v. Traders' Insurance Company (6 Paige, 587, 594).
These remedies—actual foreclosure by judicial proceedings, or sale under the power contained in the mortgage—seem to be the only modes by which the equity of the mortgagor can be extinguished. These are distinctly recognized in Talman v Smith (39 Barb., 390), where the court say this right of redemption continued in the mortgagor until the property was sold. There is no doubt, I think, that when a mortgagee takes possession of the mortgaged property, it will, until the equity is foreclosed, be deemed a satisfaction of the debt if it be of 'sufficient value.
In Case v. Boughton (11 Wend., 106), the defendant gave the plaintiff a chattel mortgage to secure payment of the note in suit, and when the note became due the plaintiff took possession of the mortgaged property, but did not sell, and the court held it was payment. The court say, that the property being of sufficient value to satisfy the debt, no further act besides taking possession was necessary to constitute payment. And they further say, that if the property had been sold upon the mortgage when it was forfeited, and upon a fair sale brought less than the amount of the debt, the mortgagee would have been entitled to demand the. balance of his debt. In Wheeler v. Miller (2 Denio, 170), this effect of taking possession is substantially affirmed. The action was trover by the mortgagor after tender of the debt but after default. It was held the action could not be maintained. At law he had no title whatever, and could only redeem in equity. The court say the mortgage authorized but did not require a sale to satisfy the debt; and such power of sale does not extend the time of payment, or under any circumstances reinvest the mortgagor with title to the property.
Although the mortgagee after forfeiture take possession of the property (and which possession while it continues, if the property is of sufficient value, will be deemed payment of the debt), it will not extinguish the equity of the mortgagor, unless, perhaps, upon his failure for a sufficient length of time to assert his right. Story says (2 Story Eq., § 1031), the equity of redemption may be asserted by the mortgagor, " if he brings his bill to redeem within a reasonable time" (Kemp v. Westbrook, 1 Vesey, 278; Harrison v. Hart, Comyns R., 392, 411).
Such equity can be extinguished, therefore, only in some of the modes which have been suggested, namely, by a judicial decree, a sale under the power contained in the mortgage, or possibly by lapse of time. If the mortgagee resorts to none of these remedies, it is clear that the mortgagor may, certainly within a reasonable time after forfeiture, notwithstanding his default, assert his right in equity to redeem.
Where a mortgagee, after default, brought trover against a person claiming under the mortgagor for a conversion of the chattel, the court held (Hinman v. Judson, 13 Barb., 629) that there was a clear right of redemption in equity in the mortgagor, and that such right had not been extinguished at the time the suit was commenced. The mortgagee had never taken possession or sold the property. In that case the defendant, in effect, was allowed to redeem, the recovery being limited to the amount due the plaintiff, instead of being for the value of the property.
To extinguish the equity of the mortgagor after forfeiture, by a sale under the power contained in the mortgage, it must be a fair and bona fide sale. Such is the language of many of the cases. In Charter «. Stevens (ubi stipra), it is said the equity may be extinguished " by a fair public sale; " and in Chamberlain v. Martin (43 Barb., 610) the end may be attained, the court say, " assuming such sale to be fair and bona fide?
It needs, however, no citation of cases to establish a principle so obviously just, that an unfair or fraudulent sale of mortgaged property by the mortgagee should and will not defeat or extinguish the equitable rights of the mortgagor. The mortgagee has no right, by any unfairness, to sacrifice the property and deprive the mortgagor of a surplus over the debt, which, by an openly conducted sale, might arise. His absolute legal title does not enable him to deal with the property quite as though it was his own, and the remark, apparently to the contrary, of Justice Gridley, in Dane v. Mallory (16 Barb., 53, 54) is qualified. He says, " especially as against the plaintiffs, who cure mere strangers." And I cannot think Justice Welles, when he said, in Talman v. Smith (ubi supra), the mortgagees " had a right to take the property into their possession, and chispóse of it at thevr pleasure" intended to assert that they could make an unjust and unfair sale to the prejudice and injury of the mortgagor.
Questions involving the rights and interests of the parties to a chattel mortgage have usually arisen in actions at law. In those actions it has uniformly been held that the legal title of the mortgagee was so absolute and perfect that it could not be divested or disturbed in such an action. I have not been able to find any case of a proceeding in equity to assert the right of redemption, either before or after forfeiture. But it is everywhere assumed and conceded that such a proceeding may be instituted and will be entertained.
It follows from all this that the mortgagor's only remedy is by seeking relief in equity, whether he seeks to redeem before or after forfeiture. The dicta in all the cases to which I have referred are to that effect, and although, perhaps, mere dicta,, are entitled to all the weight of authority.
Hor do I see how an action at law can be maintained under a/ny circumstances. Hot even where the mortgaged property has been wrongfully and unfairly disposed of. So far as the legal rights or obligations are concerned, a mortgagee may treat the property as his own, and if he squanders, destroys it, or gives it away, he incurs no liability at law. The party aggrieved must go into a court of equity, which alone can afford him redress.
It is evident, therefore, that the plaintiff in this action has mistaken her remedy, and instead of an action to recover damages for a wrongful sale of the property, she should have invoked the aid of the equitable powers of the court, in the nature of an action to redeem.
I have, not without much hesitation and doubt, satisfied myself that the defendant having, by a sale of the property, put it beyond the power of the court to allow a redemption, so as to reinvest the title in the mortgagor, the plaintiff might not be excused from going into equity, and be allowed to be compensated in this form of action, inasmuch as no other relief can,
. under the facts of the case, be awarded in equity. But upon consideration I find what appears to me an insuperable difficulty. Relief in equity can be granted, ex cequo et bono, oidy upon payment or tender of payment, of the whole mortgage debt. That must be averred and proved; and it lays at the foundation of the only remedy of the plaintiff in this case. Had the sale of. the mortgaged property realized sufficient to have satisfied the debt, together with the costs and expenses of sale, then, perhaps, a tender would not be necessary: But it was not so in this case. There remains, after applying the proceeds of the sale, a considerable amount of the mortgage debt still unpaid; and before the defendant can be prosecuted in any form of action, whether for unfairly disposing of the property or otherwise, he must be paid or have tendered to him the balance due.
Were it not for such fact we might sustain this judgment by allowing an amendment, or by conforming the pleadings to the facts. But as there has not been any tender, and a part of the debt is yet unpaid, this action, so far as regards any of the property covered by the mortgage, must entirely fail.
The right to recover the value of the property claimed not to have been included in the mortgage depends upon wholly different principles, which need not be alluded to here.
I have no doubt that in an equitable action to redeem, after a tender of the sum remaining due, the court can give complete relief. Having acquired jurisdiction of the action for the purpose of redemption, if it shall appear that the defendant has wrongfully placed it beyond the power of the court to decree a redemption, it can in the same action make complete reparation to the plaintiff in damages. Such damages, of course, would be assessed under issues properly framed and sent to a jury to be tried (Woodcock v. Bennet, 1 Cow. R., 711; 2 Story Eq., § 794 to 799).
All right to redeem was taken away, if the sale by the defendant was a fair and justifiable sale. If it was not a fair sale, then the plaintiff has not lost the right of redemption, and the question of the fairness of the sale must be litigated in the action to redeem.
If the views I have expressed are correct, the motion for a non-suit, on the ground that the action should have been to redeem, should have been granted, so far, at least, as the property included in the mortgage was in controversy.
I think, therefore, there should be a new trial. Upon which new trial the case, as the pleadings now stand, will be confined to the property claimed not to be covered by the mortgage.
Judgment reversed, and a new trial ordered.