Case Name: HAMPSHIRE v. GREEVES et al.
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1912-02-07
Citations: 143 S.W. 147
Docket Number: 
Parties: HAMPSHIRE v. GREEVES et al.
Judges: 
Reporter: South Western Reporter
Volume: 143
Pages: 147–151

Head Matter:
HAMPSHIRE v. GREEVES et al.
(Supreme Court of Texas.
Feb. 7, 1912.)
1. MORTGAGES (§ 372 )— FORECLOSURE — PRIOR Incumbrance — Title of Purchaser.
The grantor in a deed of trust to secure a debt to S. thereafter conveyed the property to a purchaser who assumed the debt. The purchaser gave a trust deed of the land as security for notes to plaintiff and afterwards gave another trust deed on the property to secure notes to a bank which took in good faith. The trust deed in favor of the bank.was recorded prior to that in favor of the plaintiff. The bank afterwards acquired the notes given to S., foreclosed both the original trust deed and its own, and purchased at both sales, and subsequently transferred its interest to an innocent purchaser for value. Held, in an action to foreclose the outstanding junior mortgage to which both the bank and the purchaser from it were made defendants, that the purchaser from the bank might set up in defense his title to the land acquired by sale under the lien of the trust deed to secure the S. notes; such defense not being forbidden by the rule that the mortgagor’s title cannot be denied by one claiming through him in an action to foreclose the mortgage.
[Ed. Note. — For other cases, see Mortgages, Dee. Dig. § 372. ]
2. Mortgages (§ 434 ) — Action to Foreclose —Parties.
In a proceeding to foreclose a mortgage lien, it is proper to make any one claiming under the mortgagor a party thereto.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. §§ 1272-1287; Dec. Dig. § 434. ]
3. Mortgages (§ 334 ) — Power of Sale-Impairment of Remedy.
The power of sale given in a mortgage is a valuable right acquired by contract inuring to the mortgagee, and cannot be impaired by any subsequent act of the mortgagor with regard to the property.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 1017; Dec. Dig. § 334. ]
4. Mortgages (§ 415 ) — Action to Foreclose —Issues—Mortgagor’s Title.
The rule that in a proceeding to foreclose a mortgage lien it is not allowable to put in issue the mortgagor’s title refers to adverse claims of those who are strangers to the mortgage and estate, and not to those who claim under the mortgagor.
[Ed. Note. — For other cases, see Mortgages, Dec. Dig. § 415. ]
5. Mortgages (§ 336 ) — Foreclosure by Sale — Notice—Junior Incumbrance.
In the absence of fraud or some undue advantage, the law imposes no duty upon a person holding a prior mortgage to notify the holder of a similar or subsequent or junior mortgage on the same property of his intention to sell the property under his mortgage.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 1024; Dec. Dig. § 336. ]
6. Mortgages (§ 372 ) — Foreclosure by Sale — Effect on Junior Lienholders— Title of Redemption.
The purchaser under a foreclosure sale, in the exercise of a power of sale given in a mortgage, takes the mortgagor’s title divested of all incumbrances made since the creation of the power of sale; a sale regularly exercised under a power being equivalent to strict foreclosure by a court of equity.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 1105; Dec. Dig. § 372. ]
7. Mortgages (§ 372 ) — Foreclosure by Sale — Rights of Purchaser.
When a regular sale is made under a power of sale contained in a mortgage, not only the mortgagor, but all persons claiming an equity of redemption by a privity of estate with him, are considered as parties to the proceeding, and are precluded by it as fully as if they had been made defendants in an ordinary foreclosure suit.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. § 1105; Dec. Dig. § 372. ]
8. Mortgages (§ 209 ) — Deed of Trust-Duties of Trustee.
The trustee named in a deed of trust to secure a debt becomes the* special agent of both parties, and by virtue of his trusteeship becomes similarly the agent of a subsequent purchaser assuming the debt and of the subsequent owner of the lien.
[Ed. Note. — For other cases, see Mortgages, Cent. Dig. §§ 466-468; Dec. Dig. § 209. ]
9. Mortgages (§ 372 ) — Bona Fide Purchaser-Constructive Notice — Knowledge of Others.
The grantor in a deed of trust to secure notes to S. sold the land to a purchaser, who subsequently gave a deed of trust to secure notes to plaintiff, and thereafter gave another deed of trust to a bank to secure a debt to it; the deed of trust to secure the bank being recorded before that to secure plaintiff’s notes. Subsequently the bank acquired the notes given to S., and foreclosed both the S. trust deed and its own, purchasing at the trustee’s sale in each case. The bank thereafter sold the property to the trustee under the S. deed of trust, who paid value, and was without any actual notice of an agreement between the bank and its mortgagor that the bank would pay off the S. notes and those held by plaintiff. Held, that the trustee, though, by virtue of his position he was the agent of the bank and its mortgagor when he foreclosed the S. trust deed, was not chargeable with the bank’s knowledge of its agreement to pay off the S. notes and plaintiff’s.
[Ed. Note. — For other cases, see Mortgages, Dec. Dig. § 372. ]
Error to Court of Civil Appeals of First Supreme Judicial District.
Action by L. Hampshire against W. B. Greeves to recover on notes and to foreclose a mortgage, in which Ras Landry was made a defendant, with a cross-action by Landry to quiet title, impleading the Beaumont National Bank and another on their warranties. From a judgment of the Court of Civil Appeals (130 S. W. 665) affirming a judgment for defendants, plaintiff brings error.
Affirmed.
Crook, Lord & Lawton, for plaintiff in error. Smith, Crawford & Sonfield, R. A. John, and D. W. Glasscock, for defendants in error.
For other eases see same topic and section NUMBER in Dec. Djg. & Am. Dig. Key No. Series & Rep’r Indexes

Opinion:
DIBRHLL, J.
This suit was by L. Hampshire against W. B. Greeves to recover on two notes of $1,000 each, dated March 28, 1903, due March 28, 1904, and March 28, 1905, respectively, payable to plaintiff and secured by a deed of trust of same date on lot No. 409, block 57, in the city of Beaumont. Ras Landry was made a party defendant by plaintiff, who alleged Landry's claim "some kind of a lien on said real estate through and under the defendant. Greeves," which was "subject and junior to plaintiff's lien," and, in "the alternative," that Landry claimed "absolute title and ownership to said real estate and under a written conveyance from the Beaumont National Bank or its trustees or agents, executed subsequent to plaintiff's mortgage aforesaid, and that the Beaumont National Bank for its title claimed under an instrument of writing purporting to be executed by the said Greeves subsequent to the date of the execution of plaintiff's mortgage aforesaid; but plaintiff alleges the Beaumont National Bank claims no lien nor title nor interest to said property, and if defendant, Ras Landry, has any interest in said property, it is subject to the mortgage aforesaid, held by plaintiff. But to prevent a multiplicity of suits and to cut off the equity, if any, claimed by the said Ras 'Landry, he is a proper party to this suit." Defendant W. B. Greeves answered by general demurrer and general denial. The defendant Ras Landry answered by general demurrer, general denial, and by special plea that on June 11, 1901, the title to the lot in controversy was in one Stephen Geraci; that Geraci was the common source of both the alleged claims of the plaintiff and of the defendant's title; that Geraci on June 11, 1901, for the purpose of securing two notes, one for $1,000 and one for $1,065, due, respectively, on December 11, 1902, and on June 11, 1904, executed and delivered to Ras Landry as trustee for the benefit of J. W. Stokes a deed of trust on said lot. After-wards, on June 18, 1901, Stokes transferred said notes, together with the mortgage lien securing them, to A. E. Broussard, and after-wards, on on about August 1, 1905, A. E. Broussard sold said notes to the Beaumont National Bank, together with the lien securing them, and that said bank while the owner of said notes and lien which existed before the defendant Greeves, plaintiff's mortgagor, acquired any title to said lot, requested the defendant Landry to sell the lot described in the deed of trust in accordance with its terms, for the purpose of paying off the indebtedness therein secured, and, while said bank was the legal and equitable owner of said notes, notwithstanding this said Broussard joined in this request to the trustee; that the lot in controversy was sold under the deed of trust on September 5, 1905, in accordance with law, and bought in by the Beaumont National Bank, and on the following day the trustee, Landry, executed a deed of conveyance to such purchaser, which was duly recorded in the deed records of Jefferson county; that the deed of trust under which defendant Landry claimed and derived title was made, executed, delivered, and recorded before the execution and recording of plaintiff's lien, and that the title of defendant Landry so acquired was superior and paramount to plaintiff's title, either legal or equitable, or any lien, claim, or demand that plaintiff has against the property. The defendant Landry further pleaded that after Geraci had given the deed of trust mentioned and while the same was a subsisting lien on the land in controversy on April 29, 1902, conveyed said property to the defendant Greeves, and that as a part of the consideration "Greeves, having theretofore assumed the payment of the Stokes note, secured as aforesaid by the deed of trust given by Geraci to Ras Landry, trustee," being indebted to the Beaumont National Bank in the sum of $5,070, on December 12, 1903, conveyed the property in controversy to Walter J. Crawford as trustee for the Beaumont National Bank, which deed of trust was recorded December 12, 1903, and prior to the record of plaintiff's mortgage, which took place May 3, 1904; that the bank took said mortgage in good faith and without any knowledge, actual or constructive, of any claim of plaintiff, and thereafter, on September 5,T905, the Crawford deed of trust was foreclosed by sale thereunder and bought in by the Beaumont National Bank; that on December 7, 1905, the Beaumont National Bank and J. L. Cunningham, who had theretofore acquired an apparent interest in said property, conveyed same to the defendant Landry for $3,500 by their warranty deed; that, by reason of such sale and purchase, the defendant Landry became a bona fide and innocent purchaser for' value of the property in controversy, and that the assertion of the pretended lien of plaintiff is a cloud upon his title, and prayed that said lien in favor of plaintiff be declared as such, and that he be quieted in his title to said land.
The defendants Beaumont National Bank and J. L. Cunningham having been implead-ed on their warranty by defendant Landry, for answer demurred and entered a general denial to plaintiff's petition and defendant Landry's cross-action, and, after pleading substantially the matters and things pleaded by Landry and presenting such matters as made their title to the property in controversy good and declaring itself to be an innocent purchaser for value without notice, presented other pleas not necessary to be mentioned in this opinion, since the issues involved in such special pleas are not raised by the assignments of error in this court.
The cause was tried with a jury, and, after the introduction of the evidence, the court instructed a verdict for defendants, upon which judgment was entered. The cause was appealed in due time, and by the Court of Appeals on May 31, 1910, affirmed, and is in this court upon writ of error.
The first assignment of error presented by the plaintiff in his application for writ of error is as follows: "The Court of Civil Appeals erred in holding that, the defendant Ras Landry having been brought in as a lienholder or purchaser under the defendant W. B. Greeves, he had a right to set up the adverse title held by himself under the foreclosure of the Stokes' deed of trust, and in holding that the title asserted under the foreclosure of the Stokes' deed of trust is not an independent title to that of L. Hampshire acquired from W. B. Greeves by the deed of trust herein sought to be enforced, because, having been brought in as a lieno'r or purchaser under the defendant W. B. Greeves, the defendant Ras Landry had no right to set up adverse title in himself and have that litigated in this foreclosure suit." The fifth assignment of error is so closely related to that above quoted that the two will be considered together; the point made in the fifth assignment being that the Court of Civil Appeals erred in holding that the "sale by the trustee, Ras Landry, effectually foreclosed all right of appellant to redeem under the junior mortgage held by him because the right of redemption of a junior lienholder is not cut off by a procedure to which the junior lienholder is not a party."
Prom a summarization of the pleadings of the parties to this suit, it will be seen that the main question for determination is whether, under the circumstances and the facts as shown by the record, the defendant Ras Landry could plead as a defense to plaintiff's suit against Greeves for judgment on two certain notes and to foreclose a mortgage lien on the lot of land in controversy, his superior title to said lot of land emanating from a prior lien given by Greeves' vendor and by Greeves assumed to be paid the beneficiary of said lien and under whom Ras Landry secured his title. Differently and abstractly stated, is it permissible under our system of procedure, where one holds a prior lien on land with power of sale which has been foreclosed by the exercise of such power, to plead in bar of the right of the junior lienholder to foreclose such junior lien where the prior lienholder has been made a party to the foreclosure proceedings his title to the land acquired by sale under such prior lien? All the other questions presented by the assignments of error in this court are subordinate and collateral to the main question as above presented.
We are referred by counsel of plaintiff to the cases of Hinzie v. Kempner, 82 Tex. 617, 18 S. W. 659; Walraven v. Farmers' & Merchants' National Bank (Civ. App.) 53 S. W. 1028; Faubion v. Rogers, 66 Tex. 474, 1 S. W. 166. Those cases serve as authority to support the general doctrine that, in a proceeding to foreclose a mortgage lien, while it is proper to make any one claiming under the mortgagor a party to such foreclosure proceeding, it is not allowed to put in issue the mortgagor's title. This seems to be denied the person called upon to defend against the plaintiff's suit to foreclose his lien, upon the theory that such proceeding would not be an adjudication of any title claimed by the defendant independent of and adverse to that claimed in the mortgagor, and hence no injury could result to the title thus claimed by the defendant. The case of Hinzie v. Kempner, supra, is not in the slightest degree analogous to the case at bar. Herbert Hinzie for himself and as next friend for his minor 'brothers and sisters, children of Martin Hinzie and Susan Ann Hinzie, their deceased mother, attempted to intervene in a suit by Kempner against Martin Hinzie to recover on a note and to foreclose a mortgage, lien on certain lots of land, which had been given Kempner by the father of inter-veners. The lots were the community property of the defendant Martin Hinzie and his deceased wife, and the interveners owned an undivided half of the property as heirs of their deceased mother. The court held that they could not intervene in that proceeding, as they could in no way be affected by the judgment in that case. The rule established in that case is that, where such facts exist as would entitle the intervener to an injunction, he may properly come in and establish his rights in the property against which foreclosure proceedings are sought by plaintiff.
In Walraven v. Farmers' & Merchants' National Bank, above, the sole question presented was whether or not a defendant to a suit to foreclose a mortgage lien could plead in bar of plaintiff's right to a judgment of foreclosure a title independent of and adverse to that of the mortgagor. Judge Key very properly held that "in an action to foreclose a mortgage, while it is proper to make any one claiming under the mortgagor a party to the suit, the mortgagor's title to the land cannot properly be put in issue." The question presented in the case of Faubi-on v. Rogers, above, is not the question presented in this case, for in that case Thompson, the plaintiff, had sold a large tract of land to Perkins and Phillips, against which he held a vendor's lien to secure the purchase money. Perkins and Phillips sold a portion of the land to the defendant, Fau-bion, who was made a party defendant in the action by plaintiff against his vendees, Perkins and Phillips, to foreclose his lien. Fau-bion sought to defeat such foreclosure proceedings against himself by pleading his title acquired from Perkins and Phillips and from one Rogers to him in opposition to the Thompson title. This right he was denied, "not for the reason that the adverse right may be owned by a stranger to the title upon which the lien sought to be enforced exists, that its owner is excluded from the suit, but because the validity of the title itself cannot be litigated in the proceeding. It was not the intention of Thompson to try in that suit the validity of the Rogers title, and Faubion had no right to force him to do so." The title of Faubion acquired from Rogers could not have been affected by the judgment in that proceeding further than as it might have been burdened by the foreclosure proceeding which he was amenable to by virtue of his voluntary purchase from Perkins and Phillips and consequential recognition of the Thompson title. If Faubion Rad not been a purchaser under the Thompson title, he could not have been properly made a party to the foreclosure proceedings, and hence there was no way by whi'eh his independence and adverse title could have been impaired by such suit. But the ease at bar presents a different state of fact, and the defendant Ras Landry is differently situated with reference to the plaintiff. Plaintiff and defendant Ras Landry claimed under liens from the same party, one a prior and the other a junior lien. The Trior lien had been foreclosed by a sale regularly and legally made, and the opportunity afforded plaintiff to pay off the prior lien, and thereby preserve the integrity of his junior lien. Ras Landry, having held the title emanating directly and exclusively from the same grantor as the lieiji claimed by plaintiff, could not be required to acquiesce in the foreclosure proceeding of plaintiff on the theory that a title to the land cannot be pleaded in bar of a proceeding to foreclose a lien against such land. If this principle is correct, then a prior lien-holder with power of sale given by contract is restricted to foreclosure proceedings in equity in order to enforce his lien when the mortgagor has given a subsequent lien on the property to which proceeding such junior lienholder must be made a party. The recognition of this doctrine would in effect impair the obligation of contracts, and would place in the power of the mortgagor by an independent and. subsequent act of giving a second mortgage lien on the property previously mortgaged with the power of sale, to revoke the exercise of such power of sale, and in the alternative, to require such prior lienholder to resort to the courts for an enforcement of his lien contrary to his agreement solemnly entered into, or failing to do this, to subject himself to the payment of the junior lien in order to preserve his title.
The right of sale given in a mortgage is a valuable right acquired by contract inuring to the mortgagee, and cannot be impaired by any subsequent act of the mortgagor with regard to such property. Not only is such right of value to the mortgagee, but likewise to the Borrower, since it gives the power to foreclose without resort to the courts, and thereby simplifies and facilitates the making of loans so desirable for the promotion of business. To hold that the defendant Landry could properly plead in bar of plaintiff's action to foreclose his junior lien against the property in controversy, in view of the fact that his claim is in common with that of plaintiff from the same mortgagor, is'in no manner departing from the well-recognized doctrine in this state as held in the cases cited by plaintiff as above and in many other cases by our courts. If the junior mortgagee desired to protect his lien, it was his privilege and duty to pay off the prior lien. Not having exercised this privilege where the opportunity has not been denied him, he cannot by a suit to foreclose his junior lien under | such circumstances deny the right of the holder under the foreclosure sale by the trustee to plead such title as a defense.
The rule as announced by the decisions of our courts refers to adverse claims of those who are strangers to the mortgage and estate, but not to those who claim under the mortgagor. The text-books announce the rule to be "adverse claimants cannot be made parties to a foreclosure suit for the purpose of litigating their titles. The only proper parties are the mortgagor and mortgagee, and those who have acquired any interest from them subsequently to the mortgage. An adverse claimant is a stranger to the mortgage and the estate. His interest can in no way be affected by the suit, and he has no interest in it. There being no privity between him and the mortgagee, the latter cannot make him a party defendant for the purpose of trying his adverse claim in the foreclosure suit. Even if an adverse claimant appears and puts his claim in issue, the court may refuse to pass upon it. A bill which makes defendants persons who claim title adversely for the purpose of litigating and settling their rights is bad for misjoinder and for multifariousness." Jones on Mortgages, § 1440.
"A junior incumbrancer is not entitled to a notice of the sale. In the absence of fraud or some undue advantage being taken, the law imposes no duty upon a person holding a prior mortgage or deed of trust to notify the holder of a similar subsequent or junior lien or incumbrance upon the same property of his intention to sell the property under his mortgage or deed of trust." Jones on Mortgages, § 1821a; Hardwicke v. Hamilton, 121 Mo. 465, 26 S. W. 342.
The contention of plaintiff's counsel to the effect that "the right of redemption of a junior lienholder is not cut off by a procedure to which the junior lienholder is not a party" is not sound as we think, and not supported by authority or reason. The rule is thus tersely stated in Jones on Mortgages, § 1897: "The purchaser (under foreclosure proceeding by sale under the power given in the mortgage) takes the mortgagor's title divested of all incumbrances made since the creation of the power." And, again, in the same section: "A sale regularly exercised under a power is equivalent to strict foreclosure by a court of equity properly pursued."
It was held in Aiken v. Bridgeford & Co., 84 Ala. 295, 4 South. 266, and in Childress v. Monette, 54 Ala. 317, that, "when a regular sale is made under a power contained in the instrument, not only the mortgagor, but all persons claiming any interest in the equity of redemption by a privity of estate with him' are considered as parties to the proceeding, and are precluded by it as fully as if they had been made parties defendant by regular subpoena in an ordinary foreclosure suit." It was alleged and proven as found by the Court of Civil Appeals that the de fendant Greeves on .December 12, 1903, gave a deed of trust to Walter J. Crawford, trustee, for tbe benefit of tbe Beaumont National Bank on tbe property in controversy to secure two notes aggregating $2,070, and that at tbe time tbis deed of trust was given and filed for record tbe deed of trust ¡given by Greeves to plaintiff Hampshire was not filed for record. As to whether or not the bank had actual knowledge of the existence of the deed of trust given by Greeves to plaintiff the evidence was conflicting, but, in so far as the defendant Eas Landry is •concerned, the Court of Civil Appeals found that he had no knowledge either actual or constructive of the existence of such lien, and was an innocent purchaser from the Beaumont National Bank of the property in controversy, and likewise an innocent purchaser with reference to any contention that •the bank had agreed to pay off the Stokes note or the notes held by plaintiff.
So that the question resolves itself into ofie of law, whether or not the defendant Ras Landry, who had no actual or constructive notice of any agreement or arrangement alleged to have been made between the •defendant Greeves and the Beaumont National Bank under which he claims his title as the purchaser under the deed of trust sales, as to the payment of the Stokes note and the mortgage of plaintiff, was chargeable •as matter of law with the knowledge of the bank as its agent. Was the defendant Ras Landry the agent of the bank at the time these several transactions are alleged to have taken place, and such agent as the knowledge of his principal would be imputed to him. At the time Ras Landry was made trustee, Geraci was mortgagor and Stokes the mortgagee, and he became the special agent of both parties. McCormick v. Cheveral, 2 Posey, Unrep. Cas. 146, 153; Jones on Mortgages, § 1771. Being the agent of the original contracting parties, he by virtue of his trusteeship became the agent of the subsequent contracting parties, of Greeves when he assumed the payment of the Stokes note, of Broussard and of the bank when they became owners •of the notes and lien. In so far as the deed -of trust executed by Greeves to Crawford as trustee for the bank, Landry had no con-nection whatever, and, being in no way an agent of Greeves or the bank in a general -sense, could not be affected with notice of any transaction between those parties. Nor •do we think the character of agency created by the office -of trustee as in this case could in any manner impute to him notice of any transaction between the principals with reference to the debt and lien not actually communicated to him. His duty as trustee was .to act in that matter alone for both parties in "the utmost good faith and the strictest impartiality." When requested to sell the property, it was his duty to do so, and, if there existed any reason unknown to him why he should not make the sale as provided in the power given in the mortgage, it was the duty of those who were immediately interested and who were in possession of the facts to notify the trustee the agent of them all for the purpose of executing the terms of the trust.
It appearing from the findings of the Court of Civil Appeals, which are sustained by the record, that the authority of Landry as trustee in the Stokes deed of trust to sell was complete, that if there was any agreement between the Beaumont National Bank and Greeves in consideration of the Cunningham deed, whereby the bank agreed to pay off the Stokes note and plaintiff's debt, such facts were wholly unknown to defendant Ras Landry, and that Landry paid value for the property in controversy under a deed from the Beaumont National Bank, he was an innocent purchaser for value, and not affected with notice of the agreement between Greeves and the bank by reason of the agency arising out of the fact of his being trustee in the deed of trust from Geraci to Stokes. We think the sale under -the deed of trust from Geraci to Stokes might be eliminated from the case, and yet the title to the property in controversy be good in Landry by virtue of the sale by Crawford, as trustee for the bank, under the deed of trust given by Greeves. That deed of trust in so far at least as Landry's rights were affected was a prior lien to that of plaintiff, and the sale thereunder conveyed the title to the property, and was a perfect defense in the hands of an innocent purchaser against any claim arising out of plaintiff's mortgage, which was a junior lien with the equity of redemption lost.
We have not thought it necessary to discuss the other questions raised in the Court of Civil Appeals, which appear to us to have been properly disposed of. A careful review of the record and of the briefs of the parties and the authorities therein referred to lead us to the conclusion that no good reason exists why the judgment of the Court of Civil Appeals should be disturbed.
Finding no error in the judgment of that court, it is affirmed.