Court Opinion

ID: 5550841
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:31:15.546241+00
Date Added: 2024-06-11T08:35:05.766755
License: Public Domain

By the Court

Warner, Judge.
Toe complainants in the court below filed their bill for the purpose of setting aside a mortgage executed by Edward Stiles to Joseph Jones, Charles West, and Roswell King, jun., trustees of Caroline Clifford Stiles, on the ground that the said mortgage was fraudulent, within the provisions of the act of 19th December, 1818, as against creditors. The complainants are judgment creditors of Edward Stiles ; their judgment having been obtained subsequent to the date of the mortgage. On the trial of the cause, the defendants in the court below, offered to intro - duce Benjamin Edward Stiles as a witness, who was objected to, on the ground that he was security for the defendants on their appeal bond, and therefore interested. The defendants’ solicitors then moved the court to permit them to substitute another security on the bond, in the place of the witness, which mofion the presiding judge refused : Whereupon the defendants excepted. We are of the opinion that the court below ought *193to have permitted the defendants to have substituted another security in the place of the witness, for the advancement of justice ; the motion for substitution being made by the parties for their benefit, they could not take advantage of it; and an order entered on the minutes of the court, stating the facts, would make the record sufficiently intelligible. It would Eot, as is supposed, be giving a new bond; the appeal was entered according to law, and security given at the time, who continues security up to the time the new security is substituted in his place. Nothing is more common in our courts, when the original security on an appeal bond becomes insolvent, pending the appeal, than to require new security to be given; the court passing an order for that purpose. The motion to substitute another security in the place of the witness ought, in our judgment, to have been allowed; and there was error on the part of the court in overruling the motion. In the case of Eastman and Philbrick vs. McAlpin, decided during the present term, (page 157,) we held that a debtor, in insolvent circumstances, might make an absolute bona fide conveyance of his property to a creditor, in payment of a bona fide pre-existing debt; provided there was no trust reserved for the benefit of the seller, without such conveyance being obnoxious to the act of 1818. But it has been ably and ingeniously argued, in this case, that inasmuch as the mortgagee is a trustee for the mortgagor, to the extent of the equity of redemption, such a trust is created, as would bring a mortgage conveyance within the statute. That a mortgage is such a conveyance, as would be obnoxious to the provisions of the act of 1818, provided it was used as an instrument of fraud, for the purpose of securing to the mortgagor a secret trust, or benefit, within the intent and meaning of that act, we do not doubt; but that a mortgage executed by a debtor in insolvent circumstances to a creditor, to secure the payment of a bona fide pre-existing debt is per se fraudulent as against creditors, within the meaning of the act of 1818, we do not admit. We have already decided that the debtor can make an absolute sale of his property to a creditor, in payment of a bona fide pre-existing debt. If he can make an absolute sale, surely he can pledge it, or create a lien upon it, as a security for a pre-existing debt.
A mortgage in this State is nothing more than a security for the payment of the debt; and the title to the mortgaged property remains in the mortgagor until foreclosure and sale, in the manner pointed out by statute. It is true, the mortgagor is entitled to the equity of redemption after the debt is paid ; and the clause in this mortgage which stipulates that the surplus, after paying the pri ¡cipal lebts, interests and costs, shall be refunded to the mortgagor, confers no other, or greater privilege than the law confers upon him. The law gives him the right to the surplus of the proceeds of the mortgaged property when sold, after foreclosure, over and above the principal debt and interest, which the mortgage was given to secure, and the costs of such foreclosure and sale.
We have said, under our law, the legal title to the mortgaged property remained in the mortgagor until after foreclosure and sale. The judgment" creditor, in this case, could have levied his execution upon th" mortgaged property, and sold it, and the purchaser would have acquired the legal title, subject to ihe incumbrance of the mortgage. The fundamental error in the argument of the counsel for the judgment ci editor, *194is, in supposing the legal title to the mortgaged property is in the mortgagee after condition broken, and that he holds it in trust for the mortgagor ; at least so far as the equity of redemption is concerned.- The fact that the legal title to the mortgaged properly remains in the mortgagor, until after foreclosure and sale, cuts off, and destroys all foundation for the idea there is any such trust existing between the mortgagee and mortgagor as was contemplated by the act of 1818. The record in this case discloses that in 1836, the plaintiffs in error took a mortgage on a tract of land called Selina, to secure the payment of a debt due by Edward Stiles, the mortgagor, for $800 00. At the time this mortgage was executed, it is admitted the mortgagor was solvent. Afterwards, this tract of land was sold by Edward Stiles to Stephens, and For the purpose of raising the incumbrance, so as to make Stephens a good title, a new mortgage was executed in 1842, on the negroes, to secure the payment of the $800 00 with the accruing interest thereon. When this last mortgage was executed, the mortgagor was in failing circumstances. The debt which the mortgage was executed to secure, it is admitted, was a bona fide indebtedness. The court below instructed the juiw, this latter mortgage, given to secure the payment of the $800 00 with the accruing interest thereon, was within the statute of 1818, so far as the interest was concerned; and being void in part, it was void altogether. We are of the opinion a debtor in insolvent circumstances, has the right to execute a mortgage to a creditor, to secure the payment of a bona fide pre-existing debt; and that the execution of such mortgage would not per se be fraudulent as against creditors, within the intent and meaning of the act of 1818. That act was directed against conveyances made by debtors to creditors, in trust for the benefit of the seller, or mortgagor, whether secret or otherwise ; but was not intended to prohibit a del tor from making a bona fide sale of his property to a creditor, or to secure the payment of a bona fide debt by mortgage on his property, free from any trust for the benefit of the seller or mortgagor. Under our law of mortgage, there is not such a trust existing between the mortgagee and mortgagor, as will per se bring it within the provisions of the act. We are, therefore, of the opinion, thére was error in the charge of the court, in deciding this mortgage came within the provisions of the act of 1818. Let the judgment of the court below be reversed, and a new trial granted.