Court Opinion

ID: 6597952
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:04:54.636183+00
Date Added: 2024-06-11T15:57:54.082982
License: Public Domain

By the Court,

Dixon, C. J.
The nature of the instrument executed by Sandford to Freer, on the 24th of February, 1850, was a point of much controversy on the argument. On the part of the respondent it was contended, on the authority of Lawrence vs. Farmers’ Loan and Trust Company, 3 Kern., 200, and the cases there cited, that it was a mortgage; and never having been foreclosed, either in equity or by advertisement, under the statute, a right of redemption still remained in the respondent, as the-assignee of Sandford. It was upon this theory that the suit was commenced. On the part of the appellants it was insisted that it was a trust deed, creating a trust authorized by the first subdivision of section 11, chap. 57, R. S., 1849; and that both by the sale made by Freer, the trustee, at Chicago, on the 4th of August, 1852, and *326by the operation of section 16, of the chapter above referred to, an absolute estate -was vested in the appellants. In many respects it partook of the nature of both; yet we are clearly of opinion, that it cannot be regarded as a mortgage.
A mortgage is defined to be the conveyance of lands by a debtor to his creditor, as a pledge or security for the payment of a debt, and to become void on payment of it. The creditor in this case, and party for whose benefit the security was taken, was Clark. Freer had no interest whatever in the matter. He was the mere agent or trustee of both parties. In the case of Lawrence vs. Farmers’ Trust and Loan Company, the instrument or trust deed was executed directly to the company, who were creditors of Champlin, as a security for the payment of his debt; and in case of default in its payment by him, they were authorized to sell the property, either at public auction, or private sale, and out of the proceeds to pay themselves, returning the surplus money to Champlin or his heirs. This instrument, though not in the usual form of a mortgage, nor intended by the parties as such, the court pronounced to be in law a mortgage, and held that a sale by the trustees, not in compliance with the provisions of their statute respecting foreclosures by advertisement, did not cut off the equity of redemption of Champlin and his heirs. The same is true of the cases of Eaton vs. Whiting, 3 Pick., 484; Chowning vs. Fox, 1 Rand., 306; Palmer vs. Gurnsey, 7 Wend., 248; Ogden vs. Grant, 6 Dana, 473; and Cooper vs. Whiton, 3 Hill, 95; upon the authority of which that case was decided.
In all these cases the power to sell was vested in the party for the payment of whose debt the sale was authorized. In Chowning vs. Fox, the reason for holding such a conveyance a mortgage instead of a deed, giving an absolute power of sale, is clearly stated. The court say that the question is whether a deed executed by a debtor, conveying land to his *327creditor, and purporting to constitute him the trustee for selling the land, and applying the proceeds of the 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 as 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; and they held, that in Virginia he could not. The reason given was, that such a power could only be vested in a third person, disinterested and inditferent between the parties ; that the principles frequently declared in relation to the powers and duties of trustees in general, were utterly incompatible with the due exercise of those powers and duties by the creditors.
In Lawrence vs. Trust & Loan Comp., the court held that such powers could be given to and exercised by the creditor, and that the whole matter was governed by the statute. The same is true with us. The instrument before us, so far as it was given to secure the payment of a debt, and conditioned for a reconveyance, in case of payment, and for a return to Sanborn of the overplus in case of a sale after failure to pay partakes of the nature of a mortgage. The test by which it is to be determined whether such an instrument is a mortgage or a trust seems to be, whether it be executed to a creditor or a third person. If to the former, it is a mortgage; but if to the latter, a trust.
In McLanahan vs. McLanahan, 6 Hump., 99, where real estate was conveyed to a creditor, with the understanding, and upon the trust that the creditor should satisfy his debts, indemnify himself against liabilities, pay the other debts of the vendor, and hand over the balance to his wife and children, it was holden that it was a mortgage as to the debt of the vendee, and a trust as to the balance.
*328In Cooper vs. Whitney, Judge Bronson said of a similar conveyance, that he was strongly inclined to the opinion that it should he regarded as a trust rather than a mortgage.
In State vs. Lawson, 1 English, 269, it was decided that an instrument like that under consideration partook so far of the nature of a mortgage that the vendor or cestui que trust had an equity of redemption which was liable to seizure and sale upon execution. The court, although they held it a trust, said it was not strictly a trust deed; that a conveyance, unconditional and without a reservation to the vendor, of any right of redemption upon payment of the money would have been. In Humphrey vs. Snyder, 1 Morris, 263, it was holden that the trustee named in a similar conveyance could not for-close in equity.
Mr. Burrill in his work on assignments, page 33, says that in most of the southern states “assignments in trust are frequently employed for a double purpose, ultimately as modes of provision for the payment of debts, but immediately as instruments of security against default of payment by the debtor. Hence, they are in many cases drawn with a condition that if the grantor pay the debt provided for, within a specified time, the trustee shall reconvey to him the property; or that the deed shall thereupon be void ; or e converso, that if the debtor do not pay. the debt by a day named, called the ‘law day,’ the trustee shall sell the property and apply the proceeds in payment. And special deeds of trust, with such conditions, are frequently made directly and exclusively to particular creditors, which gives them still more the character of mortgages. They are in fact mortgages, with the qualities of an assignment in trust superadded; or assignments to take effect at a future day.” No case will be found, we think, which goes the length of holding them mortgages. See Hewitt vs. Haling, 11 Pa. St., 27.
It being determined that it was a trust and not a mortgage, *329it remains to be inquired whether it was authorized by sec. 11, of chap. 57, of the statutes of 1849, above referred to.' We are of opinion that it was.not. By the first section uses and trusts, except as authorized and modified, by that chapter were abolished. By section 11 express trusts might be created for any or either of five purposes therein specified. The only purpose material to he considered here is the first, viz: “ To sell lands for the benefit of creditors.” Thése words seem to point plainly to those absolute transfers made by debtors in embarrassed or insolvent circumstances of their estates to trustees for the benefit of their creditors, for the purpose of being turned into money and applied by the trustee to the payment of the debts due and owing by the assignors. The statute does not have regard to a conditional conveyance, by which the property may be reconveyed or revested in the debtor, but to an absolute assignment to sell and pay at all events. This construction seems plain and obvious. See Ridgway vs. Stewart, 4 Watts and Serg., 383; and Manufac. & Mech. Bank vs. Bank Penn., 7 id., 335.
The instrument being neither a mortgage nor such a trust as by our statute the parties were authorized to create, it follows as a matter of course that none of the defendants acquired such a title to the property under it as would enable them on that ground alone successfully to defeat the action of the plaintiff. The intention of Sanborn no doubt was to secure a bona fide debt, which he owed to Clark, and there can be little question that under the circumstances a court of equity upon a proper application would have given effect to that intention as an equitable” mortgage, notwithstanding the irregularity of the instrument, and would have made it available as a security at least as against the maker. There is as little doubt also that it could not have been foreclosed by advertisement under the statute. These are questions however not strictly pertinent to inquiries before us.
*330There is however a matter which we think decisive of the present controversy, and for which the judgment of the circuit court must be reversed. We have decided in the case of Nash vs. Church, at this term, supra, 303, that a judgment in partition, where the proceedings were regularly had against unknown owners, was conclusive as to title of the partitioned premises, as against all the world. JL fortiori, it must be held conclusive as against all persons who were made parties and brought in by name. Marvin was party defendant to the suit in partition in which judgment was rendered August 15, 1856, by the circuit court of Racine county. He was regularly brought in by publication under the statute. The objection to the order of publication is clearly untenable. Section 5, of chap. 131, of the statues of 1S49, authorized county judges to exercise the power of a judge of the circuit court at chambers. The same power of making the order was conferred upon him as upon the circuit judge. That there was no proof of title, cannot be listened to. The judgment recites that it appeared from the abstracts, exhibits and testimony adduced by the complainants, that they were entitled in fee to one equal undivided half of the premises. This is conclusive upon that question. The provisions of section 26, of chap. 108, statutes 1849, must be regarded as directory to the commissioners; and when, as in that case, the allotments made are susceptible of an accurate description, by reference to known public boundaries or government surveys, they must be regarded as sufficient, without a designation of boundaries by posts, stones, or other permanent monuments. These directions can only be held applicable to those cases where such monuments become necessary to an accurate and clear description of the several parts or portions allotted.
The judgment of the circuit court must be reversed, and the cause remanded for further proceedings in accordance with this opinion.