Stoddard v. Denison , 38 How. Pr. 296 ( 1869 )

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 tne 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.

Nor 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 resoonsibility 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 bed-rooms, and containing the usual bed-room 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 conclus o.1 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 1 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 Cortelyou v. Lansing (1 Cai. Cas., 202), it is said the title passes, with a condition of a defeasance; in Charter v. Stevens (3 Denio, 35),- it is said the mortgage transfers a defeasable title to the property mortgaged ; and in Mattison v. Baucus (1 N. Y. [1 Comst.], 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 law. 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).

IsTelsom", J., says, “notwithstanding the forfeiture and perfection of the 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 Bailm., § 287 ; Fuller v. Acker, 1 Hill, 475 ; 1 Pars, on Cont., 453 ; Mattison v. Baucus, 1 N. Y. [1 Comst.], 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, thát- 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 sup.), 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, &c. 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 without 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 reinvest the title in the mortgagor, so as to enable him to recover at law, and this is sustained by the vice-chancellor, and approved by the chancellor, in Rogers v. Traders’ Ins. Co., (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, 172), this effect of taking possession.is substantially affirmed. The action was trocer 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 continue^, if. the prpperty 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. Stout says (2 Story Eq., § 1081), 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 Ves., 278; Harrison v. Hart, Com., 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 troter 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 v. Stevens (ubi sup.), it is said that 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 not, 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 G-ridley, J., in Dane v. Mallory (16 Barb., 53, 54), is qualified. He says, “especially as against the plaintiffs, who are mere strangers.” And I cannot think Welles, J., when he said, in Taiman y. Smith {ubi sup.), the mortagees “had a right to take the property into their possession and dispose of it at their 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 ail the cases to which I have referred is to that effect; and although, perhaps, mere dicta, are entitled to all the weight of authority.

Nor do I see how an action at law can be maintained under any circumstances. Not 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 qction, 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 aguo et tono, only 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 st 11 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 re-, deem, 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., 711; 2 Story Eq., §§ 794-799).

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 nonsuit, 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.

* Present, Barbour, Oh. J., and Monell, J.