Denning v. Smith , 3 Johns. Ch. 332 ( 1818 )

The case stood over for consideration to this day, when the following opinion was delivered.

The Chancellor.

1. The first and most essential object of inquiry in this case is, how far the provisions-of the statute have been disregarded or violated by the Commissioners in the sale in question. It will accordingly be necessary to examine all the circumstances of the notice and sale, to ascertain this matter of fact.

.The commashcToms under 31? ch.’ 21&) are, in case of default on the part oi the mortgagor, whereby they became seized of the premises clear of the equity of redemption, trustees for the people to the amount due on the mortgage,"and for the mortgagor, a-to the surplus, in case of sale.

A tract of land in the town of Cairo, in Greene county,” of the value of 3,00.0 dollars, and upwards, was mortgaged to the defendants, Smith and Hollenbeck, as Commissioners under the act of the 11th of April 1808, (sess. 31 ch. 216.) to secure the repayment of a loan of 75 dollars. The interest of 5 dollars, 25 cents, due thereon in May, 1814, being unpaid, the Commissioners, by reason of the default, became forthwith, according to the declaration and words of the act, “seised of an absolute, indefeasable estate in the lands, &c. to the uses in the act mentioned, and the mortgagor, his heirs and assigns, were utterly foreclosed and barred of all equity of redemption.” They were directed in such case to sell, the lands on the third Tuesday in September following, at the court house of the county, and after retaining the principal and interest of the mortgage, and the costs, not exceeding 3 dollars, the remainder of the moneys, if any, were to he paid to the mortgagor, his heirs or assigns.

The sale was to be made in pursuance of public notice, and the Commisioners were directed, in case of such default, and within eight days after the 4th Tuesday in May, “to cause advertisements to be fixed up, at no less than three of the most public places of the county, describing the quantity and situation of the lands, and giving notice of the sale on the 3d Tuesday in September, by way of public vendue, to the highest bidder, and they were also to cause such notice to be given in, at least, one of the public newspapers in the county.”

The seisin of the Commissioners, free and clear of the equity of redemption, was nevertheless, as public agents or trustees for the People of the' state, to the amount of the mortgage money, and for the mortgagor and his representatives, in respect to the surplus. The right of the mortgagor, and his assigns, to the surplus moneys, notwithstanding the statute bar of the equity of redemption, was explicit"ly declared in the act; and the State and the mortgagor were equally entitled to demand a due and faithful performance of the trust, with which the Commissioners were thus clothed.

We must so construe the act as to give effect to all its provisions'. The mortgagor, after the default, has no legal, (9 Johns. Rep. 129. 14 Johns. Rep. 362.) and, probably, no equitable title, which can be directly enforced, as against the land itself. But he has a valid and deep interest in the execution of the Commissioners’ trust. The State has no interest beyond the amount of their loan. All the surpuls moneys belong to the mortgagor; and we are not willing to presume such a fearful and lamentable defect of justice as the case would present, if a mortgagor could not call in question a fraudulent or irregular sale by which he was deprived of his surplus.

Let us then recur to the proofs, to see in what manner the directions of the statute were complied with.

One of the advertisements was fixed up in the village of Greenville, about seven miles northerly from the lands, in the store of Abijah Reed, and another was fixed up on the back of the writing desk of James JM’ Vichar, standing on the counter in his store at Coxsachie, about 15 miles easterly from the lands. ’ ■

The selection of these two places does not appear to have been made under the exercise of a sound discretion, and, when taken in connection with many other circumstances, it forms a very material item in the mass of testimony, going to impeach the impartiality and integrity of the sale.

The act required the notices to be put up in three “ of the most public places” in the county; the object, doubtless, was to diffuse, as widely as possible, the knowledge of the sale, and of the cause, and the subject of it. The step was absolutely requisite in order to do justice to the parties concerned in the land, and in the moneys to arise from it; and it was a duty peculiarly pressing in this case, in respect to the mortgagor, considering the very great disproportion between the value of the pledge and the debt charged, and the general severity of the- provision, foreclosing at once, upon default, all right and equity of redemption. The Commissioners were bound to use diligence and judgment in selecting the public places best calculated to bring the notice of sale home to the ° mortgagor, and to all who were most likely to enter into' ,, competition for the purchase.

The notice of the msT’to i» ]^-cup 'pi^es, Xuld^be ‘put UP "V t.hos,c places best cat-» pniated to bring-home the notice of sale to the "°1iffgperscms likely"" attend as putcbilBers'

But here the Commissioners selected two country stores, at a great distance from the land, while it is proved that the premises were adjoining a turnpike road, and had on and adjoining them, mills, factories, and a toll-bridge, xvhich rendered them a place, of great notoriety. It is also shown, that Smith, one of the Commissioners, had frequently passed by the land, and must have been acquainted with it. It is very extraordinary, that a place of such noteas the land itself, should not have occurred to the Commissioners as very suitable for a notice. Or if the land should not have been deemed one of the most fit public places, the village of Cairo, which is within the distance of a mile and a half of the premises, was a place of great notoriety. It is at the junction of three turnpike roads,- and has a number of stores and taverns, and’ is the most central village in the county, and where county business is transacted. Why omit such a village as this, so near the lands, and resort to distant places? I apprehend no sufficient reason can be assigned.

The third notice xvas directed to be Up on the court house door. This place was, no doubt, judiciously selected. It is, in many instances, the place required by statute authority. Thus the notice of the sale of mortgaged premises by thp mortgagee, under a power captained ÍW the mortgage, and the notice given by insolvent debtors, must be fixed upon the outward door of the court house of the county; and the notice of the general election of Got vemor and Senators, is to he given by the sheriffs in the same way. In the very loan office act, under which the sale was made, the Commissioners, were to fix up notice of their appointment, &c. at the court house. But there was a very peculiar direction given as to this notice-In the letter from the defendant Smith to Crosipell, directing this notice to be put up on the court house door, he adds, “ the inside, I think, is best on account of damage;” and it was, accordingly,, affixed up pn the inside , of the door. There is no evidence in the ease, of any damage having occurred in former pases, by putting the notice-on the outside of the court housp door; it is proved that notices are usually put up on the outside of the door, and-we have no proof that they had ever before been put up on the inside. The proof in this case is, that notice- on-the inside of the door would not be visible when the door is open, (as it no doubt is_ on all public occasions,) because the door swings against a wall. This concern in a. public officer about damage to the notice, and assigning it as a reason for departing,, in this particular case, from, the usual, and probably from the universal practice, is a very suspicious circumstance, and looks like premeditated wrong.

Tee act further directed that notice was also to be given, in at least one of the public newspapers in the county; and the notice in this case was directed to be published ini the Catskill Recorder, for three weeks.

One objection to this notice was the limitation qf it to three weeks.

The act does not prescribe, in express terms, the length of time the notices were to remain fixed up, or continued in the paper. It only declared when they were to be-given, viz. within eight days after the 4th Tuesday in May, and when the lands were to be sold, viz. the 3d Tuesday in September. But I think the true construction of the act is, that, the notices fixed up in three public places, xvere to continue “fixed up” until the sale. In a subsequent para■graph of the act, when a new or resale of the lands is to be made, the act requires at least “ six weeks notice” of the sale to be given, in the manner before directed. This more explanatory provision as to the continuance of notice was necessary, because the time of first announcing the notice was not fixed, and it comes powerfully in aid of . • i the construction given to the prior section. If the Com missioners might direct the notices to remain fixed up only three weeks, they might in the exercise of their discretion, limit the time to three days. The act left discretion with them on this point. The time when the notices were first to be put up, and the time of sale being declared, there was no need of any further provision, as the notice xvas, doubtless, intended to occupy the intermediate time. In the absence of proof to the contrary, we might presume, that the notices fixed up in the three public places remained up until the sale, but xve have certain proof that the newspaper notice xvas only for three xveeks, by the express direction of Smith.

The notice 0f tofteTruTcoiv I*™ should be ed'ujTat1 three p£biished in a PubI!c the county, “*0m aD“ a*ter the expiration from the fourth I&fyfuntil the sq^mba3, ory/™®cofJca*8 not

This notice ought to have been commensurate in point of time with the others.

The words of the act are, that the Commissioners shall also cause, “ such notice” to be given, in at least one of the public newspapers; and it meant a notice that xvas to correspond, in description and duration, with the notices to be “ fixed up” at the public places. If the Commissioners had a control over the duration of the newspaper notice, they had equally a control over its commencement, and it might have been deferred until the day of the sale. “ Such notice,” here meant the same notice with the others, in every material point, and the duration or length of the notice, is always the most material part of if.

The notice th™Lme oftiie Mortgagor jmd description of the quantity and situation foreclosed, and t0 s° '

Having slated the facts as to the time and place of the notice, we proceed next to examine the contents of the notice, as to the description of the land.

In the notices fixed up at Greenville and Coxsackie, the premises were described as being in Cairo, and as being “ ^°- U- and part of lot No. 14. near Per serfs mills, containing 125 acres, mortgaged by Henry Persen.” In the other notice, on the court house door, and in the news- ; . paper, the premises were described as a tract of land in Cairo, “part of lot No, 14. containing 125 acres.” The name of the mortgagor was here omitted, and the lands in lot No, 11. omitted, which contained about 110 acres, while the lands in lot No. 14. were but 15 acres. The omission of the mortgagor’s name and of the number of the lot in the advertisements in Catskill, where the agent of the owner under the mortgagor resided, was a most unfortunate circumstance, and is calculated exceedingly to increase our apprehensions. It was also an omission, fatal, in any view, to the legality of the notice., Indeed it appears from the testimony of Samuel Haight, the agent of the plaintiff Denning, that if he had discovered from the advertisement of the Commissioners in the newspaper, (and which paper he took,) that the lands mortgaged by Henry Persen were included, he would have satisfied the demand.

Upon such notices the sale was made. There were very few bidders attracted by the notice. The sale was made in the lower entry of the court house, while the front door and wipdows were shut; and when the Commissioners were asked for an account of the lands, by one of the solitary by-standers, they referred him to the loan office books, and gave no further explanation.

The lands in question were purchased by the defendant Judson, for about 340 dollars; and it appears, that he came that day from his house in Coxsackie to Catskill, and, probably, for the purpose of such a speculation.

if the commissioners abuse their trust, this court will afford relief either by saíe‘nma8¡etting ™edem¡ commissioner6 aca?“Dt for the difference between the sum for which the land was sold, and its real value at

á. All these combined, warrant conelusion, that the Commissioners grossly departed from the letter and spirit of the act, in the advertisement and sale of the lands. Some subsequent circumstances were ed upon the argument, as evidence of the disposition or design of the Commissioners, or one of them, in this transaction. But I forbear to enlarge on that point. The abuse of trust appears to me to have been too palpable to be denied, and too grievous to be endured. There was a want of due discretion in the selection of the public places, at which two of the advertisements were fixed up. There was an abuse of discretion in putting the notice on the inside of the court house door, where it would probably be concealed from the public; and it was so singular and extraordinary a precaution, as to afford an inference of unwarrantable and fraudulent views. There was a defective notice as to time, in being confined to three weeks, in the Catskill Recorder, and still more defective as to description, by totally omitting the mention of one entire lot, containing the most part of the lands that were sold. And, lastly, the sale itself was attended with singular circumstances, calculated to exclude observation and competition. There was, upon the whole, so manifest a vio_ , . iation of the intention and directions of the act, and so ... , , . -. , , great an injury m consequence of it, has been inflicted upon such of the plantiffs as were entitled to the surplus moneys, that I cannot bring myself to doubt of the right of the party to relief. The only difficulty consists in settling the mode and extent of the relief to be afforded. The sale must either be set aside as null and void, and an opportunity afforded to the plaintiffs to redeem, under the 19th • « , i z-x • ♦ n section of the act, or the Commissioners must account tor the difference between the price that the lands sold for, and their actual cash value at the time. To allow the sale to stand, and to afford no relief to the plaintiffs, would (as the evidence strikes me,) leave a stain on the justice of the country. Sales of real property by public officers of one description or another, have become so frequent, and have excited such active cupidity, and such a spirit of speculation, that there is very great danger of injustice, unless we support strictly the checks and guards provided by law against abuse.

A special anetrictty“pursued, and a purchaser is presumed to know such authority, when it is given by a public statute; and if he purchases, where the authority is not pursued, it is at his peril.

I should have no difficulty, if that was the only alternative presented, to hold the Commissioners responsible for 6 breach of trust in the sale of the lands, and make them answer in damages. The case of The Charitable Corporation v. Sutton, (2 Atk. 400.) would fully justify me, in going to that extent. “ I will never determine, said Lord Hardwicke, in that, case, that a court of equity cannot lay hold of every breach of trust, let the person be guilty of it in a private or public capacity.” But I think the more .appropriate remedy in this case is, to declare the sale void. It was not a sale under a judgment, or decree of a court of justice, where the purchaser has a right to presume every thing to have been legally done. In Lloyd v. Jones, (9 Vesey, 37.) Lord Eldon seems to have been of opinion, that mere irregularity, without making düt a case of fraud or collusion of some sort or other in the purchaser, was not sufficient to affect him. Lord Bedesdale, in Bennett v. Hamill, (2 Sch. and Lef. 566.) adopted the same idea, but the doctrine was applied in both cases to irregularity in a decree, and those cases have no analogy to the present. Here was a special trust to be executed by the Commissioners of loans, for the benefit of the State, and of the party entitled to the surplus, and all their authority to sell was under the statute prescribing the mode. If the sale by the Commiss ioners would be valid, upon a short or defective notice, it would be valid without any notice; and this surely cannot be maintained. A special authority must he strictly pursued, and- every purchaser is to be presumed to know that special authority, in this case, for it is contained in the act; and if he purchases in a case in which that special authority was not pursued, he purchases at his peril. The notice, which omitted altogether lot No. 11, and which was put up under an extreme abuse of discretion, if not with a fraudulent design, on the inside of the court house, was before the eyes of the purchaser as he stood in the inside of the court house hall, and ignorance of the defect and irregularity cannot be pretended,

The most advisable and proper remedy for the case appears to be, to declare the sale void, and to order the deed to be delivered up and cancelled, and to continue the injunction of the action of ejectment. This will be reinstating the parties in their rights, as they stood prior to the sale.

The defendant Judson, does not put himself forward as a bona fide purchaser, without notice of any irregularity. He knew all that the Commissioners knew. He only joins with them in their general allegation, that “they did not know that there was any deficiency or error of description of any kind, in the notice published in the newspaper.” But they do not say when they did not know of the defect. Did not Judson know of it before the sale l That he does not deny. Besides, the ignorance is confined to the newspaper notice; and it is proved that the same notice was affixed upon the inside of the court house door. If a purchaser wishes to rest his claim on the fact of being an innocent, bona fide purchaser, he must deny notice, even though it be not charged, and'he must deny it positively, not evasively; he must even deny fully, and in the most precise terms, every circumstance from which notice could be inferred. (Cason v. Round, Prec. in Ch. 226. Brace v. Marlborough, 2 P. Wms. 491 See also 1 Johnson’s Ch. Rep. 302. and the cases there cited.)

I cannot entertain any doubt of the jurisdiction of the court being competent to afford the requisite relief. The jurisdiction is necessary to help the cestui que trusts, who have been defrauded or unduly deprived of the surplus moneys, which were to arise from a fair and regular sale, They were compelled to resort to this court, as they had no title at law, and the legal title rested in the Commissioners, free of the ordinary equity of redemption. They could not have made any defence at law; all their right was a claim to the surplus fund, on a sale within the statute; so far the. Commissioners were trustees for them; and in that view the plaintiffs have an equitable interest to be protected. To vindicate that equitable right, the plaintiffs were obliged to apply to this- court; and I conclude, with entire conviction, that the sales by the Commissioners, to be valid, must be made in conformity with the act, and that they cannot dispense with any of its directions,

I shall accordingly, declare, that the sale in question was made without the due public notice required by law, and under circumstances denoting a fraudulent intent on the part of the defendant Smith, and that it be adjudged null and void; and that the deed executed by the Commissioners to the defendant Judson, be delivered up and cancel-led ; and that the action of ejectment in the bill mentioned be perpetually enjoined; and that the defendants, Smith and Hallenbeck, pay to the plaintiffs their costs of suit,, to-be taxed.

Decree accordingly.