47 F. 761 | U.S. Circuit Court for the District of Northern California | 1891
(orally.) The defendant demurs to complainant’s bill in equity, praying for a decree allowing her to redeem certain property, and for an accounting of the rents, issues, and profits therefrom since November 4,1881. The bill alleges that on November 4,1881, complainant was the owner in fee of certain lands, specifically described in the bill, situated in Santa Clara county; that at said date, and for some time prior thereto, said property was subject to mortgage liens, two of which were held by the Bank of San José and the other by David Belden, aggregating the sum of $185,000; that the liens held by the Bank of San José were foreclosed on the 13th of August, 1881, by judgment and decree of the superior court in Santa Clara county; that prior to said decree “all of said mortgage liens were assigned and transferred to said defendant; that said defendant purchased said mortgage indebtedness as a means of securing the title to said property, and for no other purpose;” that at the time of said purchase complainant “had no available means of support for herself and family, and was in indigent circumstances and in great need, and such continued to be her condition up to and including the 4th day of November, 1881, all of which said defendant well knew; * * * that said defendant thereupon took advantage of the destitute condition of your oratrix, and by means of the said mortgage indebtedness purchased by him as aforesaid induced your oratrix to transfer the said property to him in consideration of the sum of nineteen thousand dollars;” that thereupon, on the 4th day of November, 1881, “your oratrix did make, execute, and deliver to said defendant á deed of conveyance of said property in consideration of the said sum of nineteen thousand dollars, and because of the helpless and destitute condition aforesaid, of which said defendant took advantage in securing said deed; that at the time of the purchase of said mortgage indebtedness, * * * and thence until the said 4th of November, 1881, the interest of your oratrix in said property, to-wit, the equity of redemption, was of'the value of forty-five thousand five hundred dollars and more, which the said defendant during all said times knew, and in taking the interest of your oratrix in said property, and paying therefor the sum of nineteen thousand dollars, the said defendant took advantage of his position as holder of said mortgage indebtedness, and of the helpless and poverty-stricken condition of your oratrix. ” Under these averments, what were the inducements held out by the defendant, which caused her to sell her equity of redemption? Did he make any false representations as to the value of the property? How did defendant take advantage of complainant’s
.Complainant seeks to maintain this action upon the theory that a mortgagee holds a financial advantage over the mortgagor which, of Use] Í, has a tendency to prevent Mm from dealing with the mortgagee on an equal footing, and that such a relation places the mortgagor under the power of the mortgagee and destroys free agency. In support of this theory counsel for complainant contends that in cases of this character the principles of law are almost as stem and inflexible as those which govern transactions between a cestui que trust and his trustee, and that the sale of the property, under such circumstances as are alleged in the bill, will never be sustained, unless bona fide, and for a full, fair, and adequate consideration. Can this contention he sustained? What is the relation of mortgagor and mortgagee? Under the law of California, and most of the otiier states, the mortgagee takes no estate in the land, but has only a lien thereon as security for the debt until foreclosure. He can at any time make a, bona fide purchase of the equity of redemption or interest of the mortgagor, and thereby acquire an absolute title to the mortgaged premises. There is no trust relation between the mortgagor and the mortgagee when unaccompanied by possession. The mortgagee does not owe the mortgagor any duly to protect the equity of redemption. There is no relation analogous to that of trustee and cestui que trust between the mortgagor and mortgagee created by the execution of the mortgage. No fiduciary character exists between them which prevents the mortgagor ¡rom buying the property at foreclosure sale, and holding the title thus acquired adversely to the mortgagor. . The mortgagee can at all times deal with the mortgagor in respect to the property mortgaged precisely upon the same footing as any other person, and ¡way purchase liens or claims against the property for less than their face value, and hold them against the mortgagor for the full amount. Under these general principles, which are well settled and supported by numerous authorities, - — Green v. Butler, 26 Cal. 601; Ten Eyck v. Craig, 62 N. Y. 421; Walker
“But strong expressions, used with reference to the particular facts under consideration, however often repeated by subsequent writers, cannot safely be taken as fixing an abstract rule. We think that, inasmuch as the mortgagee in possession may'exercise an undue influence over the mortgagor, especially if the latter be in needy circumstances, the purchase by the former of the equity of redemption is to be carefully scrutinized when fraud is charged; and Unit only constructive fraud, or an unconscicntious advantage which ought not to be retained, need be shown, to avoid such a purchase. But we are unwilling to lay down a rule which would be likely to prevent any prudent mortgagee in possession, however fair his intentions may be, from purchasing the property, by making the validity of the purchase depend on his ability afterwards to show that he paid for the property all that any one would be willing to give. We do not deem it for the benefit of mortgagors that such a rule should exist.”
The general principles announced in these and other cases cited by complainant, when applied to a similar state of facts, should always be followed; but they have no application to the particular facts of this case, ami cannot bo considered as authorities in support of the theory upon which complainant relies to sustain this action. To determine the character of the transaction it would be unfair to coniine the consideration solely to the alleged valuation of complainant’s interest and the amount paid by defendant therefor. To be jusi to both parties, the entire transaction should be inquired into. Is it reasonable to believe that any other person, with knowledge of the amount of the mortgage liens, in the light of the foreclosure proceedings, the accumulated costs and interest on the money, and the limited time allowed for redemption, would have paid more than $19,000 for complainant’s interest in the property? The fact that $204,000 was paid lor property alleged to be worth $280,500, under such circumstances, certainly does not show such a marked undervaluation or inadequacy of price as would, of itself, shod: the conscience, or raise any presumption of fraud or undue advantage that would justify a court of equity to annul the sale. The demurrer is sustained.