Elliott v. Wood

53 Barb. 285 | N.Y. Sup. Ct. | 1869

By the Court, Clerke, J.

As to what constitutes a mortgage, courts of equity hold that the particular 'form or words of the conveyance are unimportant; and it is laid down, as a general rule, that wherever a conveyance transferring an estate is originally intended between the parties as a security for money, or for any other incumbrance, whether this intention appears from the same instrument or any other, it is always considered in equity as a mortgage, and consequently is redeemable upon the performance of the conditions or stipulations contained in it. In the present case an absolute conveyance, on its face, in the two instances was given; one to Van Vechten, the other to Ross W. Wood and Richard D. Wood; but by a defeasance in each case, the transaction became a mortgage, and the mortgagor is entitled to all the rights of the owner of the equity of redemption.

In determining the nature of the property mortgaged, the proper and legal mode • of foreclosing the equity of redemption, and the rights of the parties, we must be governed entirely by the language employed by them in the instruments which they adopted as the evidence of their agreements. By these agreements, it is evident that they considered the mortgaged property as real estate, to be treated and dealt with precisely as if it was situated within the territorial jurisdiction of the state of Hew York, subject to the provisions prescribed by its laws relating to the foreclosure of the equity of redemption, and to any rights pertaining to any of the parties. To the mortgagees in both instruments, the plaintiff* conveys all his right, title and interest of, in and to the island of Sombrero, situated in the West Indies, and in and to all deposits, minerals, earths, fossils, and property of every nature and description on the said island; and, in both defeasances, it is expressly provided that the respective mortgagees, or their legal representatives or assignees, may become the purchasers at the foreclosure sale; and, in that event, no further or other conveyance of said property shall he necessary, and that such sale, whoever should become the purchaser, should be a perpetual bar in law and equity against Elliott, (the plaintiff,) his executors, administrators, and assignees. As to the mode of foreclosure, it was provided in a supplemental memorandum," amendatory of the previous defeasance, that in case Elliott failed to pay to Van Vechten, on demand, ■ as the same shall become due, the sums which he then owed, or may thereafter owe him, it may be lawful for him to sell the property at public auction, at the Merchants’ Exchange in the city of New York, upon notice of such intended sale, to be inserted in a newspaper published in the said city, once a day for thirty successive days, and without any further notice whatever; and, in a memorandum supplemental to, and amendatory of the defeasance agreement between the plaintiff and the defendants Wood, it is provided that the notice of sale to be given by them, instead of being a notice of thirty days, to be published in a newspaper, should be a notice of ninety days by leaving a copy thereof at a certain office or place of business in the city of New York, and by addressing another copy of said notice to Elliott at Baltimore, Maryland, or, if he should change his place of residence, then to such other as he may designate. The special term finds that, on failure of payment of the sums due to Van Vechten, the latter having given the notice required by the agreement between the plaintiff and said Van Vechten, he offered the said property for sale at public auction, at the Merchants’ Exchange in the city of New York, at 12 o’clock, noon, and that the defendant, Boss W. Wood, having bid at said sale for said property, the sum of $1200, and that being the.highest bid offered, the property was sold to said Wood, and a deed of it was executed and delivered by Van Vechten to said Wood.

The special term also finds, with regard to the mortgage to the defendants Wood, that the latter, after having given the notice required by the amendatory agreement, offered the share and interest of the plaintiff in the said property for sale at the Merchants’ Exchange in the city of Sew York, and that the said Ross W. and Richard D. Wood having bid for it, at said sale, the sum of $25, and no other bid being offered, they purchased the said share- and interest.

I. The counsel for the plaintiff contends, that the relation between the plaintiff and the defendants Wood, was that of cestui que trust and trustee, and that they were, therefore, incompetent to be purchasers of the property. Is the mortgagee of property, authorized by the mortgage to sell the property at public auction, and to be a purchaser of it at the sale, in that peculiar confidential relation to the mortgagor, which the law regards as a fiduciary relation, such as that of guardian and ward, attorney and client, trustee and cestui que trust? If any such relation can be supposed to have existed between the plaintiff and the defendants Wood, it must be on the ground that the one was the principal and the other the agents, for the sale of the property in question. In all cases, indeed, óf purchases and bargains respecting property made between principals and agents, the utmost good faith is required. But a sale of his principal’s property, purchased by an agent, is not necessarily void. The transaction should be, undoubtedly, scrutinized closely; but it is only, voidable, where there has been undue influence and advantage, or where there has been imposition. It is different, certainly, where the strict relation of trustee and cestui que trust exists; and, in such case, the principle applies where a purchase has been made by a trustee, of the property of his cestui que trust; although it was sold at public auction, it is in the option of the cestui que trust to set aside the sale, whether made bona fide or not. The relation in the present case I hold not to be of that character, and that, at most, it is only one of principal and agent; and, as no undue influence or advantage, or imposition has been shown, the sale is valid, unless other principles of law render it void.

II. Undoubtedly, courts of equity have always held that the equity of redemption is so inseparable .from a mortgage, it cannot be disannexed even by an express agreement of the parties. But by statutes of the state it has been long declared that mortgaged land can be sold by advertisement, in all cases, where the mortgage contains a power to the mortgagee, or any other person, to sell it, upon default being made in any condition of the mortgage. Every sale pursuant to such a power is declared to be equivalent to a foreclosure and sale under the decree of a court of equity. As the law, however, looks upon the mortgagor as one who might, by his necessities, be driven t'o an improvident contract, it requires that the party availing himself of the power must conform to the requirements of the statute to bar the equity of redemption. For instance, the sale must be public, even when the mortgage contained a power to sell either by public auction or at private sale. (Lawrence v. The Farmers’ Loan and Trust Co., 3 Kern. 200.) The sale in the case which I have just noted, was private and secret, and without notice to the heirs or representatives of the mortgagor, by advertisement pursuant to the statute, or otherwise; and it was held to be void. Whether the Court of Appeals in that case held, that in every particular the method prescribed by the statute must be strictly followed, may be considered doubtful. For instance, that the notice of sale should be published for twelve weeks successively, and that the notice should be affixed at least for that time on the outward door of the building where the county courts are directed to be held in the county where the premises are situated. Is this necessary where the mortgage provides that the notice of sale shall be for a shorter time and in a different manner ? Iam inclined to think that in -all cases it is only necessary that the sale should he public and not private; and that there should be notice. By this, the rights of mortgagors are sufficiently .protected; and if they have themselves provided expressly for a time and manner different from that prescribed by the statute, and if the sale is in conformity with the provisions of the mortgage, it will be upheld, particularly when it is manifest that the method contained in such provisions is more likely to secure notice to the mortgagor, than the method prescribed by the statute. The mortgage to the Woods, or rather the supplement, provided that the notice should be given ninety days before the sale, and that to Van Vechten provided that it should be given thirty days before the sale; and, accordingly, these notices were given, as we have seen by the findings of the special term. The 7th section of the statute expressly declares that the mortgagee, his assigns, and his or their representatives, may fairly and in good faith purchase the premises at the sale; and as the section makes no exception, this can be done even when the mortgage contains no provision to that effect.

III. Does the usury in the loan from Van Vechten to Elliott affect the sale to the defendants Wood, under the foreclosure ?

Both counsel have referred to Jackson v. Henry, (10 John; 195,) and both agree that an innocent purchaser, under a statute foreclosure, .is not affected by the usurious character of the mortgage. But, the counsel for the plaintiff insists that this decision does not apply to the present case, as the mortgaged property is situated out of the state. As I have already said, however, in the introductory part of this opinion, I have regarded this mortgaged property, throughout, in analogy to the laws relating to the foreclosure of property within the territorial jurisdiction of the state. The parties, evidently, in their dealings and agreement, meant that it should be regarded in this light.

[New York General Term, January 4, 1869.

The "decision in Jackson v. Henry, has been recognized in several recent cases; and I deem it now satisfactorily settled that as usurious contracts are not absolutely void, but are capable of being treated as valid by the borrower, if the mortgagor allows the property to be sold under a foreclosure, without taking the necessary measures to avoid the mortgage, an innocent purchaser cannot be affected by the alleged usury.

The judgment of the special term should be reversed, new trial ordered, costs to abide event.

Clarice, Sutherland and Geo. G. Barnard, Justices.]