127 F. 32 | 6th Cir. | 1904
after making the foregoing statement of the case, delivered the opinion of the court.
i. The case must chiefly turn upon the validity of the power of sale contained in the mortgage made by the Etna Coal & Iron Company to Clark and Bee, as trustees, to secure the purchase-money notes made by the mortgagor company. Whether we call that instrument a mortgage, or a mortgage in the nature of a deed of trust, is of no vital importance. The parties to the instrument have undertaken to provide that, in case of default in the payments secured, there need not be a resort to judicial proceedings, but that the trustees should, after advertising as provided, themselves sell the property and convey to the purchasers by deed “all the right and title of the iron company to the premises,” and that a sale so made “shall be a perpetual bar, both at law and in equity, against the Etna Coal & Iron Company and all persons claiming or to claim the said premises or any part thereof,” etc. They further undertook to provide that “the trustees shall not be required to have the property to be sold appraised or valued in accordance with any present or future law of the state of Ohio or any other state.” But it is said that this instrument contains a clause providing that, if the makers should well and truly make all the payments as provided, and do all other things required by the covenants of the obligation, it should become “null and void and of no effect,” and that the effect of this defeasance clause is to nullify the agreement for a sale without appraisement by the trustees, and to require a proceeding in equity notwithstanding the agreement of the parties. We know of no principle of the
“We agree to what is stated by tbe court in that case. There is nothing in the law of mortgages, nor in the law that covers what are sometimes designated as trust deeds in the nature of mortgages, which prevents the conferring by the grantor or mortgagor in such instrument of the power to sell the premises described therein upon default in payment of the debt secured by it, and, if the sale is conducted in accordance with the terms of the power, the title to the premises granted by way of security passes to the purchaser upon its consummation by a conveyance. Grant v. Burr, 54 Cal. 298; Bateman v. Burr, 57 Cal. 480. The power of sale in the indenture, whether- we call it a deed of trust or a mortgage, does not change its character as an instrument for the security of the indebtedness designated, but it is an additional authority to the' grantee or mortgagee, and, if he does not choose to foreclose the mortgage by any of the ordinary methods provided by law, he can proceed under the power added for the sale of the property, •to obtain payment of the indebtedness. The insertion of a power of sale does not affect the mortgagor’s right to redeem so long as the power remains unexecuted, and the mortgage is not, as it may be, foreclosed in the ordinary manner; but when a sale is made of the interest of the mortgagor his right is wholly divested, embracing his equity redemption: Mr. Jones, in his careful treatise on Mortgages, observes that ‘the delay and expense incident to a foreclosure and sale in equity have brought power of sale mortgages and trust deeds into general favor both in England and America, and, although their general use is now confined to a part only of our states, the same influences which have already led to their partial adoption and use are likely to lead to their general use everywhere at an early day. * * * A power of sale, whether vested in the creditor himself or in a trustee, affords a prompt and effectual security.’ ”
But the complainants say that, whatever be the common law, under the law of Ohio this mortgage could not be enforced without an appraisement and a judicial decree. In Martin v. Alter, 42 Ohio St. 94, 98, it was held that a conveyance of land for the purpose bf securing a debt is “a--mortgage, or mortgage -in the nature of
Conceding for the purposes of this case, that the legal title remained in the complainant, and that it was such a title as was subject to levy subject to the mortgage, does it follow that the power of sale conferred by the mortgage was ineffective, and that the title still remains in the mortgagor, notwithstanding the sale authorized by the instrument has been made? Whether we call this instrument a mortgage or a deed of trust, and whether the title passed at once to the trustees or not, is of no vital importance, for the character of the instrument is not changed thereby. It is, in either event, a security for the indebtedness secured, and for the more expeditious and economical enforcement of the security the parties have provided for a sale by the trustees upon default, and that upon such sale and the execution and delivery of a deed that the title of the mortgagor shall pass to the purchaser. This power is but an additional element of protection to the creditor, and there is nothing in the Ohio decisions referred to which affects in any way the validity of such a power. Indeed, the opinion of the court deals with this very question, and while what was said in reference to the power of sale was not essential to the decision of the points involved, it is not out of place to refer to it as indicative of the opinion of Judge Burket as to the law of Ohio upon the matter now under discussion. Upon this subject Judge Burket said;
“The power of sale, instead of showing the instrument to be a deed passing title to the grantee, has the contrary effect, and aids in showing the instrument to bo a mortgage, as no such power is necessary in a deed which passes title, because the deed, by its own vigor, carries with it the power of sale tO' the grantee, while a mortgage does not carry such power unless expressly granted therein. The power of sale in this instrument is in the nature of a power of attorney to sell and convey lands, in which case the legal title remains in the grantor until the power is executed. The only purpose to he' served or advantage to be gained by a power of sale in a trust deed or mortgage is to enable the trustee to take possession of the property and sell it tinder the power, and thereby cut off the vested rights of the grantor without the aid or delay of a proceeding in court. The grantee may, however, refuse to exercise the power of sale, and invoke the aid of a court to make the sale as upon foreclosure; and where subsequent liens have attached such a course becomes necessary, because a sale by the trustees would convey a title burdened with such subsequent liens. Until a sale shall be made, either under the power or by the order of court, the grantor will retain his vested rights*38 in the property, and such rights will be subject to liens the same as his other lands and tenements.”
Complainants cite Babcock v. Camp, 12 Ohio St. 11, 34, where Judge Brinkerhoff, in the course of his opinion, said:
“This trust deed, it will be observed, was in the nature of a mortgage given as a security for money loaned, and by its terms conferred on the iender and grantee a power of sale without appraisement on default being made in the repayment of the loan. And if, in order to decide this case, it were necessary for us to pass definitely upon the question of the validity of a sale made in pursuance of the terms of such an instrument, it would become a subject of serious, and perhaps doubtful, inquiry, whether, in view of the long-established policy of our laws forbidding the sale of lands pledged by way of mortgage for less than two-thirds of their appraised value, such a sale could be upheld. But, in our view of the case, it is not necessary to pass upon that question' — and we avoid the expression of any opinion upon it — because, whether the sale under the deed of trust were valid or invalid, we are of opinion that the only parties interested in questioning the validity of that sale, to wit, the plaintiffs, and Graham & Belden and Moreau & Scudder, are concluded by the proceedings and decree in the King suit, and are not now at liberty to call the validity of that sale in question.”
But this is confessedly pure dictum, and as such not authoritative.
We are utterly unable to discover any statutory provisions which in any'way forbid the granting of a power of sale by a mortgager or require an appraisement contrary to the agreement of the parties. Sections 5316, 5389-5391, 5398a, 5404, Rev. St. Ohio 1892, are supposed to have some bearing upon the subject, but we quite agree with the trial judge, who held that there was nothing in these provisions which prohibits the exercise of the right incident to ownership of conferring authority upon the mortgagee or trustee to sell, either by a separate instrument or by a power in the mortgage itself. The dictum of Judge Brinkerhoff in Babcock v. Camp, cited above, is not in accord with the Ohio cases, for sales under such powers have been frequently upheld. Johnson v. Turner, 7 Ohio, 216, pt. 2; Turner v. Johnson, 10 Ohio, 205; Brisbane v. Stoughton, 17 Ohio, 482; Woodruff v. Robb, 19 Ohio, 2x2. That the instruments containing such power were deeds of trust, rather than mortgages, may be true, but neither the Ohio court nor any other has ever lield that a power of sale under one form of security would be good and under the other bad. If there is nothing in tlie Ohio statutes which forbids such a power of sale in a security under which the title passes to the trustee, there is likewise nothing which forbids such a power in a like security when the technical legal title remains in the mortgagor.
2. But it is objected that, if the power of sale in the mortgage be valid, the sale should be set aside for certain irregularities which are said to have occurred. Birst, it is said that the trustees were not authorized to make any sale under the mortgage becaxxse they had not been requested so to do by any party in interest.' But such request was not essential. The mortgage gave the trustees the right to make such sale upon default “upon the written request of the holders of one-fourth in amount of said bonds then outstanding, * * * or without such request or security or indemnity in their own discretion.” In addition, it may, be added that the bonds se
3. It is next urged that the sale was advertised to take place at 10 o’clock, and that in fact it did not occur for some hours thereafter. There was some delay in the sale in consequence of an effort made by one of complainants’ officers and stockholders to enjoin the sale upon the ground that such a sale was unauthorized without an appraisement, and there is a great conflict in the evidence as to the extent of the delay thus occasioned. We have made a careful examination of the testimony, and we are of opinion that complainants’ case upon this point is not made out. The weight of proof is that the sale was cried substantially at the hour advertised, and that there was no such delay as some of the witnesses think there was. No objection to proceeding with the sale was then made on that account by any of the representatives of complainant present at the time.
4. It is said that there was some collusive arrangement between Clark and Lee as trustees and one Hart, an officer of the Ironton Coal & Iron Company, in regard to the bidding at the sale. Mclnnes and Clark, trustees holding the bonds secured by the mortgage so to be enforced, had directed Lee and Clark to bid at the sale for them, as holders of the bonds so secured, and had authorized them to bid their full debt and interest and taxes, costs, etc., but to buy at a less price if able, and to act upon their own discretion. Under this authority Clark and Lee determined to bid up as high as $80,000, and there was probably some understanding between Clark and Hart that they would run it up to that figure-. Tut this was intended to enhance the price, and not to suppress bidding, and how the complainant was injured or affected by the by-bidding of Hart, which only enhanced the value and encouraged competition, is not satisfactorily made out. It certainly falls short of that kind of mala fides which will affect a trustee’s sale. “It is only some practice to prevent bidding or procure a sale for less than the property would have otherwise brought, which can be relied on by them to avoid the sale.” Richards v. Holmes, 18 How. 143, 148, 15 L. Ed. 304.
5. It is next said that the property was bid in by Lee and Clark as individuals at their own sale as trustees, etc. But this is a total misconception of the facts. Clark and Lee, as we have already seen, bid the property in for the holders of the bonds secured under the
. The seventh article of the mortgage expressly authorized the trustees to buy at the sale, and the holders of the bonds to fix the amount at which it should be the duty of the trustees to buy in the property, and that the trustees should “on any such purchase hold the property so purchased upon the trust for the equal benefit of the bondholders who had so required the trustees to buy in the property.” The power of the párties to stipulate as to the terms of sale by a trustee under a mortgage is indisputable in the absence of statutory regulation. This right of contract includes the right to agree upon an interested party -as trustee, and that the trustee shall have the right to buy at his own sale for the benefit of the cestui que trust. 2 Beech on Trusts & Trustees, § 649; Davy v. Durant, 1 De Gex & Jones, Chan. 535; Montague v. Dawes, 12 Allen, 397; Elliott v. Wood, 45 N. Y. 71, 79; Woonsocket Institution for Savings v. American Worsted Co., 13 R. I. 255; Hall v. Bliss, 118 Mass. 554, 19 Am. Rep. 476; Ellenbogen v. Griffey, 55 Ark. 268, 18 S. W. 126; Knox v. Armistead, 87 Ala. 511, 6 South. 311, 5 L. R. A. 297, 13 Am. St. Rep. 65. The learned counsel for appellants cite Farrer v. Farrer, L. R. 40 Ch. Div. 395, and Glidden v. National Bank, 53 Ohio St. 588, 42 N. E. 995, 43 L. R. A. 737, to sustain their contention. Neither case denies the validity of a power of purchase granted to the trustee.
6. The bill charges a general collusion between the trustees and the Ironton Coal & Iron Company and a conspiracy to deprive the complainants of their property, which is averred to be easily worth $500,000, by unfair practices. The complainants held possession of the property involved from December 17, 1895, to some time in July, 1897, when George N. Gray, as agent for the trustees under the mortgage, -took possession in pursuance of .the powers in that regard. The complainants had, while in possession, made expenditures in the way of repairs, etc., aggregating possibly $30,000, but they had not put either furnace in condition for operation, as they had bound themselves to do, and had apparently exhausted all their means. They had suffered taxes to go unpaid, and had not paid a single interest coupon, and seemed to be entirely unable to comply further with their engagements, and for some weeks before the trustees took possession the premises were apparently or practically abandoned, all repair work havifig ceased. Prior to this occupation by the trustees the evidence tends strongly to show that both the Ironton Coal & Iron .Company: and the mortgage trustees had been urgent that the Etna Company should get the furnace into operation, and had manifested in every way an earnest desire that, complainants might be able to raise the money to comply with their engagements and succeed in- their undertaking. We find no evidence of any disposition to throw obstacles in their way, or desire to have them fail in their
Many other objections to the granting of any relief under this bill have been urged, which we have had no occasion to consider in view of our conclusion upon the questions considered.
The decree dismissing the bill, for want of equity is accordingly affirmed.