38 S.C. 138 | S.C. | 1893
Lead Opinion
The opinion of the court was delivered by
Mary Regina Holley, by her deed dated the 18th day of December, 1867, conveyed a tract of land, containing 412 acres, situated in Fairfield County, in this State, to Thomas W. Rabb, in trust for his wife Cassandra during her life, and at her death to be delivered to such issue as the said Cassandra may have living at her death, to be held by such issue absolutely and discharged from all further trust. Under such deed said lands were taken possession of by such trustee. This deed was duly recorded, and contained a power to the trustee to make any changes of investment of such trust estate as he may think proper, after the written consent therefor of the said Cassandra, such changes of investment to be subject to the same trusts as original tract of land conveyed.
On the 20th day of February, 1877, the said Thomas W. Rabb, as trustee, with the written consent therefor of the said Cassandra, conveyed the tract of land in question, and for $1,600 paid and secured to be paid as the consideration, unto David R. Flenniken in fee simple, alleging in said deed that the same was made in pursuance of the power in the deed made by Mrs. Holley. This deed and the written consent of Cassandra, the wife of the trustee Rabb, were duly recorded, and the said David R. Flenniken went into possession of said lands.
On the 23d day of July, 1884, Cassandra H. Rabb, as plaintiff, exhibited her complaint in the Court of Common Pleas for Fairfield County against David R. Flenniken and Thomas • W. Rabb, as trustee, as defendants, to set aside the deed made by Thomas W. Rabb, as trustee, to David R. Flenniken, on the 20th February, 1877, on the ground that her trustee had thereby and therein been guilty of a breach of trust, with a fraudulent intent, participated in, if not contrived, by the said David R. Flenniken. A notice of lis pendens was duly filed in the office of the Clerk of Circuit Court for Fairfield County, on the 20th day of July, 1884.
On the 5th day of December, 1885, the said David R. Flenniken, in view of his insolvency, by deed conveyed his whole estate, including expressly this tract of land, to James A. Brice, for the benefit of his creditors.
On the 27th January, 1887, Giles J. Patterson, as jfiaintiff, began his action to foreclose the mortgage assigned to him by Flenniken, against James A. Brice, as assignee of the estate of David R. Flenniken, as defendant, on which judgment of foreclosure was rendered on the 13th June, 1887, and lands ordered sold on the first Monday in October, 1887, and at such sale on that date were bought by the plaintiff, Giles J. Patterson, for the sum of $550. At this sale notice was given publicly that Mrs. Cassandra Rabb owned the land. Deed • was made by clerk of court to Patterson, and he went into possession of the land immediately thereafter.
On 12th July, 1890, Giles J. Patterson, as. plaintiff, against the defendants (who are here as appellants), in his complaint sets out such of the foregoing facts as he conceived sustained his right to procure a judgment restraining any and all persons who claim through, or act for, Cassandra H. and Edwin J. Rabb, as trustee, from any interference with his possession of the tract of land in question. Such plaintiff claims that when he received
The answer of the defendants deny that Patterson is entitled to be considered as holding the bond and mortgage of Pickett, by assignment of Flenniken as the assignee, by purchase thereof for full value without notice, and that the doctrine in equity of innocent purchaser for a valuable consideration without notice, cannot be maintained by the said Patterson, because he is merely the holder of a chose in action, which, under the laws of this State, is unnegotiable, being under seal; and, therefore, his rights under his holding are only such as his assignor, Flenniken, held, and that Flenniken, as the obligee in the bond of Pickett to him, held said bond in fraud of the trust estate created by the deed of Mrs. Holley in 1867, of which he had full notice. Besides this, the defendants claim that Patterson ought not to be considered as having the right to maintain his present suit, because of the Us pendens, filed on the 20th July, 1884, as required by law.
The testimony was taken by Mr. McCants as special master. In addition to the records and deeds hereinbefore indicated, it was established by the testimony of Flenniken himself, that when in 1877 he received the deed for this land from Thomas
The defendants appeal from the order of Judge Witherspoon of 12th July, 1890, and from the decree of Judge Fraser. As these two sets of exceptions will be set out in the report of the case, we will not reproduce them here.
“In this State, a mortgage is a mere security for a debt, and the case or Haynsworth v. Bischoff, supra, in which it is held that a mortgagee is a purchaser for valuable consideration without notice, and is within the rule, effectually settles the question as to whether in this State a mortgagee should have the legal title, as in some States he has, in order to entitle him to that protection which equity gives to an innocent purchaser without notice. An innocent assignee has all his rights. In Maybin v. Kirby, 4 Rich. Eq., 105, the contest was between several assignees of the stock of an incorporated manufacturing company. The case was decided according to the well known principles as in those cases in which this doctrine applies, and there was no case of a want of notice made out. I think that the statement that a chose in action is not within the rule, is a mere dictum, and must be regarded as not law, after Haynsworth v. Bischoff, supra. I, therefore, hold that, to the extent of the mortgage, the plaintiff’s title was good, and that he has a right to the possession of the premises bought under his foreclosure proceedings, and that he cannot be turned out of possession under any proceedings to which he was not a party.”
Our courts have enforced these fundamental distinctions between negotiable and unnegotiable chose in actions, both in law and in equity. Hodges v. Connor, 1 Speer, 120; Whitesides v. Wallace, 2 Id., 163; Waring, as assignee, v. Cheeseborough and Campbell, 1 Hill, 187; Cantey, as executor, v. Blair, 1 Rich. Eq., 49; Holbrook v. Colburn, 6 Rich. Eq., 299; Bobo v. Vaiden, 20 S. C., 281; Moffatt v. Hardin, 22 Id., 9. Both bonds and mortgages are choses in action. Our courts, both before Haynsworth v. Bischoff, 6 S. C., 159, supra (decided in 1875), and since that ease, have held that choses in action, under seal, were not within the rule, whereby equity will protect a purchaser for a valuable consideration without notice. 1st. As we have seen, our statutes expressly make them, in the bands of assignees, subject to discounts or defences of defendants. 2d. The cases now cited so held.
In Hodges v. Connor, supra, a note under seal was sued on. It seems that when Connor executed the note to Hodges (the
In Waring, as assignee, v. Cheeseborough and Campbell, supra, which was an action by the plaintiff, as assignee, for full value of the assignee of the obligees of a bond, the obligees were guarantors also of the bond assigned. The defence was failure of consideration. At the trial it was proved that Cheeseborough and Campbell, named as obligees in the bond, and who assigned the bond to Withers, were the sureties of Smith, the obligor in the bond, and that the bond was made by them in that form to Withers for negroes and two plantations. Some ten of the negroes sold were not the absolute property of Withers. The defence of failure of consideration prevailed. In Cantey, as executor, v. Blair, supra, the facts were about as follows: Henry T. Cantey had executed a sealed note, payable to James W.
In Holbrook v. Colburn, 6 Rich. Eq., 299, supra, the court said: ‘ ‘The honest obligee of a bond is liable to be defeated of satisfaction by proof of fraud, mistake, or want of consideration affecting the obligation.” The complainant in this ease, who was the assignee of the obligee, failed in his suit. Bobo v. Vaiden, 20 S. C., 281, supra, was an action decided in 1883. In this case, the assignee of the interest in an estate of a distributee thereof, which distributee was a surety on the bond of the administrator of such estate, invoked the doctrine of an innocent purchaser for valuable consideration without notice, to the effort of creditors of the estate of the intestate to apply the share of such distributee, Mrs.'Vaiden, to the payment of her liability as surety on the bond of the administrator, he proving insolvent. This court held: “If Mrs. Vaiden were now suing the estate for her share, is there any doubt that her liability as surety would be set off before anything was paid to her? Has the assignee any higher right? The demand is a mere chose in action, and in such cases the admitted rule is, that the assignee takes the interest assigned, subject to all the defences, both legal and equitable, against the assignor. Wait Ann. Code; Lynch’s Code, sec. 135.
In Moffatt v. Hardin, 22 S. C., 9, supra, Hardin executed to Melton a sealed note and mortgage of land. This sealed note
This last cited case (Maybin v. Kirby, supra,) is not regarded by the Circuit Judge as throwing much light upon the question he was discussing, because there was notice. This is quite true; yet, when it is remembered that the principles there dis
This is not only the rule in our State, but it is that observed in the Supreme Court of the United States. Carpenter v. Longan, 16 Wall., 241. It is true, that this last cited case referred to a negotiable note, which the mortgage secured, yet the court in its judgment said: “The caséis a different one from what it would be if the mortgage stood alone, or the note was unnegotiable, or had been assigned after maturity.” This case is approved in Kenicott v. The Supervisors, 16 Wall., 469: “It has been decided at the present term of this court, that when a note secured by a mortgage is transferred to a bona fide holder for value before maturity, and a bill is filed to foreclose the mortgage, no other or further defences are allowed as against the mortgage than would be allowed were the action brought in a court of law upon the note. Carpenter v. Longan, supra.” It is thus seen, not only is the theory and practice of our own courts on the subject of unnegotiable choses in action approved by the Supreme Court of the United States, but also the flexibility of a mortgage, as that it may be adapted to the fate of the note, negotiable or not negotiable, it is intended to
Dissenting Opinion
dissenting. The facts of this case are so fully stated in the Circuit decree,
Down to this point, nothing was heard of any hidden equity to the land, or affecting the legal title to it. (6) But on January 23, 1884, action was commenced by Cassandra H. Babb and her children then living, to set aside the conveyance of her trustee to Flenniken as a fraudulent breach of trust, Thomas W. Babb, her trustee, and Flennikeu being alone made parties defendant. Lis pendens was filed, long litigation followed, the result of which will be referred to hereafter. (7) On December 5, 1885, Flenniken, being embarrassed, executed to one James A. Brice an assignment of his property, including the equity of redemption in the aforesaid tract of land, for the benefit of his creditors. After this assignment, Giles J. Patterson brought an action against Brice, the assignee of creditors, to foreclose the mortgage assigned to him. He made no one a party but Brice, but filed notice of lis pendens. A decree of foreclosure was rendered, and the land sold under an order of court on October 5, 1887. When the property was offered for sale, notice was given of the claim of the defendants. The land was bid off by Patterson, the holder of the mortgage, for less than was due on the bond and mortgage. Titles were made to him by order of the court, and he was let into the possession.
The proceeding of Mrs. Babb to set aside the deed of her trustee to Flenniken was not finally decided uutil 1889, when a j udgment was entered that Flenniken should hold the said trust tract of land subject to the trusts in the original Holley deed. The parties obtained an order from Judge Norton appointing Edward J. Babb trustee, and requiring Flenniken to execute and deliver to the new trustee a deed of the aforesaid premises upon the original trusts. That was done; and the
The cause was heard by his honor, Judge Fraser, who held “that, to the extent of the mortgage, the plaintiff’s title was good, and that he has a right to the possession of the premises bought under his foreclosure proceedings, and that he can not be turned out of possession under any proceeding to which he was not a party. At the same time, I am inclined to the opinion that, under the foreclosure proceeding, and after the filing of notice of Ms pendens, and express notice of the claims of the trustee and cestui que trust, he did not purchase such a title as would extinguish the equity of redemption existing in favor of the trust estate; and that the trustee has still a right to redeem the mortgage. I do not, however, see how that can be accomplished in this action, as the answer sets up no such claim, and makes no offer to redeem. James A. Brice held subject to this mortgage, and also to the trusts of the original deed. This decree, therefore, must be without prejudice to any action the trustee and his cestui que trust may hereafter be advised to bring for the redemption of the mortgaged premises,” &c.
From this decree the defendants appeal to this court upon the following exceptions: [See ante, p. 139.]
There is some confusion in this case, arising from the fact
In order to prevent confusion, therefore, we will go back to the time when Mrs. Rabb filed her complaint to set aside the deed, which her trustee, with her consent, made to Flenniken (January 23, 1884), and see how the matter then stood. At that time Patterson was in possession of the bond and mortgage, having purchased the same for full value some years before, with no notice whatever of any claim on the part of third persons of any hidden equity in the land mortgaged. ■The claim as developed was a mere equity, and the question is whether Patterson could defend himself against it by the higher equity of innocent purchaser for value. There is no positive law creating or defining that plea, but it is purely equitable. If Patterson had taken a conveyance of the land from Pickett, instead of an assignment of the purchase money mortgage given to Flenniken, I suppose that there would have been no doubt as to his right to .protect himself by the plea.
This seems to be conceded, but it is said that the case of Haynsworth and Bischoff did not go so far as to include the assignee of a mortgagee; that in such case the mortgage being merely anunuegotiable chose in action, another principle intervenes, viz: that the assignee takes subject to all equities which may be developed as to the land mortgaged. It is true, that the case of Bischoff did not, in express terms, embrace the case of an assignee of the mortgagee; but we do not see why the principle decided does not apply. It has been considered, that although a mortgage might be so far considered as a mere chose as to be discharged by equities between the mortgagor and mortgagee, against which the assignee might protect himself by making inquiry of the former at the time of the assignment, yet that with regard to the equities of third persons the case was different, and an assignment for value was to be regarded as a purchase. There has been discussion on the subject, and possibly difference of opinion, but we do not propose to reopen the argument. We agree with the Circuit Judge, on the force of the authorities cited by him in his decree, that to the exteut of the mortgage the plaintiff’s title was good. We also concur in his intimation, that Patterson, at the sale of the land under his foreclosure suit against Brice, did not purchase such a title as would extinguish the equity of redemption existing in favor of the trust estate. We hold, first, that to the extent of the mortgage the plaintiff’s title was good, but that'the purchase and conveyance at the foreclosure sale in the case of Patterson v. Brice did not carry to the purchaser the equity of redemption iu land. Second, that the trustee and cestui quetrusts have the right to redeem the premises in question, by (paying, the balance due upou the mortgage debt, after allowing, of course, all proper credits of payments, rents, &c. Third, that unless the defendants take action to redeem the land in a reasonable time, the plaintiff, or his representative, disregard
Judgment reversed.
Quite as fully stated in the opinion by Mr. Justice Pope. — Reporter.