Brown v. British Amer. Mortg. Co.

• Decision Date: 18 April 1905
• Citation: 86 Miss. 388,38 So. 312
• Court: Mississippi Supreme Court
• Parties: WILLIAM R. BROWN v. BRITISH AND AMERICAN MORTGAGE COMPANY ET AL

38 So. 312

86 Miss. 388

WILLIAM R. BROWN v. BRITISH AND AMERICAN MORTGAGE COMPANY ET AL

Supreme Court of Mississippi

April 18, 1905

FROM the chancery court of Amite county, HON. WILLIAM P. S VENTRESS, Chancellor.

Brown the appellant, was complainant in the court below, and the mortgage company and others, appellees, were defendants there. From a decree in favor of the defendants the complainant appealed to the supreme court. The facts are stated in the opinion of the court.

Affirmed.

Cassedy & Cassedy, for appellant.

1. The instrument purporting to substitute M. H. Wilkinson as trustee, signed by A. R. Shattuck and L. H. Graham, is a nullity.

The instrument is not under seal, as provided by Code 1892 § 2437. The members of the board of directors have no power to convey land; a corporation can only act through its officers; a board of directors in session may direct the officers, supervise the business, and direct the course of the corporate affairs, etc., but the individual members of the board have no more power than any other stockholders.

2. The sale by substituted trustee is void because the act of substitution did not appear of record in the office of the chancery clerk of Amite county until after the sale. See Acts 1896, p. 105. The said act provides three modes in which the substitution may appear of record. 1 Morawetz on Private Corporations (2d ed.), sec. 531, and cases cited; 1 Beach on Private Corporations, sec. 224, and cases cited; Clark on Corporations, 488, 489, and 490, and cases cited.

It cannot be contended that handing to the clerk the instrument of writing substituting Wilkinson as trustee, which at best only amounts to lodging the instrument with the clerk to be filed and recorded, is the same thing as that which is required by this act of the legislature, and all the evidence shows that this instrument was only delivered to the clerk to be recorded. If the legislature had intended that lodging with the clerk was sufficient, the first mode fixed by it would have been the same as that used in the code and "lodged with the clerk to be recorded." And again to further show the intention of the act, the same reads "until such substitution appear of record." The manner in which this is to be done then follows. This is a different statute, having different meaning from all other statutes requiring instruments of writing to be recorded. By reference to the statutes themselves, it will be seen that Code 1871, § 2302, fixes the lodging with the clerk to be recording; so does Ib., sec. 2303; so does Ib., sec. 2304; so does sec. 2306 substitute "delivered" for "lodged," as does sec. 2307. The same language is used in these sections brought forward in codes of 1880 and 1892. In another article, under the caption, "Clerk's Duty in Recording," Code 1892, § 2457, provides "lodged," and sec. 2454 is the same.

If the court should hold that the lodging with the clerk of the acts substituting a trustee is the meaning of the act of 1896, where it is said that the acts shall be of record before the sale, then the appellant says the term sale means each and every act necessary to the transfer of the title. The acts necessary are--First, notice; second, the auction; third, the deed. The three acts together are necessary to transmit title. Enochs v. Miller, 60 Miss. 19, as to advertisement; Washbourne v. White, as to the auction; Code 1892, § 4225, and Jelks v. Barrett, 52 Miss. 315, as to the deed. If there is no advertisement, the court says "the sale is void;" if there is no deed, the court says "the sale is void." Therefore appellant argues that, the notice being a part of the sale, and the sale being void or nothing without notice, then the beginning of the sale is the notice, and the completion of the sale the deed. This being true, the writing substituting the trustee should have appeared on record before the first notice of sale.

3. This sale must be set aside, for the reason that the substituted trustee in selling the land under the mortgage sold in bulk, and did not offer in legal subdivisions. See Code 1892, § 2443. And there can be no answer to this proposition excepting the provisions of the deed of trust itself, which provides that the trustee may, in his discretion, sell the land in bulk. It is contended, however, by the complainant, that the parties hereto cannot by their contract evade the operation of this statute. See sec. 111 of constitution; see Code 1892, § 849. Foreign corporations cannot enforce any contract in violation of law or contrary to the public policy of this state.

4. The complainant further claims that the sale must be set aside for the reason that it was not fairly conducted, and not characterized by the utmost good faith and impartiality.

The defendant, the British and American Mortgage Co., in order to protect itself from intervening claims, caused this deed of trust to be lodged with the clerk for record; this it had a right to do, and it in no manner changed its right to sell and enforce this deed of trust, nor did it give any additional rights. The clerk when he came to record the deed, made a mistake in the description by leaving out more than two hundred acres of land and about $ 900 of the money secured. This in no manner affected the rights of the mortgagee or mortgagor; the only effect so far would be to make the clerk responsible to an innocent purchaser for damages sustained by loss of property which the record would in that condition show unencumbered. The reason of this is evident, because the code only requires the mortgage to be lodged with the clerk for record, and when this is done, he has done all the law requires of him to protect himself; the trustee, however, in this case proceeded to give notice of sale, and in the notice called attention of the public to the incorrect record, and by his reference to that record instructed them to inquire at that place for information as to his right to sell the property advertised--something over 900 acres of land for $ 1,500 and interest--the reference being as follows: Which said trust deed is recorded in Amite county, in deed book 35, pp. 233-239, to which reference is hereby made.

The clerk is not responsible for the acts of the substituted trustee. The public, acting upon the reference of the trustee as advertised, go to the record, look at the book, and find that the trustee has advertised more than his deed of trust calls for; if any such wish to become purchasers of the said land at its market value, and it is upon this assumption the deed requires a notice, and the law compels the same, then such purchasers would be placed in an unequal contest with the mortgagee, because the mortgagee knew the land conveyed, and had the original deed, while the public were referred to the incorrect record for information; thus the mortgagee can buy 900 acres of land for the market price of $ 700. In Dernton v. Sharp, 70 Miss. 864, the court said: "The utmost good faith and impartiality must characterize the execution of the power of sale in a deed of trust, or else the grantor may by timely complaint have it set aside." And, again, this court said in 14 So. 40: "The right of the mortgager in a deed of trust or mortgage with power of sale to the utmost good faith and fairness in its execution is undoubted, and should be upheld and rigidly enforced in the courts." After the sale is inevitable, then the only thing the mortgagee can demand is good faith, fairness, and impartiality. The acts of the trustee cannot be in good faith and impartial, nor is it common fairness to the grantor, when the notices are not fairly given and are so worded that the public are not induced to bid, but deterred from bidding on account of false statements made in said notice. In Burnett v. Denniston, 5 Johnson's Chancery, 35, "Where the advertisement of sale of mortgage premises under a power states a false assertion as advertised, the premises are to be sold for default of three mortgages, when there were only two, the third being o a other land, by which the public might be misled or purchasers deterred from bidding, the sale will be irregular and void." In Jenks v. Alexander, 11 Page's Chancery, 619, it is said: "In relation to the notice of sale, or whereby the owner will be deprived of the advantage of a fair competition at the sale is an act of bad faith on the part of the mortgagee and a fraud upon the owner of equity in redemption."

Mayes & Longstreet, for appellees.

None of the cases cited by counsel sustain the proposition for which they contend, and the distinction which they attempt to make between the lodgment of the writing appointing a substituted trustee, on the one hand, and the lodgment for record of any other recordable instrument, on the other, is in conflict with the express language of the statute to which they appeal. Chapter 96, Laws 1896, provides that "such substitution may appear by separate instrument recorded as other recordable instruments;" and thereby the statute itself expressly declares that the record of this instrument of substitution, which shall accomplish the purpose of the statute, is to be the same record (and that, of course, includes the method of recording) as other recordable instruments.

Moreover, this argument is in conflict with Code 1892, § 2458, which provides that "every conveyance, covenant, agreement, bond, mortgage, and deed of trust shall take effect, etc., only from the time when delivered to the clerk to be recorded."

The sufficiency of the appointment is also assailed on the ground that the instrument is not under seal, as provided by sec 2437 of the code, and that it appears to have been executed by two parties claiming in their acknowledgment to have been directors, whereas...