Brown v. Hall
| Decision Date | 28 August 1913 |
| Citation | 142 N.W. 854,32 S.D. 225 |
| Parties | BROWN v. HALL et al. |
| Court | South Dakota Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Butte County; Wm. G. Rice, Judge.
Action by Thomas Brown against Prescott F. Hall and another. From a judgment for plaintiff, defendant D. Blakely Hoar appeals. Reversed, and new trial ordered.Schrader & Lewis, of Rapid City, and Dan McCutchen, of Belle Fourche, for appellant.
Stewart & Hodgson, of Deadwood, for respondent.
On January 9, 1888, respondent, Thomas Brown, borrowed $500 from the Western Loan & Trust Co., giving his note for that amount, secured by a mortgage on a quarter section of land in Butte county. The note was made payable to W. W. McDonald, trustee, and bore interest at the rate of 7 per cent. per annum, payable semiannually, evidenced by 10 interest coupons. In the mortgage respondent was named as the party of the first part, W. W. McDonald, trustee, as party of the second part, and the Western Loan & Trust Co., cestui que trust, as party of the third part. The mortgage provided that the note should be paid at maturity to the Western Loan & Trust Company. It contained the further provision that in case of default it might be foreclosed by action or advertisement, as provided by statute. It contained a power of sale, and named and authorized the said W. W. McDonald, trustee, or his successor in trust, or their duly appointed attorney, to sell the premises described in the mortgage, and to convey the same to the purchaser in fee simple, and further provided that one H. M. McDonald should be successor in trust in case of the death, absence, inability, or refusal to act of the party of the second part. On February 6, 1888, the said W. W. McDonald, trustee, indorsed said note in blank and delivered it to J. Emory Hoar, and on the following day executed, acknowledged, and delivered to said J. Emory Hoar an assignment of said mortgage, for which assignment of the said note and mortgage the said J. Emory Hoar paid the Western Loan & Trust Company the full face value of said note. Said note was also indorsed by the said Loan & Trust Company by an indorsement amounting to a guaranty, made by the company by W. W. McDonald, “Pt.” The mortgage was duly recorded in the office of the register of deeds in Butte county in January, 1888, and the assignment in February, 1888. No part of the principal or interest due after June 1, 1890, was paid, and on or about August, 1894, foreclosure proceedings were begun by advertisement. The published notice of foreclosure contained the name of the mortgagor and the name of W. W. McDonald, trustee, as mortgagee, and J. Emory Hoar as assignee, but did not mentioned the Western Loan & Trust Company as party of the third part. At the foreclosure sale the premises were sold to J. Emory Hoar, and, there being no redemption, a sheriff's deed was issued to him in October, 1895. By mesne conveyances the title passed to appellant, D. Blakely Hoar. From a time prior to the giving of the mortgage until the trial in this action respondent has been in possession of the premises. All of the taxes from 1889 to and including 1909 have been paid by J. Emory Hoar or his grantees. This action was begun in May, 1910. It is in the usual short form of an action to quiet title. Appellant answered, denying plaintiff's title, and set forth as a counterclaim his claim of title under the foreclosure proceedings and deed, the payment of taxes as above set forth, and pleaded the 10-year statute of limitations and an estoppel against plaintiff by reason of plaintiff's laches. Plaintiff replied, admitting the execution of the note and mortgage, denying the validity of the foreclosure proceedings, and pleaded section 66, C. C. P., as a bar to appellant's counterclaim. At the trial plaintiff offered to pay appellant the amount due on the note at the time of the foreclosure, and the expenses of foreclosure, with legal interest to date, and the amounts expended for taxes, with interest. Upon the foregoing facts the court held, as a matter of law, that the attempted assignment of the note and mortgage by W. W. McDonald, trustee, was in contravention of the power conferred upon him by the terms of the mortgage, and was therefore void; that the attempted foreclosure of the mortgage was irregular and void, and vested to title in the said J. Emory Hoar, and that likewise all the attempted conveyances of the mortgaged premises thereunder were void; but that the appellant, D. Blakely Hoar, had become subrogated to the rights of the Western Loan & Trust Company, and that plaintiff should repay to appellant all moneys he had advanced for the said note and mortgage and the foreclosure thereof, and all sums paid by him as taxes, together with interest thereon from date of payment, amounting in all to the sum of $2,249.95; that appellant have a lien on the mortgaged premises for that amount; and that, unless the same were paid by plaintiff within 60 days, said premises might be sold under execution in satisfaction thereof-holding in effect that the attempted assignment of the note and mortgage by W. W. McDonald, trustee, to J. Emory Hoar, and the receipt and appropriation of the proceeds thereof by the Western Loan & Trust Company, amounted to an equitable assignment of the note and mortgage to him, and the subsequent conveyances under the foreclosure proceeding conveyed to appellant the rights of the said mortgagee under the said mortgage. From the order denying a new trial, defendant D. Blakely Hoar appeals.
Appellant's assignments of error are voluminous. We are of the opinion that no question of estoppel or of laches by either party to the controversy is presented by the record, nor any question under statutes of limitation. We do not agree with appellant that there is any question of mistake in that the mortgage was to be paid to the party of the third part instead of the party of the second. We are of the opinion that the one important matter for determination in this case is whether or not the foreclosure of the mortgage was valid. It having been foreclosed by advertisement under notice of foreclosure sale given by direction of the assignee of the mortgage, was there a valid recorded assignment of the mortgage at the time of the foreclosure proceeding? If there was, the plaintiff has no standing in this court; if there was not, the decree of the trial court was right.
[1] There is no question in this case as to the pound of flesh or the last drop of blood, as argued by respondent. It is simply a question of interpretation of the mortgage and of the statutes relating thereto. Brown, mortgagor, mortgaged the land to McDonald, trustee, party of the second part, in trust for the Western Loan & Trust Company, party of the third part. The note was made payable to McDonald, trustee. McDonald was the legal owner of the note and mortgage. The Western Loan & Trust Company was the equitable owner. McDonald, trustee, assigned the mortgage, together with the note secured thereby, to J. Emory Hoar, who placed his assignment of record, and later foreclosed the mortgage. The note was also indorsed by the company by an indorsement amounting to a guaranty, made by the company by McDonald, “Pt.” This was in law an indorsement, and passed the interest of the Western Loan & Trust Company in the note and mortgage to the holder of the note. Merrill v. Hurley, 6 S. D. 592, 62 N. W. 958, 55 Am. St. Rep. 859; 7 Cyc. 795, n. 50, 51.
[2] Eliminating from consideration for a moment the power of sale contained in the mortgage, and also the provision in regard to the appointment of a receiver, let us consider the nature of the trust relation. Section 2044, Civ. Code provides as follows: “Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which case it is to be deemed a pledge.” This section is exactly like the California statute. In that state the words “other than in trust” have been held in Banta v. Wise, 135 Cal. 277, 67 Pac. 129, to refer to sections 852 and 857 of the California Civil Code. These sections are precisely like our sections 302 and 305 of the Civil Code. Therefore, if the instrument in question had been a trust in relation to real estate, it would have vested no title in the trustee under the provisions of section 308, Civ. Code. Murphey v. Cook, 11 S. D. 47, 75 N. W. 387.
[3] It has many times been held by this court that an instrument similar to the mortgage or trust deed in issue was a mortgage; therefore the note and mortgage were personal property. Berry v. Evendon, 14 N. D. 1, 8, 103 N. W. 748. A trust in personal property may lawfully be created. Section 1612, Civ. Code; Perry on Trusts (6th Ed.) §§ 311, 318, 330; Berry v. Evendon, supra; Toland v. Toland, 123 Cal. 140, 144, 55 Pac. 681. Section 308, Civ. Code, relates only to real property, and is not at all applicable to a trust in personal property. We believe that if this distinction had been borne in mind, much of the trouble this court was put to in deciding the “Dunn” cases might have been obviated.
[4] In this case not only the title to the mortgage, but the title to the note, was vested by the contract in the trustee, although the mortgage provided that the indebtedness should be paid to cestui que trust. The trustee, therefore, held the legal title to such personal property, and the Western Loan & Trust Company was the beneficiary. As such trustee, he was the general agent of the property. Section 1642, Civ. Code. In addition to his powers as trustee of personal property he was given the power of sale in the event of default in the terms of the mortgage. This power of sale was a power in trust in relation to real property. Section 336, Civ. Code; Reilly v....
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