Everett v. Buchanan

• Decision Date: 21 January 1881
• Citation: 8 N.W. 31,2 Dak. 249
• Parties: Everett v. Buchanan.
• Court: South Dakota Supreme Court

8 N.W. 31

2 Dak. 249

Everett

v.Buchanan.

Supreme Court of the Territory of Dakota.

Filed January 21, 1881.

Separate opinion.

SHANNON, C. J.

As this is the first case presented to this court requiring full consideration of the law of mortgages, and as the nature of the transition, in this territory, from the common law to the codes is materially involved, it is deemed proper, to a due understanding of the contention, to present some general observations explanatory of our existing laws on the subject.

It is now a part of the history of jurisprudence, and of legislative progress, that Dakota was the first government to adopt and to put into practical operation anything like a code of the common law. The codes, penal and civil, of 1865 and 1866, reduced into written and systemetic order, not only the rules and decisions of the common law on the subjects embraced, but also, to the same extent, the whole body of the law, whether denominated as written or unwritten, tribunal or statutory. Their sources are mostly to be found in Blackstone, Kent, and Story, and in the decisions and statutes of New York. Thus it has occurred that in this territory there is no common law in any case where the law is declared in the codes. That they have given general, if not complete, satisfaction, has been evinced by the adoption of the Revised Codes in 1877. Still, it is somewhat singular that, after nearly 15 years of practice, so little is really known of the sterling value of the improvements introduced by these codes.

It is quite natural that those who have been rigidly trained in the school of the common law should be averse to our system of codes; yet it is to be remembered that the laws of Rome in the time of Justinian were reduced into a code, and the concurring judgment of thirteen centuries since has pronounced that code one of the noblest benefactions of the human race, as it was one of the greatest achievements of human genius. France, too, at the beginning of her revolution, was governed partly by the civil and partly by customary law. But the French codes made one uniform system for the whole country, supplanting the former laws and forming a model by which half of Europe has since fashioned its legislation. Louisiana may also be adduced as another illustration of the possibility of a general code of the law; but California, by her recent action in adopting a codification under the common law, including the law of evidence, has furnished additional proof of the wisdom of our previous legislation. The Civil Code of Dakota has four general divisions, relating to persons, to property, to obligations, and, lastly, to general provisions connected with these different subjects. The principles and definitions are, in the main, those almost universally recognized in this country in modern decisions and statutes; whilst it contains a few important changes or modifications believed to be the result of the best thought and experience. Among the latter is the law in reference to mortgages, to be found in the third division.

Originally, and at common law, mortgages were regarded as conveyances upon condition; and, unless the condition was performed at the appointed time, the estate became absolute. But from an early day, to relieve against the apparent hardships, and to carry out the manifest intentions of the parties, courts of equity interfered and considered the debt as the principal matter, and the failure to perform at the appointed time only as a matter requiring compensation by interest in the way of damages for the delay. Thus there resulted a right to redeem, which became known as the equity of redemption; and this equitable doctrine, as against the harshness of the common law, has been, in most states, gradually adopted by the courts of law, although, in some instances, to a limited extent only. 4 Kent, 160. However, the cases in this country indicated a fluctuation between equitable and common-law views of the subject, and a hesitation by the courts of law to carry the equitable doctrine to its legitimate results.

While the original character of mortgages had thus been undergoing a change, there was still so much confusion in the books relative to the rights of mortgagor and mortgagee, that a learned judge, in 1855, well observed as follows: “It is time that mortgages and mortgage controversies were stripped of legal fiction,-of all unnecessary legal technicality,-and that courts of law, as well as the courts of equity, in settling the rights of parties in this class of cases, should more particularly regard and carry out the real contract of the parties in its substance and intent. The doctrine of a mortgage being a mere incident of the debt is founded in a true view of the mortgage contract, and as in fact intended by the parties, and not of its forms. The mortgage is only in fact intended by the mortgagor, and so understood by the mortgagee, as collateral security for the ultimate payment of the debt, and not as a sale of the premises.” Dougherty v. Randall, 3 Mich. 489;4 Iowa, 571.

Mr. Justice Story, in Conard v. Atlantic Ins. Co. 1 Peters, 441, said that a mortgage is something more than a lien for a debt; “it is a transfer of the property itself as a security for the debt.” Kent defines a mortgage to be the conveyance of an estate or property by way of pledge for the security of debt, and to become void on payment of it. He states that the legal ownership is vested in the creditor, but that, in equity, the mortgagor remains the actual owner until he is debarred by his own default, or by judicial decree. 4 Kent. 136.

In 1 Washburn on Real Property, 479, a legal mortgage is said to be a conveyance of property intended by the parties, at the time of making it, to be a security for the performance of some prescribed act, and that the legal estate passes to the mortgagee. See Stelle v. Carroll, 12 Pet. 205.

As to a mortgage of personal property, however, it was held to be a conveyance of the title upon condition, and to become an absolute interest at law if not redeemed by a given time. 4 Kent, 138, 141; Story on Bailments, 262, 264, as to Pledges; Stewart v. Slater, 6 Duer, 99; Wilson v. Brannan, 27 Cal. 258.

In respect to mortgages of real property, and in recognition of the mortgagor having the ownership at law as well as in equity, the courts of New York, at an early period, went to greater lengths than any of the English cases warranted. They took a sensible departure from an intricate path, and it became, and it is, the law of that state, that mortgages of real property do not transfer the title. Collins v. Torry, 7 John. 277;Runyan v. Mersereau, 11 John. 538;Jackson v. Bronson, 19 John. 325;Gardner v. Heartt, 3 Denio, 234;Waring v. Smith, 2 Barb. Ch. 135;Hostright v. Cady, 21 N. Y. 344;Stoddard v. Hart, 23 N. Y. 560;Power v. Lester, 23 N. Y. 531;Hubbell v. Moulson, 53 N. Y. (8 Sick.) 225.

This view of mortgages of real property was followed in California; and there, when such mortgage is executed, the estate remains in the mortgagor, and a mere lien or encumbrance upon the premises is created; and default in the payment of the money secured does not change its character. There it is not regarded as a conveyance vesting in the mortgagee any estate in the land, either before or after condition broken, but as a mere security operating upon the property. McMillan v. Richards, 9 Cal. 365;Goodenow v. Ewes, 16 Cal. 461;Mack v. Wetsler, 39 Cal. 247. See, also, Caruthers v. Humphrey, 12 Mich. 270.

So far as mortgages of reality are concerned, this is the carrying out of the equitable doctrine to its logical consequences; yet, strange to add, in California, (before the adoption of the Civil Code,) it was held that a mortgage of personal property vested the legal title in the mortgagee, subject to be divested on compliance, with the conditions of the mortgage. Hackett v. Manlove, 14 Cal. 85;Moore v. Murdock, 26 Cal. 527;Tannahill v. Tuttle, 3 Mich. 104.

So, likewise, in New York, as in other states, a mortgage of personal property, in its ordinary form of a grant upon condition, transfers the title to the mortgagee. Bank v. Jones 4 N. Y. 507;Butler v. Miller, 1 N. Y. 496;Hitchcock v. Ins. Co. 26 N. Y. 68;Southworth v. Itham, 3 Sandf. 448; Shuart v. Taylor, 7 How. Pr. 251;Fox v. Burns, 12 Barb. 677;Nichols v. Webster, 2 Pinney's Wis. R. 234, 447; Flanders v Thomas, 12 Wis. 456.

Thus there was apparent a glaring inconsistency in the application of the principle stated as to the two kinds of mortgage. If, as to realty, the equitable rule should wholly prevail, and there is no transfer of title, but a mere lien, why should not the same principle govern in regard to chattel mortgages? This and other complications were so unreasonable, and became so jarring, that it was conceived to be best to establish a uniform rule upon this subject, and to make all mortgages mere liens upon property. See Flanders v. Chamberlain, 24 Mich. 313. Accordingly, in our Civil Code, all mortgages are classified as liens only, or as charges imposed upon specific property, by which it is made security for the performance of an act. Mortgages, therefore, are now liens, and nothing more, and they are subject to all the general rules of liens. All former distinctions between mortgages of personal and of real property are abolished; and, notwithstanding an agreement to the contrary, a lien, or a contract for a lien, transfers no title to the property subject to the lien. Section 1706. Consequently, all words of grant or transfer in a mortgage are here unmeaning, useless, and absolute; and correct practice demands an observance of the forms set forth in sections 1736 and 1742. Moreover, all contracts for the forfeiture of property subject to a lien, in satisfaction of the obligation secured thereby, and all contracts in restraint of the right of redemption from a lien, are void, with a solitary exception relating to lost property. Se...