Haynsworth v. Bischoff
| Decision Date | 26 April 1875 |
| Citation | 6 S.C. 159 |
| Parties | HAYNSWORTH v. BISCHOFF. |
| Court | South Carolina Supreme Court |
BEFORE TOWNSEND, J., AT DARLINGTON, TERM, 1873.
Action by W. F. Haynsworth and others, plaintiffs, against Henry Bischoff & Co., and others, defendants.
The facts of the case are as follows:
J. M McCall was administrator, with the will annexed, of J. L McCall, deceased. On the 22d of October, 1866, a bill in equity was filed for settlement of the estate of the testator, to which the plaintiffs, as devisees and legatees of the testator and the administrator, were parties. Under the proceedings had in that cause, a final decree was rendered on May 10, 1871, in favor of the plaintiffs, against the administrator for $8,262.87. In the year 1866 the administrator loaned moneys of the estate to W. E. McCall taking from him his promissory notes as securities for the loans. The notes were afterwards put in suit, and in 1868 judgment was recovered thereon. Execution was issued on the judgment, and on January 6th, 1868, the Sheriff sold, under the execution, a tract of land, the property of the judgment debtor. The administrator was the purchaser, at a price more than sufficient to satisfy his judgment, and he paid the balance of the price, after satisfying his own judgment, by giving to the holder of another judgment against W. E. McCall his note, secured by a mortgage of the land.
The notes of W. E. McCall to the administrator, the judgment thereon and the Sheriff's deed of conveyance were to him, not in his representative character, but as an individual.
After his purchase of the land, J. M. McCall contracted a debt with Henry Bischoff & Co. for goods bought of them, and on the 1st of September, 1869, he gave them his note, payable thirty days after date, for $619.80, the price of the goods. To secure the payment of this note, J. M. McCall, on the 11th of July, 1870, gave to Henry Bischoff & Co. his mortgage of the land he had purchased at Sheriff's sale-the only consideration expressed in the mortgage, besides the nominal consideration of three dollars, being his indebtedness on the note, then past due. The mortgage was recorded on the same day it was given.
Some time after the mortgage was given, Henry Bischoff & Co. commenced action against J. M. McCall on his note to them, and on the 7th of March, 1871, obtained and entered judgment thereon. The mortgaged premises were levied on under the execution and advertised for sale by the Sheriff in June, 1871, and thereupon W. F. B. Haynsworth and others, plaintiffs, commenced this action against J. M. McCall and Henry Bischoff & Co. and other judgment creditors of J. M. McCall, for injunction to restrain the sale by the Sheriff of the said tract of land, and praying that the same be sold under the decree of the Court and the proceeds applied to the payment of the judgment in favor of the plaintiffs in the bill in equity for settlement of the estate of J. S. McCall, deceased.
Henry Bischoff & Co. were the only defendants who answered the complaint.
The case was referred to a Referee, and at the hearing before him numerous questions of law and fact were presented for his consideration, the principal question being whether Henry Bischoff & Co. were entitled to protection under their mortgage as purchasers for valuable consideration without notice.
The Referee held, inter alia , that the trust in favor of the plaintiffs could be shown by parol; that the defendants could not show by parol any consideration for the mortgage, (as forbearance, for instance, which in this case was attempted to be shown,) except that expressed upon its face; that Henry Bischoff & Co. were mortgagees in good faith for valuable consideration and without notice of the trust, but he held that, as a mortgagee by the statute law of this State held only a lien upon the land as security for the payment of his debts, they did not acquire the full legal title, and could not, therefore, be protected under a plea of purchase for valuable consideration without notice. And he declared it as his judgment that the plaintiffs were entitled to the injunction they demanded by their complaint, and to have the land sold and the proceeds applied to the payment and satisfaction of their claims under the judgment in the bill for settlement of the estate of J. S. McCall.
Henry Bischoff & Co. excepted to the report on a number of grounds, presenting for consideration by the Court the same questions of law which the Referee had ruled against them.
His Honor the presiding Judge overruled the exceptions, and made a decree in conformity with the recommendations of the report.
Henry Bischoff & Co. appealed to this Court.
A. C. Spain , for appellants, contended that the evidence had not established the alleged trust in favor of the plaintiffs; and, if it had, the appellants were purchasers for valuable consideration without notice, and should be protected. That forbearance to sue was a valuable consideration, (Perry on Trusts, § 220; 1 Steph., N. P., 255; Thomas vs. Croft , 2 Rich. 113; McCelvey vs. Noble , 13 Rich. 330; Goodman vs. Simonds , 20 How. 370,) and that the Referee had erred when he ruled that it was incompetent for the plaintiffs to shew in this case any consideration for the mortgage except that expressed on its face.- Garrett vs. Sewart , 1 McC. 514; 1 Phil. Ev., 549; Hartop vs. Hartop , 17 Ves. 184; The King vs. Scammonden , 3 T. R., 474; Buckner vs. Ruth , 13 Rich. 157; 1 Green. Ev., § 304, note 5. And that a bona fide mortgagee is a purchaser and entitled to protection.-Perry on Trusts, § 235; Willoughby vs. Willoughby , 1 T. R., 769; Story Eq., § 1000; Ledyard vs. Butler , 9 Paige 132; 1 Hill on Mort., 163, note b.
T. B. Fraser , contra, made numerous points, and contended that trust funds, as a general rule, may be followed by the parties interested in them, and no change of the state or form in which they originally existed can divest the property of its trust character.- McNeil vs. Morrow , Rich. Eq. Cases, 172; Story Eq., §§ 1258-9-60; Rhame vs. Lewis , 13 Rich. Eq., 269; Williams vs. Hollingsworth , 1 Strob. Eq., 103. That appellants were not entitled to protection as purchasers for value. An antecedent indebtedness is not a valuable consideration.- Bassett vs. Noseworthy , 2 Lead. Cases in Eq., 71, 72; Donaldson vs. State Bank , 1 Dev. 103; Williams vs. Hollingsworth, sup. The evidence was insufficient to prove that indulgence was a consideration of the mortgage; and, if it had been, it would not have sustained the defense of purchase for value. But whatever may be the rule in England and other States, a mortgagee of real estate in this State is not entitled to the defense of purchase for valuable consideration without notice. To sustain that defense, it is necessary for the purchaser to show that he acquired the legal estate. At common law he does acquire it, but our Act of 1791 converts the mortgage into a mere lien or security for the payment of the debt. There can be no foreclosure in the strict sense of that term. There can only be a decree for the sale of the mortgaged premises.- Brown vs. Wood , 6 Rich. Eq., 167; Blake vs. Heyward , Bail. Eq., 221; Perry on Trusts, § 218; Story Eq., § 1503; Laffan vs. Kennedy , 15 Rich. 257; Beard vs. Williams , 1 S. C., 324.
The pleadings are not set forth in the brief, nor is the precise character of the relief demanded by the complaint stated.
It appears that, before the commencement of this suit, defendants were seeking to enforce a judgment recovered upon a note of J. M. McCall, secured by a mortgage executed on lands of which the legal title stood in his name. It does not appear that defendants were attempting to enforce their mortgage. The injunction issued in the present action arrested the proceedings of the defendants to enforce their judgment. A copy of the injunction is not set forth, and it does not appear whether the defendants were restrained by it from asserting and proceeding to enforce their mortgage.
The case has been discussed by all parties as to the questions at issue related to the rights acquired by the defendants under their mortgage, and the questions raised by the present appeal will be considered upon the assumption that the defendants stand before the Court on the strength of their claims as mortgagees.
J. M. McCall was administrator, with the will annexed, of the estate of J. S. McCall, deceased, and as such held funds appertaining to that estate. The plaintiffs are legatees and devisees, their respective interests in the realized assets being established by a decree to which the administrator was a party.
Plaintiffs allege that the administrator acquired the lands in controversy through the use of the assets of the estate, taking, improperly, the title in his own name, and that the land became by substitution assets of the estate; and they seek to charge the lands accordingly as against the mortgage upon them held by the defendants.
The defendants claim, among other defenses, that, under their mortgage, they are purchasers for a valuable consideration and without notice of any trust or breach of duty on the part of the administrator, and they resist the claims of the plaintiffs to subject the mortgaged premises to their equities.
The first question to be considered is, whether the plaintiffs have an equity as against J. M. McCall to claim the land in controversy as assets of the estate. The facts bearing on this question, as found by the Referee, are, briefly, as follows: J. M. McCall, the administrator, loaned to W. E McCall money of the estate, taking therefor notes payable to himself individually. He recovered judgment on these notes, and, under that judgment, sold and became the purchaser...
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