Lee v. Fox

• Decision Date: 18 January 1888
• Citation: 14 N.E. 889,113 Ind. 98
• Parties: Lee v. Fox et al.
• Court: Indiana Supreme Court

113 Ind. 98

14 N.E. 889

Lee

v.Fox et al.

Supreme Court of Indiana.

January 18, 1888.

Appeal from circuit court, Hamilton county; D. Moss, Judge.

Action by Stephen Lee, appellant, against appellees, William R. Fox, and Eliza E. Fox, his wife, to foreclose a mortgage.

Shirts & Shirts, for appellant. Neal & Neal, for appellees.

Mitchell, C. J.

Stephen Lee commenced this suit against William R. Fox, and Eliza E. Fox, wife of William R., to foreclose a mortgage executed by the latter, whereby certain real estate owned by the husband was conveyed to Lee, to indemnify him against loss for having become bound as surety upon certain notes signed by Fox as principal. It is charged in the complaint that the defendant William R. Fox failed to pay the notes so executed, at maturity, and that, in consequence of his default, the plaintiff had sustained loss and damage in the sum of $1,000, which remained due and unpaid. Fox answered, in substance, that, contemporaneously with the execution of the mortgage in suit, he executed a certain chattel mortgage whereby he transferred to the plaintiff one-half interest in two portable steam-engines, and two threshing-machines, which latter mortgage, he alleged, was executed as a security, and to indemnify the plaintiff against loss for signing the identical notes mentioned in the complaint, and in the mortgage therein described. A copy of the chattel mortgage, so alleged to have been executed, is set out as an exhibit with the answer. One of the stipulations written in the mortgage was to the effect that, upon default of the mortgagor in performing any of the conditions of the mortgage, the mortgagee was expressly authorized to take possession of the mortgaged property, and, upon giving 10 days' written notice thereof, to sell the same at public auction, the mortgagee being authorized to retain from the proceeds of the sale any amount due him on account of his having become surety, as above, rendering the surplus to the mortgagor. The answer admits that the defendant had made default in the payment of the notes upon which the plaintiff had become bound as surety, but it alleges that the plaintiff had taken possession of, and sold one of, the engines and threshers mentioned in the mortgage; the plaintiff having himself become the purchaser, at the price of $10, such sale having been made in pursuance of a 10-days notice, and under pretense of the authority contained in the mortgage. It is alleged, further, that the plaintiff retains possession of the property so purchased, and claims to be the owner thereof by virtue of the sale so made. The court held this to be a sufficient answer.

The claim of the mortgagor is that the sale of a part of the mortgaged property, and the purchase by the mortgagee, at a sale made by himself, of the property so sold, without the aid of a court of chancery, waived any right which he may have theretofore had to look to the mortgagor, or to any other securities, for any deficiency. It is said that the effect of the sale was to satisfy the debt. The recent case of Landon v. White, 101 Ind. 249, is relied on as sustaining the above proposition. A conspicuous and important difference between the mortgage considered in the case cited and that involved in the present case is that, in the former, the mortgage contained no power of sale, while that involved in the present case expressly empowers the mortgagee, upon any default, to sell the property after giving 10 days' notice, and to apply the proceeds of the sale to the liquidation of the mortgage debt. While expressly declining to pass upon the merits of the question, the court said, in substance, in the case relied on, that it would seem to be the law applicable to a mortgage such as the one there involved, that a mortgagee, in order to secure a personal claim against the mortgagor for any part of the mortgage debt which may remain unsatisfied after the sale of the mortgaged chattels, must foreclose his mortgage in equity, and that, by selling in any other way than in pursuance of the decree of a court, the mortgagee waived all claim for any deficiency. This was said in reference to the mortgage then under consideration, in which there was no power of sale. A chattel mortgage is, at law, a conditional sale, which vests the legal title, and, prima facie, the right of possession to the things mortgaged, in the mortgagee. Brodhead v. McKay, 46 Ind. 595;Johnson v. Simpson, 77 Ind. 412;Roberts v. Norris, 67 Ind. 386;Cline v. Libby, 46 Wis. 123.

While it has been often broadly asserted that the title of the mortgagee becomes absolute after a breach of the conditions contained in the mortgage, it is nevertheless true that, until the right or equity of redemption of the mortgagor has been foreclosed by some appropriate proceeding, the latter, having tendered performance of the conditions of the mortgage, may apply to a court of equity for permission to redeem; or, if the property has been converted or disposed of in an irregular way, without his consent, the mortgagee may be compelled to account for its value, less the amount of his debt and interest. Hackleman v. Goodman, 75 Ind. 202;Patchin v. Pierce, 12 Wend. 61;Denny v. Faulkner, 22 Kan. 89; Herm. Chat. Mortg. 461, 462. The right of the mortgagor to discharge the mortgaged property from the claim of the mortgagee, after condition broken, is abundantly settled. Unless the right to redeem has been waived, the mortgagor may assert his right at any time after forfeiture and before the mortgage has been foreclosed, by paying or tendering the debt and interest and redeeming the title. This right is called his “equity of redemption,” which may be barred or foreclosed in either of two ways, at the election of the mortgagee. It may be foreclosed by a decree in chancery, or by taking possession of the mortgaged property, and selling it at public auction, in pursuance of legal notice to the mortgagor. Whether a mortgage contains a power of sale or not, the mortgagor's equity of redemption may be foreclosed by a bill in chancery, or, if possession has been taken, the equity of redemption may be as completely foreclosed by a sale, upon due notice, as by the decree of a court. Freeman v. Freeman, 17 N. J. Eq. 44;Flanders v. Chamberlain, 24 Mich. 305;Wilson v. Brannan, 27 Cal. 258;Bryant v. Carson, etc., Co., 3 Nev. 313; Jones, Chat. Mortg. § 307; Herm. Chat. Mortg. 461. Where the foreclosure is effected by the aid of a court of equity, the ultimate rights of the parties can be adjusted in the decree, which may provide, on the one hand, that if, upon a sale, the property falls short of satisfying the debt, the mortgagee may proceed for the residue; and, on the other, that, if there should be a surplus, it may be awarded to...