McNees v. Swaney

• Decision Date: 31 July 1872
• Citation: 50 Mo. 388
• Parties: JOHN C. MCNEES, Plaintiff in Error, v. JAMES SWANEY AND JOHN G. HAYDEN, Defendants in Error.
• Court: Missouri Supreme Court

50 Mo. 388

JOHN C. MCNEES, Plaintiff in Error,

v.JAMES SWANEY AND JOHN G. HAYDEN, Defendants in Error.

Supreme Court of Missouri.

July Term, 1872.

Error to Kansas City Court of Common Pleas.

Sheffield and Slavens, for plaintiff in error.

I. The purchase by a mortgagee with power of sale at his own sale, through a third person, does not change the relation of the parties. (Mapps v. Sharpe, 32 Ill. 13; Benham v. Rowe, 2 Cal. 387; Moore v. Titman, 44 Ill. 368; Eaton v. Whiting, 3 Pick. 490; Thornton v. Irwin, 43 Mo. 153.) The mortgagee in such case will still hold the title as security for his debt. The mortgagor's only remedy is a bill to redeem, offering to pay the amount found or admitted to be due. (Goldsmith v. Osborne, 1 Edw. Ch. 560; Schwarz v. Sears, 1 Walk. Ch. 170; Russell v. Southard, 12 How., U. S., 139.)

II. Although a mortgagor may sell and convey his equity of redemption to the mortgagee, if he does so in embarrassed circumstances and under pressure, for a price considerably below its value, the transaction is looked upon with great jealousy. (Baugher v. Merryman, 32 Md. 185; Sheckel v. Hopkins, 2 Md. Ch. 90; Dougherty v. McColgan, 6 Gill & J. 275; Conway v. Alexander, 7 Cranch, 218.)

W. B. Napton, for plaintiff in error.

I. Upon the face of the documentary title, this case stands, under the decision of the court in Thornton v. Irwin, 43 Mo. 153, as still a mortgage, notwithstanding the sale by the mortgagee and the purchase by the mortgagee at that sale, through the interposition of Hayden, the crier. (Howards v. Davis, 6 Tex. 174.)

II. Courts of equity view transactions between mortgagor and mortgagee with distrust, and require the clearest proof of a mutual understanding of the contract, and an entire absence of all imposition on the debtor, the mortgagor. (Baugher v. Merryman, 32 Md. 185; Conway v. Alexander, 7 Cranch, 218.)

M. D. Trefren and F. M. Black, for defendants in error.

I. A trustee may purchase the trust property from the cestui que trust, and if the purchase is free from fraud it is valid, and not even voidable. A mortgagee, with power of sale, is both trustee and cestui que trust, and may become the purchaser of the mortgaged property, with the consent and approval of the mortgagor. (Medsker v. Swaney, 45 Mo. 274; 6 Tex. 174; 4 Seld. 216; 14 Verm. 272; 5 Ala. 428; 1 Pet. 145; 1 Hill on Mortg. 142.)

II. In determining whether a transaction is a mortgage or a conditional sale, the intention and the understanding of the parties at the time should be ascertained and must control. If a mortgage on the one hand, there must be a debt on the other, capable of being enforced either in rem or in personam. There must be a debt on the one side and a corresponding obligation to pay on the other. If there is no such continuing indebtedness, and the party have the privilege of refunding if he please, and thereby entitle himself to a reconveyance, the transaction is a conditional sale. (Brant v. Robertson, 16 Mo. 143; Slowey v. McMurray, 27 Mo. 115; Turner v. Kerr, 44 Mo. 431; Robinson v. Cropsey, 2 Edw. Ch. 138; Holmes v. Grant, 8 Paige, 258.) A purchase by a strict trustee of the trust property is valid and not even voidable, when made with the knowledge and consent of the cestui que trust. (11 Ga. 77; 10 Ohio, 117; 7 Sm. & M. 410.)

WAGNER, Judge, delivered the opinion of the court.

The real question underlying this case is whether, after the sale of the mortgaged premises, the mortgagor, who is the plaintiff here, still retained the right of redemption. The principle is, I think, well established that when a power of sale is contained in a mortgage, and a sale made by virtue of such power, and the mortgagee becomes the purchaser, the equity of redemption still subsists and attaches to the property in favor of the mortgagor. And if at such sale the mortgagee acquires the title through the agency of a third person, the title will not be in anywise altered, and the rights of the mortgagor will remain the same. It is not disputed that parties have the right to agree upon the terms of a power of sale of mortgaged premises, and where the sale takes place upon such terms as the parties were competent to agree upon, and is faithfully and fairly executed, courts will not interfere. (Dobson v. Racey, 4 Seld. 216; Elliott v. Wood, 45 N. Y. 71.) But there is less danger of oppression and abuse of the creditor in agreeing upon the conditions of the security and the power of sale at the time of giving the mortgage, when the mortgagor is free to act as his interest and judgment prompt, than after the relation of mortgagee and mortgagor has been created, and the debt has become due, as the latter is then in a greater or less degree in the power and at the mercy of the creditor. An examination of all the facts in this case makes it perfectly clear to my mind that the sale of the mortgaged premises was not intended to and did not destroy the equity of redemption in the mortgagor. The country was in an unsettled condition, both of the parties were apprehensive that they would have to leave Kansas City, and in fact they did leave in a short time thereafter; and they labored under the impression that by selling the property and having the title vested in the mortgagee, the matter would be more secure. This was the view entertained by them, which resulted in the arrangement under which the property was sold. McNees, the mortgagor, was unable at that time to pay the debt, and there were no sales of property, and Swaney wanted to be secure. It was then agreed that Swaney, the mortgagee under the power, should sell the premises, that they should be bid in by Hayden at the amount of the principal debt and interest, and that Hayden should immediately convey the same to Swaney; and that McNees should have one year within which to pay off the debt, and...