Medsker v. Swaney

• Decision Date: 31 January 1870
• Parties: JAMES C. MEDSKER, Defendant in Error, v. JAMES SWANEY et al., Plaintiffs in Error.
• Court: Missouri Supreme Court

45 Mo. 273

JAMES C. MEDSKER, Defendant in Error,

v.JAMES SWANEY et al., Plaintiffs in Error.

Supreme Court of Missouri.

January Term, 1870.

Error to First District Court.

Trefren, Black & Sheffield, and Slairns, for plaintiffs in error.

I. McNees must show himself in a condition to demand a reconveyance of the property according to the terms of the agreement within a reasonable time. Five years is not within a reasonable time. (4 Seld. 219; McNew v. Booth, 42 Mo. 189; 8 Paige, 257; 14 Pick. 467; 4 Denio, 495; 1 Littell, 190-1; Mackelreth v. Fox, 1 Lead. Cas. in Eq. 150, and notes; 6 Hill, 219.)

II. A mortgagee may become the purchaser of the equity of redemption, with the assent of the mortgagor, at his own sale. The pleadings admit that Swaney purchased through Hayden, with the express assent of McNees and with his full knowledge and agreement thereto. The sale can not be set aside on that account. (Hendricks v. Robinson, 2 Johns. Ch. 283, 311; McNair v. Biddle, 8 Mo. 257; 7 Iowa, 60; 4 Blackf. 339.)

III. McNees having been present at the sale, instrumental in causing it to be made, assenting to the same, standing by and permitting the property to be improved and grow in value, is now estopped from denying its regularity. (5 Ala. 427; 2 Law Reg., new series, 730.)

Gage & Ladd, for defendant in error

I. The interest of McNees in the mortgaged property before the sale was an equity of redemption, and was not foreclosed by it. The sale was voidable, and properly set aside. The purchase by the mortgagee was fraudulent and void. (Thornton v. Irwin et al., 43 Mo. 153; Fox v. Macreath, 2 Bro. C. C. 400; Davore v. Fanning, 2 Johns. Ch. 252; 1 Lead. Cas. in Eq. 92.)

II. The agreement between McNees and Swaney was at best an agreement to clog the equity of redemption made between mortgagor and mortgagee, and, as such, is void; and if the sale stands upon that agreement, the sale itself is void. (Perkins v. Drye, 3 Dana, 170; Clark v. Henry, 2 Conn. 327; Wharf v. Howell and Wife, 5 Binn. 399; Johnston v. Gray, 16 Serg. & R. 365; Jacques v. Miks, 7 Wend. 261.)

III. The notice of the sale was insufficient, and the sale liable to be set aside for that cause alone. (Beattie v. Butler, 21 Mo. 313.)CURRIER, Judge, delivered the opinion of the court.

This is a petition in equity to set aside certain conveyances, and for permission to redeem. The suit was originally instituted by John C. McNees, who subsequently sold out his interest in the suit and cause of action to the present plaintiff, who was thereupon substituted in the place of the original plaintiff.

It appears from the record that McNees, on the 20th of June, 1860, mortgaged the disputed premises to the defendant, Swaney, to secure the payment of the former's promissory note of that date for $1,450, payable twelve months after date, with ten per cent. interest. The deed of mortgage clothed the mortgagee with a power of sale. Under this power, default having been made in the payment of the note, the mortgagee proceeded to advertise and sell the mortgaged premises. They were sold on the 27th day of May, 1862, and one Hayden became the purchaser thereof at the sum of $1,739 88, being the exact amount then due on said note. A deed was made to him accordingly in due form, and he, on the same day, re-deeded the premises to Swaney, the mortgagee. Hayden had no interest in the transaction, and paid nothing, but acted throughout as the agent of Swaney, or perhaps as the agent both of Swaney and McNees; for it had previously been agreed between these parties that, if the property did not sell for more than the mortgaged debt, Hayden should bid it in on Swaney's account, and he did so. Thus far there is no dispute about the facts.

The petition, which was filed May 2, 1868, some six years after said sale, is framed upon the theory that the sale, on the part of Swaney, was fraudulent in fact, and various allegations are made in support of that view.

The answer denies all fraud, and alleges that the sale was made, and the title vested in Swaney, with the full knowledge and consent of McNees; that the mortgage debt was thereby extinguished, and the title to the mortgaged property vested in Swaney absolutely, in accordance with the understanding and agreement of the parties. The plaintiff's replication admits the existence of the alleged understanding, but avers that the arrangement included the further stipulation that Swaney should hold the property subject to redemption--that is, that he should reconvey to McNees on being reimbursed the amount of the mortgage debt.

The state of the plaintiff's pleadings is peculiar, but it is not necessary to enter into an examination of them, since upon the whole case, we are of the opinion that he fails to show adequate ground for equitable relief.

The theory upon which the petition was framed--namely: fraud in fact--is abandoned, and a recovery is now sought upon other grounds. It is insisted that the mortgagee could not purchase at his own sale, either directly or through a third party, however upright his conduct; and that if he could do so with the mortgagor's assent, still the stipulation for redemption, as set out in the replication, vitiated the whole transaction.

The general rule on this subject undoubtedly is that a trustee can not, as against his cestui que trust, acquire the title to the trust property at his own sale, whether acting directly or through the intervention of a third party; and a mortgagee, with a power of sale, is regarded as a trustee. But a mortgagee with such power is not only a trustee; he is also a cestui que trust, and his interest as such may absorb the whole estate. It is pledged to him for his protection, and his security might be greatly impaired or sacrificed at such sale, if he were not permitted, under any circumstances, to become a purchaser. It has been held, therefore, that where the mortgagor was privy to the sale, assented to it, and to the acquisition of title by the mortgagee, and concurred in that result after it was reached, and there was no suspicion of fraudulent practices, the mortgagee might purchase at his own sale. And why not? The mortgagor could at any time part with his equity and convey it to the mortgagee by a private sale and transfer. No substantial reason is perceived why the same results might not, and with equal propriety, be reached through the medium of a public sale under the mortgage, the mortgagor assenting thereto.

In Texas it has been held that a mortgagee, with a...