De Mey v. Defer

• Decision Date: 22 December 1894
• Citation: 103 Mich. 239,61 N.W. 524
• Court: Michigan Supreme Court
• Parties: DE MEY ET AL v. DEFER.

61 N.W. 524

103 Mich. 239

DE MEY ET AL v. DEFER.

Supreme Court of Michigan

December 22, 1894

Appeal from circuit court, Wayne county, in chancery; William L Carpenter, Judge.

Action by Marie Rose De Mey and Edward G. Bagard against Peter B Defer to redeem from the foreclosure of a mortgage executed by complainants' mother. From a decree dismissing the bill, complainants appeal. Reversed.

George Gartner, for appellants.

Moore &amp Moore, for appellee.

MONTGOMERY J.

This is a bill filed to redeem from a foreclosure upon a mortgage executed by complainants' mother, Marie G. Bagard. The facts of the case are that on the 1st of April, 1871, Marie G. Bagard was the owner of lot 3 of the subdivision of St. Jean farm, being part of private claim 26 in the township of Grosse Point, Wayne county. On that day she executed to Marie G. Tracy a mortgage to secure the payment of $700 at the end of five years, will interest at the rate of 10 per cent. per annum, payable semiannually, according to the conditions of a certain bond collateral thereto. In October, 1872, Marie G. Bagard died, leaving the two complainants, her children, and who are her sole heirs at law. The youngest of these complainants became of age November 3, 1891, and this bill was filed shortly after. It appears that in 1873 there was due upon the mortgage one installment of interest, of $35, and Edward G. Bagard, it is claimed, offered to pay such installment, and was also desirous of paying the principal sum, which was not yet due, but that he was advised by the attorney of Mrs. Tracy that it would be more convenient, to control the property, to have a foreclosure upon the mortgage, and vest the title in a third party, and that this course was accordingly taken. The mortgage was foreclosed, and one John P. Hension became the purchaser at the foreclosure sale for the sum of $840. The consideration was paid, $140, by Edward G. Bagard, and $700 by executing to Mrs. Tracy a new mortgage upon the same premises, payable in four years, with a like rate of interest, of 10 per cent. per annum. The title thus resting in Hension, he, on the 31st of January, 1877, executed to Peter Defer, the defendant, a mortgage upon the property, conditioned for the payment of $3,000 within three years, with interest at 10 per cent. This mortgage was given as security for moneys theretofore advanced, and upon no new consideration, save that there was an extension of time upon the indebtedness to the date of the maturity of the mortgage thus executed. On the 13th of April, 1878, Hension went into bankruptcy, under the United States bankruptcy act, and on the 18th of April the assignee in bankruptcy of Hension sold all the right, title, and interest of said Hension in the property in question to Defer, the defendant, for the consideration of $18. Defer thereupon paid off the Tracy mortgage, and discharged of record the mortgage executed to him. On December 2, 1891, complainants tendered the sum of $2,300 in satisfaction of the amount due upon the Tracy mortgage, with interest, and requested the execution of a quitclaim deed from defendant, which was refused, and complainants thereupon filed the present bill. Upon the final hearing the bill was dismissed, and complainants appeal.

The theory of complainants is that the transaction by which Edward G. Bagard sought to vest the title to this property in Hension, and to use it to satisfy his own debt, was a legal fraud upon the complainants, and that the defendant occupies no better position than would Hension, were he still the owner of the title. Defendant does not seriously contend that complainants are not equitably the owners of the land, as between them and Hension, but he contends-First, that, by virtue of the conveyance from the assignee in bankruptcy, defendant acquired the legal title to the property, divested of the latent equities in favor of the complainants, and subject only to the mortgages given to Mrs. Tracy and himself; and, furthermore, that even if it should not be held that defendant is entitled to the rights of a bona fide purchaser, by virtue of his purchase from the assignee in bankruptcy, he was at least a bona fide mortgagee, to the extent of the mortgage given by Hension, and that, the mortgage having been canceled under a misapprehension of fact, he is entitled, in equity, to have the cancellation treated as of no effect.

Was the defendant, by virtue of his purchase from the assignee in bankruptcy, under the circumstances disclosed in this case entitled to the right of a bona fide purchaser? The circuit judge was of the opinion that he was, and, if he was correct in this conclusion, it is an end of the complainants' case. The authorities are not altogether harmonious upon this question. In Webb on Record of Title, it is stated: "The rule of caveat emptor applies to bankrupt sales, and the purchaser takes the property subject to all the equities with which it was chargeable in the hands of the bankrupt"; citing Fletcher v. Ellison, 1 Tex. Unrep. Cas. 662; Baker v. Vining, 30 Me. 121; Anderson v. Miller, 7 Smedes & M. 586. There are, however, cases which hold the contrary doctrine. See Holbrook v. Dickinson, 56 Ill. 497; Moorman v. Arthur (Va.) 18 S.E. 869. See, also, as sustaining the contention of complainants, Smith v. Perry, 56 Ala. 266. We think it unnecessary to determine whether, on a conveyance...