Ulrich v. Sec. Inv. Co., 2382.

• Court: Supreme Court of Hawai'i
• Writing for the Court: OPINION OF THE COURT BY PETERS
• Citation: 35 Haw. 158
• Parties: EVELYN WELLS ULRICH, AS EXECUTRIX OF THE ESTATE OF BARRY S. ULRICH, DECEASED, v. THE SECURITY INVESTMENT COMPANY, LIMITED, CHARLES M. HITE AND HERMAN V. VON HOLT.
• Docket Number: No. 2382.,2382.
• Decision Date: 23 August 1939

35 Haw. 158

EVELYN WELLS ULRICH, AS EXECUTRIX OF THE ESTATE OF BARRY S. ULRICH, DECEASED,
v.
THE SECURITY INVESTMENT COMPANY, LIMITED, CHARLES M. HITE AND HERMAN V. VON HOLT.

No. 2382.

Supreme Court of the Territory of Hawai‘i.

Argued May 26, 1939.
Decided August 23, 1939.

APPEAL FROM CIRCUIT JUDGE FIRST CIRCUIT. HON. D. H. CASE, JUDGE.

Syllabus by the Court

The legal duties imposed upon mortgagee required him to use all fair and reasonable means in obtaining the best prices for the property to be sold upon foreclosure. Where it appears that the sale was not made in good faith, that the amount received upon the sale was inadequate and that the mortgagee took a wrongful and unfair advantage of the mortgagor, the foreclosure sale must be set aside. Whether the foreclosure sale was planned and executed to defraud the mortgagor is unnecessary to decide.

Where the mortgagee himself purchases at a foreclosure sale, the burden is upon him to show that the sale was regularly and fairly conducted in every particular and that an adequate price was paid for the property sold; and if he cannot sustain this burden the sale will be set aside at the election of the mortgagor.

Assuming both the legality and validity of an assignment by way of mortgage of an attorney's fee conditional upon recovery, the mortgage is at best nothing more than an executory contract under the terms of which the creation of a lien is conditional upon the happening of the contingency upon which the accrual of the fee depends. And until the contingency upon which the accrual of the fee depends accrues, no lien has come into existence and none is enforceable.

As a general rule equity protects the assignment by way of mortgage of future choses in action. Choses to accrue in the future are assignable by way of mortgage.

The defense of laches may not be invoked to defeat justice and should apply only where the enforcement of the right asserted would work injustice.

Where a firm of attorneys innocently accepts employment in a matter in which they were concededly disqualified, a member of the firm who personally makes restitution of the retainer received is entitled to contribution from his copartners to the extent that the latter share in the profits and losses of the firm.

P. Silver ( Cass & Silver on the briefs) for appellant.

M. K. Ashford ( W. H. Heen with her on the briefs) for appellees.

PETERS AND KEMP, JJ., AND CIRCUIT JUDGE METZGER IN PLACE OF COKE, C. J., DISQUALIFIED.

[35 Haw. 159]

OPINION OF THE COURT BY PETERS, J.

This is a suit in equity to set aside a chattel mortgage and the foreclosure proceedings taken thereon for the cancellation of the mortgage and a reconveyance to the legal representative of the deceased mortgagor of the property sold upon foreclosure.

The plaintiff sues in her representative capacity as executrix of the estate of the late Barry S. Ulrich, Esq., for and on behalf of the heirs, creditors and all persons interested and concerned in the estate of the deceased.

The chattel mortgage involved is dated July 22, 1933, and was recorded August 30, 1934. The mortgagor is the late Barry S. Ulrich, Esq.; the mortgagee the Security Investment Company, Limited, an Hawaiian corporation. The mortgage purports to have been given to secure the payment of the demand promissory note of the mortgagor of even date in the principal sum of $1500, with interest at the rate of eight per cent per annum, and to assign by way of mortgage first, all of the mortgagor's interest in the firm business of Ulrich & Hite, a law copartnership;

[35 Haw. 160]

second, all of the mortgagor's one-half interest in and to all outstanding fees owed said firm and his undivided one-half interest in all fees to be earned by said firm; third, all of the mortgagor's furniture, fixtures and law books then situated in the office of the firm, Dillingham Building, Honolulu; and fourth, all of the mortgagor's furniture, fittings, furnishings, linen, chinaware and, without limitation, all of his household belongings located in or about his residence at 1951 Vancouver Highway, Honolulu. The exact language employed in describing the property is quoted in the margin.¹

On July 22, 1933, and at the time of the execution of the chattel mortgage referred to, the mortgagor Barry S. Ulrich and the respondent Charles M. Hite were attorneys at law and copartners practicing law together in the city of Honolulu under the firm name and style of Ulrich & Hite. The copartnership of Ulrich & Hite was formed in September, 1925. There were no written articles of copartnership. They were general copartners and shared equally in the profits and losses of the firm. On October 2, 1934, and on the same day that the chattel mortgage referred to was foreclosed, Mr. Hite filed in the territorial treasurer's office a formal notice of dissolution of the copartnership. On October 11, 1933, it was mutually agreed between the partners that from and after September 23, 1933, the partnership of Ulrich & Hite should continue as such only with respect to all firm obligations and all

[35 Haw. 161]

matters of unfinished business and business in process of investigation or upon which work had been done in the office prior to and as of that date and that all matters of business originating with or coming to either of the partners from and after September 23, 1933, should belong to and be handled by him individually free from the claim of the other. It was further agreed that during the continued joint use and occupancy of the same offices, the partners should contribute equally to all office overhead and expenses. The partners continued to occupy the same offices until March, 1934, when Mr. Ulrich sought separate offices of his own. Mr. Ulrich died in August, 1936.

On February 3, 1927, the firm of Ulrich & Hite was employed by George H. Holt, guardian of the estate of Eliza R. P. Christian, an incompetent, to recover and collect properties situated within the Territory stated to be of great value, both in lands and moneys, of which the incompetent had been allegedly deprived. The compensation of the firm was contingent upon recovery and was payable in kind. The terms of the employment were committed to writing and signed by the guardian and by both partners in the firm name.

On May 8, 1928, Ulrich & Hite, as attorneys for plaintiff, filed in the first circuit court of the Territory at chambers a suit in equity on behalf of the ward as plaintiff against the Waialua Agricultural Company, Limited, as defendant, which had for its object the recovery for the ward of an interest claimed by her in certain lands in the district of Waialua and for the mesne profits thereof. This case will hereafter be referred to as the Waialua case. The issues involved in that case and history of the litigation appear from the decisions of this court in 31 Haw. 242, 348, 817; 32 Haw. 30, 67; 33 Haw. 34; from the decisions of the United States circuit court of appeals for the ninth circuit in 52 F. (2d) 847; 93 F. (2d) 603;

[35 Haw. 162]

94 F. (2d) 806; and from the decisions of the United States supreme court in 304 U. S. 553; U. S. Sup. Ct. (November 7, 1938).

Mr. Holt died in March, 1929, and he was succeeded by the defendant, Herman V. von Holt, and on March 12, 1929, Mr. von Holt, as successor guardian of the incompetent, adopted, ratified and confirmed the contract of employment entered into with Ulrich & Hite by his predecessor, Mr. Holt. On April 3, 1929, the contract of employment was amended. As originally executed it contained no provision for the costs and expenses that had been or might thereafter be incurred in connection therewith. Considerable professional work had been done by Ulrich & Hite prior to February 3, 1927, the date of the contingent contract, and extensive and protracted litigation was anticipated. And on April 3, 1929, in a letter to Mr. von Holt, the firm expressed itself as understanding that it was obligated to personally advance all expenses reasonably necessary in the performance of their employment on behalf of the incompetent and that in the event of recovery they would be reimbursed for all necessary and reasonable expenses theretofore or thereafter advanced by them. In July, 1929, a claim of the incompetent against the Waianae Plantation Company, Limited, of an interest in lands situated in the district of Waianae and in the mesne profits thereof was settled by way of compromise and to the extent that the contingent contract of Ulrich & Hite affected the recovery, the contingent contract, as amended, was approved by the judge of the first circuit court at chambers in the matter of the guardianship of the incompetent.

The mortgage reserved to the mortgagee the right upon default of the mortgagor to foreclose the mortgage by sale of the mortgaged property or any part or parts thereof at public auction or private sale. It was agreed therein

[35 Haw. 163]

that the mortgagee or any person in its behalf might purchase at any foreclosure or private sale and that until default the mortgagor could hold and enjoy the mortgaged property and receive the benefit thereof. The mortgage was foreclosed by the mortgagee by sale at public auction pursuant to the power contained in the mortgage and the provisions of sections 4724 to 4728, R. L. 1935, both inclusive. Notice of intention to foreclose was published by the mortgagee for the statutory period in the “New Freedom,” a local weekly newspaper published in Honolulu, that is, on the 1st, 8th, 15th and 22d of September, 1934. The mortgaged property was described in the published notice of intention to foreclose in the same manner as the same was described in the mortgage. Prior to foreclosure some of the office furniture included in item three of the mortgage had been released from the terms of the mortgage. Upon default of the mortgagor the mortgagee did not take into its possession any of the remaining property included in items three and four of the mortgage....