Wheeler v. Slocinski

• Decision Date: 05 January 1926
• Citation: 131 A. 598
• Parties: WHEELER v. SLOCINSKI.
• Court: New Hampshire Supreme Court

131 A. 598

WHEELER

v. SLOCINSKI.

Supreme Court of New Hampshire. Hillsborough.

Jan. 5, 1926.

Transferred from Superior Court, Hillsborough County; Burque, Judge.

Assumpsit by Scott M. Wheeler against Roman W. Slocinski for balance due on a note. Transferred on plaintiff's exception to the allowance of recoupment. Exception overruled, and new trial ordered.

A farm mortgage securing the note was foreclosed under a power of sale contained in it, and at the auction the plaintiff bid off the property for less than its market value. He, his attorney, and the auctioneer were the only ones present. All express requirements of the statute and power were observed, and the defendant as mortgagor had seasonable notice of the sale. The court found that the plaintiff knew his bid was less than the property was worth, and that the sale was not advertised in a way and conducted at a time when purchasers could have been expected to attend, and was not the kind of an auction to establish market value. On these facts it was found that "the plaintiff did not perform in full the duty which he owed the defendant in the sale of the property, and that it cannot be said that he acted in good faith in bidding the property off to himself at the amount of $1,300," and recoupment was allowed the defendant to the amount of the excess of value over the bid.

Irving E. Forbes, of Manchester, for plaintiff.

Maurice F. Devine, of Manchester, for defendant.

ALLEN, J. "The mortgagee in the exercise of the power of sale acts as a trustee of the mortgagor. Although he has the right to sell the property for the payment of the mortgage debt, all the proceeds of the sale above the amount necessary for that purpose belong to the mortgagor. In the performance of this duty he must exercise good faith and use reasonable diligence to protect the rights of the mortgagor under the terms of the power. He must use reasonable efforts to obtain a fair price for the property, in properly advertising and conducting the sale in those particulars which the contract leaves to his determination." Pearson v. Gooch, 69 N. H. 208, 209, 40 A. 390.

This principle was not affected by the later enactment of legislation relating to powers of sale in mortgages. The acts (Laws 1899, c. 19; Laws 1905, c. 2; Laws 1923, c. 115) in their requirement of certain essentials in the execution of the power are not to be construed as making such essentials the sole and exclusive test of good faith and reasonable diligence. Such a construction is not only inconsistent with general equitable principles, but is fairly negatived by the phraseology of the first act on the subject; section 3 thereof providing that "the mortgagee * * * may * * * give such notices and do all such acts as are authorized or required by the power; but no sale under * * * a power * * * shall be valid * * * to foreclose such mortgage, unless" certain specified things are done. This language fairly indicates a purpose to establish additional or independent essentials rather then to declare a definition of full duty and requirement. The requirement set forth in the power are still to be observed, and the evident purpose to protect the mortgagor's interest is not to be defeated or impaired by a construction which dispenses with duties not inconsistent with those laid down by the acts.

While the legislation permits the mortgagee to be a purchaser unless the terms of the power forbid it, thus changing the doctrine established in Very v. Russell, 65 N. H. 646, 23 A. 522, such right does not alter or modify, although it may affect, the duties owing the mortgagor. It was the design of the statute to enable the mortgagee to sell without the risk of sacrificing his security, but not to weaken the protection of the mortgagor's equity.

So far as the power itself defines the details of notice and execution in addition to, or not inconsistent with, statutory requirements, and provides for a sale in compliance with them, such provisions constitute an agreement of liquidated reasonableness, and their observance leaves open no inquiry as to their sufficiency, since the mortgagor has bound himself to a sale so advertised and so conducted. But, so far as details are left to the mortgagee's judgment and discretion, they must be administered in the exercise of good faith and due diligence to protect the mortgagor's interests.

The duties of good faith and due diligence are distinct according to their usual and respective definitions. One may be observed and not the other, and any inquiry as to their breach calls for separate consideration of each.

As the court's finding is understood and construed, a conclusion of bad faith from the facts appearing is deduced. Such a finding could not...