Gilbert v. Penfield

CHIPMAN, C. Action to have a trust declared in favor of plaintiff as to certain lots -situated in Santa Barbara, and that defendants E. H. and W. H. Penfield convey said lots to plaintiff. They denied the alleged trust, and averred that defendant E. H. Penfield took a conveyance from plaintiff of the lots in question and holds the title in trust, as he alleges it to be. Defendant W. H. Penfield filed a cross-complaint asking foreclosure of a deed, held by him, as a mortgage to one of the lots, the subject of the alleged trust. J. 0. Gilbert is husband of plaintiff, and is -made defendant in the cross-complaint. The court, as conclusions of law, found plaintiff not entitled to the relief asked by her; that the legal title to the lots in question is vested in defendant E. H. Penfield, subject to certain trusts set forth in the findings; that defendant W. H. Pen-field has a valid subsisting mortgage on certain of -the property and is entitled to foreclosure thereof, and that the rights of plaintiff and said J. 0. Gilbert are subordinate to the lien of said W. H. Penfield. Plaintiff appeals from an order denyiüg her motion for a new trial, but does not appeal from the judgment. The only question presented by counsel for appellant is, Does the evidence support the findings? Plaintiff and defendants, the Penfields, are cousins; plaintiff came to California in August, 1887, and was then unmarried, [236] and made her home with defendant, E. H. Penfield, at Santa Barbara; upon the recommendation of her cousin, E. H., she purchased certain Santa Barbara city lots in block 80 and in block 147, and a certain other lot she purchased contrary to his advice; E. H. testified, and the court found, that before she made any purchases he verbally promised, as to those made upon his approval, “that he would stand between her and loss, but .... he received no consideration for or by reason of, and reaped no benefit from, said purchases or any of them, and had no interest in them.” The purchases in block 80 and block 147, recommended by E. EL, were made in December, 1887—the lots in block 80 being subject to two mortgages held by one Hassinger, and the lot in block 147, being under mortgage to one Pilcher. On March 37, 1888, plaintiff borrowed six hundred dollars on her note, signed also by E. H., to raise money for her own uses, and which was used by her; this note E. H. afterward paid, and “plaintiff has never repaid him the whole or any part of the sum so paid by him on said note.” In 1889 plaintiff paid the Pilcher mortgage, and the spring of 1890 found her the owner of the lots in blocks 80 and 147, subject to the Hassinger mortgages; payment was pressed by Hassinger, “and, plaintiff being unable to meet the indebtedness, the defendant E. H. Penfield offered to take the property from plaintiff for the purpose of handling the indebtedness for her and carrying the property until an advantageous sale could be effected. Accordingly, plaintiff conveyed to him all the property described in the complaint upon the following trusts, and no others: To provide for taking up the two Hassinger mortgages, and to hold the property until a favorable time to sell the same should come, at which time he should sell the same and apply the proceeds of sale, first, to the payment of the sum due upon the indebtedness represented by the Hassinger mortgages and to reimburse himself for the payment of the six hundred dollar note, and then to apply the surplus to repaying plaintiff her outlay on said lots, and then to divide any excess between plaintiff and himself.” Plaintiff conveyed to E. H. upon the trusts above stated, April 30, 1890, and on the same day E. El. procured his brother, defendant, W. H., to purchase the two Hassinger mortgages for the sum of nine hundred and [237] ninety-nine dollars, the amount then due 'thereon. On November 12, 1891, E. H. mortgaged the lots in block 80 to W. H. for the amount of principal and accrued interest of the Has-singer mortgages, and these latter mortgages were satisfied of record. On August 30, 1895, E. H. delivered to W. H. a deed conveying these lots to W. H., which bore date May 1st, and was acknowledged May 2, 1895. This deed was intended 'as a mortgage, and upon its delivery W. H. canceled and surrendered to E. H. the mortgage of November 12, 1891, and the note secured by it. The indebtedness represented by both the mortgage and the deed “is the same indebtedness secured by the two said Has-singer mortgages.” There is no finding and no evidence explaining -the reason for substituting first the mortgage and next the deed for the Hassinger mortgages held by W. H. But the court finds that E. H. executed these instruments without anv intention to defraud plaintiff, and that when he received the deed, he, W. H, had no notice of any rights of plaintiff except that E. H. held the title upon the trusts as found by the court above stated. While claiming that the evidence does not support the findings, appellant makes the case really to turn upon the question: Had E. H, as trustee, the power to mortgage? The evidence is conflicting in many particulars, especially as to the trust alleged in the complaint and the trust as found. There is evidence tending to show that the trust as found by the trial court correctly states the understanding of the parties, and 'as the evidence is conflicting the finding is conclusive upon this court. Turning to the language of the trust, and interpreting it in the light of the then existing circumstances and the purpose for making the conveyance, we think the trust carried with it the power to remortgage the property to take up the Hassinger mortgages, foreclosure of which was threatened. The court found on sufficient evidence that market values had greatly fallen, and sale could not be made to any advantage. The only practical way out of the danger which lay in foreclosure by Hassinger was to find some one who would carry the Hassinger mortgages. It was not of any importance to plaintiff whether the one who came to her relief should do so by taking an assign [238] ment of those mortgages and holding them, or whether he should .require a new mortgage to take their place. The Has-singer mortgages were past due, and would in course of time be barred by limitation. The statute had run against the Has-singer notes before this action was brought; and in point of fact W. H. did not ask foreclosure until five years after he took his mortgage, and not then, as he testified, until plaintiff had forced him to it, for his own protection, by this action. The power given by the trust was: “To provide for taking up the two Hassinger mortgages, and to hold the property until a favorable time for the sale of the same should come.” The evidence was that a sale could at no time, after plaintiff conveyed to E. H., have been made for enough to pay the indebtedness secured -to be first paid by it. That this contingency of remortgaging must have been contemplated is, it seems to me, obvious from the clause authorizing E. H. “to provide for taking up the two Hassinger mortgages,” followed by the clause “and to hold the property until a favorable time for the sale,” et cetera. How else could he provide for taking up these mortgages if the sale of the property was to be postponed indefinitely? It is true, as claimed by appellant, that every act of the trustee not authorized by, -or which is in contravention of, the trust is void; but a trustee has “authority to adopt measures and to do acts which, though not specified in the instrument, are implied in its general directions, and are reasonable and proper means for making it effectual.” (2 Pomeroy’s Equity Jurisprudence, sec. 1062.) I think the power to -mortgage is not only clearly implied in the directions given, but that the natural reading of the trust gives the authority-. It is not necessary, therefore, to fall back upon the alternative proposition of defendants in support of the decree of foreclosure, to wit, that W. H. was subrogated to the rights of Has-singer, and -that the lien of the latter was preserved, although the evidence of the debt was extinguished; and that, even if the new mortgage made by E. H. to W. H. was void, the original or Hassinger mortgages were revived for the protection of W. H., who advanced the money. Appellant points out several alleged contradictions in the findings—for example: The court finds that the execution of [239] the trust has not become impossible on account of the conveyance alleged (i. e., the mortgage to W. H.); another example: the court finds that this conveyance (mortgage) was not fraudulent. The contention is, that because the conveyance was unauthorized and void, it must be treated as a fraud upon plaintiff’s rights; and that, if allowed to be foreclosed, it would make the trust impossible, hence the findings are contradictory of and inconsistent with each other. These alleged consequences flow from the erroneous assumption that the mortgage to W. H. was unauthorized. And so of the other assignments of error; they all find their origin in the same unwarranted assumption. The foregoing disposes of the points made by appellant’s brief; and, as we discover no error in the conclusions of the court, it is advised that the order denying the motion for a new trial be affirmed. Haynes, C., and Pringle, C., concurred. For 'the reasons given in the foregoing opinion the order denying the motion for a new trial is affirmed. Henshaw, J., Temple, J., McFarland, J.