Lewis v. Duane

HARDIN, P. J. Plaintiff insists “that the statutory foreclosure was inoperative, and the plaintiff has the right to redeem.” In Jencks v. Alexander, 11 Paige, 626, it was said, viz.: “But a mere mistake in computing the amount due at the time of the first publication of the notice does not, of itself, furnish any sufficient ground for setting aside the sale under the statute. The direction in the statute that the notice of sale shall contain a statement of the amount claimed to be due upon the mortgage was undoubtedly for the purpose of apprising the owners of the equity of redemption of the extent of the claim of the mortgagee, so that they might not be surprised at the sale by an unfounded claim for what" had in fact been previously paid, and to enable them to apply to this court for relief in due season if the amount due could not be otherwise adjusted between the parties.” A similar doctrine was laid down in Bunce v. Reed, 16 Barb. 350. The effect of an error in the amount claimed to be due was under consideration in Mowry v. Sanborn, 68 N. Y. 165, and the court observed: “Without considering whether the claim of a much larger amount to be due than was due would, in the absence of fraud, invalidate the proceedings, we are of the opinion that it does not appear that the amount claimed was more than- was secured by the mortgage." In that case the mortgage was given, as the one before us, to secure commercial paper of the mortgagor. The case of Ferguson v. Kimball, 3 Barb. Ch. 619, is unlike the one before us, as the mortgage under consideration in that case was conditioned for the support of the widow of the mortgagee, and was .therefore “given as a security to cover unliquidated damages.” In Klock v. Cronkhite, 1 Hill, 110, Bronson, J., said: “But the statute imposes no penalty for claiming more than is really due; and if such a claim could, under any circumstances, affect the validity of the sale, it certainly could not in a case like this, where, if the plaintiff has in fact demanded too much, it has not resulted from a fraudulent purpose, but from a mistake concerning his legal rights.” In the case in hand we are not furnished any evidence indicative of a fraudulent intent on -the part of -the mortgagee, or his attorneys who conducted the foreclosure of the mortgage, in inserting in the notice of foreclosure the principal sum mentioned in the mortgage, augmented by the interest thereon from the date of the mortgage to the time of the foreclosure; and in the absence of averments of fraudulent intent, and evidence that the amount stated in the mortgage was swollen, for the fraudulent purpose, beyond the indebtedness of the mortgagors, we are not prepared to say that the foreclosure was inoperative, or that the sale in virtue of the statute and the power of sale found in the mortgage did not cut off the legal rights of the mortgagors in the premises covered by the mort — 437 — gage. The mortgagors had personal notice, and acquiesced in the sale, and yielded up possession of the premises to the purchasers at the sale. In Jackson v. Slater, 5 Wend. 297, it was said: “In this case the foreclosure was under the statute; and that statute provides that every foreclosure made under it shall be an absolute bar of the equity of -redemption, and shall have the like effect as if the mortgage had been foreclosed in a court of chancery by a decree against all parties in interest.” In Ingraham v. Baldwin, 12 Barb. 20, it was said, viz.: “The statute foreclosure was equivalent to a decree in equity.” In Warner v. Blakeman, 36 Barb. 518, it was said, viz.: “It is not a good answer to say that these statutory proceedings are not in court, and that the mortgagor is not required to contest them. The notice of such proceedings, with a claim against him for a certain amount due upon the mortgage, at least imposes upon him the duty of notifying purchasers at the sale of his claim, or the duty of silence afterwards. If he will not speak when duty towards others requires it, he will not be permitted to speak after-wards, when his interest prompts him to do it.” In Elliott v. Wood, 53 Barb. 305, it was said: “Undoubtedly, courts of equity have always held that the equity of redemption is so inseparable from the mortgage, it cannot be disannexed, even by an express agreement of the parties. But by the statutes of the state it has long been declared that mortgaged "lands can be sold by advertisement in all cases where the mortgage contains a power to the mortgagee, or any other person, to sell it upon default being made in any condition of the mortgage. Every sale pursuant to such a power is declared to be equivalent to a foreclosure and sale under a decree of a court of equity. * * * The seventh section of the statute expressly declares that the'mortgagee, his assigns, and his or their representatives, may fairly, and in good faith, purchase the premises at the sale.” la this case the referee has found that on the 3d day of July, 1875— “The aggregate of the sums so advanced and paid by said Drake in payment of such notes and judgments and taxes, with interest computed thereon, as stated, was $42,014.48. No part of said aggregate sum had at said date been repaid to the said Drake by the said Lewis, or any person in his behalf.” The referee also found: “Each of said tracts or parcels were sold to the highest bidder, and for the greatest sum bidden therefor; and the aggregate of the sums bidden therefor, and for which said mortgaged premises then and there sold, was $24,-8(56.00. Said sale or sales was or were, in all respects, honestly and fairly conducted; and said Giles W. Hotchkiss purchased the premises bid off by him fairly and in good faith, and said Patrick H. Drake pm-chased each parcel of the premises bid off by him fairly and in good faith.” The referee further found that the affidavits of the foreclosure of the said mortgage, and of the sale thereunder— “Were on the 11th day of February, 1876, duly filed in the office of the clerk of the county of Broome, and were on that day duly recorded in the office of said clerk, in Book of Mortgages No. 51, at page 1. Said Frederick Lewis was present at said foreclosure sale, and did not in any manner forbid such sale, or object to the making thereof.” In Hubbell v. Sibley, 5 Lans. 51, affirmed 50 N. Y. 468, it was said by this court that— — 438 — “The statute providing for foreclosure of a mortgage by advertisement is to be complied with substantially, but with regard to the objects intended by it.” Attention has been given to Burnet v. Denniston, 5 Johns. Ch. 85, which is unlike the case before us. There the advertisement under a power contained a false assumption, “as that the- premises are to be sold for default of three mortgages, when' they were only -two,—the third being on other land, by which the public might be misled, or purchasers deterred from bidding;” and there was also another defect, in that no place of sale was designated in the ¿advertisement; and it also appeared “.that the power inserted in the third mortgage, thus intruded upon the public, was void, for the mortgagor was not twenty-five years of age when the mortgage was executed;” and it also appeared that the sale was made after a tender of the sum due upon the two mortgages; and by reason of such defects and imperfections the chancellor held -the sale invalid. We see nothing in the case militating against the sale now under review. Our attention is invited to Soule v. Ludlow, 3 Hun, 503, in which case it was held that “a mortgagee, in the execution, by advertisement, of the power of sale contained in his mortgage, is regarded as a trustee executing a power ip. trust, and is bound to conduct the proceedings in a fair and just manner, and in good faith. Belief will be granted, • setting aside such proceedings, upon the same grounds upon which a court would set aside a sale had under foreclosure by action.” In that case a party had taken an assignment of a mortgage, and a foreclosure had taken place without service upon the assignee of the mortgage; and under the circumstances disclosed it was said that the foreclosure “was a practical fraud upon him,” inasmuch as the defendant “well knew that the plaintiff was the assignee and owner of said mortgage, for he had paid to him, or to his attorney, several installments of interest thereon, and knew that Goss had no interest in said foreclosure.” Under such circumstances, relief was given. We find nothing in the case that aids the position of the appellant. In Elliott v. Wood, 45 N. Y. 78, Allen, J., said: “But a mortgagee is not solely a trustee for the mortgagor, but is a creditor having interests to protect, and has rights which a naked trustee may not have. If it be conceded that a mortgagee with a power of sale, being a trustee for sale, cannot, either directly or indirectly, except by the express authority of the mortgagor, purchase the mortgaged estate, still he may do so when such authority is conferred either by the terms of the power, or in any other way.” And he further adds, viz.: “Powers of sale are construed liberally, for the purpose of effecting the general object, and neither the interest of the mortgagee or mortgagor will be advanced by forbidding purchases by the mortgagee. The security of the mortgagee would be less valuable, and the mortgagor would lose the benefit of the competition of the mortgagee upon the sale.” In the mortgage before us it was expressly stipulated, viz.: “This grant is intended as a security for the payment of the sum of $60,000 one year-from date, with interest; * * * tad in ease default shall be made — 439 — in the payment of the principal sum hereby intended to be secured, or in the payment of the interest thereof, or any part of such principal or interest, as above provided, it shall be lawful for the party of the second part, executors, administrators, or assigns, at any time thereafter, to sell the premises hereby granted, or any part thereof, in the manner prescribed by law,” etc. We thus see there was ample power given by the mortgage to the mortgagee to make sale of the premises after the expiration of one year; and section 7, 2 Rev. St. 546, provides as follows: The mortgagee, his assigns, -and his or their legal representatives, may fairly and in good faith purchase the premises so advertised, or any part thereof, at such sale;” and section 8 provides that every sale “pursuant to a power * * * shall be equivalent to a foreclosure and sale under the decree of a court of equity.” In Tuthill v. Tracy, 31 N. Y. 162, it was said, “It is the decree and sale, or the perfection of the statutory proceedings by a sale, that extinguishes such equity” of the interest of the mortgagor. Upon the evidence found, we are therefore of the opinion that under the power of sale, and the statute in such cases made and provided, the purchasers at the sale acquired legal title to the mortgaged premises. 2. It is insisted in behalf of the appellant that a trust was created as to the real property of the mortgagors, and that, therefore, an accounting should be had. It is to be observed that the instrument signed by Drake first recited the fact that the mortgage was given as a security; and, secondly, it declared, viz.: “The intention of the undersigned, by this said mortgage, is to secure the said Drake against all liability he has or may have incurred as indorser for the said Lewis.” When that phraseology was prepared, presumably, it was expected that the paper should be executed by Lewis. However, it never was executed by him. It only bears the signature of Drake, the mortgagee. It further declares that the intent of the mortgagor was “to secure the said Drake for advances which he is to make to liquidate and satisfy the large amount of •judgments against the said Lewis, which are a lien upon the property covered by the said mortgage.” That language is in harmony with the language found in the mortgage. The instrument then contains the following declaration: “The said Drake, in the taking of the said mortgage, only desires to secure himself for the amount of his liability as such indorser, and for the advance which he is to make in taking up and satisfying the judgments against the said Lewis.” This language is in "harmony with the language found in the mortgage, and simply indicates that Drake had taken security to indemnify him against any loss by reason of his indorsements, and to reimburse him for any advances which he might make at the instance of Lewis. Then follows a clause as follows: “Anything more than this is not contemplated by the said Drake.” If we give full effect to that sentence, it is simply a declaration that he has taken the mortgage to indemnify him against any loss in tne premises, but it is insisted in behalf of the appellant that the right to foreclose the mortgage was dependent upon an ascertainment or liquidation of the indebtedness secured thereby. We think the instrument contains nothing making it a condition precedent to — 440 — the right to foreclose that such ascertainment or liquidation should be first had. The language relating to that subject is as follows: “When the amount of such liabilities and advances is ascertained or liquidated, then said Drake to indorse same, or reduce said . mortgage to the true amount so advanced by him.” This language only provides for an indorsement if the ascertainment or liquidation shall be determined before the maturity of the mortgage, or before the same shall be foreclosed, or pass from the hands of the mortgagee. Doubtless the mortgagor, upon a proper demand, or a suit for that purpose, might have required an ascertainment of the amount advanced by Drake, and an indorsement thereof upon the mortgage, at any time before the same was foreclosed; and perhaps a suit in equity for that purpose might have been maintained by Lewis at any time prior to the foreclosure. Another clause is found in the instrument relating to a supposed possibility that the mortgagee might assign the mortgage, and it is stipulated that in case he does assign it, or part with the control of it, “he is to account to the said Lewis for the full amount that said Lewis may have to pay upon the same, or which he will be liable to pay to the holder thereof.” As no assignment was made of the mortgage by Lewis, this language is inoperative upon the rights of the parties as to the property. It must be borne in mind that, at the time of the execution of this instrument, several judgments were existing liens against the property of Lewis, and by reason thereof the instrument contained the following language: “In the mean time the said Drake will take care of and protect the said Lewis and his property from the enforcement of any of the .judgments against the said Lewis or his property, and save the property of the said Lewis from sacrifice, and the said Lewis from damages and costs.” Perhaps a fair construction of the expression, “in the mean- time,” would be to assume that until the mortgage matured it was the duty of Drake to avoid a sale of the real estate upon the judgments. Apparently, that was accomplished and the property of Lewis was saved from sacrifice by sale upon such judgments. We find nothing in the language in the instrument which prevented the operation of the stipulations of the mortgage, or restricted the right to enforce the mortgage by means of the power of sale contained therein. The last clause of the instrument, which provided that the mortgagee should assign the mortgage “to said Lewis’ order upon being reimbursed on his advances,” doubtless would have required Drake to assign the mortgage if he had been reimbursed his advances prior to the foreclosure thereof. We are of the opinion that,' reading the mortgage and the instrument together, they did not operate to place the legal title to the property in Drake, and that he did not, per force of the stipulations in the two instruments, become a trustee of the real estate; that he sustained the relation of mortgagee to the property; and that the title to the property remained in the mortgagor until he was divested by the exercise of the power of sale given in the mortgage. Nor do we think the papers constituted an express trust. Norris v. Schuyler, (Com. Pl. N. Y.) 4 N. Y. Supp. 558; Trust Co. — 441 — v. Carroll, 5 Barb. 615. This case is unlike Slee v. Manhattan Co., 1 Paige, 48, and the principle there laid down is not applicable to the case. That was an assignment of the mortgage to the defendant as security for a debt, which mortgage was foreclosed by the assignee, and the mortgaged premises were bid in by him for a sum less than the amount of the mortgage, and less the amount of the debt which the assignment was made to secure; and there the assignee was required, on receiving the amount of the debt and interest, to convey the mortgaged premises to the assignor, and the relief was granted upon the equitable rule “which forbids a trustee or person acting in a fiduciary capacity from speculating out of the subject of the trust.” That case was explained and followed in Hoyt v. Martense, 16 N. Y. 231. This case is unlike Case v. Carroll, 35 N. Y. 385, as in that case the defendant was the attorney of the plaintiffs in relation to the bond and mortgage, and their adviser as to the manner of obtaining and using them for the purpose of enabling them to obtain and give a clear title to the farm; and it was held that, by reason of his confidential relations to the plaintiff, his purchase of the premises should be deemed to be for and in behalf of the plaintiffs, and that a trust was created “which a court of equity will enforce against a defendant, by requiring him to convey the legal title of the premises to these plaintiffs upon being paid what was necessarily expended by him in procuring” such title. In Dalton v. Smith, 86 N. Y. 176, a bond and mortgage were assigned as collateral for a loan, and the mortgage was foreclosed by the lender without making the borrower a party thereto, and the mortgaged premises were bid in by the lender; and it was held that the equitable interest which the borrower obtained in the mortgage attached to the land, and that he was entitled to the surplus in case of a sale thereof by the lender for more than the amount of his claim. We find nothing in the case which aids the position of the appellant. A similar doctrine was laid down in Gilbert v. Thayer, (N. Y. App.) 10 N. E. Rep. 148. In the latter case it was held that if the assignee forecloses the mortgage without foreclosing the assignor’s right, and becomes a purchaser at the sale, he holds the lands as a substitute for the mortgage, “and precisely as he held the latter, and by no different or stronger title.” We find nothing in either of the cases last cited which aids the contention of the appellant. In Williams v. Townsend, 31 N. Y. 415, it was said, viz.: ‘A mortgage is a mere security for a debt; and there is no such relation of trust or confidence between the maker and holder of a mortgage as prevents the latter from acquiring title to its subject-matter, either under his own or any other valid lien.” That case was referred to in Ten Eyck v. Craig, 2 Hun, 464, and Gilbert, J., said: “We think, therefore, it is a misnomer to call a mortgagee a trasteo of the mortgaged estate. He is a creditor having a lien.” Our attention is invited to Terrett v. Crombie, 6 Lans. 82. In that ease the defendant took a deed of building lots which were under — 442 — a contract of sale, and agreed with his grantor to make advances for building purposes to the purchaser, and in due time convey to him, and receive back mortgages, and after deducting his advances, and certain other sums and claims, from the price under the contract, pay 'the surplus to the grantors by the second mortgages of the purchaser; and it was held that he was a trustee sub modo for the . grantor, and was bound to convey the subject of the trust to her on payment of the amount due him, with expenses of management and interest, and until discharged from the trust to hold, manage, and preserve the property for the grantor. And it was also held that he could not divest himself of the character of trustee by becoming the purchaser of the property upon foreclosure sales in actions brought by himself upon the second mortgages; no settlement having been made with the grantor, and she not having been party to the action. And it was made a query in that case whether the fact would have been otherwise if the grantor had been a party to the foreclosure actions. We are of the opinion that neither the instruments nor the evidence disclosed upon the trial establish that Drake was a trustee for the mortgagors at the time of the foreclosure and sale, and purchase by him, of the premises covered by the mortgage. The power of sale was exercised in pursuance of its terms, and in accordance with the statute, and he became the purchaser; and the referee has found, upon ample evidence, that he was a purchaser in good faith, and the sale was regularly conducted, and that the affidavits were filed and recorded, showing the sale to have been conducted in accordance with the provisions of the statute. We think the effect of the sale was to cut off the mortgagor’s interest in the property; that the legal title was, through the instrumentality of the sale, transferred to the purchasers at the sale; and that the right of redemption was extinguished. It is disclosed in the evidence that .the purchasers at the sale went into possession under a claim of title, and the evidence indicates several acts on the part of the mortgagor and his wife in acquiescence in, approval, and ratification of the sale, and no satisfactory evidence is furnished to indicate that the purchasers at the sale in any way consented to hold the property acquired through the instrumentality of the sale as a security. Before .such a position can be established, evidence must be given which is clear, unequivocal, and convincing. Erwin v. Curtis, 43 Hun, 292; Ensign v. Ensign, 120 N. Y. 655, 24 N. E. Rep. 942. Considerable evidence was given, tending to show that the mortgagors acquiesced in the sale. It appeared that on the 21st of March, 1876, Drake paid to one Phelps $31,874.45 for the judgments which were a lien on the property covered by the mortgage at the time of its execution, and the accrued interest thereon, and on the 15th of March he sold the Lewis homestead to McKinney for $22,000; and in order to obtain possession of the premises, on the 22d of March he commenced summary proceedings for the recovery of the possession of the premises, and, on the return of the summons, Lewis appeared in person, and made no objection to the demand, and that judgment was given, awarding the possession of the — 443 — premises to Drake, who on the 26th of March, 1877, was put into possession thereof, and on that day Lewis and his wife executed an instrument referring to the premises on the west side of Washington street as “formerly owned by me, [Lewis,] and now occupied by Patrick H. Drake and family, * and purchased by him at a mortgage sale November 6th, 1885, * * * are hereby unqualifiedly surrendered to the said Patrick H. Drake, and he is hereby put into full and uninterrupted possession thereof. * *” That instrument was signed by Frederick Lewis and Maria A. Lewis. Other evidence appears, indicative of the knowledge on the part of Lewis of the sale, and of the fact that Drake claimed to be the absolute owner of all the property which he had purchased at the foreclosure sale. Such acquiescence appears to have continued down to about the time of the commencement of this action, in 1883. Upon the whole evidence, we are satisfied that, at the time of the commencement of this action, neither Lewis nor his successor in interest had any ¡right in the real estate, in law or equity, and that this action, so far as it seeks to redeem any portion of the property from the sale, was properly dismissed upon the merits. 3. It is claimed that the referee fell into an error in finding that “Frederick Lewis was present at said foreclosure sale, and did not in any manner forbid such sale, or object to the making thereof.” In the view we have taken of the case, it is of no importance whether he was present at the sale or not. It does appear, however, that he had notice that the sale would take place at the time and place where it did take place, and that circumstances are disclosed which indicate that it is of no importance whether he was personally present, and forbade the sale, or not. Plaintiff was sworn in her own behalf, and in the course of her redirect examination she tes anea tnat she was served with a notice of foreclosure, and snt added, viz.: “Mr. Hotchkiss came, and consulted with me about it.” Thereupon the following question was propounded to her: “Question. Did Mr. Hotchkiss tell you, or say to Mr. Lewis in your presence, that the foreclosure should make no difference as to the agreement between Mr. Drake and Mr. Frederick Lewis?” (It was conceded that Mr. Hotchkiss was dead.) Thereupon the defendant’s counsel objected to the evidence on the ground that she is not competent under section 829, and it was objected to on the further ground “that it is incompetent, improper, and inadmissible.” The objections were sustained, and the plaintiff took an exception. It does not appear clearly when the alleged conversation took place, —whether it was before the sale or not,—nor does it appear that any transaction was taking place in regard to the property at the time of the supposed conversation. In Breck v. Ringler, (Sup.) 13 N. Y. Supp. 501, it was said: •‘An exception was also taken to the exclusion of a statement made by the attorney Mr. Olapp. But as this was in the absence of the plaintiff, and the attorney was not shown to be authorized to compromise him by any statement he might make, the evidence was rightly excluded.” The reversal of this case—(N. Y. App.) 29 N. E. Rep. 833—was upon other grounds. — 444 — In Gutchess v. Gutchess, 66 Barb. 483, it was said: “The declarations of an agent are not admissible against the principal, unless made while he is performing some act, and in reference to the thing done.” It did not appear that the proposed declaration of Mr. Hotchkiss was within the scope of his authority, and that it would therefore bind the mortgagee. Story, Ag. § 134; Anderson v. Railroad Co., 54 N. Y. 341; White v. Miller, 71 N. Y. 118. In Adee v. Howe, 15 Hun, 21, in delivering the opinion, Boardman, J., said that an admission by an attorney “must be within the scope of the attorney’s authority in the proceedings he is engaged in.” We think the exception taken to the ruling is unavailing. Several exceptions are taken to the findings as made, and to the refusals to find upon requests made by the plaintiff, and it is not deemed important to examine them in detail, as the views already expressed, if adopted, lead to the conclusion that the referee’s disposition of the case was proper, and we are of the opinion that his report should be sustained. Judgment affirmed, with costs. MEEWIN, J., concurs.