Allen v. Lucas

— 53 — OPINION OF THE COURT BY FREAR, C.J. (Galbraith, J., dissenting.) This is a statutory action, to quiet title. It is brought by a mortgagee after default of the mortgagors, against certain other persons, who, it is alleged, claim an estate or interest in the mortgaged land. On demurrer, the Circuit Court ordered the complaint dismissed and plaintiff to pay costs including a fee of $15 to one of the guardians ad litem and of $50 to the other, to which order the iflaintiff excepted and now brings the case here by writ of error. Two points are raised. The principal one is that a mortgagee has not such title or interest as to enable him to bring an action of this kind. The statute, which is set out in full in Mossman v. Dole, 14 Haw. 368, provides that actions of this nature may be brought “by any person.” This is in terms about as broad as it can be. Doubtless as held elsewhere a mere stranger could not' bring the action, notwithstanding the breadth of the language used. The complainant would have to be a party in interest. Whether an equitable interest alone would be sufficient we need not say. It seems to us that a mortgagee, after default, has a sufficient legal interest as against others than the mortgagor. There are two leading theories of mortgages. One is the common law theory which regards the mortgage as what it purports to be — a deed defeasible upon the performance of a condition subsequent. The title passes to the mortgagee. He is entitled to possession, and may recover it in ejectment, in the absence of an agreement to the contrary, even before default by the mortgagor. After default his title becomes absolute at law, and the mortgagor cannot even redeem. But equity after some centuries stepped in and permitted the mortgagor to redeem. This interference by equity has been developed, chiefly by statute, into what is known as the equitable theory, now recognized at law as well as in equity in many jurisdictions, which regards the mortgage as what it is really intended to be — 54 — —a mere security for a debt. Tbe title remains in tbe mortgagor and be is entitled to possession even after default, and until foreclosure, in tbe absence of an agreement to tbe contrary, tbe mortgagee having merely a lien. These two theories have many features in common notwithstanding these and other points of difference. The common law theory still holds for the most part in England and most of the eastern states, that is, the older states, while the new theory obtains in most of the western states — as a result to, some extent of the adoption of codes taken largely from the code of New York where this theory originated. In some states these two systems are blended to a greater or less extent. For instance, in several the mortgagor is entitled to possession before default and the mortgagee after default. In several the mortgagee is regarded as having the legal title for some purposes and not for other purposes. The idea of the courts which blend the two theories seems to be that the mortgagee’s title or interest should be held sufficiently extensive to protect his rights and sufficiently limited to pro-' tect the morgagor’s rights. See in general Jones, IVItgs., Sec. 11 eb seq.j 2 Wash., E. P., 6th Ed., Sec. 1041, et seq. No one theory is entirely consistent in all respects. This would naturally be so where the unusual course is adopted of allowing the actual intention to override the expressed intention. “Just what the theory of mortgages is here has never, that we are aware of, been judicially determined.” Malani v. Alapai, 13 Haw. 194. Hardy v. Ruggles, 1 Haw. 457, is cited as tending to show the adoption of the equitable theory here, but the court merely held that within the meaning of the registry statute, construing that statute as a whole, he legislature intended to include mortgages under “pledges.” The word “pledges” was held to have been used there in its general as distinguished from its technical sense, and the court said: “We would not urge for a moment that there is not a clear and plain distinction' between a pledge and a mortgage, in a technical sense of those terms.” Campbell v. Kamaiopili, 3 Haw. 477 (followed in Kaikainahaole v. Allen, 14 Haw. 527) is cited — 55 — to show tliat the common law theory has been recognized herein that case the court held that a mortgagee could proceed by foreclosure after the debt was barred by the statute of limitations, in other words, in substance, that the mortgage was not a mere incident of the debt, saying, among other things, that “a mortgage deed of land conveys to the mortgagee his heirs and assigns, a vested right in the mortgaged land, defeasible only on performance of the condition named in the deed, unless affected by adverse occupancy. * * * * We do not think the act was intended to divest mortgagees of their titles or of their remedies against the land by foreclosure. In Kanoii v. Kaioipahia, 11 Haw. 389, the court said: “It will be unnecessary to go into the question of the theory of mortgages in this country with respect to the status or legal rights of the parties thereto,” but recognized that the rights of those parties as against each other-might be different from their rights as against third parties. The equitable theory is mostly of statutory origin. There are no statutes here requiring its adoption. There are no Hawaiian judicial precedents requiring its adoption. On the contrary, the precedents, so far as they go, point the other way. There has been no usage here that has gone to the extent of showing that a mortgagee has not sufficient title after default of the mortgagor to enable him to protect himself against third parties. The courts in a number of states which have adopted the equitable theory permit the mortgagee to act as if he had the legal title for some purposes. It may be that the mortgagor here is entitled to possession as against both third parties and the mortgagee until default and even until foreclosure, and yet the mortgagee might consistently be held clothed with sufficient-title after default of the mortgagor to protect himself againststrangers under our broad statute on quieting title. It would certainly seem just to permit him to clear up the title preparatory to foreclosure, and we know of no reason in law to prevent this. In Love v. Bryson, 57 Ark. 589 (22 S. W. 341) the mortgagee was held to have sufficient “legal title” to “maintain ejectment or a suit to quiet title preparatory to a sale. — 56 — under the mortgage.” That would be expected, for in Arkansas the common law theory of mortgages prevails. In Rosenbaum v. Foss, 4 S. Dak. 184, in a state in which the lien or equitable theory prevails, it was held that a mortgagee could maintain an action to quiet title against one who claimed under a prior mortgage. But the statute there relating to actions to quiet title was worded somewhat differently from ours. The second point raised relates to the 'fees ordered paid by the plaintiff to the guardians ad litem of certain of the defendants. The guardians contend first that this question cannot be raised now for several reasons. (1) Because the order was made after judgment. The record shows that there was but one order for the dismissal of the complaint and the payment of fees. (2) Because the order is not within the “record” as defined in Civ. L., Sec. 1446. That section provides that certain things shall be included in the record for the purposes of the writ of error statute, but does not exclude other things which are necessarily part of the record, such as the judgment or order itself. (3) Because the plaintiff did not move for a retaxation of costs. We do not see that such a motion was necessary. Besides the order was part of the main judgment and was not part of a proceeding for taxation of costs. (4) Because the plaintiff did not except to the portion of the order that related to fees. Whether an exception was necessary, the error appearing on the record, we need not say. See Cummings v. Iaukea, 10 Haw. 1. A fair construction of the “exception taken makes it cover the entire order, although the order is described in part in the exception as “sustaining the demurrer of the defendants to the complaint filed herein, and dismissing the said complaint.” It may be added that the order for costs and fees being merely incidental to the principal order dismissing the complaint would fall with the latter. As to the merits of the question of fees, a court of law has no authority in the absence of statute to allow fees of this kind, in the nature of counsel fees, against a losing party. Such fees may be allowed as necessary expenses in probate out of the — 57 — estates of the minors themselves, and in some jurisdictions, under statutes, by the court trying the action, but not by that court in the absence of statute and against the opposite party. W. A. Whiting; Holmes & Stanley; C. F. Clemons, for plaintiff. F. M. Watson; J. J. Dunne, for defendants. The writ is allowed, the judgment and order below reversed and the case remanded to the Circuit Court for further proceedings consistent with this opinion.