Chambers v. Mauldin

COLLIER, C. J. — 1. The adjustment of priority of lien between incumbrancers, and the appropriation of the proceeds of the property in dispute, is an acknowledged subject of equity jurisdiction. And although there may be no controversy as between the parties which shall be preferred in the order of payment, it is competent for a subsequent incumbrancer to go 'into Chancery to coerce a sale, and after the payment of prior •liens, to obtain whatever balance may remain. True, if so inclined, he may purchase of the preferred creditors their demands, and thus acquire the right to control the securities which they held; yet, this is not the only course by which he •can avail himself of his lien. If it was, he might lose all benefit of it, for the want of money or credit, though the object was adequate in value to the payment of all the debts, which it was conveyed to secure. • The case of the Western Insurance Company v. Eagle Fire Insurance Company, [1 Paige’s Rep. 284,] does not lead to a different conclusion. There a mortgagee of certain premises filed a bill against a prior mortgagee of the same premises, praying that the mortgaged property might be sold, subject to — 482 — the incumbrance of the elder mortgage; or that the complainant might be permitted to redeem the prior mortgage; or that the whole interest in the mortgaged premises might be sold, and the amount due to the complainants paid out of the proceeds of such sale, after satisfying the prior mortgage. To so ■much of the relief prayed as sought a decree for the sale of the • premises a demurrer was filed, on the ground that such a de,cree would give to the complainant, in the capacity of subsequent mortgagee, an undue control over the prior security of .the defendant. The Chancellor said, “The usual decree in cases of this kind, in England, where strict foreclosures are still in use, is, that the complainants be permitted to redeem the prior incumbrances, that the junior incumbrancers redeem in course or be foreclosed; and if the complainants are not entitled to a decree to sell the whole estate, and pay the prior in-cumbrancers out' of the same, they are at least entitled to redeem, and then sell the whole estate for the purpose of obtaining the redemption money, as well as to satisfy their own in-cumbrance. And if the prior mortgagees will not consent to a sale, or the amount of their incumbrances is not yet due, I do not at present perceive any valid objection to a decree for a sale of the equity of the redemption, subject to their mortgages, leaving the purchaser to pay the same as they become due, or whenever the prior mortgagees think proper to enforce their lien upon the premises.” These remarks, so far from showing that the complainant’s only equity, is to redeem the property conveyed from the lien of the deed for the benefit of Tartt, tend rather to prove that it is entirely competent to order a sale, subject to the prior satisfaction of the debt intended to be secured. No prejudice can result to Chambers from the exercise of such a jurisdiction, as the Court might direct that the property be offered for sale, and that the lowest bid received should be the amount ascertained to be due upon the notes of Stout to Tartt. 2. It is certainly competent under some circumstances for a Court of Equity to remove an old trustee and appoint another in his stead. [Lewin on Trusts and Trustees, 597, et post; 2 Story’s Eq. 527.] But the 'bill in the present case contains no allegation against the trustees in the deed for the benefit of Tartt, nor is there any thing in the record to show that they — 483 — have not acted with entire propriety, or that they are unfit persons to execute the trust. In Greenleaf v. Queen et al, [1 Pet. Rep. 138,] it was held, that where a deed conveys property in trust, to be sold for the benefit of a creditor of the grantor, the trustee must conform to the mode of sale pointed out by the deed;- that this was the test of value which the grantor thought proper to require; and it was not competent to the trustee to establish any other, although by doing so, he might in reality promote the interest of those for whom he acted. We merely cite this case'to show how strict the law is, in enjoining upon the trustee a conformity to the requisitions of the deed. We will not undertake to determine, (as it will be hereafter seen to be unimportant to a decision of the cause,) that there is error in the decree of the Chancellor upon this point; but we will remark, that it would be entirely regular to direct a sale to be made by the trustees in the deed under which Chambers claims, according to its terms, so far as they can be ascertained. 3. Upon the execution of a deed of trust, the legal estate vests in the trustee, for the benefit of the. cestui que trust, and he may defend the property at law. [2 Story’s Eq. 241; Willis on Trustees, 123, et post; Fletcher on Estates of Trustees, 2, 3, 5, 9, 16, 23, 40, 72, 75, 80, 82, 85, 88, 91, 101.] The powers pertaining to a trustee over the trust property, depend upon the nature of the trust and the terms of the instrument by which it was created. [2 Story’s Eq. 241 ; Lewin on Trusts, &c. 234, 412.] If not inhibited by the nature of the trust, or the instrument under which he acts, he may reduce it into possession. [Lewin on Trusts, &c. 295, 412.] And while the cestui que trust is obliged to resort to • equity for the assertion or protection of his equitable title, an action at law may be maintained in the name of his trustee. “ So fixed and immutable is this principle,” said to be, “that a trustee may maintain an ejectment against his own cestui que trust.” [Willis on Trustees, 201, and cases there cited.] If a trustee may sue at law for the recovery of real property, upon principle, it would seem, he might sustain an action of detinue to obtain the possession of personal property. This being the case, we cannot perceive hów the trustee can be permitted to go into equity against the grantor, or one claiming — 484 — tinder him, and seek a decree for the sale of personalty, when by reducing it into possession he has ample authority under the deed to sell. The slave Hannah was not embraced by the deed from Stout for the security of the debt to Tartt, nor does it appear that she was ever demanded of the former, or was in the possession of Chambers; and there is an entire absence of any allegation, or proof, to show that ample relief could not be obtained at law. Indeed it is difficult to conceive of any allegation that would confer jurisdiction upon Chancery, in respect to Hannah, as the act of 1830, “To regulate proceedings in certain actions of detinue,” [Aik. Dig. 263,] affords quite as ample protection to the rights of Mauldin or his cestui que trust, as a Court of Equity can. The record shows that the lien of the complainant upon this slave was paramount to all other claims; in fact it does not appear that any adverse right was set up by any one. Under these circumstances we are of opinion, that the Chancellor should not have charged Chambers with her hire, or have entertained the cause so far as it relates to her. 4. A mortgagor remaining in possession by the permission of the motgagee is not bound to account for rents and profits although the security is insufficient; unless they are specifically pledged. [Coote on Mort. 332, et post, and 555; 1 Powell on Mort. 174-7; 3 id. 946, note; Ex parte Wilson, 2 Ves. & B. Rep. 252.] In the Bank of Ogdensburg v. Arnold, [5 Paige’s Rep. 38,] it was held, if the whole amount secured by the mortgage has become due, and the mortgaged premises are not of sufficient value to pay the debt and costs, the Court, upon the filing of the bill, may, upon due notice to the defendant, appoint a receiver of the rents and profits of the premises, or otherwise secure such rents and profits for the satisfaction of the debt and costs. But it was said, where the mortgagee has neglected to take a specific pledge of the rents and profits of the mortgaged premises, for the security of his debt before it becomes due, he has no equitable right to the rents and profits in the meantime ; and in case of the death of the mortgagor, his judgment creditors are entitled to a preference in payment, out of such rent and profits. It has been said that the mortgagee is the legal owner of the — 485 — mortgaged premises, and may eject the mortgagor without notice ; that the latter is not entitled to emblements, nor is he authorized to underlet, and if he does, the mortgagee may treat his tenant as a trespasser. [1 Powell on Mort. 155; 6, 161 ; 6, 259, note; 2 id. 429, note.] And the mortgagee, by giving notice to the tenant in possession, may recover the rent then in arrear, or which may afterwards accrue. [1 Powell on Mort. 17-24.] This doctrine was declared by the Court of King’s Bench, in Moss v. Gallimore, [Doug. Rep. 266,] where the tenant held under a lease made previous to the execution of the mortgage. But if a mortgagee take possession, he is considered inequity, in some measure, in the light of a trustee, and accountable for the profits. [Coote on Mort. 320, 368, 556; Reed v. Lansdale, Hard. Rep. 7; Brainbridge v. Owen, 2 J. J. Marsh. Rep. 465; Whittick v. Kane, 1 Paige’s Rep. 202; Robertson v. Campbell, 2 Call’s Rep. 421; Van Buren v. Olmstead, 5 Paige’s Rep. 9.] And where slaves are taken'possession of by a mortgagee, he becomes liable to the mortgagor for hire. [Fenwick v. Macey’s ex’rs. 1 Dana’s Rep. 286; Wilkins v. Sears, 4 Monr. Rep. 348.] We have been thus particular in stating the rules in respect to the rights and liabilities of mortgagor and mortgagee as they apply with all force not only to mortgages, but, in analagous cases, where the security is given by deed of trust. To apply them to the case before us, and it is clear that Stout was not chargeable with hire, so long as he was permitted to retain the possession; but if he transferred the possession to a third person, under a contract for the sale of his reversionary interest or otherwise, that person, after demand of the slaves was made'of him by the trustee, who was entitled to the possession, would be liable for hire. Chambers, in virtue of the assignment of Tartt, became the cestui que trust of the property which was conveyed for the security of his assignor, and was fully substituted to his rights. If Tartt had taken possession of the slaves, he would have been accountable to Stout for hire, and to that extent would his lien have been extinguished. But Chambers’ [possession may be referred both to his purchase from Stout and the assignment by Tartt; and as a purchaser he is not liable for hire previous — 486 — to the time he may have been called on to direct a sale under his deed, or some equivalent, step was taken by the junior in-cumbrancer. Whenever this was done, the hire thereafter accruing, would be a charge upon him, and go in satisfaction of the debt of which he was assignee. It does not appear that Chambers had the possession of both the slaves embraced in the deed for Tartt’s benefit. Mil ley alone was in his possession, while Henry remained with Stout. There is then no pretence for charging him with the hire except as to Mil ley. The decree of the Chancellor in this particular, can only be sustained upon the legal hypothesis, that as Stout’s possession was acquiesced in by Chambers,it shall be considered as his own. We know of no warrant for such a conclusion. 5. No question was raised in the argument as to the priority of the lien of Tartt’s deed. The decree was rendered by the Court of Chancery, under the impression it was sufficiently shown by the answers, that Sledge was informed of its execution when he received his security from Stout. It is stated in the answer of Aikin, a trustee in Tartt’s deed, that within thirty days after it was executed, he handed it to the Clerk of the proper County Court, duly proved, with directions to register it;. but upon inquiry at the office, he learned that it had not been recorded, and upon search it could not be found in file. In addition to which, he, as well as several other of the defendants, state facts from which an express notice is inferable. Whether these answers are thus far responsive to the bill, or are evidence, or whether it would not be safer to sustain the answers by proof, we deem it unnecessary to consider at this time. For the several errors particularly noticed in this opinion, the decree of the Court of Chancery is revered and the cause remanded, that it may be disposed of according to the principles we have laid down.