Lowell v. North & Carll

Atwater, J. By the Court The Plaintiffs below, North & Carll, bring their action to recover the sum of $633 77-100, claimed to be due from the defendant upon a promissory note. The complaint sets forth the making and delivery of the note by the Defendant, &c., and also the execution and delivery by the Defendant of a mortgage to secure the same, upon certain lots in the town of Wilton, Waseca County; that default had occurred in the condition of said mortgage, and the same had been foreclosed and the property sold for $300, which (with other payments) had been endorsed upon the note, leaving a balance due on the same of $633 77-100 for which, with interest at the rate of three per cent, per month, the Plaintiff demanded judgment. The answer admits the execution and delivery of the note and mortgage, but sets up as a ground of defence, that the Plaintiffs proceeded to foreclose the mortgage by advertisement, and that in so doing they did not comply with the requisitions of the statute in reference thereto. That the notice of sale was not published in a newspaper printed in the county where the mortgaged premises were situated, nor in the nearest paper in one of the adjoining counties, that the time and place of sale were unknown to the Defendant, and were not pub [40] licly and generally known, whereby the sale was not generally attended by purchasers; that the Plaintiffs procured a formal purchase by themselves for the sum of three hundred dollars, when in fact the premises were worth one thousand dollars, and would have brough at any sale duly published, and made fairly and in good faith, more than sufficient money to pay the balance due on the note. The cause was tried by the Court, and judgment rendered for the Plaintiffs for the amount demanded in the complaint. In the facts found by the Court, no mention is made in regard to any of the allegations above stated in the answer, and it is presumed the Court held them immaterial. If they are so in fact, no finding upon them would be required, but if otherwise, an omission to try those issues would be error, and if the allegations are admitted to be ,true, would form a good defence to the action. To determine'their materiality, it will be necessary to consider the duties and" liabilities of a mortgagee, in the management and disposal of the property conveyed to him, as security for the indebtedness of the mortgagor. The relations of the mortgagor and mortgagee are in some respects identical with those of trustee and cestui que trust. Technically, they are not so termed, the rights and liabilities of each being defined and limited by statute more specifically than is done in the case of the trustee and cestui que trust. The mortgagee, however, is in one sense a trustee of an express trust. He has received a conditional conveyance of property from his debtor as security for his debt. He holds it for that purpose only, and can only dispose of it for the accomplishment and in pursuance of that end; and that, in accordance with the provisions of the stutute. The mortgagor is entitled to the surplus arising from the sale of the mortgaged premises, and also has a right of redemption. He has therefore interests which a court will protect, when its aid is invoked in a proper case. The mortgagee in his management and disposition of the mortgaged property, has no more right to prejudice the interests of the mortgagor, than has the trustee those of his cestui que trust. It is well settled that a trustee cannot purchase in his own name, at a sale either in behalf of, or against his cestui que trust, nor could the mortgagee except by express [41] authority of statute, aud for the same reason that the trustee could not. The only authority which the mortgagee has to dispose of the mortgaged property, is that granted by the terms of the mortgage, and this only authorizes him to dispose of it in accordance “ with the statute in such case made and provided.” When, therefore, the mortgagee proceeds to dispose of the property contrary to the statute, he is acting without authority, and renders' himself liable to the mortgagor for the consequences of his wrongful act. The question does not here arise as to whether such a sale would be void, as the relief sought is not to vacate the sale. The appellant has two remedies in case of a sale like the one under consideration — he may either apply to the Court to have the sale set aside, or he may hold the mortgagee personally responsible for the injury he has suffered by the unauthorized sale of the mortgaged property. In this case he has chosen the latter remedy. The allegations of the answer constitute a good cause of action — which, under the statute, may be set up as a defence — the statement of the illegal sale, and that in consequence thereof the property sold for less than its value, and that had the sale been duly made, it would have brought sufficient to have satisfied the note, which it was given to secure. If these allegations shall be found true, they constitute a good defence to the action below. In adopting this form of remedy, it would be incumbent on the Defendant to prove all these allegations, and it would not be sufficient to show that the sale was illegal, and that the property brought less than its value, as those facts, if admitted, would not show of themselves, that the Defendant had suffered any injury. The allegations in the answer as to the sale of the property for less than its value, and the amount it would have brought if duly sold, only become material when the sale is illegal. It is no answer to the views above expressed, to urge, as is here done, that the Defendant below has suffered no injury even if the sale be illegal, as the Defendant may redeem, and thus save his property, if it be as valuable as is alleged. It is for the. interest of the mortgagor that the property bring as high a price as possible, and the statutes are framed to attain this end. It does not lie in the mouth of the mortgagee, having [42] wrongfully disposed of the property of Ms debtor, to assert tbat the Defendant may save himself from loss by exercising Ms right of redemption. The law gives him that right even when the sale is legal. But the law has also provided certain rules regulating the sale of mortgaged property, to make it available so far as possible, as security for the debt of the creditor. Courts of Justice should afford a remedy where these ruleá are violated to the prejudice of the debtor. ■ The respondents also claim that the sale is not shown by the answer to have been illegal, inasmuch as the Defendant does not allege that the notice of sale was not published in a newspaper published at the seat of government. Such an allegation was unnecessary, as if the notice was so published, it was still illegal. Chapter 96, of the Session Laws of 1858, p. 293, provides that the notice of sale shall be published in a newspaper of the county where the premises intended to be sold, or some of them, are situated, if there be one, if not, then in the nearest paper in one of the adjoining counties. This act was approved August 2d, 1858. The sale took place October 15th, 1858. Sec. 2 of Chap. 3, Comp. Stat., p. 114, provides that “ every statute which does not expressly prescribe the time when it shall go into operation, shall take effect throughout the Territory on the thirtieth day next after that on which it shall be approved by the Governor, or otherwise become a law, according to the provisions of the organic act of this Territory ; Provided, That no general law shall take effect until published.” The two following sections, and Secs. 1 and 2, p. 117, Comp. Stat., provide for the immediate publication of the laws, and in the absence of any allegation to the contrary, it will be presumed that the law had been duly published. The answer alleges specifically that the notice of sale was not published in a newspaper printed in the county where the mortgaged premises were situated, nor in the nearest paper in one of the adj oining counties. This was a sufficient allegation of want of proper notice of sale. The judgment below is reversed and a new trial granted.