National Exchange Bank v. Holman

The opinion of the court was delivered by MR. Justice McGowan. It seems that in the year 1885, James E. Davis purchased from J. Z. Dunlap, of Aiken, a lot of law books, for which he gave his note, and to secure it, a mortgage of the books ; that Dunlap transferred the note and mortgage to the plaintiff bank ; and when it fell, due, Davis not being able to pay the debt, sold the books, with the consent of the bank, to Holman, the defendant, took his note for the same, and transferred it to the bank, the agreement being that the mortgage given by Davis was still to stand and bind the books in the possession of Holman, the object being, as it would seem, to substitute for tlie note and mortgage of Davis to Dunlap the note and mortgage of Holman to Davis, assigned to the bank. Holman was a citizen of Barnwell County, and being unable to pay his-note when it fell due, he wished to surrender the books in discharge of the debt; but the bank was unwilling to do that, and, the condition of the mortgage being broken, they (the bank) through W. R. Peoples, as their agent, took possession of the mortgaged books, had them carried to Aiken, an adjoining county, where, after full notice and advertisement, they were sold at auction, and the net proceeds of the sale (§>174.60) credited on Holman’s note, leaving still due a balance of $150.40, to recover which the action was brought. The defendant made two defences: First, a general denial; and second, “That the note described in the complaint has long since been discharged by payment by the defendant delivering to W. R. Peoples, the agent of the plaintiff, a certain lot of law books; and further, that the said books were delivered to the [163] said Peoples as agent as aforesaid, upon the express condition that the said note should be at once returned and delivered to the defendant herein fully satisfied and discharged,” &c. The facts were proved as herein stated, and, under the charge of the judge, the jury found for the plaintiff the balance still due upon the note — •$> 178.15 ; and the defendant appeals to this court upon the following exceptions: “1. Because his honor, the presiding judge, erred in charging that a seizure of a mortgaged chattel by the mortgagee for the purpose of a sale, and a sale irregularly made, not in compliance with the statute regulating such sales as to time, place, and manner, was a mere irregularity and not a conversion by the mortgagee, and would not entitle the mortgagor to a satisfaction in full of the mortgage debt. 2. Because he erred in charging that if there was an irregularity in the sale, the defendant would have a right to sue the plaintiff for any damages caused by that irregularity. 3. Because he erred in charging that the taking of the property and selling it at a place not contemplated by law, or after advertisement not in accordance with the law, would be an irregularity in the sale, which, if pleaded as a counter-claim, might be admissible as a defence for whatever damages defendant had sustained by reason of that irregularity; whereas it is respectfully submitted that he'should have charged the jury that when a mortgagee takes possession of the mortgaged property, and converts it to his own use without a sale, or when a sale is made neither in conformity with the statute nor the consent of the mortgagor, it operates as a satisfaction of the mortgage debt,” &c. It was shown that the defendant executed the note sued on ; that with his assent it was assigned to the plaintiff, and that the books in his possession were still subject to the mortgage executed by Davis. The defendant failed to show that, at the time of the seizure there was any agreement in fact that the books were taken in satisfaction of the debt, and the rights of the parties must be determined by law. It is quite clear that the defendant-mortgagor owed the note sued on, and was liable to a personal judgment for any balance that might remain unpaid, after properly selling and applying the proceeds of sale of the mortgaged property on the note. If the plaintiff had gone into equity to [164] foreclose his mortgage, the first order would have been to sell the mortgaged property; and, after crediting the proceeds of sale upon the debt, then second, to give a personal judgment against the debtor for the balance left unpaid. But the plaintiff was not bound to go into equity to foreclose. The subject being personalty, and the condition broken, he had the legal title and the right to take the property into his own possession and sell it fairly after proper advertisement at public sale, and crediting the net proceeds of the sale on the debt, to recover judgment against the mortgagor debtor for the balance. Straub v. Screven, 19 S. C., 449; 3 Pom. Eq. Jur., sec. 1229, where it is said: “Upon a breach of the condition contained in the mortgage, the legal title rests so completely in the mortgagee that all the rights incident to ownership and possession in law, at once arise. By taking possession of the property and selling it at public sale upon due notice, he will then extinguish every right and interest at law of the mortgagor,” &c. This certainly was the general law down to 1882, when the legislature passed the act (18 Stat., 124) regulating the advertisement and sale of personal property under a chattel mortgage, which provides “that the mortgagee or person holding the instrument, &c., shall advertise the time and place of said sale by posting a notice thereof in writing, at least 15 days before such sale in 3 public places in the county in which such personal property may be found, one of which shall be at the court house door, or shall publish the same at least two weeks in a newspaper published in his county, unless the person making such mortgage, or his legal representative, shall consent, or shall have consented, to a sale in some other mode or on some other notice,” &e., &c. It is insisted that the alleged sale of the books not having been made in precise accordance with the act, in that they w'ere not sold in the County of Barnwell, where they were “found,” but in the adjoining County of Aiken, it must be considered that the whole proceeding was void. It is not suggested that there was any unfairness in the sale, or any want of full notice both by advertisement in a newspaper and printed hand-bills, or that the property brought less in Aiken than it would have done in Barnwell. But the naked point is made that in law there was no sale at all, [165] and the plaintiffs, having converted the property to their own use without sale, must be held to have incurred the penalty imposed in such case, viz., “satisfaction” of their whole debt, without any reference whatever to the value of the mortgaged property. The Circuit Judge charged the jury that the seizure of the property under the mortgage for the purpose of a sale, and a sale, was not a conversion to their own use by the plaintiffs which avoided the whole proceeding; that the sale of the property in Aiken instead of Barnwell County was a mere irregularity, and if the defendant ivas damaged thereby, he had his recourse by suing the plaintiffs. Was this error? This must depend upon the construction of the act. If it had created a new right, not before allowed by the general law, as, for example, the right of a mortgagee in a chattel mortgage after condition broken, to seize and sell the property at public sale, and credit the proceeds upon the mortgage; and in granting such new right the act had prescribed the forms and terms of the sale provided for, we would have no doubt that all the regulations stated would be regarded as mandatory in character, and, as a consequence, to be strictly pursued, as the condition on which alone the party could entitle himself to the benefit of the act. As, however, the act did not, grant a new power, but only imposed certain duties as to an old one — did not create a right to sell, but only undertook to regulate one already existing — does it follow that the legislature must have intended that all the regulations declared should be followed at all events and in exact conformity with the prescribed details, as a condition precedent to the validity of the sale ? It will be observed that the act simply prescribes certain regulations as to the sale, without negative words or imposing any penalty for non-compliance. As no injury really resulted from the sale being made at Aiken instead of in Barnwell County, we do not see why the plaintiffs should be precluded from recovering the remainder of their debt, after crediting the proceeds of the sale of the mortgaged property. The question is not whether the statutory regulations should be conformed to as law, but whether in character they are so exclusive as that technical nonconformity in a single particular must operate as a discharge of the whole debt. The object being to secure a fair sale and appli [166] cation of the proceeds, it would seem that the error complained of was not of the essence, but merely the manner of the thing. In Monk v. Jenkins (2 Hill Ch., 9), Chancellor Harper said: “Where a statute is passed authorizing a proceeding which was not allowed by the general law before, and directing a mode in which the act shall be done, here the mode pointed out must be strictly .pursued. It is a condition on which alone a party can entitle himself to the benefit of the statute, that its directions shall be strictly complied with, otherwise the proceeding will be void. But when a proceeding is permitted by the general law, and an act of the legislature directs a particular form and manner in which it shall be conducted, then it will depend on the terms of the act itself whether it shall be considered merely directory, subjecting the parties to some disability if it be not complied with, or whether it shall render the proceeding void,” &c. In State v. Massey (2 Hill, 379), it was held that the act of 1799, directing jury lists to be made out from the tax returns once in every three years, was held to be merely directory to public officers in the discharge of their duty ; and if the requirement was-disregarded and the act was nevertheless done, such act was not thereby rendered void. In McNamee & Co. v. Huckabee (20 S. C., 200), it was stated that the act which required the county auditor to put his endorsement upon every deed of real estate before it was recorded, was directory merely, and the registry was good without such endorsement. In Darnall & Susong v. Darlington (28 S. C., 256), under this very act of 1882, the point made here did not arise, for there the mortgagor “consented” that-the sale might be made in Savannah, which made long notice unnecessary. It was held that the mortgagee was entitled to recover the deficiency which remained after applying to the debt the proceeds of sale “especially in the absence of testimony that the sale was not fairly made and for a good price.” The judgment of this court is, that the judgment of the Circuit Court be affirmed.