Wygal v. Bigelow

The opinion of the court was delivered by Horton, C. J.: Upon the trial of this case in the court below, the burden of the issues, under the pleadings, was upon the defendants. The plaintiff objected to the introduction of any testimony to sustain the answers, and this objection having been sustained, judgment was rendered for $1,009.92, the balance claimed to be due to the plaintiff upon the notes of D. Wygal & Son, and for a foreclosure of the mortgage of Sylvester Wygal and wife on lot 2, in block 30, in Paola, to pay the judgment and costs. All the answers must be treated as if filed before the trial, as the court below so treated and considered them. The principal question in the case is, can the defendants, under the allegations of the answers, recover damages justly proportioned to the injuries alleged by them, or can relief only be granted to them upon payment or tender of payment of the mortgage debt? If it appeared from the pleadings that the plaintiff still held in his possession or under his control the personal property described in the chattel mortgage, then perhaps payment of the debt or tender of payment by defendants ought to precede any claim for damages or any return of the property. But as it is alleged that the personal property was unlawfully, fraudulently and unfairly converted to the use of the plaintiff, and that he has disposed of large portions of the same, the defendants cannot redeem on account of the conduct of the plaintiff. The chattels cannot be returned, as the plaintiff has disposed of large portions thereof, and the defendants, the mortgagors, are entitled, if the allegations of the'ir answers are true, for judgment against the plaintiff, the mortgagee, for the excess of the value of the personal property over the amount of the notes and interest. (Leach v. Kimball, 34 N. H. 568; Hungate v. Reynolds, 72 Ill. 425.) Some of the courts hold that relief can be granted only to [483] a mortgagor upon payment or tender of payment of the whole mortgage debt, and then, although the mortgagee has disposed of the property, a court of equity will give relief by decreeing damages. But in this state the dlstinction between courts of equity and courts of law has been abolished, and it was useless and unnecessary to tender any payment of the mortgage debt, if the plaintiff has unlawfully, fraudulently and unfairly converted to his own use the personal property of the defendants of a much greater value than the debt, and subsequently to such conversion has disposed of large portions of the property, so as to be disabled from returning the same, or of allowing any redemption thereof.. In Case v. Boughton, 11 Wend. 106, the court say, that the property being of sufficient value to satisfy the debt, no further act besides taking possession was necessary to constitute payment. In this case, if the property taken by the plaintiff was of sufficient value to satisfy his debt, and if it has been unlawfully, fraudulently and unfairly purchased by him, no judgment ought to be rendered for any balance claimed upon the notes. The personal property was placed in the mortgagee’s hands for the purpose of being appropriated for the satisfaction of the notes, and the mortgagors had the right to have it faithfully and fairly applied' for that purpose. If it was not so appropriated, the mortgagee is liable. In this state, we think that.the mortgagee of the chattel may purchase at a sale under the mortgage, but the relation which the mortgagee holds to the debtor imposes on him the observance of fairness and good’faith. If he abuses the power which he holds and becomes the purchaser unfairly and dishonestly, he will be required to account to the mortgagor therefor. (Herman, Chat. Mort., § 219; Jones v. Franks, 33 Kas. 497.) “If the mortgagee carries out in. good faith the terms of the agreement, and makes the. very disposition which he has contracted to make, and has 'broken no contract, he has been guilty of no bad faith to the mortgagor, and ought to be chargeable with only the actual proceeds of the property thus disposed of by him.” (Denny v. Van Dusen, 27 Kas. 437.) [484] The unfair or fraudulent sale of mortgaged property by a mortgagee should not and will not defeat or extinguish the rights of the mortgagor. The mortgagee has no right by any unfairness to sacrifice the property and deprive the mortgagor of the surplus over the debt which by a fair and honestly conducted sale might arise. If the property consists of many different articles which can be easily offered for sale separately, or in lots or parcels, a sale of the whole in a lump, or in two lumps, in some cases might be regarded as an unfair mode of sale, especially if it were shown that the property brought much less at the sale than its actual value. (Jones, Chat. Mort., 3d ed., § 797; Hungate v. Reynolds, 72 Ill. 425.) We cannot say, as a matter of law, upon the allegations in the answers, that the property was wrongfully and unfairly disposed of; nor can we say that the property was sold fairly and in good faith according to the terms of the mortgage. These are matters for a jury under proper instructions from the trial court. The defendants were entitled to have a fair and bona fide sale. The trial court should have permitted the testimony to go to the jury to determine whether this was done or not. Upon the issues in the case, it was important to determine whether the sale was made by the mortgagee in a manner calculated to produce the best price for all the articles sold. As all the testimony offered in support of the answers was rejected, no opportunity was permitted the defendants to show that the sale was unlawful, fraudulent, or unfair. In this the court committed error. We are referred to Hamlyn v. Boulter, 15 Kas. 376, that the defendants’ answers were insufficient because they did not allege the payment of the debt or the tender thereof. In that case it does not appear that the defendant unlawfully, fraudulently, or unfairly disposed of the mortgaged property. It does appear, however, from the opinion, that Hamlyn was surety for Boulter; that he held a chattel mortgage upon property as security, and all the court decided in that case was, that no action could be maintained by Boulter against him for the conversion of the mortgaged property until he had [485] been fully repaid, or indemnified for his liability as surety. This, and nothing more. . In accordance with the usual practice of this court, the petition in error is allowed to .be amended as requested in the motion on file. The judgment of the district court will be reversed, and the cause remanded for further proceedings in accordance with the views herein expressed. All the Justices concurring: