Gillenwaters v. Miller, Gardner & Co.

Simrall, J., delivered the opinion of the court: This case is here upon appeal and cross appeal. In ■August, 1867, Adair &-Isom conveyed in trust, to Jno/F. Arnold, a lot of ground in the town of Corinth, to secure a note of $470.00, payable to John J. Rice. Miller, Gardner & Co., on the 14th December, 1867, purchased the property from Adair & Isom, and -received the deed. A few days after 1 heir purchase, as alleged in the bill, they appointed E. F. Haynie an agent, and let him into the possession of the premises. Miller, Gardner & Co. further allege that on the 29th of January, 1868, they bought from Rice the note aforesaid, secured by the deed of trust, which was transferred and delivered to them, which has never been paid. The answers of Gillen waters & Haynie, and of Arnold, . make an affirmative defense against Miller, Gardner & Co., by setting up a title to the lot, acquired at Sheriff’s sale, •made 16th March, 1868, under judgments secured 25th September, L867, in favor of Trabue, Davis & Co., and H. Buck-hart, against Adair & Isom. — 161 — The controversy is between Miller, Gardner & Co., as purchasers of the equity of redemption from Adair & Isom, the 14th of December, 1867, and claiming, as assignees of Rice, of the note of $470.00, secured by the trust deed of August, 1867, and Gillenwaters & Haynie, purchasers at Sheriff’s sale, under the judgment. It becomes necessary, to a correct solution of these conflicting claims to the property, to examine the complexion, which the testimony gives, to the peculiar circumstances out of which they respectively originated. It is important to note the dates of the several occurrences. The deed of trust (2d August, 1867), is older than the judgment (September, 1867). The purchase of the equity of redemption is junior to the judgment. Miller, Gardner & Co., in their original bill, insist that Gillenwaters & Haynie acquired no title as against complainants by their purchase at the judicial sale — -(the reasons assigned will be hereafter considered). In the amended bill, the complainants pray that, if the Sheriff’s sale shall not be canceled, then Gillenwaters & Haynie should be required to account for rents of the property; and after crediting that sum, when ascertained, upon the $700 paid on execution sale, the complainants, upon payment of the balance, should have the benefit of their title. Gillenwaters & Haynie, in their answers, insist that the complainants did not take the note from Rice as assignee, but that they paid and satisfied the debt, that the endorsement on the margin of the record of the deed is conclusive that the incumbrance had been discharged. The endorsement is in these words: Satisfied in full by order of Jno. J. Rice, January ls.t, 1868. (It is agreed that, the true date is 1869.) There is no signature ; nor is the authorization attached ; it was actually placed upon the record more than a year after the Sheriff's sa,le, so that when that sale was made the deed in trust appeared as a subsisting incumbrance on the property. The consideration paid, and agreed to be paid by Miller, — 162 — Gardner & Co. to Adair & Isom, for the property, was the satisfaction of a debt of five or six hundred dollars, owing by Adair & Isom to therfi, to. pay their debt to one Dixon, also to take up the debt to Rice, in this wise, (as stated by Buckner in his deposition,) “ we were to pay Mr. Rice, and he was to transfer to us all the advantages he had by virtue of the deed of trust.” The whole consideration amounting to twelve hundred dollars. The terms of the endorsement of Rice’s note is as follows: “ This is to certify that the within note has been duly satisfied, and the mortgage on house and lot in Corinth, Mississippi, for security of same, is hereby silenced and discharged; also that all interest, real and imaginary, that I may have had in said property, is released in toto to the Messrs. Miller, Gardner & Co., purchasers of said house and lot from makers of this note. I furthermore deny all connection with, or responsibility in the premises. January 29, 1868. (Signed) J. J. Rioe.” Rice, in his deposition, states with emphasis, that he transferred the note, to Miller, Gardner & Co., substituting them to all the rights which he had to the trust deed. That such was his contract with them, and whatever form it may have been put in, his intention was to substitute them to the note and security, just as they were in his hands. Was this an assignment or payment of the debt to Rice ? The general principles will be found on an analysis of the cases to be, that whether a given transaction shall operate as a payment which satisfies and discharges the mortgage, or as an assignment, which keeps it alive, does not depend so much upon the language used, discription of the act done, as upon the relations subsisting, or that spring up, between the party advancing the money, and others, who had or have acquired interests in respect to the property. If the mortgagee himself, or .his legal representative, pays off the debt, no purpose generally can be considered by keeping the mortgage on foot. So, too, if others have come under a duty, as by contract to pay off the mortgage, in — 163 — the performance of which other persons have an interest; although an assignment in terms be made, it should be held to be a release, and not an assignment Undoubtedly the general rule is, that if the legal and equitable title was united in the same person, the equitable title is also his, as when the legal title is taken by mortgage, and then by his own act the mortgagee acquires the equity of redemption ; the incumbrance is extinguished. Commonly, there is no motive to keep up the burden, and continue the relation of creditor and debtor, when both relations are personated by the same individual. In equity the merger of the two estates depend upon the intention, express or implied, and upon the purposes of justice. If the interest of the cestua qui trust require the estate to be kept separate, and justice is promoted thereby, a court of equity will keep them distinct. Forbes v. Moffatt: Moffatt v. Hammond, 18 Vesey Rep. 384, note a. In the course of the judgment, Sir Wm, Grant used this language; “ Upon looking into all the cases, in which charges have been held to merge, I find nothing which shows that it was not perfectly indifferent to the party in whom the interests had united, whether the charge should or should not subsist, then it always sinks. In that case the testator devised his whole estate to J. M., who was also mortgagee — the estate being also subject to another mortgage — the charge in favor of J. M.'was kept alive, because it would be to his interest so to treat it, in view of the conflicting rights of the other incum-brances. A strong case illustrative of the principle is Popin v. Bumstead, 8 Mass. Rep. 431. The administrator sold the equity of redemption, under a license of the proper court, which was purchased by Wheetock, who conveyed to Bum-stead, who paid to the mortgagee the whole sum due, who entered satisfaction upon the record of the deed. After this had been done the widow of the mortgagee applied for dower. The court, however, treated the claim as though the mortgage was outstanding and unsatisfied. The object of the purchaser in paying off the incumbrance was to perfect — 164 — his estate. That ought not to be seized upon by the widow to give her a better right than she had before. In an analogous case, Gibson v. Crehove, 3 Pick. 482, speaking of the purchaser of a right to redeem, who acquires the mortgage, the court say: “It shall, or shall not operate as an extinguishment of the mortgage, according to the interest of the party.” In that case, the purchaser had entered into covenant to pay the mortgage debt, and, moreover, had sold and conveyed the property to a third person. Neither of these facts precluded him from insisting upon the mortgage. In Compton v. Oxendon, 2 Vesey jr. 264. Lord Thurlow, addressing himself to the question of intent, as to whether the estate shall stand with the incumbrance upon it, or be discharged of it, referred to the fact whether it would be more beneficial to the person entitled to the charge, toletitremain; as having a controlling influence in deciding the “ implied intent.” Such are the doctrines of a court of equity, where both estates are united in the same person. In the case under consideration, there would not obtain a legal merger strictly; for Miller, Gardner & Co. were owners of the right of redemption; the dry legal title outstanding in Arnold, the trustee; substantially, however, the deed in trust was but a charge upon the estate, capable of being redeemed. There is, therefore, less technical difficulty in the way. In continuing this incumbrance, if it shall be necessary to protect the estate of Miller, Gardner & Co., consistently with an intention, express or implied so to do, we think that the principles to which we have referred, growing up in cases where there has been a concentration of both rights in the same individual, apply in reason to charges created by deeds in trust, like that presented here. It is proved in the deposition -of Buckner, that Adair & Isom consented that the complainants might take up the note, with the. benefit of the security incident to it. It is proved by Rice, that the transaction with him was an assignment of the note and security, and not a payment of the debt. The law guage used by Rice in passing the note to the complainants, is equivocal and uncertain, — 165 — indicating that Nice was not conversant with the exact use and import of words. In cases of doubtful meaning it is entirely competent to accept proof of the relations of the parties to each other and the subject matter, and of surrounding circumstances, as aids to the interpretation of the language employed, so as to reach the intent. Whallow v. Kaufman, 19 John. 107; Sumner v. Williams, 8 Mass. 214. Taking the entire written words endorsed by Rice on the note, we think his fair meaning was, that as to him the note was paid and the security satisfied; but as to Miller, Gardner & Co. “ all his interest is released to them, they being purchasers of the house and lot, from the makers of the note.” This construction comports with the express intent of the complainants, when they agreed with Adair & Isom to take up the debt, and also with the express intent of Rice and themselves when they negotiated with him. The caution of Miller, Gardner & Co., to preserve the charge upon the property, shows that they wished to retain the incumbrance as a support and protection of their title. It is manifest that without that aid, the title would be in a most precarious condition. No case, perhaps, can be found in the books, where it is more essential to the interest of the purchaser of the equity of redemption, that the charge shall remain and not be extinguished. We conclude, therefore, that the transaction with Rice, should be treated as an assignment, and that the complainants may avail of whatever advantage it may afford, against Gillen waters & Haynie, the purchasers, at sheriff’s sale. The judgment, being older than the sale to Miller, Gardner & Co., was a lien upon the interest conveyed by Adair & Isom to them, but was subordinate to the incumbrance of the deed in trust. The sheriff’s sale would therefore pass the equity of redemption, and would leave to the complainants, simply a right to enforce the charge upon the land, for payment of the note of $470.00. This would be the ordinary result, and would be so in this case unless the purchasers from the sheriff stood in such relation to the complainants. — 166 — as forbids that they should enjoy any legal advantage they may have obtained over the complainants. It is averred in the bill, and stated by Buckner, (one of the complainants,) in his testimony, that immediately after the purchase, (which was negotiated by him,) from Adair & Isom, Haynie tbe defendant was constituted agent to look after the property, rent it out, etc. .The agency was accepted ; and Haynie went into possession and control, for complainants who were residents of Evansville, Indiana. Haynie, in his answer, denies the agency in toto; but when examined as a- witness, he admitted his appointment, acceptance and conduct as such. The purchase of Gillenwaters & Haynie, (partners in business,) was made whilst Haynie was agent, and in that right controlling the property. In his answer, Haynie states how the purchase was-made; he and Gillenwaters had sent-B. J. Fleming, as agent, to attend the sale, and buy in the property. It was, however, bid off to J. F. Arnold, who consented to substitute them to his bid, whereupon the sheriff made the deed to them. Arnold in his answer, gives substantially the same account, with the further fact, that Fleming was his competitor in bidding. It is also developed that Gillenwaters & Haynie owned other real estate in Corinth, in copartnership ; and that after the sale, Gillenwaters occupied the premises. Haynie, in-his testimony, says that he never repudiated his agency until after the sheriff’s sale. Gillenwaters must have been let into possession by Haynie; but the deed was made to them by their firm name. That fact alone, might suffice, but coupled'with the other surroundings, induces the conviction that Gillenwaters knew the relations of his partner, Haynie, to the complainants. It is in proof, that Haynie was taken into counsel by the complainants, as to the purchase, and advised them to make it. A court of equity exacts fidelity and loyalty from agents, and fiduciaries of every sort to their principals, and will strip them of all advantages obtained by a breach of trust .and confidence. It will clothe them with the character and — 167 — responsibilities of trustees, as respects dealings and purchases which involve a breach of good faith; and will turn over, upon just terms, the fruits of such transactions to the principal. We are of opinion, therefore, that Miller, Gardner & Co., may, if they choose, elect to treat this purchase as made for them; as the judgment under which Gillenwaters & Haynie bought, was a lien upon the equity of redemption, which was discharged by their purchase. The complainants upon refunding the $700.00, less the value of the rents of the .property, upon an account taken, should be intrusted with this title, or the complainants, if they prefer, should have a foreclosure' of the deed in trust, so as to be paid the debt thereby secured, if they prefer that mode of relief. We do not intend to advance the proposition that an agent may not become the Iona fide purchaser, of the property, at public judicial sale. But thére^aíe^s'uch, and so many badges of equivocation and bad faith connected with this purchase, that it ought not to/stand against the complainants. There was ho difficulty in the way of giving them notice. Although Haynie says he wrote to the complainants about it, Buckner, in his interview with him, after the sale, complaining of his delinquencies, taxed the failure of notice of the sale, as the greatest of his acts of unfaithfulness. We attach no importance to the indorsement of satisfaction on the record of the trust deed, inasmuch as it was made long after the Sheriff’s sale, and would not have misled bidders and purchasers, and could not prejudice Gillen-waters & Haynie, or influence them as bidders and purchasers. At the time of the sale, the incumbrance appeared to be open.and unsatisfied. Nor has the defendant, Arnold, sustained the imputation made upon the conveyance to the complainants by Adair & Isom, as a fraudulent • assignment, within the purview and intendment of the bankrupt law. The uniform construction put upon the law by the Federal •judiciary is, that the purchaser and assignee must participate in the fraud. The latter must know the pending insol — 168 — Vency of his debtor, arid must be aware that he is obtaining a preference over other creditors. The only testimony on the point is, that Miller, Gardner & Co. were acting in good faith, and were not aware that Adair & Isom were insolvent. The decree is reversed, and cause remanded for further proceedings, in accordance with this opinion.