Littlewort v. Davis

Simrall, J., delivered the opinion of the court. This is a suit in equity to enforce an absolute deed conveying land, as a mortgage to secure a debt for money borrowed by Jane F. Davis from the trustees of the schools for the township. The bill, with distinctness, avers the loan of the money, the execution of the bond for its repayment, and the execution of the deed purporting to convey the quarter section of the land therein described to the president of the trustees, absolutely. But the intention was that the conveyance should operate as a mortgage security for the debt. It is well settled, that an absolute deed will be held to be valid and effectual as a mortgage, if it clearly appear that it was designed as a security for money, and such may be shown to be the intention and effect of the deed, by a contemporaneous or subsequent writing, or by agreement resting in parol. Prewett v. Dobbs, 13 S. & M., 440; Anding v. Davis, 38 Miss. Rep., 594; Vasser v. Vasser, 23 Miss. Rep., 378. But the objection most strenuously urged to the relief sought is, that the trustees were only authorized by the statute to loan on promissory notes, with good personal sureties; and since they have transcended their power, the mortgage is inoperative. Hut. Code, 214. A loan of the school fund upon mortgage, or other security than that named in the statute, would have been a misapplication of the fund, for which the trustees would have been person [408] ally liable. Lindsay v. Marshall, 12 S. & M., 590. Whilst- this is so, it does not necessarily follow that the borrower can set up, as ground to defeat the security, that the statute did not allow a loan upon any other than personal security. These township school trustees were a quasi corporation, charged with the duty of managing the funds, and keeping up schools, with the interest arising upon loans. There was a loan irregularly made. The power to loan is conferred; the mode is regulated. If a corporation make a contract altogether outside of the purposes of its creation, it is void, because it has not power over the subject in reference to which it acted. But if it contracts witb reference to a subject within its powers, but in so doing exceeds them, the person with whom it deals cannot set up such violation of its franchises to avoid the contract. Haynes v. Covington, 13 S. & M., 411, and cases there cited. It might be ground for the resumption of its franchises by the state. The adjudged cases support this view of the law. The charter of the Bank of South Carolina directed that loans upon long time should be secured by mortgage. But a bond with sureties for such a loan was held to be binding. Bank of S. C. v. Hammond, 1 Rich., 281. The charter of a savings institution required that its funds should be vested in or loaned on public stocks or private mortgages, and when so loaned, a sufficient bond or other personal security should be taken from the borrower, it was held, that a promissory note without other security was not for that, reason invalid. Mott v. U. S. Trust Co., 19 Barb., 568; U. S. Trust Co. v. Brady, 20 Barb., 119. So also when the charter prescribes what species of security shall be taken by a corporation of its officers or agents, for faithful performance of duty, a different sort of security from that prescribed may be enforced against the person who gave it. Bank of Northern Liberties v. Cresson, 12 S. & R., 306. We think therefore, that the defendant cannot set up the irregularity of the loan and security, to defeat the relief sought by the [409] bill. The policy of the statute directing the sort of security to be taken was, to preserve the fund for the charitable use to which it was devoted. If the trustees, from ignorance or design, lean upon different security, and such see.urity should be held void, it would defeat the object of the legislature, which was to protect the interest of the beneficiaries, In that class of cases where the contract has been declared void, the law has by words, or plain intendment, prohibited it or affixed that consequence to it. Nothing of that sort is in this statute. This suit should be regarded with the same leniency as if the beneficiaries were complainants, seeking to recover their funds invested on mortgage. Vernon v. Board Police, 47 Miss., 188. But the statute does not make void or illegal a mortgage or other security, for a loan of the school funds. If the Joan had been made without any sort of security, would the borrower plead that he had failed to give personal security \ or if, in addition to the personal security, he had made a mortgage as cumulative indemnity, could he resist a foreclosure because the statute did not expressly authorize? On this point it was said by the court, in The Bank, etc. v. Cresson, 12 S. & R., 814, that when the statute gives a particular form, and makes it the duty of the officers to take a bond in that form, and a different security is given, if there is no provision in the statute declaring it to be void, it is a valid obligation at the common law. But it is also insisted that by a comparison of the note or bond of Jane F. Davis with the deed, which are made exhibits to the bill, a proper inference would be that Jane P. Davis was to buy back the land, and the only remedy of the complainant, if he had any at all, would be by an offer to convey, and demand of Jane P. Davis of the money, and then file a bill on that state of facts. It is further urged, that that sort of relief could not be granted in this suit. The demurrer admits all the allegations of fact well stated in the bill, and we cannot go outside of the bill to borrow aid from exhibits. The bill, if true, entitles the complainant to relief. [410] The averment is, that defendant, PridcLy, accepted the conveyance from Jane F. Davis, with knowledge of the prior unrecorded mortgage. If that be so, he occupies no better position than his vendor. It was errror to sustain the demurrer and dismiss the bill. Decree reversed, demurrer overruled, and cause remanded, with leave to defendants to answer in fifty days from this date.