Slaughter v. Bernards

MaRshall, J. There is no controversy but that, on the 12th day of February, 1840, Eamsay McHenry was the owner in fee simple of the lands described in the complaint, and on that day conveyed the same to George H. Slaughter and received back a mortgage thereon to secure $720. Was the title thereafter affected by the cancellation instrument ? That is the first question presented by this appeal. The trial court found in the negative. To that appellant excepted, contending that the legal title was in McHenry under the mortgage, that an equitable interest only remained in Slaughter, which could be surrendered by acts of the parties and operation of law, without any conveyance in writing, and that the cancellation instrument, the trust deed made on the faith of such instrument, and the mortgage back from the trustee establish a surrender by Slaughter to McHenry of the equitable title, an acceptance by the latter, and action relying on such surrender and acceptance, which operated to merge the equitable in the legal title by estoppel. Sec. 2302, E. S., was then sec. 6, p. 162, Terr. Stats, of 1839. It provides that “ no estate or interest in. lands, other than leases for a term not exceeding one year, , . . shall be . . . surrendered — 190 — or declared, unless by act or operation of law, or by deed or conveyance in writing,” etc., thus clearly recognizing the power to surrender a mere interest in lands, such as a lease for more than one year, or the equitable interest of a person under a land contract, without a conveyance in writing, by act or operation of law. O'Donnell v. Brand, 85 Wis. 97; Goldsmith v. Darling, 92 Wis. 363. In some jurisdictions the surrender and cancellation of an unrecorded deed, with intent to revest the title in the vendor, is given that effect by applying the doctrine of estoppel. Mussey v. Holt, 24 N. H. 248; Farrar v. Farrar, 4 N. H. 191. Rut the rule is the other way in this state. Parker v. Kane, 4 Wis. 1; Albright v. Albright, 70 Wis. 528; Rogers v. Rogers, 53 Wis. 36, which are in accord with the great weight of authority in this country and England. Walker v. Renfro, 26 Tex. 142; Bailey's Adm'r v. Campbell, 82 Ala. 342; Jeffers v. Philo, 35 Ohio St. 173; Killey v. Wilson, 33 Cal. 690; Somers v. Pumphrey, 24 Ind. 240; Potter v. Adams, 125 Mo. 118; Hyne v. Osborn, 62 Mich. 235; Roe v. Arclibishop of York, 6 East, 86. In Cranmer v. Porter, 41 Cal. 462, the law governing the subject is stated thus: “It is a familiar rule of law that the destruction or cancellation of a deed, after delivery, even though it be done with the consent of all the parties to it, and for the express purpose of restoring the title to the grantor, cannot work that result.” We apprehend it would not be contended that, if the legal title to the land were in Slaughter and a mere lien in Mc-Henry, the cancellation instrument, together with the circumstances above referred to, changed the legal title to the latter. So appellant starts out with the contention that the common-law rule then prevailed, and that such title was in McHenry under the mortgage. It follows from what has preceded that the question of whether in 1840 a real-estate mortgage carried with it the legal title or a mere lien is important. That there exists some — 191 — doubt on the subject as to what the law then was, at this late day, is not to be wondered at, inasmuch as the question, was not fully discussed in this court till Brinkman v. Jones, 44 Wis. 498; and though Mr. Justice Tayloe, in a very exhaustive opinion, then stated that the common-law rule was entirely changed, yet he reached the conclusion by reasoning from circumstances, without reference to any statutory change or any previous adjudication of this court one way or the other. So, though since that time the doctrine that the legal title does not pass with a mortgage, but remains in the mortgagor till the equity of redemption be foreclosed, has been deemed firmly established, the idea has yet prevailed, generally, that such was not always the law in this state and before the state government was organized, and just when the change took place has been left very much in obscurity. The change is not the result of a direct legislative enactment to that effect. It has come about by legislation in an indirect way and by a gradual development and application of equitable principles by the courts. The gradual change in the character of a mortgage, from the time when it carried the whole title at law and there was no interest left in the mortgagor that could be protected in equity except upon strict performance of the conditions of the mortgage, to the final establishment of the new doctrine, whereby the mortgagee takes a mere lien which can be converted into a legal title only by extinguishing the equity of redemption, is said by eminent text writers to be “ one of .the most striking' triumphs of equity over the rigors of the common law, that exists in our jurisprudence.” The change was recognized early in this state as evidenced by many judicial observations on the subject, falling short, however, of establishing the doctrine that the legal title remained in the mortgagor. In Byron v. May, 2 Pin. 443, Mr. Justice Hubbell said: “ Not only the original severity of the common law, treat — 192 — ing the mortgagor’s interest as resting upon the exact performance of a condition, and holding the forfeiture or the breach of a condition to be absolute, by nonpayment or tender at the day, is entirely relaxed; but the narrow and precarious character of the mortgagoi'’s rights at law is changed under the more enlarged and liberal jurisdiction of the courts of equity.” In Tallman v. Ely, 6 Wis. 244, Mr. Justice Cole said, in effect, that at common law it was well understood that a mortgage conveyed the legal title, and that after forfeiture of the mortgage and notice to quit,'it has been held that the mortgagee could maintain ejectment against the mortgagor and recover possession, and, continuing, said: “But our statute provides that the mortgagee shall not bring his action of ejectment before foreclosing the equity of redemption (sec. 53, ch. 106, R. S. 1849); or in other words, he must complete his title before he shall be permitted to recover at law upon the strength of it.” This language, without meeting the point directly, shows clearly that the court as then constituted recognized that the statute referred to had operated to change materially the character of the mortgagor’s title, yet it stops short of saying that it was changed from the legal title to.a mere lien to secure an indebtedness. In Wood v. Trask, 7 Wis. 566, Mr. Justice Cole, speaking for the court, met the question squarely in the following language: “Our statute [obviously referring to the same statute cited in Tallman v. Ely, supra] •has essentially changed the rule of the common law in relation to the position of the fee of the mortgaged premises after condition broken. The fee does not vest upon default of the mortgagor, in the mortgagee, or his assignee. The fee only vests upon sale on foreclosure.” Coming down to Croft v. Bunster, 9 Wis. 503, when only Justice Cole of the former bench remained, DixoN, C. J., discussing a subject that did not necessarily involve the question of the character of the mortgagee’s interest, and with — 193 — •out referring to former decisions of the court, said: “ Patten [the mortgagee] having the legal title to, and a valid lien •at law upon, the mortgaged premises, by virtue of the execution and delivery of the mortgage to him, could convey that title and lien by assignment of the mortgage to the plaintiff. His assignment to the plaintiff did so vest the title in him.”. The question which the court had before it was whether Bunster, who received a deed from Smith as security and with power to convey or mortgage, could thereafter mortgage the premises to Patten in his, Bunster’s, interest, and thereafter reconvey to Smith, and cause Patten, for value, to assign the mortgage to Croft, and thereby vest in the latter a valid claim upon the property for the mort.gage debt. Obviously, whether the legal title passed by ■the mortgage to Patten, or a mere lien, was immaterial to the question. It was not intended by the court to decide that question.' What was said on the subject was mere obiter 'dictum, hence lacks force as an adjudication of the question, and was clearly considered so at the time, else it would not have escaped the notice of Mr. Justice Cole, who had twice, with the concurrence of all the members of the court, expressed a different view. Tet, coming as it did from so •distinguished a source, and standing since without criticism •even by the opinion of Mr. Justice Tayloe in Brinkman v. Jones, 44 Wis. 498, it is not strange that the idea has generally prevailed that the change to the present doctrine was not finally judicially determined till the decision in that ■case, and that the date of the change was still left in obscurity, which was not relieved by what was said by Mr. Justice OetoN in Mason v. Beach, 55 Wis. 607, that “the common-law relation of mortgagor and mortgagee . . . has been so changed by our statute and practice that the fee no longer passes to the mortgagee, even upon condition broken,” referring to Wood v. Trask, supra, and apparently overlooking what was said in Croft v. Bunster, supra. Eor a long — 194 — period prior to Brinkman v. Jones, the language of Lord DeNMAN in Higginbotham v. Barton, 11 Adol. & El. 307 (1840), in regard to the state of thelaw then, in England, aptly applies: “It is very difficult to attempt to define tbe precise relation in which the mortgagor and mortgagee stand to each other in any other words than those very words.” . Going back and tracing the history of the change under consideration, it is quite clear that it was complete as early as 1839. Sec. 53, ch. 106, E. S. 1849, referred to by Mr. Justice Cole in Tallman v. Ely, 6 Wis. 244, as having worked a change, was not then new. It is identical with § 53, p. 257, Terr. Stats, of 1839, and reads as follows: “No action of ejectment shall hereafter be maintained by a mortgagee or his assigns or representatives, for the recovery of the possession of the mortgaged premises, until the equity of redemption shall have expired.” All the reasons which Mr. Justice Taylor referred to as having worked a change, and others that might have been stated, existed under the territorial statute. No conveyance was required after payment of the debt, and performance of the conditions, to divest the' mortgagee of his interest. The payment of. the debt per se extinguished the mortgage claim upon the land, and a mere entry of the fact of payment, duly witnessed and acknowledged on the record, barred the entry of the mortgage. Terr. Stats, of 1839, p. 181, § 20. The interest of the mortgagee could not be levied upon for his debts. In case of his death it passed to his personal representatives as personal property. Terr. Stats, of 1839, p. 314, § 19. Upon payment of the mortgage, the executor or administrator could discharge the mortgage by an entry of record.- Terr. Stats, of 1839, p. 315, § 21. Provision for extinguishing the equity of redemption by foreclosure and sale, both by advertisement and in chancery, existed then as now. The mortgage lien was a mere incident of the debt, and passed with a transfer of the debt without any transfer of the mortgage in writing. The in — 195 — terest of the mortgagor was subject to levy and sale and passed to his heirs upon his death. It had all the elements of a title in fee, while the interest of the mortgagee had none of them. Our whole system was the same substantially as in New York, and was largely adopted from that state, where the law was well settled long prior to such adoption, that the legal title remained in the mortgagor till extinguished by foreclosure. In Runyan v. Mersereau, 11 Johns. 534, decided in 1814, it was held that a mortgage at law as well as in equity was merely a security, and the mortgagee had but a chattel interest; that the legal title and the freehold were in the mortgagor. In Wilson v. Troup, 2 Cow. 195, Mr. Justice SütheRlaud said: “ A mortgage is a chattel interest. The freehold remains in the mortgagor.” To the same effect is Astor v. Hoyt, 5 Wend. 603, where, in the opinion by Say-age, C. J., Lord Mansfield’s language in a dissenting opinion in King v. St. Michael’s, 2 Doug. 632, as follows: “ It is an affront to common sense to say the mortgagor is not the real owner,” was approved, and it was held, notwithstanding the rule of the English courts to the contrary, that in New York the mortgagor was the owner as against all the world, subject only to the lien of the mortgage. In an earlier case Lord Mansfield, the members of the court concurring (Eaton v. Jaques, 2 Doug. 455), held in accordance with his opinion above mentioned; and in Astor v. Hoyt, supra, the doctrine of the early case was said to be the established doctrine in New York. To the same effect arq Walton v. Cronly's Adm'r, 14 Wend. 63; Edwards v. Farmers' F. Ins. & L. Co. 21 Wend. 467. Many other authorities might be cited, but enough has been said to settle beyond reasonable controversy that under the territorial statutes of 1839 a real-estate mortgage, till after the extinguishment of the equity of redemption in the manner provided by law, vested in the mortgagee a mere lien, and that a taking pos — 196 — session, even of the mortgaged premises did not operate to vest the legal title to the land mortgaged, in the mortgagee. What has preceded effectual^ removes from this case the principal ground upon which it is contended that by the acts of the parties the title to the lands in question was vested in McHenry at the time he made the trust deed. If appellant’s contention in that regard rested wholly upon the record of the cancellation instrument, we should say that, standing alone, it does not affect the respondent. The record shows that the instrument was not properly witnessed, hence not properly of 'record, and not constructive notice to any person subsequently dealing with the title. But we have treated the matter, as did the trial court, as if there were circumstances established by the evidence sufficient to charge those under whom respondent claims with notice of the attempted cancellation. The next question in order pertains to the trust deed. The trial court found that it was properly executed, but gave it a construction favorable to respondent. Appellant excepted to such construction, and respondent attacks the conclusion of the trial court that the existence of the trust deed was properly established. We are not bound on this appeal by the findings and conclusions unfavorable to respondent, but may properly review the whole case and affirm the judgment though errors be found, if, notwithstanding, the judgment be right on the pleadings and the evidence. So, assuming that the power of attorney was properly executed, and the trust deed as well, under such power, we will take up the subject of the effect of the trust deed where the trial court left it. The learned circuit judge found that by the trust deed the legal title to the premises in question was conveyed to G-abriel T. Long, in trust for Mildred Ann Slaughter, and subject to her control during coverture with George H. Slaughter; that it vested in Mildred Ann Slaughter the right to exercise such power of disposal through Gabriel T. — 197 — Long, the trustee, and that the execution of the three mortgages by the trustee, Mildred Ann Slaughter and George H. Slaughter uniting with him, constituted a valid conveyance of the whole title in fee, which ripened into an absolute title in fee in Calvin G. Williams by the sheriff’s deeds on foreclosure. It follows necessarily, from what has been decided in regard to the state of the title at the time of the execution of the trust deed, that McHenry had a mortgage lien only, hence did not convey any greater interest to Long. In the light of the foregoing the construction of the trust deed is not difficult. The conclusion we have reached in that regard renders it unnecessary to consider many questions that were argued in the briefs of counsel with much learning and supported by the results of commendable research. The property covered by the trust deed was, mainly, mere personalty. The principal thing was a debt due from George H. Slaughter. Incident to such debt was a lien on the realty in question. The lien had no existence independent of the thing it secured. The property was vested in the trustee for the sole benefit of Mildred Ann Slaughter during coverture with George H. Slaughter, and subject to her control and disposal. Such control and disposal obviously were in aid of the beneficial use and enjoyment. The latter could not be realized to the extent clearly intended, considering the nature of the property, without using up the property itself, and the extinguishment of the lien would result as a necessary consequence. How it is a familiar rule that in such cases the necessary result must be presumed to have been the intent of the parties to the instrument creating the trust, and their language is to be construed accordingly; and if there be language creating a trust over to another after the expiration of the first use, which cannot be construed so as to harmonize therewith, such words of limitation of the first use, to the extent of the necessary conflict, — 198 — must fail. The rule was recognized by Danfoeth, J., in Campbell v. Beaumont, 91 N. Y. 464, by way of reference to several decisions which turned on its application, thus: u In all these cases it was, in effect, held that when property is expressly or by necessary implication to be spent by the primary legatee at his pleasure, a further limitation is clearly hostile to the nature of the gift.” The application made was that as to such use such limitation was void. It follows from the foregoing that Mildred Ann Slaughter had the absolute right to finally dispose of all of the trust property in any way she saw fit. She also had power to charge such property with her own or her husband’s debts, so that a court of equity would enforce her contracts in that regard. The execution of the mortgages by her and the trustee, presumably by her direction, shows unmistakably an intention to charge the property described in the mortgages with the payment of the debts mentioned in such mortgages. Heath v. Van Cott, 9 Wis. 516. She and the trustee were made parties to the foreclosure proceedings, and all questions in regard to the property interests actually covered by the mortgages, so far as they had power to incumber the same at least, were forever foreclosed by the judgment. ¥e have now proceeded further with this discussion than the case really required, because, inasmuch as the so-called trust deed only vested a mere lien upon the premises in the trustee, if it were true that the lien still exists and is owned by plaintiff, that constitutes no foundation whatever for this action of ejectment. By the Court. — The judgment of the circuit court is affirmed.