Carpenter v. Bowen , 42 Miss. 28 ( 1868 )

Peyton, L,

delivered the opinion of the court.

This was a bill filed in the Chancery Court of Adams county, by the appellees, to enjoin a sale of certain real estate in the city of Natchez, in said county-, under an execution at law, emanating from a judgment of the Circuit Court of said county, in favor of the appellant against the appellees, William II. Forbes, and Isaac Lum.

The bill alleges that said Forbes and wife, on the -15th day of February, 1858, executed a mortgage to one of the appellees, Thomas Bowen, to secure the payment at maturity of three promissory notes, made by said Forbes in favor of said Bowen, of that date, and payable in one, two and three years from date, and for the sums respectively of $1,167", $1,273", and $l,37910ir. That said mortgage deed was duly recorded; that the first two notes have been paid, and a small part of the third; and that said Bowen, on the 26th day of January, 1867, filed his bill in chancery to foreclose the said mortgage.

That afterwards, on the 3d day of April, 1861, said Forbes and wife executed a deed of trust of the real estate', mortgaged to said Bowen, as aforesaid, to Josephus I-Iewett as trustee to secure, protect, and indemnify the said Bum against eventual loss for and on account of his then existing liabilities as joint-drawer for the accommodation of, and as surety for, said Forbes, on certain promissory notes therein specified, to wit: one dated February the 3d, 1860, for $5,000, payable twelve months after date, to the order of and indorsed by said Forbes, and held by said complainant, Davis; one dated February the 4th, 1860, for $8,000, payable twelve months from date to Ira Carpenter or order, and another to W. A. Britton & Co., for $8,500, dated April 9th, 1860; and also on account of any further liabilities which might be incurred by said Bum for said Forbes in the renewal of said notes, and in the further business of the latter. The deed of trust provides that if said Forbes should pay said promissory notes and all interest thereon, and any and all renewals thereof, and also any other and additional liabilities or seeurityship to which said Bum might or should subject himself, or become liable for the further accommodation of said Forbes, during the continuance of said trust, then the said deed and trust were to be mill, and to determine; but in the event that said 'notes and liabilities, or any of them, should remain due and unpaid beyond the maturity thereof, the trustee, upon the request of Bum, shall, after giving notice thereof, sell said real estate; and the proceeds of sale, after payment of the expenses and a proper compensation for the performance of said trust, he shall apply to the payment and discharge of the indebtedness mentioned and provided for in said deed; and the surplus, if any, of money or property, to deliver over to said Forbes or his assigns; which deed was drily acknowledged and recorded.

That the said Ira Carpenter having departed this life, on the 28th day of February; 1866, Sarah E. Carpenter, the executrix of his last will and testament, filed her bill of complaint in the .Chancery Court of the said county of Adams, against the said Forbes, Lum, and ITewett, to foreclose the said deed of trust, and for sale of said real estate ; and also at the same time instituted her action at law, in the Circuit Court of said county, against the said Forbes and Lum, to recover'judgment on a note and draft, dated May 21st, 1862, and Februaiy the 1st, 1862, respectively, alleged to be covered by said deed of trust; one of them a renewal, and the other a further and additional liability of said Lum for.said Forbes, in the business of the latter as provided for in said deed; and that on the 10th day of October, 1866, the said Sarah E. Carpenter recovered judgment against the said Forbes and Lum for the sum of $19,821-,^. That said bill of complaint was amended by making said Davis and others defendants, and that the same is now pending and undecided.

And that said executrix has caused execution to issue upon said judgment at law, notwithstanding the said mortgage and deed of trust, and her said suit upon the latter, and has had the same levied by the sheriff upon said real estate, in said mortgage and deed of trust contained; and that the sheriff is about to advertise and sell said property under said judgment and execution for the payment thereof, and will do so unless restrained and enjoined therefrom.

Sarah' E. Carpenter, in her answer, admits the existence of the mortgage and deed of trust as set forth in the bill of complaint; and that she might, if so disposed, claim the benefit of the trust estate by being.subrogated to the rights of Lumbut denies that said deed of trust was made to secure the' payment of any of the debts of said Forbes named in said deed, and avers that the whole object of said deed was to secure the said Lum on account of his liabilities for the accommodation of said Forbes.

She admits that she filed her bill in equity against the said Forbes, Lum, and ITewett as stated, and at the same time cornmenced her suit at law against the said Forbes and Lum, and that she recovered a judgment against them as stated in the bill, and that execution issued thereon, which the sheriff levied on the real estate mentioned in said deeds, and would have advertised and sold the same under said execution, had he not been enjoined from so doing; insists that neither said mortgage nor deed of trust can be interposed to prevent the sale of said property under execution at law. To satisfy the said judgment ; admits that said Bowen has filed a bill in equity to foreclose his mortgage since the date of her said judgment, and insists that by her judgment she has obtained a priority of lien upon the property of Forbes and Lum, and that she cannot bo precluded from pursuing her legal remedy on account of the breach of the conditions of said mortgage; that the conditions of the deed of trust have not been broken,-.and that said Forbes is in the possession of the said real estate, receiving the rents, issues, and profits thereof.

At the April term of said court, the appellant moved to dissolve the injunction in this case upon the bill, answer, and exhibits; which motion was overruled by the court; and the cause comes here by appeal from that order.

The record presents for our. consideration three important questions: 1, Whether the equity of redemption in property mortgaged or conveyed by deed of trust as security can be sold under execution at law? 2, If so, is it subject to sale under execution for the debt secured by the mortgage or deed of trust? and, 3, Is the debt of the appellant secured by the deed of trust?

At common law, an equity of redemption was not subject to levy and sale under execution at law. It could be reached only in a court of equity. But, under our former statute of 1822, which provides that “ estates of every kind, holden or possessed in trust, shall be subject to like debts and charges of the persons to whose use or to whose benefit they were or shall be respectively holden or possessed, as they would have been subject to if those persons had owned the like interest in tbe things holden or possessed as they own, or shall own, in the uses or trusts thereof,” it has been decided by this court, that the interest of a vendee of land, who holds a bond for title when the purchase-money is paid, may be sold under execution at law, after payment of the purchase-money. Thompson v. Wheatley, 5 S. &. M. 499. In case only part of the purchase-money has .been paid, the interest of the vendee is not subject to sale under execution at law. Goodwin v. Anderson, ib. 730. But, even in the case of a sale of such interest under execution, after full payment of the purchase-money, the purchaser must go into equity to divest the legal title. lie bought but an equity, which a court of chancery alone could enforce. The principle of these cases extends to mortgages and deeds of trust, to the sale of an equity of redemption, and to the interest of a grantor in a deed of trust. They are all of kindred character. "When the debt is fully paid, the mortgagee or trustee holds but a naked legal title for the debtor, who has the whole beneficial interest, which is subject to sale under execution at law. But, until full payment, the debtor has no interest which can be sold under legal process. Wolfe v. Dowell, 13 S & M. 108.

Uses and trusts were not subject to executions at common law. The statute of 1 Bichard III. c. 1, was the first legislative enactment winch subjected uses to an execution upon a judgment. This statute became obsolete after the Statute of Uses (27 Hen. Till. c. 10) united the possession and the use. But the subsequent revival of uses, under the name of trusts, called for a further interposition of the legislature, and a clause was introduced in the Statute of Frauds (29 Car. 2, c. 3, § 10), which subjected trusts to execution at law. 2 Powell on Mortgages, 602, 003. The last-named statute applies'to trusts of freehold lands only; our statute is more comprehensive, embracing within its scope trusts of both real and personal property. The English statute has been construed to authorize a sale of the trust estate only in cases in which the trust has been fully satisfied. In the case of Forth v. Dulte of Norfolk, 4, Madd. Rep. 504, the vice-chancellor says, “ A judgment creditor has at law, by the Statute of Frauds, execution against the .equitable freehold estate of the debtor in the hands of his trustee, provided the debtor has the whole beneficial interest / but, if he has left a partial interest only, the judgment creditor has no execution at law, though he may come into a court of equity, and claim there the same satisfaction out of the equitable interest as. he would be entitled to at law if it were legal. This seems to have furnished the rule adopted by this court, in the construction' of the act of '1822, without any distinction between trusts of real and personal estate.

We come next to consider whether the statute of 1857 has made such a change in the law in this respect as to require a different construction, with regard to the' sale of trust estates, than' that which we have seen has been given to the former statute-. It provides that “ estates of any kind, kolden or possessed in trust for another, shall be subject to the like debts and charges of the person to whose use, or for whose benefit, they are kolden or possessed, as they would have been subject to if the person had owned the like interest in the thing holden or possessed as he may own in the uses or trusts thereof, whether the trusts be fully executed or not, and may be sold under execution at law, so as to'pass whatever interest the cestui-que trust may have; and, before a sale under a mortgage or deed of trust, the mortgagor shall be deemed the ' owner of the legal title of the property conveyed in such -mortgage or deed of trust, except as against the mortgagee and his assigns, or the trustee, after breach of the condition of such mortgagee or deed of trust.” Rev. Code, 308, art: 12.

In this ■ statute, the legislature has incorporated the equity doctrine that a mortgage is a mere security’for the debt, and that, until a' sale under it, the mortgagor continues the real owner of the property. The equity of redemption is considered to be the real and beneficial 'estate, tantamount to the fee at law, and it is accordingly held to be descendible by inheritance, devisable by will, and alienable by deed. As between the mortgagor and mortgagee, the fee of the estate passes to the mortgagee at the execution of the deed. This is necessary to enable him to guard and protect his security. But, as between the mortgagor and oilier persons, he is' considered as having the legal estate in himself, and the power of conveying it to a third person, subject to the incumbrance of the mortgage. 2 Greenleaf’s Bep. 132; 1 Washburn on Beal Estate, 589, § 6. In a court of chancery, the mortgagor is viewed as being seized of the freehold, and the mortgagee as having a lien upon the land by way of pledge only. In equity, the -mortgagee is only a trustee, and the mortgage only a security. This doctrine, both ancient and uniform, is founded in a correct view of the true nature and character of the contract of the parties, in its substance and intent.

It has been said by a distinguished jurist (Lord Bedesdale), that the distinction between strict law and equity is never, in any country, a permanent distinction. Law and equity are in perpetual progression, and the former is constantly gaining ground upon the latter. A great part of what is now strict law was formerly considered as equity; and the equitable decisions of this age will unavoidably be ranked under the strict law of the next.

This equitable doctrine, concerning the rights of mortgagor and mortgagee, has gradually been naturalized in the common law code, and, by the adoption of principles long established in chancery, it lias become well settled, in courts of common law, that the mortgagee, until foreclosure, has only a chattel interest ; that a mortgage is but a charge upon the land, and that whatever would give the money will carry the estate in the land along with it, to every purpose. The estate in the land is the same thing as the money due upon it. It will be liable to debts; it will go to executors; the assignment of the debt will draw the land after it. From these properties of the mortgagee’s estate, it appears, in the strongest manner, that it is not in the land, but in the security only. The debt is considered as the principal, and the mortgage as an incident only. Green v. Hart, 1 Johns. 580. In Jackson v. Willard, 4 Johns. 41, 42, Chief-Justice Kent says, “ The real nature of a mortgage, in the equity sense of it, has been repeatedly recognized in the courts of law; and it has been said and repeated, that it was an affront to common-sense to say that a mortgagor in possession was the real owner; that the mortgagee, notwithstanding the form, has but a chattel, and the mortgage is only a security.” It is not considered as a conveyance of land within the Statute of Frauds. Runyan v. Mersereau, 11 Johns. 534. Until foreclosure, whether the mortgagee has possession or not, the estate mortgaged is a pledge only; the relation of debtor and creditor exists, and the eqtiity of redemption is unimpaired. Although the mortgagee has a chattel interest only, yet, in order to render his pledge - available, and give him the intended benefit of his security, it is considered as real property, to enable Mm to maintain ejectment for the recovery of the possession of the land mortgaged: It is only considered as real estate for the purpose of enabling the mortgagee to get it into possession. When contemplated in every other point of view, it is personal property. This is .the conclusion to be drawn from a review of the English and American authorities.

It has been said by a distinguished American jurist, that, “not only the original severity of the common law, treating the mortgagor’s interest as resting upon the exact performance of a condition, and holding the forfeiture or breach of a condition to be absolute, by non-payment or tender at the day, is entirely relaxed; but the narrow and precarious character of the mortgagor at law is changed, under the more enlarged and liberal jurisdiction of the courts of equity.' Their influence has reached the courts of law; and the case of mortgages is one of the most splendid instances in the history of our jurisprudence, of the triumph of equitable principles over technical rules, and of the homage which those principles have received by their adoption in the courts of law. 4 Kent, 158. This .doctrine in relation to mortgages applies with equal force and propriety to deeds of trust, which arc but a species of mortgage with a power of sale in the trustees. Wolfe v. Dowell, 13 S. & M. 108.

From the examination and investigation -which we have made, it appears that in many of the States of the Union, independently- of statutory regulations, the rule has prevailed, that an equity of redemption was vendible on an execution at law. Such sales may operate injuriously upon the interests of debtors, in cases in which property is permitted to be sold under execution at law, before the debt is paid or the trust is fully satisfied. The purchaser, not knowing the extent of the incumbrances, which in many cases cannot possibly be ascertained until, an account is taken, would scarcely ever venture to give the value of the equity of redemption; and the result would be, in complicated cases, a sacrifice of the debtor’s interest. There is no necessity to'subject estates holden in trust, which has not been fully executed and satisfied, to execution at law. If the debtor should be dishonest enough to make conveyances of any kind for the purpose of hindering, delaying, or defrauding his creditors in the collection of their debts, certainly a court of chancery would be the most appropriate tribunal to remove the clouds, expose the fraud, set aside such conveyances, and subject the property to the payment of his debts. And in case the transaction has been fair and honest, it is generally best to resort in the first instance to that court in which an account can be taken of the amount of the incumbrances, the equity of redemption foreclosed and the property subjected to the payment of the debts. Even in cases in which the equity of redemption is sold under execution at law, the purchaser is frequently compelled to go into a court of equity to redeem, before he can enjoy the fruits of his purchase.

The legislature of 1857 must be presumed to have known the construction which had been given to the statute of 1822 in relation to the sale of trust estates, by which they were subjected to sell under execution at law, when the trust was fully executed. With this knowledge, they so changed the law as to provide that “ estates of any land holden or possessed for another shall be subject to the debts and charges of the cestui-gue trust, whether the trust be fully executed or not, and may be sold under execution at law so as to pass whatever interest the cestui-gue trust may have.” This was certainly a very material and important change in the law upon this subject, and the language is so clear and explicit as to leave but little room for construction. Courts have nothing to do with the propriety or expediency of a statute: the intention of the legislature must always control in the construction of a statute. And the court must j udgo of that intent from the language they have used to express it; and where the language is clear and explicit, and susceptible of but one meaning, and there is nothing incongruous in the act, the court is bound to suppose the legislature intended what their language imports. Courts may give a sensible and reasonable interpretation to legislative expressions which are obscure, but they have no right to distort those which are clear and intelligible. The ordinary rule is, that the intention can only be determined by the fair and natural import of the terms used,- and in view of the subject-matter of the law. Guided by this rule, we have arrived at the conclusion that the law authorizes a sale under execution at law of the equity of redemption of a mortgagor, or grantor in a deed of trust, whether the debt be wholly paid or not, or the trust fully executed or not, at any time either before or after the breach of the condition of the mortgage or deed of trust and before a sale under the same.

The former statute subjected the interest of the cestuir-que trust, in the trust estate, to sale under execution at law, only in cases in which the trusts had been fully executed. The present code is intended to supply what was, no doubt, supposed to be a defect in the law, by subjecting the interest of the cestui-que trust in the trust estate to execution at law, as well in cases in which the trusts had not ■ been fully executed, as in those in which they had been; and to provide that the partial as well as the entire beneficial interest of the cestui-que trust may be sold under execution at law.

This brings us to the consideration of the second question presented by this record. Is the equity of redemption in property mortgaged, or conveyed by deed of trust, subject to sale under executional law for the debt secured by the mortgage or deed of trust ?

The equity of redemption is the excess of the value of the property conveyed over and above the debt secured by the mortgage or deed of trust, and the purchaser thereof stands i,n the shoes of the debtor, and takes the property, subject to the incumbrance, which he must pay off and discharge, in order to perfect his title to the same. The debtor is entitled to the benefit of the proceeds of the sale of his equity of redemption. But when it is sold under an execution for the debt secured by the mortgage or deed of trust, the proceeds of the sale, according to the very terms of the execution, must be paid to the plaintiff in the execution or brought into court for his use; and this would necessarily extinguish, to that extent, the incumbrance subject to the whole of which the purchaser bought the equity of redemption. The very sale implies that the equity is worth something, and yet under such sale the debtor would get nothing; his equitable interest wotdd be thereby 'sacrificed, and the purchaser would have a credit on the incumbrance to which he would not be legally entitled. This surely could not have been in the contemplation of the legislature. It is very clear to the court that the situation of the creditor, whose debt is secured by mortgage or deed of trust, is not within the mischief intended to be remedied. The object of the statute is not to foreclose mortgages or deeds of trust, and make them more effectual as securities to such creditors, but to subject the equitable interest of the mortgagor or grantor to the satisfaction of those of his creditors who had not a specific lien on the property. The authorizing a sale of the equity of redemption implies that the thing pledged is worth more than the debt; and the act of making such pledge, and thereby withdrawing the thing from execution, is regarded, in a degree, as a species of fraud on' the general creditors, whose executions are thereby hindered. Bor such creditors the provision must have been made. To allow a sale of the equity of redemption upon legal process, emanating from a judgment for the debt secured by mortgage or deed of trust, would be in contravention of the contract of the parties, as understood in a court of equity, by which the debtor had a right to redeem. And the court will not allow him to be deprived of that right in this summary way. The statute did not mean to interfere with the stipulations of the parties, as they might affect them, either at law or in equity. -It was a designed to prevent a mischief to other persons, who were strangers to those stipulations. If the creditor is not satisfied with his security, he may resort to other property of his debtor; but against the estate on which he has taken a security, he ought not to act, but upon the footing of that security, and according to its terms, in their established sense. He needs no other aid to come at his debt, and in all reasonable propriety should be left to the remedy provided by the terms of his own contract with his debtor.

"We think it was the intention of the legislature to iimit the statute to general creditors, or to all those judgments and executions other than for the debt secured by the mortgage or other incumbrance. And this view we find sustained by adjudications in other States, upon similar statutes, in which it has been decided that an equity of redemption is not subject to sale under an execution at law for a debt secured by mortgage or deed of trust. Goring v. Shreve, 7 Dana, 64; Waller v. Tate, 4 B. Monroe, 529; Camp v. Coxe, 1 Dev. & Battle’s Law, 52; Dean v. Parker, 2 Iredell’s Equity, 40; Tice v. Annin, 2 Johns. Ch. Pep. 130; Atkins v. Sawyer, 1 Pick. 351; Washburn v. Goodwin, 17 Pick. 137; and Thornton v. Pigg, 24 Missouri, 249.

We have now arrived at the third and last question presented by the facts of this case,' — • Is the debt of the appellant secured by the deed of trust ? - We think it was. Although Ira Carpenter may have had no knowledge of this deed at the time it was executed, yet as its provisions were for his benefit, his assent to it will be presumed. The conveyance was intended not only to indemnify Lum against his liabilities as surety for Eorbes,but manifestly to secure the payment of the debts therein specified. It was to be void on' the condition that the' notes and liabilities therein mentioned were paid at maturity, otherwise not. What were formerly conditions are now regarded as trusts. Carpenter had a trust in, or equitable lien upon, the property on the execution of the deed, which Lum and Hewett, the trustee, had not any power or right to discharge or defeat, unless to a boriá-fida purchaser for valuable consideration without notice, Hewett will be regarded as trustee, for the benefit of the creditors named in the deed of trust. The deed was to become void, not upon indemnifying Lum, but if the debts shall be paid at maturity. He had a right, by the very terms of the deed, to have the property sold at any time after the maturity of the debts or any of them, to pay the same, before he is damnified; and the proceeds of the sale, after paying the expenses of executing the trust, are expressly required to be’ applied to the payment of the debts' and liabilities specified in the deed, and the surplus, if any, is to be handed over to Forbes, or his assigns. Lum, it is conceded, is the surety for Forbes in the debt, which has been reduced to a judgment in favor of appellant, and as such surety he has taken the deed of trust as counter-security. And in all such cases it is well settled, that if a surety has a counter-security from the principal debtor, it shall inure to the benefit of the creditor, who may in equity reach such security to satisfy his debt. This doctrine was recognized and enforced in the case of Ross v. Wilson, 7 S. & M. 753, 766, and is laid down as well established in all the elementary books to which we have had access, that treat upon the subject of principal and surety. 1 Story’s Equity, 515, § 502; Pitman on Principal and Surety, 88; Theobald onP. & S. 254; Burge on Suretyship, 324. It is upon this principle that it has been decided, that property mortgaged to a surety,'bound for a particular debt, cannot be sold under an execution to satisfy that debt. Bronston v. Robinson, 4 B. Monroe, 142.

The appellant, by prosecuting her suit in the chancery court, which appears to be now pending, will be enabled to reach the security given to Lum, and subject the property therein specified to those debts of Forbes that are mentioned and provided for in the mortgage and deed of trust. That is the most appropriate tribunal for the fair and equitable adjustment of matters of this character.

Upon the whole, we conclude that the law does not authorize the sale of the property specified in the deed of trust under an execution, emanating from the judgment in favor of the appellant against tbe appellees, William H. Forbes and Isaac Lum.

The decree must, therefore, be affirmed.