Hubbard v. Jarrell

Weisel, J.,

delivered the opinion of this Court:

The appeal in this case is from an order, final in its nature, passed ’by the Circuit Court for Caroline county, as a Court of Equity, ratifying a sale made by the appellees, as mortgagees, under a power of sale in a mortgage executed to them by the appellants, and recorded on the 28th day of November 1859. Two mortgages were executed by tlie appellants to the appellees, on the same day for the same real estate, each to secure the sum of $3,499.49, with interest from date, the one payable on the ITth day of May 1860, the other on the 17th day of May 1861, and each providing “that if default be made in the payment of the money or the interest thereon, at the time and manner therein, then it should be lawful for the mortgagees or their assigns to sell the mortgaged premises, at the town of Denton, in Caroline county, State of Maryland, by public auction, for cash, after giving at least three weeks’ public notice of the time, place, manner and terms of sale, in one or more' newspapers published in Caroline county, at least once a week for three successive weeks, prior to the day of sale, to pay the debt and cost of sale, and other expenses.”

The construction and effect of such a provision in a mortgage, are given or contained in the Act of 1856, ch. 154, sec. 110.

The Code of General Laws, Art. 64, sections 5 and following, prescribes the manner of proceeding by mortgagees in making sale of mortgaged premises, under a clause au-thorising the same in the mortgage. Among other provisions, such sale is to bo reported under oath to the Court-having chancery jurisdiction where the sale is made, and there shall be the same proceedings on such report as if the same were made by a trustee under a decree of said Court,, and the Court shall have the same power to hear and determine any objections which may be filed against said sale by any person interested in the property, and may confirm or set aside said sale. (Sec. 8.)

In this case, the mortgagors having failed to pay the-debt due 17th of May 1860, the mortgagees caused a notice of sale, signed by Thomas H. Kemp, as their agent, to be-inserted in the Denton Journal for three weeks, commencing on the 17th day of November 1860, advertising all the “mortgaged premises, 533 acres, more or less, to be sold on the Court House square, In the town of Denton, Caroline-county, on Tuesday, the 11th day of December then next; terms, one-third part of the purchase money to he paid in cash on the day of sale, and the residue in equal instal-ments at six and twelve months from the day of sale, the purchaser to give notes with security, hearing interest from the da’y of saleadding, “ that should these terms not suit, a more liberal arrangement may probably be made,”

The mortgagees reported to the Equity Side of the Circuit Court for Caroline county, on the 26th day of January 1861, that after giving bond with security, as required by Art. 64, sec. 6, of the Code, and also notice of the time, place, &c., they sold, on the 11th day of December 1860, all the mortgaged premises, and that they, being the highest bidders, became the purchasers thereof, by virtue of the 12th section of said Article of the Code, for the sum of $2,000, all of which was fully paid.

The report is set out in full in the record, was sworn to, and with it were filed the said two mortgages; also the bond of the mortgagees, dated the 80th November 1860, but not approved or filed until the 11th day of December 1860, the day of the sale; also a copy of the advertisement of sale, with tire printer’s certificate of publication; and upon these the Court passed a nisi order of ratification, assigning a day for finally ratifying said sale, and providing for its publication. To the ratification of the sale the mortgagors (appellants) filed objections, which the Court below overruled.

No exception was taken in the Court below to the jurisdiction of the Court to entertain these proceedings, and the learned Judge of the Circuit Court regarded this omission, and the filing of other objections to the report, as a waiver of the objection to the jurisdiction. Nevertheless, as the objection had been taken in the argument, he considered and determined the question in favor of the Court’s jurisdiction, under the 64th Article of the Code of Public General Laws, although adopted after the execution of the mortgage. And on this appeal, in the notes of the counsel for the appellants, it is relied on, and it is contended, that the objection does appear in the record, inasmuch as it is noticed and disposed of in the opinion of the Circuit Judge, which is claimed to he a part of the record; — the Act of 1841, ch. 163, codified hy sec, 27 of Art, 5 of the Code, providing that no defendant to a suit in equity, in which an appeal may he taken, shall make any objections to the jurisdiction of the Court below, unless it shall appear by the record that such objection was made in said Court.” We think that the manner in which this objection was raised and treated by the Court below, does not gratify the requirements of that Act, and that the exception to the jurisdiction, to bo available, should have been specially taken in the Circuit Court. So this Court have heretofore determined. O’Neill vs. Cole, 4 Md. Rep., 107. McKnight vs. Brawner, 14 Md. Rep., 1. We, however, have no hesitation in saying that the Court had jurisdiction of this case, ffhe law of 1825, ch. 203, provided for sales by mortgagees under powers in the deed. That law was both retroactive and prospective; and some of its provisions, with others changed, are codified in the 64th Art. of the Code, which further prescribes the mode of reporting the sale and procuring its ratification; provisions not affecting the rights of parties under the mortgage, but only perfecting the remedy.

We proceed, therefore, to the consideration of the objections in the record to the sale.

The 7th was abandoned by the appellants' counsel in the notes of argument.

The 6th is, that it no where appears in the proceedings in this cause, that any contingency had happened upon which the power to sell depended. It is true the report might have been drawn in a more special manner, sotting forth the condition of the mortgage and the failure of payment. But as the mortgage itself, with the advertisement of sale, was filed and constituted part of the proceedings,, before an order of ratification was asked for or passed, everything was substantially complied with that was necessary to induce the proper action of" the Court, and to show a compliance with the law. If payment had in fact been made, or any contingency had riot occurred upon which the power of sale depended, the mortgagors could show it, and thereby, arrest the ratification of the sale. This objection is simply to the form of the report.

The 1st objection alleges that the sale was not made by the mortgagees, but by one Thomas H. Kemp; and it is argued that this was an unauthorized and unlawful delegation of the authority to sell. The advertisement of sale, in its recital, and the proof of Mr. Kemp, fully negative the position taken in this objection. In what Mr. Kemp did, he only acted as agent and attorney of the mortgagees, exercising no discretionary powers, but aiding them ministerially. The advertisement set forth the names of the mortgagees with their power to sell under the mortgage specified, and that he was acting as their agent simply in the sale; and his proof shows that the mortgagees were present at the sale. The employment of an agent by trustees, on proper occasions, to execute the details of their duty, is no delegation of the power or trust, and such employment is often desirable as a safeguard for the interests of the cestui que trusts. Lewin on Trusts, 265, (24 Law Lib., 184.)

The 2nd objection ⅛ rather general in its terms, but from it and the argument on it, we gather that the terms of sale were departed from in selling partly for cash and partly on credit, when the power in the mortgage directed a sale for cash only; and that the mortgagees filed no bond in time, but deferred it to the day of sale. It is true that in a case like this, no departure from the terms and conditions of the instrument would be sanctioned, they being a part of the contract of the parties, which neither could violate without the consent of the other, and over which the Court would have no control. Dolan & Foy, vs. Mayor & C. C. of Balt., 4 Gill, 405, 406. The change from a cash to credit sale was advertised, and it does not appear that the appellants assented to it in any way, but it was a change for their benefit, inasmuch as a credit sale would naturally operate to their advantage; but the sale itself was regarded as a cash sale by the purchasers, who reported the money as fully paid. The result, therefore, the sale being in fact for cash, was no departure from the prescribed terms. The bond, we think, was filed in time, the law requiring simply that “before any person so authorized shall make such sale, he shall give bond to the State,” &c. (Sec. 6, Art. 64.) This was done on the day of sale, and, in legal presumption, before the sale was made, which is a sufficient compliance with the law in this particular.

The other objections, 3rd, 4th and 5th, we will consider together, regarding them as the only meritorious objections to the sale. The mortgaged premises, it seems from the record, consisted of 533 acres of land, divided and used in three parcels; one of 200 acres, with dwelling house and out-houses thereon; another of same quantity, and with similar improvements; and a third parcel with saw-mill, dwelling, tenant and other houses thereon. So the objections aver, and the answer to them does not controvert these facts. The proof goes to support them. It further appears, and is admitted, that the notes given by the mortgagors, of $3,499.49 each, dated llfch November 1859, and which the two mortgages were given to secure, were for the purchase money of these premises, showing that at that period, a little more than a year before, the mortgagors purchased them from the mortgagees for but a small fraction under $7,000. The proof as to value, by all the witnesses, varies from $4,000 to $8,000 ; arid shows that the mill and six acres attached to it, were themselves worth $2,000. Mere inadequacy of price is not sufficient to set aside a sale, unless so gross and inordinate as to furnish in itself evidence of fraud or misconduct on the part of the trustee. This is the recognized rule; and if these objections stood alone upon the simple fact of a sale largely under value, there would be a strong disposition to set it aside on this ground. But the objections also address themselves to the sound discretion of the Court, and present other circumstances involving the duty of trustees, and the interests and rights of mortgagors and cestui que trusts, which call for our equitable interposition. It is not likely that if these trustees had been selling.lands of their own, divided and occupied as ¡.these were, they would have exposed and sold them in one entire lot. They would have sold them, or at least offered them, in parcels, and tried the market in that way before they offered them together. A provident owner would have been thus cautious in the case of his own property; and then, in case a full price had not been obtained, no valid objection could lie against the sale. A good rule has been laid down by Sir John Leach, Vice Ghancellor of England, in this, that “ every trust deed for sale is upon the implied condition that the trustees will use all reasonable diligence to obtain the best price; and that, in the execution of their trust, they will pay equal and fair attention to the interests of all persons concerned. If trustees, or those who act by their authority, fail in reasonable diligence; if they contract under circumstances of haste and improvidence; if they make the sale with a view to advance the particular purposes of one party interested in the execution of- the trust, at the expense of another party, a Court of Equity will not enforce the specific performance of the contract, however fair and justifiable the conduct of the purchasers may have been.” Ord vs. Noel, 5 Mad., 267. See, also, Turner vs. Bouchell, 3 H. & J., 106. In the case of a mortgage to secure the payment of a debt by instalments, the mortgage may be entirely foreclosed, or so much of the property sold as will satisfy the sum due at the time; and the decree will stand as security for the other instalments. But if the mortgaged property cannot be conveniently or safely sold in parcels, then it must be disposed of entire, and the whole debt paid, with a rebatement of interest on sums not due. This is done from necessity, and as an unavoidable consequence of the peculiar nature of the case. Bland, Ch., in Clagett vs. Salmon, 5 G. & J. 334, and cases there cited. This was a case of that kind, and the property was not only susceptible of division, hut was, in fact, divided into farms, and so used; and the trustees assign no good reason for not so selling it, or so offering it for sale. It is in proof that a small portion of it, improved with a mill, was worth what the trustees reported they had purchased the entire estate for. It is the more inequitable, as more than $5,000 of the mortgage debt would remain unpaid, for which the mortgagors are held liable, to be answered out of any other estate they may have or acquire; whereas, by a different mode of sale, the whole or a large portion of this sum might bo realized out of the estate mortgaged for its payment. And where trustees are privileged by law to purchase at their own sales, as in cases of this kind, there is greater reason for diligence and effort on their part to obtain the hest price, and the Court is called upon to exercise the more care and strictness in passing upon the sales thus made.

(Decided May 11th, 1865.)

We think, therefore, that the sale, in view of these objections last noticed, and the proofs in the cause, ought not to have been confirmed but set aside, and a new sale ordered. We therefore reverse the order of the Circuit Court, with costs to the appellants, and remand the cause for further proceedings.

Order reversed and cause rema/nded.