Opinion
No. 36227.
November 25, 1946.
1. MORTGAGES.
Generally, the provisions of a trust deed as to manner and form of execution of instrument by which substitution of trustee is made must be strictly complied with.
2. MORTGAGES.
Generally, the relationship between mortgagor and mortgagee is one of trust and is such that neither shall so conduct himself in regard to the mortgage or mortgaged property as to prejudice the substantial rights of the other.
3. MORTGAGES.
A mortgagee, in process of forclosure under power of sale, including substitution of trustee, must exercise due care so that course pursued by him shall be reasonably free from such action as might deter any of those who would become bidders at foreclosure sale or to depress offers of those who bid (Code 1942, sec. 890).
4. MORTGAGES.
In determining whether an instrument substituting a trustee under trust deed is sufficiently clear in its reference to trust deed in record book, inquiry becomes what would a layman of average intelligence and business prudence, on making an examination of the instrument and the record book, have concluded as to the safety of a venture by him as a bidder for the property at full price.
5. MORTGAGES.
Where instrument substituting trustee under trust deed was erroneously drawn up so that name of substituted trustee appeared in blank for name of county, and name of county appeared in blank for name of substituted trustee, and instrument stated that trust deed appeared on certain page of record book, but record book contained two pages with such number and trust deed appeared on only one of those pages, trustee's sale was voidable on the doing of equity by those who claimed under the mortgagor (Code 1942, sec. 890).
APPEAL from the chancery court of Smith county. HON. LESTER CLARK, Chancellor.
E.L. Dent, of Collins, and Beverly C. Adams and R.E. Spivey, Jr., both of New Orleans, La., for appellant, Federal Land Bank.
We are unable to see how any interested person, capable of reading and having ordinary intelligence, could have been misled by this confusion in the notices.
Readus et al. v. Easterling et al., 145 Miss. 13, 110 So. 769.
The presumption is that the trustee did those acts in pais which were conditions precedent to the sale.
Graham v. Fitts, 53 Miss. 307; McCaughn v. Young, 85 Miss. 277, 290, 37 So. 839.
The trustee in a deed of trust is supposed to be nonpartisan and must in the performance of his duties exercise good faith and act fairly to protect the rights of al parties — the one equally with the other. His is more than a passive trust. His duties are positive and his powers far-reaching. There is no question but that the substituted trustee faithfully and fairly performed the duties of trustee in making the sale.
See Webb v. Biles et al., 192 Miss. 474, 6 So.2d 117.
Defects in the sale, even though they may be more or less serious, may be waived. Mortgagors and other persons interested may waive defects in or ratify an otherwise irregular sale, as by acquiescing in it or delaying for too long a time to raise objections, or may, by their conduct, be estopped to object to the sale as against rights accruing under it.
See Brown v. British American Mortgage Co. et al., 86 Miss. 388, 38 So. 312; Kelly v. Skates, 117 Miss. 886, 78 So. 945; Camp et al. v. Celtic Land Improveemnt Co., 129 Miss. 417, 91 So. 897; Chandler et al. v. Bank of Brooksville, 181 Miss. 529, 178 So. 797; Hamilton et al. v. Federal Land Bank, 184 Miss. 878, 186 So. 832; Dunton et al. v. Sharpe, 70 Miss. 850, 12 So. 800; Smith v. McWhorter, 74 Miss. 400, 20 So. 870; Catchings v. Edmondson et al., 194 Miss. 882, 13 So.2d 630; Wirtz et al. v. Gordon et al., 187 Miss. 866, 184 So. 798; 41 C.J. 1006.
It was unnecessary to name the heirs of M.T. Collom in the notice of sale.
Castleman v. Canal Bank Trust Co., 171 Miss. 291, 156 So. 648; Melchor v. Casey, 173 Miss. 67, 161 So. 692; McLendon v. McGee, 189 Miss. 712, 198 So. 725; Code of 1930, Sec. 2167; Code of 1942, Sec. 888; Laws of 1934, Chs. 248, 249.
A question not raised in the trial court will not be considered on appeal.
Adams v. Board of Sup'rs of Union County, 177 Miss. 403, 170 So. 684.
Details of the law relating to the remedies of mortgagees for enforcing their rights may be changed without impairing the obligation of existing contracts; but no substantial rights of the mortgagee to the enforcement of his security can be taken away, unless the parties by their contract may be said to have contemplated such changes. Thus, a statute is valid which dispenses with the necessity of personal service of notice of foreclosure, or merely requires an affidavit to be recorded as a condition precedent to foreclosure, or merely provides a more expeditious method for the removal and substitution of trustees in deeds of trust, or substitutes a judicial investigation of value in confirmation proceedings for an extra-judicial method of apraisement, or permits foreclosure for installments, or cures mere irregularities in prior foreclosure sales, or which, particularly where the parties contemplated changes in the method of foreclosure, reduces the time required by law for advertisement prior to sale.
16 C.J.S., Constitutional Law, Sec. 385(c).
Even if the substituted trustee had been an employee or agent of the appellant bank, the validity of the foreclosure for this reason could not be questioned.
Federal Land Bank of New Orleans v. Miller, 199 Miss. 615, 25 So.2d 11; Hamilton v. Federal Land Bank, 184 Miss. 878, 186 So. 832.
The power to substitute a trustee in a deed of trust is not created by any statute but by contract between the grantor and beneficiary.
Clark v. Wilson, 53 Miss. 119, 127.
Where the execution of a power created or reserved by the act of a donor is defective in form, it may be aided or corrected by a court of equity, provided an intention on the part of the donee to execute the power, and an attempt to effectuate that intent, partial in its nature and falling short of accomplishment, appear. But even where the intention to execute is shown, equity cannot relieve against the defective execution of a power created by law, nor dispense with any of the formalities required thereby for its due execution.
Hammett v. Markham, 128 Miss. 39, 90 So. 848; McCaleb v. Pradat, 25 Miss. 257; 49 C.J. 1303-1304, Sec. 146; Story's Eq. Juris., p. 240, Sec. 241, p. 243, Sec. 242.
All of the statutory and contractual requirements were complied with.
White v. Stennis, 151 Miss. 765, 118 So. 902; Provine v. Thornton, 92 Miss. 395, 46 So. 950; Code of 1930, Secs. 2147, 2148, 2167, 2168; Code of 1942, Secs. 868, 869; Laws of 1934, Chs. 248, 249; 23 R.C.L. 182, Sec. 38.
The burden is on appellants to recover on the strength of their own title and not on any weakness of their adversaries.
Chandler v. Bank of Brooksville, 181 Miss. 529, 178 So. 797; Griffith's Mississippi Chancery Practice, Sec. 211.
Irwin W. Coleman, C.C. Richmond, and Green Green, all of Jackson, for appellant, Gulf Refining Company.
The Gulf Refining Company, claiming derivatively as mineral lessee from (a). The Federal Land Bank and (b) from W.H. Collom et al., appropriately adopts, should the Court agree with the Federal Land Bank, the arguments integrated into that brief as a predicate for relief by the Gulf Refining Company as against the Colloms, but should the Court adopt the contentions made by the Colloms, as against the Federal Land Bank, the Gulf adopts the contentions thus made and asks relief in accordance therewith, having been a lessee of both the Federal Land Bank and the Colloms and obligated as lessee not to controvert the title of its lessors respectively.
Henry Edmonds, of Jackson, for appellees.
The foreclosure sale, November 23, 1935, was void for non-conformity with Section 2167 of the Code of 1930, either in original form or as amended by Chapter 249 of the Laws of 1934, but if not actually in contravention, nevertheless that method of foreclosure pursued by the Federal Land Bank created such a cloud as to preclude a proper sale under a power in pais and by reason thereof said sale was void.
Dibrell v. Carlisle, 48 Miss. 691; Sims v. Hundly, 2 How. (3 Miss.) 896; Cook v. Taylor, 200 Miss. 381, 27 So.2d 404; Connecticut General Life Ins. Co. v. Lombard (Miss.), 185 So. 260; Fauntleroy v. Mardis, 123 Miss. 353, 85 So. 96; Wilczinski v. Watson, 110 Miss. 86, 69 So. 1009; Wilkinson v. Federal Land Bank, 168 Miss. 645, 150 So. 218, 151 So. 761; Barbour v. Williams, 196 Miss. 409, 17 So.2d 604; McLendon v. McGee, 189 Miss. 712, 198 So. 725; Wisconsin Lumber Co. v. State, 97 Miss. 571, 54 So. 247; Bank of Philadelphia v. Posey, 130 Miss. 530, 92 Co. 840; Price v. Harley, 142 Miss. 584, 107 So. 673; Pruitt v. Dean, 198 Miss. 71, 21 So.2d 300; Blakeney v. Smith, 183 Miss. 151, 183 So. 920; Campbell v. Yazoo M.V.R. Co., 199 Miss. 309, 24 So.2d 531; Planters' Bank of Tennessee v. Black, 11 Smedes M. (19 Miss.) 43; Taylor Chicksaw County, 74 Miss. 23, 19 So. 834; McCulloch v. Stone, 64 Miss. 378, 8 So. 236; Jefferson Standard Life Ins. Co. v. Dorsey, 178 Miss. 852, 173 So. 669, 671; Ohio Life Ins. Trust Co. v. Debolt, 16 How. 432; Muhlker v. N.Y. H.R. Co., 197 U.S. 544, 49 L.Ed. 872; Von Hoffman v. Quincy, 4 Wallace 434, 18 L.Ed. 403; Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 89 L.Ed. 1296; Code of 1906, Sec. 2772; Code of 1930, Sec 2167; Code of 1942, Secs. 888, 889; Laws of 1934, chs. 248, 249, 250, p. 523, 524, 525; 11 Am. Jur. 914, Sec. 209; 36 Am. Jur. 690, Sec. 2; 41 C.J. 273, Secs. 1, 2; 16 C.J.S. 300, Sec. 112; 3 Jones on Mortgages (8 Ed.), Sec. 2285.
The foreclosure sale of November 23, 1935, was further invalid for non-conformity with Section 2168, Code of 1930, but if not actually in contravention, nevertheless that method foreclosure pursued by the Federal Land Bank created such a cloud as to preclude a proper sale under a power in pais and by reason thereof said sale was void.
White v. Jenkins, 79 Miss. 57, 28 So. 570; Shipp v. New South Building Loan Association, 81 Miss. 17, 23, 32 So. 904; Hyde v. Hoffman (Miss.), 31 So. 415; Provine v. Thornton, 92 Miss. 395, 46 So. 950; Camp et al. v. Celtic Land Improvements Co., 129 Miss. 417, 91 So. 897, 899; Webb v. Biles, 192 Miss. 474, 6 So.2d 117; Sharpley v. Plant, 79 Miss. 175, 28 So. 799; Brown v. British American Mortgage Co., 86 Miss. 388, 38 So. 312; White v. Stennis, 151 Miss. 765, 118 So. 902; Federal Land Bank v. McCraney, 171 Miss. 191, 157 So. 248; Mangold v. Barlow, 61 Miss. 593; Clark v. Wilson, 53 Miss. 119; Green v. Gaston, 56 Miss. 748; McDonald v. Vinson, 56 Miss. 497, Hyde v. Warren, 46 Miss. 13, 29; Thompson v. Houze, 48 Miss. 444; Code of 1930, Sec. 2168; 41 C.J. 930, Sec. 1352; 37 Am. Jur. 153 Sec. 724; Thompson on Real Property, Sec. 3520.
See also Wilson Banking Co. Liquidating Corporation v. Colvard, 172 Miss. 804, 161 So. 123; Home Building Loan Association v. Blaisdell, 290 U.S. 398, 78 L.Ed. 413, 88 A.L.R. 1481; Laws of 1934, Ch. 247.
The Federal Land Bank violated both Sections 2167 and 2168, Code of 1930, and consequently a foreclosure in pais did not constitute as to the mortgagor a fair and proper and equitable divesture of the equity of redemption.
Quarles v. Hierne, 70 Miss. 259, 12 So. 149 (approved in Germaine v. Harwell, 104 Miss. 679, 61 So. 659); Rosset v. Fischer (Va.), 11 Gratt. 492, 500; Code of 1930, Sec. 2167; 2 Joyce on Injunctions 1839, Sec. 1263; 3 Jones on Mortgages (8 Ed.), p. 864, Sec. 2351.
The foreclosure was had without knowledge of or notice to the decedent's family, and without notice to prospective purchasers because of the error as to the true record and so being was had by the Land Bank in such a way as to deprive the mortgagor of that right to a free and clear title being offered.
Wilkins v. Gordon (Va.), 11 Leigh 547; Miller v. Argyle (Va.), 5 Leigh 467; Drayton v. Chandler, 93 Mich. 383, 53 N.W. 558; Pence v. Jamison, 80 W. Va. 761, 94 S.E. 382; Webb v. Haeffer, 53 Md. 187; Olcott v. Crittenden, 68 Mich. 230; Strong v. Tomlinson (Mich.), 50 N.W. 106; Dutton v. Cotton, 10 Iowa 408.
Equity cannot relieve against the defective execution of a power created by law, nor dispense with any formalities required thereby for its due execution.
Brooms Legal Maxims, p. 594; 2 Sugden 113; Kerr on Fraud and Mistake (5 Ed.), p. 561; 49 C.J. 1303; 1 Story on Equity Jurisprudence, p. 243, Ch. 5; Restatement of the Law, "Powers of Appointment," Ch. 25, Sec. 347; Minor on Real Property, p. 1675, Sec. 1243.
See also Yellowly v. Beardsley, 76 Miss. 613, 24 So. 973; Readus v. Easterling, 145 Miss. 13, 110 So. 769; Swofford v. Garmon, 51 Miss. 348; Blakeney v. Smith, 183 Miss. 151, 183 So. 920; Campbell v. Yazoo M.V.R. Co., supra; Sharpley v. Plant, supra; 7 C.J.S. 982, Sec. 145.
As to the matter of equitable estoppel raised by appellant Federal Land Bank, we need only say that the only limitation applicable under the statute is the ten year statute of limitations, and that most of the appellees were infants, and all were without either actual or constructive notice at the time of foreclosure. We therefore fail to see where estoppel has any place in this case.
Argued orally by E.L. Dent, R.E. Spivey, Jr., and Garner Green, for appellants, and by Henry Edmonds, for appellee.
On December 15, 1928, M.T. Collom, appellee's father, owned the land involved in this suit. On that date he gave a deed of trust on the land to appellant, Federal Land Bank, to secure the payment of a loan. This deed of trust was recorded in Book 63 at p. 318 of the records of Mortgages and Deeds of Trust of the county wherein the land was situated, which is Smith County in this State. It turns out, however, that there are two pages numbered 318 in the record Book No. 63, one of these carrying the record of a deed of trust from W.E. Sullivan and wife to the Land Bank on entirely different land with a different trustee, the trustee in that deed of trust being Jos. H. Moss, later to be further mentioned.
The trustee named in the Collom deed of trust was J.D. Martin. The instrument provided for the substitution of a trustee, and on the 24th day of October, 1935 the said Land Bank by its vice-president and assistant secretary attempted to substitute a trustee and so to do executed and acknowledged an instrument in the following words and figures:
"The Federal Land Bank of New Orleans, being the present owner and holder of the indebtedness secured by a certain deed of trust executed by M.T. Collum (also known as Tom Collom) Widower appearing of record in Book 63, Page 318, of the Mortgage Records in the office of the Chancery Clerk of Jos. H. Moss County, Mississippi, does hereby constitute and appoint one Smith as Trustee in said deed of trust in the place and stead of the original trustee named therein.
"Witness the corporate signature and seal of said The Federal Land Bank of New Orleans on this the 24th day of October, 1935."
It will appear by said instrument, as now explained, that at the point therein where the name of the county, Smith, should have been inserted there appeared the name of the supposed substituted trustee Jos. H. Moss, and where the name of the latter should have appeared there was written instead the name of the county. It will be further observed that had an examiner of the quoted instrument sought to gain more light as to what was meant and had turned therefor to p. 318 in Book 63 he would have been as apt to have found there the Sullivan deed of trust in which Jos. H. Moss was already trustee as to have turned to the other p. 318 where the Collom deed of trust with Martin as trustee was recorded. There is nothing in the testimony which shows that a searcher of the records would have been advised by an index that there were two pages 318 at different places in said Record Book No. 63.
The trustee said to have been substituted gave public notice and sold the land at his trustee's sale on November 23, 1935, at which sale the mortgagee, the Land Bank, became the purchaser. Within the time allowed by law the heirs at law of Collom, and all of them, filed their bill to have the same declared invalid because of the insufficiency of and confusion in the attempt to substitute a trustee. Collom had died intestate on July 19, 1934. The complainants offered to do equity by paying any balance due on the deed of trust with interest less the net value of the use of the property since its sale. The bill was sustained and this appeal is from that decree.
Section 2168, Code 1930, same section, Section 890, Code 1942, reads as follows, so far as here pertinent: "Sales of land made under deeds of trust by substituted trustees shall not convey the interest of the grantor or grantors therein, but shall be absolutely null and void, both at law and in equity, unless the substitution shall appear of record in the office of the chancery clerk of the county where the land is situated, and unless it shall so appear by being actually spread at large upon the record before the first advertisement or notice of sale shall have been posted or published; the filing for record or lodging with the clerk not being sufficient; . . ."
A statute in terms such as the one quoted exists in a few states only, and there is a dearth of authority, so far as we have found, on the precise question now before us. We must have recourse to general rules, one of which is that the provisions of a deed of trust as to the manner and form of the execution of the instrument by which the substitution of trustee is made must be strictly complied with, 37 Am. Jur. at p. 445, annotations 98 A.L.R. 1157, and the other, a fundamental principle, that the relationship between mortgagor and mortgagee is one of trust and is such that neither shall so conduct himself in regard to the mortgage or the mortgaged property as to prejudice the substantial rights of the other. Meyers v. American Oil Co., 192 Miss. 180, 187, 5 So.2d 218.
A consequent obligation on the part of the mortgagee is that in the steps taken by him in the process of foreclosure under power of sale, including of course any substitution of trustee, he shall exercise due care to see to it that the course pursued shall be reasonably free from any such action as would be liable to deter any of those who would become bidders at the foreclosure sale or to depress the offers of those who bid, and when we consider what would be likely to deter or depress we must look to the average man of intelligent business discretion, not to what would deter or depress one skilled in the law and in the unraveling of legal instruments, if and when the latter were acting for himself and not for others. If the average person were obliged first to consult an attorney before deeming himself justified in appearing as a bidder or in offering a full price this in itself, as to property of small value, such as the property in this case, would become a substantial deterrent so far as the interests of the mortgagee is concerned, and if this has been brought about by the purpose or carelessness of the mortgagee, a remedy against it should be furnished by not allowing the sale to stand.
It may be conceded that had any one of the competent attorneys engaged in this case been personally interested to become a bidder at the foreclosure sale herein he would not have been greatly disturbed by the careless and confused manner by which the substitution of trustee was made, and that when he sought confirmation by recourse to p. 318 of Book 63 he would have known how to search further in that Book. But as already indicated that would not be the test. The inquiry becomes, rather, what would a layman of average intelligence and business prudence on making an examination of the instrument purporting to make the substitution of trustee, and the record to which it made reference, have concluded as to the safety of a venture by him as a bidder for the property and this at full price? Would he not rather have declined the venture until he first went to see his lawyer and even then would not a competent legal consultant of average caution have advised that a purchase at the foreclosure sale would be in danger of buying also a lawsuit?
On the face of the quoted instrument it is manifest that the mortgagee did not exercise care and it cannot be asserted with much confidence, as we see it, that the result of such carelessness was not such as to create some real likelihood that bidders would be deterred, or their bids depressed, from which it follows that the sale must be declared voidable upon the doing of equity by those who hold under the mortgagor, as they offer to do.
Affirmed and remanded.
Sydney Smith, C.J., did not participate in this decision.