Mr. Justice SWAYNE
delivered the opinion of the court.
The statement of facts agreed upon by the counsel of the parties has abridged our labor in this case. We shall confine our remarks to the points, which, in our judgment, require consideration, referring to the facts only so far as is necessary for the elucidation of our views.
The validity of the two mortgages executed to Langley & Co., by the corporation known as the Kalmia Mills, is not questioned ; nor can it be doubted that the power to sell, which they contained, was sufficient to warrant the sale of the mortgaged premises in the manner prescribed.
Olcott
v. Bynum,
17 Wall. 68. The good faith of Langley & Co. in making the sale, and of Cogswell, Evans, and Mordecai in making the purchase, are undisputed. No ground is disclosed for doubt as to either of these points. All concerned acquiesced at the time, and were apparently satisfied. This litigation has grown out of the large and unexpected depreciation of the property upon which both the appellants and appellees supposed their debts were abundantly secured, and out of the proceeds of which they expected to be paid, if a sale became necessary.
Upon the default of the mortgagor, the mortgages gave the mortgagees authority “ to put the mortgaged premises into the hands of some good broker and auctioneer, to be sold for cash or credit, at the option and direction of the mortgagees, at public sale to the highest bidder, according to the custom of vendue, after advertising ” as directed; and, further, “ to do and perform all and every other act and acts, thing and things, which shall or may be necessary and proper for the full and complete effecting and performing of the covenants and agreements herein contained.”
The terms of sale advertised were a cash payment of one-third of the amount bid, and the balance in six, nine, and twelve months, secured by notes and a mortgage upon the premises. At the sale, the auctioneers announced that they were authorized to state “ that the purchasers would be able to negotiate more favorable terms with the sellers, provided it was to their mutual interests.”
The property was sold to Cogswell, for himself, Evans, and Mordecai, upon a bid of the amount due Langley & Co., and $20,000 in addition. One-third of the amount bid to be paid in cash was $71,445.69. The buyers thereupon represented to Langley & Co. that it was impossible for them to make the cash payment, and asked for indulgence, and a change of the terms of the sale with respect to the times when the payments Avere to be made.
Langley & Co., rather than re-advertise the property and take the risk incident to offering it for sale again, entered into an agreement with the purchasers, whereby it was stipulated as follows : —
That the purchasers should give to Langley & Co. their four
several promissory notes, one for §180,000, payable on the 12th of January, 1868 (being for the principal of the debt then due to them), with interest; and three others, each for $4,779.92, payable respectively at five, six, and seven months, with interest (being for interest then due on the principal debt) ; and, in addition, another note for §20,000, payable with interest on the 8d of April, 1868.
The title to the mortgaged premises was to be conveyed to Cogswell, first to pay the several notes for the purchase-money, and then in trust for such uses and purposes as Cogswell, Evans, and Mordecai should appoint. They were also to give to Langley & Co. their bond, secured by several mortgages upon their individual property, conditioned to pay any residuum that might be left due on the notes after exhausting the property covered by the deed of trust to Cogswell. This agreement was in all things carried out by the parties. The note of §20,000 was intended to meet the liabilities of the Kalmia Mills to its creditors, other than Langley & Co. The debt due to Markey & Co. was one of those intended to be thus provided for.
A few days before the sale, Markey & Co. put on record a contract with the Kalmia Mills, under which they had been working upon the mortgaged premises. This gave them a mechanics’ lien. They threatened to enjoin the proceedings to sell by Langley & Co. Cogswell, Evans, and Mordecai thereupon gave them a guaranty, that, if the guarantors became the purchasers of the premises, they would continue the contract under which Markey & Co. had been working, and indemnify them against any loss arising from the Kalmia Mills failing to pay the amount due on the contract. This being arranged, Markey & Co. interposed no obstacle to the sale. After the sale, they entered into a contract with Cogswell, the trustee, whereby it was stipulated that they should be paid the sum of §18,000 for their work done and to be done. They continued to work under this contract, and received payments from time to time.
The enterprise in which Cogswell, Evans, and Mordecai had engaged, with the premises they had bought as its basis, having failed, they requested Langley & Co. to take possession of the premises conveyed by the trust-deed to Cogswell, and of the premises covered by the mortgages given by Cogswell, Evans,
and Mordecai, and to proceed to sell under the powers contained in those instruments. Langley & Co. thereupon advertised the Kalmia Mills property to be sold on the 10th of March, 1868. Markey & Co. and other creditors threatened to interpose by injunction. Langley & Co. thereupon filed this bill to settle their rights and those of the adverse parties. On the day fixed for the sale, the Kalmia Mills property, by consent of parties, was bought by Langley for §160,000. Forty thousand dollars of the fund was reserved by order of the court to await the result of this litigation. Subsequently, by the like consent of parties, the property mortgaged by Cogswell, Evans, and Mordecai was sold, and yielded the net sum of §52,148. The proceeds of both sales were less than sufficient to satisfy the amount due Langley & Co. by §6,152.13, leaving nothing to be applied to any other liability of the Kalmia Mills.
The contest in the court below was as to the application of the proceeds of these sales. The defendants claimed that Langley & Co. should be charged with the amount of the cash bid of Cogswell at the sale under the original mortgages, §71,449.69, as so much paid to them, because they had no right to waive its payment at the time of the sale, and include it in the notes given for the purchase-money.
This, if done, would leave a residuum of the proceeds of the sales large enough to pay the balance due Langley & Co., and also the amount due on the trust-note of §20,000.' Failing this, the defendants insisted that this note should be paid out of the proceeds of the Kalmia Mills property, and of the property mortgaged by Cogswell, Evans, and Mordecai severally,
pro rata
with the other notes given for the purchase-money.
The court below decided against them upon both points. Here the same propositions have been urged upon our attention.
The first one cannot be maintained, for several reasons.
The mortgagor makes no objection to the sale as made.
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Mr. Justice SWAYNE
delivered the opinion of the court.
The statement of facts agreed upon by the counsel of the parties has abridged our labor in this case. We shall confine our remarks to the points, which, in our judgment, require consideration, referring to the facts only so far as is necessary for the elucidation of our views.
The validity of the two mortgages executed to Langley & Co., by the corporation known as the Kalmia Mills, is not questioned ; nor can it be doubted that the power to sell, which they contained, was sufficient to warrant the sale of the mortgaged premises in the manner prescribed.
Olcott
v. Bynum,
17 Wall. 68. The good faith of Langley & Co. in making the sale, and of Cogswell, Evans, and Mordecai in making the purchase, are undisputed. No ground is disclosed for doubt as to either of these points. All concerned acquiesced at the time, and were apparently satisfied. This litigation has grown out of the large and unexpected depreciation of the property upon which both the appellants and appellees supposed their debts were abundantly secured, and out of the proceeds of which they expected to be paid, if a sale became necessary.
Upon the default of the mortgagor, the mortgages gave the mortgagees authority “ to put the mortgaged premises into the hands of some good broker and auctioneer, to be sold for cash or credit, at the option and direction of the mortgagees, at public sale to the highest bidder, according to the custom of vendue, after advertising ” as directed; and, further, “ to do and perform all and every other act and acts, thing and things, which shall or may be necessary and proper for the full and complete effecting and performing of the covenants and agreements herein contained.”
The terms of sale advertised were a cash payment of one-third of the amount bid, and the balance in six, nine, and twelve months, secured by notes and a mortgage upon the premises. At the sale, the auctioneers announced that they were authorized to state “ that the purchasers would be able to negotiate more favorable terms with the sellers, provided it was to their mutual interests.”
The property was sold to Cogswell, for himself, Evans, and Mordecai, upon a bid of the amount due Langley & Co., and $20,000 in addition. One-third of the amount bid to be paid in cash was $71,445.69. The buyers thereupon represented to Langley & Co. that it was impossible for them to make the cash payment, and asked for indulgence, and a change of the terms of the sale with respect to the times when the payments Avere to be made.
Langley & Co., rather than re-advertise the property and take the risk incident to offering it for sale again, entered into an agreement with the purchasers, whereby it was stipulated as follows : —
That the purchasers should give to Langley & Co. their four
several promissory notes, one for §180,000, payable on the 12th of January, 1868 (being for the principal of the debt then due to them), with interest; and three others, each for $4,779.92, payable respectively at five, six, and seven months, with interest (being for interest then due on the principal debt) ; and, in addition, another note for §20,000, payable with interest on the 8d of April, 1868.
The title to the mortgaged premises was to be conveyed to Cogswell, first to pay the several notes for the purchase-money, and then in trust for such uses and purposes as Cogswell, Evans, and Mordecai should appoint. They were also to give to Langley & Co. their bond, secured by several mortgages upon their individual property, conditioned to pay any residuum that might be left due on the notes after exhausting the property covered by the deed of trust to Cogswell. This agreement was in all things carried out by the parties. The note of §20,000 was intended to meet the liabilities of the Kalmia Mills to its creditors, other than Langley & Co. The debt due to Markey & Co. was one of those intended to be thus provided for.
A few days before the sale, Markey & Co. put on record a contract with the Kalmia Mills, under which they had been working upon the mortgaged premises. This gave them a mechanics’ lien. They threatened to enjoin the proceedings to sell by Langley & Co. Cogswell, Evans, and Mordecai thereupon gave them a guaranty, that, if the guarantors became the purchasers of the premises, they would continue the contract under which Markey & Co. had been working, and indemnify them against any loss arising from the Kalmia Mills failing to pay the amount due on the contract. This being arranged, Markey & Co. interposed no obstacle to the sale. After the sale, they entered into a contract with Cogswell, the trustee, whereby it was stipulated that they should be paid the sum of §18,000 for their work done and to be done. They continued to work under this contract, and received payments from time to time.
The enterprise in which Cogswell, Evans, and Mordecai had engaged, with the premises they had bought as its basis, having failed, they requested Langley & Co. to take possession of the premises conveyed by the trust-deed to Cogswell, and of the premises covered by the mortgages given by Cogswell, Evans,
and Mordecai, and to proceed to sell under the powers contained in those instruments. Langley & Co. thereupon advertised the Kalmia Mills property to be sold on the 10th of March, 1868. Markey & Co. and other creditors threatened to interpose by injunction. Langley & Co. thereupon filed this bill to settle their rights and those of the adverse parties. On the day fixed for the sale, the Kalmia Mills property, by consent of parties, was bought by Langley for §160,000. Forty thousand dollars of the fund was reserved by order of the court to await the result of this litigation. Subsequently, by the like consent of parties, the property mortgaged by Cogswell, Evans, and Mordecai was sold, and yielded the net sum of §52,148. The proceeds of both sales were less than sufficient to satisfy the amount due Langley & Co. by §6,152.13, leaving nothing to be applied to any other liability of the Kalmia Mills.
The contest in the court below was as to the application of the proceeds of these sales. The defendants claimed that Langley & Co. should be charged with the amount of the cash bid of Cogswell at the sale under the original mortgages, §71,449.69, as so much paid to them, because they had no right to waive its payment at the time of the sale, and include it in the notes given for the purchase-money.
This, if done, would leave a residuum of the proceeds of the sales large enough to pay the balance due Langley & Co., and also the amount due on the trust-note of §20,000.' Failing this, the defendants insisted that this note should be paid out of the proceeds of the Kalmia Mills property, and of the property mortgaged by Cogswell, Evans, and Mordecai severally,
pro rata
with the other notes given for the purchase-money.
The court below decided against them upon both points. Here the same propositions have been urged upon our attention.
The first one cannot be maintained, for several reasons.
The mortgagor makes no objection to the sale as made. If it were defective, this would cure the defect, and give it validity.
Taylors Admr.
v.
Chowning,
3 Leigh, 654;
Benham et al.
v.
Rowe et al.,
2 Cal. 387. If the power require the sale to be for cash, and it is made for part cash and part credit, the de parture from the power is beneficial to the mortgagor, and the sale is valid.
Hubbard
v.
Jarrell,
23 Md. 75. When the
power is to sell for cash, and the sale is made accordingly, the mortgagee may allow time for the payment of the purchase-money; and whether this arrangement is made before or after the sale is immaterial.
Mahone
v. Williams, 39 Ala., N. s. 202.
Where mortgaged premises were offered for sale for cash under a power which required the sale to be so made, they were struck off for $2,375. The purchaser tendered $1,200 cash, and offered to give any security that might be required for the payment of the balance when the sale was confirmed. The mortgagee declined to receive the money and the security, as not in conformity with the terms of the sale. The property was offered for sale again, and bought by the mortgagee for $1,600.
The court said,—
“ In determining upon the approval or rejection of the sale in such cases, the true question to be considered is, not so much whether there has been
a literal or technical, as a fair and reasonable, compliance with the terms of sale,
and a
bona fide
disposition of the property.
“ Without intending to charge the mortgagee in this case with the wilful violation of his trust, the circumstances disclosed by the proof show reasonable ground for the inference that he misapprehended the nature of his duty as trustee, which required
an advantageous sale of the property for the benefit of all the parties interested."
The sale was vacated.
Horsey
v.
Hough,
38 Md. 139. See also
Grib son's Case,
1 Bland, Ch. 144;
Olcott
v.
Bynum,
17 Wall. 63.
Where a power coupled with a discretion has been exercised, a court of equity, in the absence of fraud, very rarely interferes.
Olcott
v.
Bynum, supra.
In this case, the mortgagees were expressly authorized to sell for cash or on credit. This gave them authority to do either, or to combine them in the sale. What was done was a simple exercise of the discretion with which they were clothed. It was in pursuance of the notice given at the vendue. It was intended to promote the sale of the premises upon the best terms that could be procured. Such an exercise of the power was as
competent after as before the property was struck off. In this respect, the power is without restriction. The arrangement was apparently greatly beneficial to Markey & Co. and the unsecured creditors, as well as to Langley & Co. It does not appear that there was any bidder but the purchasers. It is clear that they could not have made the cash payment. If insisted upon, the sale would have fallen through. Besides the mortgaged premises, a large amount of additional property was pledged for the payment of the purchase-money. The light thrown backward by subsequent events shows clearly that it was the only way to secure the payment of the debt due to Langley & Co., and leave any thing for the other creditors. The arrangement seemed to furnish the means of satisfying all demands. That it failed to do this was not the fault of Langley & Co.
A mortgagee, in such circumstances, is a trustee for the benefit of all concerned. He must regard the interests of others as well as his own. He should seek to promote the common welfare. If he does this, and keeps within the scope of his authority, a court of equity will in no wise hold him responsible for mere errors of judgment, if they have occurred, or for results, however unfortunate, which he could not reasonably have anticipated.
Hext
v. Porcher, 1 Strob. Eq. 172.
The second proposition is also untenable.
The liens of the mortgages and the mechanics’ lien attached to the proceeds of the sales in the same manner, in the same order, and with the same effect, as they bound the premises before the sales were made.
Astor
v.
Miller and Others,
2 Paige, 68;
Sweet
v. Jacobs, 6 id. 855;
Brown
v.
Stewart,
1 Md. Ch. Decis. 87;
Olcott
v.
Bynum,
17 Wall. 63.
In the view of equity, the new securities stood in substitution for the old ones; the liens of Langley & Co. being prior in point of time to all others, and first to be paid. As the case is developed in the record, such appears plainly to have been the intent of the parties. The note of $20,000 was the last to mature.
If the sale to Cogswell had been made by a master or a trustee other than those named in the power of sale, for cash or on credit, the money, when received, would have been paid over according to the priorities of the liens of the parties entitled to receive it. Langley & Co. would have been first paid.
The fact that the sale was made by the mortgagees, acting as trustees and performing the functions of a master, does not change the principle involved, nor affect its application.
It appears that a question was raised in the court below as to the right of the unsecured creditors of the Kalmia Mills to share with Markey & Co. in the proceeds of this note. As there can be no such proceeds, we need not consider that subject.
jDecree affirmed.