Tannahill v. Tuttle

3 Mich. 104

Opinion

By the Court,

Martin, J..

The first question made in this case is, whether Crane & Eolger, the mortgagors, have an interest in the property which was liable to an attachment, and levy and sale upon' execution, and whether the defendant in suing the writ of attachment, had a right to hold the property, in order that such interest might be disposed of.

By a mortgage of chattels, the whole legal title of the property passes to the mortgagee conditionally, and to defeat-such title, the mortgagor, or those claiming under him, must show a performance of the condition. Upon its breach, the title is absolute in the mortgagee, as the general owner, and cannot be questioned in a Court of law. (Story on Bail. § 287; 2 Hill, on Mort. 315, 344; Butler vs. Miller, 1 Denio, 407; Sumner vs. Batchelder, 30 Maine, 39; Thornhill vs. Gilmer, 4 Sm. and M. 153; Brown vs. Bennet, 8 J. R. 98; 1 Barb. S. C. 548; 9 Wend. 83, 84; 7 Cow. 292; Wood vs. Dudley, 8 Vt. R. 435; Gifford vs. Ford, 5 Id. 532; Melody vs. Chandler, 3 Fairf. 282; Flanders vs. Barstow, 18 Maine, 357; Badlam vs. Tucker, 1 Pick. 389; Pickard vs. Low, 15 Maine, 48; Howlahd vs. Willett, 3 Sand. S. C. R. 607; Spriggs vs. Camp, 2 Speers, 181; Burdick vs. McVanner, 2 Denio, 170; Charter vs. Stevens, 3 Id. 33; Bank of Rochester vs. Jones, 4 Comst. 498; Alden vs. Lincoln, 13 Metc. 204; Hall vs. Snowhill, 2 Greene, N. J. S.)

And- whether at common law, such mortgagor has an equity of redemption, or whether Courts of Equity will interfere, and allow a redemption, where there is no statutory provision relating to redemption, is not definitely settled, although the latter .opinion seems to be that equity will interfere to prevent gross injustice. (1 Pars. on Cont. 452; 2 Hill. on Mort. 314; 2 Story Eq. Juris. § 1031; Brown vs. Lips comb, 9 Port. 472; Story on Bail, § 287, and cases cited; White vs. Cole, 24 Wend. 117, 143.) The general title then being in the mortgagee, he is entitled to immediate possession of the property, to hold it until condition broken, unless the parties otherwise stipulated in the mortgage; without such agreement, the possession of the mortgagor (if suffered to retain the property) is deemed the possession of the mortgagee, so that he may reduce the property to possession at any moment, and may maintain trespass, trover or replevin, as the case may be, for any intermeddling with, or taking of the property by a third party while in the possession of the mortgagor, equally as though such possession were actually in himself. See cases above cited; also, Welch vs. Whittemore, 25 Maine, 86; Paul vs. Hayford, 9 Id. 234; Brackett vs. Bullard, 12 Metc. 310; Alden vs. Lincoln, 13 Metc. 204; Ferguson vs. Thomas, 26 Maine, 499; Case vs. Winshop, 4 Blackf. 475. And so absolute is this title, and Consequent right to immediate possession held, that even the agreement that the mortgagor may retain possession until condition broken, is personal, and the mortgagee may maintain trover for the property, before condition broken, against a purchaser from such mortgagor. Such agreement is not assignable to others, either by the mortgagor, or by sale or levy on his property for debts. See Bullen vs. Wallace, 2 Rich. S. C. R. 80. So upon condition broken, the mortgagee may immediately sell, or otherwise dispose of the property. See Wood vs. Dudley, 8 Vt. 438; Burdick vs. McVanner, Charter vs. Stevens, ubi supra; Holmes vs. Bell, 3 Cush. 322. Indeed, this necessarily follows from the foregoing principles, for it is inconsistent with an absolute title, to hold that the power of sale, or other disposition of the property, does not exist in the person holding it, nor is this inconsistent with the right of the mortgagor to resort to equity to redeem the property at any reasonable time before such sale, or other disposition of the property shall be made. See Patchin vs. Pierce, 12 Wend. 61.

The right of action in the mortgagee for an unlawful interference or intermeddling with the property mortgaged, exists as well when the property is taken by an officer under color of legal process, as when it is taken without color of authority of law, as will be seen by reference to nearly all the cases I have above cited.

It is a singular fact that very much of the law determining the rights of parties to chattel mortgages, has been settled in adjudications between mortgagees and the ministerial officers of the law, who have attempted to make the title of the mortgagor subservient to the claims of his creditors. When the condition of the mortgage has become broken, and the title in the mortgagee becomes absolute, his right to reduce the property to possession, and to hold it against all the world, as a principle of common law is beyond question. That he cannot be disturbed in that possession, except through the intervention of the Courts of Equity, is equally clear. In the case at bar it is found that the condition of the mortgage was to indemnify the plaintiffs against the consequences of their endorsement of a note for the accommodation of the mortgagors; that the note was dishonored and then taken up by the plaintiffs, who immediately afterwards took possession of the property mortgaged, and held it under such possession until it was seized by the defendant, by virtue of a writ of attachment issued by a Justice of the Peace some sixteen days after such acquisition of the possession by the plaintiffs, upon a debt claimed to be due to one Henry Barns from the mortgagors. The defendant attached the right and title of said mortgagors, but seized the property and retained it from-the possession of the plaintiffs, to satisfy any judgment which, might be rendered in their attachment suit.

It is contended by the defendant’s counsel that this light of seizure and possession is given to the defendant by the provisions of the Revised Statutes. By the provisions of chap. 93, § 26, the officer serving a writ of attachment is required to seize so much of the goods cmd chattels of the defendant — excepting such as are by law exempt from execution — as will be sufficient to satisfy the plaintiff’s demand, and safely keep the same to satisfy any judgment that may be recovered by the plaintiff in such attachment, &c. This lien of the officer necessarily continues until after judgment and execution, and 'a levy by virtue of such execution. See also R. S. p. 550, § 38. If then the defendant had a right to make the seizure in this case, his lien was perfect at the time of the institution of this suit. Had he such right? At the common law, goods and chattels mortgaged, whether in possession of the mortgagor or mortgagee, were ndt subject to levy and sale upon execution either before or after condition broken. (See opinion of Story in Conard vs. Atlantic Ins. Co., 1 Pet. R. 440, 441; Marsh vs. Lawrence, 4 Cow. 467; Holbrook vs. Baker, 5 Greenl. 312, marg.; Melody vs. Chandler, Badlam vs. Tucker, ubi supra.) It is said in Bailey vs. Burton, 8 Wend. 347, that when the mortgagor had a right to redeem and a right to the possession for a definite period, before the property can become forfeited, the mortgagor has an interest which may be sold on execution. The purchaser in such case takes the property subject to the incumbrance : he purchases the right of the mortgagor, which is a right to the possession and the absolute ownership, subject to the incumbrance ; but if the mortgage at the time of the salé on execution had been forfeited, the mortgagor had not the right to possession for a moment; all the right he has is in equity. See also Wheeler vs. McFarland, 10 Wend. 322, where Savage, C. J., in spealdng of the right to sell the interest of the possessor of personal property, says, “ such is the case possibly of a mortgagor in possession before forfeiture.” See also Charter vs Stevens, ubi supra; Bank, &c. vs. Crary, 1 Barb. S. C. 543.

At the most, then, a right to seize and sell the interest of a mortgagor only exists, when he is entitled to the possession under an agreement to that effect — and not when his possession is by permission — nor after condition broken. See also Perkins vs. Mayfield, 5 Porter, 182; King vs. Bailey, 8 Miss. R. 332. But we are told that all property not exempt by law from execution, is liable to attachment, and by the provisions of § 23, p. 476, of the R. S., the interest of the mortgagor was liable to seizure and. sale. The section is as follows : “ When goods or chattels shall be pledged by way of mortgage or otherwise, for the payment of money or the performance of any agreement or contract, the right and interest in such goods of the person making such pledge, may be sold on execution against him, and the purchaser shall acquire all the rights and interest of the defendant, and shall be entitled to the possession of such goods and chattels on complying with the conditions and terms of the pledge”— and by § 32 sales of personal property are prohibited, except the same be present and exposed to the view of those attending the sale.

We have already shown that the mortgagor after condition broken, has nothing left, unless it may be an equity of redemption, which is not a legal interest, and is not the subject -of levy and sale. The statute was not designed to create -rights, and subject them to seizure, but only to extend the remedy by execution over rights in existence. Such is the only construction which can be placed upon it consistent with law and the rights of parties. The language of the section relates to' goods pledged by way of mortgage or otherwise, authorizes a sale of the pledgor’s interest, and confers upon -the purchaser at such sale all the rights and interest of the pledgor, and entitles him to possession only upon complying with the terms and conditions of the pledge. Now although it is said “ a mortgage is a pledge, and more — it is an absolute pledge to become an absolute interest, if not redeemed at a certain time,” yet there is a broader distinction than this between them, for a mortgage passes the legal title, subject to be defeated upon performance of a condition, while a pledge only passes the possession, or at most a special property to the pledgee, with a right of retainer, until the debt is paid or the other engagement is fulfilled. See cases above cited. In the one case the title becomes absolute at law upon breach of the condition — while in the other case the title never becomes absolute in the pledgee — and he has only a right to foreclose against the pledgor by proceedings in equity, or sale of the •chattel after notice. See Story on Bail., § 308.

In the view of equity, a mortgage may be regarded as a pledge and something more,” and hence the jurisdiction courts of equity assume in relation to its redemption — but the law regards it rather as a grant or sale of the property, by which, unlike a pledge, a title passes, which becomes absolute upon breach of condition, without the intervention of any legal proceedings, or a decree of a court of equity. Now a mortgagor, unless he have a right of possession, has no legal title or interest in the property mortgaged. He has nothing which can be seized or sold, and by performance of the condition of the mortgage, he acquires a title and right of possession; of both which he was divested up to that period. What rights, then, at all analogous to those of a pledgor, has •a mortgagor, which are legally tangible and subject to seizure and sale ? The words “ by way of mortgage,” in § 23, therefore, can only relate to the right of possession, if any, which exists in the mortgagor, upon which right the property may be seized before condition broken, and the mortgagor’s interest therein sold, and along with which the right to.redeem is carried, according to the rule of Bailey vs. Burton. This construction of the statute harmonizes it with the common law, accords with the decisions of other States, and preserves the rights of the parties — while any other will impair the rights of parties, be utterly unavailing for the purposes contemplated, and as we shall presently see, be absolutely impracticable in execution. We are referred to § 32, as prescribing the manner in which this power must be executed. That provides that personal property shall not be sold unless it be present and within view of those in attendance, and shall be offered for sale in such lots and parcels as shall be calculated to bring the highest price. If the mortgagor have neither the possession nor the right to possession, nor the title — nothing but a duty to perform, upon' which the title to property may revert — he has in fact only an equity of redemption. "What has he which may be taken into possession,, produced at the sale, exposed to view, and parceled out for » sale or delivered to the purchaser ? To seize the property it would be necessary to dispossess the mortgagee, whose possession is rightful, and by virtue of a legal title — a proceeding without a parallel in law, and without any positive authority in the statute. It is hardly necessary, I imagine, to argue that no person can be deprived' of his property, even for a, temporary purpose — except by authority of law exercised directly against him, according to the course of judicial proceedings — or in the exercise of the right of pre-eminent sovereignty, and upon compensation being made. Under a statute of New York, and precisely like that of this State, except that the words “ by mortgage or otherwise ” are not: found in it, it is yet an unsettled question whether the pledgeecan be deprived of his possession for the purpose of sale-under execution. (Stief vs. Hart, 1 Comst. 20.) The court of appeals of that State are equally divided upon the question, and the judgment of the court below sustaining the proposition, that property pledged might be taken into possession on an execution against the pledgor, for the purpose of sale of the pledgor’s right, was by such decision affirmed. If the solution of that question is so difficult, how much less-free from doubt is the present. In the case of a pledge, the title remains in the pledgor, and the sale of his interest is the sale of the title, subject to the pledgee’s lien. In that of a mortgage the title is not in the mortgagor, and the sale is of" an equity. The one is susceptible of being seized and taken into possession and restored — the other is not. In the one case the possession alone passes by compliance £C with the terms and conditions of the pledge,” the title passing by the sale— in the other, the title passes, reverts, by performance of the condition, and does not by the sale. The pledgor has the general property in the thing pledged — a mortgagor has not before performance of condition. But if the mortgagor has the possession of the goods mortgaged, under an agreement to that effect, then he has a property which may be seized and sold, and by force of the statute draws with it the right to redeem, while if there be no such agreement, he is but the bailee of the mortgagee. These views are fully sustained by the authorities above cited, and give the statute a reasonable and practicable construction. These observations apply, in my judgment, as well to the sale of a mortgagor’s interest before as after condition broken, when no right of possession is reserved to him. But after condition broken, the absolute title is in the mortgagee; there can, from the very nature of things, be no legal interest remaining in the mortgagor which can be sold. In New York, the statute allowing the interest of a pledgor to be sold under execution, has never been understood as extending to the interest of mortgagors. See Mattison vs. Bancas, 1 Comst. 295; Howland vs. Willett, 3 Sandf. S. C. R. 607; White vs. Cole, 24 Wend. 117, 142. In Massachusetts, by the provisions of statute, (ch. 90, § 78,) any personal property of the debtor which is subject to a mortgage, pledge or lien, may be attached and held, &c., provided the attaching creditor shall pay to the mortgagee, pawnee or holder of the property, the amount for which it is so liable, within twenty-four hours after the same is demanded. If such payment be not made, the attachment is dissolved and the property restored, and the attaching creditor held liable for any damages the mortgagee may have sustained. Thus in that State, by force of its statute, the right of attachment upon mesne process, is contingent upon the right of redemption, and cannot be exercised after that is lost;, and although the right of seizure is given in the first instance, yet there can be only a continued possession by the attaching officer upon payment of the debt secured, so that sale upon final process shall be of the title and not a right of redemption. So also the statute being in derogation of the common law, a strict compliance with its provisions is required to protect the officer and attaching creditor from liability for taking it. A very similar law exists- in Maine, and the same rules and principles govern its execution. In Kentucky, it is provided by statute that when estate, real, personal or mixed, is held or covered by mortgage, deed of trust, or other incumbrance, all the right, title and interest, legal or equitable, which the,mortgagor or grantor has in such real estate-, shall be subject to be levied upon and sold by execution in the same manner a/& sueh property might home been sold if no such incumbrance had existed; and the purchaser shall take it subject to such incumbrance, and may pay off and discharge such incumbrance, and thereby perfect his title thereto in the same-manner as the grantor, mortgagor, or any other person having an equity of redemption therein might do, provided (in cases other than the sale of real estate) that the purchaser or purchasers of any such mortgaged property, shall, before he takes possession of the property, give bond and security that he will not within twelve months sell or remove the property out of the'State, but that he will during that time have the property at all times forthcoming, unavoidable accidents excepted, to any order or decree of any Court of competent jurisdiction. Under this statute it was held in McIsaac vs. Hobbs, 8 Dana, 268; Fugate vs. Clarkson, 2 B. Monroe, 41, that the property should be taken into possession by the officer upon execution and held for sale, and to these decisions our attention was called by the defendant’s counsel. Such indeed is the clear import of the act itself, as it requires a levy and sale in the same manner as though no suchincumbrance existed. But our statute makes no suck provision, and no rule of construction can be drawn from these cases, in aid of the power claimed to seize the property in possession of the-, mortgagee, and hold it for the purpose of selling the mortgagor’s interest, even before condition broken. This statute of Kentucky has received a construction in the case óf Swigert vs. Thomas, 7 Dana, 220, relative to the rights of possession of the purchaser and of the mortgagee, which strongly fortifies-many of the views heretofore expressed, and' the fights of a mortgagee as established at the common law most fully maintained. “We have no statute,” says the Court, “qualifying this right; and we are-not prepared to decide that the prevailing practice of permitting mortgagors to enjoy the possession and profits of the mortgaged property until foreclosure,,, should operate as a constructive abrogation of the mortgagee’s; common law right, or as an implied stipulation entitling the-mortgagor as a matter of right to that possession, which as-a-matter of favor or of convenience he is generally permitted to enjoy.”' See also Dougherty vs. Linthicum, 8 Dana, 198.

We have heretofore treated this question as though the interest of a mortgagor, if subject to sale upon execution, would be liable to seizure upon attachment. It is clear that such liability could only exist, if at all,- when the possession of the mortgagor is by agreement with the mortgagee, and before condition broken. It is not so clear, however, that such interest of the mortgagor is liable to attachment in any event. The remedy by attachment is a special remedy, unknown to the common law. No rights or powers are to be acquired by implication. The goods and chattels of the defendant not exempt from execution are subject to seizure under the writ. The interest of a mortgagor is neither- goods or chattels subject to seizure at the common law — it is an equity of redemption intangible, and incapable of delivery. What we have already said respecting the nature of the rights of a mortgagee and the inability of an officer to divest him of his possession, applies with, still greater force to an attachment. The property must be kept to satisfy any judgment which may be rendered against the defendant. Thus it may be detained from the mortgagee for an indefinite period of time, and if of a perishable nature he may become thereby deprived of his title as well as his possession, and the whole security of the mortgage defeated. No provision is made by law for such contingency, nor for the discharge of the debt due the mortgagee by the attaching creditor. It is only upon execution sale that a creditor can acquire any rights over the property; no judgment can be rendered against such defendant, and ' thus no sale under execution had. Every thing conspires to -show that the remedy by attachment could not have been intended to extend to such interest of a mortgagor. The statute which authorizes the sale of a pledgor’s interest upon execution, is in derogation of the common law, and must be strictly construed. Its provisions cannot be extended by implication to any other remedy than that by execution sale, and especially not to a special statutory remedy which is silent in respect to it. The directions and provisions of this statute clearly assume that such right or interest can only be sold upon final process. The seizure by attachment is altogether different in its nature; it being a seizure upon mesne process, and not necessarily accompanied by a right to execution and sale.

In Lyon vs. Coburn, 1 Cush. 278, the question was, wheth- ' er under the Statutes of Massachusetts the interest of a mortgagor, which might be seized in attachment, in which case ample provisions were made to protect the mortgagee’s rights,- could be seized upon execution in the first instance, and the Courts held that it could not, as the language of the statute was appropriate to an attachment upon mesne process, but not to a seizure or taking upon execution. So in Snyder vs. Hilt, 2 Dana, 204, it was held that the interest of a mortgagor was not liable to be sold under a distress for rent. The Court say: “an equity of redemption was not distrainable at common law, and the statutes which subjected equities to sale under execution cannot consistently be so construed as to embrace distress warrants. The policy of these enactments was to substitute the liabilities of equities and choses in action for the ca sa, and a distress warrant is within neither the letter nor spirit of the provisions.”

In looking through the reports of all the States, it will be. found that statutes respecting the sale of a mortgagor’s interests, have received a most strict construction, and no right not clearly within their letter .has been built upon them.

The judgment of the Court below must, therefore, be affirmed with costs to the plaintiffs.

Douglass, J., did not participate, having decided the cause below.