Wofford v. Board Police of Holmes County

SlMRALL, J.:

Is there equity in the bill? The security executed by Wofford, conveys the land to J. A. Durden, president of the board of police, in trust, to secure the debt, with power, on default made in the pajunent, to said Durden, or his successors in office, to make a sale. The security partakes much more of the nature of a mortgage, than a deed in trust. It is a mortgage with a power of sale. And it may admit of grave doubt whether a sale made by the grantee would convey an absolute title. The equity rule is, once a mortgage, always a mortgage. Would a sale made by Durden, free the property in the hands of the purchaser, from the rights and incidents of a mortgage, as respects Wofford, the grantor?■ Durden could convey no larger interest or estate than was vested in him. If there was-remaining in Wofford any right or estate, that interest or estate could not be passed by Durden’s deed. It was held in Clay v. Willis, 1 Barn. & Cress., 364; Wright v. Rose, 2 Sim. & Sta., 323, that instruments in all respects like this, werewnortgages, and that the grantors had the equity of redemption. It was so declared in Chowning v. Cox et al., 1 Rand., 310 . There the conveyance was made by the debtor to the creditor, with power of sale. In reference to the ordinary deeds in trust, when the lands are con *586 veyed to a trustee, with a power of sale, it was said, that it was going far enough to uphold sales made under such peremptory securities; hut, they were not objectionable, inasmuch as the trustee was indifferent and disinterested between, the parties. It was expressly held, that a sale, in. that case, did not bar the equity of redemption. The modern cases however seem to hold, that if the right of redemption is not pressed before sale, it comes too late alter it. But there is another fact stated in the bill, which made it eminently proper to go into a court of equity. Aschraft and Owens are said to be in the possession of the premises, setting up some sort of claim to them. In order that the security might be fully available, the creditor had a right to bring these parties before the court, so that their rights might be canvassed, and if they discovered a cloud, it might be removed. The creditor had a right to go before bidders, at the sale, with an estate dis-embarred of all conflicting pretended claims, so as to insure the market value of the property.

The primary purpose of the bill is to foreclose the mortgage (denominated in the pleading, deed in trust), and subject the property to sale for payment of the debt, and not to recover a moneyed decree, founded on a lost or destroyed promissory note. If there be no debt due, of course there can be no foreclosure. As this debt was evidenced by a promissory note, it was necessary that the complainant should produce it, or satisfactorily account for its absence.

But it is insisted that the bill should have tendered indemnity, and the decree secured it to the plaintiff in error. There is an unquestioned jurisdiction in equity to decree the payment <3f a lost bond, promissory note, or other negotiable instrument. The English authorities go to the length of holding that the relief is exclusively in chancery. Because, the debtor has a right to have delivered up to him the bond or note, and he is entitled to security, as a protection against the hazard and risk of the instrument turning up in the hands of some lucky finder, or other person taking it from him. 1 Story Eq. Jur., §§ 85, 86. The doctrine of the English courts has been followed in some of the states. Bow- *587 ley v. Ball, 3 Cow., 303 . Posey v. Decatur Bank, 12 Ala., 802 . In others it has been modified. If lost after due, suit may be at law, if before due, it must be in equity. Thayer v. King, 15 Ohio, 242. The same doctrine has been announced in Khode Island: “ If the bill or note has been destroyed, or was unindorsed, or so indorsed as that a third person could not recover upon it.” 1 R. I., 401. The revised statute of New York gives an action at law on a lost negotiable note, or bill upon security being made to the adverse party; in Des Artes v. Legget, 16 N. Y., 588 , it was held that the statute had no application where the instrument has been destroyed, and that the action may be maintained without indemnity. The reason assigned is, that a destroyed note cannot be in the hands of a bona fide holder, or be subsequently transferred to the prejudice of, or hazard of loss by the defendant. So, also, is Hinsdale v. Bank of Orange, 6 Wend., 379 . 8 Cow., 303 . Lord Ellenborough drew a very palpable distinction between the loss and destruction of a security. In the latter case there may be a recovery at law, on proof of contents ; but it is very different when a note is. stated to be lost; then if the note was indorsed in blank, and was not overdue, it may have got into the hands of a bona fide in-dorsee for value, who might maintain an action upon it against the maker. He declared that for a court of law to require indemnity was contrary to the principles upon which our judicial system rests. But, if the plaintiff can neither produce the note or bill, nor prove that it has been destroyed, he ought to resort to a court of equity for relief. Pierson v. Hutchinson, 2 Camp., 212; also, Myer v. Johnson & Eaton, 3 Camp., 325; Powell v. Roach, Esp., 77.

In the earlier cases, the reason assigned why the obligee of a lost bond must go into a court of equity, was that there must be jorofert of the instrument, without which the declaration would be defective. In later times, courts of law entertained the suit, and dispensed with profert, on the. allegation of loss, by time and accident. Reed v. Brookman, T. R., 151; *588 Totty v. Nesbit, 3 T. R., 153; Cutts v. United States, 1 Gallis R., 69; Smith v. Emory, 7 Hal., 53; 6 Cow., 749 .

It is laid down in East India Co. v. Boddam, 9 Ves., 460; Piersons v. Hutchinson, 2 Swann, 213; Mosrop v. Eaton, 16 Ves., 433, that the strong argument in favor of the exclusive jurisdiction of equity in respect of lost securities, is that complete justice cannot be «done to the prayee, without indemnity, should the security be subsequently brought forward by a bona fide holder for value.

Prior to Hunsard v. Robinson, 7 B. & C., 20, the question was unsettled, whether the remedy on a lost note or bill of exchange, was exclusively in chancery. In that case Lord Tenderden, after a full examination of the subject, came to the conclusion, that an action would not lie at law. Since that decision Chitty & Story, in their treatise on bills, accept the'rule as settled that way; therefore, in Posey & Coffee, executors v. the Decatur Bank, 12 Ala., 819 , under a statute allowing an action at law on a lost note, on affidavit of the fact and security given, it was held that the making of this affidavit, was a condition precedent to the right to sue atlaw. But if the bill has been destroyed, the suit was not maintainable. The reason is, that the statute provided a remedy, where none existed at common law, .and therefore, the party availing of it, must bring himself within the terms of the law.

In Clark v. Reed, 12 S. & M., 557 , it was held, that a recovery at law can be had on a lost note, because by statute, whoever derives title under the payee, takes subject to all the equities between him and the maker. This decision rests' on the idea that it was because the law merchant precluded such defenses and equities in the hands of a remote holder, was the remedy in equity maintained. That tribunal being able to require an indemnity for the maker, which courts of law were inadequate and incompetent to provide.

The judgment of the court is placed upon the single ground that, as our statute allowed the maker to set up the same equities and defenses against a remote indorsee, which he could against the payee, therefore, the reason upon which chancery had exclusive jurisdiction in those states *589 and countries, where the law merchant prevailed in all its rigor, had no force or existence here. The case is silent on the point of indemnity. None was offered or required, evidently because the statute referred to, ivas supposed to afford ample protection to the party. Moreover, it would hardly be claimed that a common law court could exact such a bond or security, in the absence of an enabling statute. So far as we have examined, no instance of such a proceeding in.a court of law, has come under our notice, except by virtue of a statute.

The doctrine of all the better considered cases is, that if the note or bill has been destroyed (as by fire), then the party may sue at law,.because the reason for the indemnity does not exist, inasmuch as the maker cannot, by possibility, be exposed to the risk of a suit on the paper by any other person.

In this case, the defendant, Wofford, (if entitled to it) did not notify the court, by his demurrer, that he found fault with the bill for not offering indemnity, so as to have afforded an opportunity to the complainant to make the tender. He neglected to claim it by plea, or answer, as might have been done, on pain of dismissal of the bill; and, inasmuch as security was for his benefit, he may well be supposed to have waived the objection to the bill.

We are also of opinion (be, this as it may) that, as the bill alleges that the note was consumed by fire, it would be useless, and not at all needful, for the future safety of Wofford, to have exacted from the complainant, indemnity.

The remaining objections to the decree, are that the complainant did not accompany his bill with an affidavit of the loss of the note, and offered no proof of the allegations of the bill. As to the last point: The order pro cortf esso, was entered after the expiration of the time allowed for answer. If the record shows that the defendants are in default, for failure to appear, after service of process, or if they neglect to answer in proper time after demurrer overruled; the record discloses all that is necessary to uphold the pro con- *590 fesso. The chancery court had ample power, for cause to have opened the^c oonfesso, and let in an answer. No such application was made. We are not disposed to entertain critical objections’ to the form of the decretal order, when exception to it, or relief against it was not taken or applied for in the court below.

Lastly — Is the failure to file with the bill an affidavit of the loss of the note. The general rule as stated by Story, is, “ That the defendant shall have the protection of the affidavit of complainant, of the loss of the instrument, before relief will be granted (it is otherwise when discovery alone is sought).” 1 Story, Eq. Jur., § 82.

The defendant did not specially call the attention of the court, to its absence, and we may infer that it was not presented at the hearing on the demurrer. But the defendant had ninety days after the demurrer was overruled, to put in an answer. Here was a second place to have insisted upon it, as could have been done; yet the defendant admits that he has no plea to offer against the relief, by allowing the bill to be taken for confessed, thereby admitting the allegation to be true, that the note had been consumed in the conflagration of Durden’s house. Lord Eldon, in Greenway ex parte, 6 Yes., jr., 812, speaking of what he calls the “new doctrine,” in courts of law, of dispensing with the profert of a lost bond: “ The difficulty about the indemnity did not arise, for there is the finding of the jury, upon the evidence that the note is lost; which is conclusive between the parties.” So, also, the solemn admission worked by th& pro oonfesso of the averment that the instrument has been destroyed by fire, is conclusive between the parties.

We think, in all the circumstances of this case, the exception for the want of the affidavit (taken most probably for the first time in this court), comes too late, and that we are waranted in holding that it has been waived. We do not wish to be understood as holding that a demurrer to a bill, does not bring into canvass the substantial merits of the bill, *591 and that upon general demurrer, without special assignment, the “ right ” of the complainant to the relief sought, is not to be considered and passed upon. The substantial equity of the complainant is the foreclosure of the security for payment of his debt. As a precaution, the defendant could have exacted from Mm a pledge of his conscience, to the truth of the loss of the note. If he suffers the case to progress to final decree, without pressing this “ precaution ” upon the complainant and the court, we think he ought to be considered as waiving it.

Let the decree be affirmed.