Gaines v. Allen

1. Contract — Mortgage—Power of Sale — Ph-rorolviousonfa.ee of instrument— , How construed. — A .mortgage with power of sale recited that in case of default . inpayment of the mortgage debt “the party of the first part,” (who according to the phraseology of the deed was the mortgagor,) should proceed to sell, and provided further, that the mortgagee, naming him, should apply the proceeds. Held, that the intention was to confer a power of sale on the mortgagee, and that the error was an obvious one on the face of the instrument; and that therefore, it did not require for its removal, the introduction of external evidence. 1 2. Agency — Mortgage, sale under — Disability of mortgagee to purchase attaches to his agent. — The same disability as to purchase at the mortgage sale attaches to the agent of the mortgagee for the collection of the debt as to the mortgagee himself. 3. Mortgages — Sales by marshal — Agency—Right of mortgagee to purchase.— Where a mortgage provides that the sale in case of default may be made by the mortgagee, or in case of his refusal to act, by the marshal, the mortgagee) and marshal are, for the purposes of making the sale, co-trustees, and the mortgagee cannot, by refusing to make the sale, and thereby procuring it to be made by the marshal, relieve himself of his disability to purchase at the sale. 4. Mortgages — Purchase at sale by mortgagee — Equity of redemption. — It is the settled law that where a mortgagee buys the property, at a sale under the power given in the mortgage, the equity of redemption still subsists in the mortgagor.

Appeal from Jackson Circuit Court. I. The court may conjecture that by mistake “first part” was written for “second part.” But the mistake has not been corrected. Until the instrument be reformed the contract can be enforced only according to its terms, at law and in equity. The court acts on it as it is. (Linton vs. Boly. 12 Mo., 568 ; Young vs. Casson, 48 Mo., 262; McClurg vs. Phillips, 49 Mo.} 316.) A court of chancery would not correct the mistake, no matter how clearly proved, because it was not necessary, and no proof could raise an equity for reformation. The mortgage could have been foreclosed under the statute, at law or in equity, as it is. As the marshal had a power to sell, it was not necessary that Allen should have one. (1 Sto. Eq. Jur., § 141; Henderson vs. Dickey, 35 Mo., 126.) There are case-s where a mistake will be disregarded, even at law, and effect be given to the instrument the same as if the mistake had not been made, or it had been corrected. These are cases of clear and obvious mistake apparent on the face of the document, so that the'paper corrects the error. This case is not, however, one of that class. (Wilson vs. Wilson, 5 II. of Lords, 66; Kerr on Fraud and Mistake, p. 41Y.) The object of the parties was to confer a power to foreclose the mortgage. This was done. Therefore a court of law neither would nor could ■by construction correct the alleged mistake, any more than a court of equity would or could. In neither case was there any reason for correcting the mistake, if any, so as to give a power different from the letter of the mortgage. II. If Allen had power under the mortgage to sell, he had, too, the right to buy at Hayden’s sale in person, or by Smith; and Smith, his agent, was hot precluded from buying on his own account. “Where the power to sell is conferred upon a third person the cestui que trust may purchase as freely as any other person.” (2 Am. Law Reg. N. S., 128, and cases cited; Miltenberger vs. Morrison, 46 Mo., 251.) III. At most, Allen was in a double relation to the mortgagors. 1st. As creditor having a lien on the land as security. 2d. As trustee of a power to sell to pay the debt. He could act in virtue of either or both relations. He acted by reason of one relation. Why were his rights abridged because the other relation existed, when he did nothing by reason thereof ? This was not like a purchase'by one trustee from a co-trustee. Allen and Hayden were not in any sense co-trustees. They could not act together in selling. Neither could control the other selling. Can any one doubt that Hayden could have bought if Allen had sold? The rule and the reason thereof, allowing a cestui que trxist in an ordinary deed of trust' to secure money, to buy, when the trustee sells, and a mortgagee to buy, when a sheriff sells on execution to foreclose a mortgage, applies in this case. (Kirkwood vs. Thompson, 2 DeGex, Jones & Smith, 613; Shaw vs. Bunny, Id., p. 468 ; Chambers vs. Waters, 3 Sim. Ch. 42; Roberts vs. Fleming, 53 111., 196; Walthal vs. Rives, 34 Ala., 95; Harrison vs. Roberts, 6 Fla., .711, is to the same effect} Kerr on Fraud and Mistake, Am. ed. 1872, p. 162.) I. Sales made by trustees being a harsh mode of disposing bf the equity of redemption, should be watched by the courts with a jealous eye, and should not be sustained unless conducted in all fairness and integrity. (Good vs. Comfort, 39 Mo., 32S.) II. Allen by the mortgage had a power coupled with an interest. (Hunt vs. Rousmauier, 8 Wheat., 204; Barnum vs. Messerve, 8 Allen, 158.) HI. The marshal by the mortgage had simply a naked power to sell, and whether he acted or not depended upon the will of Allen. According to the position of defendants, if Allen wished to shirk the duties voluntarily assumed by him, and so rigidly imposed upon him when assumed, he had only to will that the marshal should act. Then in that event, he who carried in himself the legal title to the land in question (8 Allen, 158), and who was by the instrument compelled to distribute, in any event, the proceeds of the sale, could thereby divest himself of the power, simply, and then act in hostility to the interests of those who gave him the power and interest both ; at one time under the instrument he is bound by the strictest requirements, at another, and under the same instrament, when tlie mortgagees are “in a greater or less degree in the power and at the mercy of the creditor,” (Mc-Nees vs. Swaney, infra) by his own motion, no one •consenting thereto, he is freed from all such obligations, and this too, in the face of the law which clearly says that when a trust is created and assumed it cannot lightly be thrown off. (1 Yol. Leading Cases in Equity ; Hare and Wallace Notes, 2d ed., 161.) The defendants seem to argue that because Allen is not compelled to make the sale, but can direct another to make it. his trust ends when he so directs. By the act of the par ties of the first part he is given a trust which he accepts, and having accepted ho thereby binds himself to act not only for himself but for said parties; (Chesley vs. Chesley, 49 Mo., 540,) and in such a position it becomes his duty to make the land bring as much as possible, and his private interests are in no event to come in conflict with his duty; (McNees vs. Swaney, 50 Mo., 388 ; Thornton vs. Irwin, 43 Mo.) 153,) yet, as claimed by defendants, Allen, by simply getting the marshal to make the sale, changes position and stands as other purchasers, interested to buy the land as cheaply as possible. But the law which says that a trustee or person standing in a situation of trust or confidence shall not purchase or deal with the subject matter of his trust for his own benefit, without the consent of his cestui que trust is absolute, universal and is subject to no qualification. (Conger vs. King, 11 Barb., 363; Armstrong vs. Houston’s Heirs, 8 Ohio, 553 ; Thornton v. Irwin, supra) Under the mortgage in question the marshal derived his authority by the instrument itself and by the act of Allen requesting him to act. IY. The expression in the condition of the mortgage “party of the first part” is plainly a clerical error and one that would be treated in a court of law as though it read “party of the second partif such would be the case in a suit at law, the reasons are much stronger that it should be so treated in equity. There was therefore no necessity for a suit in equity to reform the same. (Kerr oil Frauds and Mistakes, 4L7, and authorities cited.) The mortgage conferred upon Allen or the marshal of the Kansas City Court of Common Pleas the power of sale, and upon Allen alone the power to distribute the money; he therefore became and was a trustee, and a purchase made by him at a sale made by the marshal, is voidable and will be set aside upon the application of the mortgagors, and they be allowed to redeem. (NcNees vs. Swaney, 50 Mo., 393 ; Johnson vs. Bennett, 39 Barb., 237; Yoorhies vs. Presbyterian Ch., 8 Barb., 142,) and cases cited. It has been repeatedly held that when there are two or more trustees at a sale made by them, one of the trustees could not buy, even though a fair price was paid for the property. It may even be in excess of its value. (Davoue vs. Fanning, 2 John. Gin, 261; "Wade vs. ITarber, 3 Yerg., 353.) In this case Allen and Hayden, were co-trustees. It is true that either could act! If Allen sold, Hayden had no authority or interest, but if Hayden, the then marshal, sold, Allen still had a duty to perform, coupled with an interest. Hayden under the deed could sell and make a deed that was all. He could not everi retain so much money in his hands. (Campbell vs. Johnson, 1 Sandf., 148; Fox vs. McEeth, White & Tudor’s Leading Cases, vol. 1, top page 172, ed. of 1859, and Am. notes ; Armstrong vs. Houston’s Heirs, 8 Ohio, 562 ; Win vs. Dillon, 27 Miss., 494.) Y. There could be no reason for giving the power of sale to the mortgagors, who were the parties of the first part. They already possessed that power, and'were fully authorized at any time to sell even before forfeiture. It was their land and they had the lawful right to sell at any time before the sale under the mortgage, and had they done so and paid the debt, then Allen’s interest in the land ceased. The court could treat the deed as though it read “party of the. second part,” without first reforming the mortgage in suit expressly for that purpose. In Kerr on Fraud and Mistake, 417, it is clearly and distinctly stated, that where it is manifest on the face of the deed that a mistake was made, a court of law would read the deed as though no mistake ever existed, orín other words would correct the mistake and not put the parties to the trouble and expense of a suit in equity to correct the deed. The author refers to a number of authorities to sustain him, and by an examination of these authorities, it will be seen that he is well supported.