Summary
In Powers v. Interstate Trust Banking Company, 163 Miss. 30, 139 So. 318, 319, the deed of trust provided the beneficiary might appoint a trustee should the named trustee "not be present or not be willing or not be able to act as trustee.
Summary of this case from Webb v. BilesOpinion
No. 29787.
February 1, 1932. Suggestion of Error Overruled April 14, 1932.
1. MORTGAGES.
That trustee named in trust deed had been appointed agent for service of process in state upon beneficiary, and that he had appeared in proceedings in behalf of beneficiary as attorney, would not per se disqualify him as trustee.
2. MORTGAGES.
Where trust deed authorized beneficiary to appoint substituted trustee, assignee had no power to do so.
3. MORTGAGES.
Power of appointing substituted trustee must be strictly construed.
APPEAL from chancery court of Wilkinson county. HON. R.W. CUTRER, Chancellor.
D.C. Bramlette, of Woodville, for appellant.
In the construction of powers, the intention of the parties, if compatible with law, governs the court. But that intention is to be collected from the instrument creating the power. And with regard to the appointment of a new trustee the power authorizing it should express plainly the cases in which a new trustee may be appointed, and it should embrace every event that can render such appointment necessary, such as the neglect or refusal of the trustee to act, his death, absence from the country, wish to retire from the office, or incapacity to discharge its duties. Hill on Trustees, 251. The appointment of a new trustee under a power cannot properly be made, unless the terms of the power clearly and distinctly authorize the appointment in the particular event which may have occurred.
In this case, it cannot, with any propriety, be said that Robert A. Clarke, the trustee appointed by the party creating the power, neglects or refuses to execute the trust, and as by the terms of the power there is no other event which would authorize the appointment of a new trustee by the cestui que trust, we arrive at the conclusion that Jane E. Pickett, had no power to appoint James V. Clarke a trustee to execute the trust. But upon the death of the trustee appointed by the party executing the deed of trust, she should have resorted to a court of chancery for the appointment of a new trustee to execute the trust.
Guion v. Pickett, 42 Miss. 77.
The power of appointing a substituted trustee is strictly construed, and must be literally complied with.
West v. Union Naval Stores Co., 117 Miss. 152; Bonner v. Lessly, 61 Miss. 392; McNeill v. Lee, 79 Miss. 455.
There is no inherent right in the creditor who is secured by a deed in trust to appoint a trustee in the event of death, resignation, or refusal to act. It is because express authority is conferred on the cestui que trust to name another trustee that such power can be exerted.
Clark v. Wilson, 53 Miss. 119; Ready v. Hamm, 46 Miss. 422.
Tucker Tucker, of Woodville, for appellees.
It has been the practice in this state to appoint in writing a substituted trustee to execute a chattel mortgage, this appointment may be written on the margin of the recorded deed, or on the margin of the original deed, or may be written on a slip of paper, or by a written request addressed to the chancery clerk to make the substitution.
Stringer v. Price, 143 Miss. 189, 108 So. 431.
Upon a breach of the condition contained in the mortgage the legal title vests so completely in the mortgagee that all the rights incident to ownership and possession in law at once arise. By taking possession of the property and selling it at public sale upon due notice, he will then extinguish every right and interest at law of the mortgagor.
3 Pomeroy's Equity Jurisprudence, section 1229.
Where a chattel mortgage securing a single debt is taken to a third person named as a trustee, he is merely an agent of the creditor, and the latter may maintain a suit to foreclose in his own name.
11 Corpus Juris, p. 698, sec. 491; Section 2128, Code of 1930; Stringer v. Price, 143 Miss. 189, 108 So. 431; Elder v. Jones, 106 Miss. 489, 64 So. 212; Bowman, Trustee, v. Robert, 58 Miss. 126.
The original trustee was ethically, morally and legally unable to execute the trust for the appellee against the interest of his clients and principal.
The trust deed does provide that the legal holder of said note and the legal holder only may request the trustee or any substituted trustee at once to advertise and sell said property.
A mortgage of personal property vests the right in the mortgagee, subject to be defeated on the performance of the condition, and if the condition be not performed the right becomes absolute.
O'Reilly v. Hendricks, 2 Smedes Marshall's, page 397.
The authority to appoint a substituted trustee and the request to sell the personal property was assigned by Eicher-Woodland Lumber Company and traveled with the note and deed of trust.
It is contrary to the policy of the law, and also contrary to the principles of equity, to permit an attorney at law to occupy at the same time and in the same transaction the antagonistic and wholly incompatible position as adviser of his client concerning a pending litigation threatening the title to his property in opposition to the title of his clients.
2 R.C.L., p. 471, sec. 47; Spinks v. Davis, 32 Miss. 152; 6 Corpus Juris, sec. 49, p. 590.
Green, Green Jackson, of Jackson, for appellees.
When this note of the H.B. Curry Lumber Company was endorsed and delivered by the Eicher-Woodland Lumber Company to the bank through the Hill Powers Finance Corporation, this trust deed, as an incident, passed to the Interstate Trust Banking Company and the Eicher-Woodland Lumber Company thereafter had no right, title or interest, either in the note and/or in the mortgage securing the same.
Garbert v. Wallace, 66 Miss. 618, 5 So. 394; Tanner v. Hicks, 4 S. M. 294; Ross v. Pascagoula Ice Co., 72 Miss. 608, 18 So. 364; Kausler v. Ford, 47 Miss. 289; Kerr v. Moore, 54 Miss. 288; Taylor v. Nelson, 54 Miss. 524; Newman v. Bank, 66 Miss. 323; Powell v. Smith, 74 Miss. 151.
The right to enjoin a threatened foreclosure appertained not to a stranger, but was personal in the H.B. Curry Lumber Company, who, alone, under the circumstances here delineated, could thereof complain, and it has herein not complained but validated that done.
Illinois Central R. Co. v. Hawkins, 65 Miss. 200; Motor Co. v. Commercial Body Co., 138 So. 592; 3 Jones on Mortgages (8 Ed.), sec. 2451, p. 994; Hicks v. Dowdy, 81 So. 37.
The acquiescence of the mortgagor in the conduct of the sale, and particularly in the terms of it, will cure any defect in this respect, and give validity to it.
3 Jones on Mortgages, sec. 2406, p. 929; Kelley v. Skates, 117 Miss. 886.
In short, with the right to condition by consent of the power of sale, the H.B. Curry Lumber Company has acquiesced in that thus done, there is no right in the Eicher-Woodland Lumber Company, a stranger, to thereof complain.
Hyman v. Peck, 33 Miss. 186; Duke v. Clark, 58 Miss. 474; Wormell v. Nason, 83 N.C. 36; Coxe v. Blandon, 1 Watts Reports, 535; Norris v. Hall, 82 N.W. 835; Herbert v. Hanrick, 16 Ala. 599; Gabbert v. Wallace, 66 Miss. 618; Wilson v. Alabama Great Southern R. Co., 77 Miss. 714; Dulion v. Folkes, 153 Miss. 91, 120 So. 437; Board of Supervisors v. Young, 156 Miss. 644, 126 So. 469.
The appellant, John T. Powers, was appointed receiver of the Eicher-Woodland Lumber Company, Incorporated, a corporation of the state of Louisiana, in a proceeding in that state. Subsequently, he was appointed ancillary receiver by the chancery court of Wilkinson county, Mississippi, for property of said company in the state of Mississippi.
The receiver filed a bill for injunction against the Interstate Trust Banking Company, and Clay B. Tucker, substituted trustee in a deed of trust executed by the H.B. Curry Lumber Company, Inc., to D.C. Bramlette, trustee, to secure an alleged indebtedness due to the Eicher-Woodland Lumber Company, Inc., which said deed of trust and note securing the same were assigned by Eicher-Woodland Lumber Company, Inc., to the Hill-Powers Finance Company, and assigned by that company to the Interstate Trust Banking Company to secure a note due by said finance company to the Interstate Trust Banking Company.
These transactions occurred prior to the appointment of the receiver.
The Eicher-Woodland Lumber Company having no funds to further finance themselves, the appellant (John T. Powers) was appointed receiver, and applied to the chancery court of Wilkinson county, Mississippi, for leave to file a bill enjoining the sale of property conveyed in the deed of trust by Clay B. Tucker, substituted trustee, and the court granted such leave. Thereupon, the bill in the present case was filed alleging that the deed of trust was void and fraudulent, and that the H.B. Curry Lumber Company did not own the property therein conveyed; and also alleging that the substituted trustee had no power to execute the trust because not lawfully authorized thereunto.
The provision in the deed of trust pertinent to the appointment of the substituted trustee reads as follows: "It is understood and agreed that Eicher-Woodland Lumber Company, Inc., may, at any time, appoint any other person trustee in the place of said D.C. Bramlette, should said D.C. Bramlette not be present or not be willing or not be able to act as trustee, said succeeding trustee to have full power to act as trustee under the foregoing provisions."
The writing undertaking to appoint Clay B. Tucker as substituted trustee reads as follows:
"By virtue of the authority vested in the holder of the note described in a certain chattel mortgage executed by H.B. Curry Lumber Company, Inc., to the Eicher-Woodland Lumber Company, Inc., bearing date of 15th day of November, 1930, which said mortgage is recorded in Chattel Mortgage Record Book No. 65 at page 11, in the Chancery Clerk's office of Wilkinson county, Mississippi. The Interstate Trust and Banking Company, the legal holder of the note described in said mortgage, hereby appoint and substitute Clay B. Tucker as trustee instead and in place of D.C. Bramlette named in said mortgage.
"Witness the name and seal of the Interstate Trust and Banking Company, signed and affixed by Chas. H. Hogan, its cashier, this the 20th day of January, A.D. 1931.
"INTERSTATE TRUST BANKING Co., "Per CHAS. H. HOGAN, Cashier."
It was admitted in the answer to the bill of complaint that there was no notice to D.C. Bramlette, or request to act as trustee, nor was there any recital of his inability, unwillingness, or incapacity to act as such.
The defendants, in answer to the bill of complaint, set up that the Interstate Trust Banking Company was the holder, in good faith, for value, before maturity, and protected as such, and that if the alleged deed of trust by the H.B. Curry Lumber Company to the Eicher-Woodland Lumber Company, Inc., was void, then that John T. Powers, the person appointed receiver, was an officer and stockholder in each of said companies above mentioned, and the Hill-Powers Finance Corporation, and that he negotiated the loan with the Interstate Trust Banking Company, and that they relied upon him as to the validity of said instrument because of his connection with said concerns and his reputation as a financier, and that he assured them that these matters had been passed upon by competent lawyers. The defendants, however, denied the allegations with reference to fraud and invalidity of the deed of trust, and prayed for a judgment against John T. Powers, individually, or as receiver, in case the deed of trust was adjudged void.
The cross-bill did not pray in the alternative for the appointment of a trustee by the court to foreclose the deed of trust, nor that there be a foreclosure decree, should it be adjudged that Clay B. Tucker, substituted trustee, was acting without authority.
On the hearing, the case was tried on the bill, answer, and exhibits, motions to dissolve, cross-bill and answer thereto, and proof. There was no preliminary motion to dissolve the injunction. John T. Powers, individually, was not made a party to the suit, nor John T. Powers, receiver.
There was a demurrer to the cross-bill which was sustained, but the injunction was dissolved and three hundred dollars attorney's fees allowed in said decree, and, in addition thereto, five per cent. of the amount of the note given to the Interstate Trust Banking Company was allowed against the receiver, and Clay B. Tucker was authorized and directed to sell the property embraced in the deed of trust. From this decree this appeal is prosecuted.
We find it necessary only to consider the point in reference to the legality of the appointment of the substituted trustee and his act in reference thereto. From a reading of the power to appoint a trustee above quoted, it will be seen that Eicher-Woodland Lumber Company alone was authorized to make the appointment. No power was conferred upon the assignees, or the holder of the note through assignment, to make such appointment; and, from a reading of the alleged appointment of such substituted trustee by the Interstate Trust Banking Company, it will be seen that there is no recital of the happening of any event upon which the power could be exercised. And it is admitted in the answer that no such recital was made, and that there was no knowledge upon the part of the Interstate Trust Banking Company that Bramlette would not, or that he was unwilling, or unable, to act as such trustee. They merely assume that Bramlette would not, or could not, from the fact that he had been appointed agent for the service of process in Mississippi upon the Eicher-Woodland Lumber Company, Inc., and that he had appeared in a proceeding therefor in behalf of said company as an attorney. Neither of these things would per se disqualify said Bramlette as a trustee, but, even if they did, the Interstate Trust Banking Company had no power to appoint a substituted trustee, no such power having been conferred upon it by the instrument, and the right not having passed to it by law under the assignment.
In the case of Guion v. Pickett, 42 Miss. 77, it was said: "In the construction of powers, the intention of the parties, if compatible with law, governs the court. But that intention is to be collected from the instrument creating the power. And with regard to the appointment of a new trustee, the power authorizing it should express plainly the cases in which a new trustee may be appointed, and it should embrace every event that can render such appointment necessary, — such as the neglect or refusal of the trustee to act, his death, absence from the country, wish to retire from the office, or incapacity to discharge its duties. Hill on Trustees, 251. The appointment of a new trustee under a power cannot properly be made, unless the terms of the power clearly and distinctly authorize the appointment in the particular event which may have occurred. In this case, it cannot, with any propriety, be said that Robert A. Clarke, the trustee appoined by the party creating the power, neglects or refuses to execute the trust, and as by the terms of the power there is no other event which would authorize the appointment of a new trustee by the cestui-que trust, we arrive at the conclusion that Jane E. Pickett had no power to appoint James B. Clarke a trustee to execute the trust. But upon the death of the trustee appointed by the party executing the deed of trust, she should have resorted to a court of chancery for the appointment of a new trustee to execute the trust."
This court has uniformly held that the power of appointing a substituted trustee is to be strictly construed. West v. Union Naval Stores Co., 117 Miss. 153, 77 So. 961; Bonner v. Lessley, 61 Miss. 392; and McNeill v. Lee, 79 Miss. 455, 30 So. 821. Many other authorities to the same effect could be cited.
It was error, therefore, for the chancellor to dissolve the injunction sued out, and the judgment of the court below will be reversed and the case remanded to the court below.
Reversed and remanded.