Summary
In Wright v. Ross, 36 Cal. 414, (1868) in a three to two decision, the Supreme Court of this state decided the point raised in line with the above-cited cases but on a rehearing in a three to two vote, the decision was changed and the court held that the pledgee had the right to purchase the property for his own account and was not accountable for it to the pledgor, but was only accountable for the surplus, if any, over the amount of the pledge.
Summary of this case from Sontag v. SpringerOpinion
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Appeal from the District Court, Twelfth Judicial District, City and County of San Francisco.
On the 12th day of June, 1856, David S. Turner, who was the owner of a lot in the City of San Francisco, borrowed fifty thousand dollars of Stephen A. Wright, and gave him his note therefor, with interest at one and three quarters per cent per month, payable three years from date. Turner, on the same day, executed to Wright a mortgage on the property, to secure the note, which mortgage was, on the 18th of June, 1856, recorded in the proper book of records. The next day after the record of the mortgage Wright sold and assigned it to Benjamin R. Buckelew. This sale to Buckelew was made to enable Buckelew to raise money on the note and mortgage, but that fact was known only to Buckelew and Wright. The assignment was absolute, and was acknowledged and recorded. Buckelew, on the 22d day of November, 1856, borrowed thirty thousand dollars from James Ross, James Phelan, and Michael Phelan, and gave them his note, bearing interest at two per cent per month, payable twelve months from date; and to secure his note, assigned to them the Turner note and mortgage sold to him by Wright.
The assignment from Buckelew to Ross and the Phelans was as follows:
" This indenture, made and entered into this twenty-second day of November, A. D. one thousand eight hundred and fifty-six, witnesseth, that I, Benjamin R. Buckelew, of the County of Marin, in the State of California, in consideration of the sum of thirty thousand dollars, ($ 30,000,) lawful money of the United States, to me in hand paid by James Phelan, Michael Phelan, and James Ross, of the City of San Francisco, parties of the second part, the receipt whereof is hereby acknowledged, have granted, bargained, sold, assigned, transferred, and set over, and by these presents do grant, bargain, sell, assign, transfer, and set over unto the said parties of the second part, their heirs, executors, administrators, and assigns, a certain indenture of mortgage, with the note therein mentioned, bearing date the twelfth day of June, A. D. one thousand eight hundred and fifty-six, made and executed by David S. Turner to one Stephen A. Wright, and by sundry mesne conveyance and assignments assigned to me, the said Benjamin R. Buckelew, party of the first part herein, together with the bond, note, or obligation therein described, and the money due or to grow due thereon, together with the interest; which said mortgage was given to secure the payment of the sum of fifty thousand dollars, with interest thereon at the rate of one and three quarters per cent per month, payable monthly, in [ILLEGIBLE WORD], which said mortgage was made payable in three years from the date thereof, and recorded in the office of the County Recorder of San Francisco County, in Liber Thirty-one of Mortgages, page four hundred and sixty-one, to have and to hold the same unto the said parties of the second part, their heirs, executors, administrators, and assigns, for their use and benefit, subject only to the proviso in said indenture of mortgage mentioned. And I do hereby make, constitute, and appoint the said parties of the second part my true and lawful attorneys irrevocable, in my name or otherwise, but at their own proper costs and charges, to have, use, and take all lawful ways and means for the recovery of the said money and interest, and in case of payment, to discharge the same as fully as I might or could do if these presents were not made. But this indenture is nevertheless made upon the express condition that if the said Benjamin R. Buckelew, his heirs, executors, administrators, or assigns shall well and truly pay, or cause to be paid, unto the said James Phelan, Michael Phelan, and James Ross, their heirs, executors, administrators, or assigns, the sum of thirty thousand dollars, on or before the twenty-second day of November, one thousand eight hundred and fifty-seven, without grace, with interest from the date hereof at the rate of two per cent per month, payable monthly, in advance, on the twenty-second day of each and every month, this indenture shall be void and of no effect; it being made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest as aforesaid, and for no other purpose whatever; and it is expressly agreed and understood by and between the parties hereto, that the said B. R. Buckelew, party of the first part, shall have the privilege of continuing his said note herein given for a further period of twelve months, upon his giving thirty days notice previous to the parties of the second part of his intention so to do; and in case the said James Phelan, Michael Phelan, and James Ross, parties of the second part, their heirs, executors, administrators, and assigns, shall collect and receive the money due on said mortgage, hereby assigned, they shall, after retaining the sum of thirty thousand dollars, with the interest thereon, and their reasonable costs and charges, not to exceed five per cent on the amount of the recovery in that behalf expended, pay the surplus, if any there be, unto the said B. R. Buckelew, his heirs, executors, administrators, or assigns. And it is also agreed by and between the parties to these presents, that the party of the first part shall and will keep the buildings erected and to be erected upon the lands above conveyed, insured against loss by fire, in a sum not less than fifteen thousand dollars, and assign the policy and certificates thereof to the said parties of the second part, their heirs, executors, administrators, or assigns.
" And in default thereof, it shall be lawful for the said parties of the second part, their heirs, executors, administrators, or assigns, to effect such insurance, and the premium and premiums paid for effecting the same shall be a lien upon the said mortgaged premises, added to the amount of the said notes hereinbefore mentioned and secured by these presents; and the said party of the first part doth hereby covenant to and with the said parties of the second part, that there is now due and owing upon the said note and mortgage first above mentioned the sum of fifty thousand dollars.
" And it is hereby agreed that it shall be lawful for the said parties of the second part, their heirs, executors, administrators, or assigns, to pay and discharge, at maturity, all such taxes, or assessments, liens, or other incumbrances now subsisting or hereafter to be laid or imposed upon said lot of land and premises, and which may be in effect a prior charge thereupon to these presents, and for such payments shall be allowed interest, at the rate of three per cent per month; such payments and interest shall be considered as secured by these presents, and a charge upon said lots of land and premises, shall be repayable on demand, and may be deducted from the proceeds of the sale above mentioned. And the said party of the first part further covenants and agrees to and with the said parties of the second part, to pay all ordinary taxes and assessments which shall or may be imposed upon the mortgage or the moneys hereby secured during its continuance; and in default thereof, the said parties of the second part shall pay and discharge the same, and the sum so paid shall bear interest at the rate of three per cent per month, and shall be considered as secured by these presents, and be a lien upon said premises, and shall be deducted from the proceeds of the sale thereof above mentioned.
" In witness whereof, the said party of the first part hath hereunto set his hand and seal the day and year first above written. B. R. Buckelew. [l. s.]"
This assignment was duly acknowledged and recorded on the 24th of November, 1856.
At the time of this assignment Buckelew delivered the Turner note and mortgage to Ross and the Phelans, who afterwards retained the same. On the 24th of January, 1857, Buckelew, who had not paid Ross and the Phelans, made an assignment to Stephen A. Wright of whatever interest remained to him in said note and mortgage and the property therein described, and on the 26th of December, 1860, Stephen A. assigned the same to Attmore Wright. Both these assignments were acknowledged and recorded about the time they were made. Just before this action was commenced, Stephen A. also conveyed by deed to Attmore his interest in the lot. It does not appear that any consideration passed. Said Attmore was the original plaintiff in this action, but died pending the suit, and his executor, Stephen A. Wright, was substituted as plaintiff. James and Michael Phelan sold their interest in the Turner note and mortgage to Ross before October 13th, 1857. On the last named day Ross commenced an action to foreclose the Turner mortgage, and obtained a decree on the thirteenth of November following, and on the ninth day of December following bought the property at a Sheriff's sale made on his judgment for the sum of ten thousand dollars. Neither of the Wrights nor Buckelew were made parties to this foreclosure. On the 12th day of January, 1858, Ross received from Turner, for a consideration of two hundred and fifty dollars, a deed of sale, and release of the mortgaged property. Ross commenced receiving the rents and profits of the property on the 9th day of December, 1857, and on the 12th day of January, 1858, entered into possession of the same.
On the 16th day of May, 1857, Isaac A. Moody commenced an action against said Turner to enforce a mechanic's lien on the lot and the buildings thereon described in the Turner mortgage, and obtained a judgment, and had an order of sale issued to the Sheriff, who sold the property, on the 18th day of September, 1857, to said Moody, for twenty-five dollars, and gave him a certificate of purchase. Moody's lien was subsequent to the lien of the Turner mortgage. On the 11th of November, 1858, said Moody, for the sum of six hundred and fifty dollars, assigned and transferred his certificate of sale to W. W. Stow, who acted therein as the agent of Ross, who advanced the money to Stow for that purpose. On the 18th of November, 1858, the Sheriff made to Stow, as the assignee of Moody, a deed of the property, and on the 20th of April, 1859, Stow deeded to Ross. On the 20th of May, 1861, Ross borrowed from the Savings and Loan Society the sum of forty-five thousand dollars, and gave his note, payable, twenty thousand dollars in four years by equal monthly installments, and twenty-five thousand dollars in two years, with interest, and to secure the same gave the said society a mortgage on the property. Before making said loan said Savings and Loan Society, by its officers, examined the Records of Mortgages in the Recorder's office in the City and County of San Francisco, and there saw and read the record of said mortgage of D. S. Turner to Stephen A. Wright, with the marginal references thereto and thereon, which said marginal references were as follows:
" For Assignment see Liber 30 of Morts., page 682.
" For Re-assignment see Liber 32 of Morts., page 69.
" For Assignment see this Book of Morts., page 677.
" For Assignment see Liber 32 of Morts., pp. 330, 334, 335.
" For Assignment see Liber 32 of Morts., page 584."
And also the record of the assignment of said mortgage from Benjamin R. Buckelew to Stephen A. Wright, in Liber 32 of Mortgages, page 584; and also the record of the assignment of the same from Stephen A. Wright to Attmore R. Wright, in Liber 60 of Mortgages, on page 578. They made no other or further inquiry respecting said assignments, or any of them, and had no other notice, and were, otherwise than by the information given by said records, ignorant of the said assignment of B. R. Buckelew to Stephen A. Wright, of 24th January, 1857, and were ignorant that James Ross ever held the said note and mortgage made by D. S. Turner on any other terms or conditions than those expressed in the assignment of November 22d, 1856, from said Buckelew to said James Ross, James Phelan, and Michael Phelan, recorded November 24th, 1856, in Liber 32 of Mortgages, page 330, which record they saw and read.
This action was commenced on the 11th day of January, 1862, to have Ross declared the trustee of Wright, and to compel him to account for the rents and profits of the property. Plaintiff claimed that when the rents, over and above disbursements, paid Ross the thirty thousand dollars he loaned to Buckelew, and interest, he was entitled to a conveyance of the property from Ross, and averred that if, on an account being taken, it should be found that Ross was not paid, he was ready to pay him what was due. The Savings and Loan Society was made a defendant under an allegation that at the date of its mortgage it had notice of plaintiff's rights, and plaintiff claimed that said mortgage was subordinate and subject to his right as cestui que trust. Pending the action Ross died, and his executrix, Ann Ross, was substituted as defendant in his place.
The case was referred to a referee, who reported a judgment for defendants, and the Court below gave judgment accordingly. The plaintiff appealed.
COUNSEL:
Whether the assignment from Buckelew to the Phelans was a pledge or chattel mortgage, was the principal question in this case.
When the payment of money is secured by a chattel mortgage, the amount secured does not constitute a debt to which the mortgaged property is collateral, but its payment is a condition to be performed, in default of which the title becomes absolute at law, and no debt subsists against the mortgagor. It is not, except in a very limited sense, if at all, a debt either before or after default. When the money to be paid is a subsisting liability after default, and the security is collateral to it, as it must necessarily be while there is a liability, the security is not mortgaged but pledged. And when any act is to be done on a particular day, and personal property is mortgaged to secure its performance, and default is made, the title to the mortgaged chattel which passed by the mortgage becomes absolute, and the mortgagor is discharged fromperformance. But when the thing assigned remains as security after the default, there must necessarily remain an obligation to perform, and the title cannot pass while the obligation to perform exists, and the property stands as security for its performance. We submit that he who holds any property as mere security for the payment of a debt, does not hold it as owner, but only has a lien upon it, and default cannot transmit the title to him. A default can only make that absolute which was before conditional. And these are principles which are not affected by the character of the property, whether real or personal. And the doctrines laid down in Dewey v. Bowman, 8 Cal. 145, fully sustains these conclusions.
Did the title in the Turner note and mortgage at once pass to Ross and Phelan, or was it merely intended as security for the note of thirty thousand dollars? If it was intended as a mortgage of the Turner note and mortgage, and to pass the legal title thereto, then all the risk of loss and chance of gain were thrown upon Ross and Phelan. If the real estate which gave them value had become worthless, Turner being insolvent, Buckelew would not then have been liable to Rossupon his note. But it would seem clear that this could never have been the intention of the parties any more in this than in the Dewey and Bowman case. The assignment, as in that case, was made to secure the payment of the debt. The payment of the debt was not made a condition subsequent to the absolute vesting of the securities, but the securities were made collateral to the debt, to make sure its payment after default. The question then presents itself, whether the doctrines laid down in Dewey v. Bowman, and the distinctions therein taken as to mortgages and pledges, as stated therein, are now open to controversy. That case has been relied upon as properly stating these distinctions for more than ten years. It has been repeatedly referred to as authority by this Court while this case has been under consideration before it. In Gay v. Moss, 24 Cal. 125, it is referred to as authority upon this precise question. We respectfully submit that the distinctions taken in that opinion should not now be departed from, and more especially as they place all securities upon a common level and reasonable grounds. It was because a mortgage of real estate was made only to secure the paymentof money, that it was denied the effect of a conveyance at law, and held to be a mere pledge. (McMillan v. Richards, 9 Cal. 411.) And it is respectfully submitted that no possible reason can exist why in the case of personal property, held as security, a payment of the debt, whether before or after default, will not operate as an extinguishment of the rights of the creditor in the property held as security, as well as in the case of real property held in the same way. It seems difficult to understand how the mortgagee of a chattel, who has already a title which has become absolute by default, can become the purchaser at any sale of that property. Whose interest in the chattel is it that is sold, that of the mortgagee or mortgagor? If it is the mortgagor's interest, then he must have the title, which makes it not a mortgage but a pledge. It is not disputed that Ross might have made Wright, the then owner of the pledged property, a party to the foreclosure suit, and sought by his bill and obtained by his decree a complete foreclosure of the mortgage, as against Turner, and the pledge of it, as against Wright. Now, we submit that upon the terms of the assignment to Ross there is nodoubt that Wright, the assignee of Buckelew, might have paid or tendered Ross his money on the first day of November, 1857, after default, and thereby discharged Buckelew's obligation to Ross, and have been substituted as a party to the foreclosure suit, or otherwise restored to the exact position that he would have occupied if he had paid the thirty thousand dollar note before default. But not if it was a mortgage, for then he could not pay his debt and release his security without going into a Court of equity. The decree then would have directed a sale of the mortgaged land, which alone gave value to the pledge, and that out of the proceeds Ross be first paid his thirty thousand dollar note; second, that Wright be paid the balance, to the amount due on his fifty thousand dollar note; and finally, that the balance after paying the fifty thousand dollar note be paid to Turner. And the usual clause would also have been inserted, allowing any of the parties to purchase at the sale. For each would have had equal opportunity to protect his interests at such sale. But not so when the sale is made without any demand of the pledgor, or notice that the only thing which gave value to the chattelwould be sold. In Gay v. Moss, this Court hold that the assignment is a pledge, because it was made only as security collateral to a debt. In Dewey v. Bowman, it is held that when chattels stand as security for the payment of a debt, which subsists as such after default, it cannot constitute a mortgage. A mortgage is more than a mere security--it is a conditional sale of the property, not a lien upon it. It is, in a very limited sense, security before default, but not at all afterwards.
S. F. & J. Reynolds, for Appellant.
Patterson, Wallace & Stow, for Respondents.
The assignment to Ross being a mortgage, and not a simple pledge, vested the title to the Turner note and mortgage in Ross. The note of Buckelew to Ross, to secure which that assignment, by way of mortgage, was made, fell due on the 27th of November, 1857. It not being paid on that day, the title of Ross to the Turner note and mortgage became absolute. " A mortgage is a pledge, and more; for it is an absolute pledge, to become an absolute interest if not redeemed at a certain time." (Jones v. Smith, 2 Vesey, Jr. 378; 2 Story's Eq. Jur., Sec. 1,030; Edwards on Bailments, 192; Ferguson v. Lee, 9 Wend. 259.)
Stress is laid uponthe circumstance that when Ross proceeded to foreclose the mortgage against Turner, he did not make either Buckelew or Stephen A. Wright or Attmore R. Wright parties to the foreclosure suit, and it is claimed by the appellant that his position or right, as now asserted here, is different and better than it would have been if Buckelew or his assignee for the time being had been made a party to the foreclosure proceedings. We submit that if Buckelew or Wright had, either of them, been a party to the foreclosure suit, the right to redeem from the transfer of the mortgage to Ross would have been wholly unaffected by such foreclosure suit, and the relative position of Ross and Wright, after the proceedings to foreclosure had terminated in a decree, would have been wholly unaffected by the decree. Buckelew or his assignee had a right originally to redeem from the assignment of the Turner note to Ross. After a decree foreclosing that mortgage, Buckelew, or his assignee, though made a party to the decree, would have neither gained nor lost any right thereby. In the case of Hoyt v. Martense, 16 N.Y. 233, this proposition was distinctly presented and decided by the Court of Appeals of NewYork. Upon this point the Court say:
" But I do not understand how or upon what principle the rights of Hoyt, the plaintiff in this action, are affected by his being a party to the foreclosure suit. The assignment to Martense was in effect a mortgage of the mortgage. The object of the action in favor of Hoyt and Martense was solely to foreclose the equity of redemption of Corbitt, the original mortgagor, in the mortgaged premises, and has no reference whatever to the right of Hoyt to redeem the mortgage by payment of his debt to Martense. Hoyt's right of redemption was wholly unaffected by the foreclosure and sale."
The title of Buckelew, and of his assignee, Stephen A. Wright, therefore, was, irrespective of any foreclosure proceedings, divested on the 27th of November, 1857, and turned into a mere right to redeem, " which may be asserted by the mortgagor, if he brings his bill to redeem within a reasonable time." (2 Story's Eq. Jur., Sec. 1,031.)
On the 27th of November, 1861, the note of Buckelew to Ross became barred by lapse of time; on that day the right of Buckelew or his assignee to redeem from the mortgage to Ross became likewise barred. The remedies were mutualand concurrent, and they ceased at the same time. (Waterman v. Brown, 31 Penn. State, 163.) " The right to foreclose and the right to redeem are reciprocal and commensurable." (Cauffman v. Sayre, 2 B. Monroe, Ky. 206.) And this language of Mr. Chief Justice Robertson is quoted approvingly by Mr. Hilliard in his work on mortgages. (2 Hill. on Morts. 1.) In Koch v. Briggs, 14 Cal. 262, this necessary mutuality and reciprocity are recognized by Mr. Chief Justice Field. (See, also, Lord v. Morris, 18 Cal. 482; McCarthy v. White, 21 Cal. 495; Grattan v. Wiggins, 23 Cal. 34, 35; Cunningham v. Hawkins, 24 Cal. 403.)
But let us, for the purpose of the argument merely, concede that the transaction between Buckelew and Ross was a pledge pure. It was a pledge to be controlled in its disposition by the express written agreement made on the 22d of November, 1856, in which it was stipulated that the pledgor might redeem by the 27th of November, 1857. On that day Ross' right of action against Buckelew to collect the debt accrued, and on the 28th of November, 1861, that right became barred by lapse of time. The corresponding right of Buckelew to maintain an action toredeem the pledge became in like manner barred on the 28th day of November, 1861, and we are not able to see why the principle announced in Cunningham v. Hawkins, supra , that remedies as between mortgagor and mortgagee are mutual, should not apply as well to pledgor and pledgee, for the pledgor, like the mortgagor, has a " mere right of redemption." (Hart v. Burton, 7 J. J. Marsh. 323; Thornhill v. Gilmer, 4 S. & M. 163.)
JUDGES: At the October Term, 1867, Mr. Chief Justice Currey delivered the following opinion, in which Mr. Justice Rhodes and Mr. Justice Sanderson concurred, Mr. Justice Sawyer and Mr. Justice Shafter dissenting.
OPINION
CURREY, Judge
A rehearing was asked and granted after Mr. Chief Justice Currey and Mr. Justice Shafter had left the Bench, which came on to be heard at the October Term, 1868, when the following opinion was delivered by Mr. Justice Crockett:
The principal question in this case is, whether the instrument from Buckelew to Ross and Phelan was a pledge or a chattel mortgage, or a mere assignment in trust, as contradistinguished from either. The line of distinction between a pledge and chattel mortgage, whilst well defined in theory, is sometimes difficult in application to the facts of the transaction. This case presents a striking illustration of the difficulty.
The chief distinctions between the two at common law were, that in a pledge the title did not pass to the pledgee, who held only a lien on the property, and in all cases the possession must accompany the pledge; whilst by a chattel mortgage the title of the mortgagee became absolute at law, on the default of the mortgagor, and it was not essential to the validity of the instrument that possession of the mortgaged property should be delivered. Nevertheless, when the transaction is evidenced by a written instrument, as in this case, it often becomes difficult to decide, on the face of the paper, whether it was intended as a pledge or a mortgage. Whether it be the one or the other, the object and design of it, in all cases, is to secure the payment of money, or the performance of some act by the maker of the instrument, or some one else, for whom he undertakes. But whilst the general office to be performed by each is the same, to wit: to secure the payment of money or the performance of some other act, the consequences resulting from a failure to perform are widely different in the two cases. In the case of a pledge the title remains in the pledgor, after condition broken, with a right to redeem at any time before a sale of the property; and if the property be sold by the pledgee, in satisfaction of his demand, he cannot become the purchaser at his own sale. But in the case of a chattel mortgage, the title of the mortgagee became absolute at law, on the default of the mortgagor; and on the foreclosure of the mortgage, the mortgagee was at liberty to become the purchaser. In this and similar cases the difficulty lies in determining, on the face of the instrument, whether the parties intended it to be a pledge or a mortgage. There is no set form of words for either, and the intent is to be deduced from the whole instrument, and all its provisions taken together.
The subject matter of the transaction in this case was a note and mortgage on real estate made by D. S. Turner, and which were placed by Buckelew in the hands of Ross and Phelan, to secure the payment to them of Buckelew's note for thirty thousand dollars, with interest.
There is no room for doubt that a note and mortgage of that character may become the subject of either a pledge or mortgage. They are but choses in action, and it is well settled that choses in action may be pledged. (Story on Bailments, Secs. 290-297; Edw. on Bailments, 197; Wilson v. Little, 2 Comst. 443.)
To make such a pledge available to the pledgee, there must necessarily accompany the pledge a power to assign the note and mortgage, in case of a sale of them, and to release the mortgage on satisfaction of it, otherwise it would not be possible for the pledgee, on a sale, to convey the legal title to the purchaser, or on a satisfaction of the mortgage to release it of record. But the instrument in question contains more than a mere authority from Buckelew to assign the note and mortgage to a purchaser, and to discharge the mortgage on satisfaction. It contains also a formal assignment to Ross and Phelan, by which they were invested with the legal title, and with full authority to take all proper steps for collection of the debt, and the release of the mortgage on the satisfaction thereof.
So far the instrument partakes of the character of a chattel mortgage, which, in granting part, conveys the legal title to the mortgage, and which is followed by a defeasance declaring the conditions on which the conveyance is to become void. This instrument contains both the absolute grant or assignment and a defeasance in the usual form. But the defeasance is followed by a provision to the effect that the instrument is " made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest as aforesaid, and for no other purpose whatever; " and it is insisted by counsel that these words repel the idea that the instrument was intended as a mortgage, and go strongly to fortify the proposition that it was only a pledge, or at most an assignment in trust. But we are unable to perceive the significance of these words in that light. Whether it be construed to be a pledge, a mortgage, or an assignment in trust, these words would have equal significance, and would be equally true as applied to the transaction. Whatever we may term the instrument, and however we may classify it, it is obvious that it was " made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest as aforesaid, and for no other purpose whatever." The whole instrument, even without the aid of these words, establishes clearly that it was intended only as a security, and for " no other purpose whatever." This provision, therefore, can have no significance in determining the character of the instrument. It is the common practice to recite in mortgages that the instrument is intended only as a security, though these words are superfluous when the intent sufficiently appears from other portions of the instrument.
There is also a provision to the effect that on the collection by Ross and Phelan of the note and mortgage made by Turner, they are to account to Buckelew for the excess, after retaining the thirty thousand dollars and interest due from Buckelew, together with the costs of collection; and counsel maintain that this provision proves that Buckelew was to retain an interest in the note and mortgage, even after default made in the payment of his own note; and hence that the transaction was a pledge and not a mortgage. This argument is founded on the fact that, in case of a pledge, the title remains in the pledgor, even after default made; whereas, in the case of a chattel mortgage, the title of the mortgage becomes absolute at law on the default of the mortgagor. Hence the argument that, inasmuch as the instrument provides for a payment of the surplus to Buckelew, it follows, as it is claimed that he retained an interest in the property after default made, and that for this reason it was a pledge, and not a mortgage.
This argument, however, is more specious than sound. If it had been in strict form a chattel mortgage, with a provision for the payment of the surplus to the mortgagor, would this of itself have converted it into a pledge? We think not. For whilst the title of the mortgagee would become absolute at law on default made, it is not controverted that the mortgagor could still redeem in equity. The provision for payment of the surplus is only expressing in words a right secured to the mortgagor by a Court of equity, if the instrument had been silent in that respect. It is none the less a mortgage because the parties have expressed in terms what a Court of equity would otherwise have implied, to wit: that the mortgagor was entitled to the surplus, after payment of the mortgaged debt, interest, and costs.
We are fortified in the opinion that the instrument was intended as a mortgage, by the fact that it is so denominated by the parties to it. One of the provisions is that it shall be lawful for Ross and Phelan to effect insurance on the buildings included in the mortgage from Turner, and that the premium paid therefor " shall be a lien upon the said mortgaged premises, added to the amount of the said notes hereinbefore mentioned and secured by these presents." The " mortgaged premises" referred to must of necessity be the note and mortgage of Turner, and not the real estate included in the Turner mortgage, on which it was not in the power of Buckelew to impose a new lien in favor of Ross and Phelan.
On the whole, we conclude that the instrument in question has all the distinguishing characteristics of a chattel mortgage, and was so intended by the parties to it. It follows that Ross had the lawful right to purchase, for his own account, at the foreclosure sale, and in the absence of fraud, the purchase inured to his own benefit.
But if the instrument be not, strictly speaking, a chattel mortgage, we are, nevertheless, of opinion, that on a fair construction of it, under whatsoever classification it may fall, Ross had the right to purchase and hold, for his own account, the property in the Turner mortgage, at a fair judicial sale, under the decree of foreclosure.
The legal title to the note and mortgage was not only conveyed to him, but he was expressly authorized " to have, use, and take all lawful ways and means for the recovery of said money and interest." This included the power to collect it by legal process, and to do whatever was proper and necessary to make the mortgaged property available for the payment of the debt. It was clearly within the contemplation of the parties that the foreclosure of the mortgage and a sale of the mortgaged property might become necessary, and Ross was clothed with full authority to accomplish that result. Was it contemplated by the parties, in the event of a foreclosure of the Turner mortgage, that Ross should not have the right to purchase the property for his own account, at a fair judicial sale? Was it within the scope of the contract, that in case of a purchase by him, at such sale, he was to hold the title only as a security for his debt, and subject to redemption by Buckelew in case Buckelew saw fit to redeem; but if he elected not to redeem, then that Ross should be forced to hold the property as his own at the price paid for it? Was it understood between them that if Ross should purchase at the foreclosure sale, Buckelew was to have the right to claim the benefit of the purchase, if it turned out to be an advantageous one, or reject it if he elected to do so? There is nothing in the contract to justify the belief that the parties contemplated anything of the kind. On the contrary, it is evident that Ross and Phelan, in their capacity of creditors, retained the right to do whatever was necessary and proper to procure satisfaction of the debt due to them from Buckelew; and, as a means to that end, it was obviously within the contemplation of the parties that they should have the right to foreclose the Turner mortgage; and if they should elect to do so, to purchase for their own account the mortgaged property, holding the surplus, if any, in trust for Buckelew. This, in our opinion, was the only trust created by the instrument, except in so far as they were bound to the use of due diligence for the collection of the Turner note and mortgage. It has not been claimed, and could not be maintained, that under the contract it was imperative on Ross to purchase at the foreclosure sale, whether he deemed it to his advantage to do so or not. If he had failed to purchase at any price, Buckelew could not have complained in the absence of fraud.
On the other hand, having elected to purchase at that sale, as a legitimate method of procuring payment pro tanto, of the debt due to him from Buckelew, he is entitled to the exclusive benefit of the purchase, unless by the terms of the contract a trust is created, which denies to Ross the usual right of a creditor to purchase the property of his debtor at a fair judicial sale. We think the contract not only fails to create such a trust, but, on the contrary, tends strongly to the conclusion that Ross was not thereby intended to be deprived of any of his rights as a creditor, including the right to purchase for his exclusive benefit the mortgaged property at the foreclosure sale.
The view we have taken of the case renders it unnecessary to consider the other questions presented in the record.
Judgment affirmed.