Wirtz v. Gordon

This appeal is from a decree for the partition of 1878 acres of farm land located in Sunflower County and the recovery of the rental value thereof, and involves the question of whether a sale of the land under a deed of trust which was foreclosed in chancery and at which the appellant Arthur M. Wirtz became the purchaser should in effect be declared void and the claim of title asserted by such purchaser under the proceeding be cancelled as a cloud upon the title on the ground that the appellees, Ann F. Gordon and Edmond Gertrude Faison, who were then minors, were not legally served with process in such *Page 869 foreclosure proceedings. Other questions are presented and will be considered in their proper order.

On July 9, 1921, E.H. Faison, father of the appellees and husband of Mrs. Gertrude H. Faison, executed his last will and testament whereby he devised and bequeathed unto his said wife and two children all of his property, real and personal, subject to certain conditions therein mentioned. Among other provisions contained in the will, his wife was appointed as executrix to serve without bond, and vested with the following powers under clauses "c", "d" and "e" of such instrument:

"c. To sell and convey, by warranty deed or otherwise, any land that she may think necessary to pay off and discharge any indebtedness constituting a lien on all or any part thereof, or any other purpose.

"d. To borrow money for the purpose of discharging any indebtedness, constituting a lien on any of the property herein devised, to operate and cultivate the plantation, or in fact for any purpose she deems advisable, execute note or notes evidencing the amount or amounts thus borrowed, and secure the payment thereof by executing a mortgage, deed of trust or other contracts on all or any part of the property, herein devised, real, personal and mixed.

"e. Any deed, mortgage, deed of trust or other contract, affecting the title to all or any part of the property, herein devised, executed by my said wife, as Executrix, shall be held and deemed as conclusive evidence that this last will and testament vested in her full and complete power to execute the same, and the property affected thereby shall be fully bound to the same extent as if legal title thereto had been vested in her."

On November 24, 1922, the testator and his wife executed a deed of trust on the land here involved, in favor of Charles Forman, who was designated as trustee, and Herman Hachmeister, who was designated as successor trustee, for the benefit of George M. Forman Company of Chicago, Illinois, to secure the payment of eighty-four *Page 870 6 1/2% Farm Loan Mortgage Gold Bonds in the principal amount of $84,000, $5,000 of which matured December 15, 1927, the same amount on the 15th day of each and every December thereafter to and including December 15, 1931, the balance, amounting to $59,000, maturing on December 15, 1932, and which deed of trust was duly recorded in said county.

On November 11, 1926, prior to the maturity date of any of the said bonds, the testator E.H. Faison died and left surviving him his wife, the said Mrs. Gertrude H. Faison, and two children, Ann Faison, who afterwards became, by marriage, Ann F. Gordon, and Miss Edmond Gertrude Faison, as his sole heirs.

The last will and testament was duly probated and letters testamentary were granted to the executrix therein named. In due time claims amounting to $10,867 were probated and allowed against the estate, none of which have ever been paid. The executrix, as such, remained in possession of the land from the death of the testator until July 1, 1933, without any payment of either principal or interest having been made on the bonds, and no taxes were paid on the land by her after the year 1929. In the meantime, on April 6, 1931, the entire 1878 acres of land were sold to individuals for the 1930 taxes due and delinquent thereon, and in April 1932 this land was again sold for the 1931 taxes to the State of Mississippi. The period of redemption from the tax sale made on April 6, 1931, for the 1930 taxes, was to expire on April 6, 1933, and the amount required for its redemption amounted to the sum of $3,681.93. The record discloses that prior thereto the executrix had made every effort, acting by herself and through local attorneys, to obtain funds to make this redemption, but was unable to obtain any part thereof; and, failing in such redemption, the title to said land would have matured on April 6, 1933, in the individual tax purchasers, and all title thereto would have been lost both to the holders of the bonds secured by the deed of trust hereinbefore mentioned and to the *Page 871 devisees of the land under the will. It was also shown that the executrix was without money with which to complete the crop on the land for the then current year. When this situation developed Louis M. Watson of Chicago, Illinois, acting on behalf of a Bondholder's Committee which had been formed and of which he was chairman, was finally able to induce the appellant Arthur M. Writz to agree to advance the necessary funds to redeem the land from both of said tax sales, after having been unable to get the other bondholders to make any part of such advances. The deed of trust provides among other things that: "if the Trustee or the legal holder of said bonds or any of them shall, . . . advance or expend any money to save said premises and property from sale or forfeiture for taxes such bondholder shall have a right to consider his advance as an additional indebtedness secured by said trust deed and be reimbursed from the proceeds of any foreclosure sale." Wirtz was on that date the holder and owner of $3,000 of such bonds.

On the last day allowed for the redemption of the land from the tax sale of April 6, 1931, and after Wirtz had been induced to come to Mississippi and investigate the condition and value of the land in question, an agreement was reached between Louis M. Watson, as chairman and representative of the Bondholder's Committee in control of $69,000 of the bonds secured by the deed of trust, and Wirtz and the executrix, whereby Wirtz was to advance the money to redeem the land from said sale; also from the intervening sale made to the State in 1932 for the 1931 taxes, together with the sum of $1,000 to enable the executrix to complete her crop on the land for the year 1933; and whereupon one of the local attorneys who had theretofore endeavored to assist the executrix in raising funds for such purposes was to be employed by Watson on behalf of the successor trustee Herman Hachmeister and the bondholders to file a bill in the chancery court to foreclose the deed of trust by and with the consent of the executrix, and in which proceeding it was *Page 872 agreed that she should be appointed guardian ad litem of the two minor devisees under the will and enter their appearance, and with the understanding that in the event Wirtz, who was advancing the funds aforesaid, should become the purchaser at the foreclosure sale, the executrix would pay to him rent on the land for the remainder of the year, beginning on the date of confirmation of sale, and with the right to repurchase to the same on or before January 1, 1934, by fully reimbursing the purchaser, applying the rent as a credit thereon. At the time this agreement was made the executrix was willing, in the exercise of the power conferred by the will, to execute a deed to Wirtz in lieu of such court proceeding, but both she and Wirtz were advised by such local attorney that she had authority under the will to bind the minors in such chancery proceeding, and that in view of the fact that she had executed junior encumbrances against the land, and that the probated claims were unpaid, it would be necessary that the foreclosure proceeding be conducted in order to convey an unencumbered title to the purchaser.

Accordingly, on April 15, 1933, the bill of complaint was filed by Herman Hachmeister, trustee, and appellant Wirtz, as a bondholder who had advanced money to redeem from tax sales as aforesaid, and process was issued for the executrix and her minor children as defendants, as well as for all junior encumbrancers, all of whom entered their appearance, except that the guardian ad litem undertook to waive the service of process and enter the appearance on behalf of the minors. The land was sold and Wirtz became the purchaser at the sale, made by the chancery clerk as commissioner. When the report of the commissioner came on for hearing on July 1, 1933, the sale was confirmed, the decree reciting that the executrix was present as a witness and requested the confirmation. Thereafter, pursuant to her right to reacquire the land on behalf of herself and the minors, the executrix made application to the Federal Land Bank of *Page 873 New Orleans for a loan for such purpose, but in which effort she was unsuccessful.

Prior to the date of the foreclosure sale Wirtz had acquired twenty-one bonds of the series in addition to the three originally owned, and it was recited by the chancellor in his findings of fact in the present case that the executrix "was to have the remainder of the year 1933 in which to raise money to repurchase the land, the amount being understood to be approximately $40,000.00 covering the bonds held by Wirtz, and which he claimed to own, taxes and amounts paid for the redemption from the tax sales, expenses and purchase price at sale, etc." And the chancellor further found that in the conference relative to the institution of the foreclosure proceeding in chancery. "Mr. Wirtz was advised that under the powers of the will Mrs. Faison had a right to enter appearance and act for the minor heirs." The record discloses that the executrix was present as aforesaid when Wirtz was so advised.

After entering possession of the land Wirtz executed a deed of trust on the same and obtained a loan of $50,000 thereon from the appellant Robert Hanley, and made valuable improvements aggregating the sum of $41,981.31. At the time of the foreclosure sale, there was due and owing on the indebtedness secured by the original deed of trust the sum of approximately $109,678.42, plus accrued interest at 6 1/2% per annum from December 15, 1932, and the taxes advanced by the appellant Wirtz. In his finding of fact in the present suit the chancellor states that: "neither the complainant in this cause, nor Mrs. Gertrude H. Faison, nor any other person in interest had ever offered to redeem from the mortgage, but to the contrary, on or about January 1, 1934, Gertrude H. Faison, as executrix of said will of E.H. Faison, deceased, delivered possession of all the lands in question in this cause to Arthur M. Writz, as the owner thereof." Sixty-nine of the eighty-four bonds were surrendered and cancelled, including twenty-four *Page 874 then owned by Wirtz, upon the distribution of the purchase price paid at the foreclosure sale. The deed of trust provided that the trustee may, and upon the request of the holders of the majority of the bonds, shall, foreclose the equity of redemption by judicial proceeding, etc.

Therefore, without regard to what may be the rights of the holders of the other fifteen bonds — if not bound by the suit filed by their trustee as a representative or class suit in which a decree for the entire indebtedness was rendered — it follows that Wirtz became the equitable assignee, at least pro tanto, of the lien and of the indebtedness to the extent of $69,000 of the bonds, plus taxes and interest, when he purchased at the foreclosure sale, even though such sale should be declared void on account of the want of legal process on the minor heirs in the manner required by Section 2982 of the Code of 1930; and that he succeeded to the rights of a mortgagee in possession from the date of the confirmation of the sale, and with the right to have such indebtedness paid or tendered as a condition precedent to the right of the appellees, Ann F. Gordon and Miss Edmond Gertrude Faison, to enter possession of two-thirds of said land under partition. Moreover, by Section 2128 of the Code of 1930 it is provided that: "Before a sale under a mortgage or deed of trust, the mortgagor or grantor shall be deemed the owner of the legal title of the property conveyed in such mortgage or deed of trust, except as against the mortgagee and his assigns, or the trustee after breach of the condition of such mortgage or deed of trust." The existence of the bonded indebtedness and the validity of the deed of trust on the land is not questioned, and after condition broken the heirs of the grantor therein did not have the right of possession as against either the trustee, or the purchaser who has succeeded to the rights of a mortgagee in possession at a void foreclosure sale, until the indebtedness is tendered or paid; and without which right of possession — essential to tenancy in common — a *Page 875 partition suit is not maintainable. The appellees and appellant Wirtz were not tenants in common of the land, and the same was not subject to partition as prayed for in the bill of complaint filed in this cause by Ann F. Gordon against her sister, Miss Edmond Gertrude Faison, and others, and wherein the decree appealed from was rendered. As against the mortgagors and the devisees under the will of E.H. Faison, deceased, the legal title of the land, together with the right of possession, passed to the trustee by operation of Section 2128 of the Code of 1930 (Section 2438, Hemingway's Code of 1927, Section 2779 of the Code of 1906) at the time of the default long prior to the foreclosure suit of 1933. Buck v. Payne Raines, 52 Miss. 271, and Elder v. Jones,106 Miss. 489, 64 So. 212. Neither can the trustee after condition broken be divested of the legal title and right of possession, nor can the mortgagee in possession after a void foreclosure sale, as equitable assignee of the debt secured, be divested of his equity and right of possession until the debt is tendered or paid. Courts of equity will decline to entertain a bill for relief against an invalid foreclosure sale without a tender or offer to pay the mortgage debt; American F. Land Mortgage Company v. Jefferson, 69 Miss. 770, 12 So. 464, 469, 30 Am. St. Rep. 587; and this requirement to do equity applies to adults and infants alike. Coburn v. Coke, 193 Ala. 364, 368, 69 So. 574; Marx v. Clisby, 130 Ala. 502, 510-512, 30 So. 517; Bunnell v. Bunnell, 111 Ky. 566, 64 S.W. 420, 65 S.W. 607, 23 Ky. Law Rep. 800, 808, 809, 1101; Tindall v. Peterson, 71 Neb. 160, 165, 98 N.W. 688, 99 N.W. 659, 8 Ann. Cas. 721; and In re Porter's Estate, 5 Misc. 274, 25 N.Y.S. 822, 823. As the court stated in the Bunnell v. Bunnell Case, 64 S.W. at page 425, 23 Ky. Law. Rep. pages 800, 809: "However the tender years of this litigant may move the courts to a protecting care of her property rights, they will not be allowed to prevail at the expense of the equities of the other parties; and what would have been required of an adult litigant as his own *Page 876 act, the court will impose on the infant as a condition of its action in her own behalf. `They who seek equity must do equity' applies to all litigants alike." Whether the purchaser in possession under a void foreclosure sale be the mortgagee or a third party, the established rule is that the only right or remedy of the mortgagor or those claiming under him is to redeem the land for the mortgage indebtedness. Helm v. Yerger, 61 Miss. 44, 51; Dickerson v. Thomas, 68 Miss. 156, 158, 8 So. 465; Haggart v. Wilczinski, 5 Cir., 143 F. 22, 26; Romig v. Gillett,187 U.S. 111, 117, 23 S. Ct. 40, 47 L. Ed. 97; Bryan v. Kales,162 U.S. 411, 415, 16 S. Ct. 802, 40 L. Ed. 1020; Burns v. Hiatt,149 Cal. 617, 624, 625, 87 P. 196; Raggio v. Palmtag, 155 Cal. 797, 801, 103 P. 312; Harsh, Guardian v. Griffin, 72 Iowa 608, 609, 610, 34 N.W. 441; Stouffer v. Harlan, 68 Kan. 135, 145, 74 P. 610, 64 L.R.A. 320, 323-324, 104 Am. St. Rep. 396; Stull v. Masilonka, 74 Neb. 309, 321, 104 N.W. 188, 108 N.W. 166; Kaylor v. Kelsey, 91 Neb. 404, 406, 136 N.W. 54, 40 L.R.A., (N.S.), 839, 844, 845; Boschker v. Van Beek, 19 N.D. 104, 109, 122 N.W. 338; Sawyer v. Vermont Loan, etc., Co., 41 Wash. 524, 529, 530, 84 P. 8; 2 Wiltsie on Mortgage Foreclosure, (4 Ed.), Sec. 787; 5 R.C.L. 664 and authorities there cited; 19 R.C.L. 330. In the case of Helm v. Yerger, supra, the mortgagor sought to cancel the trustee's sale as against a mortgagee in possession thereunder, and the court said: "Whether the sale was valid or voidable, the complainant was not entitled to possession of the property. If the purchaser acquired title at the sale, he was entitled to hold possession as owner; if he did not, he was still in possession as mortgagee, and entitled so to continue until the mortgage debt should be fully paid." In the case of Haggart v. Wilczinski, supra, 143 F. 22, the complainants sought to foreclose a mortgage de novo which had been declared void in Allen v. Alliance Trust Company, 84 Miss. 319, 36 So. 285. In upholding the right to again foreclose the court said [page 26]: "The sale under the mortgage . . . *Page 877 having been declared void, it is not denied that the position of the complainants is, in substance, that of mortgagees in possession. . . . It follows, we think, that where a mortgagee obtains possession by suit, or under an irregular, or voidable, or void, foreclosure, after breach of the condition of the mortgage, he has the right to hold possession until his mortgage is paid. The mortgagor cannot deprive him of possession without first paying the debt. Bryan v. Brasius, 162 U.S. 415, 16 S. Ct. 803, 40 L. Ed. 1022; Helm v. Yerger, 61 Miss. 44, 51; Buckley v. Daley, supra [45 Miss. 338, 339]. We have no reason to doubt that this doctrine prevails in Mississippi. . . . This rule, that the mortgagee cannot be deprived of possession by the mortgagor till the debt is paid is applied in cases where the debt secured by the mortgage is barred by the statute of limitations. Bryan v. Brasius, [3 Ariz. 433], 31 P. 519; Id., 162 U.S. 415, 16 S. Ct. 803, 40 L. Ed. 1022." The rule above announced as to the statute of limitations running against the debt in such case was approved by this court in Wall v. Harris, 90 Miss. 671, 44 So. 36, and it was held in Romig v. Gillett, supra, 23 S. Ct. 42, that a purchaser other than the mortgagee at the foreclosure sale, "stands in the shoes of the mortgagee," citing Bryan v. Brasius,162 U.S. 415, 16 S. Ct. 803, 40 L. Ed. 1022. No further citation of authorities should be necessary in support of this requirement of one seeking relief against the effect of an irregular or void foreclosure proceeding where the indebtedness secured by the mortgage is admittedly a valid lien against the land. Since there must be a tenancy in common to justify a decree of partition of the land involved in any partition suit, and the existence of a tenancy in common is dependent upon possession or the right to the possession of the land, it therefore appears that under the authorities hereinbefore cited the appellees, not having the right of possession, cannot maintain the suit at bar. Price v. Crone, 44 Miss. 571; Spight v. Waldron, 51 Miss. 356; 7 R.C.L. 815; 47 C.J. 354; Laughlin v. O'Reiley, *Page 878 92 Miss. 121, 45 So. 193; Tresher v. McElroy, 90 Fla. 372,106 So. 79; Kissel v. Eaton, 64 Ind. 248; Reed v. Reed, 122 Mich. 77, 80 N.W. 996, 80 Am. St. Rep. 541; Harsh, Guardian, v. Griffin,72 Iowa 608, 34 N.W. 441. In the Iowa case, supra, partition was denied to infant heirs of the mortgagor who had not been made parties to the foreclosure suit, and the court said [page 442]: "Surely, it will not be claimed that a mortgagor, or one standing in his shoes, as an heir, can bring an action against the mortgagee to partition the mortgaged land. His only right is to redeem."

The decree of the special chancellor in the case at bar whereby the land was partited in kind so as to allot to Wirtz the one-third interest of the executrix and a one-third interest each to the appellees, Ann F. Gordon and Miss Edmond Gertrude Faison, seems to have attached no particular importance to the circumstance that the indebtedness of $139,918.42 outstanding under the original deed of trust at the time of the rendition of such decree in 1938, was a valid lien against the land, and that no tender thereof or other offer to do equity had been made in the premises.

It is unnecessary that we pass on the question as to whether the appellees were entitled to credit on the indebtedness for the full amount of rental value on the land since July 1, 1933, as assessed by the chancellor in the sum of $10,786.34 each against the appellant Wirtz, nor that we consider the value of improvements, or state the amount of the indebtedness which they should pay to free the land of the lien of the deed of trust, for the reason that we are of the opinion that the foreclosure proceeding in chancery whereby Wirtz became the purchaser of the land was a method adopted by the executrix for the exercise of the powers conferred upon her by the terms of the will hereinbefore set forth. The record discloses, as found by the chancellor, that in addition to the unpaid indebtedness and taxes secured by the deed of trust which was foreclosed in 1933, there was other indebtedness *Page 879 of more than $30,000 with interest thereon for several years against the land, as evidenced by junior trust deeds and notes executed by the executrix under the powers of the will, in addition to the claims probated against the estate and for the payment of which there was no money or personal property belonging to the estate. The effect of such finding of the chancellor is that the equity of redemption in favor of the appellees at the time of the foreclosure sale was of no value whatever, since there is no contention here made that the land was worth at the time of the foreclosure sale, or at this time, a sum in excess of these several indebtednesses, or even in excess of the amount secured by the deed of trust foreclosed. Since the executrix was vested with the power to convey the land by deed or otherwise at a private sale, we see no reason why she could not agree to the entry of what amounted to a consent decree approving a judicial sale made in a foreclose proceeding instituted with her sanction and approval, and the execution of a commissioner's deed to the purchaser in that behalf. Her request as a defendant in such proceeding that the foreclosure sale be confirmed and a commissioner's deed be executed had the same legal efficacy as if she had been a petitioner instead of a defendant, asking for the entry of a decree sanctioning a sale which she was authorized to make under the will. In either case the devisees are not necessary parties in view of the powers granted under the will. In the case of Preston v. Safe Deposit Trust Company,116 Md. 211, 81 A. 523, Ann. Cas. 1913C, 975, the trustee under a will, being doubtful of this power to sell land under the terms thereof, filed, a statutory proceeding and obtained a decree therefor. The proceeding was not in compliance with the essential requirements of the statute, but the decree was upheld under the implied powers of the will, the court saying [page 526]: "The fact that the decree appears to have been founded upon the act of 1868, instead of the implied power contained in the will, is immaterial, since the trustee did *Page 880 in fact possess the power." And in 3 Bogart on Trusts and Trustees, sec. 742, it is said: "If a decree of the court for a sale is void for any reason, but the trustee had an implied power to sell under his trust instrument, the sale will not be subject to attack although made professedly by virtue of the decree." In Reeve v. North Carolina Land Timber Co., 6 Cir., 141 F. 821, where the will involved gave the executor power to sell and convey any part of the land, the court held that this gave such executor the authority to direct the making of a curative sheriff's deed direct to the complainant company which had acquired the testator's equity title, and said [page 834]: "He had ample power under [the] will to sell and convey [the testator's] estate, real and personal, and we see no reason for doubting the validity of his direction to the sheriff to make deed to the complainant company."

While no mention was made in the foreclosure proceedings of the exercise of the power conferred by the will the chancellor in the case at bar found as hereinbefore stated that the purchaser was advised in advance that the executrix had the right, under the powers conferred by the will, to enter appearance and act for the minor heirs, and it is clear that she was acting pursuant to such advice throughout the progress of such proceeding.

It was held in the cases of Yates v. Clark, 56 Miss. 212, Baird v. Boucher, 60 Miss. 326, and Hammett v. Markham, 128 Miss. 39, 90 So. 848, that: "The rule is that, where one has both an estate in and a power over property, and does an act which may be referred either to the the execution of the power or the exercise of his rights as owner, it will be presumed that the act is done by reason of his ownership; but if a conveyance is made, which cannot have full effect except by referring it to an execution of the power, though some estate would pass by reason of his ownership, yet because the conveyance can only have full effect by referring it to the power, this will be done." 90 So. 849. To the same effect are *Page 881 the following cases: Lee v. Simpson, 134 U.S. 572, 10 S. Ct. 631, 33 L. Ed. 1038; Coles v. Kearney, 8 Ohio Dec., Reprint, 733; Lanigan v. Sweany, 53 Ark. 185, 13 S.W. 740; 49 C.J. 1285; Warner v. Connecticut Mut. Life Ins. Co., 109 U.S. 357, 365 et seq., 3 S. Ct. 221, 27 L. Ed. 962; Campbell v. Johnson, 65 Mo. 439, 440; Kirkman v. Wadsworth, 137 N.C. 453, 457, 458, 49 S.E. 962; Young v. Mutual Life Insurance Co., 101 Tenn. 311, 317, 47 S.W. 428; Edens v. Simpson (Tex. Sup.), 17 S.W. 788, 789; Walke v. Moore,95 Va. 729, 739, 30 S.E. 374; 49 C.J. 1294; and 21 R.C.L. 795-799.

It is urged however that the entire agreement pursuant to which the foreclosure proceedings were conducted in 1933 was oral and unenforceable under the statute of frauds, Code 1930, section 3343. The answer to this contention is: (1) that the statute of frauds is a personal privilege of the contracting parties sought to be charged, and is not available to anyone else in a collateral proceeding, Grisham v. Lutric, 76 Miss. 444, 24 So. 169; Chaffe Sons v. Benoit, 60 Miss. 34; 2d that the agreement was fully performed on the part of Wirtz by advancing the tax redemption money and the loan of $1,000 to the executrix, the institution and completion of the foreclosure proceeding as consented to by all of the parties to the agreement, and then on the part of the executrix by the delivery of possession of the land to the purchaser at such sale. Bentley et al. v. Barnes,162 Ala. 524, 50 So. 361, 362; Rovelsky v. Scheuer, 114 Ala. 419, 422, 21 So. 785; Emond v. Robison, 213 Ala. 150, 104 So. 323, 324; Penney v. Norton, 202 Ala. 690, 81 So. 666, 668; Clark Lewis, Inc., v. Gardner, 91 Fla. 1059, 109 So. 192, 193; and 13 C.J. 305.

The ultimate facts and the conclusions of law applicable thereto, hereinbefore stated, render it necessary that the decree of the court below, whereby the land in question was partited and recovery of rents thereon was awarded appellees, be reversed and decree rendered here for appellants.

Reversed and decree here for appellants. *Page 882

ON SUGGESTION OF ERROR. In Banc. Nov. 13, 1939. 192 So. 29.