Nathans v. Steinmeyer

The opinion of the Court was delivered by

Mr. Justice Gary.

This is an action to foreclose a mortgage of real estate in the city of Charleston. The respondents made application for an order appointing a receiver on the ground that the mortgaged premises were • about to be sold in payment of delinquent taxes. This order was granted. Subsequently the case was heard upon the merits. The defense was partial failure of consideration by reason of a paramount outstanding title. This defense was overruled, as there had been no eviction, and as a mistake of title cannot be relieved against, if it is a misconception of law. A detailed statement of the facts is set forth in the decree of his Honor, Judge Aldrich.

The appellant filed the following exceptions to the order of his Honor, Judge Buchanan: “ist. Because at the time of the making of the order last named the said mortgagor had no interest in the said mortgaged premises, or in the rents thereof. 2d. Because at the time of the making of the order last named the plaintiffs herein had no lien upon the rents and income arising from said mortgaged premises. 3d. Because there is no provision in said deed of mortgage warranting the appointment of a receiver.”

1 The view which we take of the questions raised by these exceptions renders it unnecessary to consider whether the Court, in the exercise of its equitable jurisdiction, will interfere with the owner of the fee, by the appointment of a receiver, at the instance of a mortgagee, when the rents and profits are not pledged, and there is no provision in the mortgage warranting such appointment. It is well settled that if the mortgagee has an otherwise adequate remedy, equity will not interfere in the premises. Section 334 of the Rev. Stat. is as follows: “Sec. 334. Any person holding a lien by way of, or any interest in' the nature of, a mortgage upon any property, the subject of taxation, upon which the mortgagor shall have failed to pay the tax, may at any time before the sale thereof for delinquent taxes, as hereinafter provided, pay the tax, with any costs, penalties or assessments which may have accrued thereon; and thereupon he shall be entitled as against the mortgagor, his representative, privies or assigns, to include the amount so paid, and all interests thereafter accruing thereon, in the debt secured by his mortgage.” It is not made to appear that the property was insufficient to pay the mortgage, nor were there any other facts brought out, showing that the remedy offered by section 334 was inadequate. Under these circumstances, equity will not lend its aid. His Honor, the Circuit Judge, therefore, erred in the appointment of a receiver.

The appellants also excepted to the decree of his Honor, Judge Aldrich, on the following grounds: ‘Tst. Because the said presiding Judge erred in holding that the said defendants could not avail themselves of their defense of failure of consideration prior to their eviction from the said mortgaged premises. 2d. Because the presiding Judge erred in holding that a mistake of title cannot be relieved against, if it is a misconception of law.”

2 We regard the law as settled in this State that neither partial nor total failure of consideration can be set up as a defense on account of a paramount outstanding title, before eviction, and, therefore, see no practical benefit to be derived from commenting on the numerous cases, or tracing the history of this question, which has caused so much trouble by reason of the fact that the Courts of law and equity heretofore entertained different views upon the subject. The reason of the rule is to be found in Abbott v. Allen, 2 Johns. Ch., 519, where Chancellor Kent pertinently asks: “Can this Court proceed to try the validity of the outstanding claim in the absence of the party in whom it is supposed to reside, or must he be brought into Court against his will, to assert or renounce a title which he never asserted, and perhaps never thought of ? I apprehend there is no such doctrine or practice in this Court, and that a previous eviction or trial at law is, as a general rule, indispensable.” This case is cited with approval in the case of Whitworth v. Stuckey, 1 Rich. Eq., 404, and after quoting the language just used, Chancellor Harper proceeds as follows: “I beg leave to throw out some other considerations. Nothing would tend more to the promotion of fraud and litigation than the establishment of a contrary rule. In the frequent fluctuations of the commercial property of the country, fluctuations to which our country seems more liable than any other, there is a corresponding fluctuation in the value of property. He who purchases land at a high price, will be tempted, when there follows a great fall of value, to discover and bring forward some claim which may have the effect of ridding him of his bargain. But this is a betrayal of his vendor’s title, and against good faith. The case has occurred of a vendee who, upon such a fall of property, has been at great expense of time, labor and money in seeking information from individuals and searching public offices, in order to ferret out a paramount title which there was not the remotest probability would ever be presented, which did not appear to be known to the person in whom it was vested, and which there was hardly a probability he would prosecute successfully even if he knew it. This was scarcely less than fraud; yet, according to the doctrine contended for, relief ought to have been granted in such a case, for there was clearly an outstanding title in some one * * * Absurd consequences would follow, if the Court should determine the validity of an outstanding claim, and the alleged claimant should never afterwards prosecute it or should prosecute it unsuccessfully.” This principle was reaffirmed in the recent case of Baum v. Raley, 53 S. C., 32. We do not deem it necessary to add any thing further to the decree of the Circuit Judge, whose conclusions are sustained by the authorities which he cites. (The authorities relied on by Circuit Judge are cited by respondents’ attorneys. — R.)

It is the judgment of the Court that the order appointing a receiver be set aside and that the decree be affirmed.