The question of whether upon this rehearing we should adhere to the result reached by the prevailing opinion at the original hearing (ante, 144, 147-159) seems to be controlled by very simple and fundamental propositions of law. A trust mortgage, like an ordinary mortgage, is contractual in its nature. The terms of such a contract are binding upon the respective parties, including bondholders under trust mortgages. Likewise, in event of *Page 728 foreclosure, the terms of the mortgage are binding upon the court. The above is on the assumption, not here controverted, that the terms of the mortgage under consideration are neither in violation of law nor contrary to public policy.
It is well to bear in mind that we are not here concerned with the foreclosure of a trust mortgage which contains no provision as to the right or power of the trustee to bid at the foreclosure sale. What a court in such a case might lawfully provide in its decree as to the right of the trustee to bid and the manner in which the trustee's bid might be satisfied is wholly beside the point in the instant case. This is true because the trust mortgage now before the court contains an express provision as to the right of the trustee to bid, and the exact manner in which he may satisfy his bid, at least in so far as he attempts to use matured bonds or coupons.
The provision of the decree entered in the circuit court, of which appellant complains, reads:
"If said trustee, or any successor in trust, shall be the purchaser at said sale, it shall not be required to have in itspossession or to present to the circuit court commissionerconducting said sale any bonds and coupons, nor shall it be required to pay any sum in cash except the costs and expenses of said sale."
The plain and simple question before us is this: Does the above quoted portion of the decree violate the contractual provisions found in the trust mortgage? Clearly it does because the trust mortgage in the article which provides for foreclosure and sale contains the following:
"At any such sale any bondholders or coupon holders or any committee or trustee appointed by them or a part of them, or the trustee or any successor in trust herein named may bid for and purchase *Page 729 said mortgaged premises or any part thereof. The purchaser at any such sale shall be entitled in making settlement or payment for the property purchased, to use and apply any bonds and any matured and unpaid coupons hereby secured, by presenting suchbonds and/or coupons in order that there may be creditedthereon the sum apportionable and applicable to the paymentthereof out of the net proceeds of such sale; and thereuponsuch purchaser shall be credited on account of such purchaseprice payable by him, with the sum apportionable and applicableout of such net proceeds to the payment of the bonds andcoupons so presented."
In the above the plain express provision is that one bidding at the foreclosure sale who wishes to use coupons or bonds as a means of payment of his bid may do so "by presenting such bonds and/or coupons in order that there may be credited thereon the sum apportionable," etc. The provision could not have been made plainer by stating the converse, i. e., that a bidder who does not present the bonds or coupons may not use them in satisfying his bid. That the quoted portion of the decree entered in the circuit court is in direct conflict with this provision in the trust mortgage is too plain for argument. This conclusion is not in any way affected by the following provision of the trust mortgage found in a subsequent article having to do with the liabilities, duties, powers and rights of the trustee. This provision reads:
"But all powers and rights of action hereunder may be exercised and enforced at all times by the trustee, at its election, without the possession or production of any of said bonds or coupons, or proof of ownership thereof at any time whatsoever."
Clearly this latter provision should be construed as relating only to the exercise of the general powers *Page 730 of the trustee; and not be distorted into a nullification of the previously quoted express provision as to his right to bid and the limited circumstances under which or the manner in which he is given power to use bonds or coupons to satisfy his bid in whole or in part.
A court should not summarily delete from this trust mortgage the italicized portions first above quoted. We cannot agree that the italicized words mean nothing or that they afford no protection to the mortgagor or the nonappealing bondholders. As to the mortgagor, it was clearly his right to have this provision made a part of his contract. It afforded him the means of knowing which of the bondholders by submitting their bonds at the time of the sale joined with other like bondholders in purchasing the mortgaged premises; and then and there to have indorsed upon the bonds of such holders a proper credit. The question is not narrowed down to the right or power of a bondholder whose bond was not so indorsed to recover from the mortgagor in a suit on the bond. Instead the right is that of the mortgagor, who by the sale of his mortgaged premises has partly paid the bond, to have the indorsement made thereon. He contracted for this in his trust mortgage and he should not be denied the right by a decree of the court. Likewise as to bondholders, while none are appealing, each has the right to have the foreclosure consummated in accordance with the terms of the mortgage. To the bondholder who is not submitting his bond to be used in payment of a bid, it is of some importance to have the record made as provided in the trust mortgage itself as to whose bonds have been so used and to what extent payment has been made by bidding through the trustee at the foreclosure sale. *Page 731
Further, to the bondholder who has not delivered his bond to the trustee to be used in making a bid at the foreclosure sale, the controverted provision of the trust mortgage fairly means that, by declining to permit his bond to be thus used, he saves himself from becoming a joint purchaser of the mortgaged property with other bondholders who have submitted their bonds to be used as the basis of a bid. Under our holding inDetroit Trust Co. v. Stormfeltz-Loveley Co., 257 Mich. 655 (88 A.L.R. 1263), this is a substantial right and one in which such bondholder should be protected.
The trust mortgage provision that all bondholders are liable "in money" for their pro rata share of costs and expenses of foreclosure is but a natural and proper provision applicable to a sale to the trustee in event his bid in whole or in part is to be satisfied by indorsements on bonds or coupons. In that case cash will be required to cover court costs and other expenses of foreclosure. Hence the mortgage fittingly provides that "all the bondholders shall contribute and pay the trustee their respective and proportionate share" of the total of such items, and that each bondholder shall be liable to the trustee for his proportion of moneys paid out by the trustee, and that the trustee shall have a lien therefor upon the interest of the respective bondholders following foreclosure. There is no intimation in this provision of the mortgage that the trustee, in violation of the first above quoted mortgage provision, may bid at the foreclosure sale without producing any and all bonds or coupons which he proposes to use in satisfaction of his bid.
We can arrive at no other conclusion than that the quoted provision of the decree entered in the circuit court arbitrarily deletes from the trust mortgage a *Page 732 portion of its contractual provisions in violation of the rights of the respective parties; and by so doing enables the trustee to make a bid on foreclosure which by necessary implication, at least, is forbidden by the terms of the mortgage itself. The decree entered in the circuit court should be modified in accordance with the prevailing opinion of this court at the original hearing.
NORTH and BUTZEL, JJ., concurred with BUSHNELL, J.