1. A deed of land, with a power of sale, to secure the payment
of a debt, whether made to the creditor or a third person is in
equity a mortgage, if there is left a right to redeem on payment of
such debt.
2. Sales under such a power have no validity unless made in
strict conformity to the prescribed directions. Therefore a sale
made on a notice of six weeks, instead of twelve, as required by
the mortgage and the statute of the state where the lands are
situate, is absolutely void and does not divest the right of
redemption.
3. A person holding the strict legal title, with no other right
than a lien fur a given sum, who sells the land to innocent
purchasers must account to the owners of the equity of redemption
for all he receives beyond that sum.
Page 97 U. S. 69
The original transaction which gave rise to the present suit was
a sale by John Shillaber of about three thousand acres of land in
the State of Illinois to John Robinson, the appellee. The contract
was evidenced by a written agreement by which it appears that
Robinson, in part payment of the Illinois land, was to convey to
Shillaber three different parcels of land lying in the State of New
York -- one in Kings, one in Sullivan, and one in Essex County.
On this contract, a suit in the nature of a bill for specific
performance was brought, in the Circuit Court of Ogle County,
Illinois, by Robinson against Shillaber. The latter having
subsequently died, his sole heir, Theodore Shillaber, was
substituted as defendant. The suit resulted in a decree which,
among other things, established an indebtedness of Shillaber to
Robinson, on final accounting, of $4,249.58, and ordered that, on
the payment of this sum, Robinson should convey to Shillaber the
lands in New York already mentioned. In order that the whole matter
should be finally disposed of, the decree then ordered that
Robinson and wife should make and deposit with the clerk of the
court a good and sufficient conveyance for said lands, as an
escrow, to be delivered to Shillaber on his payment of the sum
aforesaid within ninety days. It further provided that if the money
was not paid by Shillaber within that time, Robinson should convey
the lands in trust to Silas Noble, who "should proceed to sell the
same, in such manner, and after giving such reasonable notice of
the time and place of such sale, as might be usual or provided by
law in the State of New York," and out of the proceeds pay the
expenses of the trust and the money due Robinson, with interest,
and hold the remainder, if any, subject to the order of the
court.
Shillaber did not pay the money as ordered by the decree.
Robinson then made the deed of trust to Noble in strict accordance
with the terms of the decree, and Noble, after giving notice of
sale, by publication once a week for six weeks successively in the
"Brooklyn Standard," sold, at public auction, on the sixteenth day
of March, 1861, the lands to John A. Robinson, for the sum of
$1,950, and made to him a conveyance of
Page 97 U. S. 70
the same. Said John A. Robinson purchased the lands for the
benefit of John Robinson. Neither the deed from John Robinson to
Noble nor that from the latter to John A. Robinson was placed upon
record.
Since that time and before the commencement of the present suit,
John Robinson sold all these lands to divers and sundry individuals
for sums amounting in the aggregate to $9,628.
The present suit was commenced in November, 1870, in the Circuit
Court for the Eastern District of New York by Theodore Shillaber
against John Robinson, requiring him to account for the value of
the New York lands on the ground that he had never acquired any
other title to them than that which he held when the decree of the
Illinois court was made, and that, since the purchasers from him
were innocent purchasers, without notice of Shillaber's rights,
their title was perfect and Robinson was liable to him on a final
settlement for the value of the lands less the sum which Shillaber
owed him, as ascertained by the decree in the Illinois court.
The court, on hearing, dismissed the bill, whereupon Shillaber
appealed here.
The provisions of the New York Revised Statutes regarding
notice, are as follows:
"SEC. 3. Notice that such mortgage will be foreclosed by a sale
of the mortgaged premises or some part of them shall be given as
follows:"
"(1) By publishing the same for twelve weeks successively, at
least once in each week, in a newspaper printed in the county where
the premises intended to be sold shall be situated, or, if such
premises shall be situated in two or more counties, in a newspaper
printed in either of them."
"(2) By affixing a copy of such notice, at least twelve weeks
prior to the time therein specified for the sale, on the outward
door of the building where the county courts are directed to be
held in the county where the premises are situated, or, if there be
two or more such buildings, then on the outward door of that which
shall be nearest the premises. And by delivering a copy of such
notice at least twelve weeks prior to the time therein specified
for the sale to the clerk of the county in which the mortgaged
premises are situated, who shall immediately affix the same in a
book prepared and kept by him for that purpose, and who shall also
enter in said
Page 97 U. S. 71
book at the bottom of such notice the time of receiving and
affixing the same, duly subscribed by said clerk, and shall index
such notice to the name of the mortgagor, for which service the
clerk shall be entitled to a fee of twenty-five cents."
"(3) By serving a copy of such notice at least fourteen days
prior to the time therein specified for the sale upon the mortgagor
or his personal representatives and upon the subsequent grantees
and mortgagees of the premises, whose conveyance and mortgage shall
be upon record at the time of the first publication of the notice,
and upon all persons having a lien by or under a judgment or decree
upon the mortgaged premises subsequent to such mortgage, personally
or by leaving the same at their dwelling house in charge of some
person of suitable age or by serving a copy of such notice upon
said persons at least twenty-eight days prior to the time therein
specified for the sale by depositing the same in the post office,
properly folded and directed to the said persons at their
respective places of residence
Page 97 U. S. 76
"
MR. JUSTICE MILLER, after stating the case, delivered the
opinion of the Court.
The principal, in fact the only, defense which merits any
consideration in this case is that by the trust deed which Robinson
made to Noble under the decree of the court, and by the sale which
Noble made in conformity to the terms of the decree and of that
deed, Shillaber's rights were completely divested in the land, and
since it did not bring, at that sale, as much money as was due to
Robinson, which, by the terms of both the decree and the deed of
trust, was to be paid to him out of the proceeds of that sale,
nothing was left for Shillaber in the matter.
The decree in the Illinois suit, in which Theodore Shillaber had
appeared after his father's death, is binding and conclusive on
both parties. The deed of trust made by Robinson to Noble is in
accordance with the decree and conferred an authority on him to
sell the land. The purpose of this sale, as expressed in the deed
of trust and the decree, was to pay to Robinson the $4,249.58 which
was a first lien on the land, and the balance into the court for
the use of Shillaber.
Much discussion has been had in the case as to the nature of the
conveyance to Noble, one party insisting that it is a simple
Page 97 U. S. 77
mortgage with power of sale and the other that it is, under the
statutes of New York, the creation of a valid trust in lands. The
point of this discussion is found in the question whether the sale
by Noble, under that instrument, was valid or was void. The counsel
of defendant insists that Noble became vested with a perfect title
to the land by the deed of Robinson, and that his sale and
conveyance are valid whether he pursued the direction of the deed
in regard to advertising or not, and that if any such advertising
were necessary, there was no usual notice, nor any provided by law,
for such sales in the State of New York.
It is shown by the evidence that Noble did publish a notice that
the three pieces of land in the three different counties would be
sold on a day mentioned at Montague Hall in the City of Brooklyn.
This notice was published for six weeks preceding the day appointed
for the sale in the "Brooklyn Standard," a weekly paper printed in
Kings County. But the statutes of New York then in force prescribed
publication of such notice for twelve weeks successively before the
sale.
If the instrument under which Noble acted is a mortgage with
power of sale, it is beyond dispute that the sale is void because
it was not made in conformity with the terms on which alone he was
authorized to sell. That the sale under such circumstances is void
is too well established to admit of controversy. We refer specially
to the recent case in this court of
Bigler
v. Waller, 14 Wall. 302. The list of authorities
cited by the appellant are to the same effect.
Without entering into the argument of the question whether the
instrument under which Noble acted is in all respects a mortgage,
the case of
Lawrence v. Farmers' Loan & Trust Co., 13
N.Y. 200, shows that it is an instrument which, for the purposes of
the sale under the power which it contains, comes under the
provisions of the statute we have cited as regards publication of
notice. It also decides that a sale made without such notice is
void. It is the well settled doctrine of courts of equity that a
conveyance of land for the purpose of securing payment of a sum of
money is a mortgage if it leaves a right to redeem upon payment of
the debt. If there is no power of sale, the equity of redemption
remains until it is foreclosed by
Page 97 U. S. 78
a suit in chancery or by some other mode recognized by law. If
there is a power of sale, whether in the creditor or in some third
person to whom the conveyance is made for that purpose, it is still
in effect a mortgage, though in form a deed of trust, and may be
foreclosed by sale in pursuance of the terms in which the power is
conferred, or by suit in chancery. These instruments generally give
specific directions regarding the notice to be given, and of the
time, place, and terms of the sale. In some states the statute
prescribes the manner of giving this notice, and in such case it
must be complied with. In either case, the validity of the sale
being wholly dependent on the power conferred by the instrument, a
strict compliance with its terms is essential.
If this is not a mortgage to which the notice of the New York
statute is applicable, we do not see that the defendant's position
is improved by that circumstance, for there is then no provision
for a sale or foreclosure of the equity of Shillaber but by a
decree of an equity court. This has never been had, and it still
remains that there has been no valid execution of the trust reposed
in Noble by the deed. If the matter had remained in this condition,
Shillaber would, on payment to Robinson of the $4,249.58, with
interest, have had a right enforceable in this suit to have a
conveyance of the New York land by Noble to him. But neither the
conveyance by Robinson, which remained an escrow, nor that to Noble
was ever placed on record, and Robinson, in whom, according to the
records of the proper counties in New York, the title still
remained, sold all these lands to persons who, as innocent
purchasers for a valuable consideration, now hold them by a good
title. This title is equally beyond the reach of Robinson, of
Shillaber, and of the court. Indeed, although Robinson alleges in
his answer that the purchase of John A. Robinson was made for his
benefit, he seems to have attached no importance to it; for he does
not aver that John A. Robinson ever conveyed to him, nor does he,
while giving copies of all the deeds on which he relies, including
the deed to John A. Robinson, show any evidence of a conveyance
from John A. Robinson to him.
The defendant, therefore, when he sold and conveyed this land to
the parties who now hold it under him, did it in violation
Page 97 U. S. 79
of the rights of Shillaber as settled by the Illinois decree. By
that decree, Robinson had no right to sell. By the conveyance made
to Noble under that decree, he had nothing left in the New York
lands but a lien for his $4,249.58. The sale by Noble was void, and
conferred no rights on Robinson whatever. His belief in its
validity did not change the matter. By availing himself of the
title which was in him originally, and which appeared by the
records to be there yet, he sold the lands for twice as much as his
lien, and received the money. That he must account to Shillaber in
some way is too plain for argument. If Shillaber could, by paying
his debt to Robinson, redeem the lands from their present holders,
it is the relief which he would prefer, and to which as against
Robinson he would be entitled. But Robinson has put this out of his
power by a wrongful sale and conveyance to innocent purchasers.
There is no evidence to show that the lands are now worth any
more than Robinson sold them for; no evidence that they were worth
more when he sold them. His answer gives the precise sum received
by him for each parcel of land and the date when he received it. He
probably believed the land was his own when he sold it, but, as we
have seen, he must be considered as holding such title as he had in
trust, first for his own debt due from Shillaber, and the remainder
for the use of Shillaber. Treating him, then, as trustee, he must
account for the money received for the lands according to the
trusts on which he held them. The decree of the circuit court
dismissing Shillaber's bill must be reversed and the case remanded
to that court with instructions to render a decree on the basis of
charging Robinson with the sums received by him for the lands, and
interest thereon until the day of the decree, deducting therefrom
the sum found due him from Shillaber by the Illinois decree, with
interest to the same time, and rendering a decree for the
difference in favor of Shillaber against Robinson, with costs, and
it is
So ordered.
