§ 436. Mortgagee may foreclose in Equity. - Thus are we brought to another remedy, which a mortgagee may pursue at his election; namely, to bring a bill of foreclosure, somewhat as in the case of a real-estate mortgage. And this is his prudent and the ordinary course where the mortgage transaction involves property of considerable value and there are other incumbrances, and parties are interested whose rights cannot readily be ascertained and adjusted.1 The mortgagee of personal property has an equitable lien for the payment of his mortgage debt on the proceeds of its sale by an assignee of the mortgagor for the benefit of creditors. And until a judicial sale can be properly effected, equity is ready to protect the chattels against conversion or destruction.3 § 437. Modern Statutes regulating Foreclosure and Redemption; Special Agreements of Parties, etc. - Furthermore, the foreclosure and redemption of chattel mortgages are at the present day considerably regulated by local statutes. And these statutes partake frequently of both equity and commonlaw principals. Thus, in some States a definite period is allowed after breach of condition for the mortgagor to redeem, say, sixty days; and the mortgagee's title becomes absolute if the debt is not paid by the time this period has expired. Provisions abound, however, requiring a mortgagee's sale after notice, and the payment to the mortgagor of any surplus which may remain after satisfying the mortgage debt.5 real estate has come to be regarded as merely a lien and not a conveyance of the legal title, a chattel mortgage is still regarded as a transfer of the title, and not a mere lien, to a greater extent. Jones Chatt. Mort. § 699, and cases cited. No provision in the mortgage in regard to a sale or payment of the surplus to the mortgagor prevents the title from becoming absolute upon default without a sale. Jones, § 700; 2 Denio, 170; 69 Ill. 371. But the rule is differently stated in some States. 34 Mich. 360. 1 See Bryan v. Robert, 1 Strobh. Eq. 334; Dupuy v. Gibson, 36 Ill. 197; Blakemore v. Taber, 22 Ind. 466; Freeman v. Freeman, 2 C. E. Green, 44; Briggs v. Oliver, 68 N. Y. 336; Jones, §§ 776-788. 2 Wilson v. Gray, 2 Stockt. 323. 3 Freeman v. Freeman, 2 C. E. Green, 44. 4 Winchester v. Ball, 54 Me. 558. See Daniels v. Henderson, 5 Fla. 452. 5 In some States the same statute applies to the foreclosure of both real estate and chattel mortgages. These Foreclosure notices, and the registry of certificates too, are sometimes made matters of legislation.1 Even the mutual contract of the parties may largely determine their respective rights; for, as in real-estate mortgages, it has now become quite customary to insert in the mortgage instrument a power of sale clause, conferring upon the mortgagee the right to a summary sale after giving a prescribed notice. These powers of sale are jealously scrutinized by courts of equity; and yet on the whole they appear to be favorably upheld; 2 as they certainly are in the case of a statutes are by no means uniform in their provisions; but the legislative disposition appears to be to require a sale on default somewhat after the manner observed in pledges. Very little provision is made in these statutes for the redemption of chattel mortgages; that being left rather to equity administration, and the right existing until the statute foreclosure becomes complete. See Jones Chatt. Mort. c. 17, where these statutes are noted at length. Any income derived by the mortgagee from the beneficial use of the mortgaged property ought usually to go to the mortgagor, or towards the extinction of the debt, at least; and though a mortgagee in possession may not be sued at law by the mortgagor for the income he receives from the property, yet the latter is entitled to a fair allowance in this respect with any surplus proceeds which remain over from a sale. good v. Pollard, 17 N. H. 271. Os It would appear that in most parts of this country the mortgagee of a chattel is permitted to purchase it at a sale made under the mortgage, provided the sale be fairly conducted and he act honorably; and, indeed, the tendency is to insert some such permission as this in power-of-sale mortgages, even where the legislature has not already granted it. The purchase would be good at common law, and equity is not likely to interfere with it save on the application of parties interested and when the mortgagee appears to have abused his opportunities. See Bean v. Barney. 10 Iowa, 498; Lyon v. Jones, 6 Humph. 533; Olcott v. Tioga R. R. Co., 27 N. Y. 546; Wright v. Ross, 36 Cal. 414. But see Korns v. Shaffer, 27 Md. 83; Pettibone v. Perkins, 6 Wis. 616; Imboden v. Hunter, 23 Ark. 622. And see Jones, §§ 806810. And whether the mortgaged 1 Taber v. Hamlin, 97 Mass. 489; property be sold with the consent of Hatch v. Bates, 54 Me. 136. 2 See Ashton v. Corrigan, L. R. 13 Eq. 76; Olcott v. Tioga R. R. Co., 27 N. Y. 546; Walker v. Stone, 20 Md. 195; Brightly v. Norton, 3 B. & S. 305; Williams v. Hatch, 38 Ala. 338; Thurber v. Jewett, 3 Mich. 295; Jones Chatt. Mort. §§ 789-821. And the mortgagee, under a power of sale, has reasonable discretion as to the mortgagor, or by way of foreclosure, a mortgagee has the right, unless he has clearly stipulated to the contrary, to apply the proceeds to the payment and satisfaction of the mortgage debt; or, if that debt is payable by instalments, towards the payment of any instalments which may be due, at his option. Masten v. Cummings, 24 Wis. 623; Saunders pledge; nor is it to be presumed that statute directions regarding the mode of sale exclude the mortgage parties from agreeing that sale upon default shall be after some different method. An irregular foreclosure sale may operate as an assignment of the mortgage; and at all events the lien of an unpaid mortgage debt remains. 3 § 438. Mortgagee may pursue Personal Remedies against Mortgagor on Default. As with respect to a pledge, so our present secured creditor may waive or postpone his claim under the mortgage security, and pursue his personal remedies against the mortgagor. His attachment of the mortgage property or of other property in a personal suit to recover his debt is no violation of the mortgagor's rights.* He has, moreover, the same right that a mortgagee of real property has to pursue all his remedies concurrently; suing on the mortgage note and carrying on proceedings at the same time for foreclosure.5 Holding various securities he may avail himself of any or all of them at discretion; deriving, however, but one satisfaction, and permitting the subrogation of securities for purposes of contribution. § 439. Mortgagor's Equity of Redemption. We have already alluded to the mortgagor's equity of redemption; a right which is regarded with increased favor in these days, as constituting his real and beneficial interest in the mort v. McCarthy, 8 Allen, 42. See White 2 Jones Chatt. Mort. §§ 778, 789; Denny v. Van Dusen, 27 Kans. 437. Parties may agree expressly that the mortgagee may sell on default at private sale. Reynolds v. Smith, 28 Kans. 810; 60 Barb. 425. As to permitting a sale without notice, the question of fairness is open to proof. Wylder v. Crane, 53 Ill. 490. Power of sale does not imply power to barter or exchange the property. Edwards v. Cottrell, 43 Iowa, 194. In general the sale under a power must be fair and bonâ fide in order to extinguish the equity of redemption. See Jones, §§ 801-805. Contract may empower to sell before default. 101 Mich. 590. 3 Jones, § 811; Rose v. Page, 82 Mich. 105; 43 Neb. 224. 4 Buck v. Ingersoll, 11 Met. 226; Whitney v. Farrar, 51 Me. 418; Taylor v. Cheever, 6 Gray, 146. Though probably attachment of the mortgaged property abandons one's attitude as mortgagee. 5 Juchter v. Boehm, 63 Ga. 1; Pettibone v. Stevens, 15 Conn. 19; Jones Chatt. Mort. § 758. 6 Ayres v. Wattson, 57 Penn. St. 360; Chapman v. Clough, 6 Vt. 123. to secure. gaged property. The worth of the equity of redemption in mortgaged chattels is substantially the value of those chattels over and above the liability which they are designed If the mortgagee of personal property retains the property after breach of condition, as we have seen he may, without selling, though he have the legal title in the chattels, yet are they always liable to redemption in equity, at the mortgagor's instance, subject of course to lapse of time and laches on his part; and the debt being satisfied, the mortgagee would have no right to retain them longer.1 And if the mortgagee sells the property, the mortgagor is allowed to redeem after the day of forfeiture at any time before foreclosure is completed by equity proceedings or by such sale upon due notice or by some other mode which complies with statute or a just understanding of the parties.2 The surplus proceeds, after satisfaction of the mortgage debt and incidental expenses, ought, after a sale of the property, to be paid over by the mortgagee to the mortgagor. Equity courts are always suspicious of arrangements by means of 1 Freeman v. Freeman, 2 C. E. Green, 44; Story Eq. Jur. § 1031; Doane v. Garretson, 24 Iowa, 351. See, also, supra, p. 534. 2 Ib. It is even held that a mortgagor of chattels in possession has a right to renew his interest in them after breach of the condition of the first mortgage, but before a sale. Smith v. Coolbaugh, 21 Wis. 427. And see Carty v. Fenstemaker, 14 Ohio St. 457. It is held that a mortgagee may, in absence of statutory requirement or express agreement to the contrary, cut off the right of redemption by a sale upon reasonable notice to the mortgagor. Jones, § 707, and cases cited. This doctrine is upheld in New York, and New Jersey, and other States. In the case of a pledge a similar right exists. Supra, § 407. But this statement of the law does not apply to the practice in various States, where the mortgage itself makes no such provision. Jones, ib.; Flanders v. Chamberlain, 24 Mich. 305. A sale of the mortgaged property upon a foreclosure by consent of the parties excludes the equity of redemption and confirms the title of the bona fide purchaser. 39 Barb. 390. But an irregular foreclosure sale operates substantially as an assignment of the mortgage. Walker v. Stone, 20 Md. 195. 3 Parish v. Wheeler, 22 N. Y. 494. And see Flanders v. Thomas, 12 Wis. 410; U. S. Dig. Mortgage, 50; Suppl. ib. 425; Alger v. Farley, 19 Iowa, 518. Nor can a creditor, who has sold chattels under a mortgage from a corporation, excuse himself from crediting the proceeds on the ground that the transaction which furnished the consideration of the mortgage was ultra vires on the part of the corporation. Ib. which the mortgagee pretends to buy in his mortgagor's right of redemption; for in preserving this right lies the debtor's last hope, and, the equity finally extinguished, his interest in the property is gone completely. Any sale of the property by a mortgagee before the time of breach and foreclosure would ordinarily be a conversion and render him liable to the mortgagor's suit.1 But § 440. Payment, Satisfaction, etc., of Mortgage Debt. a mortgage debt, like any other debt, may be extinguished, as by release or payment and satisfaction; and generally whatever extinguishes a mortgage debt extinguishes the mortgage security also. But the extinguishment of a mortgage debt involves questions concerning the intent of parties.2 The payment of the mortgage debt to a mortgagee, by some third party who is under no obligation to make it, will not necessarily operate in satisfaction of it; the intention of this third party in making the payment being regarded. In these and many other respects, the doctrines applicable to debts in general will be found to apply.4 § 441. Mortgage of a Ship or Vessel. Before we leave the general subject of chattel mortgages, it may be well to speak briefly concerning the mortgage and hypothecation of ships and vessels. These are sometimes mortgaged like other personal property; in which case they appear to come under the usual rules concerning registry, save so far as statutes of any State, in this respect, may be thought to interfere with those of the United States; the navigation 1 Spaulding v. Barnes, 4 Gray, 330. 2 See Harrington v. Brittan, 23 Wis. 541; Bryant v. Pollard, 10 Allen, 81; Packard v. Kingman, 11 Iowa, 219; Franklin Bank v. Pratt, 31 Me. 501; Jones Chatt. Mort. §§ 632-680. 8 Walker v. Stone, 20 Md. 195. 4 See, further, chapter as to Debts, supra; Thompson v. Van Vechten, 27 N. Y. 568; Packard v. Kingman, 11 Iowa, 219; 3 Kern. 556; Jones Chatt. Mort. §§ 632-657. For the doctrines of merger and subrogation here applicable, see Jones Chatt. Mort. §§ 658, 659. If the Statute of Limitations runs long enough to bar a debt secured by a mortgage, the mortgagee's title is not thereby defeated. Crain v. Paine, 4 Cush. 483; Almy v. Wilbur, 2 W. & M. 371. Statutes requiring a formal instrument for discharge of a mortgage and its record should be carefully followed; yet it will be found that requirements of this sort are quite lax for chattel as compared with real-estate mortgages. See Jones Chatt. Mort. §§ 663-680. |