Flagg v. Walker/Opinion of the Court

by William Burnham Woods

United States Supreme Court

113 U.S. 659

Flagg  v.  Walker

The appellants make no objection to that part of the decree which finds the balance due to Walker. It must, therefore, be accepted as a fact in the case, that the sum so due, over and above all moneys received by Walker from the property conveyed to him by Flagg, was, on October 4, 1880, $25,207.13. Non upon this appeal is there any charge of waste or other mismanagement by Walker of Flagg's property, except in his failure to furnish money to pay the accruing interest on the Sibley debt, and in allowing the property mortgaged to secure it, to be sold at a sacrifice, as is alleged, under the trust deed. It is, therefore, virtually conceded by the appellants that, in all other respects, Walker's administration of the trust was honest and faithful.

But the appellants complain of the decree upon the following grounds. First. Because it does not hold Walker liable for his breach of trust in not providing for the payment of the interest on the Sibley debt, secured by trust deed upon the 'pasture,' and in allowing it to be brought to sale without competition or any personal attention from himself, and to be sold for $10,500, when it ought to have brought from $60,000 to $100,000. Second. Because it orders a strict foreclosure, as the appellants call it, of the premises to Walker. Third. Because it consolidates the advances made and expenses incurred by Walker in the management of the estate with the amount of the mortgage or trust deed upon the homestead, and decrees a strict foreclosure for the w ole sum upon all the property.

We do not think either of these grounds for reversal well founded. The evidence makes it perfectly clear that the terms upon which Walker took the conveyance, as set out in the writing executed by him on April 12, 1875, were assented to by Flagg and his wife. Neither of them ever objected to the writing, or after its execution expressed the slightest dissent from its provisions. On the contrary, although both Mr. and Mrs. Flagg were examined as withesses, neither of them says that the writing was not satisfactory to them, or that they did not accept it as showing the terms upon which the transfer of Flagg's property was made to Walker. In fact, the execution of this paper is referred to in the original bill, and made, in part, the basis of the relief therein prayed for by Mrs. Flagg; and her counsel, in their brief, quote it at length, and insist that it shows the trust character in which Walker accepted the conveyance, and the consideration thereof. Of course, Walker is bound by his written admission of the terms upon which the property was transferred to him. By this writing Walker agreed to pay off all the ascertained indebtedness of Flagg, except the Sibley debt; and as to that, he was only to pay so much of it as could be made out of a sale of the lands mortgaged to secure it. Walker did in fact pay off all the other indebtedness of Flagg. The complaint made against him is that he did not furnish money to pay the Sibley debt, or sufficient to keep down the interest, but made default in the payment of interest, and thus allowed the property to be sacrificed at a forced sale.

It must be conceded that in accepting the conveyance of the property Walker became a trustee to manage the property and pay off the debts of Flagg according to the terms of the trust, and should be held liable for a faithful discharge of his trust. But this liability was imposed upon him on the condition, and with the understanding, that he was to be allowed the undisturbed possession and management of the property transferred to him, and reception of the rents and profits, which, the testimony shows, exceeded $3,000 per annum. It was to give him this undisturbed possession and control that the transfer of the property was made to him.

The evidence shows that Walker, after the conveyance to him, did furnish money sufficient to pay off the interest for six months due on the Sibley debt. It also shows that Flagg, having been absent from home for five or six weeks in the spring of 1875, returned with greatly improved health, in the latter part of April. He at once claimed as his own all the property which he had conveyed or transferred to Walker. He stopped the repairs which Walker had begun on the tenement houses, drove off the workmen, refused to recognize Du Bois, the agent appointed by Walker to take care of the property and collect the rents, and before the first of August he had resumed possession of all the property he had conveyed and delivered to Walker, both real and personal, and from that time on until the filing of the original bill, on September 25, 1878, had collected and enjoyed all the rents and profits of the real estate except of such part as Flagg and wife had undertaken to sell and dispose of, or such as had been sold under mortgage or other incumbrances. In short, within less than five months after Flagg had transferred his property to Walker and put him in possession thereof, and after Walker had paid a large sum upon Flagg's indebtedness, the latter repudiated, as far as he could, the transfer of the property, and resumed possession of it as if no conveyance thereof had been made. Since that time he had, with Walker's consent, sold and disposed of a large part of the property conveyed to Walker and appropriated the proceeds, and, until the date of the final decree, he had enjoyed and managed the residue without interference from Walker or his agents. By the tacit consent of Walker the management of the property was re ommitted to Flagg; he was allowed the undisturbed control of it; he was permitted to contract for the sale of a large part of the trust property, and Walker made deeds therefor whenever requested by Flagg, until only sufficient was left to afford what the circuit court found to be but a scant security for Walker's advances. It was after Flagg had himself in this manner interfered with the execution of his trust by Walker, and, in effect, had released Walker from all duty as trustee, that he called upon the latter to provide money to pay another installment of interest on the Sibley debt. This Walker declined to do; but, at Flagg's request, he executed a conveyance of a lot, part of the property transferred to him, and out of the proceeds Flagg paid one installment of the interest due on the Sibley debt.

It was in November, 1876, about 16 months after Flagg had resumed possession of his property and undertaken its management, and was in receipt of its rents and profits, that the 'pasture' was sold by Weed, the trustee, at public sale, for default in the payment of interest due on the Sibley debt. It is clear that under the declaration of trust of April 12, 1875, Walker was not bound to advance, out of his own means, money to pay the principal or interest on the Sibley debt. He was only bound to apply the rents and profits to the satisfaction of interest. Upon what ground, therefore, any just complaint can be made against him for not keeping down the interest, or paying the principal of the debt, after Flagg had resumed the possession and management of his property, and was receiving its rents and profits, it is not easy to see. But if Walker had agreed to advance money out of his own means to keep down the interest, the conduct of Flagg in disregarding his conveyance to Walker, and in resuming possession of the property, would have released Walker from his engagement. We do not, therefore, find it necessary to examine the question whether the property was sold at a sacrifice or not. There is great conflict in the testimony on this subject; but as Walker, under the circumstances which we have stated, was under no obligation to carry out an agreement which Flagg had repudiated and made impossible of performance, that question is immaterial. Walker was not liable for any loss, if there was a loss, resulting from the sale of the property covered by the trust deed to secure the Sibley debt. The proceeds of the property by which the debt was secured have been applied to its payment, and that is all that Walker agreed, in any event, should be done.

The next ground upon which the decree of the circuit court is complained of, is that the court decreed 'a strict foreclosure of the property to Walker, thus cutting off the statutory right of redemption, and also cutting off the benefits of a public sale.' The contention of appellants' counsel is that if Walker is to be considered as a mortgagee, and entitled to the rights of a mortgagee, the court should have decreed a sale, and not a strict foreclosure. The provisions of the statute law of Illinois, on which this assignment of error is based, are as follows: Rev. St. c. 77, § 16: 'When any real estate is sold by virtue of an execution, judgment, or decree of foreclosure of mortgage, or enforcement of mechanic's lien, or vendor's lien, or for the payment of money, it shall be the duty of the sheriff, master in chancery, or other officer, instead of executing a deed for the premises sold, to give the purchaser a certificate describing the premises purchased by him, showing the amount paid therefor, or, if purchased by the person in whose favor the execution or decree is, the amount of his bid, the time when the purchaser will be entitled to a deed, unless the premises shall be redeemed, as provided in this act.' Section 18 provides, in substance, that any defendant, his heirs, administrators, or assigns, or any person interested in the premises under the defendant, may redeem the property so sold by paying to he purchaser, or the officer who sold the same, for the benefit of the purchaser, the sum of money for which the premises were bid off, with interest from the time of sale; and upon such payment the sale and certificate shall be void. It will be observed that it is only in the case where the court orders a sale that there is any right of redemption. So that this assignment of error is resolved into the contention that it was the duty of the court to order a sale, so as to give the plaintiff a chance to redeem.

But it has been repeatedly held by the supreme court of Illinois that the courts of that state may under certain circumstances decree a strict foreclosure. Johnson v. Dunnell, 15 Ill. 97; Wilson v. Geisler, 19 Ill. 49; Weiner v. Heintz, 17 Ill. 259; Stephens v. Bichnell, 27 Ill. 444; Farrell v. Parlier, 50 Ill. 274; Boyer v. Boyer, 89 Ill. 447. A mortgagor, or other creditor, has not, therefore, in every case the right to insist that the court shall order a sale. It is settled by the decisions of that court that when the property is of less value than the debt for which it is mortgaged, and the mortgagor is insolvent, and the mortgagee is willing to take the property in discharge of the debt, the court is justified in decreeing a strict foreclosure, unless there are other incumbrancers, purchasers of the equity of redemption, or creditors, to object. The evidence satisfies us that a public sale for cash of the trust property now remaining undisposed of would fall short of paying the advances of Walker, which now amount to near $30,000, and that Flagg is insolvent. He does not appear to be the owner of any assets, and Sibley has an unsatisfied judgment against him for $18,685.22, with interest from February 8, 1875. Flagg is under no personal liability to Walker for the advances made by the latter, and if Walker gets title to the property in question under the decree of the circuit court, he is entitled to no other relief against Flagg. The property satisfies his demand. There are no other incumbrancers, and no purchasers of the equity of redemption, and Sibley is the only creditor, and he, although a party to the decree of the circuit court, has not appealed. This is, therefore, a case where, if the suit was for the foreclosure of a mortgage, the court might, according to the local law, decree a strict foreclosure.

But there is no mortgage in this case, and this suit is not brought for the foreclosure of a mortgage, or other lien, or to enforce the payment of money by sale. The original bill filed by Mrs. Flagg was for the settlement of a trust and the redemption of real estate in the hands of the trustee from liens alleged to be in the nature of a mortgage for money advanced by him for the purpose of the trust. The claim of the bill was that although the defendant Walker had advanced money to pay the debt of Flagg, which was a lien upon the property held by him in trust, yet he had neglected his trust and wasted the trust estate, and that the money lost to the trust property by his neglect and waste should be charged against the moneys advanced by him, and that upon a just and fair settlement there would be nothing due the trustee for his advances, and the prayer was for a reconveyance by the trustee.

The cross-bill of Walker averred that the conveyance by Flagg to him was absolute, and prayed that it might be confirmed, and his right to the peaceable and quiet enjoyment established; but if the court should be of opinion that his title to the property was to be considered a mortgage, that the amount due him from Flagg might be declared a lien thereon, and if the sum so due was not paid within a day to be fixed by the court, the conveyance already made to him of the property should be declared absolute.

In view of the declaration of trust made by Walker on April 12, 1875, it is clear that the transaction between Flagg and Walker was not a mortgage. A mortgage is a deed whereby one grants to another lands, upon condition that if the mortgagor shall pay a certain sum of money, or do some other act therein specified, at a day certain, the grant shall be void. Conard v. Atlantic Ins. Co. 1 Pet. 386; Montgomery v. Bruere, 4 N. J. Law, 268; Erskine v. Townsend, 2 Mass. 495; Lund v. Lund, 1 N. H. 41. In this case there was a conveyance by Flagg to Walker of certain property, to be administered and sold by the latter, and in consideration of the conveyance Walker agreed to pay certain specified debts owing by Flagg, and if, after the payment of the debts, there was any residue resulting from the sale of the property, to pay Flagg one-half of such residue. The conveyance was made to secure neither the payment of any money nor the performance of any act by Flagg. All the money to be paid was to be paid by Walker; all the acts to be done were to be done by him. There was no agreement by Flagg to pay Walker any money in any event. Flagg never owed Walker any money by reason of the matters shown by the record in this case, and never came under any obligation to him. Walker was to reimburse himself out of the property conveyed to him by Flagg, and the parties never contemplated a reconveyance by Walker to Flagg of the property in question. We are not required to apply to such a transaction the rules prescribed by the statute of Illinois for the foreclosure of a mortgage. It is the case of a trust. The bill was filed for settlement of the trust, and the question we are to decide is whether, under the circumstances shown by the testimony, the appellants are entitled, as matter of equity and right, to have a sale of the premises.

The only interest which remained to Flagg in the property conveyed by him to Walker was his right to receive one-half the net proceeds of its sale, after repayment to Walker of all the moneys advanced by him for Flagg, and the expenses incurred in the administration of the trust. But the decree of the circuit court has, in effect, given the appellants the entire net proceeds of the property after the payment of Walker's advances; for, on the payment by Flagg within six months of the sum found due to Walker, it directs a reconveyance of all the trust property remaining unsold. Upon the averments of their bill they have no right to demand a sale. The property was conveyed to Walker to dispose of 'at pleasure, and according to his best judgment,' and he was 'in all things to be the sole judge of the time and manner of using and disposing of said property.' The right thus to dispose of it he had bought and paid for, and he could not be deprived of it unless he was wrongfully using it to the damage of the Flaggs. There is no charge in the bill that he has abused that discretion, or that the neglect to sell at the present time would result in loss to the appellants.

The prayer of the original bill was not for a sale, but for a reconveyance by Walker to the appellants of the trust property still remaining in his name. The decree of the circuit court is in accordance with their prayer, first, however, requiring a repayment to Walker of his advances. It does not, therefore, lie in the mouths of the appellants to object that the decree does not order a sale which they did not pray for, and which they have not shown themselves to be entitled to demand as a matter of right.

The last objection to the decree of the circuit court is that it included the amount paid by Walker for the mortgage or trust deed upon the 'homestead,' with the advances made by him and the expenses incurred in the management of the trust, and decreed a strict foreclosure for the whole sum upon all the property. The contention of appellants is, that for the sum paid by Walker for the purchase of this mortgage he should be limited for his security to the property covered by the mortgage. But there is no warrant for this claim in the declaration of trust of April 12, 1875. The mortgage on the homestead was one of the debts which Walker had expressly agreed to pay, and it was the understanding that he was to be reimbursed for his advances, not merely out of the mortgaged premises, but out of the proceeds of all the property conveyed to him by Flagg, so far as they might be necessary. For the purpose of securing Walker, the whole property was regarded and treated by the parties as an entirety. The fact that Walker's payment of the mortgage debt took the form of a purchase of the mortgage lien does not deprive him of that security.

We find no error in the proceedings and decree of the circuit court. But as the time limited by the decree, to-wit, April 1, 1881, for the payment to Walker by W. F. Flagg, or some one of the defendants to the cross-bill, of the said sum of $25,207.18, with interest, has passed, we think the time for such payment should be extended. The appellants, while they were litigating their rights with Walker in this court, having given an appeal bond, which superseded the decree of the circuit court, were not required to make the payment.

We therefore direct that the decree of the circuit court be so modified as to extend the time for the payment of the sum coming to Walker for the period of six months from the filing of the mandate of this court in the circuit court; and, as so modified, the decree of the circuit is affirmed.

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