1. By the law of Illinois in respect of mortgages, the legal
title passes to the mortgagee, who is entitled to possession, at
least after condition broken. The mortgagor has an equity of
redemption, and, in case of foreclosure by sale, has by statute
twelve months within which to redeem by payment.
2. Where a mortgagee has rightfully taken possession of the
mortgaged premises on condition broken, the filing of a bill to
foreclose is in aid of the legal title, and not inconsistent with
it.
3. Prior to the passage of a certain statute, where at the sale
on foreclosure, the mortgagee bid in the property conveyed by the
mortgage at less than the amount due, and the mortgagor did not
redeem, failure by the mortgagee to take out a deed had no effect
so far as the mortgagor was concerned on the original title of the
mortgagee as against the mortgagor, though it might let in the
right of redemption.
4. When, by a statute passed subsequently to a mortgage and
going into effect after the mortgagee has taken possession as such,
on condition broken, it is enacted that, if the mortgagee, being in
possession, bids in the mortgaged premises at sale on foreclosure
at less than the amount found due on the mortgage, and the
mortgagor does not redeem, the legal title of the mortgagee and his
right of possession shall be forfeited by failure to obtain a deed
within the time prescribed to the mortgagor, who has not redeemed
or in fact paid anything in extinguishment of the mortgage, such
statute impairs the obligation of the prior mortgage contract, and
operates to deprive the mortgagee of property rights without due
process.
Page 195 U. S. 2
Five ejectment suits were brought by Lightcap against tenants of
Mrs. Bradley, July 13, 1895, in the Circuit Court of Mason County,
Illinois, and taken on change of venue to Fulton County, where they
were consolidated; Mrs. Bradley was let in to defend, and the case
went to judgment in her favor. This judgment was reversed by the
Supreme Court of Illinois, after several hearings, and the case
remanded to the circuit court. 186 Ill. 510. On the retrial,
judgment was recovered by Lightcap, which was affirmed by the
supreme court, 201 Ill. 511, and this writ of error prosecuted.
On the disposition of the case when brought to the supreme court
the second time, the division of opinion among the seven members of
the court found expression. Mr. Chief Justice Magruder, Mr. Justice
Carter, and Mr. Justice Ricks concurred in the opinion of Mr.
Justice Cartwright in affirmance of the judgment. Mr. Justice
Wilkin and Mr. Justice Boggs filed dissents, and Mr. Justice Hand,
while agreeing that the legal title was in Lightcap, was of opinion
that the full beneficial interest was in Mrs. Bradley, and that
she, being in possession, a court of chancery might protect her
equitable interest and possession by enjoining the prosecution of
the ejectment suit.
The facts are in substance these:
Tobias S. Bradley loaned T. B. Breedlove, June 3, 1867, $19,616,
evidenced by notes payable in one, two, three, four, and five
years, respectively, and secured by a trust deed on 1,200 acres of
land in Mason County, Illinois. On Bradley's death, Lydia, his
widow, became the sole owner of the trust deed and notes. October
8, 1867, Breedlove conveyed the 1,200 acres to Prettyman, subject
to the mortgage to Bradley. August 13, 1868, Prettyman conveyed 680
acres to McCune, and McCune gave a trust deed thereon to E. G.
Johnson, trustee, to secure the payment of $15,000, evidenced by
three notes, to the order of Lydia Bradley, and due in one, two,
and three years after date. Mrs. Bradley, through her agent,
accepted these notes and trust deed as part payment of the
Page 195 U. S. 3
Breedlove notes, and Prettyman paid the difference, and the
1,200 acres were released from the Breedlove trust deed or
mortgage.
November 13, 1868, McCune conveyed the 680 acres to Prettyman,
subject to the trust deed to Johnson. No taxes were paid by McCune
or by Prettyman, and no part of the mortgage debt was ever
paid.
May 24, 1871, Mrs. Bradley redeemed from the tax sales for taxes
of 1868 and 1869, and in 1872 for the taxes of 1871, and she has
paid all other taxes assessed on the land since the trust deed or
mortgage was given.
Early in the summer of 1871, Austin Johnson, whom Mrs. Bradley,
in July, 1870, had appointed her business agent, went on the land
on her behalf, and, in 1872, Mrs. Bradley and Austin Johnson
together went upon the land, and she took personal and exclusive
possession of it, which, by herself and her tenants, she has
retained ever since.
February 22, 1872, Mrs. Bradley filed a bill in the Circuit
Court of Mason County to set aside the release of the Breedlove
trust deed or mortgage, on the ground of fraud, and for the
foreclosure of that mortgage on the 1,200 acres for the payment of
the balance of the original debt. McCune was a party, but seems to
have left the state, and was brought in by publication. The bill
was contested, and on August 22, 1879, the Mason Circuit Court
entered a decree of foreclosure and sale on the McCune trust deed,
finding the amount due Mrs. Bradley to be $31,500. The 680 acres
were sold by the master in chancery October 27, 1879, bid in for
Mrs. Bradley for $10,000, and a certificate was issued to her.
Mrs. Bradley proceeded to develop and improve the 680 acres,
drained the tract, erected farm buildings, laid tiles, reduced the
land to cultivation, and has maintained exclusive possession to
this date.
September 4, 1893, Prettyman gave a quitclaim deed of the land
to Lightcap, which was recorded November 30, 1894. July 13, 1895,
these actions in ejectment were commenced.
Page 195 U. S. 4
The McCune trust deed or mortgage was executed August 13, 1868,
and at that time chapter 57 of the Revised Statutes of Illinois
contained these sections:
"SEC. 12. Whenever any lands or tenements shall be sold by
virtue of any execution, it shall be the duty of the sheriff or
other officer, instead of executing a deed for the premises sold,
to give to the purchaser or purchasers of such land or tenements a
certificate in writing, describing the lands or tenements
purchased, and the sum paid therefor, or, if purchased by the
plaintiff in the execution, the amount of his bid, and the time
when the purchaser will be entitled to a deed for such lands or
tenements, unless the same shall be redeemed, as is provided in
this chapter, and such sheriff or other officer shall, within ten
days from such sale, file in the office of the recorder of the
county, a duplicate of such certificate, signed by him, and such
certificate, or a certified copy thereof, shall be taken and deemed
evidence of the facts therein contained."
"SEC. 13. It shall be lawful for any defendant, his heirs,
executors, administrators, or grantees, whose lands or tenements
shall be sold by virtue of any execution, within twelve months from
such sale, to redeem such lands or tenements, by paying to the
purchaser thereof, his executors, administrators, or assigns, or to
the sheriff or other officer who sold the same, for the benefit of
such purchaser, the sum of money which may have been paid on the
purchase thereof, or the amount given or bid, if purchased by the
plaintiff in the execution, together with interest thereon at the
rate of ten percentum from the time of such sale, and on such sum
being made as aforesaid, the said sale and the certificate
thereupon granted shall be null and void."
"SEC. 22. If such lands or tenements so sold shall not be
redeemed as aforesaid, either by the defendant or by such creditor
as aforesaid, within fifteen months from the time of such sale, it
shall be the duty of the sheriff or other officer, who sold the
same, or his successor in office, or his executors
Page 195 U. S. 5
or administrators, to complete such sale, by executing a deed to
the purchaser. . . ."
"SEC. 24. In all cases hereafter where lands shall be sold under
and by virtue of any decree of a court of equity for the sale of
mortgaged lands, it shall be lawful for the mortgagor of such
lands, his heirs, executors, administrators, or grantees to redeem
the same in the manner prescribed in this chapter for the
redemption of lands sold by virtue of executions issued upon
judgments at common law, and judgment creditors may redeem lands
sold under any such decree in the same manner as is prescribed for
the redemption of lands in like manner sold upon executions issued
upon judgments at common law."
The statutes contained no limitation of time within which a
sheriff's or master's deed must be taken after the period for
redemption had expired, and prescribed no penalty or loss of right
to the purchaser by reason of delay or failure in taking out such
deed.
In
Rucker v. Dooley, 49 Ill. 377, the Supreme Court of
Illinois at its September term, 1868, reasoning by analogy, held in
an equity suit, as against a purchaser of real estate at an
execution sale, who was never in its possession, and had no claim
to it, except under his judgment and sale, and who had taken out a
sheriff's deed twenty-nine years after the sale, and in favor of a
bona fide purchaser, in possession, claiming by mesne
conveyances from the judgment debtor, that, for the protection of
purchasers for a valuable consideration, without notice, from the
judgment debtor and those claiming under him, a sheriff's deed
ought not to be issued after the lapse of twenty years, and that
application for a deed made after the lapse of seven years, during
which the judgment was a lien, and fifteen months, the time given
for redemption, and within twenty years, should be made to the
proper court by rule on the sheriff and notice to the parties
interested.
March 22, 1872, an act of the General Assembly of Illinois was
approved, entitled
"An Act in Regard to Judgments and Decrees, and the Manner of
Enforcing the Same by Execution,
Page 195 U. S. 6
and to Provide for the Redemption of Real Estate Sold Under
Execution or Decree,"
which went into force July 1, 1872, the provisions of which were
not materially different from those above quoted, but section 30
was as follows, the additions to former acts being indicated by
italics:
"SEC 30. When the premises mentioned in any such certificate
shall not be redeemed in pursuance of law, the legal holder of such
certificate shall be entitled to a deed therefor at any time within
five years from the expiration of the time of redemption. The deed
shall be executed by the sheriff, master in chancery, or other
officer who made such sale, or by his successor in office, or by
some person specially appointed by the court for the purpose. If
the time of redemption shall have elapsed before the taking effect
of this act, a deed may be given within two years from the time
this act shall take effect. When such deed is not taken within the
time limited by this act, the certificate of purchase shall be null
and void; but if such deed is wrongfully withheld by the officer
whose duty it is to execute the same, or if the execution of such
deed is restrained by injunction or under of a court or judge, the
time during which the deed is so withheld or the execution thereof
restrained shall not be taken as any part of the five years within
which said holder shall take a deed. "
Page 195 U. S. 16
MR. CHIEF JUSTICE FULLER delivered the opinion of the Court.
Among the defenses it is stated Mrs. Bradley relied on were
that,
"under section 6 of chapter 83 of the Revised Statutes, in
regard to limitations, the trust deed from McCune to Johnson, the
decree of sale, and certificate of purchase constituted color of
title which, coupled with her possession and payment of taxes for
seven successive years, made her the legal owner of the lands to
the extent and according to the purport of her paper title;"
that,
"under section 4 of the same act, her possession and actual
residence, through her tenants, for seven successive years, having
a connected title in law or equity deducible of record from the
United States, by virtue of the same trust deed, decree and sale,
barred the action of plaintiff,"
and "that she was mortgagee in possession after condition
broken, and entitled to possession as such." The Supreme Court of
Illinois overruled all these defenses, and held
Page 195 U. S. 17
that when the sale was made under the decree, and the mortgagee
purchased at the sale, the mortgage was satisfied as to the land,
and all rights of the mortgagee were represented by the certificate
of purchase, and that, by force of the act of 1872, the mortgagee
having failed to take the deed within the time limited by the
statute, the certificate became null and void, her title terminated
as it would on redemption, and she ceased to have any interest
whatever in the premises, so that the mortgagor or his grantees,
without any payment of the mortgage debt, was entitled to recover
the possession from the mortgagee, in ejectment, on the strength of
a perfect title.
Before and when the trust deed to Johnson, which may be treated
as if a mortgage to Mrs. Bradley, was given, the legal title passed
to the mortgagee according to the law of Illinois in respect of
mortgages.
After condition broken, the mortgagee became entitled to
possession of the mortgaged premises, and could maintain an action
of ejectment. The mortgagor had only an equity of redemption, and,
in case of sale on foreclosure, had, by statute, the right to
redeem within twelve months by making full payment.
The law in general as it is today was thus declared in
Ware
v. Schintz, 190 Ill. 189, 193:
"Under the repeated rulings of this court, a mortgagee, as
against the mortgagor, is held, as in England, in law, to be the
owner of the fee, having the
jus in re as well as
ad
rem, and entitled to all the rights and remedies which the law
gives to such owner, and may, after condition broken, maintain
ejectment against the mortgagor. The mortgagor or his assignee,
however, is the legal owner of the mortgaged estate as against all
persons, excepting the mortgagee or his assignees.
Delahay v.
Clement, 4 Ill. 201;
Vansant v. Allmon, 23 Ill. 30;
Carroll v. Ballance, 26 Ill. 9;
Oldham v.
Pfleger, 84 Ill. 102;
Fountain v. Bookstaver, 141
Ill. 461;
Esker v. Hefferman, 159 Ill. 38. The fee title
held by the mortgagee is in the nature of a base or determinable
fee. The term of its
Page 195 U. S. 18
existence is measured by that of the mortgage debt. When the
latter is paid or becomes barred by the statute of limitations, the
mortgagee's title is extinguished by operation of law.
Pollock
v. Maison, 41 Ill. 516;
Harris v. Mills, 28 Ill. 44;
Gibson v. Rees, 50 Ill. 383;
Barrett v. Hinckley,
124 Ill. 32;
Lightcap v. Bradley, 186 Ill. 510. Until it
is extinguished, the legal title is in the mortgagee for the
purpose of obtaining satisfaction of his debt."
The condition of the McCune mortgage was broken as soon as made
by failure to pay taxes previously and then due, and again by
failure to pay the notes maturing in 1869, 1870, and 1871, and Mrs.
Bradley entered into peaceable possession of the tract of 680 acres
before the act of 1872 took effect. If the assent of the mortgagor
was necessary, which we do not hold it was, it should be implied in
the circumstances. Her possession was that of mortgagee in
possession, and she could defend, as against the owner of the
equity of redemption, any action except for an accounting of the
rents and profits, and to redeem. And, as she could pursue
concurrent remedies, the character of her possession was not
affected by the filing and pendency of the bill to set aside the
release of the Breedlove mortgage. But that bill went to decree in
1879 of foreclosure of the McCune mortgage by sale, and sale was
had. There was no independent purchaser, nor was the whole amount
of the mortgage debt bid, but Mrs. Bradley, the mortgagee in
possession, bid about one-third of the amount due. By the statute,
the right of redemption of McCune and his grantee was barred and
determined October 27, 1880, at the expiration of twelve months
from the date of sale, and so it was by the express provision of
the decree of foreclosure.
The certificate of purchase was issued to Mrs. Bradley, but it
does not appear that she obtained a deed. It is assumed, and we
assume, that she did not, although it is suggested that, after the
lapse of so many years, and under the circumstances, in an action
at law by the original mortgagor against the
Page 195 U. S. 19
mortgagee in possession, an irrebuttable presumption of a deed
arises on grounds of public policy.
The Supreme Court of Illinois in the present case decides that
the act of 1872 applies to mortgagees in possession, and that it
operates not simply as a statute of limitations on the right to
obtain a deed, but in effect as a statute forfeiting, by the
nullification of the certificate, the mortgagee's estate and right
of possession by reason of laches, and means that, if a deed be not
taken out within the time specified, the mortgagee has lost his
debt, and the mortgagor has been reinstated in his former title by
operation of law, and without having paid anything in redemption.
Accepting the construction of the act by the state court, and its
conclusion that it applies to Mrs. Bradley, then the question is
whether such a statute so applied does not impair the obligation of
the contract previously existing between the mortgagee and the
mortgagor, or deprive the mortgagee of property rights without due
process. That question was raised in the Supreme Court of Illinois,
and the court held that it did not. 201 Ill. 511.
Confessedly subsequent laws which, in their operation, amount to
the denial of rights accruing by a prior contract are obnoxious to
constitutional objection.
In
Bronson v.
Kinzie, 1 How. 311, the statute objected to gave
the mortgagor twelve months to redeem after the sale, and Mr. Chief
Justice Taney said:
"It declares that, although the mortgaged premises should be
sold under the decree of the court of chancery, yet that the
equitable estate of the mortgagor shall not be extinguished, but
shall continue for twelve months after the sale, and it moreover
gives a new and like estate, which before had no existence, to the
judgment creditor, to continue for fifteen months. If such rights
may be added to the original contract by subsequent legislation, it
would be difficult to say at what point they must stop. . . . Any
such modification of a contract by subsequent legislation, against
the consent of
Page 195 U. S. 20
one of the parties, unquestionably impairs its obligations and
is prohibited by the Constitution."
In
Barnitz v. Beverly, 163 U.
S. 118, it was held that a state statute which
authorized redemption of property sold in foreclosure of a
mortgage, where no such right previously existed, or extended the
period of redemption beyond the time previously allowed, could not
apply to a sale under a mortgage executed before its passage, and
Mr. Justice Shiras, referring to
Brine v. Insurance
Company, 96 U. S. 627,
96 U. S. 637,
said:
"But this Court held, through Mr. Justice Miller, that all the
laws of a state existing at the time a mortgage or any other
contract is made, which affect the rights of the parties to the
contract, enter into and become a part of it, and are obligatory on
all courts which assume to give a remedy on such contracts, . . .
that it is therefore said that these laws enter into and become a
part of the contract,"
and that
"the remedy subsisting in a state when and where a contract is
made and is to be performed is a part of the obligation. . . ."
"What we are now considering is whether the change of remedy was
detrimental to such a degree as to amount to an impairment of the
plaintiff's right; and, as this record discloses that the sale left
a portion of the plaintiff's judgment unpaid, it may be fairly
argued that this provision of the act [which provided that the land
'shall not again be liable for sale for any balance'] does deprive
the plaintiff of a right inherent in her contract."
"When we are asked to put this case within the rule of those
cases in which we have held that it is competent for the states to
change the form of the remedy, or to modify it otherwise, as they
may see fit, provided no substantial right secured by the contract
is thereby impaired, we are bound to consider the entire scheme of
the new statute, and to have regard to its probable effect on the
rights of the parties."
In
Hooker v. Burr, 194 U. S. 415,
these and many other
Page 195 U. S. 21
cases were considered, and the distinction was pointed out
between a purchase by the mortgagee and by an independent
purchaser, having no connection whatever with the original contract
between the mortgagor and mortgagee, and whose contract was made
under the law as then existing; as well as the distinction where
the mortgagee bids the whole amount of the mortgage debt, as in
Connecticut Mutual Life Insurance Company v. Cushman,
108 U. S. 51, which
was cited with approval. There, the company bid enough to pay the
full amount of the mortgage debt, principal, and interest, and on
redemption contended that it was entitled to interest at the rate
existing at the time of the execution of the mortgage, which had
been reduced before the sale, though subsequent to the mortgage.
Barnitz v. Beverly was distinguished. In that case, the
sum bid at the foreclosure sale did not equal the amount due on the
mortgage, the debt of the mortgagor was not thereby paid, and it
was the mortgagee's rights under her contract as contained in the
mortgage, and not her rights as a purchaser, that were in
controversy. In the
Cushman case, on the contrary, the
amount bid at the foreclosure sale paid the mortgage debt, and the
subsequent position of the mortgagee was as a purchaser only.
And we said:
"If the mortgage had been foreclosed, and the mortgagee had
thereby realized his debt, principal and interest in full upon the
sale, there can be no doubt that he would not have been heard to
assert the invalidity of the subsequent legislation, nor would an
independent purchaser at the sale have been heard to make the same
complaint. Of course, this does not include the case of a mortgagee
who purchases at the foreclosure sale, and bids a price sufficient
to pay his mortgage debt in full with interest, and an action
thereafter commenced against him to set aside the sale because it
was made in violation of legislation subsequent to the mortgage. In
such case, we suppose there can be no doubt of the right of the
mortgagee to assert, as a defense to the action, the
unconstitutionality of the subsequent legislation
Page 195 U. S. 22
as an impairment of his contract contained in the mortgage."
In Illinois, the legal title vests in the mortgagee, but in
equity that title is regarded as a trust estate to secure the
payment of the money, and where the mortgaged premises are bid off
by the mortgagee at foreclosure sale for the full amount of the
decree, interest and costs, the mortgage may be held to have
expended its force; but where the bid is for less than the full
amount, a different rule would be applicable.
Bogardus v.
Moses, 181 Ill. 554, 559-560.
Entitled to pursue different remedies to collect the mortgage
debt or to free the mortgaged premises of the right of redemption,
foreclosure and sale, purchase and deed are in aid of the original
title, and not inconsistent with it.
Williams v. Brunton,
8 Ill. 600. If the right of redemption is determined by the efflux
of time, which must be before a deed can issue, failure to take out
the deed either has no effect so far as the mortgagor is concerned,
because he is not injured, or the right of redemption still
remains, and all the mortgagor can claim is that the relation
between the parties is unchanged.
In the present case, there was no independent purchaser; the bid
of the mortgagee was less than one-third of the amount found due;
there was no redemption, and the right of redemption was cut off;
the mortgagee was in possession before and at the time of
foreclosure and sale, and when ejectment was brought, sixteen years
thereafter, and the mortgage debt had never in fact been paid; so
that the original mortgagor as plaintiff in ejectment could not
recover, unless, by the subsequent law, the mortgagee had been
subjected to the loss of all her rights, as against him, by laches
in obtaining a deed, although as a general rule laches are not
imputable to a party in possession to the loss of the right
thereto.
And if the operation of the subsequent law is to impair the
obligation of Mrs. Bradley's mortgage contract, or to deprive her
of rights protected by the Constitution, we cannot decline
jurisdiction because of a construction that we deem untenable.
Page 195 U. S. 23
Louisville Gas Co. v. Citizens' Gas Light Co.,
115 U. S. 683,
115 U. S. 697;
Terre Haute & Indianapolis Railroad Company v.
Indiana, 194 U. S. 579.
By the judgment in this case, Lightcap had been held clothed
with the legal title and the immediate right of possession. And
this on the ground that the certificate of purchase discharged the
McCune mortgage, and that the act of 1872 nullified the certificate
after the lapse of five years. This gave to the limitation of time
for taking out the deed the effect of destroying the right of
possession taken under the mortgage, wiping out the mortgage with
the certificate, and allowing the mortgagor to assert the legal
title and right of possession as against the mortgagee as a
wrongdoer. That is to say, though Mrs. Bradley was rightfully in
possession, and though the mortgage debt had not in fact been paid,
the bar of the statute as to the deed is held to be efficacious in
turning Mrs. Bradley into a trespasser as respects the mortgagor,
who, not having in fact paid anything, is treated as having made
payment by the mortgagee's bid, and being at the same time entitled
to assert the failure of the purchase by reason of
laches
in taking out the deed.
And yet, because a statute may take away the sword which a deed
would give a mortgagee out of possession, it does not follow that
it can lawfully operate on prior transactions so as to take away
the shield afforded by possession. Rightful possession is a defense
in ejectment (
Sands v. Wacaser, 149 Ill. 530, 533, and
cases cited), and Mrs. Bradley's possession could only be treated
as wrongful as against the original mortgagor by the application of
the subsequent law.
As we have said, when Mrs. Bradley took this mortgage, there was
no statutory limitation as to the time within which a master's deed
must be taken out, and no loss of right by reason of failure to do
so was prescribed. After she had filed her bill, and while she was
in possession, the act of 1872 went into effect, and, it may be
conceded, limited Mrs. Bradley's right to obtain a deed on
foreclosure sale, and so far affected
Page 195 U. S. 24
any remedy through a deed she might have had. But, reading the
act, as the view of the supreme court compels us to do, as taking
away her right to maintain her possession, we are of opinion that
it materially impairs the obligation of her contract, and deprives
her of property without due process.
Judgment reversed, and cause remanded for further
proceedings not inconsistent with this opinion.
