
    June Term, 1860.
    Flanders vs. Thomas.
    A mortgagee of personal property who sells the same after default, under a power of sale contained in the mortgage, is accountable to the mortgagor for the surplus, after the debt and all reasonable costs and expenses are paid.
    ERROR to tbe Circuit Court for Sauh County.
    Tbe facts in this case are sufficiently stated in tbe opinion of tbe court
    
      J. Mackey, for plaintiff in error.
    
      H. W. Olarh, for defendant in error.
    July 31.
   By the Court,

Cole, J.

This action was brought to recover tbe surplus moneys claimed to be due on tbe sale of a lot of logs, mortgaged by Flanders to Thomas, after tbe mortgage debt and costs were satisfied and discharged. The chattel mortgage was in tbe usual form, and contained a clause authorizing tbe mortgagee, on non-payment of tbe sums therein secured to be paid, as they became due, to take possession of tbe mortgaged property, and sell tbe same at public or private sale, after giving ten days notice of the time and place of such sale, and apply tbe proceeds to the payment of tbe notes, returning tbe residue to the mortgagor, after paying all reasonable costs and charges. Two of tbe notes secured by tbe mortgage, one for $159 31, tbe other for $58 43, were returned by tbe mortgagee to tbe mortgagor, as paid. Tbe maker or mortgagor' paid nothing upon tbe notes otherwise than by giving tbe mortgage. Tbe mortgaged property was sold by the mortgagee, and prior to tbe commencement of this suit, Flanders demanded of Thomas, tbe surplus money arising on such sale, over and above tbe amount secured to be paid on tbe mortgage. The circuit court instructed tbe jury that, on default of tbs payment of tbe money by Flanders at the time specified in the mortgage, tbe property became absolutely tbe property of tbe mortgagee, and that be was not answerable to tbe mortgagor for any part of the proceeds of such salo; and directed tbe jury to find for tbe defendant. Tbe chattel mortgage bore date October 8th, 1857, and was given to secure tbe payment of the flmu of $420 74, with interest at 10 per cent, per annum, as follows: the sums of $159 31, and $58 43, in thirty days from the first day of October, 1857, according to two notes dated the day last aforesahl, and the sum of $203 in thirty days from the date of the mortgage. The mortgagee took possession of the property, and sold it on the 8th day of January, 1858, for $900.

The law appears to be well settled, that the execution of a chattel mortgage transfers to the mortgagee a defeasible title to the mortgaged property, which becomes absolute at law by the failure to pay the debt at the stipulated time. But notwithstanding the mortgagor is divested of all interest in the property at law, he still has an equity of redemption, which a court of equity would protect and enforce. Nichols et al., vs. Webster, 1 Chand. R., 203; 2 Story’s Eq. Jur., § 1031; Hart vs. Ten Eyck et al, 2 John. Ch.,R., 62-99: Kemp vs. Westbrook, 1 Vesey Sen., 278; Charter vs. Stevens, 3 Denio, 33; Patchin vs. Pierce, 12 Wend., 61. The mortgagor, it is said, must bring his bill to redeem within a reasonable time, and before his rights have been foreclosed by a sale of the property on the part of the mortgagee. 4 Kent, 139; Story on Bail., § 287, and authorities in the notes. If, however, the mortgagee sells the property, he is accountable to the mortgagor for the surplus after the debt, and all reasonable costs and expenses, are paid. Charter vs. Stevens, supra; Bryan and Richardson vs. Robert, 1 Strob. Eq. R., 342-3; Hinman vs. Judson, 13 Barb. S. C. R, 629. And in the case of Pettibone et al. vs. Perkins, 6 Wis., 616, this court decided that when at a public sale, held by the mortgagee to foreclose the equity of the mortgagor in a chattel mortgage, there was collusion between the mortgagee and a, third person, by which the latter was to bid off the property for the use of the mortgagee, such sale was void, and the mortgagor was entitled to an account of one-half of the earnings of the vessel, and of one-half of the sum for which the vessel had been sold. This case establishes the doctrine that a mortgagee of personal property, who, upon default, takes possession of such property and sells the same, is liable to account to the mortgagor for any surplus over and above satisfying the mortgage debt. And it will be observed that this is precisely what the mortgage provides should be done in the present case. The mortgagee is authorized, on non-payment of the sums therein specified, to take possession of the property, and sell the same at public or private sale, after giving-ten days notice of the time and place of such sale, and to apply the avails of the property to the payment of the debt, returning the residue to the mortgagor, after paying all reasonable costs and charges. Here the mortgagee proceeded under the mortgage, and within two months after the same became due, and while the mortgagor had the undoubted right to redeem, raised the amount due him by a sale under this power. His debt is paid. What right has he to withhold the residue, contrary to the terms of the mortgage, and to all principles of equity and justice?

It has been intimated that there was something in the case of Nichols et al. vs. Webster, 1 Chand., 203, In conflict with this doctrine, but we do not so understand that case. There a mortgagor of personal property brought an action of trespass against the mortgagee, who had taken the property into his possession after the mortgage debt became due. The court held that the action would not lie, for the reason that when the condition of the mortgage was broken by the neglect of the mortgagor to pay the money at the time stipulated, the goods became the property of the mortgagee, the mortgagor having no interest in them except an equity of redemption. This is in harmony with all the decisions upon this subject, a great number of which have already been cited in this opinion, which hold that after default in the payment of the money secured by the mortgage, the title to the mortgaged property becomes absolute at law in the mortgagee, and that the mortgagee has a right to reduce it to possession. But at the same time it is asserted,' that in equity the mortgagor, upon well settled principles, has a right to redeem upon paying the mortgage debt, providing he does so within a reasonable time, and before his right has been foreclosed by a legal sale of the property. But when the mortgagee proceeds to sell the property, and has raised a sufficient amount to pay his debt and all reasonable expenses, wg do not see any reason wliy he should not account to the mortgagor for any surplus arising from the sale.

It follows from this view that the instruction of the circuit court was erroneous, and calculated to mislead the jury, to the prejudice of the plaintiff in error.

The judgment of the circuit court is therefore reversed, and a new trial ordered.

DixoN, 0. J., did not sit in this case.  