Morgan v. Dod

| Colo. | Dec 15, 1877

Stone, J.

Upon the facts in this case, and* under the general assignment of error, that the complainant was not entitled to any relief whatever, the first question presented is, what was the nature of the conveyance of the goods of the defendant in error to the plaintiff Babcock ? The con■veyance was by a bill of sale, absolute in terms, and accompanied by actual delivery-of, the property. The admitted purpose of the conveyance was to indemnify Babcock, as security upon defendant’s note to Morgan. This purpose determined the character of the transaction as a pledging; where one delivers a chatfel to another as security for a debt or as indemnity for suretyship therein, the law regards such delivery of the property as a pledge merely. Story on Bailments, §§ 286-300. Nor-does it alter the case in a court of equity that the property or chose in action is transferred to the creditor or surety-by an unconditional bill of sale or assignment,' nor even if the contract had ■stipulated that the pledge should -be irredeemable. Id., § 345. As limited to cases in equity, this doctrine is well settled. Newton et al. v. Fay, 10 Allen, 510.

. The defendant then had a right tp redeem the property pledged upon payment of the debt, either upon maturity of the note or even after default. Story on Bailments, §§ 318, 345, 346 and 348.

And he had the whole of the day upon which the note fell due in which to pay. Before default on that day, Babcock transferred the property to Morgan in discharge of the debt. This he had no right to do ; he could only transfer his interest as pledgee. The transfer did not change the status of the property. Morgan, as the common creditor of both Dod and Babcock, could only take and hold it as second pledgee until the debt was paid. Story on Bailments, §§ 324, 327 and 350.

Neither Babcock nor Morgan had the right to sell the pledge except for the purpose of applying the proceeds of the sale in discharge of the debt; and the sale must have been at public auction and upon due notice tp the pledgor or owner. Nor could the pledgee become a purchaser even at such public sale. Middlesex Bank v. Minot, 4 Metc. 325; Story on Bailments, § 310.

Morgan could hold the property merely as collateral, and upon payment of the note, which was done two days after maturity, Dod was entitled to a return of liis property. But here it is contended by counsel for plaintiffs that the agreement of Dod to pay the amount of the note after default and to give his horse and harness, part of the pledged property, in consideration that Morgan would restore the other part 'to Millspaugh, the real owner, the consummation being without fraud, and the subsequent ratification of that agreement constituted a new and independent contract which was valid and binding upon him.

We have examined this proposition with considerable care, and are convinced of its unsoundness in that this new contract, viewing it as such, lacks the essential element of adequate consideration. It is proper to observe here that it is an admitted fact in the evidence, that all the parties to the original transaction, Morgan, Babcock, Millspaugh and Dod, really believed that the pledged property upon default in payment of the note at maturity, became forfeited to Babcock, with the right to treat it as his own absolutely, and that by the transfer to Morgan the latter became in like manner the absolute owner. This belief was founded upon the conclusions of the parties as to the effect of the unconditional character of the bill of sale, and while it gives a color of plausibility to the position assumed by counsel for plaintiffs, that it is a sufficient consideration to support a contract for the compromise of a doubtful claim, or to end or avoid litigation, yet it must be borne in mind that here was neither compromise of any claim, doubtful or otherwise, nor was there litigation pending, or impending, which actuated Dod in the payment of the two hundred and fifty dollars. The avowed purpose was to get back a part of the pledge, upon payment of the original debt. The sole consideration was that Morgan should do the very thing which in law he was bound to do.

This brings us to the question whether a mistake of the law will avail to discharge an obligation assumed thereunder.

The maxim ignorcmtia legis neminem excused, when applied to civil contracts, has undergone much discussion, and manj' exceptions have been made by the courts. And while no rule of exception of general applicability has been formulated, there is, nevertheless, ample authority, based upon sound reasons, to support such exceptions in given cases. This whole subject is fully discussed by Mr. Story in his work upon Equity Jurisprudence, and in section 121 he says: “It has been laid down as unquestionable doctrine, that if a party, acting in -ignorance of a plain and settled principle of law, is induced to give up a portion of his indisputable property to another, a court of equity will relieve him from the effect of his mistake.” And in the next section he adds : “ Indeed, where a party acts upon the misapprehension that he has no title at all in the property, it seems to involve, in some measure, a mistake of fact that is, of the fact of ownership, arising from a mistake of law. A party can hardly be said to intend to part with a right or title of whose existence he is wholly ignorant; and if he does not so intend, a court of equity will, in ordinary cases, relieve him from the legal effect of instruments which surrender such unsuspected right or title.” In section 188 c, the same learned author says: £ ‘And where the result of denying relief will be to give the other party an unconscionable advantage, and the fact of - such misapprehension is admitted or proved to the entire satisfaction of the court, it would be strange if it were not a sufficient ground for equitable interference. The denial, of relief in such cases would seem to be at variance with the long-established doctrines of courts of equity, and a reproach to the law itself.”

The same doctrine is recognized in 'Bispham’s Principles of Equity, § 187, and in Kerr on Fraud and Mistake (Bump’s ed.), page 398. Nor is the application of this doctrine confined altogether to equity, it being distinctly recognized under .the head of inadequacy of consideration by the general law writers. 1 Parsons on Contracts, 437 ; Chitty on Contracts, 46 ; Addison on Contracts, § 315.

The relinquishment by Dod of his property to Morgan was clearly without consideration. And other elements of the bargain render it unconscionable. Dod, when he made the note for two hundred and fifty dollars, received but two hundred and twenty-five, Morgan retaining twenty-five dollars as interest for thirty days, which was at. the rate of about eleven per cent per month. Upon payment of the full amount of the note, the rights of no third party had intervened to prevent the parties being placed in statu quo by the decree, yet while Morgan had received all he was entitled to by the original contract, he still held of the pledged property a portion equal in value to the amount of the debt.

We are satisfied that the facts warranted the decree, and since Babcock was not without fault in transferring the property to Morgan at the time he did, we think the equity discretion of the court in decreeing costs against him jointly with Morgan was not erroneously exercised.

The questions raised upon the pleadings we do not consider of sufficient importance to call for any decision other than that we think the bill, though inartificially drawn, sets forth facts sufficiently to entitle the complainant to the relief prayed for, and hence the demurrer was properly overruled. As we can perceive no error in the record, the decree of the court below must be affirmed.

Affirmed.