13 Cal. 116 | Cal. | 1859
Baldwin, J. concurring.
In March, 1854, Hutchinson & Greene were the owners of a farm in Yolo County, and having become indebted in a large amount to Frierson, for advances of money to enable them to carry on their farming operations, executed to him a conveyance thereof,'which, though absolute in form, was intended only as security for the payment of their indebtedness. In September following, having become further indebted to Frierson, for advances, and being in debt to their laborers, they executed to him a conveyance of the personal property upon the farm, consisting principally of stock and farming utensils, and, at the same time, delivered possession of both farm and personal property. The second conveyance was made, and the possession of the property under both conveyances delivered, upon the express agreement that such property, and the proceeds of the real property, were to be held, not only as additional security for the indebtedness of the grantors to Frierson, but for their indebtedness to the laborers who had been employed on the farm, and the future wages of laborers which the grantee might himself subsequently employ thereon; and that for the existing indebtedness of the laborers, the grantee would accept the drafts of the grantors. The plaintiff was one of the laborers, for the payment of whose
If the first conveyance is to be treated as a mortgage, then Frierson was liable after possession taken to account for the proceeds of the farm, and was chargeable for their net amount in the settlement of the debt for the security of which the conveyance was executed, and any surplus remaining was subject -to the disposition of the mortgagors. (2 Story’s Equity Juris. Sec. 1016.) For such surplus he was Trustee of the mortgagors, the trust arising from the very nature of the security by operation of law, and by the subsequent agreement of the parties the same became appropriated for the benefit of the laborers, including the plaintiff. Frierson thenceforth was Trustee of the surplus for them. It was not his property, to be disposed of as he might elect. Without the agreement, it would have been the property of'the mortgagors, and held subject to their order; but, by the agreement, it became subject to the payment of the demands of the laborers, and, to that extent was theirs. The agreement was something more than a mere personal covenant of Hutchinson
If the orders to which Thurlow and Eldon refer, would constitute an equitable assignment of the particular fund pro tanto against which they are drawn, equally so must the agreement in the present case—upon the faith of which, and the representations of the parties, the plaintiff relied—took the acceptance of one of them, and relinquished his claim upon the other. The agreement, under the circumstances of the case, must be deemed to have operated as an equitable assignment of the surplus, so soon as any existed, for the benefit of the laborers. Frierson, as Assignee, thereupon held the same as Trustee for their benefit. As trust property, the proceeds could not pass to the Administrator as general assets for the benefit of the creditors at large, but were subject in his hands to the same trust which attached to them before the decease of the intestate. (Kip v. Bank of New York, 10 John. 63.)
The principles upon which the plaintiff bases his right to the appropriation of the specific property have been repeatedly asserted and affirmed in the most maturely considered cases. In Moses et al. v. Murgatroyd et al. (1 John. Chan. 128,) Chancellor Kent held that tbe holders of certain promissory notes were
In Burn v. Cavalho, (4 Mylne & Craig, 690,) Lord Cottenham decided that directions by a debtor upon his agents to apply property in their hands belonging to him, to the discharge of his liabilities to a creditor, in pursuance of an agreement to that effect, gave the creditor a right in equity to have the property thus applied, notwithstanding the debtor had become bankrupt before the directions had reached his agents, and a commission had issued. To the same effect is the decision in Clark v. Mauran, (3 Paige, 373.) In that case the debtor had sent orders to his agents in Caracoa to sell out his goods remaining in their hands, and to ship the balance of his funds in doubloons' to the
The authorities cited, establish clearly the equitable right of the plaintiff to the proceeds in the hands of the Administrator for the payment of his demand. The fact that the proceeds were not in existence at the time of the agreement, does not affect the, question. The agreement took effect as an assignment in equity so soon as any surplus existed. The right of the plaintiff to the appropriation of the funds then attached. The case of Field v. Mayor of New York, (2 Selden, 179,) sustains the doctrine that equity will uphold assignments—not only of dioses in action, but of contingent interests and expectations, and of things which have no present actual existence, but rest in possibility, provided they are fairly made, and are not against public policy; and an agreement for such interests will take effect as such assignment when the subjects to which they refer have ceased to rest in possibility, and have ripened into reality. (See Leading Cases in Equity, vol. 2, Hare & Wallace’s Notes.)
I have thus far treated the first conveyance as a mortgage. If not such, the inquiry as to the proceeds of the farm ivas useless. If the conveyance were absolute, transferring the title in fee-simple, as on its face it purports to be, the proceeds were the property of the grantee, not subject, in any particular, to the
In Johnson v. Sherman, decided at the July Term, 1858, the same question was again presented, and I took the occasion to give, in a separate opinion, the reasons of my dissent from the doctrine announced in Lee v. Evans. A rehearing having been granted, and a change on the bench having since taken place, and Mr. Justice Baldwin concurring with me, I avail myself of this opportunity to re-affirm the views I then expressed, using substantially the language of my dissenting opinion in Johnson v. Sherman, trusting thereby to place the doctrine of this Court in
I consider parol evidence admissible in equity, to show that a deed absolute upon its face was intended as a mortgage, and that the restriction of the evidence to cases of fraud, accident, or mistake, in the creation of the instrument, is unsound in principle and unsupported by authority.
The entire doctrine of equity, in respect to mortgages, has its origin in considerations independent of the terms in which the instruments are drawn. In form, a mortgage in fee is a conveyance of a conditional estate, which, by the strict rules of the common law, became absolute upon breach of its conditions. But, from an early period in the bistorj? of English jurisprudence, Courts of Equity interposed to prevent a forfeiture of the estate and gave to the mortgagor a right to redeem, upon payment within a reasonable time, of the principal sum secured, interest and costs. As the right to thus recover the estate forfeited arose not from the terms of the instrument, but from a consideration of the real character of the transaction, as one of security and not of purchase, it could be enforced only in equity, and .was hence termed an equity of redemption., And when the right to redeem had been once established, to"prevent its evasion, the rule was laid down and has ever since been inflexibly adhered to, that the right is inseparably connected with the mortgage, and cannot bo abandoned or waived by any stipulations entei'ed into between the parties at the time, whether inserted in the instrument or not. (Vernon v. Bethell, 2 Eden, 113; Butler’s Note to Coke on Litt. 2046; 4 Kent, 142—144; Story’s Equity, Sec. 1019).
As the equity upon which the Courts act arises from the real character of the transaction, it is of no consequence in what manner this character is established, whether by deed or other writing, or by parol. Whether the instrument, it not being apparent on its face, is to be regarded as a mortgage, depends upon the circumstances under which it was made, and the relations subsisting between the parties. Evidence of these circumstances and relations is admitted, not for the purpose of contradicting or varying the deed, but to establish an equity superior to its terms. It is against the policy of the law to allow irredeemable
Fraud, accident, and mistake, are special grounds of equity jurisdiction, and may be shown by any satisfactory evidence, written or verbal, with reference not merely to mortgages, but to all written instruments. From their nature they must generally bo established by parol evidence. And the evidence is admissible, not for the purpose of contradicting or varying the terms of the-instrument-—not to make its language mean one thing, when it speaks another, but to show a state of facts dehors the instrument, raising an equity, which a Court of Chancery will enforce by annulling or reforming the instrument, or limiting its operation, or enjoining its use. And the doctrine is both novel and startling which restricts, in matters of fraud, its jurisdiction over the operation of written instruments, to those cases whore the fraud has been committed in their creation. If maintained, it will sweep away its heretofore admitted jurisdiction in an infinite variety of cases, of almost daily occurrence, where the fraud alleged consists in the use of instruments, entered into upon mutual confidence between the parties. Fraud in their use, is as much a ground for the interposition of equity, as fraud in their creation. There is no distinction in the principle upon which the jurisdiction is asserted in the two cases. In both there is the same abuse of confidence, and from both the same injury results.
In Hultz v. Wright, the Supreme Court of Pennsylvania said : “As to fraud, it is not supposed to be necessary to have ¡woof express that a writing has been obtained fraudulently, in order to admit parol evidence against it on that score; but parol evidence may be admitted to resist the fraudulent use of a writing in the obtaining of which no fraud can be made to appear.” (16 Seargt. & Rawle, 346.) And in Oliver v. Oliver, (4 Rawle, 144,) the same Court said: “ When the fairness of the transaction is impeached, it is immaterial whether the party intended a fraud
“A deed,” says Kent, “absolute upon the face of it, and though registered as a deed, will be valid and effectual as a mortgage as between the parties, if it was intended by them to be merely a security for a debt. And this would be the case, though the defeasance was by agreement resting in parol, for parol evidence is admissible in equity, to show that an absolute deed was intended as a mortgage, and that the defeasance has been omitted, or destroyed by fraud, surprise, or mistake.” (4 Com. 143.) And Mr. Justice Story, after quoting this passage, adds: “It is the same if it be omitted by design, upon mutual confidence between the parties, for the violation of such an agreement would be a fraud of the most flagrant kind, originating in an open breach of trust against conscience and justice. I do not comment upon this subject at large, because it seems to me wholly unnecessary, in the present state of the law, to do more than enunciate the principles which govern cases of this nature, and which are as well established'as any which govern any branch of Our jurisprudence.” (Taylor v. Luther, 2 Sumner, 233.)
And if authority is to govern, the concluding observations of Mr. Justice Story are correct beyond all question. For the' last one hundred years parol evidence has been held admissible to show that an absolute conveyance was intended as a mortgage. In those tribunals to whose adjudications we are accustomed to look for authoritative expositions of the law, the doctrine is at rest. It prevails in England and in the Supreme Court of the United States; it is held in ¡New York, from which our Statute of Frauds is almost literally copied; it is maintained in the eastern States, except as modified by statutory enactments as to the equity jurisdiction of the Courts; it is the law in Virginia, in the Carolinas, in Alabama, Tennesee, Ohio, Indiana, and Illinois, and, I have no doubt, in other States.
In the case of Taylor v. Luther, cited above, there was no alie
In Van Buren v. Olmstead, (5 Paige, 10,) the allegation of fraud contained in the bill was not sustained, but Chancellor Walworth held that parol evidence could be received to show that the conveyance was intended as security. “It is now well settled," he says, “ that parol evidence is admissible to show that a deed, absolute in its terms, was intended by the parties as a mortgage, or security for the payment of money merely."
In Hodges v. The Tennessee Marine and Fire Insurance Co. (4 Selden, 416,) the Court of Appeals of Mew York held the parol evidence admissible. In that case, there was no pretense of any fraud, accident, or mistake, either in the creation or use of the instrument. “ From an early day,” said the Court, “ the admissibility of such evidence had been established as the law of our Courts, and it is not fitting that the question should now be reexamined.” (Strong v. Stewart, 4 J. C. 167; Whittick v. Kane, 1 Paige, 206.)
In Miami Exporting Company v. Bank of the United States, (Wright, 252,) the Supreme Court of Ohio said: “It is now the acknowledged doctrine that parol evidence is admissible against the face of a deed, to show that a mortgage only was intended. And whether a conveyance be a mortgage or not, is determined by its object. If given as a security, it is a mortgage, whatever may be its form. This is so whether the condition of defeasance form a part of the deed, is evidenced by other writing, or exists only in parol. The fact of its being given as security determines its character, not the evidence by which the fact is established.”
In Miller v. Thomas et al. (14 Ill. 431,) Caton, J. of the Supreme Court of Illinois, says: “ It is by no means necessary, in order to constitute a mortgage, that the deed and defeasance should be contained in the same instrument, or that they should even refer to each other. Their connection may be shown by parol. Indeed, it is not absolutely necessary that the defeasance should be in writing at all. The conveyance may be absolute on its face, and yet it may be shown by parol that it was in
In a great number of the adjudged cases in which parol evidence has been held admissible, special circumstances of fraud, accident, or mistake, have existed, and are referred to as distinct grounds for equitable relief. T.et, it is no less well settled that the evidence is admissible in the absence of such circumstances. The jurisdiction of equity is asserted upon the admission of the parties to the character of the transaction, either by pleadings or otherwise, and even against their express denial, upon clear and decisive proof. (Conwell et al. v. Evill, 4 Blackford, 67; Franklin v. Roberts, 2 Iredell’s Eq, 564;) and even where a disposition has been manifested to restrict the jurisdiction to cases in which the elements of fraud or undue advantage are mingled, it is held, with few exceptions, sufficient to authorize a decree for relief, that the proof of the fraud consists in the attempt of the grantee to appropriate the conveyance to his own use.
Thus, in Wright v. Bates & Niles, the Supreme Court of Vermont, says: “ It is well settled law in this State, that a Court of Chancery will treat an absolute deed of real estate, given to secure the payment of a debt, as a mortgage, as between the immediate parties, especially if the grantor continues to remain in possession, though the defeasance rests wholly in parol. When there is an attempt to set up such an instrument as an absolute conveyance, there is a fraudulent application or use made of it; and this is a proper ground on which chancery may proceed.” (13 Vermont, 348.)
In Morris v. Ex’r of Nixon, (1 How. 126,) Mr. Justice Wayne, of the Supreme Court of the United States, says: “ The charge against Mixon is substantially a fraudulent attempt to convert that into an absolute sale which was originally meant by himself and the complainant to be a security for a loan. It is in this view of the case that the evidence is admitted, to ascertain the truth of the transaction, though the deed be absolute on its face.” • '
In Strong v. Stewart, (4 Johns. 167,) the deed was absolute on its face, but it was proved against the express denial of the answer of the grantee to have been executed as security for a loan, and not
The parol evidence is admitted, as I have already observed, not for the purpose of contradicting or varying the written instrument, but to show facts dehors the instrument creating an equity superior to its terms. The same rule prevails in the admission of parol evidence in equity to establish resulting or implied trusts. Where one party purchases an estate with the money of another, and takes the conveyance in his own name, a trust in favor of the latter results by implication of law without any agreement on the part of the nominal grantee. Such trust may be proved by parol evidence even in the absence of fraud, and against the positive denial of the grantee. “Irrespective of any allegation of fraud,” says G-reenleaf, “it has been settled upon great consideration that parol evidence is admissible to prove that the purchase money for an estate was paid by a third person other than the grantee named in the deed in order to establish a trust in favor of him who paid the monear.” (Evidence, vol. 1, 365; Boyd v. McLean, 1 Johns. Ch. 582.)
The evidence is received not in contradiction of the deed; on the contrary, the legal effect of its terms is admitted, but to show the source of the consideration. The trust arises from the fact appearing, dehors the instrument, that the money advanced by the real, and not the nominal purchaser, constituted the consideration of the purchase, just as the equity in the case of an absolute conveyance arises from the fact appearing, dehors the deed, that 'it was executed as security for a debt. In neither case is it attempted to vary the language of the conveyances, but to prevent an inequitable advantage being taken from their terms.
In Lee v. Evans, the complaint alleged a loan to the defendant, for a certain period, at a stipulated interest, and the execution of the absolute conveyance as security for the payment of the sum, but contained no averment of fraud, accident, or mistake, in the creation of the instrument, or any attempted fraud in its use. The answer did not specifically deny the allegations of the complaint, but insisted that the conveyance was to operate as a con
It is difficult to perceive the consistency of the judgment with the reasoning of the opinion. The admission by the pleadings only established for the purposes of the suit, the truth of the facts stated. Those facts might have been proved with equal certainty by evidence. Written evidence not being by deed or conveyance, is as much in contravention of the language of the statute as oral evidence. The statute reads: “Ho estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same, or by his lawful agent thereunto authorized by writing.” Admissions, whether contained in pleadings or established by competent proof, do not constitute “a deed or conveyance in writing.” "The answer in Lee v. Evans contained no admission of the execution of any such deed or conveyance, but only of the character of the original transaction as one of loan and not of purchase.
The judgment of the Court in Lee v. Evans, as to the effect of the' admissions by the answer, is undoubtedly correct; but it is not warranted by the opinion. It must rest upon the equity which arises from the nature of the transaction, when that transaction is admitted by the parties, and it follows that such equity must arise when the transaction is clearly established by other evidence than admissions.
Since the opinion containing the views here repeated was rendered, my attention has been called to the separate opinion of Mr. Justice Burnett, in Arguello v. Edinger, (10 Cal. 160,) in which he again re-affirms the doctrine announced in Lee v. Evans.
The parol evidence being admissible, and clearly establishing the fact that the conveyance was intended only as security, Hutchinson & Greene were entitled to redeem the property, and to insist upon a reconveyance after its proceeds had satisfied their indebtedness to Frierson, and to make any disposition they thought proper of the surplus.
It only remains to add, that the judgment of the Court below must be reversed, and that Court directed to enter a decree declaring that the plaintiff is entitled to the application of the funds in the hands of the Administrator, which are the proceeds of the produce of the farm, to the payment of his demand, and directing the same to be made.
Ordered accordingly.