Case ID: nc_21/html/0621-01.html
Source: Caselaw Access Project
Author: {"author": "Ruffin, Chief Justice.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THOMAS FLEMING et al. v. WILLIAM SITTON.
    A deed of bargain and sale, with a proviso avoiding it, upon repayment by the vendor of the purchase money, is prima facie for a conditional sale, and shall not in the absence of all fraud on the part of the vendor, be turned into a mortgage securing the purchase money as a debt.
    The allegations of the bill were, that the defendant purchased goods of the plaintiffs, residents of Charleston, to the amount of one thousand five hundred and two dollars and eighty-four cents, and on the 19th of May 1832, gave a note at six months, for the amount: that the defendant neglected to take it up, and the plaintiffs becoming doubtful of his solvency, went to the residence of the defendant, at Waynesville, in Haywood County, and requested further security: that the defendant then confessed his inability to give any additional security, unless it was a mortgage upon an improved lot in Waynesville, which he represented as being worth three thousand dollars : that confiding in this representation of the value, the offer was accepted, and the plaintiffs agreed to suspend the collection of their debt, until the 11th of January 1834: that on the 14th of September 1832, the defendant executed a mortgage of the lot, to secure the payment of the debt due them in Charleston : that after its execution the defendant insisted upon the cancellation of the note for one thousand five hundred and two dollars and eighty-four cents ; assigning as a reason for so doing, that it was customary to surrender the note when a mortgage was given to secure it, and insisting that unless this was done, he might be called upon to pay the debt twice: that the plaintiff being ignorant of such things, and supposing that the mortgage deed would be sufficient evidence of the debt, consented to this arrangement.
    Dec. 1837.
    The plaintiffs then alleged, that the defendant had not paid the mortgage debt, and when being called on, had denied that he owed them any thing, insisting that he had sold the lot and improvements to them absolutely, for the debt of one thousand five hundred and two dollars and eighty-four cents : that the value of the property was but six or eight hundred dollars, and their debt with interest one thousand and eight hundred dollars. They averred that the whole plan originated in a fraudulent design to cheat them.
    The prayer was, that the lot might be sold, and the proceeds applied to the payment of the debt due the plaintiffs, and that they might have execution for the residue of it.
    A copy of the mortgage was filed as an exhibit; it was in form a deed of bargain and sale, for the lots with a covenant of quiet enjoyment, executed by the defendant to the plaintiffs, in consideration of the sum of one thousand five hundred and two dollars and eighty-four cents, with a proviso, that “if the said William Sitton, his heirs &c., “ doth or shall, well and truly pay to, &c. the assumed “ sum of one thousand five hundred and two dollars and “eighty-four cents in the city of Charleston, on or before “ &c., then the above indenture to be void, or otherwise to “ be and remain in full force and value in both law and “ equity.”
    The defendant in his answer, denied that it wras his intention, or that of the plaintiffs, to take a mortgage of the lot, but that both parties had a conditional sale in view, and that the condition was inserted for his benefit, as he then believed the property worth more than the debt: that it had cost him more, and that one of the plaintiffs was on the premises and examined it. He denied all fraudulent misrepresentation of the value; and admitted that it was doubtful, whether the lot would now sell for the amount of the purchase money and interest.
    
      Upon a bill to foreclose a mortgage a sale may be decreed, but an award of execution for the balance, after applying the proceeds is erroneous.
    The question of debt or no debt cannot be tried by a Court of Equity, unless there is no remedy at law, as in cases of lost bonds and the like.
    
      The depositions of the attesting ’witnesses were filed, and the substance of them is stated in the opinion of the Court.
    - His Honor Judge Pearson, at Haywood on the last Spring Circuit, by his decree, declared that the debt due by the defendant to the plaintiffs, still existed, and that the indenture was a mortgage; and ordered a sale of the lots, and in case the sale did not realize a sum equal to the debt, that execution should issue for the residue.
    From this order the defendant appealed.
    
      Badger, for the defendant.
    No counsel appeared for the plaintiffs.
   Ruffin, Chief Justice.

The Court is of opinion that so much of the decree as requires the defendant personally to pay to the plaintiffs the mortgage debt and interest, and awards execution for the same, or any part of it, is erroneous.

. The jurisdiction of equity in mortgages is simply to decree redemption or foreclosure. To that end the Court directs accounts to be taken of the sum due, in order that it may be known how much the mortgagor must pay to entitle him to a reconveyance, or to prevent his equity of redemption being foreclosed. Of late years, a beneficial practice has gained favour, until it may be considered established in this country, not absolutely to foreclosure in any case, but to sell the mortgaged premises, and apply the proceeds in satisfaction of the debt: if the former exceed the latter, the excess is paid to the mortgagor; if it fall short, the creditor then proceeds at law on his bond or other legal security, to recover the balance of the debt. Gillis v. Martin, 2 Dev. Eq. 470. In Lansing v. Goelet, 9 Cowen, 346, Chancellor Jones treats the subject much at large, and with great learning.

But the debt is never recovered in the Court of Equity on a bill for foreclosure. Debt or no debt is purely a legal question, and the parties must try it at law. The Court of Equity acts only upon the equitable security, not upon the debt. It makes the pledge absolute, but it cannot decree the independent payment of the money due, over, beyond the value of the pledge. His honor, therefore erred in the decree as pronounced; because; he therein merely declares, that the defendant owed the plaintiffs a certain sum at the date of the mortgage, and that the same with interest is wholy unpaid ; and therefore decrees that the defendant pay to the plaintiffs their said debt and interest; and to that end, that a sale of the premises be made, and after applying the proceeds, that execution go against the estate or person of the defendant for the residue. Upon the facts upon the face of the decree, therefore, it cannot stand.

Nor do we think that the allegations of the bill and ■ the proofs, will enable this Court to supply the defect in the decree, by declaring the facts necessary to support it. There are cases in which this Court will decree the payment of a legal money demand. If the bond or other security be lost by time or accident, the jurisdictio'n is established; a fortiori, it exists when the creditor has been deprived of them by the fraud of the other party. The object of the bill, was to charge that' case. The mortgage contains no acknowledgment of debt, or covenant to pay money. It purports to be a bargain and sale for two lots of land in fee simple, in consideration of the sum of one thousand five hundred and two dollars and eighty-four cents, paid by the plaintiffs to the defendant, on the day of the date, 19th of March 1832, with covenants of general warranty; with a proviso, to be void upon payment of the same sum in Charleston, South Carolina, by the defendant, on the 11th of January 1834. On its face therefore, it would not appear to be connected with a personal debt of the defendant. The bill charges however, that it was ; that in truth he owed the plaintiffs that sum for merchandize before sold, and for which they held his note; that, doubting his solvency, they wished further security; and that the defendant proposed to give a mortgage on this property, by way of additional security, which they agreed to accept; it being represented to them that the property was of value to answer the debt. The bill then states, that when the defendant was about to execute the deed, he claimed to have his note surrendered and cancelled, which they acceeded to, upon the belief that the defendant was better acquainted with business than they were; and that the deed would be sufficient evidence of the debt, and also the lots a sufficient security;. and the bill thereupon charges, that in truth the lots will not pay more than half the debt, and that the defendant knew it at the time, and designed by his assertions to the contrary to obtain the surrender of his note upon a false pretence, and to cheat them out of the money.

It is manifest, that the whole fraud consists in the alleged false representations as to the value of the property. It is not a fraud to obtain a personal discharge from a debt, by substituting a real security. It is often a better secui’ity and to the advantage of the creditor to get it. The circumstances of the defendant were doubted by the plaintiffs, as the bill admits; and it is not improbable that the creditors should prefer the mortgage without any security against the original debtor, to his note or bond without the mortgage. The question is, did they, or had they'reason to expect both or only one ? The presumption is, the latter only, because they say, they consented to give up the note. But they complain that they were entrapped into that. The answer is positive and precise to the contrary; and states, that it was distinctly understood, that the lots were to be the only security ; and that the reason why he insisted on the clause for redemption was, that the defendant really thought them worth more and hoped to redeem them. He admits that in that, he has been disappointed, and the lots, like most property at county court houses in the back country have fallen. In these statements, the answer is supported by the subscribing witnesses to the deed. They prove that at the execution of the mortgage, the value of the lots was from one thousand two hundred dollars to one thousand five hundred dollars; and that, upon one of them advising the defendant not to redeem them, but let them go at the price, the defendant said, they had cost him more and were worth more, and that he would redeem them, if he could. The other witness says, he thinks the lots are now worth the whole debt. Consequently the foundation laid in the bill, for a personal decree against the defendant, sinks under the proofs.

As however, the plaintiffs may possibly recover at laW' on the original sale and delivery of the goods, or in some other way, the Court will not simply foreclose the mortgage ; but so much of the decree as directs a sale of the premises, may be affirmed. The residue of the decree must be reversed with costs in this Court, without cost to either party in the Court below.

Per Curiam. Decree reversed.