#### *Breckenridge v. Auld and Others.

August, 1842,

Lewisburg.

(Absent Allen and Baldwin, J.*)

Mortgages—Deed Absolute on Face Deemed a Mortgage.†—Where a deed for land is absolnte on its face, and, at the time it is made, a written agreement is entered into by the parties, shewing that the object of the deed is to secure to the grantee money, and indemnify him against liabilities, such deed is only a mortgage, and the right of redemption by the mortgagor is incident to it.

Same — Same — Vendee of Land — Rescission. — The grantee in a deed for land, which is absolute on its face, but in truth a mortgage, having conveyed the land to a purchaser from him for valuable consideration, without notice of the equity; and the purchaser, upon obtaining knowledge of it, haying filed a bill against his vendor for a rescission of the contract, in which suit the mortgagor is a party, and unites'íd the prayer for rescission; Hell, such rescission will be decreed, unless there be some other party who has a right to object.

Same—Same—Assignee of Purchase Money‡—Onus Probandi.—The grantee in a deed for land, which is absolute on its face, but in truth a mortgage, having sold the land, and taken from the purchaser bonds for the purchase money, and a deed of trust to secure the same, and haying then transferred the bonds to one who claims to be the assignee thereof for valuable consideration, but appears to have taken the assignment under circumstances calculated to throw strong suspicion on the transaction; Hell, it is incumbent on the assignee to prove that the assignment was for value.

Costs§ — Appellate Court — Coappellees — Apportionment.—The court of appeals reversing a decree, and there being three appellees, one of whom gets by the decision here what was sought by his bill and denied by the court below, and another of whom prevails here to the same extent that he prevailed in the court below, decreed that the third appellee pay to the appellant his costs.

On the 17th of August 1826, James W» Breckenridge and Eliza his wife, of the county of Prince George in the state of Maryland, made a deed to Colin Auld of the county of Alexandria in the district of Columbia, *which stated on the face thereof, that Breckenridge and wife, for the consideration of 20,000 dollars, conveyed to Auld three pieces of land in the county of Mason in the state of Virginia, forming part of a tract called Graham’s station.

On the same day, a memorandum was signed by Breckenridge and Auld, stating, that although that conveyance was made, it was understood that Auld was to account to Breckenridge for whatever the land might ultimately produce, after deducting any claims which Auld might have against Breckenridge, or against the estate of Bailey E. Clarke deceased, of which Breckenridge and his wife were executors, or whatever loss or damage might arise to Auld in consequence of his undertaking for Breckenridge and obligation to Abraham Clarke.

The conveyance was admitted to record in the county court of Mason (without the memorandum) on the 18th of September 1826, upon the certificates of two justices of the peace, of the acknowledgment of Breckenridge. and the acknowledgment and privy examination of his wife.

About three years after the conveyance, Auld advertised the land for sale. His advertisement appeared in some of the papers of the district of Columbia. And Breckenridge was at the time in the district, and knew of the advertisement.

On the 1st of September 1831, Auld made a *110deed to Henry Strider, of the county of Jefferson in Virginia, whereb3’’ he conveyed to Strider two parcels of the Graham’s station tract (being all that remained unsold by Auld) for the consideration of 10,000 dollars. On the same day, Strider made a deed of trust to Richard H. Claggett, reciting his purchase from Auld ; stating that he had executed to Auld the following bonds, to wit, five bonds for 1000 dollars each, payable on the first day of April 1832. 1833, 1834, 1835 and 1836 respectively, *two bonds for 2000 dollars each, payable on the first day of April 1837, and 1838 respectively, and one bond for 1000 dollars, payable oh the first day of April 1839; and conveying to Claggett in trust, to secure the payment of the said bonds, the same property which had been conveyed by Auld to Strider. Both of these deeds were admitted to record ; the deed to Strider on the 20th of September 1831, and his deed of trust on the 15th of November 1831.

Previously to the conveyance from Auld to Strider, Auld had been discharged from the liabilities against which the deed from Breckenridge and wife was intended to indemnify him, and Breckenridge had demanded a reconveyance of the land, on the allegation that there was no indebtedness from him to Auld. But Strider had not, at the date of his purchase, any knowledge of the secret equity of Breckenridge, or of any adversary claim whatever. Auld had held the land for years, and was in the actual possession thereof, claiming to be the owner, and exercising acts of ownership. And Strider contracted with Auld in the belief that he was the true and sole owner. Strider broke up his establishment in Jefferson county, removed to his new purchase, took possession of the land, and held it for nearly three years, before he heard of the claims of Breckenridge. During this time, he put upon the land valuable and permanent improvements. But he had paid no part of his purchase money, when he first received notice of Breckenridge’s claims.

Before this notice was received by Strider, the matters in controversy between Auld and Breckenridge had, in March 1833, been submitted to arbitration. The adjustment was found to be one of great difficulty, requiring long and laborious investigation. The arbitrators had various meetings, and did not make up their award until the 29th of January 1834; when they adjudged that Auld should convey the land to Breckenridge, and *that the latter should, on receiving the conveyance, pay to the former the sum of 3347 dollars 31 cents, which they found due to him.

About the time of this award, an assignment was made by Auld to John Ramsay, of the'bonds executed by Strider to Auld. Strider was informed of the ássignment by a letter from Auld bearing date the 30th of January 1834, and by a letter from Ramsay bearing date the 3d of February 1834.

In July 1834, Strider filed a bill in the circuit court of Mason, setting forth the nature of Breckenridge’s title ; stating, that he (Strider) considered his contract with Auld a beneficial one, but that' he regarded the title of Breckenridge as superior to that which he had acquired; and concluding with a prayer for a rescission of the contract between himself and Auld. To this bill, Breckenridge, Auld and Ramsay were made defendants : and they all answered.

The rescission of the contract between Strider and Auld promoted the object of Breckenridge, who by a cross bill, as well as by his answer to the original bill, sought a decree compelling the other parties to convey the land to him. Such rescission was. however, objected to by Ramsay, who claimed to be the assignee for valuable consideration, of the bonds executed by Strider to Auld.

It was expressly charged in the bill, that the assignment was made without consideration ; and though the charge was denied by both Auld and Ramsay, neither of them exhibited any satisfactory proof of the consideration. All that was shewn was, that Auld had given bond in the office of the register of wills for Alexandria county, as guardian of John Ramsay and four other orphan children of John Ramsay deceased, in the penalty of 80.000 dollars. Whether any settlement of Auld’s accounts as guardian had ever taken place, or what was the amount of his indebtedness, or whether he was ^indebted at all, nowhere appeared. Yet Ramsay stated, that the motive which induced him to take the assignment, was his desire to get from Auld’s hands the debt due from Auld on account of his father’s estate.

Both Auld and Ramsay alleged that the assignment was made on the first of January 1834. But there was no proof to support this allegation. Neither of them alleged that any step was taken to inform Strider of the assignment until after the award. It appeared by the depositions of the arbitrators, that although Strider was no party to the submission, yet the sale to him was a subject investigated by them. They were satisfied that the land was'worth much more than it was sold for to Strider; that it was worth 13,000 dollars. And this induced them to provide in the award, that in case Auld should not restore the land to Breckenridge at the time prescribed by them, then he should pay to Breckenridge, in lieu thereof, the sum of 13.000 dollars, subject to a deduction of the before mentioned sum of 3347 dollars 31 cents.

Pending the cause, a judgment was obtained by Ramsay on one of Strider’s bonds, and an injunction was awarded to restrain Ramsay from proceeding on that judgment, and on the other bonds.

The circuit court of Mason, by two decrees of the 23d of January and 19th of April 1839, decreed, 1st.

That Strider be quieted in his title and possession of the land, subject to the deed of trust executed by him to secure the payment of the purchase money. 2. That the injunction be dissolved as to the judgment, and as to so much of the bonds first becoming due. as, with the judgment, would amount to 3347 dollars 31 cents- with interest thereon from'the 1st of January 1834, deducting there*111from the costs incurred by Breckenridge in the prosecution of his cross bill, which Auld was decreed to pay. 3. That Ramsay should file with the clerk the residue of the bonds, and that Strider pay the ‘same to Breckenridge, without any damages by reason of the injunction.

On the petition of Breckenridge, an appeal was allowed him.

The cause was argued in August 1841, by the attorney general for the appellant, by Peyton for Ramsay, and by Cook for Strider.

The argument not being concluded before the term ended, written notes of argument were delivered to the judges in vacation, by Baldwin for the appellee Auld, and Johnson for the appellant. It is unnecessary to report the argument in detail.

The question of law mainly discussed was, whether, notwithstanding the sale made by Auld of the land conveyed to him by the deed of the 17th August 1826, Breckenridge retained, as between Auld and himself, a right of redemption? The counsel for the appellees endeavored to distinguish the case from that of Chowning v. Cox &c., 1 Rand. 306. But supposing the cases not to be distinguishable in principle, they said that Chowning v. Cox &c. had been decided without reference to the late decisions in England, or to those in New York, and was clearly inconsistent with them. Those decisions, they contended, have established the proposition that a power of sale given to a mortgagee, in default of payment, by way of substitute for the decree of foreclosure, may be exercised by the mortgagee so as to bar the equity of redemption. They referred to 2 Rob. Pract. 61. 2 Story’s Eq. 295, § 1027. and note. 4 Kent’s Comm. 146. 1 Sugden on Vendors 157, 8.—where the doctrine and cases are stated.

*

The former had been consulted by the appellee Strider. The latter was counsel for the appellee Auld.

†

Deed of Trust Considered a Mortgage.—In Spencer v. Lee, 19 W. Va. 192, it is said: “The death of the *cestui que trust*and the qualification of the trustee as his executor rendered it improper for him to sell. He could no longer act with that impartial disinterestedness required of a trustee. He had become a party himself. He had ceased to be a trustee and had become a mortgagee with the right of redemption in the mortgagor or his heir. In Chowning v. Cox, 1 Rand. 306, it was held, ‘where a conveyance of real estate is made to a creditor in trust to satisfy his own debt, such conveyance is not to be considered as a deed of trust but as a mortgage, to which the right of redemption is incident.’ *Vide*also Taylor’s Adm’r v. Chowning, 3 Leigh 654; *Breckenridge*v. *Auld, 1 Rob.*154; Floyd v. Harrison, 2 Rob. 178, 183, 185, 188; a Min. Inst. 290.” The principal case is cited in this connection in Floyd v. Harrison, 2 Rob. 183, 190.

See monographic *note*on “Mortgages” appended Forkner v. Stuart, 6 Gratt. 197; and monographic *note*on “Deeds” appended to Fiott v. Com., 12 Gratt. 564.

Deeds of Trust—Outstanding Title—Duty of Trustee. —It was held in Rossett v. Fisher, 11 Gratt. 492, that where real estate is conveyed in trust to secure debts, and the grantor in the deed has at the time but an equitable title, but is entitled to have the legal title, it is an abuse of his power by the trustee to sell the property before getting the legal title. The court said, at page 502: “Whatever might have been the rights of a *bona fide*purchaser without notice at such a sale, as to which I express no opinion, I think that the creditor being the purchaser under the circumstances before stated, the debtor has lost none of his rights by the sale, but is entitled to have it set aside and the property resold, if necessary, for the purposes of the trust. See Gibson v. Jones, 5 Leigh 370; *Breckenridge*v. *Auld,*1 *Rob.*148; Dabney v. Green, 4 H. & M. 101; Lord Cranmouth *v.*Johnston, 3 Ves. Jr. R. 170.”

‡

Assignments—Consideration.—In Hopkins v. Richardson, 9 Gratt. 492, the court said; “It is doubtless correct, as argued by the counsel for the defendant in error, that the assignment of a chose in action not assignable at common law, does not make the assignor liable without a valuable consideration for the assignment; and that the assignment being in writing does not necessarily import that it was for a valuable consideration. Hall v. Smith, 3 Munf. 550; Wood v. Duval, 9 Leigh 6; *Breckenridge v. Auld,*1 *Rob. R.*148.”

See *monographicnoteon*“Assignments" appended to Ragsdale v. Hagy, 9 Gratt. 409.

§

 Costs.— See monographic *note*on “Costs” appended to Jones v. Tatum, 19 Gratt. 720.

CABELL, P.

The deed from Breckenridge to Auld for Graham’s station, executed on the 17th of August 1826, although absolute on its face, was in fact nothing more than a mortgage; for the written agreement entered into by the parties on the same day, gives the *true character of the deed, by shewing that its sole object was to secure to Auld any moneys which Breckenridge then owed him, or might thereafter owe him, and to indemnify him against certain liabilities to which he was exposed on his account.

The deed being only a mortgage, the right of redemption by Breckenridge was incident to it ; and Auld could not, by the mere authority derived from the deed, and without resort to a court of equity, sell the land so as to bar the rights of Breckenridge. Chowning v. Cox &c., 1 Rand. 306. The sale of the land by Auld to Strider, by the deed of the first of September 1831, was therefore, as between Auld and Breckenridge, a mere nullity; especially when we consider that Breckenridge had previously discharged him from the liabilities against which the deed was mainly intended as an indemnity, and had demanded a reconveyance of the land, on the allegation that there was no indebtedness from him to Auld. A sale of the land under such circumstances, and without disclosing to Strider, the vendee, the pretensions of Breckenridge, was doubly fraudulent. If, therefore, there were no other parties to this controversy but Auld and Breckenridge, it is manifest that Breckenridge would be entitled to his land, on his paying to Auld the money which he owed him.

But there is a third party to the controversy. Strider has obtained the legal title to the land ; and although that title was fraudulently conveyed to him by Auld, yet Strider did not participate in the fraud. He saw Auld in the actual possession of the land, which he had held for many years, claiming to be the owner thereof, and exercising all the acts of ownership, under an absolute deed in fee simple from Breckenridge, spread upon the records of the courts of the county where the land lay. Auld had even advertised the land for sale in the public newspapers published at no great distance from the residence of the parties, without remonstrance *or opposition on the part of Breckenridge. It is not pretended that Strider, at the date of his purchase, had any knowledge of the secret equity of Breckenridge, or of any adversary claim whatever. On the contrary, he had good reason to regard Auld as the true and sole owner ; and he contracted with him in the belief that he was so; he received his conveyance, gave his bonds for the purchase money, broke up his old establishment, removed to his new purchase, took possession of the land, and held it for nearly three years, before he heard of the claims of Breckenridge; during which time, he put upon the land valuable and permanent improvements. It is true that he had paid no part of his purchase money, before the time when he received notice of Breckenridge’s claims ; and it was strongly contended in the argument, that this circumstance is sufficient to deprive him of the right to insist on the benefit of his purchase. I do not think it necessary to decide this point in this case ; for if, in consequence of this notice, Strider had no right to insist on his purchase, then there would be nothing to prevent the court from deciding the cause as to Breckenridge and Auld, upon the principles of equity applicable to them. And if, on the contrary, he had a right, notwithstanding this notice, to insist on his purchase, it is very clear that he had the right to waive or abandon the purchase, provided his doing so would not impair or injure the rights of others. He might pursue this course, even if his right to insist on his purchase were clear and undoubted ; much more might he do so, if it were attended with doubt and uncertainty. He has filed his bill, stating what he considers the superior title of Breckenridge, and praying the rescission of the contract, although he thinks that contract was a beneficial one. Who is to object to this course? Not Breckenridge ; for it is that which he desires, and to which he claims to be entitled. Not Auld ; for his interest is *not affected by it ; and if it were, the fraud of which he has been guilty must close his mouth against any such objections. If, therefore, Breckenridge, Auld and Strider *112were the only parties to this controversy, the claims of Breckenridge must prevail.

But there is yet a fourth party, Ramsay, whose pretensions remain to be examined. He claims to be the assignee, for valuable consideration, of the bonds executed by Strider to Auld for the purchase money of the land in controversy. To make this claim available, he must not only allege, but he must prove, that he was an assignee for value ; for, as the bonds were invalid and worthless in the hands of Auld, they will be equally so in the hands of his assignee without value. And it may also be added, that even if full value were paid for them, they will be unavailable in the hands of Ramsay, if he had notice of the claims of Breckenridge.

It is certain that these bonds were assigned to Ramsay under circumstances calculated to throw strong suspicion on the transaction.

The matters in controversy between Auld and Breckenridge had been submitted to arbitration, as far back as March 1833. The adjustment was found to be one of great difficulty, requiring long and laborious investigation. The arbitrators had various meetings from time to time, and did not make up their award until the 29th of January 1834, when they adjudged that Auld should convey the land to Breckenridge, and that the latter should, on receiving themonveyance, pay to the former the sum of 3347 dollars 31 cents, which they found due to him. Both Auld and Ramsay say that the assignment of the bonds was made on the first of January 1834. " But' there is no proof to support the allegation. They do not pretend that any step was taken to inform Strider of the transfer of his bonds, until after the award; Auld’s letter, which gives the information, bearing date on f the 30th of January, and Ramsay’s *on ' f ' the 3d of February. If the assignment was in fact made on the 1st of January, this delay in making so important a communication would manifest a degree of negligence and imprudence which we are unprepared, by any thing in the record, to attribute to mr. ■Auld ; whilst the almost simultaneous communication by both Auld and Ramsay, so immediately after the award, excites a strong suspicion that the assignment itself followed the award, and was induced by a knowledge of its contents ; and consequently, that Ramsay had notice of the claims of Breckenridge. This suspicion becomes still stronger, by the notoriety which the record shews was given to the subjects investigated by the arbitrators ; one of which was the sale of the land to Strider, although he was no party to the submission. Besides, it seems almost inconceivable that any man should take an assignment of bonds for such, an amount, and payable at such remote periods, without an enquiry into the consideration for which they were originally given ; especially where the parties to the transaction occupied towards each other the intimate relations existing between Auld and Ramsay. But be this as it may, the conduct of Auld in assigning these bonds, at any time, while his right to them was involved in the questions then pending before the arbitrators, was grossly fraudulent ; and as it is expressly charged in the bill that the assignment was made without consideration, it was incumbent on Ramsay to adduce satisfactory proof of the consideration, if any. No such proof is exhibited. We have nothing but his own assertion and that of Auld, added to the fact that Auld had qualified as the guardian of Ramsay and his four sisters, and had given a bond as guardian of them all, in the penalty of 80,000 'dollars. But whether any settlement of his accounts had ever taken place, or what was the amount of his indebtedness, or whether he was indebted at all, nowhere appears. '^Nothing is more improbable than the story told by Ramsay, as to the motive which induced him to take the assignment of these bonds. He says it was his desire to get from Auld’s hands the debt due from him on account of his father’s estate. Then why not get it directly from Auld himself, who lived in his immediate neighborhood, and who is not alleged to be insolvent, or even in embarrassed circumstances? Why take bonds on a stranger, living hundreds of miles from him ? And above all, why take, in discharge of a present debt which he wished to collect, bonds, some of which had to run four years before they came to maturity ? Upon the whole, I am of opinion that he has shewn no title to the bonds as against Strider or Breckenridge, and that his pretensions to enforce the collection thereof are without any just foundation.

The other judges concurred with the president in the following decree:

The court is of opinion that the sale by Auld to Strider of the land in controversy be rescinded, and that Strider do surrender to Breckenridge the full possession of the said land, with all its appurtenances, on or before the first day of January next; and that in the mean time he do permit him, his servants &c. to have free ingress and egress into and from the said land, for the purpose of seeding the usual fall crops. That an account be taken of the rents and profits of the said land while in the possession of the said Strider, and also of the permanent improvements put thereon by him, until the present time; distinguishing those permanent improvements made before, and those made since, the institution of the suit by Strider. That Strider do pay to Breckenridge the amount of the said rents and profits, subject, however, to a credit for so much of the value of all the said improvements, as may not exceed the amount of all the rents and profits ; but that Breckenridge *shall not be liable for any excess of the value of the improvements above the amount of all the rents and profits, unless the value of the improvements put upon the land before the institution of the suit, shall exceed the amount of all the rents and profits during the whole time that Strider has held the said land ; in which case he shall be chargeable with such excess, as a lien on the said land. That the injunction restraining Ramsay from enforcing his judgment at law, and from enforcing the collection of the bonds executed by Strider to *113Auld, and by him assigned to Ramsay, be perpetuated ; and that Ramsay surrender the said bonds to Strider, to be cancelled.

But although Ramsay has shewn no cause, as between him and Breckenridge and Strider, to enforce the collection of the bonds assigned to him by Auld, yet as Auld admits that the said bonds were assigned by him for valuable and full consideration, the court is of opinion that that admission gives to Ramsay a just claim against Auld, and intitles Ramsay to receive from Breckenridge the sum of 3347 dollars 31 cents, found due from Breckenridge to Auld by the award of the arbitrators in the proceedings mentioned, with interest thereon from the first day of January in the year of 1833 ; and that the said sum, with interest as aforesaid, is chargeable as a li'en on the said lands herein before directed to be surrendered to the said Breckenridge : that Breckenridge be directed to pay to Ramsay the said sum of 3347 dollars 31 cents with interest as aforesaid, on or before the expiration of sixty days from and after the time when he shall receive possession of the land as aforesaid ; and that in default of said payment, the said land shall be sold, in whole or in part, as may bedeemed most expedient, to pay such portion or part of the said sum of money and interest as aforesaid, as may remain unpaid, and the costs of the sale,—on a credit of nine months for *one third part thereof, of twelve months for another third part, and of eighteen months for the residue.

It is therefore adjudged, ordered and decreed, that the decrees be reversed, with costs to the appellant Breckenridge, to be paid by the executor of Auld out of assets of his testator in his hands to be administered, if so much thereof he hath; the other appellees not being subjected to costs in this court, because the appellee Strider gets by the decree of this court a rescission of the contract of purchase, which he sought in the court below, and which was denied by the decree of that court; and because the appellee Ramsay prevails in this court, to the extent that he prevailed in the court below. And the cause is remanded to the circuit court, to be further proceeded in according to the principles before declared.