Source: https://supreme.justia.com/cases/federal/us/79/323/
Timestamp: 2019-04-26 05:44:18+00:00

Document:
a mortgage; this against a lessee of the grantee, with a right of purchase, who had made large expenditures on the land in apparent expectation of purchase; in the face too of some proof that the deed was meant to make an absolute transfer with a view to sale, leaving a trust upon the proceeds of the sale above the amount of the original mortgage debt.
2. A vendee cannot defend as a bona fide purchaser without notice against an unrecorded mortgage where his rights lie in an executory contract, nor where he has a right to call for no deed but that of a "quitclaim."
4th December, of the same year just named, a mortgage for $4,000, bearing 24 percent per year interest for 5 years, and providing that the same should be compounded every six months, and in case he should sue upon it, he should also be allowed counsel fees at 5 percent, and should he pay taxes on the land, all amounts so paid should bear the same interest and become a part of the mortgage debt, all payable, according to the California usage, in gold coin. On the 13th November, 1862, Rodriguez paid an additional sum of $1,172, to redeem the land from a tax sale, which the widow's failure to pay the taxes on it had brought about.
that, and that they did it with great pleasure. Then I told them,"
" It is well, but here is a thing I have to say to you: there is Antonio [this was the youngest son], who is not yet of age; if, when he comes of age, he makes a conveyance to somebody else, that will give me some trouble."
"He said that I might confide in him; that he would do nothing of the kind, that he had been benefited by the use of these moneys as well as the rest of the family. I said, 'It is very well if that is so; I trust to you.' Then I said, 'Very well, I shall cause the conveyance to be drawn up in order to close the mortgage. I shall bring the recorder here,' &c., and the whole family told me go and get the titulo made out, and that they would be sure and comply with what they had said."
At this time, as the reader will have noted, Rodriguez had his money secured on only three-sevenths of the property.
"When I came and settled my affairs with my sister, I said that it did not suit me to pay taxes twice. If they did not pay the taxes on the ranch, I had to pay them."
country when the already-mentioned deed was made by the widow and other children, conveyed May 20th of the year above stated. The consideration paid to this last was $100 in gold.
"that he would, by a sufficient deed, release and quitclaim to the lessees or their heirs and assigns, free from all encumbrances created by him, all right and title which he then had to the premises or which he might thereafter acquire from the United States or from any of the heirs of Jose Maria Villavicencia."
The Villa family were informed of this lease in a general way both before and after its execution.
Under this contract, the Steeles went into possession of the property, began the construction of improvements, stocked the land with cattle, and established dairies. The Villa family remained on the ranch in the old ranch house, with certain lands around it which gave them the means of pasturing their horses. The males of the family were employed by the Steeles in hauling timber, in fencing the land, and in building houses of the Steeles, and generally in the construction of the improvements to be made under the covenants of the lease.
San Francisco, and on the 26th day of December, 1867, executed to one George Alexander a deed conveying all his right, title, and interest in the said lands. The consideration, as set forth in the deed, was $35,000. But the real money consideration paid was $1,000, with a promise that, should Alexander succeed in recovering the premises, the family should receive $35,000 and a conveyance of 350 acres of land, including the ranch house. Alexander, being thus vested with a paper title to six-sevenths of the land, filed the bill below against Rodriguez and the Steeles to be declared owner of that portion of the land, subject to the debt which first rested on it.
The bill set forth that the Villa family, being poor, and both they and Rodriguez desirous of avoiding the payment of taxes upon land and mortgage both, had an account concerning the moneys due upon the mortgage, and for the money advanced to effect the redemption from the tax sale; that there was found to be due upon the mortgage, for principal and interest, $8,610, and for the moneys advanced to effect the redemption $1,172, with interest from November 12, 1862, and that it was then agreed, in order to avoid the payment of taxes both upon the lands and mortgage, that the widow and children should convey the lands to Rodriguez by deed of conveyance purporting to convey the same in fee, but that such deed should in fact be, and was intended to be a mortgage upon three-sevenths, for the security and payment of the debt of $8,610, and upon five-sevenths for the repayment of the $1,172 and interest, as aforesaid, and that the mortgagors should have the right to redeem the lands upon the repayment of the said several sums and interest thereon; that the grantors accordingly remained in possession of the premises described as owners; that the deed was, at the time of its execution, intended by all the parties to be, and was in fact a mortgage to secure the payment of the two above-named sums respectively, and that the same was true of the conveyances subsequently made by the two other children.
taken possession of all the lands so granted, except an adobe dwelling house, situated on them, and about fifty acres of land surrounding it, and had since then continued, and now were in possession of the same, and had used and occupied the same for agricultural and dairy purposes; that the value of this use and occupation had been, and was $3,500 a year, and that upon a fair settlement of the rents and profits, nothing would be found to be due Rodriguez, either upon the mortgage debt, or upon the other sum advanced, or otherwise.
Rodriguez and the Steeles, answering, denied that the deeds were intended to be a security and alleged that the transaction was a bona fide sale for full value; that the widow and children had been in possession only of a small part (twelve acres), and of this but as tenants of Rodriguez; that the use and occupation of the whole tract -- it being a wilderness -- was not worth more than $100 except in virtue of great outlays by the Steeles -- $14,000 at least; and that with these, it did not exceed $500 a year; that the rent of $3,500 agreed on had been punctually paid to Rodriguez; that the widow and children had seen the Steeles put into possession, and the improvements made without any objection, conversing with the Steeles daily and the Villa children working for them on and about the very premises, and that the Steeles were to be regarded purchasers bona fide without notice.
by his sister. He mentioned also by their so doing he would avoid paying taxes on the mortgage, while as it then stood, they paid on the premises and he on the mortgage. Then he generally mentioned that they would not have cause to regret the steps they had taken. That he would save the property for them and save himself at the same time. There was a short conversation between Rodriguez and Mrs. Villa, in my presence and that of the rest of the grantors. Mrs. Villa asked Rodriguez whether the instrument was in strict accordance with the private conversation which had taken place between them, and the agreements which they had made. He answered that it was in accordance with all the agreements and understandings which had been had between the two. Then Mr. Rodriguez requested me to read the deed, which I did. Mrs. Villa, when the reading was over, stated that it did not mention any of the agreements they had made. Rodriguez, to the best of my recollection, stated that it did; that they ought not to distrust him, as he was taking all these steps for their interest. Thereupon they executed the deed, and I took their acknowledgments. At the time when the deed was executed, I observed that the family were not very willing to sign the deed unless under the agreements and conversations which had taken place between them and Mr. Rodriguez, and then the remarks which I have said, I distinctly recollect, were made."
"The agreement that we made with my brother when he obtained the signatures, was that it was to be a security for his money. With this understanding, I informed my children of the conversation that took place with my brother. He told me not to distrust him."
"My mother stated that my uncle said he would take no advantage of us, but wanted merely to get his money, and that we should not distrust him."
"I signed the paper because my uncle came to the ranch and had a talk with my mother, and requested her that she should speak to us, that we might sign. "
"Mr. Rodriguez came from Monterey, and came to see me, and said he wanted to know what lawyer he could employ to make some papers. I told him Mr. Van Ness. Then we went to see Van Ness next day. He told me that he wanted to have a deed made from his sister and all her children to secure him for his debt which they owed to him, because he was paying taxes for the property and the mortgage, being, both the property and the mortgage, the same thing, and he paying the taxes twice, and by having a deed made to him, the boys would not be in debt any more."
"Mr. Rodriguez had said to me and written to me several times, that his object was to save the valuable portion of the property for his sister and her children, and that if he could dispose of two leagues lying back towards the mountain, that sum would cancel his debt and leave all that the family would require."
" I don't wish to speculate upon you, because you are my relations and you have treated me well, and if I can sell this ranch for enough to reimburse myself for my outlays as well as interest, I will return you the surplus money, if any, and also if I can sell a portion of the ranch, or enough to reimburse myself for my advance, I will do the same, and return to you the unsold portion of the ranch; but if I cannot sell it, I will lose the money."
Rodriguez himself asserted in the most positive manner that the instrument was not meant to be a mortgage of the land itself, but was meant to put the title completely in him.
"Question. Was there any agreement between you, that the deed should be a mortgage?"
"Answer. No, sir; as far as the mortgage was concerned, I had one already. I wanted the title of ownership."
"Question. Did you say anything in that conversation to Mr. Dana about giving the surplus to the family?"
"Answer. I stated at the ranch, and again stated to my sister, afterwards, that I would return the surplus money; but it was no obligation of mine. It may be that I said so to Charles Dana at the time. I told him I was much pleased with having settled my business, and also with being the owner of that ranch; that if I had not interfered with that business, they would have been deprived of this ranch many a year ago."
"In 1864, towards the end of May, my sister told me she had sold the ranch to Jacinto. They were all present except Jose and Fulgencio. During the whole time, they expressed that they sold it with great pleasure. In 1864, my sister told me she wanted to look her a house somewhere in San Luis Obispo, to dwell in, so that whenever Jacinto should require the ranch, she could be ready to leave there with the same pleasure that she had took in selling the ranch."
"She stated to me that she lived on the ranch through the favor of my brother, and that whenever he had any use for it, she would leave the same; quit the house on it with much pleasure, and go and live even under a tree."
that at any hour, whether in the daytime or at night, they had to quit it."
The actual quantity of land conveyed was 20,135 acres. Its value in 1864, when the deed was made, was perhaps $20,000, and in 1866, when leased to the Steeles, hardly less than $30,000.
"3856. § 1. Where there is no express contract in writing fixing a different rate of interest, interest shall be allowed at rate of 10 percent per annum for all moneys after they become due on any bond, bill, promissory note or other instrument of writing."
"3857. § 2. Parties may agree in writing for the payment of any rate of interest whatever on money due or to become due on any contract."
"3858. § 3. The parties may, in any contract in writing whereby any debt is secured to be paid, agree that if the interest on such debt is not punctually paid, it shall become a part of the principal and thereafter bear the same rate of interest as the principal debt."
The conclusion of the court below from all the evidence in the case was that the deed and the testimony of Rodriguez disclosed the true nature of the transaction -- viz. that the land was conveyed not in security for, but in satisfaction and extinguishment of the precedent debt, but under the expectation, founded on Rodriguez's assurances, that any surplus of the price at which it might be sold over and above the amount necessary to reimburse Rodriguez, would be by the latter appropriated to the benefit of the family.
Whatever trust, therefore, was created referred itself, according to this view, to the proceeds, and did not attach itself to the land or in any way impair the right of Rodriguez to dispose of it.
A decree being made accordingly, Alexander appealed to this Court.
This is an appeal in equity from the decree of the Circuit Court of the United States for the District of California. The appellant was the complainant in the court below. The decree was against him.
He seeks to redeem the premises in controversy according to the prayer of his bill. The defendant, Rodriguez, claims an indefeasible estate in them as regards the complainant and those from whom he derives title. The other defendants claim under a contract of purchase made with Rodriguez. The validity of the complainant's title, if his grantor had anything to convey, is not questioned. Nor is the original title of his grantor and of those who conveyed to him denied. But the defendants insist that the title of all those parties was vested absolutely in Rodriguez by deeds duly made and recorded before the conveyances to the complainant and his grantor were executed. The complainant insists that Rodriguez, after, as before, the legal title was conveyed to him held the premises only as security for a debt. This is the hinge of the controversy between the parties.
The entire tract of which the premises in controversy form a part was conveyed by Jose Maria Villavicencia on the 13th of April, 1852, to his seven children. He died in 1853. The widow and five of the children conveyed to Fulgencio, also one of the children, on the 16th of December, 1867. On the 26th of the same month, Fulgencio conveyed to the complainant. By virtue of this conveyance, he claims six-sevenths of the tract. That proportion is his if his title be valid.
deed was executed, and hence had not joined in it, also conveyed to Rodriguez. Nothing was paid to the grantor. On the 20th of May, 1865, the other and seventh child, who had then become of age, executed a like conveyance. The consideration paid was $100.
On the 22d of July, 1866, Rodriguez demised the premises so conveyed to him to his co-defendants, Edgar W., Isaac C., and Rensselaer E. Steele. The defendant, George Steele, subsequently became interested in this contract by an arrangement with the lessees. The leasehold term was for five years from the 1st of August ensuing its date. Rodriguez stipulated that at the end of the term or within five days thereafter the lessees might purchase by paying him $25,000 in gold, and upon such payment's being so made he covenanted that he would by a sufficient deed release and quitclaim to the lessees or their heirs and assigns, free from all encumbrances created by him, all the right and title which he then had to the premises or which he might thereafter acquire from the United States or from any of the heirs of Jose Maria Villavicencia.
The lessees and their assignees insist that they are bona fide purchasers without notice.
made, without notice of the adverse claim. Such a purchaser cannot have the immunity which the principle sought to be applied gives to those entitled to its protection. [Footnote 4] This contract may therefore be laid out of view. It is no impediment to the assertion of the complainant's rights, whatever they may be. It does not in any wise affect them.
"He stated to me that his object in getting the Villavicencia family to execute the deed aforesaid was to secure his money, money which he had loaned or advanced to them, and save the property for the benefit of his sister and her family, while if it remained in their hands, he might lose his money and his sister and her children would lose the whole property. He said they had done wisely in trusting him, as he intended to deal justly by his sister."
"Afterwards I had with them further conversation, and told them, I don't wish to speculate upon you, because you are my relations, and you have treated me well. If I can sell the ranch for enough to reimburse myself for my outlays as well as interest, I will return you the surplus money, if any, and also if I can sell a portion of the ranch or enough to reimburse myself for my advance, I will do the same and return to you the unsold portion of the ranch, but if I have bad luck and cannot sell it, I will lose my money."
"I stated at the ranch and again stated to my sister afterwards that I would return the surplus money, but it was no obligation of mine. It may be that I said so to Charles Dana at that time."
rents, issues, and profits, and improvements made upon the premises must also be taken into the account.
The decree is reversed, and the cause will be remanded to the circuit court with directions to enter a decree and proceed in conformity to this opinion.
1 General Laws of California 559.
Nace v. Boyer, 30 Pa. 110; <|10 Pet. 177|>Boone v. Chiles, 10 Pet. 177, <|10 Pet. 211|>211.
<|5 Wall. 289|>Croxall v. Shererd, 5 Wall. 289.
<|11 Wall. 232|>May v. Le Claire, 11 Wall. 232; <|3 How. 383|>Oliver v. Piatt, 3 How. 363.
<|1 How. 118|>Morris v. Nixon, 1 How. 118; <|12 How. 139|>Russell v. Southard, 12 How. 139; Wakeman v. Hazleton, 3 Barbour's Chancery 148; 4 Kent's Commentaries 143; Holmes v. Grant, 8 Paige 245; 3 Leading Cases in Equity 625.

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