Case Name: Archibald Babcock, Appellant, v. Edward Wyman
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1856-12
Citations: 19 How. 289
Docket Number: 
Parties: Archibald Babcock, Appellant, v. Edward Wyman.
Judges: Mr. Justice CATRON and Mr. Justice CAMPBELL dissented.
Reporter: United States Reports
Volume: 60
Pages: 289–303

Head Matter:
Archibald Babcock, Appellant, v. Edward Wyman.
Parol evidence is admissible to show that a conveyance of property, absolute upon the face of it, was really a mortgage or deed of trust.
In the present case, parol evidence, taken in conjunction with corroborating circumstances, shows that the deed was not intended to be absolute.
The statute of limitations is no£ applicable, because the possession was not adverse.' So, also, the trustee is not protected by the statute, although he sold the land and received the proceeds six years before the bill was filed, because it was his duty to apply those proceeds to the reduction of the interest and principal of the debt due to him when the deed was made.
[Me. Chief Justice Taney and Mr. Justice Daniel did not sit in this cause.]
This was an appeal from the Circuit Court of the .United States for the district of Massachusetts, sitting in equity.
The bill was filed by Edward Wyman, a citizen of Missouri, and an assignee of Nehemiah Wyman, by a deed of conveyance made in 1858. The facts of the case are particularly stated in the opinion of the court, and need not be repeated. The decree of the Circuit Court was as follows, viz:
This case having been heard on the bill of complaint filed therein, and upon the answer of the defendants thereto, and upon the proof exhibited by the respective parties, and the parties having been heard by their counsel, this court doth declare the conveyance of JSTehemiah Wyman to said defendant,, bearing date the twentieth day of November, in the year one thousand eight hundred and twenty-eight, to have been a mortgage to secure the debts, the amount whereof is named in said deed, as the consideration of the same; and that, at the times of the sales of the lands in said conveyance set forth, by the defendant,* the assignor of the complainant had the - tight to redeem the same; and doth declare that the absolute sales and conveyances by defendant of said land to bona fide •purchasers for valuable consideration, without notice, was a constructive fraud upon the rights pf the assignor of complainant; and that therefore he became entitled, a$ against the defendant personally, to an account of tlie value of the land and of the rents and profits thereof, and, after deducting the amount of principal and interest due said defendant, to the payment of the balance; and doth declare that the complainant, as assignee, has succeeded to those rights.
And said cause having been referred to a master, to take the necessary accounts, in pursuance of the foregoing declaration of this court, and said master having made his report in the premises, and the same being duly considered and the respective parties heard therein, this court doth order and decree that there be paid by said defendant to said complainant the sum of twelve thousand and sixty-seven dollars and nine cents, together with costs taxed at four hundred and sixty-nine dollars and seventy-four cents.
Babcock appealed to this court.
The case was argued by Mr. Loving and Mr. Merwin for the appellant, and by Mr. Bartlett for the appellee.
The reporter can notice only that part of the arguments of counsel which related to the admissibility of parol evidence in this case, to establish that the deed, absolute in its terms, was intended to operate only as a mortgage.
The counsel for the appellant treated this point in the following manner:
I. The first question is, whether, under the circumstances •of this case, it is competent to show, by parol evidence, that a deed absolute in terms'was intended to operate only as a mortgage. The respondent contends that it is not competent, but is in direct violation of the statute of frauds.
The well-settled rule in equity is, that it is not .competent ±o show by parol evidence that an absolute deed was intended only as a mortgage, except upon the ground that the written defeasance was omitted by fraud,. accident, or mistake. (1 Story Eq. Jur., secs. 158, 154, 155, 156; 4 Kent’s Com., 142.)
It is clear, upon the facts, that a written defeasance was not omitted" through any accident, mistake, ignorance, or fraud.
On the contrary, the parties executed all the papers they intended to, and the form of the conveyance was precisely what they intended it should be. (Hunt v. Rousmanier’s Ex’rs, 1 Peters, 1.)
According to the testimony of both Hehemiah and William Wyman, the present conveyance was in exchange for the mortgages which the said Hehemiah- had previously given to the respondent and Francis Wyman, the parties well knowing the. distinction between the-two forms of conveyance, and their different legal effect.
It is also certain, upon their evidence, that no defeasance'., was contemplated, and that it was not omitted through any fraud of .the respondent, or through any misapprehension, by Kehemiah Wyman, of the nature or effect of his deed.
The proposition, therefore, which the complainant must maintain in this case is, that it is competent, by parol evidence of the admissions of the grantee at the time the conveyance ■ was made, to convert an absolute deed into a mortgage, although the grantor, well knowing their different legal effect, deliberately, and in defiance of the statute, gavie an absolute conveyance.
Such a proposition is not warranted .by the decisions, and is entirely subversive of the statute of frauds.
The fraud against which equity relieves, is not the refusal of one of the parties to acknowledge or perform a void parol contract, the parties having voluntarily assumed the risk of the statute — but it relieves where the parties did intend to'put their contract into writing, conformably to the statute, and have failed to do so, through the fraud of one, or by. mutual mistake.
“Where there is no fraud, and the party relies upon'the honor, word, or promise, of the defendant, th^ statute making that promise void, equity will not interfere.” (Lord Hard-wicke, in Montaeute v. Maxwell, 1 P. Wms., (¡18.) . ■;
■To extend the doctrine beyond this, and to allow a party to offer parol evidence of an agreement, on the ground that the mere refusal to acknowledge or perform that agreement (which the statute itself declares-is void) is such a fraud as will avoid the statute, and render the parol evidence competent, amounts to a judicial repeal of the statute.
- TJpon this ground, there can be no ease to which the statute of frauds can. possibly apply.
The fallacy of this theory is, that it admits the evidence prohibited by the statute, for the purpose of first proving a fraud by proving a refusal to perform a parol agreement, and then uses that fraud as1 the reason for' admitting- the parol evidence to prove the agreement.
To allow, then, the complainant, under the circumstances of the case, to control the legal effect of the conveyance of Kehemiah Wyman to the respondent, by parol evidence of his declarations or admissions made at the time the deed was executed, would violate the statute of frauds, and would also be contrary to the decided weight of authority.
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Mr. Bartlett, for tbe appellee, referred to tbe point as follows: • ' _ ■
_ Upon tbe question, whether oral evidence is admissible to. ■ show that a deed, absolute on its faee, wasin fact given as se- . curity for a debt, and is-a mortgage, appellee forbears to trouble ' tbe court with any authorities beside those referred to in the opinion of the Circuit Court, which seem conclusive, and are . as follows: Taylor v. 'Luther, 2 Sumner, 229; Jenkins v. Eldridge, 3 Story, 293; Conway v. Alexander, 7 Cranch, 238; Sprigg v. Bank of Mt. Pleasant, 14 Peters, 201; Morris v. Nixon, 1 Howard, 126; Russell v. Southard, 12 Howard, 139.

Opinion:
Mr. Justice McLEAN
delivered the opinion of the court.
This is an appeal from the decree of the Circuit Court for Massachusetts.
The bill states the following facts: Nehemiah Wymán waS. seized in fee of about eleven and a half acres of land in Charleston, purchased by him of Tuft's administrator, one acre of which he sold to Foster, who gave a mortgage to secure the payment of the consideration of $600, which sum was not paid when due, and he entered to foreclose. The entire' tract on the 1st of December, 1820, had been mortgaged by him to Francis Wyman, his brother, to secure three notes of that date, one for $676, payable in one month; another for $650, payable in six months; the third for $704.39, payable in one year; interest to be paid on each note semi-annually.
Shortly after this, Francis Wyman, by his will, dated 14th June, 1822, devised to defendant, Babcock, all his estate, including said notes and mortgage, in trust for testator's wife and children, and made Babcock his executor. The testator died in August, 1822. On the 1st of December, 1824, Nehe-: mi ah paid Babcock, as trustee -and executor, the note for $704 and interest; and from time to time paid the interest oh the other notes, up to December, 1826.
Xn 1825 or 1826, Nehemiah became embarrassed, and having entire confidence in his brother-in-law, Babcock, he, by deed, 26th April, 1826, mortgaged the eleven acres of land as security of a note to Babcock of that date, for $1,200, payable in one year, with interest. At this time, little, if anything, was due to Babcock, but at was understood, between them, that Babcock would become security for him, or advance, money to him, the mortgage to stand as a security. Before the 20th of November, 1828, Babcock did become bound for and advanced to him. upwards of $400. In addition to this, there was due to Babcock as executor, for rent, $136.71. On a settlement, Rehemiah executed to Babcock three notes, one dated 7th Ro-vember, 1828, for $486.79, of which $400.08 were due Bab-cock individually, and $86.71 to the heirs of Rehemiah "Wy-man,, sen. ; another note for $8.10, and third for $50, due to the heirs of the same, were given.
Rehemiah being thus indebted to Babcock, as trustee and executor, and riot being able to pay the interest, Babcock and William Wyman, brother of Réhemiah, urged him to make a clear deed in fee for the land aforesaid, to Babcock, that he might manage and improve the same, and apply the rents and Erofits to pay interest on the encumbrances, and to the gradual quidation of the principal. And finding that this conveyance to Babcock was made a condition of further advances, he eventually conveyed the estate to Babcock, it being expressly agreed by Babcock, that, notwithstanding the form of the con-veyancej it should stand as security only for the sums due to him.
That on the 20th of Rovember, 1828, a. memorandum was made out of the sums thus due, and handed to Rehemiah, as evidence of the amount for which the land was held.
At the time this deed was executed, no one of the notes held by Babcock was surrendered, nor the mortgage to Francis Wyman, deceased. All the evidences of indebtedness remained in the hands of Babcock, Rehemiah holding only the memorandum of the sums. The total amount of the notes in said memorandum, with interest to the 20th Rovember, 1828, amounted to the sum of $2,033.87.
Upon receiving the above deed, Babcock took possession under it,, not only of the eleven acres, but of the adjoining acre. Babcock,, it is alleged, received annually, from sales' of clay, grass, and ledge stone, from the land, more than enough to pay interest and taxes. Rehemiah having removed to the West, regardless of his trust, Babcock sold the land at private sale, without notice to the said Rehemiah, and in fraud of his rights, for eight thousand dollars.
In the sale, Babcock represented himself to be the sole, owner of the premises. On the 4th of February, 1853, Rehemiah conveyed his right to redeem to Edward Wyman, the com-{dainant, &c. Within two years, Babcock has promised Wil-iam Wyman, acting for his brother, that he would come to an account with Rehemiah for the price of the land, and pay him the proceeds of the sales, deducting the debts aforesaid, if he -would take his notes on time; and would refer the question of amount of rents and profits to the arbitrament of neighbors. Babcock lias frequently, recently, admitted that it was originally intended that said deed should stand as security for the amount set forth in the memorandum; and that he always intended to do right in the matter, hut that he had heen advised hy counsel, that the agreement, not being in writing, could not he enforced, and this was the reason he refused to perform it.
The bill prays for an account, and the defendant in his answer admits the conveyance stated in the hill, and that the' land was subject to the mortgages. He avers the consideration named in the deed was the amount then due defendant in his own right, and as executor and trustee; and the further sum of $8.10, due the defendant, and $50 due as agent. He admits no additional consideration was paid; but he states the land was not worth more than $1,900; that he consented to receive the deed in payment of the sums due him personally, and upon an agreement that if he should be able to obtain therefrom, in addition, enough to pay the sums due fo him as executor and trustee, he would pay these sums, and upon no other trust or confidence whatever.
That, upon the delivery of the deed, he cancelled the notes of Hehemiah held in his own right, and either surrendered them to him or destroyed them. That he did not cancel the notes held by him as executor or trustee, because he was not satisfied that he should receive enough from the land to pay the same; and in order to prevent the presumption that he had so agreed absolutely, he made a minute thereon to the effect that he did not guaranty the payment thereof, it being the •understanding between him and ifehemiah, that Hehemiah should be personally liable therefor.
That he made no other agreement, and he denies that it was understood or agreed, that the land was conveyed to him on the trust set forth in the hill; but insists that the' conveyance was absolute, in payment of the sums due him, and liabilities incurred; and the only understanding was, that if the defendant should realize therefrom more than enoqgh to pay his own claims, he would pay the debts due him as executor and trustee.
Defendant took possession of the land, and for eight years occupied it, Hehemiah never claiming any interest in it. He denies the allegations of the bill, as to the trust; sets up the defence, that the agreement, not being in writing, cannot be enforced. He denies that he proposed a compromise, if his notes would be taken on time, as alleged, and he pleads the statute of twenty years limitation, &e., and avers the profits of the land did not exceed the taxes, &e.
Three points may be considered as embracing the merits of this case:
1. Was the deed executed by Nehemiah Wyman to Baheock, for the eleven and one-half acres of ground, given in trust?
2. Can this trust he established by parol evidence ?
8. Does the statute of limitation or lapse of time affect the complainant's rights ? • -
Uo one can read the history of this case, as stated in the hill, without being impressed with the confidential relations of the parties. The grantor and the grantee were brothers-in-law, and the advisers bore the same relation to the grantee. It was a family concern, designed, as it would seem from the bill, to aid an embarrassed member of it, without a probability of loss by the other members.
The bill charges, when the deed in question was executed, the sums -which it was intended to secure were stated, and handed to Nehemiah. This.is not denied in the answer, and William Wyman, the brother, being present, swears, as a witness, to the sums so staged, amounting in the whole to the sum of $2,033.87, the consideration named in the deed. This list was in the handwriting of the son of Babcock, and the paper was deliveied to Nehemiah' in the presence of the witness. The deed was drawn by the witness, and he knows that, the sums named included all the debts which Nehemiah owed to Babcock individually, or as trustee. The witness remembers Babcock said, after the statement was made, add sixty-two cents for recording the deed, which made the sum inserted as the consideration in the deed. Uehemiah hesitated to sign the deed, when Babcock said, he can have the land again, at any time he shall pay the debts secured by it.
The answer avers, when the deed was executed, the defendant gave up the notes of Nehemiah held in his own right, and either surrendered them to him or destroyed them. But it is proved by the same witness that he did neither. These notes were given to the witness without explaining to whom they belonged.^ Witness supposed they belonged to the estate of Nehemiali Wyman, sen.
The witness says, the property, at the time it was sold, was worth thirteen or fourteen thousand dollars, and that it was sold greatly below its value.
The bill charges, that the defendant promised William Wy-man, acting for his brother, that he would come to an account with Nehemiah for the price of the land, and pay him the proceeds of 'sales. This is denied in the answer. William Wy-man swears, that on the 8th of November, 1851, he showed to Babcock the memorandum of the sums named, to secure the payment of which the deed was executed. He was much embarrassed, and admitted the handwriting was his son's, then. deceased. He then expressed a willingness to settle it up, and asked the witness, how shall this he done ? Witness replied, that he Bhould first charge Hehemiah with all his notes and interest, and then credit him with the proceeds of the land, and what he received from the land, with interest, and be allowed a fair compensation for his trouble. He then said, I can't tell how much I have received from the land, hut we 'mil leave it to two good men; and that he would give his note for what should be due.
A short.time after this, Babcock told witness that he had consulted counsel, who advised him to pay the amount due the estate of íTehemiah, sen., and no more; and this he offered to do, if the witness would execute a bond of indemnity against any farther claim. He said that he had been advised, as the deed was absolute on its face, and no writing showed that the land was conveyed in security of a debt, the obligation could not be enforced.
The witness signified to Babcock, some time before the sale of the land, that he would redeem it for his brother.
Hehemiah Wyman, having transferred all his interest to the complainant, was examined as a witness, who stated, at the time he executed the deed tp Babcock, he owed him, as an individual, as executor and agent, the sum of $2,033.87, which included sixty-two cents for recording the deed;sand that sum was stated as the consideration in the deed. Of this sum, only $408.18, and interest, were due to Babcock in his individual capacity.
, In his answer,.the defendant states that the- conveyance was made in payment of the sums due him personally; that he did not .cancel the notes held'by him as executor or trustee, because he was not satisfied that he should receive enough from the land to pay those debts. But the proof shows, that the debt due him as executor and agent, and also his individual debt, were all included in the consideration named in the deed.
The defendant made no advance to the witness, on the note and mortgage for twelve hundred dollars; but, at the date of the subsequent conveyance, the defendant had advanced to him $400.08, and $8^10, which,-as above stated, constituted the debt due to the defendant on his personal account.
The conveyance, was made to the defendant, the witness swears, with the express understanding, that Babcock was to have the entire management of the land, so as to apply the proceeds in payment of the interest, and witness was to have the land again on paying the'sums specified.' He was induced to make the conveyance by the urgent request of his brother William, and Babcock; Ms brother told him, if he did not make it, he would not assist him in his pecuniary matters. On the execution of the deed, none of the notes held by Bab-cock were cancelled, or surrendered to the witness; but they are still held against him.
The witness says that Babcock promised to keep an account of the receipts of the land conveyed to him; but in his answer he says he kept no account, "because the land and rents and profits were his own, without any liability to account to any one."
Such a transaction as set out in the bill, between brothers-in-law, in the nature of things might be supposed to have taken place in the mutual confidence of the parties; and in the final adjustment there should be no evasions or subterfuges to gain an advantage. So far as regards the deed under consideration, all the material allegations of the bill are proved, and all the material averments of the answer seem to be unfounded. In coming to this conclusion, we do not rest alone on the witnesses, bfehemiah and William Wyman. There are strong circumstances which corroborate the witnesses, and satisfy the mind beyond a reasonable doubt.
In his answer, the defendant avers that the land was conveyed to him in payment of the sums due him personally. It appears from the oaths of both the Wymans that this is not correct; and, in addition, it is shown by the memorandum made out at the time, stating the sums for which the land was conveyed, in the handwriting of the son of the defendant.
Taking the statement of the defendant as true, that he did not intend to'make himself responsible for the debt due to him as executor and agent at the time the deed was executed, prer sents him in'an unfavorable light. The land for which he received a deed from hfehemiah Wyman,, he was aware, had been previously mortgaged to secure the-debt in his- hands as executor of Erancis Wyman. Could he have carried out this declared intention, he would have been unfaithful to the trust committed to him.
William Wyman seems to be a man of business. He drew, the conveyance from his brother Uehemiah to his. brother-in-law Babcock, and he took, in other-respects, an active agency in the transaction; and he states the facts as alleged in the bill, and his statement is in every respect corroborated by his brother Nehemiah; and although the trust is denied in the answer, there are circumstances in the case which go strongly to establish it.
. .The defendant' admitted all' the facts to William Wyman, and promised to settle the account, and spoke of the principles on which it should be adjusted, but eventually he took refuge •under the statutes of frauds, of limitations, and the lapse of time.' We think there can be no reasonable doubt that the deed in controversy was intended to be a mortgage. And this brings us to the second point of inquiry:
Can the trust be established by parol testimony ?
If the doctrine of this court is to be adhered to, as laid down in the case of Russell v. Southard, (12 How., 154,) this is not an open question. In that case the court say: "To insist on what was really á mortgage, as a sale, is in equity a fraud." And in Conway v. Alexander, (7 Cranch, 238,) Chief Justice Marshall says: "Having made these observations on the deed itself, the court will proceed to examine those extrinsic circumstances whidh are to determine whether it was a sale or a mortgage.". In Morris v. Nixon, (1 How., 126,) the court say: "The charge against Nixon is substantially a fraudulent attempt to convert that into an absolute sale, which was originally meant 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 Edrington v. Harper, (3 J. J. Marshall, 355,) the court say: "The fact that the real transaction between the parties was a borrowing and lending, will, whenever or however it may appear, show that a deed absolute on its face was intended as a security for money; and whenever it can be ascertained to be a security for money, it is only a mortgage, however artfully it may be disguised."
In Jenkins v. Eldredge, (3 Story's Rep., 293,) Mr. Justice Story said: In 4 Kent, 143, (5th edit.,) it is declared, "a deed absolute upon the face of it, and though registered as a deed, will be valid and effectual as a mortgage 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 an agreement resting in parol; for parol evidence is admissible to show that an absolute deed was intended as a mortgage, and that the defeasance had been omitted by fraud or mistake." In 2 Sumner's Rep., 228, 232-'3, Judge Story said: "It is the same, if it he 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."
In Foy v. Foy, (2 Hayward, 141:) "In North Carolina, it is said the law on this subject is the same as the English law was before the statute of frauds, and .parol declarations of trust are valid." • "Where a testator gave by will all his estate to his wife, having confidence that she would dispose of it according to his views communicated to her, and it being alleged that the testator, at the time of making the will, desired his ' wife to give the whole of, the property to B, and that she promised to do it, it was held, that the allegation being proved, a trust would be created as to the whole of the property in. favor of B." (Podmore v. Gunning, 7 Simons, 644.)
Parol proof is admissible to show fraud, and consequently a resulting trust, in a deed absolute on its face, notwithstanding any denial by the answer. (Lloyd v. Spillote, 2 Atk. Rep., 150; Ross v. Newall, 1 Wash. Rep., 14; Watkins v. Stockett, 6 Har. and Johnson, 435; Strong v. Stewart, 4 John. Ch. Rep., 167; English v. Lane, 1 Porter's Ala. Rep., 318.)
In Boyd v. McLean, (1 John. Ch. Rep., 582,) it was held, after ah examination of the cases, " that a resulting trust might be established by parol proof, not only against the face of the deed itself, but in ' opposition to the answer of the nominal purchasers denying the trust, and even after the death of such purchaser." The statute of frauds in Rhode Island contains no exception in favor of resulting trusts, but Mr. Justice Stoiy considered the exception immaterial, for it has been deemed merely affirmative of the general law.' (1 Sumner, 187.)
Where a trustee misapplies the fund, it may be followed, however it may have been invested, by parol, as between the parties, or a purchaser with notice. So, where an estate was purchased in the name of one person, and the consideration came from another, a resulting trust ipay be established by parol — and in all cases where there is a resulting trust.
In Hayworth v. Worthington, (5 Black., 361,) it was held that parol evidence is admissible to prove that a bill of sale of goods, absolute on its face, was intended by the parties to be only a mortgage. The court say these decisions are founded upon the assumption that the admission of such evidence is necessary for the prevention of fraud. (Cas. Temp. Talbot, 62; King v. Newman, 2 Munf., 40; Strong v. Stewart, 4 John. Ch. Rep., 167; Dunham v. Dey, 15 John. R., 555; Walton v. Cronly's Adm'r, 14 Wend., 63; Van Buren v. Olmstead, 5 Paige, 9.)
Ip the case of Overton v. Bigelow, (3 Yerger, 513,) it was held, "that an absolute bill of sale of negroes may be converted into a mortgage by a parol agreement to allow the conveyor to redeem; and this agreement may be inferred from the price given, and the mode of dealing, between the parties."
The case of Walker v. Locke et al. (5 Cushing, 90) is con* sidered as having no application to the case before us. It is well known that until within á few years the courts of Massachusetts had no chancery jurisdiction. The jurisdiction, when first conferred by statute, was limited to cases of specific exp- cution of contracts and trusts, not including fraud as a ground of relief. Within some one or two years past, the jurisdiction has been extended to frauds, but this has been done since the decision in the case above cited.
If the decision had been ipade since the extension of the jurisdiction beyond the construction of the local statutes, we should consider it only as the decision of a highly respectable and learned court, and not as a rule of decision for this court.
It is admitted that the authorities on the question before us are conflicting in this country and in England; hut as this court in several cases have decided the point, and it is now and has been for several years past a rule of decision, we are pot prepared to balance the State authorities, with the view of ascertaining on which side the scale preponderates.
The third point regards the lapse of time and the statute of limitations.
In his answer, the defendant avers that the pleadings show a possession by him of more than twenty years before the insti-' tution of this suit, and that that possession has never been disturbed; and also that the proceeds of sale were'received more than six years before the bill was filed, and these facts are relied on to bar the right of the complainant.
It is clear that the statute cannot constitute a bar in the present case. Courts of equity apply the statute by analogy to cases at law; but in this case, the trust being established, there was no adverse possession in favor of which the statute could run. The possession was consistent with the intentions of the parties, until the fraud was discovered, in 1851. Nor can the statute bar the right of the complainant to the proceeds of the land, as Babcock was bound to apply these to the payment of interest on the debt, and in discharge of the principal.
The decree of the Circuit Court is affirmed with costs.
Mr. Justice CATRON and Mr. Justice CAMPBELL dissented.