Case Name: SAMUEL A. PEUGH vs. HENRY S. DAVIS
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1875-01
Citations: 2 MacArth. 14
Docket Number: No. 1713
Parties: SAMUEL A. PEUGH vs. HENRY S. DAVIS.
Judges: Oartter, Ch. J., and Mr. Justice Wylie dissenting.
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 9
Pages: 14–23

Head Matter:
SAMUEL A. PEUGH vs. HENRY S. DAVIS.
In Equity. —
No. 1713.
I. Parol testimony is admissible for the purpose of showing that a deed of real estate, although absolute on its face, was really intended as a security for money loaned.
H. But the testimony of three witnesses, aside from the complainant, as to admissions made by the purchaser that the vendor is still indebted to him for the money two of them being contradicted, will not prevail against the absolute sale expressed on the face of the deed, where the allegations of the bill, that it was intended as a security, are positively denied by the answer, and where also the attorney who prepared the deed under the direction of both parties, as well as the defendant, both testify that the transaction was an absolute purchase, and also where there is a receipt signed by the vendor, expressing the consideration to be for the purchase of the land.
III. Where it is difficult to say from the testimony in the case that the mortgagee has not paid for the property all it was worth at the time of the purchase of the equity of redemption ; and where the bill contains no allegations that the sale was procured by fraud or undue influence, a court of equity will not disturb the validity of the deed.
STATEMENT OE THE CASE.
This is a bill in chancery to redeem certain lauds which the complainant had conveyed to the defendant by a deed absolute on its face, but which he alleges was only a security for money lent him by the said defendant.
The bill sets forth, in substance, that in the month of March, 1857, the complainant borrowed of the defendant $2,000 for sixty days, and executed to him a deed to squares numbered 910 and 911, in this city, with the express understanding that, if the loan was repaid at the expiration of sixty days, the deed should be returned to the plaintiff, and should not meanwhile be recorded; that the amount of the loan and interest was paid within the sixty days, and the deed surrendered by the defendant.
The bill then proceeds to state that afterwards, in themonth of July, in the same year, (1857,) the complainant borrowed from the said Davis the sum of $1,500 for sixty days, and delivered to him the same deed as security for the repayment of said loan, and that it should not meanwhile be recorded, and should be void on repayment of the debt; that at the end of sixty days complainant obtained an extension of sixty days longer time, and borrowed $500 more, and executed a further instrument of similar tenor and effect to the deed he had already delivered.
And complainant .alleges that both .the original deed and ■the second instrument just mentioned were both intended as a mere security for the payment of the two sums last borrowed, and were to have no other effect or operation.
It is also alleged that on all these loans a higher rate of interest was required than the legal rate, and that the present value of the property so conveyed is $30,000.
The complaint concludes by praying for a surrender of the conveyance and of the bond, and offers to pay the sum of $2,000, with legal interest thereon from the time it was borrowed.
The defendant, in his answer, asserts that the second loan of $1,500 was made with the understanding that if it was not paid at the end of sixty days the defendant might then have the deed recorded and the land was to be his. That at the maturity of such indebtedness the complainant refused to pay the same, although defendant repeatedly offered to accept the principal of such debt in full discharge thereof, and to reconvey the property mentioned in the deed; and on the 7th -day of September, 1857, two months after the debt matured, defendant recorded said deed according to the previous agreement.
The answer further states that complainant afterwards offered to sell the defendant his interest in the property, if the defendant would pay him the further sum of $500, making in all $2,000. That the defendant for some time refused to pay him any further sum, stating that he objected to said purchase, for the reason that there were outstanding tax-titles against the property, upon which ejectment suits had been commenced and were then pending. That the complainant thereupon offered and agreed, in consideration of the sum of $500, to release to defendant his equity of redemp tion in said squares, and to indemnify and save harmless the defendant against said suits, and generally to warrant and defend the title to the lands. That defendant accepted this proposition; and that an instrument to that effect was prepared by Wm. H. Ward, and signed and delivered to defendant, who then paid to complainant the agreed sum of $500, taking a receipt for $2,000 in full for the said purchase, which is alleged to be the cash-value of said property in the years 1857 and 1858; and that defendant, by virtue of such instrument, became the exclusive and absolute owner of said squares of ground. That since that time he has held possession of the same, and has paid from time to time the taxes levied thereon, including a large special tax for grading and paving, and has discharged the duties of ownership with the knowledge and acquiescence of the complainant, who has never pretended, till the filing of his bill in this case, that he had any interest whatever in said squares of ground or either of them; and that the present value of said lands is not over $10,000.
The deed and instrument, in the form of a covenant, dated February 9,1858, are made exhibits to the answer, together with the receipt above mentioned. The bond and receipt are as follows:
“ Whereas the undesigned, Samuel A. Peugh, of the city of Washington, in the District of Columbia, having heretofore sold and conveyed to Henry S. Davis, of the said city, two certain squares of ground in said city, the same being numbered nine hundred and ten (910) and nine hundred and eleven (911) in the said city — the said sale and conveyance having been by the said Peugh made with the full assurance and promise of a good and indefeasible title in fee-simple, though the said conveyance contains only a special warranty — - the said conveyance to said Davis bearing date on the fourth day of March, A. D. 1857, and being recorded on the seventh day of September, A. D. 1857.
“And whereas the title to the said squares, so conveyed as aforesaid to said Davis, having been now questioned and disputed, the said Peugh doth now, for himself, his heirs, executors, and administrators, promise, covenant, and agree, to and with the said Henry S. Davis, his heirs and assigns, in the manner following: That is, that he, the said Samuel A, Peugh and his heirs, shall and will warrant and forever defend the said squares of ground and appurtenances, as conveyed as aforesaid, unto the said Henry S. Davis, his heirs and assigns, from and against the claim or claims of •all persons whomsoever.
“And, further, that he, said Peugh, and his heirs, executors, and administrators, shall and will pay and refund to said Davis, his heirs or assigns, all and singular the loss, cost, damage, and expenses, including the consideration in said deed or conveyance which, or to which, the said Davis, his heirs or assigns, shall lose, incur, pay, or be subject to by reason of any claim or litigation against or on account of •said squares of ground, or either of them.
“And for the full and faithful observance and performance of all the covenants and agreements aforesaid, and for the payment of all the sum or sums of money as therein provided, in the manner prescribed as aforesaid, the said Samuel A. Peugh doth hereby bind himself, his heirs, executors, and administrators, and each and every of them, firmly by these presents.
“ In testimony whereof the said Samuel A. Peugh doth hereunto set his hand and seal on this ninth day of February, in the year of our Lord one thousand eight hundred and fifty-eight.
“ [l. s.] S. A. PEHGH.
“ Signed, sealed, and delivered in the presence of—
“Francis Mohun.
“Wm. H. Ward.
“ Washington, D. C., February 9,1S58,
“ Rec’d of Henry S. Davis two thousand dollars, the ■same being in full for the purchase of squares Nos. 910 and 911, in the city of Washington.
“ $2,000. S. A. PEUGH.”
There was a great deal of testimony taken on both sides in regard to the value of the lands in controversy during the years 1857 and 1858; the complainant contending that Davis paid an inadequate price for the same, which was fatal to his title in his relation of mortgagee. The only portion of the testimony on the value of the land is sufficiently referred to in the opinion of the court. It is also in evidence that Davis denied Peugh’s right to the land after he recorded the deed; that after that he considered the land as absolutely his own, and so informed Peugh, and told Peugh, when lie-demanded the $500, that- his conduct was dishonest, and that his attempt to extort $500 from him was unjust, and not consistent with fair dealing.
The deposition of the complainant tends to sustain his bill,, and that of Davis to sustain his answer. George Simms and Margaret Simms, who were examined in behalf of the complainant, state that in 1865 they rented the premises from Davis, and heard him say that Peugh owed him $2,000 ; and Eichard Hill testified, on the same side, that in the fall of 1862, at the corner of Fourteenth street and Pennsylvania avenue, he heard Davis hail Peugh about a $2,000 loan, and that Davis on that occasion fold Peugh he had promised two and a half per cent, interest per month thereon, and said if Peugh would pay that interest he would give Peugh a. deed in fee.
On the part of the defendant, William H. Ward testified that the bond above set forth was in his own handwriting, signed by S. A. Peugh, and witnessed by Mohun and himself; tbe receipt annexed is also in his handwriting, and signed by S. A. Peugh; he recollects date from that on the paper; Peugh and Davis came into his office together, and stated that Peugh had previously made conveyance of squares 910 and 9L1 to Davis; .that that conveyance was in effect a mortgage, and the matter was then to be settled by a further advance, and sale to be finally completed; he wrote above paper while Peugh and Davis were in his office, and it was then and there signed, he believes; he drew the-deed and paper by direction of both parties, and from reading the paper he concludes it was also done to indemnify Davis against Wiltberger’s suit then pending, as well as purchase-money for the property; he thinks a copy of first conveyance was shown him at the time, and that Mohun was in his office when he drew the deed and receipt. By his saying “ there would be a further advance, and the. sale was finally to be completed,” he meant that he understood Davis was to pay an additional sum of money to complete purchase of property named in the agreement; doesn’t recollect that Davis said to Peugh that their relation of mortgagor and mortgagee was still to continue; in his recollection, the transaction was a final sale of the property; he has no recollection of any interview of his with Peugh, wherein Peugh asked him whether he (Peugh) “ would be safe in executing said paper under all circumstances, and whether Davis could or would in any way take advantage of it to the injury of plaintiff; ” he has no recollection of having seen Peugh in relation to the deed and receipt, except when the paper was prepared ; doesn’t recollect any consultation with defendant in relation to papers before the parties met at his office.
Joseph H. Hilton testified that he was present at the time the two Simms swear about, and that he didn’t hear any loan of $2,000 from Davis to Peugh spoken of; that the room was small, and he could hear all that was said.
It appears that the defendant took entire possession of the property in 1865, and has retained it and controlled it ever since.
The case was heard in September, 1874, by Mr. Justice Humphreys, and a decree passed dismissing the bill. Thereupon the complainant prosecuted this appeal.
Richard T. Merrick and Edwin L. Stantonfor complainant cited—
Hinkley vs. Wheelwright, 29 Maryland R., 341; Villa vs. Rodriguez, 12 Wall., 323; Morris vs. Nixon, 1 How., 118; Russell vs. Southard, 12, 139.
John E. Norris and W. D. Davidge, for defendant, cited—
2 Wall., 94; 15 How., 56; 17 Pick., 214.

Opinion:
Mr. Justice MacArthur
delivered the opinion of the court:
The first question to be determined is whether the two instruments in writing, executed and delivered by the complainant to the defendant, operate as a security for the payment of the $2,000, or as an absolute conveyance of the property. The complainant offers parol testimony for the purpose of showing that the deeds, although absolute on their face, were really intended as a security for money loaned. The rale admitting such evidence for this purpose is now well settled, and was not questioned on the hearing of this case. The evidence upon the subject consists of the pleadings, the deeds, and the testimony of one or two witnesses. The instruments are absolute on their face, and are both in the record, and are in support of the case set up by the defendant. The allegations in the bill, that they were intended only as a mortgage, are positively denied in the answer. The only witnesses, except the complainant himself, who testify to anything from which the court can infer, at the time of the second instrument, the transaction was a loan, are George Simms and Margaret, his wife, who. both state that Davis said that Peugh owed him $2,000, loaned on the squares. They are, however, contradicted by Joseph H. Hilton, who was present at the same interview, and who testifies that no such statement was made. Bichard A. Hill says he knew the parties, and that in the fall of 1862, at the corner of Fourteenth street and Pennsylvania avenue, he heard Davis hail Peugh about a $2,000 loan, and that he said to Peugh he had promised two and a half per cent, interest per month thereon, and that if Peugh would pay that interest he would give Peugh a deed in fee. There is no other fact or circumstance in the case going to show that the last instrument was effected upon any arrangement that it could be a mortgage. »
William H. Ward, who was a witness for defendant, states that the instrument is in his handwriting, and that the parties came to his office, and that he drew said paper at their joint direction, and that the transaction was a final sale of the property; and he directly contradicts every allegation in the bill material to the plaintiff's case, and supports the defendant's answer on that subject. Mr. Ward is a conveyancer-and a member of the bar, and with opportunities of knowledge, by information from both parties, as to the nature of the transaction at the time it occurred.. He prepared the instrument under their immediatedirection, and embodied in it their agreement. He states that he informed them that, as a deed had already been made of the property, this would be the best way'to convert what had previously been a mortgage into an absolute purchase. And he is corroborated by the receipt which Peugh then gave the defendant, expressed to be for the purchase of the squares.
We think that against a case like this a statement which might bear a different construction, made in a conversation at a corner of a street and, perhaps, not well remembered, cannot prevail, and we are quite clearly of the opinion that it was the understanding of the parties that the deed of February 9,1858, should operate as an absolute sale, and that complainant's equity of redemption should thereby be extinguished.
The complainant seeks also to invoke to his aid the principle by which courts of equity will regard any agreement between mortgagor and mortgagee for the absolute sale of the land. In Villa vs. Rodriguez, 12 Wall., 323, the Supreme Court enforced this principle in the following language :
" The law upon the subject of the right to redeem, where the mortgagor has conveyed to the mortgagee the equity of redemption, is well settled. It is characterized by a jealous and salutary policy. Principles almost as stern are applied as those which govern where a sale by a oestui qui trust to his trustee is drawn in question. To give validity to such a sale by a mortgagor, it must be shown that the conduct of the mortgagee was, in all things, fair and frank, and that he paid for the property what it was worth. He must hold out no delusive hopes; he must exercise no undue influence; he must take no advantage of the fears or poverty of the other party. Any indirection or obliquity of conduct is fatal to his title. Every doubt will be resolved against him. When confidential relations and the means of oppression exist, the scrutiny is severer than in cases of a different character. The form of the instruments employed is immaterial. That the mortgagor knowingly surrendered and never intended to reclaim is of no consequence. If there is vice in the transaction, the law, while it will secure to the mortgagee his debt, with interest, will compel him to give back that which he has taken with unclean hands. Public policy, sound morals, and the protection due to those whose property is involved require that such be the law."
These observations were made in a case where the deed was made by nieces and nephews of the mortgagee, who was their uncle, and by their mother, who was his sister, and a widow. There had also been agreements which the mortgagee had omitted in the deed, and which he falsely affirmed were in the deed. The deed was in a language which the widow could not read, and it was translated to her by the person who took the acknowledgment, and who testified that Eodriguez, the mortgagee, informed him at the time that he only wanted to secure his advances, and that he would return the surplus money to the widow and her children. Indeed, the evidence was overwhelming to show that the deed was to be regarded as a security for the indebtedness, and the strong expressions of the court were amply justified by the oppressive and unconscionable conduct of the creditor. In the present case there is no allegation in the bill that the instrument was procured by fraud or undue influence, and no constraint is alleged to have been used by the defendant. The needy circumstances of complainant are shown, but that is an incident to the condition of almost all men who have to borrow money. There is no ground, therefore, shown in the bill which would authorize the court to scrutinize the transaction as in a case where fraud is charged, or relief asked from an unconscientious advantage obtained by the defendant, for which the purchase should be set aside. There is no suggestion even in the bill that the defendant did not pay the value of the property; it only alleges that it is now worth about $30,000. But the bill was filed after the lapse of eleven years from the time of the transaction, and we all know that the value of real estate has realized a very great appreciation from the wonderful growth of the city.
In the case of Russell vs. Southard, 12 How., 155, Mr. Justice Curtis, who delivered the opinion of the court, has collected the authorities regarding the law where a mortgagee in possession takes a release of the equity of redemption, and he concludes by observing: "But we are unwilling to lay down a rule which would be likely to prevent any prudent mortgagee in possession, however fair his intention may be, from purchasing the property, by making the validity of the •purchase depend on his ability afterwards to show that he paid for the property all that any one would have been will ing to give. We do not deem it fit, for the benefit of mortgagors, that such a rule should exist."
Much of the testimony in the depositions has reference to the value of the property in question during the years 1857 and 1858, and if it were necessary to examine it for the purpose of determining the adequacy of price for the purchase made by the defendant, it would be difficult to say that Davis did not pay a sufficient consideration for the surrender of the equity.
The land was purchased in 1845 by the complainant for two cents per square foot. In 1858, when Davis procured the full title, the complainant's witnesses testify real estate had risen in value, and the defendant's witnesses are equally positive that it had declined by reason of the monetary crisis of that period, which prostrated the values and business of the whole country. Sales were few and always on credit, and these squares were unimproved, and probably had only a •speculative value at that time; so that, if we were called upon to consider the testimony on this point, we cannot say that the validity of the purchase can be effected by anything connected with the consideration.
Suits in ejectment upon tax-titles were pending which, if successful, would not only have cut off the equity of redemption, but destroyed the lien of the defendant. Other taxes were unpaid; all this was known by the parties, and the con-, tract was made with reference to these encumbrances. The condition and value of the property was undoubtedly affected in the mind of the defendant by these circumstances; and it would indeed be hard, if not impossible, to say at this distance of time, in view of all the circumstances, that the amount paid was not an adequate consideration. We apprehend it would be a dangerous precedent to hold otherwise at this late day.
The intemperate expressions of defendant toward Peugh, preceding the execution of the bond, certainly exhibit acerbity of temper, but they do not seem to have influenced the conduct of the parties in the slightest decree.
A majority of the court are of opinion that the decree below ought to be affirmed.
Oartter, Ch. J., and Mr. Justice Wylie dissenting.