Case Name: Honore v. Hutchings
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1871-10-27
Citations: 8 Bush 687
Docket Number: 
Parties: Honore v. Hutchings.
Judges: In this case Judge Hardin did not sit.
Reporter: Kentucky Reports
Volume: 71
Pages: 687–700

Head Matter:
The following case was misplaced at the time the opinions delivered in October, 1871, were printed, and for this reason it appears at the end, instead of at its proper place in this volume.
Case 49 — PETITION EQUITY
October 27, 1871.
Honore v. Hutchings.
APPEAL EROM LOUISVILLE CHANCERY COURT.
1. A RESULTING TRUST AND PLEDGE OR MORTGAGE NOT A CONDITIONAL SALE.
Hutchings and Honoré in 1861 jointly purchased thirty acres of land near Chicago, 111. Hutchings advanced the entire purchase-price, took a conveyance to himself, and executed a writing in which, among other things, “it is agreed between said parties that when said land is sold said Hutchings is to have first his six thousand dollars so advanced, and ten per cent, interest, and the profits over and above said sum are to be equally divided between said parties.....This arrangement is to continue eighteen months, when, if the property has not been sold, said Honoré is to pay one half the sum so advanced, with the accrued interest, or said Hutchings is to be the sole owner of the same.”
The land was not sold within the eighteen months, and Honoré failed to pay any part of the sum so advanced. In 1869 Hutchings sold the land for one hundred thousand dollars, and refused to pay any part thereof to Honoré. Honoré sued Hutchings for one half of the net profits, after deducting purchase-price, interest, etc. Held that
A trust resulted in favor of Honoré to the extent of one half of the land jointly purchased. This interest he pledged to Hutchings to secure the repayment to him of one half the purchase-price advanced, etc.; and
Hutchings held the legal title to one half of the land in trust for Honoré, and the latter is entitled to one half of the net profits realized upon the resale of the same.
2. The conveyance to Hutchings and the condition of defeasance executed by him to Honoré must be construed together, as though the one was incorporated into the other. (Powell on Mortgages, 67.)
8. When so construed it appears that the one took an absolute title to the joint property of both, having first executed and delivered to the other a condition of defeasance. In such a case the onus devolves on the party who insists that the contract was a conditional sale. (Edrington v. Harper, 3 J. J. Marshall, 356.)
4. The contracts show upon their face that Hutchings took the title to secure the payment of the money and the interest that might accrue upon the same. Such an arrangement is perfectly consistent with the idea of a mortgage, and though it may be doubted as to whether or not the absolute conveyance to Hutchings was intended to operate only as such, yet the rule is that in all doubtful cases the law will construe a contract to be a mortgage, because such a construction will be most apt to attain the ends of justice and prevent fraud and oppression. (Skinner v. Miller, 5 Littell, 86.)
5. Distinction between a mortgage and a conditional sale. Where the debt forming the consideration of the conveyance still subsists, or the money is advanced by way of loan, with a personal liability on the part of the borrower to repay it, and by the terms of the agreement the land is to be reconveyed on payment of Ihe money, it will be regarded as a mortgage; but where the relation of debtor and creditor is extinguished or never existed, there a similar agreement will be considered as merely a conditional sale. (2 Greenleaf’s Cruise, note 1, page 74.)
6. The common law will be presumed to be in foi'ce in the state of Illinois, where the entire transaction in this case took place, as there is nothing in the record showing the contrary.
For Appellant,
CITED
21 Maine, 195, Smith v. People’s Bank.
17 Ohio, 358, Marshall v. Stewart.
37 Illinois, 216, Snyder v. Griswold.
36 Illinois, 339, Roberts v. Richards, &c.
T4 Illinois, 428, Miller v. Thomas, &c.
15 Illinois, 519, Davis, &c. v. Hopkins.
21 Missouri, 325, Poindexter v. McCannon. 10 Harris, 171, Woods v. Wallace.
3 Watts, 196, Colwell v. Woods.
3 Atkins, 280, Lowley v. Hooper.
7 Watts, 361, Scott v. Fields.
4 Kent’s Commentaries, 145.
2 Story’s Equity Jurisprudence, sec. 1018.
3 Dana, 252, Bright, &c. v. Wagle.
3 J. J. Marshall, 355, Edrington v. Harper.
2J. J. Marshall, 472, Secrist v. Turner.
5 Bush, 47, Martin v. Martin.
6 Dana, 473, Ogden v. Grant.
1 Yern. 190, Howard v. Harris.
2 Yern. 402, James v. Oades.
5 Littell, 84, Skinner v. Miller.
3 Leading Oases (Hare & Wallace’s), pp. 624, 625, et seq.
7 J. J. Marshall, 217, Bishop v. Rutlege.
1 Dana, 277, Fenwick v. Macy’s heirs.
9 Dana, 387, Lohban v. Garnett.
4 Monroe, 45, Ward v. Deering.
4 Monroe, 349, Wilkins’s ex’rs v. Sears.
3Dana, 170, Perkins y. Drye.
2 McMullin’s Equity, 1, Walling y. Aiken.
1 Murphy, 117, Wilcox v. Morris.
3 W. and S. 384, Hiester y. Madera.
1 Ohio N. S. 107, Stover v. Bounds.
1 Wisconsin, 527, Bogan v. Walker.
7 Johnson’s Chancery, 40, Henry v. Clark.
7 Watts, 261, Jaques v. Weeks.
2 Johnson’s Chancery, 182, Dey v. Dunham.
1 Bush, 335, Sandford v. Farmer’s Bank, &c.
Powell on Mortgages, page 67.
Saxton, 534, Youle v. Richards.
A. Habéis, . . . .' E. S. WOBTHINC4TON, I. & J. Caldwell, • • f ‘ * ’ J. E. & T. W. Bullitt, For Appellee,
CITED
13 Yesey, 224, Adley v. Descamp.
34 Illinois, 40, Milnor v. Willard.
16 Maine, 92, Rogers v. Saunders.
29 Illinois, 196, Grum v. Cook.
13 Illinois, 186, Stephenson v. Thompson.
13 Illinois, 221, Alexander v. Tomms.
16 Missouri, 129, 146, Brant v. Robertson.
44 Illinois, 103, Pitts v. Cable.
12 Howard, 329, Russell v. Southard.
16 Missouri, 129, Brant y. Robertson.
19 Wendell, 518, Gloyer v. Payne.
23 Maine, 234, Treat v. Strickland.
43 Maine, 565, Mills v. Darling.
44 Illinois, 68, Sheldon v. Harding.
13 Illinois, 576, Kemp v. Humphreys.
21 Illinois, 235, Chrisman v. Miller, &c.
22 Illinois, 655, Steele v. Biggs.
13 Illinois, 227, Perry v. McHenry.
1 New Hampshire, 39, Lund v. Lund.
2 Sumner, 533, Flagg v. Mann.
2 Greenleaf’s Cruise, 74, note 1.
1Sugden on Vendors, 221, note to see. 24.
3 J. J. Marshall, 353, Edrington v. Harper.
1Comyn on Contracts, 16. 4 Kent’s Com. 144.
1Duvall, 95, Magoffin v. Holt.
3 Bush, 694, Jones v. Noble.
6 Wheaton, 539, Brashear v. Grate.
1 Douglass, 527, The Michigan Bant v. Hammond.
4 Beavan, 197, Perry v. Meddowcroft.
1 Hilliard on Mortgages, 69.
7 Cranch, 218, Conway’s ex’r v. Alexander.
7 Monroe, 282, Davis v. Phelps.
1 Allen, 107, Murphy v. Galley.
4 Denio, 493, Baker v. Thrasher.
8 Paige, 254, Holmes v. Grant.
2 Edward’s Chancery, 147, Robinson v. Cropsey.
1 Bland’s Chancery Rep. 206. 6 Paige, 480.
3 Watts, 96, Colwell v. Woods.
3 Hawkes, 423, Streaton v. James.
3 Howard, 126, Morris v. Nixon.
5 Littell, 84, Sk’inner v. Miller.
2 J. J. Marshall, 471, Secrist v. Turner.
3 Dana, 471, Bright v. Wagle.
7 Connecticut, 143, Reading v. Weston.
2 Yerger, 6, Bennett v. Holt.
1 Bland’s Chan. Rep. 206, Chase’s case.
3 Michigan, 487, Swetland v. Swetland.
1 Dev. Equity, 377, Poindexter v. McCannon.
1 Sandford’s Chan. Rep. 73, Brown v. Dewey.
1 J. J. Marshall, 341, Hopkins v. Stephenson.
9 California, 538, Low v. Henry.
4 J. J. Marshall, 594, Letcher v. Letcher.
2 Story’s Equity Jurisprudence, section 1202.
2 Gilman, 334, Andrews v. Sullivan.
5 Gilman, 814, Smith v. Brown.
1 Johnson’s Chancery, 370, Benedict v. Lynch.
Newland on Contracts, 152, 153.

Opinion:
JUDGE LINDSAY
delivered the opinion oe the court.
H. H. Honoré, who was a real-estate agent in the city of Chicago, Illinois, and Eusebius Hutchings, a citizen of Louisville, Kentucky, having negotiated with one Tiernan for the purchase of an undivided moiety of a tract of sixty acres of land situated near the city of Chicago, agreed that the title to the same should be conveyed to Hutchings for the reasons and purposes set out in a paper executed and delivered by Hutchings to Honoré on the 18th day of November, 1861. Said paper is in the following words:
"Mr. E. Hutchings has this 18th day of November, 1861, bought jointly with H. H. Honoré the undivided half of sixty acres of land in section 13, township 39, range 13, from Mr. Tiernan for the sum of six thousand dollars, the whole of which sum the said Hutchings is to pay, and takes the title and control of the property to secure himself for said sum of six thousand dollars and ten per cent, interest that may accrue upon the same until the land is sold.
"It is agreed between said parties that when said land is sold said Hutchings is to have first his six thousand dollars so advanced, and ten per cent, interest, and the profits over and above said sum are to be divided equally between said parties. The parties are to pay equally the taxes or any assessments that may be levied upon said land, and the parties propose to sell said land when a satisfactory price to said Hutchings can be obtained. This arrangement is to be continued eighteen months, when, if the property has not been sold, said Honoré is to pay one half the sum so advanced, with the accrued interest, or said Hutchings is to be the sole owner of the same.
[Signed] E. Hutchings."
The evidence in the case conduces to show that the land was bought upon very favorable terms, and that the parties making the purchase had every reason to believe that a great speculation had been secured. It can not be doubted but that it was through the exertions' and superior information of Honoré that the investment, which eventually turned out even more profitable than could reasonably have been expected by either party, was made. During the first two or three years after the purchase lands in the vicinity of Chicago did not advance in value as rapidly as had been anticipated, and no sale was made within the stipulated time. Honoré, who appears to have been greatly embarrassed, failed to pay one half of the purchase-price and the accrued interest thereon, as he had agreed to do, and Hutchings insists that by reason of such failure he forfeited the interest secured to him in the purchase by the writing before set out; and when Honoré applied to him, some time after the expiration of the eighteen months, for an extension of time within which to make the agreed payment, he declined to accede to the proposal, and claimed that he was then the sole owner of the land.
In pursuance to the written agreement Hutchings, on the 31st day of December, 1861, caused the land to be conveyed to himself. In February, 1869, he sold it for one hundred thousand dollars in currency.
Honoré instituted this suit against him, claiming that under the terms of their purchase he was a joint owner with him in the land purchased, and entitled to one half of the net profits realized in the speculation. Plis petition was dismissed, and he has appealed to this, court.
The legal title to the land having been conveyed to Hutchings, the first question to be determined is whether or not the written agreement executed by him to Honoré so far modified the legal effect of this conveyance, made with the knowledge and consent of the latter, as to raise by implication of law a trust in his favor to the extent of one half of the land. The entire _ transaction took place in the state of Illinois, and as there is nothing in the record showing the contrary we must presume that the common law is in force in that state.
By the common law implied trusts are generally raised upon the supposed intention of the parties, as gathered from their language and conduct, or from the nature of the transaction between them. If the conveyance be made to one person and the purchase-money paid by another, a trust results by implication of law in favor of the person who pays the money. So likewise if the conveyance be made to one and the purchase-price in part paid by another, a resulting trust is raised in favor of the latter to the extent of such payment. In this instance, however, it is insisted that no part of the purchase-money was paid by the appellant, and that he does not come within the reason of either of the foregoing equitable rules. But it is equally Avell established that if a joint purchase be made in the name of one party, and the other secures to be paid his share of the purchase-price, he will be entitled to his proportion of the property purchased as a resulting trust. (Wray v. Steele, 2 Ves. & Bea. 388; Tiffany and Bullard on Trusts and Trustees, 97.)
In the case of Boyd v. McClain (1 Johnson's Chancery, 582) Chancellor Kent goes even further than this. In that case the party to whom the conveyance was made paid the entire purchase-price, yet the chancellor permitted the fact to be established by oral testimony that he took the title to secure the repayment of the same, it having been loaned to the real purchaser, and held that a trust resulted in favor of the latter by implication of law. In this case we have written evidence that Hutchings bought the land jointly with Honoré; that Honoré secured to be paid his share of the six thousand dollars, the purchase-price, and ten per cent, interest thereon, which sum had been advanced by Hutchings on the joint purchase of himself and Honoré; that the parties were to share equally the profits realized on the resale of the land, and to bear equally the taxes and assessments that might be levied against the same, and that when sold it was to be sold by "the parties," are circumstances which of themselves are sufficient to establish the joint ownership of the litigants, even if Hutchings had not over his own signature stated that such was the fact.'
It therefore becomes necessary to determine the legal effect of the condition of forfeiture contained in the writing upon which Honoré relies to support his claim to one half of the net profits realized from the speculation. It was agreed that in case the land was not sold at the end of eighteen months he was to pay one half of the sum advanced, with the accrued interest, or Hutchings was to be the sole owner of the land.
If it can be gathered from this that Honoré took no vested interest in the land under the purchase from Tiernan, but was merely the agent of Hutchings to sell, and was to receive one half of the net profits as compensation for his services in making the sale, then it follows that the contract between the parties was in the nature of a conditional sale from Hutchings to Honoré, and as time is of the essence of such contracts, the failure of Honoré to makq prompt payment of the stipulated amount puts it out of the power of a court of equity to afford him relief. But to give such a construction to this latter clause not only makes it repugnant to the remainder of the agreement, but makes it override and nullify every other stipulation or provision contained in the entire writing.
As we have before stated, a trust resulted in favor of Honoré to the extent of one half of the land jointly purchased. This interest he pledged to Hutchings to secure the repayment to him of one half of the purchase-price advanced. In pursuance to their agreement Hutchings took the title to the laird and was allowed to control the same. But the conveyance of Tiernan and the writing executed by Hutchings constitute in law but one instrument, and must be construed together as though the one was incorporated into the other. (Powell on Mortgages, 67.) When so construed it appears tliat the one took an absolute title to the joint property of both, having first executed and delivered to the other a condition of defeasance. In such a case the onus devolves on the party who insists that the contract was a conditional sale. (Edrington v. Harper) 3 J. J. Marshall, 356.)
The contracts show upon their face that Hutchings took the title to secure the payment of the money and the interest that might accrue upon the same. Such an arrangement is perfectly consistent with the idea of a mortgage, and though we may doubt as to whether or not the absolute conveyance to Hutchings was intended to operate only as such, yet the rule is that "in all doubtful cases the law will construe a contract to be a mortgage, because such a construction will be most apt to attain the ends of justice and prevent fraud and oppression." (Skinner v. Miller, 5 Littell's Reports, 86.)
We do not regard it as material that Honoré was insolvent and that Hutchings took no other security for his money than the land itself; nor that, under our construction of the contract, in case the property decreased in value, it was optional with Honoré whether he would pay or not, and if he failed to pay that Hutchings would be without remedy as to his share of the loss. This circumstance is not conclusive, nor even very formidable. In the case of Edrington v. Harper, before cited, it was expressly agreed that it should be optional with the mortgagors whether they would repay the' money advanced or not, and yet the court held that this being virtually the fact in every mortgage as to whether the condition should be forfeited or not, it could not have the effect of converting what would otherwise have been a mortgage into a conditional sale.
The distinction between a conditional sale and a mortgage, as drawn by Greenléaf, is that "where the debt forming the consideration of the conveyance still subsists, or the money is advanced by way of loan, with a personal liability on the part of the borrower to repay it, and by the terms of the agreement the land is to be reconveyed on payment of the money, it will be regarded as a mortgage; but where the relation of debtor and creditor is extinguished, or never existed, there a similar agreement will be considered as merely a conditional sale." (2 Greenlcaf's Cruise, note 1, page 74.)
In this case Hutchings advanced the money by way of a loan to his co-purchaser, Honoré, who is personally liable to repay it with interest at the rate of ten per cent, per annum, and had he done so before the land was sold, ivould have been entitled to a conveyance of the one half held in trust for him by Hutchings. The fact that Hutchings was to have interest on the money advanced tends very strongly to show that it was a loan (Colwell v. Wood, 3 Watts, 196), and would perhaps warrant that conclusion even if the fact was left in doubt by the terms of the written memorandum of agreement.
It is further insisted that Honoré, being the agent of Tier-nan, could not have become a joint owner of the land; that the policy of the law forbade him from selling to himself. In all cases in which the agent has discretion as to the price, or where the principal relies upon his knowledge or information as to the value of the property, and expects him to sell for what in his opinion the same is worth, this rule should be inflexibly enforced. But in this case Tiernan, the principal, was a real-estate agent himself, doing business within a short distance of the property sold, and well acquainted with its value. He fixed the price at which it was to be sold, and offered to sell to Honoré, or any one else whom he could find, at the price so fixed. Through the exertions of his agent he secured the sale of his property at the price fixed by himself, and as he does not complain, so far as it appears from this record, of bad faith or unfairness upon the part of Honoré, there can be no good reason why Hutchings should be allowed to make available any such defense.
Hence we conclude that Hutchings held the legal title to one half of the Tiernan land in trust for Honoré, and that the latter is entitled to one half of the net profits realized upon the resale of the same. In the settlement of the accounts between the parties Hutchings should be credited with the six thousand dollars advanced, with interest at the agreed rate from the time it was paid up to the sale of the land; also with all other amounts paid by him on account of taxes or other assessments against the land, or of other necessary and proper expenses incurred and paid by him in the management of the same, with legal interest on each amount from the time of payment up to the sale; and in these expenses should be included such sum as he may have paid John M. Tiernan for choice of lots when the sixty-acre tract was divided. He should also be credited with such reasonable and proper fees or commissions as he may have paid to his agent for negotiating the sale of the land. It appearing that the land was sold for currency, the payments which Hutchings may have collected should be scaled to their actual value in coin at the time of collection.
The judgment of the court below is reversed, and the cause remanded for further proceedings consistent with this opinion. And to prevent further and unnecessary litigation either party who desires should be allowed to amend his pleadings so as to properly present the issues indicated, and a reasonable time within which to take further proof, in case the same may be necessary under the amended pleadings.
In this case Judge Hardin did not sit.