Case Name: Roberts v. McMahan
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1853-06
Citations: 4 Greene 34
Docket Number: 
Parties: Roberts v. McMahan.
Judges: 
Reporter: Reports of Cases in Law and Equity, Determined in the Supreme Court of the State of Iowa
Volume: 4
Pages: 34–36

Head Matter:
Roberts v. McMahan.
Where R. undertook to advance sufficient money to satisfy two judgments against M., and as security for such advance-and twenty per cent, interest, it was arranged that R. should bid off the land under execution in his own name, and receive the rents therefrom, and when the rents received amounted to more than enough, to refund the money advanced and twenty per cent, interest: held that the transaction shows an intention to create and secure an indebtedness from R. to M., and that the sheriff's deed to R. should be regarded as a mortgage which was satisfied by the rents collected.
Oral evidence not admissible to contradict or vary a written instrument, but under the exception to this rule, it may be shown by extraneous proof that a deed, absolute on its face, was intended as a mortgage.
In Equity. Appeal from Des Moines District Court.

Opinion:
Op'mion by
Greene, J.
Bill to set aside an execution sale. Prom tbe pleadings and evidence in tbe case, we regard tbe following facts as proved : In October, 1840, John Hargrave and wife, for tbe use of David Hendersbot, recovered a judgment against tbe complainant, McMaban, for $11016 ; and in October, 1841, Amos Ladd recovered a judgment against bim for $116 62. In May, 1844, lot 364 in tbe city of Burlington was sold to Roberts to pay tbe judgment in favor of Ladd. Prior to tbe sale', there was an agreement between McMaban and Roberts by wbicb Roberts undertook to advance sufficient money to satisfy tbe Ladd and Hendersbot judgments, and to take tbe title to tbe lot as security for tbe money advanced, and twenty per cent, interest. Roberts was to have immediate possession of tbe land and receive tbe rents and profits. In consideration of this agreement and tbe undertaking of Roberts to pay off both judgments, Hendersbot, who stood ready to pay tbe amount of both judgments for the lots, was prevailed upon not to bid. After the sale, Roberts requested delay in tbe payment of tbe Hendersbot judgment unfil be obtained tbe sheriff's deed. But after obtaining the deed, he refused to pay the judgment, and refused to execute writings to McMahan to deed the lot oh his payment of the money advanced. The rents and prof its received by Eoberts amounted to more than he had advanced in the purchase of the lot. On this state of facts the court below found for complainant; and the defendant now seeks to reverse the decree.
On a careful examination of the bill, answer and depositions, we can discover no good reason for disturbing the decree.
The entire transaction shows an intention to create and secure a debt from McMahan to Eoberts. The purchase was made in Eoberts' name, for the purpose of securing the debt. The deed under this contract amounted to nothing more than a mortgage. Eoberts, as mortgagee and as trustee of McMahan, received full payment of his debts ia the rents and profits collected by him from the mortgaged premises.
It is true, as insisted, that if we were to follow the deed alone in this case, we could not otherwise regard the transaction than as a Iona fide sale. And it is equally true, as a general rule, that oral evidence is not admissible to contradict, vary or add to a written instrument. But in equity there are exceptions to this rule. To declare that to be a sale, which was really intended as a mortgage, is in equity a fraud so repugnant that -it cannot be sanctioned under the most imposing and formal deeds of conveyance. To expose this fraud, and to advise the oourt of the true character of the contract, and the real intention of the parties, extraneous evidence is clearly admissible, both upon principle and authority.
The authorities upon this point are numerous. Conway v. Alexander, 7 Cranch., 238; Prince v. Bearden, 1 A. K. Marsh., 170; Oldham v. Halley, 2 J. J. Marsh., 112; Whittick v. Kane, 1 Paige, 202; Taylor v. luther, 2 Sumner, 232; Flagg v. Mann, ib., 538; 2 Halsted, 102; 6 Gill, and John., 275; 15 Conn., 575; Wright v. Bates, 13 Verm., 341; Strong v. Glasgow, 2 Mur., 289; Russell v. Southard, 12 Howard, 139.
M. D. Browning, for appellant.
J. O. Hall and II W. Starr, for appellee.
The refusal of Roberts to pay off the ITendershot judgment, and to give McMahan an obligation to re-deed the lot agreeable to contract, and his avowed determination to convert that into an absolute sale which was intended by the parties to be nothing more than a security for a loan, were obviously fraudulent acts, which in equity justified the admission of oral evidence; and indeed rendered it necessary, in order to show the true state of the transaction.
We think the evidence in the case amply proves the facts as we have stated them, and shows further that the consideration paid by Roberts was grossly inadequate — not one-fifth of the real value. This gives weight to the conclusion that ihe relation of debtor and creditor was alone contemplated by the parties.
Decree affirmed.