Court Opinion

ID: 7875356
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:06:53.357508+00
Date Added: 2024-06-11T16:30:46.686873
License: Public Domain

Paynter, J.,
(concurring.) A bond and mortgage was executed by William Walker and Eliza S. Walker, his wife, bearing date the 8th day of November, A. D. 1873, to the president, directors, and company of the Farmers’ Bank of the State of Delaware for the sum of $22,406.37. The mortgage embraced and conveyed 16 different tracts or parcels of land. An amicable scire facias having been docketed between the bank and Walker and wife on this mortgage, March 23, 1875, a judgment thereon was recovered by the bank against them for the sum of $22,406.37, with interest from April 18, 1875. On the 26th day of January, 1881, a levari facias was issued on said judgment, the interest due on said mortgage and judgment recovered thereon being then in arrear; but the proceedings on this execution were afterwards abandoned, arrange-*302meats having been made for the payment of said interest. On the 8th day of February, 1882, a second levari facias was issued on said judgment, the interest then being again in arrear. Proceedings on the second writ were also abandoned, Walker having provided for the payment 'of his arrears of interest the second time. Walker being the third time in arrear with his interest without having reduced in any way the principal of said debt, a third levari facias was issued on said judgment the 14th day of February, 1883. In the month of December, 1882, Walker sold five of the said tracts at public sale, and on the 22d day of February, .1883, he and his wife executed a deed of conveyance to the president, directors, and company of the Farmers’ Bank of the State of Delaware for nine other tracts of the lands named in said mortgage; the lot known as the “Dry-House Lot ” not being embraced in said deed of conveyance for reason not necessary to be stated here, but which fully appear by the deposition taken in this cause. The consideration named in the deed was $26,000, but the real consideration, according to the evidence in the case, was the release to Walker of his entire indebtedness to the bank, amounting at that time to $25,277.36, the payment by the bank of a mortgage of Walker in favor of Charles Bispham, amounting to $6,988.67, and the payment of a judgment of Abraham Pearson against Walker, amounting to $85. The Du Pont mortgage, the Bispham mortgage, and the Pearson judgment were liens upon the lands of Walker, but the . Du Pont mortgage had been assigned to the bank prior to that time. The aggregate amount of Walker’s indebtedness to the bank, and the prior .liens which the bank assumed and paid on the- 22d day of February, 1883, the date of said deed of conveyance, was the sum of $32,351.32. ° The bank afterwards sold all these nine tracts of land which were conveyed to it, as aforesaid, by Walker and wife, for prices aggregating the sum of $34,870. Three tracts sold for $31,500, and six sold for $3,370. It is admitted by the bank that the aggregate prices for which the said nine tracts were sold by the bank exceed the consideration price for which Walker and wife con*303veyed them to the bank to the amount of $2,271.26; but it is claimed in the answer that the greater part in value of these lands were sold on credit, and a large portion of the consideration price therefor remained unpaid. A bill in equity was filed by Walker, in his life-time, against the bank, to compel the payment of said excess by the bank to him which he claims was equitably due him. The chancellor made his decree in favor of the defendant below, and the case comes before the court of errors and appeals upon an appeal from the decree of the chancellor.
The question is the case is as to the effect of the deed of conveyance to the bank from Walker and wife. The solicitors for the appellant contend that said deed should not be allowed to have force and effect according to its import, but should be construed, as between the parties, to have the effect only of a mortgage to secure the subsisting debt; and, though the deed may be absolute upon its face, the fact of the bank selling the property for more than the real consideration for which said Walker and wife conveyed the same to said corporation, with other facts proved, and all the circumstances surrounding the case, raised a trust by which the bank was converted into a trustee to apply the consideration price for which they sold said tracts of land to the payment of the debts against Walker, viz., his debt to the bank, and the prior liens which the bank assumed and paid, aggregating the sum of $32,-351.32, and to pay the amount in excess of such last-mentioned sum which said bank received as the consideration prices of said several tracts to the said William Walker or his administrator. The solicitor for the respondent, on the other hand, contends that the evidence in the case will not justify the court in construing the deed of conveyance made by Walker and wife to the bank as mortgage only for the security of the subsisting debt, and that no trust was raised by the, facts and circumstances surrounding the transaction, but that the deed was absolute upon its face as well as by the understanding and agreement between the parties, and that the entire contract and sale of said lands was complete in every respect by *304which the title to said property was vested absolutely in said bank, with absolute power for its disposal or sale, and with no obligation at law or equity to pay over to appellant or his representative any surplus or excess over the real consideration price for which Walker and wife conveyed said property to the bank.
It' becomes necessary, in discussing the questions involved,' therefore, to ascertain, as far as possible, from the proof in the case, the intent of the parties at the time the conveyance was made, their objects and purposes, and all the facts and circumstances surrounding the making of the deed, and the methods used or practices employed to obtain the execution of that instrument. Mrs. Watson, the most important witness for the appellant, says the “ deed was made by Walker and wife upon the express understanding that it was in discharge of the indebtedness of the said Walker to the said bank, and its assumption to pay the Bispham mortgage and the Pearson judgment; that, at an interview between Walker and some of the bank directors, it was stated by Edward Ridgely, the attorney for the bank, that the bank did not want the said Walker’s property for speculation, but simply to get its own money, and that it was stated by either Dr. Henry Ridgely or Edward Ridgely, and assented to by the other, that the bank was a rich corporation, and could sell the property of the said Walker on better terms, and give longer time, and thereby secure a better price therefor, as a reason and argument to induce the said Walker and wife to execute a deed to the bank for the same; and it was several times stated that all the bank wanted was its actual debt and expenses.” She also stated that “she was present in February, 1883, when Edward Ridgely called upon Walker in reference to the execution of a deed to the said bank. When Edward Ridgely came in, he stated that he had come to report the action of the directors of the bank upon the proposition which had theretofore been made to the bank, and that the bank had conceded to the exemption of the Dry-House lot if Mr. Walker and wife would make a deed to the bank for the other property.” To an inquiry of Mrs. Watson as to whether the *305execution of the deed could not be postponed until March, Mr. Ridgely, after some, hesitation, said: “No, madam; the bank has ordered me to prepare the deed this afternoon, and have it executed at once.” She also says: “The tenor of the conversation at this interview was that it must be done at once, or the bank would proceed to cause the said Walker’s real estate to be sold by the sheriff, and that Mr. Ridgely said. ‘ I wish, Mr. Walker, that you could sell your property to advantage; for all we want is our money;’ that, after the said interview, she made inquiry of him if it was the intention of the bank or its officers to sell the lands of the said Wm. Walker at sheriff’s sale, and that the said Edward Ridgely said he had already ordered a writ of levari facias, and that if it had not gone too far he would recall it, and wait until Harry A. Richardson would return homeshe having requested him to wait until Richardson’s probable return. She states: " There was nothing said on that occasion about any surplus which might remain after paying the indebtedness of said Walker.” According to Mrs. Watson’s testimony, nothing was said in her presence about such surplus until a considerable time had elapsed after the execution of the deed to the bank. She states, further, that Harry A. Richardson brought the deed to Walker’s house for execution, and that it was executed in her presence; that “ the bank, through its officers, had before that time repeatedly threatened or said it would sell the real estate of Walker on its mortgage if Walker and wife would not make a deed to itthat this wjs the third levari facias; that Walker was suffering from the effects of paralysis, which affected his limbs and conversation, making him nervous and excitable, and causing him much trouble about his business; that about a year after the deed was made, and the bank had sold the property, Mr. Edward Ridgely was sent for, and the question being asked him whether the bank was going to pay Mrs. Walker the surplus, a letter was written, at Mr. Ridgely’s suggestion, to the bank for the surplus,—he at the same time saying that Walker had no right to such surplus; and that, after the bank had completed the sale, *306Walker would sit on every Tuesday, being known as “ Bank Day,” at the front window, and was looking, as he said, for some one to inform him that the bank had made provision to pay him whatever surplus there was.
Harry A. Richardson testified as to an interview with Dr. and Edward Ridgely to arrange about liquidating the indebtedness of Walker with the bank after he (Richardson) had paid Walker’s interest up to January 1, 1882, when the subject of Walker and wife conveying their property to the bank in discharge oi said indebtedness was talked about; that Dr. Ridgely expressed the opinion that Walker ought to have all his real estate in Dover clear, after paying his indebtedness; that an estimate was made of each farm, piece, or tract of land then owned by Walker by Henry Ridgely, with a lead-pencil furnished by said Richardson,—the said estimate aggregating about $48,000; that Edward Ridgely concurred in said estimate, and said that at said estimate the said Walker could pay all his debts of record, and have all his town property clear; that there was an interview between William Walker and certain directors of the bank about the 1st of February, A. D. 1883, at which William Walker, Henry Ridgely, Edward Ridgely, Annie E. Watson, and himself (Richardson) were present; that Henry Ridgely and Edward Ridgely insisted upon a conveyance of all of Walker’s property to the bank, but that he did not remember or know that any representations were made to induce Walker to make the deed, unless it was the statement, made by both of them at different times, that all the bank wanted was what Walker owed it,—this statement being made several times first by one, and concurred in by the other; that it was also said by Edward Ridgely, and concurred in by Dr. Ridgely, that the bank was a rich corporation, and could sell the lands more advantageously than he could, because it could give better terms; that a statement was made both by Henry Ridgely and Edward Ridgely, at the time of the conveyance of Walker’s real estate to the bank, that the bank did not want the property for speculative purposes, but merely *307wanted to liquidate his indebtedness to the bank; that, about the time of issuing the third levaría fadas, Edward Ridgely told him that, unless the deed was executed, the bank would proceed to sell Walker’s real estate at sheriff’s sale; that he could not get them to execute the deed, as Mrs. Walker refused to sign it unless the bank would pay the surplus, and wanted to know if he (Richardson) could not induce them to execute the deed, as otherwise the lands would have to be sold at sheriff’s sale; that he would not have advised Walker and wife to convey the property had he not been informed by Edward Ridgely he would proceed to sell at sheriff’s sale, and in order to avoid such sale; that he advised Walker and wife to execute the deed ; and that he had no agreement or understanding about the bank’s paying Walker any surplus over and above Walker’s indebtedness, and that question was not in his mind at that time.
On the part of the bank it is testified to by Edward Ridgely, and corroborated by Dr. Ridgely and other witnesses, that there was a general feeling of reluctance, on the part of the directors, to accept a conveyance of the said lands, because they did not want to be burdened with them,—to have the trouble of renting and attending to them, and of selling said lands. That they greatly preferred that Mr. Walker should dispose of his lands himself, but were induced to think favorably of the conveyance, after his attempted sale, when it became evident that he could not dispose of the lands himself, and that the only alternative for the mortgagee was a sheriff’s sale or a voluntary conveyance by Mr. Walker. That the suggestion as to such conveyance was offered by Walker him- . self, and the proposition to execute the deed was made by him to the bank. That they were present at the interview spoken of by reason of an invitation of Walker, and at his request. That neither the bank, nor any one connected with it, suggested such a conveyance, according to their recollection. That there was nothing said about the surplus to the bank until the deed was in course of preparation, and that the bank immediately rejected the proposition, *308refusing thereby to take the deed upon such conditions, but ordered their attorney to collect the mortgage by legal process. That no one connected with the bank was present when the deed was signed]; Mr. Harry A. Richardson having attended to that part of the business, acting, not on behalf of the bank, but as the sou-in-law of Walker and wife. That said conveyance was to be made and was made as an absolute conveyance to the bank. That there was no condition whatever to which it was to be subject. That there was no agreement or understanding whatever that either William Walker or Eliza S. Walker, or any other person, should receive, or be entitled to receive, any part of any moneys which the Farmers’ Bank might obtain from the sale of said lands, or any part thereof. That the deed was executed after the bank had rejected Mrs. Walker’s proposition that the bank should pay her the surplus. That the bank never, before or after the execution of the deed, acknowledged or recognized any liability upon its part to pay Mr. Walker such surplus or excess. That no demand was made upon the bank for such excess until a year had elapsed after the execution of said deed. That the consideration of the conveyance was the satisfaction of the bank’s mortgages, and the payment of the liens against Walker, etc.; such satisfaction and payments to be made, not out of the proceeds of the sales of Walker’s lands, but absolutely by the bank, whether it ever sold the said lands or not. That one of the Ridgelys might have said substantially that the bank could probably sell the lands better than Walker could, as it could afford to give longer credit than he could under the circumstances; but such language was not to induce Walker to convey the lands, because he himself had voluntarily proposed to make the conveyance, and the effort was on his part to get the bank to accept the conveyance with the Dry-House lot excluded therefrom. The directors at that time thinking the bank would lose a portion of its debt, the question of accepting them for speculative purposes did not enter into their minds. That the bank did not want the lands, preferring that Walker should sell them himself, but he had *309attempted to make a sale, and had failed, when the alternative was presented to either sell at sheriff’s sale or to accept Mr. Walker’s proposition. That the bank was prevailed upon to accept the deed, considering the effect a sheriff’s sale might have upon Mr. Walker, and other circumstances. That the estimate spoken of as to the value of Walker’s lands ($48,000) was not made by Dr. Henry Ridgely, though it was in his handwriting; he simply acting as Mr. Walker’s amanuensis, and the estimate being really that of Mr. Walker himself. The directors of the bank were unanimous in rejecting the proposition of Mrs. Walker as to paying her the excess of the sales over the indebtedness, and instructed their counsel to immediately inform Mr. and Mrs. Walker that the proposition would not be agreed to, and to proceed to sell the lands at sheriff’s sale. That there was no condition to which the deed should be subject. That there was no agreement or understanding whatsover that either Walker or his wife, or any other person, should receive or be entitled to any part of the proceeds of the sales of said lands, and that Walker and his wife had been so informed before they executed the deed. That the price at which the bank took the lands was a fair and reasonable price at that time.
In viewing and weighing the testimony on both sides in connection with the arguments of counsel and authorities cited, we find the questions in connection with the deed are: (1) Was there any trust created either by agreement of the parties that the bank should sell the land conveyed to it, and, after paying the debts, refund the surplus or excess, or was there any trust raised by circumstances of circumvention, imposition, or fraud ? It is impossible from the evidence in the case to arrive at the conclusion that there was such a trust created by express agreement of the parties, because the witnesses for Walker nowhere say in positive terms there was such an express agreement or contract, while Dr. Henry Ridgely, Edward Ridgely, Caleb S. Pennewill, Walter Morris, and Edwin M. Stevenson testify in the most unqualified and unequivocal language that there was no condition whatever to which it should *310be subject, and that there was no agreement or understanding whatsoever that either the said William Walker or Eliza S. Walker, or any other person, should receive or be entitled to receive any part of any moneys which the Farmers’ Bank might receive from the sale of said lands, or any part thereof; Dr. Ridgely also saying that Mr. and Mrs. Walker had been so informed before the execution of said conveyance. It is also in evidence that the directors had rejected Mrs. Walker’s proposition to pay her any surplus which might result from the sale of said lands by the bank, by a unanimous vote, and that said Walker and wife were notified of the bank’s action. Numerous authorities have been cited to show that, “ whenever the relation of mortgagor and mortgagee is once shown to exist, a court of equity views with distrust and disfavor any arrangement between them by which it is proposed to transfer the equity of redemption to the mortgagee. The parties will be held to their original relation unless the transaction shall appear perfectly fair, and no advantage taken by the mortgagee by reason of his incumbrance.” Baugher v. Merryman, 32 Md., 185; Villa v. Rodriguez, 12 Wall., 326. No matter how absolute a conveyance may be on its face, if the intention is to take security for a subsisting debt, or for money lent, the transaction will be regarded as a mortgage, and will be treated as such. Baugher v. Merryman, 32 Md., 185 ; Villa v. Rodriguez, 12 Wall., 326.
In determining whether a deed absolute on its face is to be allowed to have force and effect according to its import, or is to be declared, as between the parties, to have the effect of a mortgage only for the security of a subsisting debt, it is necessary to determine the manner in which the deed was procured, and the object and purposes contemplated by the parties at the time it was executed, as shown by all surrounding facts and circumstances. For this purpose, paroi testimony is admissible. Baugher v. Merryman, 32 Md., 186; Hall v. Livingston, 3 Del. Ch., 348. If a person obtain the legal title to property by circumstances of circumvention, imposition, or fraud, or if he obtains it, by virtue of a con*311fidential relation and influence, under such circumstances that he ought not, according to the rules of equity and good conscience, as administered in chancery, to hold the beneficial interest of the property, courts of equity, in order to administer complete justice between the parties, will raise a trust, by construction, out of such circumstances or relation; and this trust they will fasten upon the conscience of the offending party, and will convert him into a trustee, and order him to hold it, or to execute the trust, in such manner as to protect the rights of the defrauded party, and promote the safety and interest of society. 1 Perry, Trusts, p. 191, § 166; Bigelow, Fraud, 190. It has been decided in this state, in the cases of Cooch’s Lesssee v. Gerry, 3 Har. (Del.,) 282; Doe v. Tunnell, 1 Houst., 326; Cornog v. Cornog, 3 Del. Ch., 416,—cited by both the solicitors of the respondent and the chancellor in his decision below,—that “ a mortgage is but security for the payment of a debt. The mortgagee has but a chose in action.” It creates no trust, and establishes no fiduciary relation, without some circumstance of fraud, circumvention, undue influence, advantage overreaching, or other wrongful act.
The next question which arises in the case is a question of fact more than of law, and we are compelled to apply the principles of law as enunciated in the cases previously cited. It is well settled that fraud vitiates a contract in equity; that, to enforce a contract, one must go into equity with clean hands; that there, must be no circumstances of circumvention, imposition, or fraud. The declaration of fraud, circumvention, grinding bargain, etc., spoken-of in the complainant’s bill, and argued so ably by his solicitor, must be susceptible of proof, before a court of equity, or any other court, will interfere. The solicitor for Mrs. Walker lays particular stress upon the statement of Mrs. Watson that the two Ridgelys said all the bank wanted was its money, that it did not want the land, that the bank was a rich corporation, and could sell the property to k better advantag'e than he could. The Ridgelys both say that they do not remember any such declaration made by them. In *312the case of Hinkley v. Wheelwright, 29 Md., 348, the court decided: “ Nor does the fact that parties stand in the relation of mortgagor and mortgagee prevent their dealing with each other as vendor and purchaser of the equity of redemption. Such transaction will not be set aside unless for manifest unfairness or inadequacy of consideration. The court also, in the case of Hicks v. Hicks, 5 Gill & J., 85, said that the mortgagee may become the purchaser of the equity of redemption if he does not make use of his incumbrance to influence the mortgagor to part with his property for less than its cash value. It has been held that conveyances from mortgagors to mortgagees'are regarded with distrust. But there is no proof here that the bank made use of this circumstance to influence Mr. Walker to part with his property at less than its real value to that time. The preponderance of the testimony points directly to the contrary. The weight of the proof is that the bank was not making any effort whatever to obtain the conveyance, but all such suggestions came from Walker himself. All of the bank directors say there was no understanding or" agreement that the bank should pay over or refund to Mr. Walker, any surplus or excess it might receive from the sale of the property, and Mr. Harry Richardson himself says he does not remember any such understanding or agreement, because it was not in his mind at the time. It is proved that the suggestion to make the deed was made by Walker to the bank; that the bank directors were lath to accept the deed; that after awhile they became willing to accept it, and the defendants wanted them to except the Dry-House lot, and, after considerable hesitation, the directors agreed to exclude the Dry-House lot from the deed. Walker and wife yvere so informed, and the deed, ordered to be drawn. In the midst of the preparation of the instrument of conveyance, Mr. Ridgely was notified that Mrs. Walker would not sign the deed unless they agreed to pay the excess over the debts to her. The directors refused the proposition, and the deed was made to the bank without condition, as an absolute deed. The bank certainly had the legal *313right to issue the third levari facias, and enforce its collection. Mr. Walker was naturally uneasy and troubled about his business, and preferred making the deed to being harassed with a sheriff’s sale; but is nowhere proved that the bank issued the writ for any such intent and purpose, and more especially is it nowhere proved that the bank used such power to cause Walker to make a deed for a less consideration than it was worth at that time. Opinions are given by some witnesses that the property was worth more than it sold for to the different purchasers; but, on the contrary, it is distinctly proved that, only a short time prior to said sale by the bank, Walker, and Harry Richardson, were endeavoring to effect a sale of said property, but were compelled to abandon it. It was at this juncture that Walker flew to the bank again, and Dr. Ridgely says the consideration was as much as it was worth at that time. I can therefore see no circumstances of circumvention, overreaching, fraud, or attempt to enforce the mortgage by taking the property at less than its value at that time; and, according to the evidence in the case, the property was sold to the purchasers afterwards at an advance by shrewd and legitimate management. I cannot see where Walker can have any equity in the case because of the disparity of the consideration at the time the bank took the deed and the consideration for which it sold the lands. Such disparity was too small to be conscienceless,—being little, if any, more, after deducting expenses, than a real-estate agent’s fees would have been, and little more than the costs of a sheriff’s sale. From all the circumstances in the case, it appears that the bank was exceptionally lenient in collecting the mortgage, having resorted to three several writs of levari facias before enforcing the collection by a sale, having allowed interest in arrears to accumulate twice, having agreed to Walker’s proposition to exclude the Dry-House lot, and, in truth, acceding to every demand or request made by Walker, except that of paying over the surplus. It must also be remembered that, during all this time the bank directors considered the claim in jeopardy. I am therefore of the opinion that the decree of the chancellor ought to be affirmed.