Court Opinion

ID: 6634110
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:39:03.696621+00
Date Added: 2024-06-11T15:59:01.804099
License: Public Domain

Campbell J.
Defendant being sued upon a note for 11,000, pleaded the general issue with notice of set-off. Dpon the trial it appeared in evidence (to which objection was taken in due form,) that this note, with another of like amount, was given under the following Circumstances: Defendant bought out Bowker’s interest as partner in a brewery, and was to pay three thousand dollars, one-third cash, and the balance by the two notes aforesaid, and was to assume and pay in full all Bowker’s share in the debts of the firm, in which defendant succeeded him, and indemnify him against all liability and damages. Bowker showed a schedule of debts and assets as the basis of this arrangement, and it was agreed that if defendant paid debts beyond what appeared on tbe schedule, he should be entitled to a corresponding deduction on the notes, which were to be left at the Savings Bank to stand for that purpose. . The defendant gave an unqualified bond to pay and indemnify, and executed the notes. One of the notes was indorsed by Bowker to a bona fide holder. Defendant paid claims in excess of the schedule list, of which Bowker’s half amounted to $1,459.20, and the set-off was allowed in the court below, and judgment rendered accordingly.
*46It is alleged as error that the effect of this was to allow parol evidence to contradict the written documents, which it was claimed could not be thus altered or invalidated.
We think such evidence as was admitted in the present case is proper as bearing upon the question of consideration. There is no difference in this respect between courts of law and courts of equity, and it has always been held in this state that evidence was admissible to explain the purpose and extent to which a security, purporting to be for the absolute payment of money, should be applied and enforced'. Where a mortgage accompanies a note or bond it is a mere incident to the principal security, and the note or bond is the substantial evidence of debt. Yet it has always been held that it might be shown the whole transaction, appearing on its face to be unconditional, was a security for 'something else, and no enforcement has been allowed for any other purpose than the actual one. The statute of frauds does not prevent trusts in personalty from being evidenced by parol, and a ■fjrust is therefore admitted to be shown against all but Iona fide holders, whether it be to create a special interest, a defeasance, or any other similar equity. See Catlin v. Birchard, 13 Mich. 110. This doctrine has been applied in various ways. It has been allowed to convert an absolute deed into a mortgage.— Wadsworth v. Loranger, Harr. Ch. 113; Emerson v. Atwater, 7 Mich. 12. To turn a contract of sale into a mortgage. Batty v. Snook, 5 Mich. 231; Swetland v. Swetland, 3 Id. 482. To show the original mortgagee had no interest in in the securities. — Bishop v. Felch, 7 Mich. 371. To show that a negotiable note, secured by mortgage, was really given for a mere indemnity.— Colman v. Post, 10 Id. 122. To show that a bond and mortgage for a fixed sum was given in consideration of a promised loan and a promised conveyance of property, and that there had not been a complete compliance with the promises. — Robinson v. Cromelein, 15 Mich. 316.
*47In Bennett v. Beidler, 16 Mich. 160, a note was given for a sum of money, which was the price of the crops on certain lands purchased at auction at an estimated number of acres, with the agreement that the maker of the note might have a subsequent measurement made to ascertain the true amount of the purchase money. The note having been paid by the maker to a bona fide holder, and the land falling short, he was held entitled to recover back the surplus payment.
We can perceive no difference in principle between these cases. Johnson undertook absolutely to pay the debts of Bowker, whatever might be their amount, and did pay them. But the price payable by Johnson was fixed upon the basis that such debts should be taken at a specified sum, and if exceeding that should entitle him to a corresponding reduction. So far as they were in excess, they reduced the consideration for his notes, and being capable of pecuniary calculation, and not in the nature of unliquidated damages, stand on the same footing as if he had given an accommodation note, or a note for money, in excess of a money price fixed at the time. The debts were all in existence at the date of the transaction, and when ascertained and paid, reduced to that extent the value received by Johnson of Bowker. The agreement rendered it the duty of Bowker to hold the notes as security for no greater sum than was equitably due, and had he retained them both they would have been enforceable. for no more. The money in excess of the schedule debts was paid to his use, by his request or agreement, and was therefore a legitimate ground of set-off.
The judgment was correct, and should be affirmed.
Cooley Ch. J. and Graves J. concurred.
Christiancy J. did not sit.