McBurney v. Wellman

By the Court, E. Darwin Smith, J. Upon the facts found by the learned judge before whom this cause was tried, without a jury, I am entirely satisfied that his conclusions upon the law are erroneous. From his findings upon the facts, it appears that the defendant had a contract from one Hunting, for the purchase of the land in question, which, at the time of the conveyance from Hunting to the plaintiff, had about a year to run; that the defendant had entered into possession under this contract, and had occupied the land about seven years, and had made valuable improvements on it, cultivated it as a farm, and was then in the actual possession thereof. Under this contract the defendant Well-man had the clear equitable title to the said lots. His interest in.the land would have gone, on his decease, to his heirs, as real estate, and his widow, if he had left one, would have been entitled to dower in it. (6 John. Ch. 398. Moore v. Burrows, 34 Barb. 174. Adams v. Green, Id. 179. 10 id. 434. 18 id. 83.) The contract between Hunting and Wellman is not set out in the case, and its terms do not distinctly appear; but it is stated in the findings of the judge that the defendant went into possession of the premises, under his contract. This finding, I think, implied that he was entitled under the contract to go into possession of the land, and as his occupation for seven years had been acquiesced in by Hunting, and his right to a deed was recognized by him, and the contract had not yet expired, I think it must be considered that he was rightly in possession, and was entitled, as against Hunting himself) to retain such possession till default was made in his payments upon the contract. In this view of the defendant’s rights, as between himself and Hunting, the latter could not [401] have maintained ejectment against him, at the time of the conveyance to the plaintiff. Having these clear equitable rights in the land, the defendant applies to the plaintiff to advance and the plaintiff agrees to advance, for him the amount of the unpaid purchase money and give him five years to make payment to him of such amount with interest thereon annually, and to take a conveyance of the land for his security and give him a contract to this effect. This, it seems to me, was clearly an application, and an agreement, in fact and in legal effect, for a loan of $284 for five years on the security of this lot of land. This was the clear object and intent of the parties. The plaintiff never contracted to purchase this land of Hunting, and never had any negotiations with him. The title to this lot was procured by Well-man to be conveyed to the plaintiff, and he advanced the money to Wellman for that purpose. This is very clear upon the evidence and the findings of the judge upon the facts. It must therefore be held that the plaintiff in fact took the title to this land, as between him and Wellman, as a mere security for the said sum of $284 by him advanced to Well-man to pay off the contract to Hunting and as a trustee of the title. Where land is conveyed by an absolute deed as a security for money due, loaned or advanced, it is well settled that the title of the grantee in such deed is that of a mere mortgagee. (4 Kent, 142. 2 White & Tudor’s Leading Cases in Equity, 430, and cases there cited.) If the plaintiff's title is that of a mortgagee, then he cannot maintain ejectment. (2 R. S. 312, § 57.) But this is an action at law, and it has been held not admissible, at law, to show by paroi that a deed absolute upon its face was intended to be and is a mere mortgage. (Webb v. Rice, 6 Hill, 219.) But it was always admissible in equity to show by paroi that an absolute deed was intended to be a mortgage; and an equitable defense may now, since the code, be made in a legal action, and is just as available as a legal defense, (Dobson v. Pearce, 2 Kern. 156; Crary v. Goodman, Id. 266; Des [402] pard v. Walbridge, 15 N. Y. Rep. 374; and Hodge v. The Tennessee Insurance Co., 4 Seld. 416;) the rule in Webb v. Rice has ceased to be of any practical consequence, if the equitable defense is spread upon the record so as to let in the paroi proof, and such is the case in this action. If Wellman had had the legal title and had conveyed it to the plaintiff as security for the said sum of $284, it is perfectly well settled that he might claim to redeem the land, in equity, by offering to pay the money, and might show by paroi that the deed was intended as a mortgage. I cannot see that it makes any difference in principle that Hunting held the title to the land in trust for Wellman, and he procured him to convey it to the plaintiff. It is just as much an absolute deed, in form given to secure a debt or a loan of money, in one case as in the other. Wellman was a debtor for the mcmey loaned. The money was not purchase money, but money lent and advanced for the benefit of Wellman. It is in principle within all the cases where equity has held an absolute deed to be a mortgage, and given relief against it as such. The case was disposed of at special term as purely...... one of law, and upon the ground that the paroi agreement proved was void by the statute of frauds. In the case of Taylor and others v. Luther, (2 Sumner, 232,) Judge Story, in a similar case, speaking of the statute of frauds, says: “Nothing is better settled than that the true construction of this statute does not exclude the enforcement of paroi agreements respecting the sale of lands in cases of fraud; for as it has been very emphatically said, that would make a statute, purposely made to prevent frauds, the veriest instrument of fraud.” If the real agreement, found to be proved between these parties, had been carried into effect, the defendant’s rights would not have rested in paroi. He would have had a clear written contract declaring his rights. It would be a great perversion of the statute to hold that the fraud of the plaintiff in getting the title to this land, and then refusing to give to the defendant the written contract, contemplated, [403] should deprive the defendant of the right to show what the real transaction \,was, and to appropriate redress, In 4Kent’s Com. 143, it is said that “paroi evidence is admissible, in equity, to show that an absolute deed was intended as a mortgage, and that the defeasance had been omitted or destroyed by fraud, surprise or mistake.” And in the case of Taylor and others v. Luther, (2 Sumner, before cited,) Judge Story, referring to this statement of Chancellor Kent, says: “ It is the same if it [the defeasance] be omitted by design upon mutual confidence between the parties; for the violation of such an agreement would be a fraud of the most flagrant kind originating in an open breach of trust, against conscience and justice.” This remark of Judge Story describes and applies to this case very clearly. The fact that Wellman has no written contract declaring his rights, is part of the wrong and fraud of which he complains, and which calls for the equitable interposition of this court. He makes out a clear case of fraud on the part of the plaintiff in seeking, under guise of friendship and confidence, to get title to his farm and thereby deprive him of it; and this is not denied by the plaintiff, but he trusts entirely to the statute of frauds as an answer to this defense. It is, in my opinion, utterly unavailable for such purpose, and was never designed to cover up such a transaction. The defendant established a clear equitable defense to the plaintiff's action, and this, as we have before seen, is just as available and complete as if it were a legal defense. The complaint should have been dismissed at the special term upon this ground. The judgment should now be reversed, and a new trial granted, with costs to abide the event. [Monroe General Term, September 5, 1864. X, 0. Smith, Welles and K Darwin Smith, Justices.]