Bryan v. Cowart

LIGON, J. — The Chancellor did not err in refusing to dismiss the bill for want of equity. In its form, structure and matter, it is not alone a bill to enjoin a judgment at law; but it contains allegations on which it seeks relief, that could only be sought in, and extended by a court of equity. On this motion all the allegations of the bill are admitted to be true. These assert, in terms or effect, that the deed from MePhail to Cowart and Bryan, though absolute on its face, was intended by the parties to operate as a mortgage, and one object of the bill is to have it so declared, and to obtain a decree of foreclosure. A court of equity is the only forum which can hear and determine such matters, and having jurisdiction for this purpose, it may rightly take it for the purpose of doing complete justice between the parties; and, if, to accomplish this end, and to prevent oppression and injustice, an injunction was necessary, it would not hesitate to grant one. This case is wholly different, when viewed in all its aspects, from that large class of cases to which we are cited by the counsel for the plaintiffs in error, and which determine the rules that govern the conduct of the Chancellor, in granting injunctions to judgments at law, for the purpose of enabling the defendant to wage, in equity, a legal defence, which he had been prevented from setting up on the trial at law by fraud, or accident, or the act of the opposite party, unmixed with any faxdt or negligence of his own. But it is contended, that the right to come into a court of equity, for the purpose of showing that a deed, absolute on face, was intended to operate only as a mortgage, is confined exclusively to the grantor. That such is the character of nearly all the cases with which the books abound, I readily admit, and this, for the obvious reason, that in such transactions the hardships, if any exist, generally fall on the grantor. But I can see no good reason why the grantee, if he desires to do so, may not become the actor. The agreement by which the absolute terms of the deed are to be controlled, is mutual, and to deny either party the right of seeking to enforce it would destroy that mutuality. [102] Again, it is not uncommon for men to lend money on securities, of which, they do not wish to become the permanent owners. They may be ample to indemnify, and exceed in value the sum advanced upon them, still, the lender may not desire to make a permanent investment in them; and I know no rule of law which will authorize the borrower to force him to do so, contrary to their agreement, and such would be the effect of the rule contended for. Such securities may depreciate in value, and though once sufficient, they may, by the fluctuations of trade, become wholly inadequate as an indemnity before the law day of the mortgage arrives. The loss thus resulting should not be thrown on the lender, when he had protected himself against it by the terms of his agreement with the borrower; and unless he is allowed to become the actor, such would be the inevitable result. In nearly all cases of loans upon mortgage securities, or securities in the nature of a mortgage, the object of the lender is to make a profit by the use of his money, and when, by his agreement, he becomes the holder of the legal estate in the thing trans ferred, and engrafts upon it a secret trust in favor of the borrower, there is no rule of law, within my knowledge, which denies him the right, after the time agreed on for the repayment of the money has passed, to come into a court of chancery to foreclose the borrower’s equity of redemption, and discharge himself from the responsibilities of the trust. In the case und&r consideration, no other conclusion can be drawn from the allegations of the bill, than, that Cowart was willing to loan his money on the security of the house and lot, but that he was unwilling to invest it permanently in such property. On this state of facts, he has a clear and unquestionable right to appeal to a court of chancery to establish his agreement, and when he makes out his case, by sufficient proof, to foreclose the deed as a mortgage, and to discharge himself from the trust in favor of MePhail. The latter will not be allowed, in fraud of his agreement, to make him the unwilling owner of an estate, which he neither agreed to purchase nor desired to own; and to change his own character from that of an obliged money-borrower, to that of a vendor of real estate who has only received his purchase money. Yet such would be the effect of allowing the motion to dismiss, for the cause last examined. [103] 2. We will next examine whether the case made by the bill is sustained by the pleadings and proof. Before, however, we enter upon an examination of the facts, let us advert to such of the general rules of law, as, by the almost universal judgment of the courts, govern in cases in which an absolute deed is set up as a mortgage. In Freeman v. Baldwin, 13 Ala. 246, in which an absolute bill of sale, accompanied by a defeasance, formed the basis of the litigation, this court held, that the deed and defeasance must be shown to be contemporaneous acts, so as to form one transaction, one agreement. See also, 2 John. Chy. Rep. 189; 2 Greenleaf’s Rep. 152; 12 Mass. 456. If the deed be made at one time, and the defeasance at another, and the latter is unsupported by any new consideration, it is nudum pactum, and no rights can arise under it. Another rule is, that, in ascertaining whether an absolute deed was intended as a mortgage or a conditional sale, parol proof of the intention of the parties at the time of its excution may be received. Hudson v. Isbell, 5 S. & P. 67; English v. Lane, 1 Por. 328; Turnipseed v. Cunningham, 16 A. R. 501. It is also held, that to enable the court to declare an absolute deed to be a mortgage, the proof must be clear and convincing. Loose declarations of trust, especially after great lapse of time, will not be allowed to overturn, or affect the written contract of the parties. Freeman v. Baldwin, supra. In referring to the authorities to sustain the rules above laid down, I have confined myself mainly to those which are found in our own court: an extensive examination, however, of those to be found in the decisions of other courts, has satisfied my mind that they may be considered, as of general, if not of universal application, where trusts of this kind'are allowed to be set up against the express terms of a deed. Let us apply them to the case under consideration, and by their direction, aided by such other rules of law and practice as must control the case, examine the complainant’s right to the relief he seeks by his bill. The answers of both the defendants deny, in express terms, that the deed was ever intended as a mortgage. It is a familiar rule in chancery proceedings, that where the answer de104 ibes tbe allegations of tbe bill, upon tbe knowledge of tbe respondent, it must prevail, unless it is disproved by tbe testimony of one witness, with strong corroborating circumstances, or two positive witnesses. These witnesses must not only be credible, but their opportunities of knowing tbe facts about which they depose must be ample. And in cases like tbe present, those facts must be shown to have existed at tbe time tbe deed was made, so as to render them contemporaneous with its execution, and a part of tbe agreement out of which it sprung. To persons present when tbe deed was made, and who became subscribing witnesses, we would most reasonably look for an intelligent and truthful account of what occurred at tbe time of its execution. When there are such persons in existence, and they are not produced to prove what transpired when it was made, tbe fair presumption is, that their testimony would militate against him whose case they could sustain or destroy. This failure alone, in tbe eye of tbe law, casts a shade of suspicion over tbe ■ cause of tbe complainant, and will induce the court to regard with more jealousy, and examine with stricter scrutiny, tbe less convincing proof on which be relies. To this deed there are two subscribing witnesses, and no reason is given why their testimony Avas not produced at tbe bearing. We must, then, resort to tbe deed itself, and tbe answers of tbe two defendants, as tbe best exponents of tbe intention of tbe parties. These correspond perfectly with each other, and directly contradict tbe allegations of tbe bill. All tbe witnesses who testify of conversations with the defendants to tbe bill, with tbe exception of Browder, speak of conversations which occurred from two to four years after tbe transaction, and it .may be remarked, that none of these conversations appears to have been held under such circumstances as would entitle them to any grave consideration, or with persons to whom it would be likely tbe parties would make a very free communication of their private affairs. I say this, because none of tbe witnesses testify that tbe relations between themselves and tbe party with whom they conversed, amounted to more than ordinary acquaintanceship; nor do they show that they were creditors, who were inquiring into tbe condition of their debtor, and upon whose memories all [105] that was said upon the subject of property, would be likely to impress itself deeply. These conversations, then, and the admissions contained in them, may be regarded as little, if indeed they amount to any thing, more than loose declarations of the party making them; arad certainly the}r do not rise to the dignity of that clear and convincing parol proof which is allowed to control the written contract of the parties. Nelson, the first witness examined in behalf of the complainant, deposes, that, “ in 1842,” (four years after the deed was made,) '‘he heard Bryan say, that he and Cowart had kept McPhail’s house from being sold, and that they held the house in their own names.” McIntyre says, that “in June, 1841, (more than three years after the date of the deed,) McPhail told him, he was paying interest on $2,200, which Cowart and Bryan had advanced for him on the brick house in Irwinton, and that the rent of the house would soon pay it up; that Cowart and Bryan had a mortgage on the house." Browder says, that, “ in the spring of 1888,” (the deed is dated in February of this year,) “Bryan applied to him to borrow money for McPhail; that he had none to lend at that time; and a few months afterwards, Bryan, in reply to a question asked by Avitness, told him that he had got the money from Cowart, and had saved McPhaü’s propertj'-, and Avitness thinks, he said, he had taken the title in his own name.” These are all the admissions of Bryan and McPhail, relied on by the defendant in error, to show that the deed was intended as a mortgage. To this may be added the fact, that McPhail lived in the house himself, and rented some of the rooms to others, from whom he received the rent; and the further fact, that Bryan did not sue on the note for nearly six years, and at one time said, “ there was a secret about it,” and at another declared “that he and Cowart had made friends, and when he destroyed a note Avhich he held on Cowart, Avhich he intended to do that evening, every thing Avould be right.” But little importance can be attached to the fact of McPhail’s possessing and renting the premises, when we read the deposition of the Avitness Thomas, who says, that, in 1845, he went to Cowart to rent one of the rooms of the house, Avhen Cow-art told him that McPhail Avas his agent to rent the house, to whom witness applied, and from whom, as such agent, he [106] rented, the room bo desired. The declarations of Bryan arc too enigmatical and uncertain to entitle them to much weight. From the former, it would be rashness to infer that the “ secret” could only relate to the existence of the trust in him and Cowart-, in favor of McPhail; and the latter may as well point to the note of Cowart, which he paid to Eoberts, as to the note in dispute. These things give but little strength to the insufficient proof before recited. Allow to the proof of the defendant in error all the force to which it is entitled, it does not equal the testimony of one positive witness, who knew the agreement between the parties; and yet, under the rule of evidence which we have cited as governing this ease, the testimony of such a witness would not prevail against the answers, unless aided by pregnant circumstances, or the proof of another witness. From this review of the facts and law of the case, it is clear, the decree of the Chancellor on this branch of the case cannot be sustained. All tbc other defences urged in the argument against the collection of the note on which the judgment is founded, are of a character purely legal, and as the defendant in error has failed to make out the only ground for relief which gave a court of equity jurisdiction of his case, the bill cannot be retained on account of the other grounds of relief, even if the proof sustained them; which, in our opinion, is not the case. It only remains to add, that the decree of the Chancellor is reversed, and decree is here rendered dismissing the bill, at the cost of the defendant in error, both in this court, and the court below.