Matheney v. Sandford

Green, Judge: The first question arising on the record is : Was the deed of August 17, 1883, executed by Wm. H. Matheney and wife to John P. Sandford conveying a tract of land in Jackson county, West Virginia in consideration of a debt due from the grantor to the grantee, amounting principle, interest and costs to about $2,400.00 though absolute on its face really and in fact a mortagage to secure this debt? This Court has decided that “if the proof offered to establish, that a deed absolute on its face was intended to secure a loan of money and was therefore a mortgage, consists only of the parol declarations of the parties, such proof in order to prevail must be clear and strong, if it be unaided by proof of the situation and circumstances of the parties, and their conduct prior to, at the time of or after the execution of the deed. The following circumstauces and facts have great weight in leading a court to the conclusion, that a deed absolute on its face is merely a mortgage: First, that the grantor was hard pressed for money, and that the grantee was a known money-lender; second, that the actual execution of the deed was procured by a negotiation for a loan of money by the grantee to the grantor; third, that the parties did not apparently consider or contemplate the quantity or value of the land; fourth, tliatthe price professedly given for the land on the face of the deed was grossly inadequate; fifth, that the possession of the land has remained with the grantor, whether rent be nominally reserved or not; and if no rent is even professedly reserved this last circumstance is entitled to great weight.” See Vandergilder v. Hoffman, 22 W. Va. 2, syl. point 7; Davis, Committee v. Deming, 12 W. Va. 281; — 400 — Dubois et al v. Lawrence et al, 16 W. Va. 443; Klinck v. Price, 4 W. Va. 4. It was also decided in Vandergilder v. Hoffman, that “if upon the parol evidence it is doubtful, whether the conveyance should he regarded by a court of equity as an absolute deed or a mortgage to secure alien, the courts incline to hold it to be a mortgage.” If in the case before us we look to the parol evidence, “it is not doubtful whether this conveyance was intended by the parties asan absolute deed or mortgage.” The evidence distinctly shows, that, when this deed was delivered, it was clearly understood by the grantor, that it was to be regarded as an absolute deed and not as a mortgage, and it was distinctly understood, that this deed would not be received, unless it was delivered and to be regarded by the parties as an absolute deed. It is true, that if the court could see from the circumstances surrounding the parties, when the deed was executed, that the real transaction was a loan of money by the grantee to the grantor or an agreement on his part to postpone the enforcement of his debt, it it should be secured by alien on the grantor’s land, then despite the form of the deed and despite the fact, that witnesses were called to prove that it was delivered as an absolute deed and not as a mortgage, it would nevertheless be declared a mortgage by the courts. For, if the circumstances show, that the transaction is such, as is above described, it would establish an equity in the grantor superior not only to the terms of the deed but to the distinct understanding; for it being shown by these circumstances that the transaction was really a mortgage, it is against the policy of the law to allow such mortgage to be irredeemable, though it be ever so distinctly understood by the parties that it should be irredeemable; just as it is against the policy of the law to allow the creation of inalienable estates; and such estates can not therefore be created by any terms however clearly expressed in the deed, and though the parol proof be ever so distinct at the time the deed was delivered, that this was the express purpose and understanding of the parties. This is a necessary conclusion from what is said in Vandergilder v. Hoffman, 22 W. Va. 16; and by Field, judge, in Pierce v. Robinson, 13 Cal. 116. — 401 — But the circumstances surrounding the parties, when this deed of August 17, 1883 was made, show beyond all controversy or dispute, that the real transaction was not and could not have been a loan and was not and could not have been an agreement or understanding express or implied on the part of the grantee, that ho would postpone the enforcement of the debt, if the grantor would secure it by a lien on his land. There is no pretence, that any money was loaned by Band-ford to Matheney in August, 1883, or that there was at that time any application or negotiation between the parties in reference to any loan. Nor had there been any proposition for such loan or any such loan made by these parties for more than two years before this deed of August 17, 1883, was executed. The first and second circumstances named in the seventh point of the syllabus in Vandergilder v. Hoffman do not exist in this case. It is absolutely immaterial whether Sand-ford was or was not a known money-lender, as the actual execution of this deed was not proceeded by. any negotiations for a loan by the grantee to the grantor. Ho such negotiation had taken place between the parties for more than,two years. It is equally obvious from the circumstances admitted as surrounding the parties, when this deed was executed, that the real transaction was not and could not possibly have been an agreement or understanding express or implied that Sand-ford would postpone the enforcement of his debt, which Ma-theney had owed him for a year without the payment of a cent of principal or interest, provided Matheney would give him alien on his land. The admitted fact was, that, when the debt was incurred, about two years before the date of this deed, Matheney had secured this debt, the only one he owed Sandford, by giving him alien on this identical tract of land. He had given this lien in the form most desirable, a form in which the land could be sold and the proceeds applied to the payment of the debt without applying to any court and upon the mere request of Sandford. Matheney’s wife had united in this lien, so as to convey her right of dower. The form in which this lien was given, a deed of trust, was far preferable, so far as Sandford was concerned, to a mortgage or any other form of lien; for any other form of lien would have required Sandford to institute a suit in equity before he could — 402 — subject the land to the payment of his debt; while under his deed of trust he could at any time require the trustee to sell after advertising the tract of land for sale. And on August 17,1883, when this deed was made, this advertisement had been made, and Sandford could have had this tract of land without any delay sold and the proceeds applied to the payment of his debt, or he could, if he had chosen, have had the sale postponed. Under these circumstances it seems impossible to conceive, that there could have been an understanding, expressed or implied, that Sandford would postpone the enforcement of his debt, if Matheney would give him a mortgage on this tract of land. Of what possible use could the mortgage be to Sandford ? Why should he desire to substitute a form of security on this tract of land, which he could only enforce by a suit in equity, for a form of security, which he already had, which he could enforce at any time at his pleasure, which he could have enforced, if he chose, that vei’y day. It would be almost impossible to induce one by any parol proof to believe, that Sandford could have done an act so entirely senseless. The parol proof of those who witnessed the delivery of the deed, is clear and emphatic, that he did not do the foolish thing of taking a mortgage in lieu of a deed of trust covering the same property, which he could have enforced at any time, even on that day. But such proof was under the circumstances entirely unnecessary. The court could not under these circumstances consider a deed absolute on its face as a mortgage. Under such circumstances the fact, that the grantor in this deed was hard pressed for money, or that the grantee had permitted the possession of the land to remain with the grantor, whether rent was reserved for the land or not, would be utterly insignificant. In this particular case the fact, that he remained in possession of the land, is accounted for by the fact, that some two weeks after this deed was executed to Sandford, he gave to Matheney an option to purchase this land within ninety days. When he did not then surrender the land, within less than three months he employed a lawyer to institute proceedings to oust him. How utterly vain is it under the circumstances to attempt to prove, that Sandford ever regarded this deed as a mortgage. There can not be a — 403 — doubt, that neither he nor Matheney ever so regarded it. This deed beyond controversy was not only intended and regarded by both parties always as an absolute deed and not as a mortgage, but the transaction, out of which it arose, demonstrates that it really was not a mortgage in fact,, which the parties were endeavoring to conceal by putting the deed in the form of an absolute deed. The circuit court was therefore clearly right, when in its decree of March 10, 1885, it declared, that this deed from Matheney and wife to Sandford was not a mortgage. But it seems tome the circuit court erred, when it expressed the opinion “from a careful examination of the record in this cause, that at the time when the alleged sale and transfer of the land from the plaintiff to defendant Sandford was made, said Riley sustained such a fiduciary relation to the said plaintiff, and to the subject-matter of said alleged sale and transfer, that he could not legally become the purchaser, or act in the purchase of said property in the manner set out in the said record for his co-defendant, and that this sale and transfer may therefore be avoided at the instance of the plaintiff.” The decree on these grounds at the request of the plaintiff set aside and annulled this deed, and the injunction awarded against Sandford for thus proceeding on the common law side of the court to recover possession in this court was perpetuated, and the costs of this suit were decreed against said Sandford. I can see no just grounds for these conclusions or for these portions of said decree. It assumes justly, that Sandford, though he had a deed of trust on this land, had a perfect right to purchase it of Matheney, but that in making this purchase Riley, the trustee, could not legally act as his agent. Is this sound law, or has the court below taken a correct view of the facts ? The counsel for the appellant insists to use his own language that: “There is a stubborn rule of equity founded upon the most solid reasoning and supported by public policy, that a trustee can not become a purchaser of the trust-estate. He can not be at once vendor and vendee. He can not represent in himselt two opposite and'conflicting interests. As vendor he must desire to sell as high, and as purchaser to buy as low, as possible; and the law has wisely — 404 — prohibited any person from assuming such dangerous and incompatable characters.” A large number of authorities are cited to sustain this position. And to the cases, which counsel cites, I would add Newcombs et al. v. Brooks et al. 16 W. Va. 32, syl. points 1 and 2. In this case the Court went still further and held : “First. — A person who occupies any fiduciary relation to another, is bound not to exercise it for his own benefit and to the prejudice of the party, to whom he stands in such relation, any of the powers or rights or any knowledge or advantage of any description, which he derives from such confidential relation.” “Second. — A purchase by a fiduciai’y, while actually holding a fiduciary relation of the trust property either of himself, or of the party to whom he holds such fiduciary relation, is voidable at the option of the party to whom he stands in such relation, although the fiduciary may have given an adequate price for the property and gained no advantage whatever.” It is true the amended bill charged “that the said Rilej' vdthout the knowledge and consent of the plaintift and against his interest has acquired a personal interest to himself the said Riley in the land in controversy.” But this allegation is denied and there is not in the record one particle of evidence to sustain it. Had it been true, that the trustee, Riley, had acquired any interest in the land conveyed by Matheney to Sandford, August 17, 1885, by this conveyance, and especially if he had had a secret interest in this purchase unknown to the grantor, Matheney, as is intimated by this charge in the bill, then there could be no doubt, but. that on the authority of Newcombs et al. v. Brooks et al. this deed could properly he set aside by the court below at the option of Matheney the grantor. But as he had no interest whatever in the purchase ot the land, and as in the sale and conveyance of August 17, 1885, he was neither vendor nor vendee, neither the law as laid down by the counsel above quoted nor the law as laid down in Newcombs et al. v. Brooks et al. is applicable to the case before us. But it is insisted by the counsel of the appellant, that, where a person because of his being a trustee cannot purchase — 405 — the estate himself even from his cestui-que trust, he can not buy it as the agent of any other person ; and to sustain this position he refers to Michael v. Good, 4 How. 503; Ex parte Bennet, 10 Ves. 381; Coles v. Trecothich, 9 Ves. 325; 3 Waite’s Actions and Defences 467; North Baltimore Building Association v. Calwell, 25 Md. 420; Beeson v. Beeson, 9 Bens. Stat. (Barr) 279; Terwilliger v. Brown, 39 Barb. 1; Same 44 N. Y. 237. I have examined these authorities, so far as they are accessible to me. And while some of them do not properly bear on the subject, and I can not say, that it would be proper to deduce this doctrine from them, yet certainly some of them give strong countenance to this doctrine; and very strong reasons may be given in support of it. I am not, with the opportunities I now have, willing to lay down this rule so broadly, or to say that there should be no exceptions to it; but I do not find it necessary to determine definitely the law with reference to this subject, because in my judgment the question does not arise in this case. I may for argument’s sake admit, that no trustee, who has authority conferred on him to sell property, can properly buy such property for himself, nor can he while such trustee acting as the agent of any other person purchase this trust-property of the cestui que trust or person who appointed him trustee to sell such property. If this be law, it is inapplicable to the facts proven in this case. Sandford had conferred on Riley no authority whatever in reference to the purchase of this land excepting the simple authority to set it up at the public sale to be made by Riley at a sum sufficient to pay his debt, interest and the costs of executing the trust, which sum would have been about $2,400.00. Riley accordingly set the land up at that price some time prior to August 17, 1883; and the public sale at the solicitation of Matheney, the debtor, was continued from time to time till August 16, 1883, at which time there was bid for said tract of land by a responsible bidder $3,000.00. The power therefore conferred on Riley to act as agent for Sandford (if it is properly to be regarded as a power to act as agent) had ceased to have any existence prior to August 16, 1883, haviug ceased to have any existence after a bid had been made at the public sale of a larger amount than $2,400.00, Sandford’s bid. So that on August 17, when the — 406 — deed the subject of controversy was executed, Riley, the trustee, was not the agent of Sandford to purchase this land at the public sale or otherwise. There is no pretence that he ever had any authority from Sandford to purchase this land for him of Matheney. When therefore he drew the deed on August .16, 1883, from Matheney and wife conveying this land in consideration of this debt, interest and costs amounting to about $2,400.00 to Sandford, he was acting solely as the agent of Matheney and at his request. Sandford not having till some days afterwards any knowledge that such purchase was contemplated, when this deed was executed by Matheney and wife and handed to Riley the trustee the next day, he was not the agent of Sandford to accept this deed, Sandford never having authorized him to accept this or any other deed from Mtaheney, and not in fact knowing that Matheney contemplated making such deed. Of course this deed was totally inoperative, till it was assented to by Sand-ford several days afterwards. Riley the trustee with the approval of Matheney but without the knowledge of Sand-ford, who was not there, when this deed was handed to Riley by Matheney, withdrew the property from sale publicly believing that Sandford would be satisfied with this deed. His only reason for so thinking was the fact that Sandford had authorized him to set up this land at his bid of $2,400.00. From that he concluded that Sandford would be willing to take a deed from Matheney conveying the land to him for this amount to be applied in satisfaction of his debt. It seems in this he was right, as when this transaction was made known to Sandford a few days afterwards, he assented to it. He seems to have preferred to take the land at that price rather than to get only about one third of his debt and wait for the balance for one and two years, which would have been the result, if he had declined to accept this deed. On this state of facts there is no propriety in saying, that this land was purchased of Matheney by Riley, the trustee, acting as agent for Sandford; and therefore the rule of law, which as a matter of public policy according to the views of. the attorney for the appellant forbids a trustee to act as agent for any one in purchasing the trust-property of the cestui que trust, has no application to the facts in this case. — 407 — A number of matters have been argued by the counsel for the appellee and many authorities cited which seem to me to be entirely foreign to this cause. For instance, it is contended, that the statute-law of Ohio, which shows that there was no usury in the promissory note executed by Matheney to Sandford and secured by the deed of trust on his tract was not properly proven — and many authorities were cited to sustain that position. In this State the court takes judicial notice of the statutory and of other laws of all other States or countries by express statutory-law. (Sec. 4 of ch. 13 of Code.) Of course it was entirely unnecessary to prove in this cause the law of Ohio whether statutory or otherwise. The courts in this State know the Ohio law without any proof. The deed of August 17, 1883 recites the consideration therefor as “a debt due from the parties of the first part to the party of the second part, amounting principal, interest and costs to about $2,400.00.” It is insisted that excluding all commissions to the trustee it only amounted to $2,345.35. This is claimed to have been a great wrong inflicted on the plaintiff Matheney by Filey the trustee. Now the consideration of this deed was “the debt, interest and costs due from Matheney to Sandford” and not $2,400.00; and Matheney suffered no wrong, if the supposed amount of this debt, interest and costs as stated in the deed was erroneous. The acceptance of this deed by Sandford was a satisfaction in full of this debt, interest and costs, and this is all it would have been if the supposed amount, which should have been stated, was, as plaintiff’s counsel claimed, $2,345.35. It is claimed too, that Filey, trustee, violated his duty as trustee grossly in accepting this deed from Matheney in consideration of $2,400.00, when at that very time he was offered at the public gale $3,200.00 for the land from a responsible party. But in fact Filey, the trustee, did not in a legal point of view accept this deed. His receiving it from the hands of Matheney, as we have seen, did not make it operative. All he really did on August 17, 1885, which had any legal effect, was simply withdrawing the land from public sale, which was done at the request and with the approval of Matheney. It is argued at much length by the appellee’s counsel, that — 408 — Riley, the trustee, was bound to act in his character of trustee with entire impartiality between Sandford and Matheney, to both of whom he held a trust-relation, and this being the case he was bound to act as the agent of both parties in such a way, as would promote the interest of both, and not be prejudicial to the rights oí either. A very large number of authorities are cited to support this position and among them the Anchor Stooe Works v. James Gray et al., 9 W. Va. 469. Rut all this is not only foreign to this cause, but it it had been the enquiry directly involved in the cause, the evidence shows that the trustee, Riley, has not violated his duty by acting in a partial manner nor abused his position as trustee by regarding solely the interest of Sandford and utterly disregarding the rights and interest of Matheney. The fact that he received from the hands of Matheney this deed of August 17,1883, conveying his land to Sandford for$2,400.00, when he knew he could get for it at least $3,200 is relied pn as showing this undue partiality. But this he did not do in his capacity of trustee and did it only on the solicitation of Matheney, who after mature consideration concluded, that his interest would be thereby' promoted. Riley was unwilling to do this and before doing it represented to Matheney, that he might loose several hundred dollars by doing it. .But Matheney believing that Sandford did not want this farm in West Virginia, which was in a very poor condition, and which he could not well keep or cultivate, as he lived in Ohio, and could not probably sell in any reasonable time because it was of so unsaleable a character, concluded that if he could raise money in a short time, as he believed he could, Sandford would sell this farm to him at a small advance on what he paid for it, and he would thus be able to put himself in a better condition in a few months than he would be, if he permitted the farm to be sold at a low price to some other person in Jackson county, West Virginia, who would not resell it to him. Doubtless in making this conclusion ho was influenced by the belief, that Sandford in re-selling the farm to him, would do so on liberal terms, as in his conduct toward him, Sanford had acted with great liberality theretofore. After once ordering this land to be sold by his trustee, in the spring of 1883, Sandford at his request had recalled the order, — 409 — and after having waited nearly a year without the payment of even the interest due or any part of it, and having a second time ordered the sale of the property by the trustee, Sand-ford had approved of the repeated postponements of the sale by the trustee for Matheney’s accommodation. Under these circumstances Matheney believed, that if he could raise the money to re-purchase this land in a short time, as he thought he could, Sandford would sell it to- him at a small advance above what he proposed to sell it to Sandford for. In these conclusions Matheney was-only mistaken in his ability to raise money to re-purchase this farm in a short time. He was not mistaken in supposing, that Sandford would re-sell to him at a small advance; for on September 1,1883, only two weeks after Sandford purchased the land he gave to Ma-theney the refusal of re-purchasing it at a small advance of from $100.00 to $300.00 according to the length of time which this right to take this laud was extended to Matheney. It is further said by the counsel for the appellee that Riley was guilty of a breach of trust in bringing on a sale of the land when it could not be sold to advantage. But Riley had as trustee no discretion as to the time, when he should offer the land for sale; for Matheney by his deed of trust had declared it to be his duty to sell this tract, if he failed to pay this debt when due, whenever he was required to do so by Sandford, and Riley was required so to do before he advertised the land for sale. ITis only discretion was, that, if at the sale he could not obtain any reasonable price for the land, and there was any probability of getting any better price for it, he might postpone the sale to another time. In the exercise of this discretion Riley did postpone the sale to a future day several times, and by so doing the price offered for the laud was raised from $2,400.00 to $3,200.00. In all this I can see no disposition on the part of the trustee to disregard the rights and interest of Matheney or to act with partiality. Again it is complained, that in this suit as well as in the action of unlawful detainer and in the ejectment suit Riley has acted as counsel for Sandford. And one of the frivolous objections to the answer of -Sandford by the plaintiff below was that Riley had no right to act as such counsel for Sand-ford. What possible objection could there be to his so — 410 — doing. He never acted as counsel for Sandford in these cases or indeed in any business transaction whatever, while he was such trustee; for after August 17, 1888, when the trust-subject was sold, of course Riley ceased to be a trustee. In fact before August 17, 1883 Riley had acted in other matters as counsel for Matheney but never as counsel for Sandford. Many authorities are cited to show, that a trustee can not properly act as counsel for one of the cestui que trust against the other. But they are entirely irrelevant in this case. So far as the record discloses, Riley has acted fairly and impartially as trustee. The last objection urged is, that the deed of August 17, 1883, ought to be set aside for gross inadequacy of price. We have seen, that in this case there is no evidence tending to impeach the fairness of this sale, the vendor was perfectly well acquainted with the farm he sold having lived on it for years. The vendee on the other hand lived in another State and was in all probability unacquainted with the farm personally, and all the information he had about it was derived from the statements of others in all likelihood. The vendee gave for the land a larger price than he would have been willing to give for it except for the fact, that by buying this farm he hoped to settle a debt, the collection oi which annoyed him. He was doubtless willing, at the time he purchased it, to have resold it at least to the vendor for the price he gave for it, for within two weeks after he purchased it, he offered it to him at an advance of only $100.00, if he would pay for it within thirty days. The land was probably worth intrinsically between $4,000.00 and $5,000.00; but it was in a very bad condition, and in addition to that there was then a general depression in the price of lands in Jacksen county as shown by the evidence. So that it would have been probably very difficult if not impossible.then to have found a purchaser for this laud in any reasonable time at a price exceeding $3,500.00. A strenuous effort had been made to sell it just before, and the highest price offered for it was $3,200.00. Underthesecircumstancesthissaleoughtnottobe set aside for gross inadequacy of price. This Court decided in Burford el at. v. McConnihay, 15 W. Va. 433, syll. point 3, that “there being no evidence tending to impeach the fairness — 411 — of a sale it can not be set aside for inadequacy of price, unless it be so inadequate as to justify the presumption of fraud, and to justify such presumption from inadequacy alone, it must be so strong and manifest an inadequacy as to shock the conscience and confound the judgment of a man of common sense. Half the estimated value of such, property is not such an inadequacy.” There is another position taken by appellee’s counsel which I deem proper to notice, though in my judgment it is entirely foreign to this cause. It is insisted, that as the legal title to this land was in the trustee, Rile}’, on August 17, 1883, the deed by Matheney to Sandford executed that day could convey only his equity of redemption, and that therefore Sandford on such a title could sustain neither an action of ejectment nor a writ of unlawful detainer; and very many authorities are cited to sustain this position. It strikes me that counsel have omitted to bear in mind in this argument, that the effect of the acceptance by Sandford of this deed of Mathe-ney to him was to extinguish his debt against Matheney, which was the only debt secured by the deed of trust which invested Riley with the legal title to this land. But I decline to examine the authorities cited on this subject by the counsel for the appellee or to consider whether what I have just above named would effect this question, as it seems to me, that the question is obviously entirely foreign to this cause. If it be true, that Sandford can in a court of common law for this reason sustain neither an action of ejectment nor a writ of unlawful detainer against Matheney to obtain possession of this tract of land, instead of being a reason for sustaining a decree perpetually enjoining such a suit in the .common law court, it would be a strong reason why a court of equity should not grant or perpetuate such an injunction. For if the plaintiff has a complete and perfect defence to this action of unlawful detainer at common law, as is here contended, he would have no right for that cause only to come into a court of equity asking such injunction; for if the ap-pellee’s comisel be right in this position, he has no need of. equitable relief having a perfect common law defence. My conclusion therefore is, that the decree of the circuit court of Jackson of March 10, 1885, must be set aside, re — 412 — versed and annulled; and the appellant must recover of the appellee, W m. JEL Matheney, his costs in this Court expended; and this Court rendering such decree, as the circuit court ought to have rendered, must dissolve the injunction granted and dismiss the bill and amended bills of the plaintifl, ¥m. H. Matheney, in the circuit court of Jackson and decree, that the defendants below, John P. Sandford and John H. Riley, recover of William H. Matheney their costs severally expended in the circuit court of Jackson. Reversed. Dismissed.