Belote v. Morrison

By the Court Flandrau, J. The complaint in substance alleges that the Plaintiff was, on the 30th day of January, 1861, seized in fee simple and possessed of certain lands. That he bargained and sold the same to Mary Morrison, and executed and delivered to her a bond for a deed, in the penal sum of five thousand dollars, by which he agreed to convey the premises to her on the payment of a note of*$2,000, executed by her and Wilson C. Morrison, on the same day with the bond, to wit, the 30th of January, 1861, and payable on or before the 26th day of May, 1861, and also on the payment of all taxes, &c., on the premises. That the Defendants have not paid the notenor the taxes; that the Defendants are insolvent; that the bond is recorded, that Mary Morrison claims an equitable interest in the land under the bond ; that the Plain tiff has executed and tendered a deed demanding payment, and asks as relief that the bond be cancelled of record, and delivered up. The answer set up that the land, on the 26th day of November, 1860, was the property of Wilson C. Morrison ; that a mortgage was upon the same, which was being foreclosed in the United States District Court, and the Defendant, Wilson 0. Morrison, could not meet the demand, bnt applied to the Plaintiff for a loan for that purpose, and they agreed that as security for the loan, the Plaintiff should purchase in the property and fake the master’s deed in his own name, and execute the bond to the Defendant, Mary Morrison, tor a sale upon the repayment of the money, both Defendants giving their note for the amount; that the deed of the master was to be held merely as security for the loan, and that this arrangement was carried into effect. The transaction is set out with great particularity and fullness, showing clearly that the same amounted to a loan, and was so intended by the parties. I merely state — 91 — ao outline in brief of the allegations of the answer. Ihe answer denies that the Plaintiff is entitled to the relief he seeks, and prays judgment for the Defendant. The answer is demurred to by the Plaintiff. Before proceeding to an examination of the question of whether the answer makes out a defence, I will state some things that do not appear in the answer. There is no allegation that the sum advanced by Belote was less than the full value of the land he purchased, nor any other circumstance or fact that shows that the Defendants would be in any way injured should the Plaintiff be allowed to retain the land, and the bond be ordered cancelled. The Defendants simply claim that the transaction, although in law is a conditional sale, is in equity a mortgage, and ask that the Plaintiff be turned out of Court. They do not aver tender of payment, or readiness or willingness to-pay the'sum due to the Plaintiff, nor do they a«k any affirmative relief whatever, but simply insist that upon the facts alleged and admitted, the Plaintiff must fail in his action, and as a consequence be driven to some other form of action for his relief. The Court below decided the demurrer well taken, upon the supposition principally, that the cases of Pross vs. Dahl, 6 Minn., 89, and Yoss vs. De Freudenrich, Id. 95, were in point and controlling. We think the Court misapprehended the effect of those decisions. In the first named case the complaint was very similar to the one in the case at bar. The Defendant demurred to it on the ground that it disclosed a mortgage. We held that it was not a mortgage, and differed widely from such an instrument. That it was a sale of the land conditioned upon the payment of a sum of money. The relation of borrower and lender had never existed between the parties, and no loan had ever been made. The complaint, therefore, was not demurrable. There can be no similarity between that case and the one at bar, where the answer sets up a series of facts showing a loan, and that the Plaintiff never was the real owner of the land he pretended to sell, but received it under an arrangement by which he was to hold it merely as security, and the answer and not the complaint is demurred to.' Had the Defendant in this case demurred to — 92 — the complaint, the case would have presented the same features as that of Pross vs. Dahl. In the case of Moss vs. Freudenrich, the complaint was in all substantial particulars similar to that in Pross vs. Dahl. The Defendant did not demur, but put in an answer which amounted to a statement that the times were so hard he could not meet his engagements, and asking delay. The answer was demurred to and held bad. It is true that in both these cases the Defendants insisted that the transactions, as alleged in the complaints, amounted in equity to mortgages, but they were in this respect mistaken, because they were in both cases clearly conditional sales, without a single element that goes to make up a mortgage. In the case at bár, however, the Defendant does not claim that the transaction, as disclosed by the complaint, is in equity a mortgage, but sets up facts affirmatively showing, as he claims, that the real agreement is not made apparent by the complaint, but by his facts alleged in the answer, and that such facts constitute a mortgage in equity. The questions in the cases commented upon and the one at bar are widely dissimilar in every respect, and the one can have no influence as authority upon the other. The Court makes no reference to the case of McClane vs. White, 5 Minn., R., 178. But the counsel for the Defendant does, and endeavors to show that the language of the Court on the subject of the admissibility of parol evidence, to show that a deed, absolute in terms, was intended as a mortgage, is too broad when applied to a Court of Equity. The evidence offered in the case of McClane vs. White, to show that the Plaintiff held the title to the land as ‘security only, although by an absolute conveyance, was shown by this Court to be immaterial, and properly rejected for that reason, because there was no allegation in the answer that the bond was received by the Plaintiff as a security only, but simply that Patrick Wha-len had sold and assigned it to him as security, this Court holding that to make such a defence good, the allegation should be full that the Plaintiff had received and accepted it as security. That to make such a transaction a mortgage security, in contradiction of the written evidence of it, the understanding must have been mutual, and not merely upon the — 93 — part of tbe Defendant, or those under whom the Defendant claimed. The Judge, who wrote the opinion, in'a further discussion of the question of when such evidence is admissible, cites with approbation the case of Webb vs. Rice, 6 Hill., 219, p. 188, as holding that “such evidence cannot be received in a court of law, nor even in a court of equity, except on the ground of fraud, mistake or surprise in making or executing the instrument,” and also the case of Stevens vs. Cooper, 1 Johns. Ch. R., 429, to the same effect, both of which cases go to the full extent claimed for them. After a careful examination of the authorities and much discussion, we are satisfied that the language used by the Judge, in McClane vs. White, on page 188 of the case, that parol evidence “ cannot be .received in a court of equity, except on the ground of fraud, mistake or surprise in making or executing the instrument,” to show that a deed, absolute on its face, was intended only as a mortgage security, is too restrictive. Courts do interfere where the fraud arises subsequent to the making or execution of the instrument, in the attempt to enforce it in a manner not authorized by the transaction, to the damage and prejudice of the grantor or mortgagor. The language was employed merely arguendo, and the point was not necessary to the decision of the case. We make these remarks in qualification of that dictum, in order that no misapprehension may result from it, but not in any way to diminish the force of the case as authority upon the points involved. It is a broad rule of equity, contained in many adjudicated eases, and all the elementary books, that when a deed, absolute upon its face, was in fact only a security for a loan, its real character may be shown by parol, and the rights of the parties adjusted according to the equities of the case. This rule, like all others, is subject to qualification by the operation of other principles equally as well understood. The reason of the rule is, to prevent lenders from taking advantage of the necessities of borrowers, by exacting contracts from which there is no redemption, in case of default to pay. This, equity will not permit, where the least advantage would — 94 — accrue from it to tbe lender, or injury to tbe borrower. Equity will also interfere where tbe written evidence of tbe transaction, through mistake or other sufficient reason, does not disclose its true features, and injury would result. There must always be some injury or damage, however, to the party complaining of the fraud or other mischance to authorize the interference of a court of equity. Mr. Story, in his Commentaries on Equity, vol. 1, sec. 203, 2d ed., speaking of actual fraud, says: “ In the next place, the party must have been misled to his prejudice or injury; for courts of equity do not, any more than courts of law, sit for the purpose of enforcing moral obligations, or correcting unconscientious acts, which are followed by no loss or damage. It has been very justly remarked that, to support an action at law for a misrepresentation, there must be a fraud committed by the Defendant, and a damage resulting from such fraud to the Plaintiff; and it has been observed with equal truth by a very learned Judge in equity, that fraud and damage coupled together, will entitle the injured party to relief in any court of justice.” I apprehend that to invoke the aid of any Court, a suitor must show that without its intervention he will sustain injury,- or in other words that he has some right to enforce, or wrong to redress. Courts will not sit to try and determine questions of merely abstract moment, where no material interests are involved. Assuming, then, that equity will interfere to declare what purports to be an absolute deed, a mere mortgage security, when such was the real nature of the transaction, we must do. so with the qualification, that such interference will only take place upon the application of a suitor who shows that without it he will sustain damage in some of his material interests. The transaction set out in the complaint is that of a conditional sale. The answer states facts, showing' it to have been of a different nature, but contains no facts which show that its enforcement, as alleged in the complaint, will work any injury to the Defendants, or be in any manner a fraud upon them which will operate to their disadvantage. It is nowhere alleged that the property is of greater value than the sum ad — 95 — vanced by the Plaintiff, or that it possesses any peculiar value to the Defendants other than its worth in money. The Counsel contends that ft would be a fraud to allow the Plaintiff to enforce it as a sal e, when it can be shown to be a mortgage. True, it may be a violation of good conscience on the part of the Plaintiff, 'to do what he agreed not to do, but we have shown that equity does not entertain such questions of moral obligation, unless material interests are involved. It is of no possible consequence to this Court whether the Plaintiff has been guilty of a fraud, unless the Defendants are in some way injured by it, and it cannot permit an investigation of the fact unless some injury will result to the Defendants from its perpetration. The Defendants are in default whether the transaction was a sale or a mortgage. The most they can ask is relief from their default, and a right to redeem the land on payment of the sum due the Plaintiff. But they ask neither; all they demand is that the Plaintiff be turned out of Court. We do not understand such to be the rule in equity, under any circumstances. When the Court obtains jurisdiction of the parties and the subject matter, it will retain it for the purpose of deciding all the equities involved, whether presented by the bill or answer. This was the rule when bills of discovery were authorized, and two distinct Courts existed. It is much more properly the practice since the consolidation of the two jurisdictions. 1 Story’s Com. on Equity, secs. 82 to 91, 438 to 440. We think the answer is fatally defective in not alleging fraud, or facts from which fraud, coupled with some injury to the Defendants, can be inferred, nor any of the grounds which call for equitable interference. The order overruling the demurrer must be affirmed. The Defendants may serve an amended answer within ten days after notice of the order to be entered upon this decision.