CADMA1'I

v. v.

PETER.

868

CADMAN

PETER.

(Circuit Oourt, W. D. Michigan, 8. D. June 10, HI82.)
CoNVEYANCE-MORTGAGE BACK-ABSOLUTE DEED.

A conveyance of land by a deed absolute on its face for the expressed conSIderatIOn of $20,000, in notes of the grantee, which were recelved by the grantor,-the grantee giving back a mortgage of the same date as the deed t<> secure the payment of the notes given for the purchase prjce paid, and accepted by the grantor,-is an absolute deed and not a mortgage.

In Equity. Charle8 F. Burton and C. I. Walker, for complainant. Harri80n Geer and Ashley PaM, for defendant. WITHEY, D. J. The bill of complaint seeks to give to a. deed the effect of a mortgage. In 1872 complainant borrowed of defendant his two promissory notes, payable to the order of Cadman at 90 days, for $5,000 each. They were renewed by defendant from time to time for the accommodation of complainant. The last renewal was between the fifteenth and twentieth of October, 1875, for the same time. On the twenty-fifth of October, the bill states, defendant agreed to loan to complainant the additional sum of $20,000, by the notes of defendant payable at four and six months, and take a deed of 5,400 acres of land in Newaygo county, owned by complainant, of the esti. mated value of upwards of $40,000, as security for the payment of both sums, $10,000 and $20,000. The deed, absolute in form, was executed by complainant and wife, and delivered to defendant on the day last named, and at the same time defendant gave his notes to complainant for $20,000, the consideration nttmed in the deed. The bill of complaint states the- balance of the agreement as follows:
.. Peter was to hold said land until such time as it might be sold at a profit, or for a greater sum than could be then realized, and when such time should possible, and out come was to sell said land in the most advantageous of the proceeds pay himself the said sums of $10,000 and $20,000, and interest and the taxes, and divide the surplus, if any."

The prayer is for an accounting, that the deed may be found to be ttn equitable mortgage, and that complainant may redeem. The answer denies the agreement to loan $20,000; denies that thi;! deed was given as security; and states that defendant purchased the land from complainant for the consideration of $20,000, for which Bum he gave his notes,and long since paid them. The answer denies that complainant has any interest whatever in the land, legal or

864

FEDERAL REPORTER.

equitable, and says that oomplainant has not stated in his bill of complaint a cause of aotion. Complainant wall, at the time of the alleged agreement, oashier in a bank in Detroit, and Peter was a lumber dealer in Toledo. The case is an important one to the parties, and has been care· fully considered as to the legal questions and the facts presented by the record. The first oonsidetation relates to the nature of the transaction,..-whether the bill states a case which turns the deed into a mortgltge, or mere security. Wherever there is a mortgage there is a right in the mortgagor or grantor to redeem the thing mortgaged. It need not be expressed, for the right to redeem will be implied wherever it is shown that property is transferred or pledged as security, unless the nature of the agreement forbids suoh implication. The agreement, set out in the bill of oomplaint and testified to by oomplainant, is, in effect, that Peter should take a deed of the land, effect a sale, and pay to Cadman one-half of the prooeeds after deducting the purchase price or consideration, $30,000, and the taxes and interest. Suoh an agreement is inconsistent with the right to redeem. Peter, by the agreement, was entitled to hold the land until sold by him, and then share in any profit he might obtain; rights wholly inconsistent 'With the idea that Cadman could redeem. This being the agreement of the parties, allowing it to be valid, the deed cannot be turned into a mortgage. Defendant's oounsel cited Baker v. Thrasher, 4 Denio, 493; Macauley v. Porter, 71 N. Y. 173. The appropriate remedy would seem to be to compel the grantee to execute his agreement whenever a sale of the land can be made at a considerable profit. If, on the other hand, f.luch agreement is obnoxious to thesectiou of the statute of frauds declaring that no ·trust concerning or .in any manner relating to land shall be created by parol, then the. agreement cannot be enforced specifically' nor employed to turn this deed into a 'security. Compo Laws 1871, § 4692. ' See S"under:;on v. Groves, 13 Rep. 364, (Law Rep. Com. PI. 234.) Emerson v. Atwater, 'I Mich. 12, cited by eomplainant's counsel, is distinguil;!hable from this case. The agreement there was that the grantee sell the land to pay the indebtedness oUhe grantor to the grantee, but the latter was to reoonvey whatever land remained unsold; and if the grantor should .pay the debt all the land was to be reeonveyed. There an express right to redeem wits reserved. . In my judglllent the agreement, if valid, would make Cadman a beneficiary .under the deed, and created a trust in Peter concerning or

CADMAN·V. PlllTEB.

865

relating to lanel, and not being in writing and properly signed is void under the statute of frauds. But, under the evidence, complainant is not, 'in my opinion, enti· tIed to relief, conceding his bill to state a good case. It is insisted for complainant, and proved, that Cadman and Peter held and had for years intimate and confidential relations; that Cadman was in great need of money, a fact known to Peter; that Cadman endeavored to effect a loan upon the land as security, and was unsuccessful, of which Peter was informed; and that Cadman had estimates of the value of the land which led him to regard it worth largely in excess of $30,000, though in July previous he had purchased" the land for about $20,000. ' Neither Cadman nor Peter.had seen the land,and pine lands were not in much demand at that time, October, 1875. It must' be said that Mr. Cadman's testimony supports' the material the bill of' complaint, and there is an item:' of testimony strongly cor· roborating,the case of the complainant.. Mr. Russell testifies'that when the parties came to him to have the deed drafted, Peter said, ih substance, that he was going to take the land as security,and let Cadman have $20,000 in addition to $10,000 he already wanted a deed so that he, Peter,couldcontrol . .On the theory that the bill. states a good case, I shQuld .regar(Hhe proof sufficient, in the absence of other and controlling testimony, to overcome the primafacie effect due to the absolute form of the although the testimony of a witness who speaks from recollection of a conversation aftedive or, yearf!, .have elapsed is often ]lot the safest evidence on Which to We of the imperfeytion of our memory,: a.nd that our we have heard said is apt to and misphLced, we have heard, stat,ements on the same subject froD:), ,differ,el1t persons. It is familiar that mere xecQllection, unai,ded \>y written. memoranweight than dum, is entitied to very much made at or about the tiniE,:"Arid the' written declarations 'of' the parties, which! shall teftlr, t'O' my mind wholly with any such statement having been made by Peter as that lle took the deed as security. I shall briefly call attention lilOwdbodme,fAtcts which control my judgment. 1. The conveyance of the land 'was by a deed, absohite on its face, for the expressedc0nsideration 'of to ovei:cometha tum it into;a mortgage, the muat effect of w btl clear and convincing beyond reasonable controV'ersy., ,;;
<

to

366
2. Peter gave back It. mortgage, to Ol:lidman of the same date as the deed to secure payment of the notes given for the purchase price named, $20,000. This mortgage was given by one party and accepted by the other; it therefore spea;ks for both of them. It may not be conclusive, but in the absence of fraud a mortgage back at the time of a conveyance ought to be nearly so, as a contemporaneous writing expressive of the intention of ,the parties. It adds to the effect of the deed as evidence that there was an absolute sale. 3. January 21st Cadman wrote to Pet.er in substance that he had drawn on the latter at one day's sight to take up one of two $5,000 notes due that day, which Cadman could not get extended by renewal. The two $5,000 notes alluded to are continuations of the accommodation paper loaned in 1872 by Peter for Cadman's benefit, and according, to Cadman's testimony were secured, together with the $20,000, by the need toPeter.Peterhfl,d forwl:lJrded new notes to enable ,Cadman to retire the .previous 'ones then about to fall and Cadman says in his letter tha;t :he had'lodged one of the new notes as collateral'to his draft. The draft directed the amount ,to be charged .to Cadman's account. Peter replied January 22d, in which he says:
"I accepted' your draft this morning. What do you think of making a draft On me at one day for $5,OOO?' 'fhis shows for itself bow my notes are Detroit. Let. me know if I must raise the money ,to pay this draft. :r want y'outo send me something to show that the two notes and this drfJ,ft
are for y01J,1:,benejlt and for yOU, to pay."

Cadman testified that it was part of the arrangement, when the deed' was'executed, that Peter wall 't&pay the said two notes. Would Peter have written in the maniler' he did if those 'notes were for him to pay and Cadman had secured him for the amount? And why should Ca.dman be asked to give something to show what Peter had no right to fask ? Cadman replied, January 24th:
"I ,am sorely mortified and grieved that this should be the case, but I am in my power. I will send you entirely powerless to aot. I will do my notes or anything Ihave."

We do not understand why Cadman should .acquiesce in Peter's demand for something to show that Cadman was to pay the paper and that it was all for his benefit; urilessCadman 80 understood the fact. This occurred only three months'after the date of the deed and alleged agreement. Again, January 30th, Cadman's pecuniary affairs had reached a ,climax, and he wrote Peter:

367
" I return your note for $5,000 berein. I cannot use it except to discredit you still more. lowe so much money outside I cannot stand the pressUre: I am ruined and penniless. I console myself in your case tbat the U1'eat bargain you, made in tbe Newaygo lands will in some great measure compensate you for tbe loss you must incur, for I cannot take care of the due early in February." . .

This acceptance was by Cadman of a draft drawn on him by Peter to pay the amount of the previous draft of Cadman on Peter at<;me day's sight, and was for $5,000. Cadman returned one of the $5,000 notes, which he did not use, and, this left outstanding of the accommodation paper the acceptance and one note, aggregating $10,000, besides the notes for $20,000 given to Cadman at the qate of the deed, and which had not yet matured. I am unable to reconcile the statements of this letter with Cadman's version of the understanding as to the purpose of the deed. He recognizes the fact that Peter had made Us, great bargain" in the land in likely to compensate in a great measure the loss Peter must incur on account of Cadman. How had Peter made f'a 'great bargain" in this land unless by a purchase of it and selling it for JIlore than it cost? If Cadman had a beneficial interest, a right to redeem, or any sort of interest in the land, or in the proceeds of any sale, would he· have made the statements of the letter? In 4istestimony he claimed the land to be worth at that time a large SUIP j.n excess of the amount he had received Peter's paper for. If the deed was understood to be security there was no reasonable ground for loss to Peter. No man of common prudence and understanding would have written such a letter while he regarded himself as the owner in equity of, or as having s, valuable beneficiary interest in, the land. A decree will be entered dismissing the billo! ,oomplaint for want of merits.

I

McCAY v.

LAMAR.

(Circuit Court, 8. D. New York.

1.

April 21, 1882,)

CoNFISCATION OD' PnOPERTy-REco'vERY OD' AVAILS-CLAIM OD' PROPORTION.

About the close of the late cIvil war a quantity of cotton was seized by the United States treasury agents aQ.d confiscated aa pronerty uaed in aid of the rebellion... Subaequentlx the owner. of the in tlfp court of claims and recovered the v,alue of the property so seized and sold, and afterwards died. After hiS death a -cla'ihl was mad6by Ii t1rlrdparty as owner