Davidson v. Jones , 26 Miss. 56 ( 1853 )

Mr. Justice Handy

delivered the following dissenting opinion.

The facts of this case necessary to be noticed in determining the questions of law affecting it, are briefly as follows: —

In 1839, Matthews bargained to Jones a tract of land for the sum of $2,032.50, for which Jones gave his three notes, payable in three annual instalments, and took from Matthews a bond to convey the title upon the payment of the purchase-money. In December, 1845, the notes being unpaid, Jones executed a deed in trust, in order to obtain further time for their payment, and “ to secure the payment of said debt at the expiration of eighteen months,” and this is the sole purpose of it appearing on its face. The deed conveyed certain slaves and other personal property. Afterwards, but at what time it does not distinctly appear either by the answer or the proofs, “ Jones abandoned the purchase of the land, and delivered up the title bond ” to Matthews. It is not shown what became of the notes given for the purchase-money of the land, or that they were outstanding ; and it must be presumed that they were cancelled, as the contract for the land, for which they were given, was rescinded. The answer avers, that Matthews made advances of money, and became liable for Jones, on an agreement that he should retain the title to the land agreed to be sold to Jones, and that Jones accordingly abandoned the contract for the land, as above stated. Jones states, that when he agreed to secure Matthews on the land notes, (that is to say, to execute the deed in trust,) he “ agreed that Matthews should reserve title to the land, in order to secure himself on Jones’s account.” But there is no evidence, either in the pleadings or proofs, that when the deed in trust was executed, any thing more was intended than to secure the payment of the three notes given for the purchase of the land.

At the time the trust deed was executed, the creditor Davidson had an action pending against Jones, on which he shortly thereafter obtained judgment; and, finding no property out of which to make the money, he filed this bill in equity to set aside a sale, made under the trust deed, of the slaves therein conveyed, to Matthews, after the rendition of the judgment, praying discovery and general relief. No contest is made in relation to the land, for that revested in Matthews upon the rescission of the contract of sale.

The validity of the sale to Matthews depends upon the simple question, whether the deed in trust'was in force at the time of the sale? If the debt secured by the deed was discharged, unquestionably the deed itself ceased to have any legal existence, for the debt is the principal, and the trust deed the mere incident, and the incident follows its principal and falls with it; and this is especially true as against a purchaser with notice, as Matthews was. What, then, was the debt secured by the trust deed ? It speaks for itself, and says it was the three notes given in 1839, which the pleadings and proof show were given for the purchase-money of the land. Now, when the contract for the purchase of the land was rescinded, as it clearly was, what consideration was there for the notes ? Certainly none whatever; the consideration for which they were given having been wholly cancelled. Suppose, then, that Matthews and Jones agreed, upon the cancelling of the contract for the land, that the notes should continue outstanding, (of which there is no proof,) and that'new vitality should be given them, by an agreement that they should remain as a security for other indebtedness of Jones to Matthews. This would amount in law to no more than the execution of new notes. Their original character and effect were lost by the discharge of the consideration, and they took their legal effect from the time of the new agreement and reissue. The notes secured by the deed in trust were, to all legal intents, extinguished, and the reissued notes must take their character and legal effect from the new consideration upon which they were founded; but they thereby become in law as distinct from the notes secured by the deed, as if they had been written on new paper and of different dates and amounts, and of course were deprived of all security of the trust deed.

This conclusion seems to me -unavoidable, unless it can be shown, that when the consideration of a note is annulled, it does not of itself become totally extinguished as between the parties to it. If these views be correct, the deed in trust ceased to be operative when the notes, which it was alone intended to secure, were discharged. If this were not true, it would hold out the strongest inducements to dishonesty, by permitting fraudulent debtors to keep alive satisfied mortgages, judgments, or other incumbrances upon their property, ad infinitum, in the hands of friendly creditors. The community could never act safely under the assurance that the particular debt specified in the mortgage or deed was discharged; for though that were the case, it would turn out, whenever it suited the convenience of the parties, that the mortgage or trust-deed had been extended to some other transaction, and to secure some other debts, and this might be amplified without limit, so that there would be no safety to the rights of creditors and purchasers, and the country would be filled with secret incumbrances. It is for the protection of subsequent purchasers and creditors that it has beeni settled, that it is incompetent to the parties to show any other consideration than that specified in a deed. But the position taken in support of this sale seems in direct opposition to that rule. It is nothing, in substance, but an effort to show a consideration different from that, stated in the deed.

If, therefore, the original notes were still outstanding when the sale was made, they could not support the trust deed and the sale under it. Much less could the sale be supported, if the notes were actually cancelled; and there is no proof whatever in the record to show that they were not cancelled; and the presumption of law, from the rescission of the contract, is, that they were cancelled and delivered up.

Under this view of the case, I am of opinion that the decree dismissing the bill is erroneous, and should be reversed.

Mr. Chief Justice Smith

delivered the opinion of the court.

The plaintiff in error, George F. Davidson, on the 2d of June, 1846, recovered a judgment in the district court of the United States at Pontotoc, against Jones, one of the defendants in the court below. Upon that judgment several executions were issued, and returned “ no property found.”

The object of the present suit, which was instituted in the vice-chancery court at Holly Springs, was to subject to the payment of the judgment, certain property conveyed by a deed of trust, executed on the 27th day of December, 1845, by said Jones, for the benefit and protection of the defendant Matthews.

The bill charges fraud in the execution of the trust deed; and sets out that Matthews, by “ a pretended and simulated sale,” made under color of said deed of trust, became the purchaser of the slaves mentioned therein, and that he has removed them beyond the reach of an execution on the judgment. The fraud charged in the bill is denied in the answer, which avers that the trust deed was executed in good faith, for the purpose of securing the payment of the notes therein described; the consideration of which was the sale of a certain tract of land, before the date of the trust deed, made by defendant Matthews' to defendant Jones; the former having executed to the latter a bond for title on the payment of the purchase-money.

It is further averred in the answer, that, prior to the execution of the deed of trust, Matthews was liable, as surety 'for Jones, in the amount of about |3,500. Also that Jones, independent of that liability, was indebted to Matthews in about the sum of $800, for money loaned. That Jones being the brother-in-law of Matthews, the latter intended to make him-further advances, in order to extricate, him from his pecuniary embarrassments, and that “ these being the facts, Matthews resolved to take, and did take, from Jones the deed of trust on the property therein contained, in the first place, to secure the purchase-money for the land, amounting to about $3,000.” Matthews further determined to retain the title to the said land to secure himself'for the money then paid, and liabilities there incurred for Jones, and for any further advances he might make to, or liabilities incurred for, him; all of which was agreed to by Jones. It is further averred that advances were afterwards made to Jones by Matthews, and that additional liabilities were incurred.

It is further stated in the answer, that “ Jones abandoned his aforesaid purchase (of the land) and delivered up the said title bond to Matthews before the rendition of complainant’s judgment. It appears that the sale under the deed of trust, at which Matthews purchased the slaves, was made on the 11th of September, 1847. Hence the title of Matthews to the said slaves arose subsequent to the rendition of the complainant’s judgment, which, as we have seen, was of the date of the 2d June, 1846.

If by the transactions which are'alleged to have taken place between the respondents, Matthews and Jones, the consideration on which the deed of trust was based, was discharged or destroyed, that deed should be held ig equity as having ceased to operate from their date; at least so far as the claims of the creditors of Jones were concerned. ' A material question thence arises as to the effect which should be given to the agreement between Matthews and Jones, the abandonment by the latter of the purchase of the land, and the surrender by him of the bond for title.

In behalf of the plaintiff in error, it is contended, that by Jones’s abandonment of the purchase of the land, and the delivery to, and the reception by Matthews of the title bond, the consideration of the notes mentioned in the trust deed was released, and consequently, the purpose for Which the deed was executed was put an end to; and that it is now incompetent for the defendants in error to substitute a new consideration for that upon which the transaction was in fact bound.

It is well settled, that a consideration different from that which is expressed upon the face of a deed or note, cannot be set up or proved. But I apprehend that the question is not, whether it was competent for plaintiffs in error to show that the deed of trust, was, by agreement between them, to stand as a security for'lhe liabilities incurred by Matthews, and the advances then made or which might thereafter be made by him to Jones, but whether the agreement and the transactions thereupon, had, in fact and in law, put an end to the original consideration of the notes secured by the deed of trust. In order, therefore, to understand properly the nature- and legal effect of what was alleged to have been done by the parties, we must look as well to their situation and the purposes which they intended to ae-co'mplish, as to the statement of the transaction contained in their answer.

Matthews, at the date of the redelivery to him of the title bond, had become involved with Jones, and was liable, as his surety, in a large sum of money, and had become his creditor by a loan of $800. He was desirous of affording him further assistance, if assistance were necessary. Jones’s whole property, with the exception of the land, to which he would have a perfect equitable right on payment of the purchase-money, was embraced in the deed of trust to secure the payment of the same. Matthews held no security whatever against his liabilities, nor for the eight hundred dollars-which he had advanced to Jones. In this condition of things, it was certainly desirable on the part of Matthews to obtain indemnity against his liabilities and security for the money advanced. ■ And we apprehend that it was fully competent for him to accept a surrender of his title, bond, or a release of Jones’s equity in the land, without affecting in the slightest degree the consideration of the notes, or impairing the operative effect of the trust deed. This seems too clear to admit of debate. For if it be supposed that Matthews had conveyed the land in fee, instead of executing a bond conditioned to make title on payment of the purchase-money, it cannot be doubted that Jones might have reconveyed the land to Matthews without affecting the validity of the trust, deed, unless the reconveyance were made in payment or discharge of the notes given for the purchase-money of the land. And this appears to me to have been the character and effect of the transaction. Matthews, on account of the liability incurred for Jones, and on account of the sum already advanced, and the money to be advanced, determined to hold the title to the land. This was agreed to by Jones, who abandoned the purchase and surrendered the bond for title. It was but a method, perhaps an informal one, by which, in my view of the subject, it was intended to release Jones’s equity in the land. But as to the effect of the transaction, whether in contemplation of law it was sufficient for that purpose, no question can arise in the case before us, as it is not sought to subject the land to the payment of the plaintiff’s judgment. I think, therefore, that the consideration of the notes was not released; hence, that the sale to Matthews vested in him the title to the slaves, freed from the lien of complainant’s judgment, unless the trust deed, for some other reason, was invalid. This brings us to the consideration of the remaining question in the cause.

The averments of the bill, that the deed of trust by which the slaves in question were conveyed by the defendant Jones to the trustee Robinson, was executed for the fraudulent purpose of delaying and defeating the claims of his creditors; and that the sale of said slaves made by the trustee, at which Matthews became the purchaser, was simulated and pretended and made for the like fraudulent purposes, are positively and specifically denied in the answer. The allegations of fraud are but feebly, if supported at all, by the evidence adduced by the complainant. On the other hand, the evidence of the defendants clearly and fully sustains the answer. It explains satisfactorily the facts alleged in the bill, from which, if unexplained, a presumption of fraud on the part of the defendant Matthews might have arisen. The decree of the vice-chancellor, dismissing the bill, is therefore affirmed.

Fisheh, J.,

having been counsel, gave no opinion.

Note bt Repoetée. The judges who sat in this case being equally divided, the decision of the court below is of course affirmed.