If A advance money, to B. and B. thereupon convey land to
trustees in trust to convey the same to A. in fee in case B. should
fail to repay the money and interest on a certain day and if B.
fail to repay the money on the day limited, and thereupon the
trustees convey the land to A., B. has no equity of redemption.
Page 11 U. S. 219
Walter S. Alexander, the appellee, son and residuary devisee of
Robert Alexander, deceased, filed his bill in equity against the
executors and devisees of Richard Conway, deceased, to be permitted
to redeem a certain tract of land which his father, Robert
Alexander, had, in the year 1788, conveyed to certain trustees by a
deed which the complainant contended was a mortgage, which land the
trustees had conveyed to W. Lyles, who had conveyed the same to
said Richard Conway. The deed was by indenture, dated March 20,
1788, between Robert Alexander of the first part, W. Lyles of the
second part, and certain trustees of the third part, whereby Robert
Alexander (after reciting his title to an undivided moiety of 400
acres of land, holden in common with Charles Alexander), in
consideration of �800 paid to him by W. Lyles, and in consideration
of the covenants to be performed by the trustees, bargained,
granted and sold, aliened and confirmed to W. Lyles, in fee, twenty
acres, being part of the said undivided moiety -- and to the
trustees the residue of the moiety, except part thereof conveyed to
B. Dade on 1 January, 1788, which residue was supposed to contain
140 acres, to have and to hold the 20 acres to W. Lyles, his heirs
and assigns, to his and their use forever -- and the said residue
of the said moiety to the trustees and the majority of them, and
the survivors and survivor of them, in trust as follows,
to-wit:
"To convey the said residue of the said moiety, except as before
excepted, unto him the said W. Lyles, his heirs and assigns
forever, by good and sufficient deeds in law for that purpose, at
any reasonable time after the first day of July, which shall be in
the 1790, unless the said Robert Alexander, his heirs, executors,
or administrators shall pay or cause to be paid to the said W.
Lyles, his heirs, executors, or administrators the sum of �700
current money of Virginia in gold or silver coin, with lawful
interest thereupon from the date hereof on or before 1 July, which
shall be in the year 1790. And if the said Robert Alexander, his
heirs, executors, or administrators shall pay or cause to be paid
to the said W. Lyles, his heirs, executors, or administrators the
said sum of �700 current money of Virginia, in gold or silver coin,
with lawful interest thereupon,
Page 11 U. S. 220
at any time on or before the said first day of July, which shall
be in the year 1790, in trust, immediately upon the payment being
made, to reconvey to him the said Robert Alexander and his heirs
forever, by good and sufficient deeds in law, all the title which
by virtue of these presents passeth to them the said [trustees] or
any of them, of, in, and to the said residue of the said moiety,
except as before excepted, hereinbefore granted and confirmed unto
them."
Robert Alexander then covenants that he has good title in fee
simple to the land conveyed, and that the 20 acres shall be laid
off in a certain situation contiguous to other land of Lyles, and
by certain metes and bounds therein described. The trustees then
covenant that they will well and truly execute the trusts reposed
in them by reconveying the land to Robert Alexander, if he should
pay the money and interest on or before 1 July, 1790, or by
conveying it to Lyles, if Robert Alexander should not pay it by
that day. Robert Alexander then covenants with Lyles, that he will
make further assurance, &c., both as to the 20 acres, and as to
the residue of the moiety, if the trustees should convey it to him.
He then covenants to warrant the 20 acres to Lyles against the
claims and demands of all persons whomsoever. This deed did not
contain any covenant on the part of Alexander to pay the �700.
On 19 July, 1790, the trustees, by deed of that date, reciting
the deed of 29 March, 1788, and that Lyles had represented that R.
Alexander had not paid the money, and had required them to execute
the trust, conveyed the residue of the undivided moiety in fee to
Lyles, in consideration of the covenants, agreements, and trusts in
the former deed contained on their part to be performed, and in
consideration of �700 mentioned in the said former deed to have
been paid by Lyles to Alexander.
On 23 August, 1790, Lyles by deed of that date (after reciting
the title of Robert Alexander to the undivided moiety of the 400
acres of land, and his deed of 20 March, 1788, to Lyles and the
trustees, and that Alexander failed to pay the �700 on 1 July,
1790, and that the trustees, by their
Page 11 U. S. 221
deed of 19 July, 1790, had conveyed the land in question to
Lyles) in consideration of �900 paid him by Richard Conway,
conveyed the 20 acres, and the residue of the undivided moiety of
the 400 acres, and all his right, title, interest, use, trust,
property, claim, and demand, in and to the same, by force of the
said indenture, and all deeds, evidences and writings in any manner
or way touching the same, and the right and privilege of
prosecuting in the name of Lyles (if at any time judged necessary
by Conway, his heirs or assigns), any actions at law for the breach
of any of the covenants in the said indenture contained, to have
and to hold all and singular the premises thereby granted, with the
appurtenances, and all the estate, right, title, use, trust,
interest, property, claim, and demand of him the said W. Lyles
thereto, by force and virtue of the aforesaid indentures to Conway,
his heirs and assigns, to his and their use forever, with a special
warranty against the claims of Lyles and his heirs and assigns
only.
On 17 January, 1793, Robert Alexander made his will, and after
devising specifically a number of tracts of land and moieties of
tracts by name and description, to his son Robert, devised all the
rest and residue of his estate, real and personal, to his son
Walter, the complainant. Robert Alexander, the testator, died in
February, 1793. The land in question was not specifically devised
by his will, and Walter, the complainant, obtained title under the
will to several other tracts not specifically devised.
The complainant became of full age in November, 1803, and
brought this suit in 1807.
The deposition of W. Lyles was taken on the part of the
defendants. He testified that Robert Alexander was not indebted to
him at the time of the contract for the land. No part of the money
was advanced by him as a loan to be secured by mortgage. He was no
lender of money, and would not have lent Alexander the money on
mortgage. Alexander was generally reputed not punctual in paying
his debts, and rather too fond of law, and at the time of the
contract for the land was confined in jail for a large debt, and
sent several times to Lyles, and urged him buy the land. Lyles
then
Page 11 U. S. 222
resided on land adjoining the 20 acres; and his house was very
near the line. He wanted the addition of about 20 acres, and was
not anxious to have any more. Alexander was more willing to sell
his whole residue of the moiety of 400 acres than to sell a part,
his object being to raise a considerable sum to pay the debt for
which he was in prison. It was agreed that the 20 acres should be
sold absolutely, and the residue should be sold conditionally, as
otherwise Lyles would not advance the money. The 20 acres were
purchased absolutely, to suit the convenience of Lyles, and the
residue was purchased conditionally, to suit Alexander. Lyles was
determined to advance no money on any bargain which should make it
necessary to go into court to get it back. The condition was
understood by both to be that if he paid the money by the time
limited, the trustees were to reconvey the land to Alexander, but
otherwise they were to convey it to Lyles in fee simple, and he was
to have the land thereafter absolutely to his own use forever. He
sold it as soon as he could after he left Alexandria, to get back
his money. He received from Conway �900 at the date of the
conveyance, or a few days after. Alexander never made any claim
upon Lyles for any part of the land, and never expressed to him any
dissatisfaction with the sale, although he saw him frequently
afterwards. Alexander was not in confinement when the trustees made
their deed to Lyles. No part of the land was cultivated, and no
formal possession delivered.
The deposition of Ch. Lee, Esq. who drew the deeds of 20 March,
1788, and 19 July, 1790, stated that Lyles consulted him about the
bargain with Alexander, and represented that Alexander wanted a
considerable sum of money to pay a debt which was pressing, and
offered to sell some land, but would not sell the whole of it
absolutely, but was willing to sell part of it absolutely, and the
residue was to be conveyed to trustees, in trust, to convey the fee
to Lyles, if a certain sum of money was not paid by a certain day;
and if it was, the trustees were to reconvey to Alexander. The
deponent was asked if such a contract was lawful, or would be
deemed in law only a mortgage, and gave it as his opinion, that the
parties might make such a contract, and that it could not be
considered a mortgage. Lyles intimated that if that was not very
clear, he
Page 11 U. S. 223
would not have anything to do in the business. That he would
not, on any terms, make a bargain with Alexander, if he should be
obliged to go into a court of equity about it, which might be the
case if there should be a mortgage; that Alexander was well known
to be troublesome and found of law. The deponent was requested to
draw such instruments as would place the contract in the state of a
conditional purchase of a part of the land, and with this view he
drew the writing. He is certain that Lyles consulted him as to the
nature and effect of the contract, and did not intend to have a
deed in the nature of a mortgage, but of absolute sale of a part,
and of a conditional sale of the other part of the land, and such
was the deponent's intention when he drew the deed. That he
afterwards drew a deed of conveyance from the trustees to Lyles to
carry into effect their trust, and delivered it to Lyles to carry
to the trustees. Lyles informed him that one of the trustees
refused to execute the deed, unless Alexander would signify his
consent, and asked whether a verbal consent would not do. The
deponent sketched a note in writing for Alexander to sign,
signifying his consent, and was afterwards informed that the
trustees were satisfied, and did execute the deed, but he does not
know whether Alexander gave his consent. Lyles was not easy in his
pecuniary affairs, and he never knew him lend a large sum upon
mortgage. Alexander was a bad manager of his estate, was generally
needy of money, and not punctual in payment of his debts, though
his landed estate was really of great value.
The answer of the executors does not admit the deed to be a
mortgage, and states that Conway began to make expensive and
permanent improvements on the land in the summer of 1791; that
Alexander had an opportunity of seeing part of them, and probably
did see them, and made no objection as they believe.
It appeared in evidence that the land had lately been sold for
more than $20,000, but that it was very poor, much broken by
gullies and exhausted, when Conway began his improvements. There
was also evidence tending to show, that it was then worth more than
he gave for it.
The court below being of opinion that the deed was
Page 11 U. S. 224
to be considered as a mortgage, directed an account to be taken
of the value of the permanent improvements, and the original sum
advanced by Lyles and interest, and of the rents and profits, which
being done, it appeared that the complainant would have to pay the
sum of $4,943 to redeem the land, and the court accordingly decreed
a release upon the payment of that sum.
From this decree the defendants appealed to this Court.
Page 11 U. S. 235
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court as
follows:
This suit was brought by Walter S. Alexander, as devisee of
Robert Alexander, to redeem certain lands lying in the neighborhood
of Alexandria which were conveyed by Robert Alexander in trust by
deed dated 20 March, 1788, and which were afterwards conveyed to
William Lyles, and by him to the testator of the plaintiffs in
error.
The deed 20 March, 1788, is between Robert Alexander of the
first part, William Lyles of the second part, and Robert T. Hooe,
Robert Muire, and John Allison of the third part. Robert Alexander,
after reciting that he was seized of one undivided moiety of 400
acres of land, except 40 acres thereof previously sold to Baldwin
Dade, as tenant in common with Charles Alexander, in consideration
of eight hundred pounds paid by William Lyles, and of the covenants
therein mentioned, grants, bargains and sells twenty acres, part of
the said undivided moiety, to William Lyles, his heirs and assigns
forever, and the residue thereof, except that which had been
previously sold to Baldwin Dade, to the said Robert T. Hooe, Robert
Muire, and John Allison in trust to convey the same to William
Lyles at any reasonable time after 1 July, 1790, unless Robert
Alexander shall pay to the said William Lyles on or before that day
the sum of �700 with interest from the said 20 March, 1788. And if
the said Robert Alexander shall pay the said William Lyles, on or
before that day the said sum of �700 with interest, then to
reconvey the same to the said Robert Alexander. Robert Alexander
further covenants that in the event of a reconveyance to him, the
said twenty acres sold absolutely shall be laid off adjoining the
tract of land on which William Lyles then lived. The trustees
covenant to convey to William Lyles, on the nonpayment of the said
sum of �700; and to reconvey to Robert Alexander in the
Page 11 U. S. 236
event of payment. Robert Alexander covenants for further
assurances as to the 140 acres, and warrants the twenty acres to
William Lyles and his heirs.
On 18 July, 1790, the trustees, by a deed in which the trust is
recited, and that Robert Alexander has failed to pay the said sum
of �700, convey the said land in fee to William Lyles.
On 23 August, 1790, William Lyles, in consideration of �900,
conveyed the said 20 acres of land and 140 acres of land to Richard
Conway with special warranty against himself and his heirs.
On 9 April, in the year 1791, a deed of partial partition was
made between Richard Conway and Charles Alexander. This deed shows
that Charles Alexander asserted an exclusive title in himself to a
considerable part of this land.
Soon after this deed of partition was executed, Richard Conway
entered upon a part of the lands assigned to him, and made on them
permanent improvements of great value and at considerable
expense.
In January or February, 1793, Robert Alexander departed this
life, having first made his last will in writing, in which he
devises the land sold to Baldwin Dade, but does not mention the
land sold to William Lyles.
The plaintiff, who was then an infant, and who attained his age
of twenty-one years in November, 1803, brought his bill to redeem
in 1807. He claims under the residuary clause of Robert Alexander's
will.
The question to be decided is whether Robert Alexander, by his
deed of March, 1788, made a conditional sale of the property
conveyed, by that deed, to trustees, which sale became absolute by
the nonpayment of �700 with interest on 1 July, 1790, and by the
conveyance of the 19th of that month, or is to be considered as
having only mortgaged the property so conveyed.
To deny the power of two individuals, capable of
Page 11 U. S. 237
acting for themselves, to make a contract for the purchase and
sale of lands defeasible by the payment of money at a future day,
or, in other words, to make a sale with a reservation to the vendor
of a right to repurchase the same land at a fixed price and at a
specified time, would be to transfer to the court of chancery in a
considerable degree, the guardianship of adults as well as of
infants. Such contracts are certainly not prohibited either by the
letter or the policy of the law. But the policy of the law does
prohibit the conversion of a real mortgage into a sale. And as
lenders of money are less under the pressure of circumstances which
control the perfect and free exercise of the judgment than
borrowers, the effort is frequently made by persons of this
description to avail themselves of the advantage of this
superiority, in order to obtain inequitable advantages. For this
reason, the leaning of courts had been against them and doubtful
cases have generally been decided to be mortgages. But as a
conditional sale, if really intended, is valid, the inquiry in
every case must be whether the contract in the specific case is a
security for the repayment of money or an actual sale.
In this case, the form of the deed is not in itself conclusive
either way. The want of a covenant to repay the money is not
complete evidence that a conditional sale was intended, but is a
circumstance of no inconsiderable importance. If the vendee must be
restrained to his principal and interest, that principal and
interest ought to be secure. It is therefore a necessary ingredient
in a mortgage that the mortgagee should have a remedy against the
person of the debtor. If this remedy really exists, its not being
reserved in terms will not affect the case. But it must exist in
order to justify a construction which overrules the express words
of the instrument. Its existence, in this case, is certainly not to
be collected from the deed. There is no acknowledgement of a
preexisting debt, nor any covenant for repayment. An action at law
for the recovery of the money, certainly could not have been
sustained, and if, to a bill in chancery praying a sale of the
premises, and a decree for so much money as might remain due,
Robert Alexander had answered that this was a sale and not a
mortgage, clear proof to
Page 11 U. S. 238
the contrary must have been produced to justify a decree against
him.
That the conveyance is made to trustees is not a circumstance of
much weight. It manifests an intention in the drawer of the
instrument to avoid the usual forms of a mortgage, and introduces
third persons, who are perfect strangers to the transaction, for no
other conceivable purpose than to entitle William Lyles to a
conveyance subsequent to the nonpayment of the �700, on the day
fixed for its payment, which should be absolute in its form. This
intention, however, would have no influence on the case, if the
instrument was really a security for money advanced and to be
repaid.
It is also a circumstance which, though light, is not to be
entirely disregarded, that the 20 acres, which were admitted to be
purchased absolutely, were not divided and conveyed separately. It
would seem as if the parties considered it as at least possible
that a division might be useless.
Having made these observations on the deed itself, the Court
will proceed to examine those extrinsic circumstances which are to
determine whether it is to be construed a sale or a mortgage.
It is certain that this deed was not given to secure a
preexisting debt. The connection between the parties commenced with
this transaction.
The proof is also complete that there was no negotiation between
the parties respecting a loan of money; no proposition ever made
respecting a mortgage.
The testimony on this subject is from Mr. Lyles himself and from
Mr. Charles Lee. There is some contrariety in their testimony, but
they concur in this material point. Mr. Lyles represents Alexander
as desirous of selling the whole land absolutely, and himself as
wishing to decline an absolute purchase of more than twenty acres.
Mr. Lee states Lyles as having represented to him that Alexander
was unwilling to sell more than twenty acres absolutely, and
offered to sell the residue conditionally. There is not, however,
a
Page 11 U. S. 239
syllable in the cause, intimating a proposition to borrow money
or to mortgage property. No expression is proved to have ever
fallen from Robert Alexander before or after the transaction,
respecting a loan or a mortgage. He does not appear to have
imagined that money was to be so obtained, and when it became
absolutely necessary to raise money, he seems to have considered
the sale of property as his only resource.
To this circumstance the Court attaches much importance. Had
there been any treaty -- any conversation respecting a loan or a
mortgage, the deed might have been, with more reason, considered as
a cover intended to veil a transaction differing in reality from
the appearance it assumed. But there was no such conversation. The
parties met and treated upon the ground of sale and not of
mortgage.
It is not entirely unworthy of notice that William Lyles was not
a lender of money, nor a man who was in the habit of placing his
funds beyond his reach. This, however, has not been relied upon,
because the evidence is admitted to be complete, that Lyles did not
intend to take a mortgage. But it is insisted that he intended to
take a security for money, and to avoid the equity of redemption;
an intention which a court of chancery will invariably defeat.
His not being in the practice of lending money is certainly an
argument against his intending this transaction as a loan, and the
evidence in the cause furnishes strong reason for the opinion that
Robert Alexander himself did not so understand it. In this view of
the case, the proposition made to Lyles, being for a sale and not
for a mortgage, is entitled to great consideration. There are other
circumstances, too, which bear strongly upon this point.
The case, in its own nature, furnishes intrinsic evidence of the
improbability that the trustees would have conveyed to William
Lyles without some communication with Robert Alexander. They
certainly ought to have known from himself, and it was easy to
procure the information, that the money had not been paid. If he
had considered this deed as a mortgage, he would
Page 11 U. S. 240
naturally have resisted the conveyance, and it is probable that
the trustees would have declined making it. This probability is
very much strengthened by the facts which are stated by Mr. Lee.
The declaration made to him by Lyles, after having carried the deed
drawn by Mr. Lee to Mr. Hooe, that the trustees were unwilling to
execute it until the assent of Alexander could be obtained, and the
directions given to apply for that assent, furnish strong reasons
for the opinion that this assent was given.
It is also a very material circumstance that, after a public
sale from Lyles to Conway, and a partition between Conway and
Charles Alexander, Conway took possession of the premises and began
those expensive improvements which have added so much to the value
of the property. These facts must be presumed to have been known to
Robert Alexander. They passed within his view. Yet his most
intimate friends never heard him suggest that he retained any
interest in the land. In this aspect of the case, too, the will of
Robert Alexander is far from being unimportant. That he mentions
forty acres sold to Baldwin Dade, and does not mention one hundred
and forty acres, the residue of the same tract, can be ascribed
only to the opinion that the residue was no longer his.
This, then, is a case in which there was no previous debt, no
loan in contemplation, no stipulation for the repayment of the
money advanced, and no proposition for or conversation about a
mortgage. It is a case in which one party certainly considered
himself as making a purchase, and the other appears to have
considered himself as making a conditional sale. Yet there are
circumstances which nearly balance these, and have induced much
doubt and hesitation in the mind of some of the Court.
The sale on the part of Alexander was not completely voluntary.
He was in jail and was much pressed for a sum of money. Though this
circumstance does not deprive a man of the right to dispose of his
property, it gives a complexion to his contracts, and must have
some influence in a doubtful case. The very fact that the sale was
conditional, implies an expectation to redeem.
Page 11 U. S. 241
A conditional sale made in such a situation at a price bearing
no proportion to the value of the property would bring suspicion on
the whole transaction. The excessive inadequacy of price would, in
itself, in the opinion of some of the judges, furnish irresistible
proof that a sale could not have been intended. If lands were sold
at �5 per acre conditionally, which, in fact, were worth �15 or �20
or �50 per acre, the evidence furnished by this fact, that only a
security for money could be intended, would be, in the opinion of
three judges, so strong as to overrule all the opposing testimony
in the cause.
But the testimony on this point is too uncertain and conflicting
to prevail against the strong proof of intending a sale and
purchase, which was stated.
The sales made by Mr. Dick and Mr. Hartshorne of lots for
building, although of land more remote from the Town of Alexandria
than that sold to Lyles, may be more valuable as building lots, and
may consequently sell at a much higher price than this ground would
have commanded. The relative value of property in the neighborhood
of a town depends on so many other circumstances than mere
distance, and is so different at different times that these sales
cannot be taken as a sure guide.
That twenty acres, part of the tract, were sold absolutely for
�5 per acre; that Lyles sold to Conway at a very small advance;
that he had previously offered the property to others
unsuccessfully; that it was valued by several persons at a price
not much above what he gave; that Robert Alexander, although rich
in other property, made no effort to relieve this, are facts which
render the real value, at the time of sale, too doubtful to make
the inadequacy of price a circumstance of sufficient weight to
convert this deed into a mortgage.
It is therefore the opinion of the Court that the decree of the
circuit court is erroneous and ought to be reserved, and that the
cause be remanded to that court with directions to dismiss the
bill.
Decree reversed.
