Where a bill in chancery states that, at an execution sale,
which was alleged to have been open and fair, the complainant
purchased, for the sum of $600, certain promissory notes secured by
mortgage, amounting in the whole to $260,000, and the bill was
demurred to, and the demurrer sustained by the circuit court, this
judgment must be reversed.
Mere inadequacy of price does not of itself furnish a sufficient
reason for dismissing the bill or deciding that the complainant was
entitled to no relief whatever.
It came up upon a demurrer to a bill filed by Andrew Erwin,
which demurrer was sustained by the court and the bill dismissed
with costs. The facts set forth in the bill, arranged in
chronological order, were as follows:
In the year 1839, James M. Wall, a citizen of the State of
Mississippi, appears to have been in possession of two plantations
in Louisiana, and on 16 November, in that year, sold them, together
with the stock and slaves upon them, to William S. Parham for a sum
amounting very nearly to $300,000. Of this consideration $35,200
were in cash and the residue in thirteen promissory notes, each for
the sum of $20,369.23, payable on 1 January, 1842, 1843, 1844,
1845, 1846,
Page 53 U. S. 198
1847, 1848, 1849, 1850, 1851, 1852, 1853, 1854. These notes were
drawn in favor of Wall, made payable and negotiable at the Citizens
Bank of New Orleans, and were endorsed
"ne varietur" by
the notary before whom the deed was acknowledged, and secured by a
mortgage of the property. It was further stipulated in the deed
that Parham was to settle all claims against the property, and have
a credit upon the notes for whatever sums he might pay. A list of
the mortgages outstanding upon the property was waived by the
parties, because, as was stated in the deed, "Parham was advised of
the mortgages existing on said property." The list nowhere appeared
in the record.
In 1842, Wall, being a resident of Mississippi, was sued in the
circuit court of the United States for that district, by one
William M. Beal, a resident and citizen of Louisiana, and a
judgment was recovered at the May term in said suit for $2,365.13.
An execution was issued upon this judgment against Wall, which was
returned "
nulla bona."
On 1 August, 1842, Parham conveyed to his mother, Elizabeth Jane
Parham, who was also the mother of Wall, all the property which had
been conveyed to him by Wall on 16 November, 1839. The
consideration for this deed was that the grantee should pay the
thirteen promissory notes above mentioned except the sum of
$18,000, which was stated to have been paid on account of them;
that the grantee should also pay to one W. Ford, Jr., $6,986.52,
which Parham owed in three separate notes, and should also pay
sundry small debts, not exceeding in the whole five thousand
dollars.
On 20 November, 1845, Beal filed a petition in the Ninth
District Court of the State of Louisiana setting forth the judgment
which he had recovered against Wall in the State of Mississippi,
and praying that it might be made executory in Louisiana. An order
of seizure and sale was accordingly granted, and, on 19 January,
1846, a writ of
fieri facias was issued to the sheriff of
the Parish of Madison commanding him to seize all and singular the
property movable or immovable, rights and credits of Wall within
his parish.
On 24 January, 1846, the sheriff levied this execution upon the
thirteen promissory notes above described.
On the first Saturday, in May, 1846, the said sheriff, after
having carefully and strictly observed and complied with and
performed all the solemnities and formalities required by the law
and the statute in such case made and provided, sold two of the
thirteen promissory notes,
viz., the two which were due on
1st January, 1846 and 1847, to Andrew Erwin, the appellant, and one
John W. Nixon, as equal proprietors, for the sum of $300,
Page 53 U. S. 199
that being the last and highest bid, and conveyed the same to
the purchasers in due form of law.
On the same day, and after the above sale, the sheriff exposed
to sale the remaining eleven notes, which were purchased by Erwin
alone, and a deed executed for them by the sheriff.
On 31 January, 1846, between the seizure and sale, Wall
acknowledged, before a notary public, that he was indebted to Dick
and Hill in the sum of $35,979.53; that he had given them his
promissory note for that amount, due on 1 April following; and
that, to secure the payment thereof, he, on that day, pledged,
transferred, and delivered to said Dick and Hill two of the
thirteen notes above mentioned,
viz., those which were due
on 1 January, 1845 and 1846, respectively.
In the meantime, but when the record did not show exactly,
Elizabeth Parham, the mother, died, leaving Parham and Wall her
heirs at law.
At some period subsequent to the above transactions, but when
the record did not show, Dick and Hill got possession of the rest
of the thirteen promissory notes, two of which had been pledged to
them by Wall, as above stated.
On 2 January, 1847, Dick and Hill being thus in possession of
the notes, caused the mortgaged property, for the purchase of which
the notes were given, to be levied upon and seized by the sheriff
of the Parish of Madison, and exposed to sale at public auction.
They became the purchasers at the sale for the sum of $50,000.
On 26 February, 1847, Erwin filed his bill in the Circuit Court
of the United States for Louisiana, setting forth in great detail
the above facts and averring that Nixon had sold his half of the
two notes purchased by him and Erwin conjointly to some person
unknown. The bill charged Dick and Hill with a corrupt, fraudulent,
and iniquitous combination and conspiracy to and with Wall to
cheat, defraud, and injure the creditors of Wall and especially the
complainant. It averred that Dick and Hill were the creditors of
Wall, if at all, only for advances made upon crops, which advances
had been fully paid; that the sale by them of the mortgaged
property was therefore wholly unnecessary; that the sum of $50,000
was an inadequate price; that if they had a claim upon Wall for a
sum less than $50,000, the residue, after paying themselves, ought
to be shared amongst the creditors of Wall, amongst whom the
complainant was one; that Wall was in the enjoyment of all the
large revenues from the property. The bill then prayed that Parham
should be adjudged to pay &c., and in default thereof that the
property might be sold. It further prayed for an injunction upon
Parham, Dick, and Hill forbidding
Page 53 U. S. 200
them from selling the property, or disposing in any manner of
any of the revenues or crops.
An injunction was granted and the defendants appeared and
answered, but afterwards withdrew their answers and demurred to the
bill.
On 8 February, 1848, the circuit court dissolved the injunction
and dismissed the bill with costs, whereupon the complainant
appealed to this Court.
MR. JUSTICE CATRON delivered the opinion of the Court.
This case comes up from the equity said of the Circuit Court for
the Fifth Circuit and District of Louisiana, by appeal from a
decree supporting a demurrer to a bill of complaint filed by the
present appellant.
The bill, filed 24 February, 1847, states in substance that
Page 53 U. S. 201
in the year 1842, one William M. Beal, a resident of the City of
New Orleans, obtained judgment in the United States Circuit Court
for the Southern District of Mississippi against James M. Wall for
the sum of $2,265.13 besides costs. That upon this judgment
execution was issued in the last-mentioned district, where Wall
then resided, and that such execution was returned "
nulla
bona." That subsequently, and in the year 1845, this judgment
being in full force and unpaid, Beal filed his petition in the
Ninth District Court of the State of Louisiana, held in and for the
Parish of Madison, setting forth the judgment and praying that by
the law of Louisiana it might be made executory in that state, and
that process thereon might be granted him against all the property,
real and personal, rights and credits of Wall in the State of
Louisiana, and that they might be applied to the satisfaction of
his rightful claim. That executory process was granted by the court
so petitioned, and that in pursuance of an order of seizure and
sale thereupon made, a writ of
fi. fa. was, on or about 19
March, 1846, issued to the Sheriff of the Parish of Madison
commanding him to seize all the property, rights and credits of
Wall within his parish, and to sell them for the liquidation of the
aforesaid judgment. That in accordance herewith, the sheriff did,
on 24 January, 1846, seize all the right, title and interest of
Wall in and to thirteen certain promissory notes, each and all of
them bearing date on 16 January, 1839, each for the sum of
$20,369.23, payable respectively on 1 January, 1842, and upon each
succeeding 1st of January until and including 1 January, 1854. Each
and all of these notes being signed and executed by William S.
Parham to and in favor of James M. Wall, and paraphed
"ne
varietur" by A. J. Lowry, Esq., Notary Public in and for the
Parish of Madison, in order to identify the said notes with an act
of mortgage and sale, passed before said Lowry on 16 November,
1839, between William S. Parham as vendee, and James M. Wall, as
vendor, by which deed the payment of these thirteen notes bore a
mortgage and privilege upon certain property, movable and
immovable, in said deed described, together with all and singular
the mortgage, liens and privileges by said deed created, or which,
by operation and effect of law, subsisted to and in favor of James
M. Wall.
That the sheriff did advertise the property so seized for the
satisfaction of the judgment in favor of Beal, and on the first
Saturday of May, 1846, having complied with all the requisites of
the law, exposed for sale, at public auction, two of the promissory
notes,
viz., those falling due 1 January in the years 1846
and 1847, and that these two notes were, for the sum of $300,
purchased by this appellant and one John W.
Page 53 U. S. 202
Nixon conjointly, together with all the right, mortgages,
equities and privileges appertaining thereto, that being the last
and highest bid. Whereupon said two notes, together with all the
mortgages &c., pertaining to them, were conveyed by the sheriff
to the appellant and said John W. Nixon.
That at the same time, the eleven other of the said notes were,
for the further sum of $300, sold and conveyed by the sheriff to
the appellant, together with all and singular the equities &c.,
attaching to them. The following is the sheriff's return on the
execution, exhibited as part of the bill.
"Received on 19 January, 1846, and executed on 24 January of the
same year, by attaching, in the hands of William S. Parham, all the
notes described in the notice of seizure, and by seizing the same
as described in the said notice of seizure, by virtue of the within
writ, and after having advertised the same for the space of fifteen
clear days, the sale to take place on the first Saturday of March,
1846, and on which first Saturday of March, 1846, I proceeded to
offer the same for sale for cash, after causing the same to be
appraised, and no person present bid for said property two-thirds
of the appraisement of the same, no sale was effected. Wherefore I,
the sheriff, readvertised the same upon a credit of twelve months,
for the space of thirty clear days, the sale to take place on the
first Saturday of May, 1846, on which said first Saturday of May,
1846, I, the said sheriff, proceeded to offer the said property for
sale upon a credit of twelve months, at the courthouse door in
Richmond, La., and J. J. Amonette being present and acting as agent
for Andrew Erwin, and Robert Garland being present and acting as
agent for John M. Nixon, bid for the notes described in said notice
of seizure, due 1 January, 1846, and 1 January, 1847, the sum of
$300, which being the last bid or offer made, the same was struck
off and adjudicated to the said Erwin and Nixon at and for the said
sum of $300 and at the same above-described day, I, the said
sheriff, proceeded to offer the eleven other notes, as described in
the notice of seizure annexed hereto and made a part of this
return, on the terms and conditions above described, and no person,
being present, bid therefor two-thirds of the appraised value of
the said property, no sale was effected. Whereupon I, the said
sheriff, readvertised the same, the sale to take place at the Town
of Richmond aforesaid on the first Saturday of May, 1846, upon a
credit of twelve months for the space of thirty clear days; I, the
said sheriff, proceeded to offer on the said first Saturday of May,
1846, at the Town of Richmond aforesaid, the said property, and
James J. Amonette being present and acting as agent for Andrew
Erwin, bid therefor the
Page 53 U. S. 203
sum of $300, which, being the last and highest bid or offer
made, I, the said sheriff, struck off and adjudicated the said
property to the said Andrew Erwin at and for the said sum of $300,
and the said Amonette, acting as counsel for the plaintiff herein,
has authorized me, the sheriff, to credit this writ the amount of
each of said bids, $600."
"Richmond, La., May 13, 1846"
That at the time of the seizure of all these several promissory
notes, they were in the possession or control of James M. Wall, and
he was at that time invested with all the liens, equities &c.,
pertaining to them.
That of all the proceedings of the Sheriff of Madison, by virtue
of this execution and of the sale of the several notes to the
appellant and Nixon, both Wall and Parham, and all claiming under
them, had due legal and constructive notice.
That Nixon had, a few weeks before the filing of the bill,
parted with all his interest in the two notes which he had
purchased conjointly with the appellant to some person unknown to
the appellant.
The bill then states that on or about 16 November, 1839, James
M. Wall was seized and possessed of two large and valuable
plantations, of a great number of negroes, and of a large stock and
all the utensils &c. pertaining to so extensive an estate, and
being so seized and possessed, he, on the day and year last
mentioned, conveyed the same to William S. Parham in consideration
of the sum of $299,999.99, of which a portion was paid in cash and
the rest was represented by the thirteen several promissory notes
above referred to.
That notwithstanding James M. Wall and all claiming under him
had legal and constructive notice of the sheriff's seizure on 24
January, 1846, of these various promissory notes, yet the said Wall
did, on 31 January of the same year, execute his promissory note to
James Dick and Henry R. W. Hill for $1,846.46, payable on 1 April,
1846, and as security therefor pledged those two of the notes of
Parham in favor of Wall, falling due 1 January, 1845, and 1
January, 1846.
The bill further states that within a few weeks before the date
thereof, the said Dick and Hill had become possessed of the eleven
other notes, but by what means the appellant knows not. That said
Dick and Hill had recently discharged William S. Parham from all
liability to Wall or any person or persons claiming under said
Wall. That the notes of Parham in favor of Wall and above referred
to cannot be met by the drawer unless the property purchased by him
of Wall and charged with the payment thereof be subjected to their
liquidation.
Page 53 U. S. 204
That the said Dick and Hill. being possessed of the said
thirteen promissory notes and professing to act in virtue of the
mortgages, equities, and liens pertaining to such notes, had on 2
January, 1847, levied upon, seized, and at public auction sold to
themselves as highest bidders the property charged with the payment
of these notes for the sum of $50,000, but the complainant cannot
state by virtue of and for what particular note or notes.
That the sum of $50,000, the alleged consideration money for
this sale, was less than one-third of the real value of the
property sold.
The bill alleges that the proceedings between Dick and Hill and
Wall and between Dick and Hill and Parham were the result of
combination and conspiracy to defraud the complainant. That on 1
August, 1842, William S. Parham, by deed, conveyed to Mrs.
Elizabeth Jane Parham, the mother of the said Parham and of James
M. Wall, all and singular the property, real and personal, which in
the year 1839 had been conveyed by said Wall to said Parham for and
upon consideration, amongst others, that the said Elizabeth Jane
Parham would discharge the thirteen promissory notes charged upon
the property, but that the said Elizabeth Jane Parham was at the
time of this conveyance aged and infirm and without any other means
of paying for the property than by the profits of the property
itself, charges said conveyance to be fraudulent and void as to the
creditors of Wall or Parham, that it could interpose no hindrance
to complainant's recovery. That Elizabeth Jane Parham died in the
year 1844, leaving William S. Parham and James M. Wall her heirs at
law.
The bill alleges that the property in question and upon which
the notes are a lien is not adequate security for their payment
unless all the revenues, issues, and profits of the estate be
appropriated to their liquidation. That since the sale of the
estate to Parham, such property has greatly depreciated, and that
it would not, at time of bill filed, bring at public sale anything
like its real and just value. That the revenues and profits of the
estate are from $20,000 to $30,000 per year. That ever since the
conveyance to Mrs. Elizabeth Jane Parham, James M. Wall and William
S. Parham have resided upon the estate, the first having the sole
management and control of the property, its issues and profits, and
both deriving their maintenance and support therefrom.
The bill claims that if the sale by Dick and Hill was lawful and
in good faith, the proceeds of that sale should be distributed
pro rata among the several thirteen promissory notes, and
after propounding interrogatories, prays the court to award
Page 53 U. S. 205
to the complainant the possession of the thirteen promissory
notes and that he be decreed to have all the liens and privileges
pertaining to said notes; that the conveyance to Mrs. Elizabeth
Jane Parham be set aside. That the sale of 2 January, 1847, under
which Dick and Hill claim, be declared null; that a receiver be
appointed, and that the defendants be restrained by injunction from
intermeddling with, or disposing of the property in question or
using or disposing of any of the said thirteen promissory
notes.
On 5 March, 1847, a writ of injunction was granted, and
afterwards answers were put in by the defendants, but were
subsequently withdrawn by agreement of counsel and a demurrer filed
alleging that the bill made out no title to the discovery sought in
the interrogatories, and did not contain sufficient matter of
equity to establish the claim for relief.
The hearing coming on upon bill and demurrer, on 8 February,
1848, the demurrer was sustained, the injunction dissolved, and the
bill dismissed with costs, and from this decree the complainant
below prosecuted an appeal to this Court.
The appellant contends:
1. That the notes from one to thirteen inclusive, by virtue of
the executory process of seizure, sale and purchase averred in the
bill, became the property of the complainant in his own right as to
eleven of them, and to one-half the other two, the other half
having been originally in J. W. Nixon.
2. That as such owner of said notes, he had a specific lien upon
the property, real and personal, mentioned in the bill.
3. That upon that ground alone, as well as upon the ground of
discovery, he had a right to the relief prayed.
4. That he was entitled to relief also upon the ground of the
corrupt combination and conspiracy between the defendants, Dick and
Hill and James M. Wall, to defraud the complainant, as well as upon
the ground of like combination and conspiracy between Dick and Hill
and William S. Parham to defraud the creditors of said Wall.
5. That if the property subject to the encumbrance of said notes
is not in the hands of Dick and Hill responsible for the whole
amount of the notes, it is at least responsible in the proportion
that said amount bears to the sum of $35,979.79, with the interest
thereon, being the amount of the note made by Wall to Dick and Hill
dated 31, January, 1846.
No counsel appeared for the appellees, Dick, Hill and Parham,
and as it does not appear by the demurrer on what grounds of
defense the respondents relied in the circuit court, or wherefore
the court dismissed the bill, we have examined for ourselves, so
far as we were enabled, whether any legal defect exists in the
Page 53 U. S. 206
proceeding and process under which the notes were seized and
sold. The bill alleges that all the steps taken were in due form of
law; nor is anything found in its statements contrary to the laws
of Louisiana, so far as we can ascertain, that will render the sale
void.
And as the bill stands on demurrer, and nothing beyond its
allegations can be considered, it is not possible for us to say
that the complainant is entitled to no relief at all, and therefore
dismiss his bill. He paid only six hundred dollars for these
thirteen notes, calling, in the aggregate, for $260,000; but this
was paid on an execution sale, admitted by the demurrer to have
been open to competition, regular, and fair. The payer, Parham, may
have been insolvent and the mortgage of no value for want of title
in the mortgagor. In such event, no startling inadequacy of price
could be predicated of the enormous disparity between the nominal
amount of the notes and the price paid for them. Complainant is
entitled to relief as the case now stands, certainly to the extent
of the six hundred dollars and interest on it, and, he having a
right of possession and owning the judgment, it is not perceived
how he could be deprived of the notes until his whole judgment was
satisfied. Or his rights may extend to an enforcement of the
mortgage and all the notes. We deem it useless further to speculate
on these matters at present.
On the other hand, the execution sale may be void for reasons
that can be brought out in evidence, but which are not now open to
controversy because the bill alleges that the proceeding under
which complainant purchased was regular and
bona fide. Or
again because of want of title in Wall to the notes and mortgaged
property at the date of the levy and sale. These matters, or any
others set up in defense, respondents may bring forth by their
answer if they think proper to do so.
All we mean now to say is that complainant has made a
prima
facie case for answer and for relief, and it is the duty of
respondents, if they mean to defend, to meet that case by answer
and to show, if they can, that no relief should be granted, or, if
any, to what modified extent compared with the entire relief
prayed. We therefore feel ourselves bound to reverse the decree and
to overrule the demurrer with leave to respondents to answer in the
circuit court when this cause is returned there on our mandate.
MR. JUSTICE NELSON dissented.
I am unable to assent to the decision of a majority of the Court
in this case.
The complainant has purchased at sheriff's sale thirteen
promissory notes, given as part of the purchase money upon a
Page 53 U. S. 207
sale of a large plantation and slaves, and secured by mortgage
on the same to an amount exceeding $260,000 for the small sum of
$600, and asks the interposition of the extraordinary powers of
this Court on the equity side to aid him in realizing this enormous
speculation.
I think he should be left to his remedy at law, and this upon
the established course of proceeding of a court of chancery in
these cases.
In
Seymour v. Delancey, 6 Johns.Ch. 222, Chancellor
Kent held that a specific performance of a contract of sale is not
a matter of course, but rests entirely on the discretion of the
court upon a view of all the circumstances. And that though mere
inadequacy of price, independent of other circumstances, is not of
itself sufficient to set aside the transaction, yet it may be
sufficient to induce the court to stay the exercise of its
discretionary power to enforce a specific performance. All the
cases on this subject will be found reviewed in that case, and also
by Chief Justice Savage in the Court for the Correction of Errors
where the decree in that case was affirmed. 6 Cow. 445.
The chancellor, after having referred to many of the cases
particularly, observed that these cases show the antiquity of the
doctrine of the court, and that the power of awarding the specific
execution of contracts for the sale of land rested in sound
judicial discretion, and was not to be applied to cases that were
hard, or unfair, or unreasonable or founded on very inadequate
considerations.
The strong ground against enforcing a contract where the
consideration is so inadequate as to render it a hard bargain and
an unequal and unreasonable bargain is that if a court of equity
acts at all, it must act
ex vigore and carry the contract
into execution with unmitigated severity, whereas if the party be
sent to law to submit his case to a jury, relief can be afforded in
damages with a moderation agreeable to equity and good conscience
and when the claims and pretensions of each party can be duly
attended to and be permitted to govern the assessment.
In the case before us, if the court undertakes to give relief,
it would seem from the established rules of proceeding in equity
that it will be bound to award to the complainant the full amount
of the notes in question, and thus, enable him to realize upwards
of $260,000 upon a purchase at the price of $600; in other words,
virtually awarding to him for this small consideration an estate
which Wall, one of the defendants, had sold for a sum exceeding
$260,000, as the notes in question constitute part of the purchase
money and the payment secured upon this estate.
Page 53 U. S. 208
The inadequacy of the consideration is far beyond that of any
case that has come under my observation in the course of this
examination, and is such as to shock the common sense of
mankind.
In many of the cases in which the Court has refused to
interfere, mainly on the ground of inadequacy of price, only half
the value had been agreed to be given. That was considered as
sufficient evidence of a hard and unconscionable bargain to induce
the court to pause, when its extraordinary powers were invoked to
the aid of the party seeking to realize the advantage of the
contract, and turn him over to a court of law.
The complainant in this case is not without a remedy. If he has
got a legal right, he can go into a court of law and enforce it.
But I do not think it a fit case for the interposition of a court
of equity.
I do not regard the allegation of a fraudulent attempt on the
part of the defendants to prevent the complainant from realizing
the benefit of his purchase, as the question whether or not a court
of equity should interfere and grant the relief prayed for, in my
judgment, is wholly unaffected by any such considerations, for
assuming the fraud should be hereafter established, and this
impediment to the enforcement of the claim set up under the
purchase, removed, even then, according to the course of proceeding
in a court of equity, as already stated, that court would withhold
its extraordinary power from aiding the party to obtain so unjust
and unconscionable advantage, and turn him over to a court of law.
By entertaining the case as presented in the bill and directing an
answer, the Court assumes that if the complainant can establish the
fraud in the transfer of the notes as charged, he is entitled to
its decree for the whole amount of his purchase, for as we have
seen, a court of equity must act, if at all,
ex vigore,
and carry into execution the purchase as it has been made. It
cannot consistently, in the exercise of its power on this subject,
carry the purchase into partial execution by separating it,
granting the execution in part, and withholding it in part. This
would be arbitrary and unsupported by any rule or principle to
guide the judgment of the court.
Whether the court will entertain the case at all or not and give
the relief prayed for in these cases is a question of judicial
discretion, but when once entertained and held to be a proper case
for the relief, there can be no other given consistent with
established principles than such as the legal title or right set up
carries along with it. If it gives to him an estate in land, the
court cannot stop at a moiety of it, nor, in this case, in awarding
any amount less than the $260,000. The legal title to the whole
amount is as complete as to any portion of it.
Page 53 U. S. 209
For these reasons, thus briefly given, I am obliged to dissent
from the decision in this case.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Eastern
District of Louisiana and was argued by counsel. On consideration
whereof it is now here ordered, adjudged, and decreed by this Court
that the decree of the said circuit court in this cause be and the
same is hereby reversed with costs, and that this cause be and the
same is hereby remanded to the said circuit court with directions
to overrule the demurrer of the defendants with leave to them to
answer and for such further proceedings in conformity to the
opinion of this Court as to law and justice may appertain.