Morris & Co. v. Alston

92 Ala. 502

• Court: Supreme Court of Alabama
• Decided: November 15, 1890
• Status: Published

Opinion

WALKER, J.

-On January 19th, 1889, according (o the •claim of Lehman, Durr & Co., there was due on Alston’s account, which was secured by Iris mortgages. $6,572.70. On. that day Mr. Alston, in company with Mr. Goctter, a member of the firm of Lehman, Durr & Co., went to the banking house of Josiah Morris & Co., and executed his note to them for the' sum of $6,875, receiving their check for that amount. ITe immediately took the check to the house of Lehman, Durr & Co., delivered it to them, and thereupon they gave him a receipt in full of his account and paid him in money the difference between the amount of the check and the amount of the •account. On the face of this transaction it operated as an absolute payment and discharge of the claim of Lehman, Durr & Co., against Alston and the creation of anew and independent liability on his part to Josiah Morris & Oo. It appears, however, from the pleadings and the proof in the case, that the parties have not regarded or treated the transaction as having that effect. When Mr.‘Alston accepted the receipt of his account, he did not ask for the mortgages or demand their cancellation, as, it is to be supposed, he would have done if he had understood that by the delivery of the check he had fully paid and satisfied the claim of Lehman, Durr & Co. In the letters written by him to Josiah Morris & Co. within a few days after the transaction the expressions used by him are not reconcilable with the existence of an understanding on his part that the mortgage indebtedness had been extinguished by the transfer of the check. And, finally, such claim could not be made by him under the averments of his bill in this case.. The bill makes no mention of said check of Josiah Morris & Co. From the detailed statement of the usurious elements in the claim of Lehman, Durr & Co., and from the averment that the notes and mortgages have been paid after deducting the usurious charges, it is plain, especially in view of the fact that the matter of the check was wholly ignored, that it was the intention of the pleader to rely, for support in his contention that all that was legally secured by the mortgages had been fully paid, upon his payments made on the account in previous years and upon the rejection of charges which represented the usury in the transactions. Having alleged that the payment was made in a particular manner, complainant’s bill could not be su|>ported by proof of payment in another and wholly different mode. There are no allegations to correspond with such proof. The state of his pleadings precludes Mr. Alston from claiming in this suit that he paid off the debt to Lehman, Durr & Co. by the transfer of the check io them.— Gilmer v. Wallace, 75 Ala. 220. The acts of the defendants, on the other hand, are equally inconsistent with any claim they may now make that the debts to Lehman, Durr & Co. were really paid off' and discharged, or that the security of the mortgages was transferred to a new and independent debt to Josiah Morris & Co. Lehman, Durr & Co. could not have regarded the transaction as having the effect of a payment of the mortgage debt; for, after giving the receipt, they transferred the mortgages as subsisting obligations to Morris & Co. having assured them of the sufficiency of the security. Morris & Co. accepted the mortgages on this assurance without demanding other security and without any inquiry at all as to the solvency of Mr. Alston,, with whom they were wholly unacquainted up to that day. It is plain from this that they did not understand that the mortgages had been discharged by the payment of the debt secured thereby. The absence of such understanding on their part is conclusively shown by their proceedings to foreclose the mortgages. Nor does it appear that the transaction can be treated as having effect to discharge the mortgages, so far as the debt to Lehman, Durr & Co. was concerned, and yet to keep them alive as security for a new and independent debt to Morris & Co. In the first place, Morris & Co. did not understand the transaction to have this effect. This is shown by their efforts to get Alston to execute a new mortgage tO' secure his note to them. If that note was already secured by the mortgages transferred by Lehman, Durr & Co. there was no need of a new mortgage upon the same property and to secure the same indebtedness. Furthermore, the contention that the note to Morris & Co. was secured by the old mortgages involves the proposition that by a parol agreement a mortgage may be so altered in its operation as to stand as security for a new debt, different in character and amount from tba' mentioned in the instrument, payable at a different time and to another person. We do not think that this is permissible, especially in view of the fact that the conduct of the party who now makes the claim evidenced a different understanding, and in the absence of clear proof of any expressions ; by the parties of an intention to make such a complete substitution. — Tucker v. Alger, 30 Mich. 67; Wilhemi v. Leonard, 13 Iowa, 330 ; Jones on Mortgages, § 355. Indeed, there'are several circumstances which much more indicate that the; transaction was a mere temporary expedient arranged by Lehman, Durr & Co., than that it was intended to work such a complete change of relations as it- is now contended • was effected thereby. From Alston’s letters written to the defendants within a few days after the transaction, it appears that he understood it as an arrangement made between the defendants, that he did not at the time know of the transfer of the mortgages, and that he expected Lehman, Durr & Co. to extend his indebtedness and make him further advances on his; executing to them a new mortgage. That he may have relied on such understanding, although he was informed that matters-would not be definitely determined until Mr. Lehman should come, is indicated by the fact that on the day oí the transaction and as a part thereof, according to his testimony, he received from Lehman, Durr & Co. a new mortgage covering the amounts of the check and of the advances desired for the coming year, to be taken home and executed by himself and wile. 'The fact that this mortgage described the same, property as that described in the mortgages transferred to Morris & Co. strongly indicates a purpose on the part of Lehman, Durr & Co. to pay off Morris & Co. as part of the consideration for the new mortgage. Morris & Co. evidently did not expect Alston to pay the note executed by him at its maturity in less than two weeks from its date. It is probable that Mr. Billing would have examined the mortgages or made some inquiry to ascertain what was secured thereby if he had expected to get-some stranger to them to take them up. His carelessness in, this regard suggests that he relied on Lehman, Durr & Co. taking back the mortgages as soon as Mr. Lehman should come and the matters of that firm be adjusted. His conduct and his testimony are well calculated to convey the impression that this was really his expectation. Whether such was thé fact or not it is unnecessary to determine. But the circumstances which have been referred to, when viewed in the light of the manifest understanding of all the parlies that Lehman, Durr & Co. should receive the amount of their claim from the check of Alston, through whom the payment was made really to them, and in the light of the distinct understanding between Morris & Go. and Lehman, Durr & Co. that the latter should transfer the mortgages as subsisting securities, convince us that the transaction did not, as indicated by the form of a part of it, operate to extinguish the debt secured by the mortgages, and to create a new indebtedness; and that the intentions of the two defendant firms in their dealings with each other in this matter can be carried out only by treating the entire transaction as merely affecting a transfer by Lehman, Durr & Co. of their debt and the mortgages securing the same. Equity will not suffer mere appearances and external forms to conceal the true purposes, objects and consequences of a transaction. 1 Pomeroy’s Eq. Jur., § 378, et seq. It is but a recognition of the real relations of the parties, and a furtherance of the purposes sought to be accomplished, to hold that the result of the transaction, so far as concerns the relations of Monis & Co. to the mortgages, was to preserve the life of the mortgages -and of the debts secured thereby, changed only in 'the fact that Morris & Co. were substituted as the holders thereof in the stead of Lehman, Durr & Co. — Kierson v. Baldwin, 62 Ala. 526; McGuire v. Van Pelt, 55 Ala. 344; Boyd v. Beck, 29 Ala. 712; Hall v. Southwick, 27 Minn. 234 ; 8 Pomeroy’s Eq. Jur., § 1211.

Treating the transaction as a mere assignment of their claim and mortgages by Lehman, Durr & Co., the matter next to be •considered is the contention of Morris & -Co. that there is an •estoppel in their favor against Alston to preclude him from setting up usury in order to reduce or extinguish the debt in their hands. Morris & Co. arranged with Mr. Goetter to take the mortgages before they had ever seen Mr. Alston. Alston •says he did not know what papers were in the package handed ■by Mr. Goetter to Mr. Billing, and that he knew nothing of the transfer of the mortgages. Mr. Billing does not remember that Mr. Alston said anything about those papers at all. He ■said nothing to him about the transfer of the mortgages and asked him no questions about his indebtedness to Lehman, Durr & Co. It does not appear from Mr. Billing’s version of the interview at which Mr. Alston was present, that the nature of the transaction of the bank with Lehman, Durr & Go. was made -known to Mr. Alston or that he did or said anything indicating a purpose on his part to mislead or to deceive. The talking, or most of it, at any rate, was done by Mr. Goetter and Mr. Billing. It does not satisfactorily appear by a preponderance of the evidence that Mr. Alston knew what was the arrangement made by Mr. Goetter with Lehman, Durr & Co., or that it was brought to his knowledge that the mortgages against him were to be transferred to Morris & Co., or that it was intended that they should thereafter operate to secure the note then executed. Furthermore, it affirmatively appears from Mr. Billing’s testimony that he was not relying on what Mr. Alston should say or fail to say. lie asked him no questions, sought no information from and had no conversation with him as to the nature of the transaction, tie says that he took the papers upon Mr. Goetter’s assurance that they were all right. In several particulars the proof falls short of ■what is requisite to the creation of an estoppel. The burden of proof is upon the party claiming the benefit of the estoppel; and as estoppels may operate to exclude the truth they must be certain to every intent for no one should be denied the right of setting up the truth, unless it is in plain contradiction to his former allegations or conduct. — Miller v. Hampton, 37 Ala. 342. The object of the law in enforcing estoppels is to prevent fraud on the parties invoking them. A person who is fully aware of the nature of a transaction between others may not intentionally conceal his interest in the matter dealt with so as to mislead a stranger. On the other hand, if the transaction is not clearly disclosed to him when his known relations 1 hereto would naturally suggest the imparting of such information to him, when the parties wholly refrain from considering him in the matter and make it plain that they are not relying on anything he may say or do, then his mere presence can not have the effect of entrapping him into an estoppel when he was not conscious of the existence of any fact put ling upon him the duty to speak. It does not sufficiently appear in this case that Mr. Alston had that knowledge without which an estoppel based on his silence would operate as a fraud on him rather than for the just protection of Morris & Co. It was incumbent on Morris & Oo. to make a satisfactory showing; by the preponderance of the evidence that Mr. Alston was so informed of the character of the transaction in reference to the transfer of mortgages that his failure to mention the usury affecting them could be regarded as willful or as incompatible with innocence of intention on his part. Mere silence, without these features evidencing a fraudulent purpose, does not have effect to raise an estoppel. — Steele v. Adams, 21 Ala. 534; Walls v. Grigsby, 42 Ala. 473. The fact, clearly appearing from the testimony of Mr. Billing, that he relied wholly oi< Mr. Goetter’s assurances and not at all on what Mr. Alston said or did not say, is another and conclusive reason for rejecting the claim to an estoppel. If he was misled by any one, it was by Mr. Goetter, in whom alone confidence was jffaced, and who knew of the usury in the debts assigned. An essential element of estoppel by conduct is that the party in-yoking it must have‘been induced to act upon the representation or concealment. In the present case Alston’s conduct or silence Avere neither looked to nor relied on. Morris & Co. ignored him and relied on Lehman, Durr & Co. alone. The claim that they Avere induced to accept the transfer by anything said or done by Alston is refuted by the testimony of Mr. Billing. The estoppel can not result from conduct which was not relied on at all. — Leinkauff & Strauss v. Munter, 76 Ala. 194; Brewer v. Brewer, 19 Ala. 481.

It does not appear from the testimony that at at the time Alston execiited the note to Morris & Co., it Avas contemplated that he should gWe a new mortgage to secure it. If,, from the attempt of Morris & Co. to get a neAV mortgage and from other circumstances in proof, it could be inferred that Morris & Co. gave the check to be applied in paying oil the old mortgages with the understanding that a neAV one aves to be substituted in their place, then, on Alston’s failure to give the neAV mortgage, the rights of Morris & Co. in reference to the old mortgages could be no greater than such as would be acquired by a subrogation to the position of Lehman, Durr & Co. — Bolman v. Lohma, 74 Ala. 507. As a subrogation is merely the substitution of one person in the place of another and giving him his rights, Morris & Co. would in that mode acquire only such •rights as Lehman, Durr & Co. had. As to the interest of Morris & Co., the result would be practically the same as is reached by treating the transaction, so far as the mortgages are concerned, as a mere transfer thereof. It has been shown, that, on the evidence, the transaction is to be so treated in order to effectuate the substantial purposes of the parties. And, as Morris & Co. are insisting upon the foreclosure of the mortgages, they are to be regarded, in this proceeding, as not relying on the unsecured note, but as accepting their position as mere transferees of the mortgages. Occupying that position, and Alston not having estopped himself -to set up the •.usury, the mortgage claim in their hands is subject to deductions to the extent as may be shoAvn to be conrposed of usurious elements. — McCollough v. Mitchell, 64 Ala. 250; Purdue v. Brooks Brothers, 85 Ala. 459.

The decree of the Chancery Court determining the equities •of the parties and ordering a reference to state the accounts is not inconsistent with the conclusions we haA^e reached. We .discover no error in it.

Affirmed.