Pratt v. Ayer

3 Pin. 236, 3 Chand. 265

• Court: Wisconsin Supreme Court
• Decided: June 15, 1851
• Status: Published

Opinion

Hubbell, C. J.

The appellant claims as a purchaser, under Isaac C. Owen ; and admitting, for the purpose of the decision, that their rights are identical, it becomes necessary to inquire what was the original transaction between Owen and the ap-pellee. In my judgment, the transaction must be resolved into one of three forms; which may be stated as follows:

1. Ayer purchased the land in controversy, from the United States, absolutely and unconditionally for his own benefit, and afterwards made a contract of sale, with Owen, as any other owner might or would do ; or,

2. Ayer loaned to Owen $400, to enter the land, and after-wards entered the land for him, and took and held the title as a security, by way of mortgage, for the repayment of the principal and a sum exceeding lawful interest, or,

3. Ayer acted as the agent of Owen, in advancing the money, entering the land and taking the title, and now holds the land in trust, to be conveyed to Owen on the terms and conditions mentioned in their written contract. Let us examine these positions in their order. Excluding the parol evidence, Owen undoubtedly appears a simple purchaser by contract ; and inasmuch as the time limited for the payment of the entire purchase money has elapsed long before the filing of the bill, and as payment or legal tender of the amount due on the contract is not shown, his rights, upon this hypothesis, must be regarded as forfeited and lost; and the decree of the circuit court, for that reason, must be affirmed. But a majority of the court do not take this view of the case, and I will not consume time by discussing the principles which lead to the suggested conclusion.

Can the transaction be resolved into a loan of money and a security for its payment ?

This position was strenuously and ably contended for by the appellant’s counsel, who maintained not only that there was a mortgage to which the right of redemption attached, but a usurious loan, and that Owen, the mortgagor, was entitled to redeem on payment of the actual sum advanced (ten shillings per acre for the land), and interest at seven per cent, per annum. If the loan of money and security for its repayment were admitted, it cannot be denied that the alleged results would follow; lapse of time and failure to comply with the terms of the contract would create no change in the relations of the parties. The rule, once a mortgage always a mortgage; would apply; and the court would have no doubt of the right of the mortgagor to redeem on payment (under the statute in force when tbe contract was made) of the principal sum loaned and legal interest. There would be a question of more difficulty, however: Whether a complainant, being a party to the usury, could invoke the aid of equity, first to discover the fact of an illegal contract and then to affirm it in part, and dis-affirm it in part, for. his benefit? It will be time enough to decide a question of so much nicety when its settlement becomes imperative.

The usurious agreement for a loan is by no means clearly established. The evidence shows that Owen made application for a loan of money to enter his land, to which Ayer replied in substance, that he was willing to enter it in his own way; and then states the terms, which were the same finally agreed upon and carried out by the parties. He made no agreement, except to enter the land “for Owen,” in his “own way.” This indeed presents a case, where senses, keen on the scent of usury, might track out a “ contrivance to evade the statute,” but even if we could venture to assume (for it must be assumption at least) that there was an “ agreement for a loan,” there is yet more difficulty in finding that there was a security executed by the borrower to the lender in the nature of a mortgage.

A mortgage is a contract of sale executed with power to redeem. Powell on Mortgages, ch. 2, p. 24. The particular form of the transaction is not material, provided there is a conveyance executed, or procured to be executed, by the borrower to the lender, to secure the payment of the money. “ To constitute a valid mortgage,” says the same learned author, “ there must be a mortgagor, who must be a person capable of granting, conveying or assigning the land or thing mortgaged; a mortgagee, who must be capable of a grant, conveyance or assignment to him; and a thing mortgaged, which must be granted or assigned in that order or manner which the law requires.” Id., ch. S, p. 77. Now if we assume upon the evidence that Ayer agreed to advance money and purchase the land in question of tbe United Statés; to take and bold tbe title, and to give Owen a contract of sale, of tbe form and tenor of that shown to tbe court; and that Owen, on bis part, agreed to buy tbe land of Ayer, at tbe price and upon tbe terms and conditions of the written contract; or (perhaps I should say), agreed to enter into such a contract as tbe conclusion of tbe arrangement; and that this agreement was literally and fully performed by tbe parties, up to and including tbe execution of tbe contract; still there seems to me one essential requisite of a mortgage wanting. Owen, the assumed mortgagor, did not convey, nor procure to be conveyed to Ayer, the assumed mortgagee, any right or interest whatever in the land. When their negotiations took place, the title of the land was in the United States. Though Owen had possession in fact, he was not in any just sense, a person capable of granting, conveying or assigning the thing mortgaged. And what is more, he did not undertake or agree to do it. He agreed to let Ayer enter the land for him; and Ayer so entered it, and paid for it. If he paid for it with the money of Owen, there was a resulting trust to Owen ; but if with his own money, then he was an absolute purchaser, unless for a proper consideration he bad agreed to enter it in trust. At all events, Ayer procured the title to be transferred from the United States to himself, and unless he was his own mortgagor, I profess myself unable to comprehend how he became, in any proper sense, a mortgagee; and much less can I comprehend how Owen became entitled to an equity of redemption in that which he never owned and never transferred or procured to be transferred.

This case differs essentially from that of Rogan v. Walker, 2 Pin., 463; but the court there carefully avoid saying there was a mortgage or a security of that nature. Walker, who entered the land in pursuance of a previous agreement, after-wards actually conveyed it to Rogan; and it was claimed that the deed was conditional and had been absolutely forfeited. Tbe court held that tbe whole was one transaction, and that Rogan beld tbe whole title to tbe land, subject to tbe lien of "Walker for some sum which it did not undertake to determine. This sum might be unpaid purchase money, or money advanced to enter the land upon a trust arrangement. As the case is yet before the supreme court, I will not comment on points designedly left undetermined. I proceed to the last position.

Did Ayer act as the agent of Owen in advancing the money and effecting the purchase? and does he hold tbe land, under their agreement, in trust ? It is said a trust cannot be established by farol. This is undoubtedly true. Steere v. Steere, 5 Johns. Ch., 1; Letcher v. Letcher's Heirs, 4 J. J. Marsh., 598. And here, I conceive, lies the chief difficulty in the view taken by the majority of the court in this case. But the existence of a trust need not be declared in express terms. It may be proved by any proper written evidence, by an answer, or by a note, letter, or memorandum in writing, disclosing facts which create a fiduciary relation. McGubbin v. Cromwell, 7 Grill & J., 157; Forster v. Hale, 8 Ves., 696; Jackson v. Moore, 6 Cowen, 706; Steere v. Steere, supra. The written contract executed between Ayer and Owen disclosed the essential particulars of the present trust sufficiently to take the case out of the statute of frauds. The parol proof was properly admitted to show the circumstances out of which the contract grew. They all tend to the affirmance of the contract. If there had been no written contract, the circumstances alone, however strong, could not be shown to establish the trust relation. And hence it is true, that had Ayer, after entering the land, refused to execute the contract, though the relations of the parties would have been the same, Owen might have been deprived of a remedy by the statute of frauds. But the agreement was fulfilled — the written contract executed; and it is no new doctrine that courts of chancery will look into the circumstances to see why a deed, bond, contract or other written instrument was executed. Such a writing was' precisely what was wanted in Steere v. Steere, supra; and the learned chancellor of New York, while denying the sufficiency of the lame efforts to make out written evidence of the fiduciary undertaking of the defendant in that case, dis: tinctly asserts the principle here acted upon. It is to be observed that the sworn answer of Ayer denies the trust purpose for which the land was entered; but the evidence was quite too overwhelming to leave any question as to the anterior agreement made between him and Owen. It was contended, however, in argument, that this agreement, if made, was without consideration and mutuality. We have thought otherwise., When the verbal arrangement was made, Owen was in possession of the land, having made valuable improvements, with the bona fide intention of purchasing whenever the lands were put in market. His possession was of value, in the estimation of the settlers; and it was in a fair way to-be protected, as we have seen, by the unauthorized but efficient regulations adopted by the community. Sales and transfers of such, possessing rights or “claims,” were frequently made, and for large sums actually paid. They were,, then, worth money, because they would bring it; and it is too late in the day to say that the occupant was a mere' trespasser when taking possession of and improving public lands, with a view to effecting a purchase of the title at government prices. Such alleged trespassers have peopled and fertilized the great west, until the wilderness was made to bud and blossom as the rose, ere the tardy movements of the government provided a means of securing a title by the hardy piotieer.

But congress has recognized the rights of the settler, by passing frequent preémption laws for his benefit; and it is only in the abstract and upon principles more nice than wise, that the courts can hold occupancy and actual cultivation of the public lands as a trespass; or the transfer of such a possession as without consideration.

Were it material in this case, it would be difficult to say that a voluntary surrender of sucb possession and waiver of such, claim of right of entry, in favor of a purchaser, was not a sufficient consideration to support a promise. But the agreement made between the present parties rests upon no such questionable grounds. As the case comes before us, it is an executory agreement. The condition on which Ayer made the entry was, that Owen should enter into the contract produced in evidence. This was done. The execution of the contract by Owen was a fulfillment of their verbal agreement, and is a consideration which Ayer cannot deny. He has had, and perhaps still has, a legal right to sue upon this contract and collect twice the sum actually advanced, and the interest. This is a consideration not only good but sufficient. Again, Owen was equally entitled, by paying the money, to fulfill the contract, and get a conveyance of the land. This is mutuality. But another point was raised, which commands notice. It was contended that Owen’s prior agreement to purchase the land, if made, was in violation of the act of congress of March 81, 1830, and that the written contract growing out of it was void. We think the act does not apply. It prohibited any agreement with “ any person or persons proposing to purchase,” etc., “ to pay or give such purchaser a sum of money, over and above the price at which the land may be bid off,” etc. Here Owen was the person “ proposing to 'purchase.” He was in possession and desirous to obtain title. But for the agreement by which Ayer undertook to enter the land for him, certainly Ayer would have had no idea of purchasing. Ayer was only the nominal, Owen 'the real purchaser and owner of the land. In other words, Ayer was a mere trustee, taking and holding the title for the use and benefit of the cestui que trust, subject to the payment of the sum stipulated beforehand.

This is the view which a majority of the court, after a very careful consideration, have taken of this transaction. Against it, the appellant’s counsel have strongly urged, 1. That the alleged commission of the trustee is unreasonable, extortionate and without precedent; and 2. That the whole transaction waá a mere contrivance to evade the interest law of the territory ; and that equity, throwing off the disguise and looking at the intention of the parties, must hold the agreement void for usury.

It is not a little singular that a contract of this character is now, for the first time, brought before the supreme court of Wisconsin. It would relieve the case of some embarrassment, if contemporaneous courts had passed upon the transaction, at the time of its occurrence. Principles of equity, always flexible, and to be applied according to the actual state and condition of communities and their established business relations, might not have seemed strained by being made to conform to the then actual condition of things.

The history of the times shows that the present transaction was but one of thousands, which spring from necessity, out of the circumstances of the early settlers, and the condition and price of the public_lands. Money was scarce, land was cheap. Settlers and capitalists made such arrangements as suited their respective circumstances and interests; and the result was unquestionably, a mere division of profits. That these agreements were entered into fairly and voluntarily, is evinced by the fact that they have been so uniformly held inviolable. The peculiar circumstances which induces them, probably never existed in the older states of the Union, or in England, and hence the absence of like cases in their courts. Shall we now impeach the validity of a contract, mutually advantageous and voluntarily entered into, simply because other courts, adjudicating under widely different circumstances, might have held it unreasonable, and therefore void ? Shall we say that the amount of the commission in this case is evidence of a design to cover usury, when we can see clearly, and the parties themselves believed, that the amount agreed upon was an equitable division of profits, in proportion to their respective undertakings and risks.?”

It is a poor rule that arbitrarily applies precedent when the reason that induced it has passed away. It is a good and sensible rule, that courts, when they can discover a proper motive for any business transaction, should not conjecture designs which will render it illegal. This most reasonable doctrine has not wanted support, even in the courts to which we are invited to look for precedents. 4 Brown’s Ch., 28; 19 Johns., 496; 9 Peters, 378; 4 Comst., 225.

Those who operated in the purchase of lands at an early day may have avoided or evaded the usury law of the territory. But was that the prominent design of the parties ? Was it the controlling purpose of the present arrangement? It seems to me gratuitous and unjust to draw such a conclusion when other and abundantly good reasons existed for the very arrangement that was made. The trust character which we attach to the transaction not only secures actual justice, but it seems to me the only construction which will carry out the actual intention of the parties themselves. Ayer undertook to act-in a fiduciary capacity; and it would be an unwelcome necessity which would force us to give his contract a different construction, and allow other parties to take the benefit of its fulfillment on paying-one-half only of the stipulated sum and interest.. Hot less unjust would it be to allow him to disclaim the trust and hold the land absolutely, on forfeiture of the contract.

There is no sufficient ground, either in reason or authority, for disturbing the decree of the circuit court; and it must be affirmed with costs.