Walker v. President, Directors & Co. of the Farmers' Bank

On the 8th day of Movember,. 1873, WilliampValker executed a bond and mortgage in favor of the President, Directors, and Company of the-Farmers’ Bank of the State of Delaware, for the sum of $22,406.37. Mrs. Walker joined in the mortgage.

Fifteen different parcels of land were conveyed by this-mortgage. An amicable scire facias was docketed, between the bank and Walker and wife, on this mortgage the 23d day of March, 1876, and judgment thereon was. recovered by^t-lie bank against them, for the said sum of $22,406.37, with interest from April 18, 1875.

The interest due by Walker and wife to the bank on this judgment being in arrear, a levari facias was issued on said judgment on the 26th day of January, 1881, proceedings on which were subsequently abandoned, Walken having made arrangements for the payment of his arrears of interest. The interest being again in arrear, a second levari facias on said judgment was issued on the 8th

On the 11th day of February, a third writ of levari - facias was issued on said judgment; Walker being again in arrear with his interest, and the principal of said judgment being wholly due and unpaid.

On the 22d day of February, 1883, Walker and his-wife executed a deed of conveyance to the bank for nine different parcels of the above-named lands; five of said parcels having been sold at public sale by Walker in the month of December previous, and one of said pieces,, called the dry-house lot, being omitted from said deed for reasons clearly stated by witnesses who have been examined in the cause.

The consideration stated in the deed seems to have been nominal, being the sum of $26,000, the real consideration (as proved by the witnesses) being the release by the bank to Walker of his entire indebtedness to the bank, which then amounted to the sum of $25,277.36 also the payment by the bank of a mortgage, in favor of one Bespham, on which there appears to have been due about $6,988.67; and the payment of a judgment of one Pearson against the said Walker, on which was then due about $85.

The Dupont mortgage had been theretofore assigned to the bank. It and the Bespham mortgage and the Pearson judgment were liens upon the lands of Walker. The entire indebtedness of Walker to the bank, and on account of prior liens which the bank assumed to pay and did pay on the 22d day of February, 1883,—the date of the deed from Walker and wife to the bank,— was the sum of $32,351.32.

The bank subsequently, at private sale, disposed of all these nine parcels of land conveyed to it by Walker and.

The bank, in its answer, says that by far the greater part in value of these lands were sold by it on credit, and the consideration price for most of them has not yet been received by it, but remains unpaid; but it admits that the aggregate price for which it sold them exceeds the consideration price for which Walker sold them to the bank, to the amount of between §2,200 and $2,300.

The bill was filed by Walker in his lifetime, against the bank, to compel the payment by it of this amount, which he claims was equitably due him from the bank.

The question in the case is whether the deed of the 22d day of February, 1883, absolute in its terms, is to be allowed to have force and effect, according to its import, ■or be declared as between the parties to have the effect of a mortgage for the security of the subsisting debt. The determination of this question depends upon the manner in which the deed was procured, and the objects and purposes contemplated by the parties, and upon the intention of the parties at the time it was executed as shown by all the surrounding facts and circumstances.

The relation of mortgagor and mortgagee existing between the parties at the time of the execution of the absolute deed in question should cause the court, as has been often said in other cases, to view with distrust, and to scrutinize with closeness, the negotiation that led to the making of the deed whereby it is now claimed that the right of redemption has been extinguished and the previous mortgage converted into an absolute sale; or, in other words, whereby the complainant is debarred the right of recovering from the defendant the excess of amount of sales of the mortgaged property over the amount of the indebtedness of the complainant to the ■defendant at the time of the execution of the mortgage.

Although the equity of redemption may be sold or disposed of to the mortgagee, yet, unless the transaction appears to be fair and unmixed with any advantage taken by the mortgagee of the necessitous circumstances of the mortgagor, equity will hold the parties to their original relation of debtor and creditor. Dougherty v. McColgan, 6 Gill & J. 275.

In the case of Baugher v. Merryman, 32 Md. 185 , the ■court says: “As the debt was not the appellee’s and for which she was not personally bound, if the property was really worth more than the mortgage debt at the time, the appellant paid nothing for the right of redemption.” Again : “That the proposal to convert the mortgage into ■a sale was made and urged by the appellant, is fully admitted in his answer; the alternative proposed being •either an absolute sale of the property or an immediate foreclosure and sale. That the appellee was distressed and perplexed with such an alternative persistently pressed upon her, it is not difficult to conceive, and as a fact is fully shown by the proof in the cause. She had in fact no power of escape, having agreed to a decree for -a foreclosure; the only chance of avoiding being turned •out of house and home summarily was by yielding to the

In this case the mortgagee sold the mortgaged premises for more than twice the amount of the mortgage debt; and this is at least some evidence of that inadequacy of price against which a court of equity will relieve. In this case the judge remarked that from a careful reading of the record he was convinced that there was an understanding that, although the deed was absolute on its face, it was to be regarded only as a means of better securing the appellant’s debt, and that the surplus-to arise from the sale of the property after payment of the mortgagee’s debt was to be accounted for to the appellee. Surely there were sufficient reasons in this case for a decree in favor of the appellee without referring toiler distress and vexation, which reference was wholly unnecessary. All debtors probably are distressed when their property has to be sold for the j>ayment of their debts; but distress and anxiety on account thereof afford, of themselves, no ground for equitable interposition.

There is no doubt that in equity a conveyance, whatever form it may assume, will be treated as a mortgage-whenever it appears to have been taken as a security for an existing débt or a contemporaneous loan; and the inclination of the courts is, in doubtful cases, so to treat it- and allow the grantor to redeem.

In the case of Hinkley v. Wheelwright, 29 Md. 348 , the court says: “Nor does the fact that parties stand in the relation of mortgagor and mortgagee prevent their dealing with each other - as vendor and purchaser of the equity of redemption. Such transactions will not be set aside unless for manifest unfairness or inadequacy of consideration.”

Lord Redesdale, in the case of Webb v. Rorke, 2 Sch. & Lef. 673 (which was a case in which the bill prayed ■that a lease for 999 years, of 29 acres of land which had been mortgaged to Rorke, who subsequently took the ,said lease from the mortgagor, might be brought into ■court, together with the mortgage deeds and bonds, and that the defendant might be decreed to reassign the lease to the plaintiff, and that the same might be decreed void, and that the defendant might account for the real value of the lands from the date of the lease), in decreeing in favor of the plaintiff, remarked: “Another objection was that this decision may tend to impeach dealings between mortgagor and mortgagee, for a sale of the equity •of redemption. But to this,” he says, “a good answer was given at the bar. The cases are totally different, the parties stand in a different relation; if there be two persons ready to purchase,—the mortgagee and another,— the mortgagor stands equally between them; and if the mortgagee should refuse to convey to another purchaser, the mortgagor can compel him, by applying the purchase .money, to pay off the mortgage. It can therefore only be for want of a better purchaser that the mortgagor can be compelled to sell to the mortgagee.” He says, however, that “courts view transactions even of that sort between mortgagor and mortgagee with considerable jealousy, and will set aside sales of the equity of redemption where, by the influence of his incumbrance, the mortgagee has purchased for less than others would have given, and there were circumstances of misconduct in his •obtaining the purchase.” 0

“We think,” says the court, “that, inasmuch as the mortgagee in possession may exercise an undue influence over the mortgagor, especially if the latter be in needy circumstances, the purchase by the former of the equity of redemption is to be carefully scrutinized when fraud is charged; and that only constructive fraud, or an unconscientious advantage which ought not to be retained, need be shown to avoid such a purpose. But we are unwilling to lay down a rule which would be likely to prevent any prudent mortgagee in possession, however fair his intentions may be, from purchasing the property, by making the validity of the purchase depend on his ability afterwards to show that he paid for the property all that any one would have been willing to give. We do not deem it for the benefit of mortgagors that such a rule should exist.”

The Farmers’ Bank was not a mortgagee in possession at the time the conveyance was made to it by Walker and wife.

The doctrine upon this subject is very clearly stated in the case of Alexander v. Rodriguez, 79 U. S. 12 Wall. 339, 20 L. ed. 410, by Mr. Justice Swayne, in delivering the opinion of the court. He says: “The law iqpon the subject of the right to redeem where the mortgagor has conveyed to the mortgagee the equity of redemption is well settled. It is characterized by a jealous and salutary policy. Principles almost as stern are applied as those which govern where a sale by a cestui gue trust to his

It has been truly remarked by Pomeroy, in his Equity Jurisprudence, vol. 3, p. 146, that “in no other department has the equity jurisprudence, as administered in this country, departed so widely from that administered in England, as in the department that is concerned with mortgages, and the respective rights, liabilities, and rem•edies of the mortgagor and the mortgagee.” “Ho correct notion,” he says, “can be obtained of equity, as it now exists within the United States, without an accurate and full appreciation of these differences. At the common law the ordinary mortgage was, to all intents and purposes, a conveyance of the legal estate. A mortgage in fee immediately vested the mortgagee with the legal title, subject, however, to be defeated by the mortgagor’s performing the condition by paying the money upon the prescribed pay-day.”

A mortgage in this state, being but security for the ■payment of a debt, creates no trust and establishes no fiduciary relation; the mortgagee has but a chose in ac"tion. Co och v. Gerry, 3 Harrington, 282 ; Hall v. Tunnell, 1 Houston, 326 ; Cornog v. Cornog, 3 Del. Ch. 416 .

Such being the nature of a mortgage, and such being the relations between mortgagor. and mortgagee in this -state, we must consider the allegations of the bill and answer in the cause and examine the evidence in the •cause and apply the principles of equity, as judicially declared, to that evidence, so as to arrive at a just conclusion in respect to the controversy between the parties.

The bill expressly charges that the deed bearing date the 22d day of February, 1883, and executed by the •complainant and his wife to the Farmers’ Bank, was procured by deception and fraud; and that had not the complainant and his wife been deceived, he would never have made an absolute deed to the bank; and that he 'believes his wife, Eliza S. Walker, would never have joined with him in executing the said deed had she fully •understood the nature and purport of the said deed,—

The bill alleges that the president, directors, and company always insisted, .before the execution of the deed by lbm and his wife,' that all they wanted was their actual debt, and gave him to understand by their acts and con•duct that they would exact nothing more; that the deed to the bank by Walker and wife was intended by them to be a deed to the bank for the payment of Walker’s indebtedness, and was intended by them to be only a deed •of trust for the sole and only purpose of liquidating and ■discharging Walker’s indebtedness to the bank; that certain directors of the said bank frequently, in presence of said Walker and wife, insisted that all the said bank wanted was its actual debt, and that the bank did not wish or desire Walker’s property for speculative purposes; ■and that said language was employed by the agents, officers, and directors of the bank to get Walker and his wife to make an absolute deed in fee simple to the bank; -that the bank accepted the deed as a deed of trust from Walker and his wife-for the sole and only purpose of ■discharging Walker’s said indebtedness; and that the bank would pay over to Walker whatever surplus there might be after said indebtedness was fully paid and dis•charged. Such at least is the contention of the complainant.

If these allegations and charges of the bill are proved tó be true, there is an end of this case, and a decree should be entered in favor of the complainant, against the defendant, for the amount of the excess which the defendant has received from the sales of the land conveyed by the complainant Walker to the defendant, or the excess ■of the sales of the land over the amount of said indebtedness. In such case the defendant would be chargeable

But the important questions are: Have these charges of the bill been proven ? Are they supported by the evidence in the cause ?

There has certainly been no contract proved between the complainant and the defendant prior to the meeting,, at the house of Walker, between Walker and his wife and the two Mr. Bidgelys, the president and attorney for the bank, at which Mr. Watson and Harry A. Richardson were present. It is reasonable to infer from the testimony that prior to that time there had been conversations between one or both of the Bidgelys and Walker, in which Walker had suggested that sooner than a public sale should be made of his lands he would convey them to the bank; and that he had asked Edward Ridgely whether the bank'would not sell his lands and pay over the surplus beyond his indebtedness to him. 6

There is no proof that both or either of them ever agreed to do so. Mr. Edward Ridgely states that such conversations and suggestions were made long before the meeting at Walker’s house, and that the proposition was never seriously entertained. It seems from the testimony of both the Mr. Bidgelys that they had persistently urged. Mr. Walker to make sale of his lands himself or by an - agent, .and thus pay off his indebtedness or greatly reduce it.

It is in proof that Mr. Walker on the- day of December, 1882, through Harry A. Richardson, his agent, offered his lands at public sale in the town of Dover, which sale was well attended, and that after sell

It was after the failure to realize from said sale a sufficient amount to pay Walker’s indebtedness that the bank —as its attorney states in liis testimony—seriously considered the propriety of taking from Mr. Walker a conveyance of his lands in payment of hisindebtednesstoit. The meeting at Walker’s house was, if I mistake not, early in the first week of February following.

It appears from the testimony, that that meeting was at the instance and upon the invitation of Mi*. Walker, with a view of making arrangements as to his indebtedness to the bank. Walker submitted an estimate of what he supposed to be the value of his real estate, and assured the Messrs. Ridgely that it was more than sufficient to pay his indebtedness. They did not agree with him in opinion, and asserted that the bank would be the loser of a portion of their debt, by reason of the insufficiency of his real estate to pay it.

It is in proof, and uncontradicted, that Walker at that interview proposed to deed all his real estate remaining unsold, to the bank, with the exception of what is called the dry-house lot, which, for reasons stated by him, he would not include in the conveyance in discharge of his indebtedness.

, They insisted that the dry-house lot should be included in the conveyance, and at first, as stated by Mr. Watson, declined to lay Mr. Walker’s proposition before the board of directors of the bank, who were to meet that morning. After considerable contention as to whether the dry-house lot should or should not be included in the conveyance between Walker and the Ridgelys, they stated that they would lay Walker’s proposition before the board of di

After the preparation of the deed had been commenced, it is proved by the attorney of the bank that he received from Mrs. Walker, wife of William Walker, a note stating that she had reconsidered her determination about signing the deed, and that she would not sign the deed conveying Walker’s land to the bank unless the bank would pay to her the surplus of sales of said land that should remain after discharging Walker’s indebtedness to the bank. The preparation of the deed was thereupon suspended.

At the next meeting of the board of directors, the attorney of the bank stated to the directors that he had received such a note from Mrs. Walker. The note was shown to the directors, and, as proved in the cause, they unanimously rejected Mrs. Walker’s proposition, and refused to accept a conveyance of the land upon the conditions proposed by her. They also as stated by Mr. Eidgely, the attorney, ordered him to proceed by levari facias and sell the lands of Mr. Walker for the payment of their debt.

The attorney states that he immediately informed Mr.

Upon Mr. Eichardson’s return home he called .upon the attorney of the bank, inquired what was the matter in the Walker business, and being informed of the situation of matters owing to the reception of the note from Mrs. Walker, and rejection of its terms by the bank, he (Eichardson), as stated by Mr. Eidgely, told him to go on and prepare the deed and he would have it signed.

The deed was prepared and taken by Mr. Eichardson to Walker’s, and signed and executed by Walker and his wife and returned by Eichardson to the attorney of the bank.

Some stress was laid in the argument upon the fact that Mr. Eichardson stated that when he received the deed to be taken to Walker, Eidgely requested him to induce Walker and wife to sign it. Eidgely says he does not remember and does not believe he made that remark. It does not seem material, however, whether he did or not; for it does not appear in evidence that Mr. Eichardson, the son-in-law, held out any inducement to Walker and wife to sign the deed. He expressly says that nothing was said about paying over a surplus to Walker and wife, but that he should not have advised a sale of all Walker’s lands to the bank if it had not been to avoid a forced sale.

By forced sale Mr. Eichardson, I suppose, must have meant a sale by the sheriff, under the levari facias which had been issued by the bank, on its judgment obtained

It is true this process is called a levari facias, and is . executed upon specific lands instead of upon lands generally; but this in no wise affects the legality or the equity of its use where it is the prescribed and appropriate process. A mortgagee may even purchase "at his own sale without becoming a trustee for the mortgagor. There is no difference in the testimony of Mrs. Watson, Harry Richardson, and the Messrs. Ridgely, in respect to the consideration of the deed executed by Walker and wife in favor of the bank. It is true that Mrs. Watson and Mr. Richardson testify as to declarations made by both the Mr. Ridgelys during the interview at Walker’s, as to the bank being a rich and powerful corporation and as to its being able to give better terms than Walker could give to the purchasers of his real estate; but it must be remembered, even if such declarations are taken to be proved, that the chief contention in that conversation was as to the value of Walker’s real estate, and as to its sufficiency to pay his indebtedness to the bank, and

Mrs. Watson says : “The deed which was subsequently agreed upon and made by the said Walker and wife "to said bank was so made and given upon the express understanding that it was in discharge of the indebtedness of said Walker to said bank, and the assumption to pay the Bespham mortgage and the Pearson judgment.”

The dry-house lot was omitted and left out of the ■deed, because it was made apparent that the said Walker ■and wife would not make a deed to the said bank unless it was so omitted; and because it was shown that the ■costs of a sheriffs sale would equal, if not exceed, the amount which the bank would receive from a sale of the dry-house lot; and because she (Mrs. Watson) had advanced about half the money to build the house thereon.

. Bo agreement between the two Mr. Bidgelys, two of the directors of the Farmers’ Bank, and Mr. Walker, has been proved to have existed previous to the meeting at the house of Mr. Walker, spoken of by the witnesses, that the Farmers’ Bank would take a conveyance of

But it would be doing violence to the language used’, on that occasion to establish a-fact by inference, from language not remembered or denied, to support a theory,, or establish as a fact that which is conclusively disproved, by other controlling facts and circumstances.

It is proved that the board of directors of the bank,, after accepting the proposition of Mr. Walker, and after their acceptance had been notified to Mr. and Mrs. Walker, refused to accede to Mrs. Walker’s proposition subsequently made to Edward Bidgely, attorney for the-bank, that the bank should agree to pay over to her any surplus of sales of Walker’s lands which should remain after the payment of Walker’s indebtedness to the bank, and that said directors unanimously rejected said proposition ; and their rejection thereof was notified to both Mr. and Mrs. Walker before the execution of said deed.

There is a-very significant fact connected with this-matter, -which is worthy of consideration. It nowhere appears in the bill or proofs in this cause that Mr. Walker ever refused to execute a deed to the bank in conformity

The whole difficulty in respect to the question of paying over any surplus that might remain after the payment of Walker’s indebtedness to the bank to Mrs. Walker, and the delay in the preparation and execution of the deed, seems to have arisen out of the note addressed by Mrs. Walker to the attorney of the bank, and which he laid before the board of directors at their subsequent meeting.

This is said, not to censure the action of Mrs. Walker. She, as a prudent and sensible woman and wife, desired all the advantage of any contingency that might arise in the disposition of her husband’s property by the bank. For this she certainly was not to be blamed, but to be-commended. The result of this action, however, was the-express refusal of the directors of the bank to agree to-the proposition, when formally made, to pay over any such excess of surplus to Mrs. Walker or any one else. And its nonagreement thereto rests, not in conjecture or inference, but rests in positive proof.

I do not think, therefore, on the proofs in this cause, that the deed from Walker and wife was procured by deception and fraud, as charged in the bill. I do not. see how it can possibly be that when the complainant, and his wife executed the deed, they should not have-considered it an absolute deed in fee simple; but I can readily perceive how it might have been possible for Mr. Walker, who had formerly, and for many years, been a depositor in said bank, and friendly in his personal relations with the directors, to have indulged the hope that, there would be a surplus from the sale of the property conveyed to the bank, after paying his indebtedness to it, and that the bank might (in the exercise of a generous

But although the directors of the bank might have positively refused to pay over to Walker any surplus of sales of the real estate conveyed by him and his wife to the bank, which might remain after the payment of Walker’s indebtedness to the bank, yet, if the principles ■of equity and good conscience, as administered in equitable tribunals, make it inequitable that the bank should retain such surplus, and not pay it over to Walker, this ■court will decree that it shall do so, notwithstanding such refusal by the bank.

Was there manifest unfairness by the bank in procuring the deed from Walker and wife ? Was Hr. Walker compelled in any manner to sell to the' bank otherwise than from the want of a better purchaser ? Did he sell to the bank for less than others would have given? Was the consideration for the conveyance inadequate and coupled with unfairness or oppression in any respect ?

These several questions must, in accordance with the proofs in this cause, be answered in the negative. .

As to inadequacy of price, there is no proof that any greater amount had ever been offered for the several parcels. And the attempt to dispose of them by public sale by Walker, and the inability to realize an amount greater than that of the indebtedness to the bank, or even that amount, precludes the idea of such inadequacy of price, ■even if that is to be considered when not coupled with unfairness in a sale.

I think it is manifest, from the reading of the testimony in this cause, that most, if not all, of the alleged surplus of sales was caused by the personal exertions and perseverance of some of the directors of the bank, and especially to those of Dr. Ridgely, the president. His

There certainly was no expressed trust in this case. I do not consider that an implied one or a constructive trust arises or can be created from or out of the evidence in the cause.

The decree is therefore in favor of the defendant.