Hoffman v. Ryan

1. If the whole transaction between the grantor and the grantee in a deed absolute on its face shows, that after the execution of . such deed, a debt still remained due from the grantor to the grantee, such transaction will be regarded as a mortgage, it matters not in what form the papers are drawn, (p. 429.) 2. Though the deed be absolute on its face, and a contract is made at the same time in writing between the grantor and the grantee, whereby the grantee is authorized to sell the land or a part of it in a specified time, and to pay back the consideration for the deed, yet in the absence of parol proof to the contrary such deed will be regarded as a mortgage, (p. 429.) 3. The fact, that possession remains with the grantor, will have great weight in favor of holding the transaction to be a mortgage, when the question is, whether it be a conditional sale or a mortgage, (p. 430.) 4. If the owner of a tract of land executes a deed of trust, conveying his land to a trustee to secure certain debts, and afterwards a judgment is rendered against him, which is duly docketed, and he then makes a contract with a third party to advance for him the amount secured by the deed of trust, and to secure such advance mortgages this land to the person advancing the money for him, and such mortgagee pays off the debts secured by the deed of trust, it would be a complete satisfaction of these debts both in law and equity ; the deed of trust becomes wholly inoperative, and the mortgagee can not be subrogated to the rights of the eestui que trust and have the deed of trust kept alive for his benefit, thus securing priority over the judgment-debtor, (p. 434.) 5. A decree between co-defendants, can only be based upon the pleadings and proofs between the complainants and defendants ; and no decree can be made between co-defendants, founded upon mattershiot stated in the bill, nor in litigation between the complainants and defendants, or some of them. (p. 437.)

Appeal from and supersedeas to a decree of the circuit court of the county of Monongalia, rendered on the 14th day of July, 1879, in a suit in chancery in said court then pending, wherein John N. Hoffman and John "W. Carrace were plaintiffs and "Benjamin Ryan, John W. Corrothers and others were defendants, allowed upon the petition of said Carrace and Ryan. Hon. A. B. Fleming,'judge of the second judicial circuit, rendered the decree appealed from. G-REEN, Judge, furnishes the following statement of the case: John H. Hoffman and John "W". Carrace, in April 1876, instituted a suit in the circuit court of Monongalia county against Benjamin Ryan and John "W". Corrothers, to whom Benjamin Ryan and wife had conveyed Ms real estate, all of which lay in said county, to subject said land to the payment of two several judgments, in favor of the plaintiffs severally, which had been docketed prior to said conveyance of said land to John W. Corrothers. The bill made as parties defendant the plaintiffs in four other judgments, which had been obtained against said Ryan, and duly docketed, before said conveyance to John W. Corrothers, as well as two others, who were the securities of said Ryan in the debt evidenced by one of said judgments, and who had paid off the same. It also made defendant Jesse F. Fitch, to whom as trustee said Ryan and wife had conveyed by deed, duly recorded, said land, prior to the rendition of any of said judgments to pay four notes of one thousand dollars each, payable respectively in one, two, three and four years from April 3, 1874, with interest from that date, and the proceeds of which notes were to be distributed among his creditors. Said deed of trust and notes to Fitch were executed by said Eyan, who had been declared a bankrupt by the district court of the United States, at the suit of John W. Corrothers and others. The real questions in controversy in this cause were, whether the conveyance made by Eyan and wife to Cor-rothers, named in the bill, was an absolute sale and conveyance, as on its face it professed to be, a conditional sale with a right to re-purchase within three years, or a mortgage to repay moneys advanced for the use of Eyan by Corrothers, and also an old debt of five hundred and thirty-seven dollars and fifty cents due to Corrothers from Eyan, prior to his discharge as a bankrupt; and whether Corrothers having paid off the creditors of Eyan, who had been secured by the deed of trust to Fitch, trustee, was under the circumstances of the case entitled to be subrogated to their former rights and to be thus entitled to the benefit of the deed of trust executed to Fitch, trustee. If he was, as the court below decided, entitled to be thus subrogated, his debt would have priority over all the judgments named in the bill, including the plaintiffs’ two judgments. If he was not, and the deed to him is to be regarded as a mortgage, then all the judgments named in the bill would have priority over his debt, which in this view of the case became only a lien from the time the deed or mortgage to him was executed. The facts disclosed by the record bearing on these controverted questions are as follows:' John W. Corrothers, who had a debt against Benjamin Eyan, with other creditors instituted proceedings against him in the district court of the United States to have him declared a bankrupt, and to distribute the proceeds of his property among' them. ITis debts amounted to some thirty thousand dollars and his assets to about four thousand dollars; and after the payment of all costs it gave on the final distribution about fifteen per cent, of his debt to each creditor. Pending the suit, Eyan proposed to all his creditors a compromise, whereby all his property real and personal was to be sold and conveyed to him, on his agreeing to pay therefor four thousand dollars with interest from April 3, 1874. One thousand dollars with this interest thereon, being payable each year from that date for four successive years. All of his creditors agreed to this proposal except Corrothers, who according to his testimony in this cause refused to agree to it, unless Ryan would give him bond with good security for two hundred dollars as a consideration for his agreeing to this compromise. According to Ryan/s testimony Corrothers agreed, that if this two hundred dollar bond with security was given, he would take it in satisfaction of the debt and sign his name to the proposed compromise. The bond was given, and tire compromise proposed was signed by all the creditors, including Corrothers, and air-proved by the court, and a deed executed by the assignee in bankruptcy, convejdng to Benj. Ryan all his real property, beiirg three-parcels of land in said county containing together about two hundred and seventy acres, and a deed of trust was executed by said Ryan and wife to the assignee, Jesse J. Fitch, as trustee, conveying all of said land in trust to secure the purchase-money, the said four notes of one thousand dollars each, with interest from April 3, 1874, payable in one, two, three and four years respectively. This deed of trust was dated September 13, 1875, and was duly recorded September 27, 1875. After this compromise had been made, Ryan proposed to his creditors to pay them on April 1, 1876, ten per cent, on their debts in full of their demands under this deed of trust, and he drew up a paper to that effect, dated March 3, 1876, which was signed by eighteen of his creditors, whereby they agreed to this proposition, and furthel agreed to give to the bearer of that paper a proper voucher to the trustee, Fitch, when they were paid by the bearer, of this paper this ten per cent, on their respective claims. Some four others of his creditors subsequently agreed to this arrangement. The whole amount of the claim of these twenty-two creditors, was eight thousand four hundred and forty-six dollars and ninety-five cents. There were however five of his creditors, who would not make this arrangement; their claims amounted to five thousand eight hundred and twenty-four dollars and thirty-eight cents, and they afterwards took for their claims as hereinafter stated six hundred and eighty-one dollars and twenty-five cents or about eleven and three fourths per cent. The money, with which Ryan expected to purchase up these claims at ten per cent., and thus make about fifty per cent, out of his creditors on the amount advanced, as the trustee, Fitch, would pay about fifteen per cent, on these claims, be expected to raise from Dille & Johnson. They were to get a conveyance of the land from Ryan and wife; Ryan drew the deed to them and signed it himself, but his wife never signed it, and it never was delivered; thus the arrangement was broken up. After Ryan had been discharged as a bankrupt, he incurred various debts, for which judgments were had against him, which were all regularly docketed. There were seven ot these judgments; the first of which was rendered on April 13, 1875, and the last on March 11, 1876, arid with interest up to September Í8, 1878, they amounted in the aggregate to seven hundred and five dollars and fifty-three cents. They are the judgments named in the bill in this cause. Nothing was ever paid on them by Ryan. Dille & Johnson were aware of the' existence of these judgments and expected, if their arrangements with Ryan had been completed, to have paid them off. Ryan states, that his arrangement with Dille & Johnson was, that they would pay off the trust-debt to Fitch, the trustee, all these judgment-liens on this land, and give to him Ryan, four hundred dollars on Ryan’s giving to them the contract, which he had made with certain of his creditors to take ten per cent, on their claims; and Ryan and wife were to execute to Dille & Johnson a deed for the land. But Corrothers had in his possession this agreement with the creditors to take ten per cent, on their claims, and he refused to give it up. Ryan says, that Corrothers told him the farm was worth more than Dille & Johnson were proposing to pay for it, and said he would loan him Ryan, the money to pay Fitch the amount due on April 3, 1876, or that he would pay the money to Fitch for Ryan on his making him safe. Ryan further states that he told him. he would like to have about three years to sell the place, if he and Corrothers made an agreement. He asked how Eyan could secure him and suggested, that Fitch should transfer to him the notes Eyan had given for the purchase-money, when Corrothers paid them off. He Eyan, told him, that Fitch could not assign these notes to him, and that Fitch said, that he Eyan, would have to pay off the notes, or some one for him, and when so paid no one could hold this lien. He Corrothers, then said, that Eyan would have to make to him a deed for the land, to secure the money he was to advance, and that he would give him three years to sell it for the amount, which was against the land and would also give Eyan an instrument in writing, of the same date as the deed to show", that Eyan was to have three years in which to sell the land, and that he was to have all he could make within the three years, over and above the purchase-money. He says, that Corrothers was to pay these judgments and was to have his old debt against Eyan, then amounting to five hundred and thirty-seven dollars and fifty cents, and the balance was to be his Eyan’s; and Eyan says he was also to furnish him three hundred dollars, of which one hundred dollars was to pay taxes, and two hundred dollars was to give him Eyan, a start. The deed, which in carrying out this arrangement was made by Eyan and wife to Corrothers, was copied from the deed, which Eyan had drawn to be delivered to Dille & Johnson, a few days before. This deed to Corrothers was dated March 20, 1876; the consideration named in it, wras the unpaid balance on the purchase-money notes, which Eyan had executed to Fitch, trustee. All the lands conveyed were said to contain two hundred and eighty-five acres, excepting six and one fourth acres, which had been sold to Z. M. Grid-ley ; and Eyan bound himself to deliver possession of this land on April 1, 1876. Eyan says, that while a son of Abe Hull was copying this deed to Dille & Johnson, he Eyan told Corrothers he thought the deed ought to show all the money he was to pay. It ought to show that he was to pay these judgment notes against Eyan, and the balance of the money, this three hundred dollars, which ho was to let him have; that if it did not, Eyan said some lawyer told him, it would be a fraud on its face. Corrothers said, he would not nave it changed; and Corrothers then drew up a paper, after reading which to him "Ryan, he said, that he Ryan, was not paying any rent; that he was to pay him Corrothers, eight per cent, per annum on the money. Corrothers then said, that it amounted to the same thing, only he called it rent in place of interest. Ryan says he told him he did not think it right that the taxes should be put in the agreement — and he says he wanted him .to put the three hundred dollars which was to be paid to him Ryan, in the agreement. He said it would not do to put it there, if he did they would make him pay it over; but he would give him two hundred dollars, and would lift the tax receipts against the land, and hand them to him, Ryan. This written agreement was as follows: “Whereas, the said Ryan has this day sold to the said Cor-rothers two hundred and seventy-nine acres of land .for the sum of three thousand and thirty-nine dollars, and the said Corrothers doth agree, for the said Ryan, to sell tire said land, and to have all he can make over and above the purchase-money, within three years from this date, and to reserve the homestead, or any part thereof, when enough of the rest is sold to satisfy the said claim. The said Ryan does agree to rent the land for two hundred and forty-two dollars from the said Corrothers, cash, to be paid on the 1st of April, 1877, and all taxes, and for two years after for the same amount and conditions. “And it is further agreed that if the said rent is not paid or to even become due, then this article is null and void and of no effect-. “And it is further agreed that the said Ryan has turned over a certain article or contract between some of his creditors and the bearer, for which the bearer has agreed to pay ten per cent, for said claims; and the said Corrothers doth agree to give to the said Ryan all above the ten per cent, after the said Corrothei’s has received Ms ten per cent, and five hundred and thirty-seven dollars and fifty cents, after deducting the per cent, out of said five hundred and thirty-seven dollars and fifty cents, and if the last does not pay the five hundred and thirty-seven dollars and fifty cents, it is to come out of the price of the land; and the said Corrothers does agree to buy all of the claims he can get at ten per cent. “John W. Coeeothees. “Benjamin Ryan.” The father of the young man, who copied the deed to Cor-rothers, also testifies, but his testimony is very vague. He was present when the papers were 'executed. He says, that Ryan wanted something inserted in the .agreement or in the deed, that was not in them, and Corrothers said, that if the amount received by Ryan was inserted it may have been one, two, three, four or five hundred dollars, which he did not remember, he Corrothers would have to pay it over again; and that it was not inserted, but Corrothers agreed to pay him. His recollection on the subject, was in other respects, so vague, as to throw no real light on the transaction. Corrothers, in his deposition, gives no details of the circumstances attending the execution of this agreement of March 20, 1876, and of the deed of that date; he simply says, that this paper contains the whole of the contract between him and Ryan. In carrying out his contract Corrothers paid to the eighteen creditors, who had agreed with Ryan to take ten per cent, on their claims, as also to four others, who subsequently agreed to do so, eight hundred and fifty-five dollars, and when he settled afterwards with Fitch and made him payments on the notes, which Ryan had given him for the purchase of this land, he received from Fitch, on account of these claims, about fifty per cent, more than he had paid, or about one thousand two hundred and eighty-two dollars. He also bought up five other claims against Ryan, and secured by this deed of trust for six hundred and eighty-one dollars and twenty-five cents, and he got from Fitch, the trustee, as the dividend further about eight hundred and seventy-three dollars and sixty-five cents, or about one hundred and ninety-two dollars and forty cents in excess of what he had paid on these five claims. The excess on the others being some four hundred and twenty-five dollars, making on all the claims purchased of the creditors of Ryan, a profit of about six hundred and twenty dollars. Corrothers paid to Fitch the full amount, which remained due from Ryan to Mm under the deed of trust of September 13, 1875. Tbe first of bis payments was made April 1,1876, and was eight hundred and eighty-two dollars and sixty-four cents; the second payment was April 2, 1877, and was one thousand one hundred and eighty dollars; and the third and last payment was of one thousand two hundred and forty dollars, and this was in full of the entire balance due by Ryan to Fitch, trustee, secured by this deed of trust. The receipts given by Fitch, trustee, for these several sums were drawn as “received of Benjamin Ryan by the hands of John W. Corrothers,” and they were stated to have been received as payments on the face of these receipts. The notes of Ryan to Fitch were not transferred, assigned or delivered by Fitch to Corrothers, he stating in his deposition, that he did not think he had any authority to transfer or assign these notes of Ryan’s. He told Corrothers so, and, that he Fitch doubted whether he Corrothers could have the benefit of any lien by paying the money, and he had better see to it before he paid the money. When the last note was paid nothing was said on the subject; when the other payments were made he told Corrothers, that he was not authorized to receive money from anybody but Ryan, and he would only receipt to him as coming from Ryan, but would show on the receipt, that the money came through Corrothers’ hands; and in this way they were all drawn. When Carrothers made the first payment for Ryan, he Fitch, did not know1' of any purchase •which Corrothers had made of Ryan, he heard of it afterwards, and was shown their agreement by Corrothers. Corrothers said, when he took the receipts as he did, that he was willing to risk the payments as they were made. Another witness, Mackey, says, that a short time previous to the agreement between Corrothers and Ryan, he spoke to Corrothers about these judgments, -which had been obtained against Ryan, and asked him if he did not think he would have them to pay if he bought the farm, and he answered by saying, that he expected he would. This is all the evidence bearing on the question, as to the legal character of this transaction of March 20,1876, between Corrothers and Ryan. In carrying out this agreement, Ryan made a verbal contract with one ¥m. Lyons, to sell him this land tor four thousand one hundred dollars, payable in part on time. But it was never consummated, because of difficulties about the terms interposed by Corrothers. This was within a few months after the agreement of March 20,1876, was made. Lyons was able to pay for this farm the price he agreed to pay. About the same time, Ryan was negotiating a sale of this land to one Brown, for four thousand dollars, of which one thousand dollars was to be paid in cash. It was broken off because Corrothers would not make the deed to Brown, but he said, that if he wTas paid his money, he would destroy the deed which Ryan had made him, and let him make the deed to Brown. About nine months after this contract between Ryan and Corrothers, Ryan sold to one McClure twelve acres, a part of the tract including the best part and the dwelling-house for two thousand eight hundred dollars, and an agreement for the sale was actually signed by these parties, McClure and Ryan, dated December 20, 1876; but this sale was also broken off by Corrothers refusing to sign the deed, and it was by the mutual agreement of McClure and Ryan canceled about a month afterwards. I deem it unnecessary to state the details of these attempts of Ryan to sell this land, or the manner in which they were broken off. Dent, commissioner, under an order of the court in this cause, made a report of the liens on the land, in which he placed Corrothers’ lien as the first lien and the judgments against Ryan in the order, in which they were obtained, as subsequent liens. A consent decree was rendered on the 30th of March, 1877, in accordance with this view, whereby a sale was ordered of this land to pay these liens; and a sale of it was made, but the court afterwards, on affidavits showing that this decree had never been consented to by some of the parties, set aside this consent decree, and being aftei’wards satisfied by the decision of this Court in Marion v. Fahey, 11 ~W. Va. 482, that it had in this suit no authority to set aside this decree of March 3, 1877, except by consent it, by consent annulled this order, and then by consent, set aside the decree of March 3, 1877, as well as the sale made under it. A motion was made to appoint a receiver, to take possession of this land, on the ground, that Ryan, in whose possession it then was, was committing waste. Twelve affidavits were taken in support of and in opposition to this motion. The court overruled it, but by consent of Ryan, enjoined him from committing waste. On March 27, 1878, the court ordered, that this cause be recommitted to a commissioner, to ascertain and report the several liens on the land in the bill and answers, describe their character, priorities and amounts, and to whom due. And it provided, that a publication should be equivalent to the service of notice on all parties to the suit, and on all parties interested. The answers of Ryan, Oorrothers and certain of the judgment-creditors had been filed, in which Ryan and the judgment-creditors insisted, that if Oorrothers had any lien on the land, which they denied, it was subsequent to the liens of the said judgment-creditors of Ryan. On February 27, 1879, Commissioner Brown reported, that the aggregate of the liens against the said land, with interest calculated thereon to the 18th of September, 1878, is as follows: First, a j udgment in favor of J ohn W. Oorrothers for three receipts given by Fitch to Oorrothers, before referred to, three thousand five hundred and sixty-four dollars and ninety-two cents; second, "Watts and Harner’s judgment for eight thousand six hundred and forty-eight dollars; third, a judgment of John W. Carrace, plaintiff, for. ninety-three dollars and fifty-eight cents; fourth, a judgment of Morgan-town Bank v. Benj. Bryan, George W. Johnson and Horatio N. Mackey, for three hundred and twenty-two dollars and seventy-three cents; fifth, a judgment of John H. Hoffman, plaintiff, for seventy-three dollars and forty-nine cents; sixth, a judgment of Rawley Waters for twenty-one dollars and sixty-five cents; seventh, a judgment of Jamos Y. Bougherfor one hundred and seven dollars and sixty cents; total four thousand two hundred and seventy dollars and forty-five cents. The sixth and seventh, being judgments pronounced at the same court, were to be paid ratably. The evidence showed, that the judgment in favor of the Morgantown Bank had been paid, but not by Ryan the principal in the debt, but by his sureties Johnson and Mackey, who were entitled to the benefit of it. Exceptions were filed to this report by Johnson and Carrace, and also by Ryan. There was no basis for exceptions, except to the crediting of the lien of John W. Corrothers as being first in priority, and as being subrogated to the lien of the Fitch deed of trust of September 13, 1875, and to allowing as his claim the three amounts paid by him to Fitch, trustee, as hereinbefore stated. But these exceptors not content with this claimed, that Cor-rothers had no lien, being at best but a simple contract-creditor of Byan.; that he was guilty of fraud as shown by the evidence and, that he should be thrown out of court altogether, or at least be postponed to bona fide creditors, and, that he should be remitted to his remedies against Lyons, McClure, &c. If he failed to avail himself of the contracts with them it was his own fault, and that neither Byan nor his honest creditors should suffer by Corrothers’ default. Byan also excepted, because the commissioner failed to credit defendant, Byan, with sundry payments made to Cor-rothers and proven, referring it is presumed to payments made by Job Hartman, on account of a small part of this land, which Byan had conveyed to him. He objects to the crediting of the Morgantown Bank judgment, because it had been paid by his sureties, and also to a statement made by-the commissioner, at Corrothers’ instance, but which was not adopted by the commissioner. The court-on March 25, 1879, by its decree by the consent of Corrothers, corrected this report reducing the amount due to Corrothers by one hundred dollars paid, and secured to be paid by Job Hartley, with interest thereon from April 1, 1875, until the 18th day of September, 1878, aggregating one hundred and twenty dollars and fifty cents, leaving the amount due Corrothers, as of the 18th day of September, 1878, three thousand four hundred and foi’ty-four dollars and forty-two cents. It then overruled all the exceptions, and confirmed this, report as thus corrected; and if the sum due each of the parties named in said report, were not paid within thirty days from the rising of the court, special commissioners ap-, pointed thereby were directed, after a specified advertisement, to sell said land for one hundred dollars in cash and the balance in equal installments, payable in one and two years with interest from the clay of sale; requiring notes to be given for these deferred payments with good security. The commissioners were required to give bond with good security, as required by law in the penalty of six hundred dollars. These commissioners pursuant to this decree sold this land, and John W. Corrothers became the purchaser at the price of two thousand three hundred dollars, and complied with the terms of sale; and the commissioners made report oi this sale to the court. Benjamin Ryan excepted to this report, for reasons not necessary to be stated, as they seem to be frivolous, except, that “of the gross inadequacy of price for which the land was sold,” and because the attorney or Job Hartley proclaimed at the sale, that certain parts of the land advertised for sale was owned by him, and that he would contest the sale. No affidavits were taken to support this exception, but on the contrary Hoffman, one of the plaintiffs, made affidavit, that he had gone on the land with a view of bidding on it; that he found it in very bad condition and the fences out of repair, and in his judgment it was not worth more than two thousand dollars. But J. ~W. Johns offered an upset bid of five hundred dollars, and gave bond with security to make his bid good. The cause was heard on July 14, 1879, and the said John Corrothers having agreed to credit Ms debt, ascertained by the court to be three thousand four hundred and forty-four dollars and forty-two cents with interest from September 18, 1878, with the whole of the purchase-money less the costs of the sale sixty-three dollars and fifty cents, and also with this five hundred dollars the proposed upset bid, the court directing these credits to be made on Corrothers’ debt, which was the first lien; overruled the exception to this sale, and confirmed it, and ordered a deed to be made to Corrothers of this land, excepting therefrom with his consent, so much of said land as was conveyed by Byan and wife, by deed dated December 7, 1876, to John Hartley. After deducting the said expenses of sale, said commissioners were directed to pay the residue of the one hundred dollars, which they had received, to Corrothers, and were allowed three dollars for making said deed, to be paid by Corrothers. From this decree, John W, Oarraee and Benj. Byan obtained an appeal and supersedeas. In their petition while they only expressly ask for an appeal from this decree, yet most of the assignments of errors, were for errors committed or supposed to have been committed by this Court in its decree of March 28, 1879, which decree really settled all the principles of the cause adversely to the petitioners for this appeal. The cause has been argued by the counsel for the appellants, as well as the counsel for the only substantial appellee, John W. Corrothers, just as if the decree of March 28, 1879, as well as that of July 14, 1879, was appealed from, though the attention of the court is called to the fact, that the summons based on the order granting the appeal, recites only the decree of July 14, 1879, as the one appeal from. cited the following-authorities: 64 N. Y. 397; 7 N. H. 99; 1 Jones Mortg. § 976; Herm. Mortg. § 185; 27 G-ratt. 740; Ya. L. J (April, 1881) 254;'42 N. Y. 96; 36 N. II. 505; 3 Barb. 537; Hill Mortg. 372; 3 Paige 645.