Cadman v. Peter/Opinion of the Court
The decision (12 Fed. Rep. 363) announced these propositions: The agreement set forth in the bill is inconsistent with a right to redeem; it being stated as an agreement under which Peter was to hold the land until he should sell it, and then share in any profit from the sale. Under that agreement, even if it was valid, the deed cannot be turned into a mortgage, although the execution of the agreement, if valid, might be compelled, when the land could be sold at a considerable profit. If the agreement is obnoxious to the statute which declares that no trust concerning or in any manner relating to land shall be created by parol, it cannot be enforced specifically, nor employed to turn the deed into a mortgage. The agreement, if valid, would make Cadman a beneficiary under the deed, and create a trust in Peter concerning or relating to land, and, not being in writing and properly signed, is void under the statute of frauds.
But the grounds of the conclusion reached were stated thus: Under the evidence, Cadman is not entitled to relief, conceding the bill to state a good case.
(1) The conveyance was absolute on its face, for an expressed consideration of $20,000. To overcome the effect of the deed, and turn it into a mortgage, the evidence must be clear and convincing, beyond reasonable controversy.
(2) Peter gave back to Cadman a mortgage, of the same date as the deed, to secure the payment of the notes for $20,000 given for the purchase price. The mortgage was accepted and speaks for both parties as a contemporaneous writing expressing their intention, and adding to the effect of the deed as evidence that there was an absolute sale.
(3) On January 21, 1876, Cadman wrote to Peter that he had drawn on the latter, at one day's sight, for $5,000, to take up at a bank a note of $5,000 made by Peter, due that day, which Cadman was unable to get extended by renewal. That note and another like it, due that day, were continuations of the $10,000 accommodation notes mentioned in the bill, which were in fact made in 1872. This $10,000 of paper is alleged by Cadman to have been secured by the deed. Peter had sent to Cadman two new notes to retire the two then coming due, and Cadman says, in his letter, that he had lodged one of the new notes as collateral to the draft. The draft, a copy of which is in the record, directs the amount to be charged to Cadman's account. Peter, on January 22, 1876, replied to Cadman thus: 'I accepted your draft this morning. What do you think of making a draft on me at one day for $5,000? I do not have the money to pay this draft. This shows for itself how my notes are peddled in Detroit. I have told you before that my credit will suffer from such transactions. You say you did this to save my good name. This is a most cruel assertion to me under the circumstances, as I derive no benefit from it. Let me know at once if I must raise the money to pay this draft. I have $5,000 to pay to your bank the same day. I want you to send me something to show that the two notes and this draft are for your benefit, and for you to pay it in case I should be taken away, which we are all liable to be. My estate should have something to show,-in fact I myself should have it.' Peter would not have written thus if the $10,000 of notes were for him to pay, and if, three months before, Cadman had given him security for the amount; nor would he have asked Cadman to give what he had no right to ask from him. To the above letter Cadman replied, on January 24, 1876: 'I am sorely mortified and grieved that this should be the case, but I am entirely powerless to act. I think I can get the money on the other note in time to recall your acceptance. * * * I shall try and get the money; but if I do not you can draw on me at three days' sight, and I will get the money in mean time on the note. I hardly know what to do. I will do anything in my power. I will send you my notes, or anything I have.' Cadman would not have acquiesced in Peter's demand for something to show that Cadman was to pay the paper, and that it was all for his benefit, unless Cadman so understood the fact. On January 30, 1876, Cadman, having come to the end, wrote to Peter thus: 'I return your note, $5,000, herein. I cannot use it, except to discredit you still more. I have resigned; am a ruined man. * * * I owe so much money outside that I cannot stand the pressure. * * * My family have gone into the country to board, and I am ruined and penniless. I console myself, in your case, that the great bargain you made in the Newaygo lands will, in some great measure, compensate you for the loss you must incur, for I cannot take care of the acceptance due early in February.' This was an acceptance by Cadman of a draft on him by Peter, drawn January 28th, for $5,000, at three days' sight, to pay the $5,000 draft of Cadman at one day's sight, which Peter had accepted January 22d. Peter having paid that draft, and there still being one $5,000 note out against him, he would lose $10,000 by Cadman, having the land to represent the $20,000 of notes given for it, which had not matured. This last letter cannot be reconciled with Cadman's version of the transaction as to the deed. At such a crisis in his affairs, with the transaction so recent, if he had a beneficial interest in the Newaygo lands, they being, as he now says, then worth $60,000, as against $30,000 of notes from Peter, he would not have dwelt on the great bargain Peter had made, as a matter of congratulation to Peter and consolation to himself, but would rather have taken consolation from the fact that he still had an interest in this valuable property. If the property, ample as Cadman now says it was, even at its value at that time, to secure to Peter the $30,000, was in fact merely a security to Peter for the $30,000, the idea of talking to Peter of loss was absurd. But if Peter owned the lands, had bought them at a bargain, and was likely to make by selling them a profit greater than $10,000, then the loss of the $10,000 by Cadman was properly called a loss to be compensated for out of a profit in selling the Newaygo lands for more than Peter had paid for them.
These are the considerations which induced the circuit court to dismiss the bill. They seem to us of controlling weight. It is not necessary to enlarge on them. The rule in cases of this kind is well settled. If the conveyance is in fee, with a covenant of warranty, and there is no defeasance, either in the conveyance or in a collateral paper, parol evidence to show that it was intended to secure a debt, and to operate only as a mortgage, must be clear, unequivocal, and convincing, or the presumption that the instrument is what it purports to be must prevail. Howland v. Blake, 97 U.S. 624; Coyle v. Davis, 116 U.S. 108; S.C.. ante, 314; Case v. Peters, 20 Mich. 298, 303; Tilden v. Streeter, 45 Mich. 533, 539, 540; S.C.. 8 N. W. Rep. 502.