author: Mr. Justice CURTIS

text:
    Gilbert C. Russell, Appellant, v. Daniel R. Southard, Samuel D. Tompkins, and William C. Bullett and William H. Pope, Administrators of James Burks, deceased, William L. Thompson, Guardian to James Burks, Samuel Burks, Charles Burks, and Nancy Burks, infant Children of James Burks, deceased, Matilda Burks and John Burks, Heirs of said James Burks, deceased.
    When the question before a court of equity is, whether a deed which purports upon its face to be an absolute deed, was in reality a deed or a mortgage, extraneous evidence is admissible to show that it was only a mortgage.
    Upon such a question as this, depending upon the general principles of equity jurisprudence, this court does not hold itself bound by the decisions of the highest court of the state in which the land in question was, but will be governed by its own view, of those principles.
    The decisions of the courts of Kentucky examined.
    Such evidence is admissible when it is alleged and proved that a loan on security was really intended and the defendant sets up the loan as a payment of purchase-money and the conveyance as a sale.
    In examining the question whether the transaction was a sale or mortgage, it is of great importance to inquire whether the consideration was adequate to induce a sale.
    In the present case, the court decides, from the evidence, that the consideration was grossly inadequate ; that he was a stranger, without friends or other resources there than the land in question; that it is true he offered to sell, but there is no evidence to show that he offered to sell for the amount of money which he actually received.
    The papers executed between the parties show a conditional sale; but in doubtful cases the court leans to the conclusion that the reality was a mortgage and not a salt.
    The absence of a personal obligation by the grantor to repay the money furnishes no conclusive test to determine whether the conveyance was a mortgage or a conditional sale.
    Nor do the facts that the- grantor endeavored to obtain the relinquishment of his wife’s, dower, and actually surrendered the paper under which he had the right to reclaim his land, amount to a bar of his claim, under the circumstances of this case.
    Three years after the transaction the grantor received one hundred dollars from the grantee upon the ground of an arithmetical error, and signed a release of all further demands. But apart from other considerations bearing upon the purchase of an equity of redemption, in the present case it was the duty of the grantee to cor-, rect errors', and consequently he paid nothing for the equity of redemption.
    Where there was a long lapse of time and the original mortgagee had been dead for many years, an account of rents and profits and of interest upon the money loaned, will be decreed to commence from the filing of the bill.
    Where there were purchasers during the intermediate time, and the record did not enable this court to determine upon their .rights, the case will be remanded to the Circuit Court for its adjudication thereon.
    A motion made in this court after the decision of the case here, to set aside the decree and remand the case to the Circuit Court for further preparation and proof, upon the ground that new and material evidence has beeen discovered since the trial of the case in that court, — cannot be sustained.
    Affidavits of newly-discovered testimony cannot be received. This court-must affirm or reverse upon the case as it appears upon the record.
    The established chancery practice is so, and if it were not, the act of Congress, passed on March 3,1803, would be decisive of the question.
    This was an appeal from the Circuit Court of the United States for the District of Kentucky, sitting as a court of equity.

      It was a bill filed by Russell, the appellant, to redeem what he called a mortgage, and the question in the case was whether it was a mortgage or conditional sale. The facts are set forth in the opinion of the court. Upon the trial, the Circuit Court dismissed the bill, and Russell appealed to this court.
    It was argued by Mr. Underwood and Mr. Morehead, with whom was Mr. Clay, for the appellant, and by Mr. Nicholas for the appellee.
    The counsel for the appellant
    made the following points:
    1. That the execution of a defeasance simultaneously with the absolute conveyance, constitutes them, in legal contemplation, one instrument; and that in this case the execution of the defeasance was so. 3 J. J. Marsh. 354; Powell on Mortg. 67.

      2. That in all doubtful cases the law will construe the contract to be a mortgage, and that courts are less inclined to consider a contract for land a conditional sale than the same kind of contract for personalty; because land is not so liable to the casualties incident to personal, and especially living property. The general and governing principle in this entire class of cases is, that whatever clauses or covenants there are in a conveyance, though they seem to import an absolute disposition or conditional purchase, yet if, upon the whole, it appears to have been the intention of the parties that such conveyance should only'be a mortgage, or pass an estate redeemable, a court of equity will construe it so. 5 Bac. Ab. 5. In the case of Edrington v. Harper, decided by the Court of Appeals of Kentucky, 3 J. J. Marsh. 354, the general rule is laid down, that if there be no other fact to illustrate the intention of the parties, but an absolute sale on one side and a defeasance on the other, the- court Will incline to the construction that the contract was a mortgage.
    In the case of Flagg v. Mann, 2 Sumner, 535, the same doctrine is ably enforced ; the presiding judge, in the course of his decision, remarking that “ it is well known that courts of equity lean against construing contracts of this kind to be conditional sales ; and, therefore, unless the transaction be clearly made out to be of that nature, it is always construed to be a mortgage,” and concluding that “ the onus probandi is on the defendant to establish it to be a conditional sale. If it be doubtful, it must be construed to be a mortgage.”
    3. That a sale in form, but which in fact and substance may be avoided by the payment of money within a given time, is, and will be held to be, a mortgage; if a mortgage until that period elapses, it must continue a mortgage until lapse of time or some other matter changes it. Wheeland v. Swartz, 1 Yeates, 579; Stoever v. Stoever, 9 Serg. & Raw. 434; Wharf v.
      Howell, 5 Binney, 499; Dimond v. Enoch, Add. 356; Coldwell v. Woods, 3 Watts, 188; Friedly v. Hamilton, 17 Serg. & Rawle, 70; 7 W. & Ser. 339; Kunkle v. Wolfersberger, 6 Watts, 126; Kerr v. Gilmore, Ib. 405; Rankin v. Mortimere, 7 Watts, 372; Brown v. Nickle, 6 Barr, 390; Hamet v. Dundass, 4 Barr, 178; Flagg v. Mann, 2 Sumner, 532; Skinner v. Miller, 5 Litt. 85; Hardin, 6; 2 J. J. Marsh. 471; 3 J. J. Marsh. 354; 1 Dev. Eq. 373; 2 Call, 421; 2 Mon. 40; 1 Wash. 125; 4 Hen. & Munf. 161; 3 Yerger, 525; 2 Haywood, 26; 2 Edwards, 138; 7 Johns. Ch. 40; 2 Id. 34, &c.; 6 Watts, 406, where the cases are reviewed.
    4. That the simultaneous execution of the deed and an instrument giving four'months to repay the money, with interest, no matter what may be the clauses or covenants intended to restrict the redemption to this precise period, necessarily import the loan of money on one side and security on the other, and, if so, a court of equity will always construe it a mortgage.
    5. That calling it a conditional sale does not make it so ; and that the extraordinary language used in this case, so far from making it such, tends strongly to show that the spirit and real substance of the contract were understood, but attempted to be avoided by the artful dress thrown around the transaction.
    The counsel then examined the extrinsic evidence bearing' upon these points, of which it is impossible to give an abstract.
    6. Whether, construing this transaction as a mere security for money advanced, any subsequent event has deprived the complainant of his right to redeem? The giving up the defeasance and execution of the receipt, it is insisted, amounted to a relinquishment or release of the equity of redemption. Russell called on Southard, after'the period stipulated for redemption, to make .good the advance mentioned in the deed. The receipt recites the several sums which, with the addition of this $100, make the amount stated in the deed, and concludes by saying it was-in full of all demands. According to the face of the papers, Russell was allowed to redeem only by paying $4,929.81, whereas, he bad only received $4,829.81. He insisted on the $100 to m ake the sum he received equal to the obligation he had imposed on himself. This is so (¿early shown by the receipt itself that it w;ould be useless to enlarge upon it. The words at the end of the receipt, “ This is in full of all demands upon J. Southard,” can only be construed as having reference to moneyed claims. Russell, after the receipt of the $100, had.no demand upon Southard, and it only increased by that sum the demand which Southard held on him. Increasing thq sum which Russell was equitably bound to pay, if it be considered a' mortgage, and releasing, all further demands on the mortgagee, cannot be construed as destroying the liability which the advance only enlarged, and the right to redeem must consequently be considered as unaffected by the receipt. The giving up the defeasance at the same time was, therefore, without consideration. .
    Admitting, however, that it was an attempt on the part of Southard to extinguish the right to redeem, will a court of eqrdty sanction it ?
    The civil law was, perhaps, more rigid on this point than ours, regarding, as it did, the mortgagor as a minor, and as having no will to do a vaiid act which would deprive him of the right to redeem. Our courts of equity have never gone to this extent, but they always look upon any act done under the influence resulting from the relation between mortgagor and mortgagee with great suspicion, and never fail to examine it with the severest scrutiny. It is not denied that the mortgagee may purchase the equity of redemption for a fair price and full consideration, under circumstances, where the mortgagor could exercise a will unembarrassed by necessity. A court of equity will never sanction an arrangement by which the right of redemption is surrendered without adequate consideration. St. John v. Turner, 2 Vern. 418; 1 Ridgeway, 295; Powell on Mortgages, 122, note n; Holdridge v. Gillespie, 2 Johns. Ch. 30; Henry v. Davis, 7 Johns. Ch. 41; 2 Cowen, 322 ; 2 Day, 246; 1 Murphey, 117; Hicks v. Hicks, 5 Gill & Johns. 75.
    7. With respect to lapse of time, the suit was' commenced .within twenty years of the date of the original transaction, and within less than seventeen years after the advance of the $100.
    The points made by Mr. Nicholas were the following:
    1. Does the written proof concerning the agreement show a conditional sale or a mortgage ?
    Over and above the unequivocal express language of the agreement itself, that it is, and was intended to be, a conditional sale from Southard, and not in the nature of a mortgage from Russell, there is the absence of any of those indicia, upon which courts rely in construing a quasi conditional sale to be a mortgage or security for a loan.
    1st. There is no agreement, express or implied by Russell, to pay the $4,900.
    2d. There is no acknowledgment, express or implied, which imports, or from which there could be inferred, an indebtedness from Russell to Southard. There is nothing creating any personal liability upon Russell, or by which Southard could have coerced the payment- of the $4,900. There' is nothing on the face of the writings importing a loan, or any thing else than what they purport to be, the evidence of a conditional or defeasible sale.
    There is, therefore, the want of that mutuality in the agreement, which,- according to all the approved authorities, is indispensable to the construing of a conditional sale into a mortgage. Robinson v. Cropsey, 2 Edw. Ch. R. 138; 19 Wend 518.
    The legality of these sales is, at this day, beyond all doubt, even if there ever was room for a fair legal doubt on. the subject. “ To deny it,” (says Ch. J. Marshall, delivering the opinion of the whole court, in Conway v. Alexander, 7 Cranch, 236,) “ would be to transfer to a court of chancery, in a considerable degree, the guardianship of adults as well as infants.” In Flagg v. Mann, 14 Pick. 480, the court says: “ Such a contract is known and recognized in law, and is as much to be enforced as is a mortgage, or any other contract or agreement. A decision to the contrary would essentially, unnecessarily, and unjustly fetter and impair the right to manage and dispose of property, according to the wants and interests of the owners.” In Glover v. Payne, 19 Wend. 522, the Supreme Court of New York says: “ Until the courts are prepared to make contracts for parties, and to assume the guardianship of adults as well as infants, such a contract cannot be declared a mortgage.” “ Conditional sales, or defeasible purchases,” says Chancellor Kent, “ though narrowly watched, are valid, and to be taken strictly as independent dealings between strangers; and the time limited for the repurchase must be precisely observed, or the vendor’s right to reclaim his property will be lost. The court never relieves the grantor who neglects to. perform the condition on which the privilege of repurchase depends.”
    The obvious reason for this departure from the ordinary chancery rule, in requiring such strict performance of the condition is, because there would otherwise be no mutuality in the agreement. The conditional vendee would be allowed to speculate on the chances of a rise in the value of the property, by lying by an indefinite time before he made his election to redeeih, whilst the vendor had no power to compel a redemption. For-the same reason, the want of power to coerce the payment of the purchase-money, is held by all the, authorities as a controlling circumstance against construing a conditional sale into a mortgage. Some of the earlier authorities say, that want of mutuality is not an unanswerable argument, and some dicta in more modern decisions seem to recognize that doctrine; but it is believed that no case of approved authority can -be found within the last seventy years, construing a conditional sale into a mortgage, where such mutuality did not exist. 19 Wend, 522; 1 A. K. Marsh. 169.

      The -written proof in this case shows “ no previous . debt or dealing, no loan in contemplation, no stipulation for the repayment of the money advanced, or right to coerce it, and no proposition for a treaty about a mortgage,” but does most clearly negative each of those propositions. We may, therefore-, safely conclude, that the .agreement cannot be construed into a mortgage from the written evidence in the cause.

      2. The next inquiry is, — can parol proof be let in, to contradict or vary the .construction of the written agreement, for the purpose of converting it into a mortgage ?
    The familiar general rule is, that this cannot be done either at law or in chancery. The exception to the rule at law is, where the parol proof is offered to establish alleged fraud in obtaining the agreement, or some vice or illegality in its consideration. Chancery allows the further exception, where a party comes to obtain the correction of an alleged mistake in the construction of the agreement. These are the only exceptions allowed in either court. In every other instance the rule is inflexible and invariable in its rigid application.
    It might be inferred, from the loose language of some respectable authorities, and die case of Conway v. Alexander, (7 Cranch,) is among the number, that the letting in of parol proof, to establish .the loan of money in this class of cases, without any charge of usury, was an additional exception. But it is believed never to have been so decided, where that was the turning point in the case. The contrary has been expressly and repeatedly decided by the Appellate Court of Kentucky, and such has long been the settled law of that State.' In 1824, that court, composed of those eminent jurists, Boyle, Owsley, and Mills, after acknowledging that there had been difference of decisions in that court, as elsewhere, on the question, determined that the parol proof could, not be allowed. The rule, thus settled, has constantly been enforced-ever since. It has become a law of property in Kentucky. Its direct, and indirect recognition, can..be found in at least twenty printed cases. In 1829, when there was a change in the members of the court, the ruN was solemnly affirmed in the strongest manner, in Fishback v. Woodford, 1 J. J. Marsh. 87. Again, in 1839, when there was another change in the members of the court, and it was composed of judges Robertson, Ewing, and Marshall, an effort was made to convert an absolute deed into- a mortgage, by parol proof, without charge of accident or mistake, and the rule was reaffirmed in the following language, in Thomas v. McCormack, 9 Dana, 109.
    “ There being no written memorial of any condition or defeasance, neither the public interest, nor the established principles of jurisprudence, will allow a court of either equity or law to admit parol testimony, in opposition to the legal import of the deed, and the positive denial in the answer, unless a foundation for such evidence had been first laid by an allegation, and some proof of fraud or mistake in the execution of the conveyance, or of some vice in the consideration. This rule, though it may operate harshly in a particular case, is, nevertheless, so salutary and conservative, that an inflexible adherence to it is necessary for effectuating the policy of the statute of frauds; and of giving prop’er security to property, and full effect to solemn contracts in writing.” “ To admit • such testimony, would operate a mischievous relaxation of wholesome rules, of law, open a wide door to perjury, and greatly impair, if not altogether destroy, the efficacy and value of written memorials of contracts.”
    3. If correct in this position, then the complainant must fail, as there is no foundation laid for letting in any parol proof, to show the original transaction to have been a mere loan and intended security for its repayment.
    4. The next question is, whether Russell' is not bound by his release under seal.
    5. The next question Í3, does the parol proof establish, in contradiction to the writings, that the parties intended a mortgage, and not a conditional sale ?
    The claim to the relief- sought here should be sustained by the fullest and most indisputable proof, because of its staleness; because it is in contradiction to the written agreement of the parties, fairly made; because it is asserted long after the death of James Southard, the principal party, and that of Warden Pope, the intelligent and respectable draftsman of the agreement; because, no sufficient excuse is even pretended, much less proved, for the long delay; because it is in opposition to Russell’s voluntary release, made seventeen years before; and because all the material allegations are positively denied, on oath, by the defendant, Daniel Southard, who is charged to have been personally cognizant of the whole transaction.
    Such is not at all the character, of the proof. On the contrary, it very strongly corroborates the import of the writings, and tends to show that the parties really' intended a conditional sale, and not a mortgage.
    The counsel then examined the evidence upon this point.
   Mr. Justice CURTIS

delivered the opinion of the court.

This is a suit in equity to redeem a mortgage, brought here by appeal from the Circuit Court of the United States for the District of Kentucky.

On the 24th day of September, 1827, Russell, the complainant, conveyed, by an absolute deed in fee-simple, to James Southard, deceased, whose brother and devisee, Daniel R. Southard, is the principal party defendant in this bill, a farm, containing two hundred and sixteen acres, situated about two miles from the city of Louisville.

At the time the deed was delivered, and as part of the same transaction, Southard gave to Russell a memorandum, the terms of which are as follows:

“ Gilbert C. Russell has sold and this day absolutely conveyed to James Southard, said Russell’s farm near Louisville, and the tract of land belonging to said farm, containing two hundred and sixteen acres, and the possession thereof actually delivered on the following terms, for the sum of $4,929,814 cents, which has been paid and fully discharged by the said Southard as follows, viz., first two thousand dollars, money of the United States, paid in hand; secondly, the transfer of a certain claim in suit in the Jefferson Circuit Court, Kentucky, iii the. name of James Southard against Samuel M. Brown and others, now amounting to the sum of $1,558.874; and thirdly, the transfer of anotb er claim in the same court, in the name of Daniel R. Southard against James C. Johnston and others, now an-"Minting to the sum of $1,270.94, as by reference to the records ror. the more precise amounts will more fully appear. The said Gilbert C. Russell has taken, and doth hereby agree to receive from said Southard aforesaid, two claims against Brown, &c.j and James C. Johnston, &c., as aforesaid, without recourse in any event whatever to the said James Southard, or his assignor, Daniel R. Southard, of the claim of said Johnston, &c., or either, and to take all risk of collection upon himself, and make the best of said claim he can.
“ The said James Southard agrees to resell and convey to the said Russell the said farm and two hundred and sixteen acres of land, for the sum of forty-nine hundred and twenty-nine [dollars] 814 cents, payable four months after the date hereof, with lawful interest thereon from this date.- And the said Russell agrees, and binds himself, his heirs, &c., that if the said sum and interest be not paid to the said James Southard, or his assigns, at the expiration of four months from this date, that then this agreement' shall be at an end, and null and void; and the wife of said Russell shall relinquish her dower within a reasonable time as per agreement of this date. This agreemént of resale by the said James Southard to the said Russell, is conditional and without a valuable consideration, and entirely dependent on the payment, on or before the expiration of four months from and after the date hereof, of the said sum of $4,929.814, and interest thereon from this date as aforesaid. And this agreement is to be valid • and obligatory only upon the said James Southard, upon the punctual payment thereof of the sum and interest as aforesaid, by the said Gilbert C. Russell.
“ In witness whereof the parties aforesaid, have hereunto set their hands and seals, at Louisville, Kentucky, on this 24th day of September, 1827.
Gilbert C. Russell, [seal.]
James Southard, [seal.'
“ Witness, present, signed in duplicate—
J. C.. Johnston.”

The first-question is whether this transaction was a mortgage, or a sale.

It is insisted, on behalf of the defendants, that this question is to be determined by inspection of the written papers alone, oral evidence not being admissible to contradict, vary, or add to, their contents. But we have .no doubt extraneous evidence is admissible to inform the court of every material fact known to the parties when the deed and memorandum were executed. This is clear, both upon principle and authority. To insist on what was really a mortgage, as a sale, is in equity a fraud, which cannot be successfully practised, under the shelter of any written papers, however precise and complete they may appear to be. In Conway v. Alexander, 7 Cranch, 238, C. J. Marshall says: “ Having made these observations on the deed itself, the court will proceed to examine those extrinsic circumstances, Which are to determine whether it was a sale or a mortgage; and in Morris v. Nixon, 1 Howard, 126, it is stated: “ The charge against Nixon is, substantially, a fraudulent attempt to convert that into .an absolute sale, which was originally meant to be a security for a loan. It is in this view of the case that the evidence is admitted to ascertain the truth of the transaction, though the deed be absolute on its face.”

These views are supported by many authorities. Maxwell v. Montacute, Precedents in Ch. 526; Dixon v. Parker, 2 Ves. sen. 225; Prince v. Bearden, 1 A. K. Marsh. 170; Oldham v. Halley, 2 J. J. Marsh, 114; Whittick v. Kane, 1 Paige, 202; Taylor v. Luther, 2 Sumner, 232; Flagg v. Mann, 2 Sumner, 538; Overton v. Bigelow, 3 Yerg. 513; Brainerd v. Brainerd, 15 Conn. R 575; Wright v. Bates, 13 Vermont, R. 341; McIntyre v. Humphries, 1 Hoff. Ch. R. 331; 4 Kent, 143, note A., and 2 Greenel. Cruise, 86, note.

It is suggested that a different rule is held by the highest court of equity in Kentucky. If it were, with great respect for that learned court, this court would not feel bound thereby. This -being a suit'in equity, and oral evidence being admitted, or rejected, not by the mere force of any State statute, but upon the principles of general equity jurisprudence, this court must be governed by its own views of those principles. Robinson v. Campbell, 3 Wheat. 212; United States v. Howland, 4 Wheat. 108; Boyle v. Zacharie et al. 6 Pet. 658; Swift v. Tyson, 16 Pet. 1; Foxcroft v. Mallett, 4 How. 379. But we do not perceive that the rule held in Kentucky, differs from that above laid down. That rule, as stated in Thomas v. McCormack, 9 Dana, 109, is that oral evidence is not admissible in opposition to the legal import of the deed and the positive denial in the answer, unless a foundation for such evidence had been first laid by an allegation, and some- proof of fraud or mistake in the execution of the conveyance, or some vice in the consideration.

But the inquiry still remains, what amounts to an allegation of fraud, or of some vice in the consideration — and it is the doctrine of this court, that when it is alleged and proved that a loan on security was really intended, and the defendant sets up the loan as a payment of purchase-money, and the conveyance as a sale, both fraud, and a vice in the consideration are sufficiently averred and proved to require a court of equity to hold the transaction to be a mortgage; and we know of no court which has stated this doctrine with more distinctness, than the Court of Appeals of the State of Kentucky. In Edrington v. Harper, 3 J. J. Marshall, 355, that court declared: — “ The fact that the, real transaction between the parties was a borrowing and lending, will, whenever, or however it may appear, show that a deed absolute on its face was intended as a security for money; and whenever it' can be ascertained to be a security for money, it is only a mortgage, however artfully it may be disguised.” We proceed then to examine this case by the light of all the evidence, oral and written, contained in the record.

The deed and memorandum certainly import a sale; the question is, if their form and terms were not adopted to veil a transaction differing in reality from the appearance it assumed ?

In examining this question it is of great importance to inquire whether the consideration was adequate to induce a sale. When no fraud is practised, and no inequitable advantages taken of pressing wants, owners of property do not sell it for a consideration manifestly inadequate, and, therefore, in the cases on this subject great stress is justly laid upon the fact that what is alleged to have been the price bore no proportion to the value of the thing said to have been sold, Conway v. Alexander, 7 Cranch, 241; Morris v. Nixon, 1 How. 126; Vernon v. Bethell, 2 Eden, 110; Oldham v. Halley, 2 J. J. Marsh. 114; Edrington v. Harper, 3 J. J. Marsh. 354.

Upon this important fact the evidence leaves the court in no doubt. The farm, containing 216 acres, was about two miles from Louisville, and abutted on one of the principal highways leading to that city. A dwelling-house, estimated to have cost, from $10,000 to $12,000, was on the land.

In May, 1826, about 16 months before this alleged sale, Russell purchased the farm of John Floyd, and paid for it the sum of $12,960. Some attempt is made to show, by the testimony of Mr. Thurston, that this sum was not paid tas the value of the land; but what he says upon this point is mere conjecture, deduced by him from hearsay statements, and cannot be allowed to have any weight in a court of justice. There is some conflict in the evidence respecting the state of the fences and the' agricultural condition of the lands at the time in question, but we do not find any proof that the lands had been permanently run down, or exhausted; and considering the price paid by Russell, and the amount expended by Wing, his agent, during the sixteen months he managed the farm, we think the evidence shows that, though the fences and buildings were not in the best condition, yet their state was not such as to detract largely from the value of the property. The consideration for the alleged sale was $2,000 in cash, and the assignment of two claims then in suit, amounting, with the interest computed thereon, to $2,829.81, not finally reduced to money by Russell, till October, 1830, upwards of three years after the assignment. Making due allowance for the state of the currency in Kentucky at that time, the worst effects of which seem to have been then passing away, and which must be supposed to have affected somewhat the value of the claims he received, as well as of the property he conveyed, we cannot avoid the conclusion that this consideration was grossly inadequate; and therefore we must take along with us, in our investigations, the fact that there was no real proportion between the alleged price and the value of . the property said to have been sold. We have not adverted particularly to the opinions of witnesses respecting the value of the property, because they have not great weight with the court, compared with the facts above indicated; but there is-a general concurrence of opinion that the value of the farm largely exceeded the alleged price.

It appears that Russell had intrusted the care of this farm to an agent named Wing, who had contracted debts for which Russell had been sued, on coming to Louisville from Alabama, where he resided. He was a stronger, without friends or resources there, except this farm, and in immediate and pressing want of about $2,000 in cash. Southard, though not proved to have been a lender of money at usurious rates of interest, is shown to have been possessed of active capital, and not engaged in any business except its management. Russell certainly attempted to sell the farm. Colonel Woolley testifies, — “ Russell was anxious to sell; indeed he was importunate that I should purchase.” And a letter is produced by the defendant, D. R. Southard, written to James Southard, by Wing, containing a proposal for a sale. , The letter is as follows: —-

Sunday, Noon.
“ Sir: Having'had some conversation in relation to Col.'Russell’s plantation, I will take the liberty of submitting for your consideration, 1st, how much will you give for the place, crops, stock, utensils,, and implements, or how much without the same, to be paid as follows: in one sixth cash in hand, the balance in one, two, three, four, and five equal annual instalments, which, may be extinguished at any time with whiskey, pork, bacon, flour, hemp, bale rope, cotton bagging, at the New Orleans prices current, deducting therefrom freight accustomary. Mules and fine horses will now be taken at appraised valuation.
“ Respectfully, yours, J. W. Wing.
Mr. Southard.
“N. B. Please leave an answer for me.at Allan’s, say this evening. Yours, &c., J.-W. W.”

It does not appear, that any price • was spoken of between Russell and Colonel Woolley, who peremptorily refused to purchase ; nor is any sum of money mentioned in this lettpr of Wing; but,.bearing in mind Russell’s necessity to have $2,000 in cash, the offer to take one sixth cash, and the balance in one, two, three, four, and five annual instalments, indicates that Russell theh expected, about $12,000 for the property, and had that sum in view as the price, when these terms were proposed,. This, offer to sell differs so widely from .the terms of the written memorandum, that it certainly does not aid in showing that the actual transaction was .a sale. Peter Wood testifies that he heard a conversation between James Southard .and Colonel Russell, about the transfer of the farm from Russell to Southard, in which Mr. Southard proposed to, advance money to Russell upon the farm; that Russell told Southard about -vyhat he had .paid for the farm, $13,000 or $14,000, and that he should consider it a sacrifice at $10,000; but no proposal was made to ' give- or take, any price, for. the farm. That some time aft.er, Southard told him he had advanced Russell between $4,000 and $5,000 on the place, but that, in case he owned the place, it would cost him $10,000. The general character of this witness for truth1 and veracity is attacked by the defendants, and supported by the. plaintiff. His credibility finds support in the consistency of his statements with the plominent facts proved in the case; This, is all the proof touching the negotiations which led to the contract; but there is some evidence bearing directly on the real understanding of the parties. Doctor Johnston was the subscribing witness to the written memorandum. He testifies that “ James Southard and Gilbert C. Russell, I think on the same day, presented the agreement, and asked me to witness the same, which I did. My understanding of the contract was both from Southard and Russell, and my distinct impression is, that Russell was to pay the money in four months, and take back the farm.” The intelligence and accuracy, as well as the fairness of' this witness, are not controverted; and if he is believed, the transaction was a loan of money, upon the security of his farm. It is.the opinion of the court that such was the real transaction. The amount and nature of what was advanced, compared with the value of the farm, the testimony of Wood as to the offer of Southard to make an advance of money on the farm, and his subsequent declaration that he had done, so, and the information given by both parties to Doctor Johnston, that Russell was to pay the money at the end of four months, present a case of a loan on security, and are not overcome by the answer of Southard and the written memorandum.

It is true, Daniel R. Southard, answering, as he declares, from personal knowledge, sets out, with great minuteness, a case of an absolute and unconditional sale; the written contract by his brother to reconvey being, as he says, a mere gratuity conferred on Russell the next day, or the next but one, after this absolute sale and conveyance had been fully completed. But this account of the transaction is so completely overthrown- by the proofs, that it was properly abandoned by the defendants’ counsel, as not maintainable. We entertain grave doubts whether, after relying on an absolute sale in his answer, it is open to him to set up in defence a conditional sale; but it cannot be doubted, that the least effect justly attributable to such a departure from the facts, is to deprive his' answer of all weight, as evidence, on this part of the ease.

In respect to the written memorandum, it was clearly intended to manifest a conditional sale. Very uncommon pains are taken to do this. Indeed, so much anxiety is manifested on this point, as to make it apparent that the draftsman considered he had a somewhat difficult task to perform. But it is not to be forgotten, that the same language which truly describes a real sale, may also be employed to cut off the right of redemption, in case of a loan on security; that it is the duty of the court to watch vigilantly these exercises of skill, lest they should be effectual to accomplish what equity forbids; and that, in doubtful cases, the court leans to the conclusion that the reality was a mortgage, and not a sale. Conway v. Alexander, 7 Cranch, 218; Flagg v. Mann, 2 Sumner, 533; Secrest v. Turner, 2 J. J. Marsh. 471; Edrington v. Harper, 3 J. J. Marsh. 354; Crane v. Bonnell, 1 Green, Ch. R. 264; Robertson v. Campbell, 2 Call, 421; Poindexter v. McCannon, 1 Dev. Eq. Cas. 373.

It is true, Russell must have given his assent to this form of the memorandum; but the distress for money under which he then was, places him in the same condition as other borrowers, ,in numerous cases reported in the books, who have submitted to the dictation of the lender under the pressure of their wants; and a court of equity does not consider a consent, thus obtained, .to be sufficient to fix the rights of the parties. “ Necessitous , men,” says the Lord Chancellor, in Vernon v. Bethell, 2 Eden, 113, “ are not, truly speaking, free men; but, to answer a present emergency, will'submit to any terms that the crafty may impose upon them.”

The memorandum does not contain any promise by Russell to repay the money, and no personal security was taken; but it is settled that this circumstance does not make the conveyance less effectual as a mortgage. Floyer v. Lavington, 1 P. Wms. 268; Lawley v. Hooper, 3 Atk. 278; Scott v. Fields, 7 Watts 360; Flagg v. Mann, 2 Sumner, 533; Ancaster v. Mayer, 1 Bro. C. C. 464. And consequently it is not only entirely consistent with the conclusion that a mortgage was intended, but in a case where it was the design of one of the parties to clothe the transaction with the forms of a sale, in order to cut off the right of redemption, it is not to be expected that the party would, by taking personal security, effectually defeat his own attempt to avoid the appearance of a loan.

. It has been made a question, indeed, whether the absence of the personal liability of the grantor to repay the money, be a conclusive test to determine whether the conveyance was a mortgage. In Brown v. Dewey, 1 Sandf. Ch. R. 57, the cases are reviewed and the result arrived at, that it is not conclusive. It has also been maintained that the proviso, or condition, if not restrained by words showing that the grantor had an option to pay or not, might constitute the grantee a creditor. Ancaster v. Mayer, 1 Bro. C. C. 464; 2 Greenl. Cruise, 82 n, 3. But we do not think it necessary to determine either of these questions; because we are of opinion that in this case there is sufficient evidence that the relation of debtor and creditor was actually created, and that the written memorandum ascertains the amount of the. debt, though it contains no promise to pay it.. In such a case it is settled, that an action of assumpsit will lie. Tilson v. Warwick Gas-Light Co. 4 B. & C. 968; Yates v. Aston, 4 Ad. & El. N. S. 182; Burnett v. Lynch, 5 B. & C. 589; Elder v. Rouse, 15 Wend. 218.

Some reliance was .placed on the facts, that in August, 1830, the plaintiff wrote a letter to his wife requesting her to release her dower, and that, in October, 1830, Russell surrendered- the written memorandum, under circumstances which will be presently stated. It is urged that these acts show he understood the original transaction was not a mortgage. But the utmost effect justly attributable to these acts is, that Russell thought he then had no further claim to the property, and this belief may as well have arisen from the terms of the memorandum, as from his knowledge that a sale was intended. In our judgment, however, these acts, taken' in connection with other facts proved, do not tend to support the defendants’ case. Russeff had, by his written contrae^ to procúre the release of his wife’s dower, subjected himself to pay liquidated damages to the extent of three thousand dollars; and he might desire to escape from this liability by having his wife release her right, even if he then believed he had a right to .redeem and expected to redeem; for, in that event, such release could do neither him nor his wife any harm. But, on the other hand, if he then thought he had no such right, it would be a balancing of disadvantages to have such a release made, and the question would be, whether the right of dower was more important than the liability to damages. And,' as to the surrender of the written memorandum in October following, it appears, from the testimony of Colonel Woolley, that Russell, even after this surrender, thought he had a just right of redemption, though he undoubtedly believed that it was greatly embarrassed, if not lost, by his failure to pay on the stipulated day and by his relinquishment of the written memorandum.

The conclusion at which we have arrived on this part of the case is, that the. transaction was, in substance, a loan of money upon the security of the farm, and being so, a court of equity is bound to look through the forms in which the contrivance of the lender has enveloped it, and declare the conveyance of the land to be a mortgage.

Being of opinion that this was in its origin a mortgage, the next inquiry is, whether the right of redemption has been extinguished. In October, 1830, Russell was temporarily in. Louisville, and, while there, called on Southard, and informed him there was a mistake of one hundred dollars in the computation of the amount due on the claims assigned to him, , Southard insisted it was the mistake of W. Pope, who, he. said, was Russell’s agent, and that he, Southard, was not liable to make it good. He also set up a claim that he had a right to redeem, or, as D. R. Southard says, repurchase the farm. This, also, Southard denied. It does not appear, from any proofs, what further negotiations if any- took place between the parties • but the result was, that, on the payment by Southard of one hundred dollars, Russell wrote and signed the following receipt on the. back of the written memorandum, which he surrendered to Southard:

“ Received, 6th Oct., 1830, of James Southard, by the hand of Daniel Southard, one hundred dollars, which makes the two debts of Brown and Johnston, with .the $2,000, amount to the sum of $4,929.81! > and nothing but the act of God shall prevent the relinquishment of dower of Mrs. Russell being deposited in the Clerk’s office by the 1st of January next. This is in full of all demands upon J. Southard.
(Signed) Gilbert C. Russell.” [Seal.]

A mortgagee in possession may take a release of the equity of redemption. Hicks v. Cook, 4 Dow, P. C. 6; Hicks v. Hicks et al. 2 Gill & Johns. 85. But such a transaction is to be scrutinized, to see whether any undue advantage has been taken of the mortgagor. Especially is this necessary when the mortgagee, in the inception and throughout the whole conduct of the business, has shown himself ready and skilful to'take advantage of the necessities of the borrower. Strong language is used’in .some of the cases on this subject. It was declared by Lord Redesdale, in Webb v. Rorke, 2 Sch. & Lef. 673, that “ courts view transactions- 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 mort.gagee has purchased for less than others would have given.” And Chancellor Kent, in Holdridge v. Gillespie, 2 Johns. Ch. R. 34, says, “ the fairness and the value must distinctly appear.” Wrixon v. Colter, 1 Ridg. 295; St. John v. Turner, 2 Vern. 418. But strong expressions, used with- reference to .the particular facts under consideration, however often repeated by subsequent writérs, cannot safely be taken as fixing an abstract rule. . We think 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 unconseientious advantage which ought not to be retained, need be - shown, to avoid such a purchase. 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.

In this case it is unnecessary to rely on such a rule. For by his own showing, in his answer, it is clear that Daniel R. Southard, as the agent of his'brother, either paid no consideration whatever for the extinguishment of the equity, or at the utmost only one hundred dollars. We think nothing was paid for it; and that the surrender of this right, claimed by Russell and denied by Southard, was insisted on as a condition for the correction of an actual mistake; which Southard was justly obliged to correct, without any condition: and .we do not hesitate to declare, that a release of this equity, obtained by the mortgagee in possession, under a denial'by him of the existence of .the right to redeem, for no consideration at all, or as a condition for the correction of a mistake which in equity he was bound to correct, the written defeasance having been purposely so prepared as apparently to cut off the right of redemption prior to the time when the equity was released, cannot staqd in a court of equity.

Indeed, if it were not for Russell’s subsequent acquiescence, of which we shall speak hereafter, the question would not admit of a moment’s doubt. Though this acquiescence is not without effect upon the complainant’s rights, as will, presently be seen, yet we do not think, that under the special circumstances, it ought to operate as a bar, to prevent redemption. The absence of all valuable consideration for the surrender of the equity, and the circumstances of distress under which it-was made, and which, so far as appears, continued to exist down to the filing of the bill, coupled with the conviction, which we think Russell mistakenly entertained, that his rights were probably destroyed, must prevent us from allowing the lapse of'time to be a positive bar.

The inquiry then arises, on what terms is the redemption to be decreed.

An account of the rents and profits is ordinarily an incident to a decree' for redemption against a mortgagee in possession. But it is not an inseparable incident.- This right'to an account may be extinguished by a release, or an accord and satisfaction, or it may be barred by such neglect of the mortgagqr to assert his claim, as renders it unfair for him. to insist pn an account extending over the whole period of possession, and unjust towards the mortgagee to order such an account. A mortgagee in possession is deemed by a court of equity a trustee; but there is no other than a constructive trust, raised by implication, for the purpose of a remedy, to prevent injustice ; Kane v. Bloodgood, 7 Johns. Ch .R. 111; and it would be contrary to the fundamental principles of equity, to imply a trust, the execution of which might work injustice. And accordingly it will be found, that in such cases, courts of equity have refused to order accounts against quasi trustees.

Thus, in Downer v. Fortescue, 3 Atk. 130, Lord Rardwicke, speaking of the case of an heir in possession under a legal title, which he is obliged by a decree to surrender to one having an equitable title, says, the court will order an account from the time the title accrued, unless upon special circumstances ; as when there hath been any default, or laches, in the plaintiff, in not asserting his title sooner, but he has lain by, there the court has often thought fit to restrain it to the filing of the bill.” So in Pettiward v. Prescott, 7 Ves. 541, a case of constructive trust, Sir William-Grant restrained the account of the rents and profits to the time of filing the bill, on account of the lapse of nearly twenty years; and similar cases may be found referred to in Drummond v. The Duke of St. Albans, 5 Ves. 433, and note 3 to page 339; and in Roosevelt v. Post, 1 Ed. Ch. R. 579. Indeed in Acherly v. Roe, 5 Ves. 565, where there was a trust created of a term, for the purpose of raising a sum of money, and the cestui que trust' had been long in possession without objection, Lord Chancellor Loughborough refused even tocarry the account back to the filing of the bill, upon the special circumstances of that case. This court, in Green v. Biddle, 8 Wheat. 78, gave its sanction to the rule as laid down by Lord Hardwicke, and declared it to be fully supported by the authorities.

This bill was filed after the lapse of nineteen years and eight months from the time the loan became payable. James Southard, the original mortgagee, had then been dead many years. More than sixteen years had elapsed since the defeasance was surrendered; and' though we are satisfied Russell was under great embarrassments, and though we are of opinion he himself believed his right to redeem was probably extinguished by the terms of the defeasance, and its surrender, yet his neglect to look into and assert his rights, must not be allowed to subject the defendants to the risk of injustice. The defendants, and James Southard, have treated the. property as their own, and have improved its condition. There is no suggestion of waste in the bill. . The value of the land has greatly appreciated, from .the growth of the neighboring city; and though we think James Southard designed to take an uncon scientious advantage of Russell, and that the defendant, D. R. Southard, obtained the surrender of the defeasance, under such circumstances as rendered it constructively'fraudulent, yet neither of them appears to have concealed any facts from Russell, or to have done any thing to prevent him from exhibiting his real caseto counsel. To such a case, the language of the Vice-Chancellor, in Bowes v. East London W. W. Co. 3 Mad. 384, exactly applies. The plaintiff ought to have looked into his rights; and as by his negligence to obtain information concerning them and to assert them, the lessees may have been led to expenditure on the premises, the benefits of which they will lose, I shall not direct an account beyond the filing of the bill.” To this extent his acquiescence must be taken to have concluded his right, and we shall direct that the account of the interest due upon the money loaned, and of the rents and profits of the farm, commence at the date of the filing of the bill.

We can perceive no ground for charging Southard, with the money received from the insurance company, cn account of the destruction of the house. He was in possession, claiming to be the absolute owner of the farm and its appurtenances. He obtained the policy to cover his interest, and paid the premium. If there were any equities against him arising out of the receipt of this money, they would be in favor of the underwriters, ánd not of the mortgagor. Carpenter v. Providence Washington Ins. Co. 16 Pet. 501.

It remains only to advert to the cases of the defendants, who claim as purchasers under D. R. Southard. 'The questions arising therein were not argued by counsel, and upon looking into that part of the record, we find some of them not capable of being fully settled upon the facts therein disclosed.

It was probably understood by counsel, that these questions would remain for consideration, in the court below,-if the-case should be remanded.

Samuel D. Tompkins claims to have been a purchaser for valuable consideration of thirty acres of this land, and to have received a deed of conveyance thereof, and paid a part of the consideration-money without notice of Russell’s title, and before the institution of this suit. He also claims to have made permanent and valuable improvements on the land purchased by him, but whether before or since the institution of this suit does not appear. 'William H. Pope, as the executor and trustee of his father, William Pope, claims that his father, in his lifetime, purchased at a sale on four executions against Southard another, part of these lands, and that Southard omitted to redeem the land by paying what was due on three of the executions, and a suit is shown by the' record to be pending in the Court of Appeals of Kentucky, wherein Russell’s right to -redeem is in contestation.

Matilda Bunks, the widow of James Burks, deceased, and John Burks, one of the sons of James, and William R. Thompson, as guardian of other children of James, and James Guthrie, assignee of J. R. Trunstall, the husband of a daughter of James. claim a lien on these lands by virtue of a mortgage thereof executed by Daniel R. Southard, and Southard insists that Guthrie has been paid; it is not ascertained whether the debts i atended to be secured on these lands, are or are not, fully secured upon other lands of Daniel R. Southard, which are embraced in the same mortgage. In this posture of the cause, it is not practicable for the court to pass finally upon the rights of these parties; and the cause will therefore be remanded, without deciding upon the existence or extent of the right of either of them as a purchaser.

A decree is to be entered, reversing the decree of the court below, with costs, declaring that the conveyance from Russell, the complainant, to James Southard, was a mortgage, and that Russell is entitled to redeem the same, and remanding the cause to the Circuit Court, with directions to proceed therein in conformity with the opinion of this court and as the principles of equity shall require.

Order.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Kentucky, and was argued by counsel. On consideration whereof, it is the opinion of this court that the conveyance by Gilbert C. Russell, the complainant, to James Southard, and dated the 24th day of September, 1827, as set out in the transcript of the record, was a mortgage, and that said Russell is entitled to redeem the same. Wherefore, it is now here ordered, adjudged and decreed by this court, that the decree of the said Circuit Court iñ this cause be, and the same is hereby, reversed, with costs, and that this cause be, and the same is hereby, remanded to the said Circuit Court for further proceedings to be had therein, in conformity to the opinion of this court and as to law and justice may appertain.

After the opinion of the court was pronounced, a motion was made on behalf of the appellees for a rehearing, and to remand the cause to the Circuit Court for further preparation and proof, •upon the_ ground, that new and material evidence had been discovered since the case was heard and decided in that court.

Sundry affidavits were filed, showing the nature of the evidence which was said to have been discovered. ■

The opinion of the court upon this motion was delivered by Mr. Chief Justice TANEY..

The decree .of the Circuit Court, in this case, was reversed during the present term, and a decree entered in favor of the appellant. A motion is now made iii behalf of Daniel R. Southard, one of the appellees, to set aside the'decree in this court, and to remand the case to the Circuit Court for further preparation and proof, upon-the ground that new and material evidence*has been discovered since the case was heard and decided in that court. In support of this motion affidavits have been filed stating the evidence newly discovered,, and that it was unknown, to him when the case was heard in the court bélow.

It is very clear that affidavits of newly-discovered testimony cannot be received for such a purpose.. This court must affirm or reverse upon the case as it appears in the record.’ We cannot look out of it, for testimony to influence the judgment of this court sitting, as an appellate tribunal. And, according to the practice of the court of chancery from its earliest history to the present time, no paper not before the court below can be read on the hearing of an appeal. Eden v. Earl Bute, 1 Bro. Par. Cas. 465; 3 Bro. Par. Cas. 546; Studwell v. Palmer, 5 Paige, 166.

'Indeed, if the established chancery practice had been otherwise, the act of Congress of March 3d, 1803, expressly prohibits the introduction of new evidence, in this court, on the hearing of an appeal from a circuit court, except in admiralty and prize causes.

The motion is therefore overruled.


source: Caselaw Access Project

author: Mr. Justice CATRON

license: Public Domain

text:
    Moses B. Ives, Plaintiff in error, v. The Merchants Bank of Boston.
    The surety for the appellants from a decree in admiralty gave bond to pay all costs and damages which might be adjudged by this court.
    This court having affirmed the decree of the Circuit Court with costs and six per cent. • damages, judgment was entered upon the receipt of the mandate by the Circuit Court, for the amount of the original judgment together with the amount of costs and damages calculated up to that day; and execution was awarded.
    Under this execution, the vessel, which had been attached under the libel, was sold for less than this aggregate amount.
    The surety is not entitled to have a relative proportion of the proceeds of sale applied to the reduction of his bond, but is responsible upon it to the entire amount.
    By the 26th section of the Judiciary Act, the courts have power to assess damages upon bonds, &c., and to render judgment for so much as is due according to. equity, in cases of default or confession or demurrer. This section does not apply .to a case heard on agreed facts.
    But then when the case heard on agreed facts was the case of an appeal-bond, it was proper for the court to give judgment for the penalty of the bond (being less than the judgment under the mandate) and allow interest'from the date of the institution of the suit, although the amount to be paid in this way would exceed the penalty of the bond.

      This case was brought up, by writ of error, from the Circuit Court of the United States for the District of Rhode Island.
    It was a consequence of the case of the New Jersey Steam Navigation Company v. The Merchants Bank of Boston, decided by this court at December term, 1847, and reported in 6 Howard, 344.
    The Merchants Bank of Boston were the plaintiffs in the Circuit Court, and the cause of action is thus stated in the brief ;of the counsel for the plaintiff in error in this court. There was a special declaration in the Circuit Court, to which the defendant demurred: —
    The facts set forth in the declaration and admitted by the demurrer, upon which the questions here presented arise, are shortly these.
    The suit in admiralty — New Jersey Steam Navigation Company, Appellant and Libellee, v. The Merchants Bank of Boston, Libellant and Appellee, lately decided by the Supreme Court of the United States, and commonly called the Lexington case, was commenced in the District Court of the District $>f Rhode Island, by attachment of the steamer Massachusetts, then belonging to the Navigation Company. The suit coming by appeal to the Circuit Court of the United States for the District of Rhode Island, a decree therein was rendered against the Navigation Company at the November Term, 1843; whereupon an appeal was taken by the company to the Supreme. Court of the United States, and Moses B. Ives, the plaintiff in error, entered into appeal-bond, as surety for the company, of which he was a member, in the penal sum of $2500, with the following condition:
    “ Now, therefore, if the said New Jersey Steam Navigation Company shall prosecute their said appeal before the said Supreme Court of the United States with effect, and shall well and truly pay all such costs and damages as shall be adjudged for them to pay by said Supreme Court, or by said Circuit Court, by reason of said appeal, then the before-written obligation to be void and of no effect, otherwise it shall remain in full force and effect.”
    The suit terminated in the Supreme Court in a decree in favor of the libellant and appellee, and execution finally issued against the Navigation Company for the sum of $28,302.26 debt, and costs taxed at $680.50, which, together with the sum of 75 cents for the execution, made the whole amount of the execution , $28,983.51, the debt drawing interest from the 19th day of June, '1848.
    Of the debt, so called, embraced in the above execution, the sum of ,16,228.78. consisted of the costs and damages of the appeal decreed by the Supreme Court, that is to say, $6,078.26 of it was interest on the amount decreed, accruing during the pendency of the appeal, given by way of damages of the appeal, and the balance $150.52 were the costs of the appeal. This sum, $6,228.78, drawing interest from the 19th day of June, 1848, is the sum for which Mr. Ives would have been liable, to the extent of the penalty of the appeal-bond, had the execution remained wholly unsatisfied. ' But the .above execution was levied by the marshal upon the steamer Massachusetts, attached as aforesaid on the original process in the suit, and on the 26th day of July, 1848, the Massachusetts was sold by the marshal under the levy for the sum of $25,000, and, deducting therefrom the sum of $883.38, the marshal’s fees and expenses, the sum of $24,116.62 was paid over by the marshal to the Merchants Bank, and the execution thereupon returned satisfied for that amount, and unsatisfied for the balance, that is to say, between four and five thousand dollars of the execution remained unpaid.
    The present action is an action by the Merchants Bank against Mr. Ives, the surety on the above appeal-bond'to recover the costs and damages of appeal; and the plaintiff and defendant in error claimed, below, that he was entitled to apply the 24,116.62, net proceeds of the Massachusetts, first to that portion of his execution not protected by the appeal-bond, and was compelled to" apply the balance only to that portion of the execution protected' by the appeal-bond, treating the sum made upon the execution in the same manner as if it had been a voluntary payment without direction by the payor, in which case the right of appropriation remains with the payee. To this result the learned judge who' tried the case below, for various reasons came, and rendered judgment against Mr.. Ives for the penalty of the bond, with interest from the day of demand by action brought.
    The cause was argued in this court by Mr. Ames for the plaintiff in error, and by Mr. Pitman, upon a brief of Tillinghast & Bradlee, for the defendant in error.
    The plaintiff in error contended,
    1. That, under the facts set forth in the declaration, judgment should not have been rendered against him for a greater sum, at the most, than what would remain due of the costs and damages of the appeal, after deducting therefrom the amount thereof received from the net proceeds of the Massachusetts, applied pro rata to every portion of the execution, as well to the costs and damages of appeal for which the plaintiff in error was liable as surety for the Navigation Company, as to that portion of it for which he was not liable. In other words, we say that the net amount made by the levy of the execution paid upwards of eighty per cent, of the amount of the same. Equally apportioned to the costs and damages of appeal, which it should have been, it paid upwards of eighty per cent, of them, that is to say, about $5000 of them; leaving about $1200 of them due with interest from the day of demand by action brought, for which, at the most, judgment below should have been rendered against us, instead of for the whole penalty of the bond with interest.
    2. That so far from the law permitting the defendant in error to apply the amount .made on the execution exclusively to the portion of the debt not secured by the appeal-bond, it will itself apply it, in the first instance, to the payment of the costs and damages of appeal in exoneration of the surety on the bond.
    3. That, at all events; judgment should not have been rendered for a sum exceeding the penalty of' the bond, which, is the utmost extent of our liability; the judgment, so far as interest on the penalty is concerned, being erroneous.
    The points raised by the counsel for the defendant in error
    were the following:
    1. That the plaintiff in error upon the bond in this suit is a substitute for the New Jersey Steam Navigation Company, and that his liabilities are the same as those of the company would have been, had the bond been executed by them.
    2. That íhé plaintiff in error is, at all events, nothing more than a surety for the accommodation of the company.
    3. That, in either light, he cannot claim a discharge from his liability, until the debt to the Merchants Bank is paid; and this, 1st, upon the principle illustrated in the eases 1 Gill & Johns. 346, and 15 Conn. 4371 See also Kyner v. Kyner, 6 Watts, 222. That a creditor holding a security for both portions of his debt, and a surety also for one portion, may, and the court will, so apply the securities, as to pay the whole debt. The surety is not entitled to any transfer or appropriation of securities for his benefit, until the whole debt is paid. 2d, Upon the rule of the civil law to be followed in its analogies in our courts of equity, which makes 'a positive appropriation of any payment first to the debt upon, a judicial demand, and not first to the interest or damages allowed for the detention of such a debt. 3d, Because such appropriation is the only mode by which the purpose of the court in requiring an appeal-bond, can be accomplished, and justice* done bétween the parties.
    4. We submit that interest on the' penalty of a bond from the date of the .writ is allowed against the obligor and sureties on a bond in the courts of the United States, as shown by the decisions in 1 Paine and 1 Gallison, both confirmed in the Supreme Court, and such also is the prevailing doctrine in other courts.
   Mr. Justice CATRON

delivered the opinion of the,court.

At November term, 1843, in the Circuit Court of Rhode Island, the Merchants Bank of Boston recovered against the New Jersey Steam Navigation Company, by decree in an admiralty suit, the sum of $22,224 and costs of suit. From which decree the respondents appealed to this' court; and on December 14, '1843, Moses B. Ives, the present plaintiff in- error, became bound as surety for, the appellants in a penal bond of $2500, with a condition, “ that the said Navigation Company 'should prosecute their appeal with effect, and should well and truly pay all such costs and damages as. should be adjudged for them to pay by said Supreme Court, or by said Circuit Court, by reason of said appeal, in case of failure. At December term, 1847, the appeal was heard before the Supreme Court, and the decree affirmed, with costs and six per cent, damages. On return of the mandate, a judgment was entered in the Circuit Court against the Navigation Company, for the original amount; and also for $6,078.20 damages, arising by reason of the appeal, and for $529.98, being costs covered by the appeal-bond. The entire sum for principal, damages, and costs, being $28,452.78. Execution, issued for the aggregate sum, and the steamboat Massachusetts was sold, 20th July, 1848, for $25,000, by virtue of the writ. The vessel had been attached' when the proceeding was commenced, and continued subject to a lien until sold; but, not bringing a sum equal to the final decree,, Ives was sued on his appeal-bond, and the Circuit Court gave judgment against him for the amount of the penalty, and also for six per cent, interest on the $2500, from October 10th, 184-8, being the time when he was served with the writ; the penalty and.interest amounting to $2,605.80, for which judgment was rendered at the June term, 1849. To bring up this judgment, Ives sued out the present writ of error.

First, it is insisted, and assigned for error, that the $25,000, made by .a sale of the, vessel, covered about eighty per cent. of. the amount included in the execution, and ought to have been proportioned to every part of the demand, and if thus applied to damages and costs, would have reduced them to about $1200, and that plaintiff in error was responsible for no more.

Ives was bound to pay such damages as might be awarded by the Supreme Court, and costs; and could' have .been sued and a judgment had against him, had no execution issued. He was positively bound to the amount of his bond, and could not -be heard to allege an extinguishment of it in pait," because of a payment made by his principals, leaving an amount due equal to the bond.

This is the plain equity of the case. If the appeal had not been taken, arid the property attached had been sold in due time after the first decree for ¡$25,000, no damages -would have been sustained by the plaintiffs below, and as the surety was instrumental in delaying satisfaction, it is equitable that he should respond to such damage as his act 'occasioned, and which enlarged the amount. The second ground relied on to reverse is, that by uniform practice costs are deducted from the first proceeds collected on an execution including them; and that a surety for costs is never held liable when an amount sufficient to cover costs is made of the principal.

It is not necessary at present to decide this matter of practice, nor shall we do so, as the unsatisfied damages, exclusive of costs, far exceeded the judgment rendered by the Circuit Court.

The third and remaining question is one' of general 'importance and some difficulty. The surety was bound in a penal bond, and this penalty the Circuit Court exceeded, by allowing interest on it from the time of demand by suit; and it is insisted that in this there .was error. The action was debt, with an allegation of damages sustained by its detention. The parties came to a hearing on an agreed case which set forth the facts, and submitted the law arising on them to the court; and, as the 26fj section of the Judiciary Act of 1789 only gives the courts power to assess damages and to render judgment for so much as is due according to equity, in cases of default or confession, or on demurrer, it does not apply in cases heard on agreed facts, or tried upon pleadings and proofs. This court so held in Farrar & Brown v. The United States, 5 Pet. 385, and which construction we follow. In the same cause it was adjudged that, in an action of debt against the sureties of a surveyor who had received moneys of the United States to disburse, and given bond with sureties to account for them, the practice was to render judgment in debt for the penalty, to be discharged by the amount actually due, and that this amount could not exceed the penalty.

In cases where unascertained damages are claimed, about which there is a contest, the foregoing is the proper rule; although it was departed from in the case of McGill v. The Bank of the United States, 12 Wheat. 514, where payments had been made by the sureties after a defalcation, and an account was taken between the parties, and interest calculated on both sides and a balance struck, which, when added to previous payments, exceeded the penalty of the bond. But these cases widely differ from the present. Here the surety was bound to pay damages that might be adjudged against his principal in the Supreme Court. They were established and settled at $6,078.26; and this judgment bore six per cent, interest from it» date. It was conclusive as against the principal; and equally conclusive of the fact, that the surety was bound to. pay it to the extent of $2,500. Then this amount was due by the bond, which could have been at once enforced by suit; and if the Supreme Court had been vested with power to render judgment against the surety on the appeal-bond, as is the case in some of the States, no reason would seem to exist, why the bond should not bear interest from the date of judgment in the Supreme Court against the surety as well, as against the principal. But as Ives only guaranteed the payment of damages, and it was a duty imposed' on the principal to pay the entire judgment, the moderate rule has been applied of requiring interest from the time that demand of payment was made by suit; a rule now so generally established in similar cases, by State courts of high authority, that this court could not violate it without manifest impropriety.

Of course we are dealing with an appeal-bond, and do not intend to go beyond the case before us. It is, therefore, ordered, that the judgment rendered by the Circuit Court be affirmed.

Order.

This cause came on to be heard on the transcript of the record, from, the Circuit Court of the United States for the District of Rhode Island, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this court, that the judgment of the said. Circuit Court in this cause be, and the same is hereby, affirmed, with costs and damages, at the rate of six per centum per annum.


author: Mr. Chief Justice TANEY

text:
    The Grand Gulf Railroad and Banking Company, and Alfred Ingraham and George Read, Assignees of said Company, Intervenors, Plaintiffs in Error, v. John R. Marshall.
    In order to bring a case within the reviewing po-vyer of this court, as prescribed by the-25th Section of the Judiciary Act, it is necessary that the record should show that the point, giving jurisdiction to this court, was raised and decided in the State court.
    The preceding decisions upon this subject referred to.
    Hence, where it appears from, the record that the decision of the State court turned upon the construction and not th'e validity of a State law, and that the question of its validity was not raised, this court has no jurisdiction.
    This case was brought up from the Supreme Court of the State of Louisiana, by a writ of error issued under the 25th section of the Judiciary Act.
    The facts are set forth in the opinion of the court, to which the reader is referred.
    It was argued by Mr. Strawbridge for the plaintiffs in error.
   Mr. Chief Justice TANEY

delivered the opinion of the court.

- This is a writ of error to the Supreme Court of the State of Louisiana.

The Grand Gulf Railroad and Banking Company was chartered by the State of Mississippi in the. year 1833. In 1840' an act was passed by the Legislature of that State declaring that it should not be lawful for any bank in Mississippi to transfer by indorsement or otherwise any note, bill receivable, or other debt. And in 1842, after the passage of this act, the bank having become insolvent and its notes greatly depreciated, assigned and transferred all of its notes, bills receivable, and other assets of any value to John Lindsey and Alfred Ingraham-, in trust for the payment of its debts, in the order specified in the deed.

Some of the debtors of the bank, whose notes and mortgages were included in this transfer, resided in the State of Louisiana. And in 1843 John R. Marshall, the defendant in error, being the holder of the notes of the bank payable to bearer to the amount of $5,400, obtained an attachment from one of the district courts of Louisiana against the property and credits of the bank, and laid it in the hands of these debtors as garnishees. The bank appeared and answered, and averred that the debts and property in question had been transferred to the trustees above named previous to the attachment; and the trustees intervened and claimed the debts and property as belonging to them by virtue of the assignment of the bank.

The defendant in error replied that the assignment was null and void by the laws of Mississippi and the laws of Louisiana, and that it was without consideration and in fraud of the creditors.

Testimony was taken on both sides to show the object of the assignment, and the circumstances under which it was made ; and several questions of "law were raised in the District Court upon the admissibility of testimony and upon the manner in which the deed to the trustees had been executed. But it is unnecessary to state either the testimony or the questions raised at the trial, bécause neither the proofs nor the points made can have any bearing upon the question upon which the case must be decided in this court.

The District Court gave judgment-in favor of the defendant in error, from which the bant and trustees appealed to the Sir-preme Court of the State where the judgment of the District Court was affirmed. And this writ of error is brought under the 25th section of the act of 1789, to revise that judgments

The plaintiffs in error claim jurisdiction for this court upon the ground that the assignment by the bank to the trustees was adjudged to be void by the State court under the act of the State of Mississippi of 1840, hereinbefore mentioned;' and that this act is a violation of the charter granted to the bank and impairs the obligation of the contract which the charter created between the State and the corporation.

If the record brought that question before us, undoubtedly we should have jurisdiction, and the judgment of the State court could not be maintained. For it is the same question which this court decided in the? case of The Planters Bank of Mississippi v. Sharp, 6 How. 301, and in Baldwin and others v. Payne and others, 6 How. 332.

But in order to give this court jurisdiction the record- must show, that the point was brought to the attention of the State court and decided by it. It is not sufficient that the point was in the case, and might have been raised and decided. It must appear that the validity of the State law was drawn in question' and the judgment founded upon its validity. This is evidently the meaning of the 25th section of the act of. 1789, which gives the writ of error. And the reason is obvious. The party is authorized to bring his case before this court, because a State court has refused to him a right to which he is entitled under the Constitution or laws of the United States. But if he omits to claim it in the State court there is no reason for permitting him to harass the. adverse party by a writ of. error to this court, when, for any thing that appears in the record the judgment of the State court might have been in his favor if its attention had been drawn to the question. The rule upon'this subject is distinctly stated in the case of Armstrong and others v. The Treasurer of Athens County, 16 Pet. 285, where the court said, that when the proceeding is under the law of Louisiana it must be shown that the point arose and was decided, either by the statement of facts, and the decision as usually set out in such cases by the court, or it must be entered on the record of the proceedings in the appellate court, (in cases where thp record shows that such a point' may have arisen and been decided,) that it was in fact- raised and decided. In suits at common law the question is usually presented by the pleadings or by an exception to the opinion of the court.

In the case before- u§. the proceedings were under the Louisiana law. And the dpinion of the court, according to the practice in that State, is entered on the record, and sets forth the principles of law upon which the decision was made. And it appears that the decision turned upon the construction (not the validity) of the-act of Mississippi of 1840; and upon a question of merely local law, concerning the right by prescription claimed by the trustees.

Nothing is said in relation to the constitutionality or validity of this act of Mississippi, and the opinion of the court clearly shows that no such question was raised or decided.

This writ of error must therefore be dismissed for want of jurisdiction.

Order.

This cause came on to be heard on the transcript of the record from the Supreme Court of the State of Louisiana, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this court, that this cause be, and the same is hereby, dismissed for the want of jurisdiction.