Hunt v. Rousmanier

• Decision Date: 01 February 1823
• Citation: 21 U.S. 174,8 Wheat. 174,5 L.Ed. 589
• Parties: HUNT v. ROUSMANIER'S Administrators
• Court: U.S. Supreme Court

21 U.S. 174

5 L.Ed. 589

8 Wheat. 174

HUNT v. ROUSMANIER'S Administrators.

February Term, 1823

APPEAL from the Circuit Court of Rhode Island.

The original bill, filed by the appellant, Hunt, stated, that Lewis Rousmanier, the intestate of the defendants, applied to the plaintiff, in January, 1820, for the loan of 1450 dollars, offering to give, in addition to his notes, a bill of sale, or a mortgage of his interest in the brig Nereus, then at sea, as collateral security for the repayment of the money. The sum requested was lent; and, on the 11th of January, the said Rousmanier executed two notes for the amount; and, on the 15th of the same month, he executed a power of attorney, authorizing the plaintiff to make and execute a bill of sale of three fourths of the said vessel to himself, or to any other person; and, in the event of the said vessel, or her freight, being lost, to collect the money which should become due on a policy by which the vessel and freight were insured. This instrument contained, also, a proviso, reciting, that the power was given for collateral security for the payment of the notes already mentioned, and was to be void on their payment; on the failure to do which, the plaintiff was to pay the amount thereof, and all expenses, out of the proceeds of the said property, and to return the residue to the said Rousmanier.

The bill farther stated, that on the 21st of March, 1820, the plaintiff lent to the said Rousmanier the additional sum of 700 dollars, taking his note for payment, and a similar power to dispose of his interest in the schooner Industry, then also at sea. The bill then charged, that on the 6th of May, 1820, the said Rousmanier died insolvent, having paid only 200 dollars on the said notes. The plaintiff gave notice of his claim; and, on the return of the Nereus and Industry, took possession of them, and offered the intestate's interest in them for sale. The defendants forbad the sale; and this bill was brought to compel them to join in it.

The defendants demurred generally, and the Court sustained the demurrer; but gave the plaintiff leave to amend his bill.

The amended bill stated, that it was expressly agreed between the parties, that Rousmanier was to give specific security on the Nereus and Industry; and that he offered to execute a mortgage on them. That counsel was consulted on the subject, who advised, that a power of attorney, such as was actually executed, should be taken in preference to a mortgage, because it was equally valid and effectual as a security, and would prevent the necessity of changing the papers of the vessels, or of taking possession of them on their arrival in port. The powers were, accordingly, executed, with the full belief that they would, and with the intention that they should, give the plaintiff as full and perfect security as would be given by a deed of mortgage. The bill prayed, that the defendants might be decreed to join in a sale of the interest of their intestate in the Nereus and Industry, or to sell the same themselves, and pay out of the proceeds the debt due to the plaintiff. To this amended bill, also, the defendants demurred, and on argument the demurrer was sustained and the bill dismissed. From this decree, the plaintiff appealed to this Court.

The cause was argued at the last term.

March 1st, 1822.

Mr. Wheaton, for the appellant, stated, that the question in this case was, whether, under the agreement mentioned in the original and amended bill, by which the plaintiff was to have a specific security on certain vessels belonging to the defendents' intestate, for the repayment of a loan of money made to him in his lifetime by the plaintiff, a Court of equity will compel the defendants to give effect to that security, by joining in a sale of the vessels, or in any other manner.

That the original intention and contract of the parties, was to create a permanent collateral security on the vessels, in the nature of, or equivalent to, a mortgage, is explicitly averred in the bill, and, of course, admitted by the demurrer. But it is supposed by the Court below, that they have failed to give effect to this their intention and contract, not from any mistake of fact, or accident, but from a mistake of law, in taking a letter of attorney with an irrevocable power to sell, instead of an absolute or conditional bill of sale. It is said, that this power, though irrevocable during the lifetime of the intestate, was revoked on his death by operation of law, not being a power coupled with an interest in the thing itself, but only coupled with an interest in the execution of the power, which is supposed to expire with the death of the party creating it, in the same manner as a mere naked power; and it is, therefore, concluded, that this is not a case where a Court of equity will relieve.

1. But, it is conceived, that this conclusion proceeds upon the idea, that the original contract between the parties was entirely merged and extinguished in the execution of the instruments which were executed, and which, by the accident of the death of one party, have turned out to be insufficient in point of law to give effect to that contract. Here was no mistake of law in the formation of the original contract. The law was fully understood in respect to all the facts on which the contract was founded. The loan, and the terms on which it was granted, were lawful; the intestate was the owner of the vessels, and legally competent to hypothecate them for his just debts; he did actually contract to give the plaintiff a specific, permanent lien upon them, as collateral security for the payment of the notes. The mistake is not in the facts, nor the law, nor in the contract, but in the remedy upon the contract. It was not necessary that the contract should be reduced to writing at all, or evidenced by any written instrument, for it is not within the statute of frauds, like an agreement for the sale of lands, &c. There was a complete legal contract, but, by the mistake of the parties, the mode selected for its execution is defective at law. This contract still subsists in full force, and is not extinguished and discharged by the writings, which have turned out to be inadequate means of giving effect to it. The contract was not for a power to sell, but for a specific security; not for a pledge of the property which was to expire on the death of the party, but for a permanent lien upon it. It is an unquestionable rule of law, that all previous negotiations are extinguished and discharged by the contract itself; but, the legal and just import of this rule is, that where the parties have definitively concluded a contract, all previous terms, propositions, and negotiations concerning it, are merged in the contract itself; and this is equally true, whether the contract is in writing, or by parol only. It does not, therefore, follow, that the contract is extinguished, but the contrary. The contract clearly exists, and is supposed by all the authorities to exist; but is not to be affected by the negotiations of the parties which preceded its final completion.

The contract, in this case, is not merged and extinguished in the writing; the power looks to something future to be done by virtue of it, and pursuant to the contract: the power is not the contract; it is a means by which a future act was to have been done, in fulfilment of the contract by one of the parties. It cannot be pretended, that the parties meant that the power should embrace the whole contract between them on both sides; neither does it. The agreement is not, and was not intended to be set out. The loan, the terms on which it was made, the negotiable notes, the assignment of the policy, all exist, independently of the power, and are binding engagements. The power was intended as a means in the hands of the plaintiff to coerce the intestate to the performance of his agreement; it was not intended as evidence at all, and, at most, it is evidence of part of the contract only; of the means which the parties had selected to carry into effect the contract, but which does not preclude a resort to other means, that having failed by accident. It cannot be denied that, according to the whole current of authorities, parol evidence is admissible to correct errors and mistakes in the written instrument. But how can this be reconciled with the notion, that the parol contract is extinguished by the writing? For, if the writing alone is the contract, all idea of mistake is utterly and necessarily excluded. The writing, in that case, would be the original, and to admit parol proof, would be, not to correct, but to alter the original. And, perhaps, it may be well doubted, whether the power, in this case, can be considered as legal direct written evidence of any part of the contract. If A. sells his ship to B., and gives him a power of attorney to take possession of her, it can hardly be considered, that this power is the direct, written evidence of the contract; it is a power growing out of the contract, and given to aid its execution. The undisputed execution of the instrument by which the power was given, is evidence of its being a voluntary act, and by inference, proves that it was agreed to be given, but is not the direct evidence of the contract itself. There is an essential difference between a contract to perform a particular thing, and the actual performance of that thing. Here the contract was for a specific lien on the vessels, and to secure that lien the power was given; it is evidence of an after act intended to be done under the contract, rather than direct evidence of the contract itself.

It must be admitted, that there was originally a contract for a lien, by mortgage, bill of sale, or some other mode; nor can it be successfully contended, that the power of attorney, when adopted, operated either as an extinguishment of the original contract, or as a waiver of all other security; thus narrowing...