Armor v. Spalding

• Decision Date: 28 March 1890
• Citation: 23 P. 789,14 Colo. 302
• Parties: ARMOR et al. v. SPALDING et al.
• Court: Colorado Supreme Court

23 P. 789

14 Colo. 302

ARMOR et al. v. SPALDING et al.

Supreme Court of Colorado

March 28, 1890

Error to district court, Arapahoe county.

In 1876 John F. Spalding, as bishop, was the owner of five promissory notes given by John Armor, aggregating $8,380, besides interest at the rate of 18 and 20 per cent. per annum. These notes were secured by trust-deeds upon the lots in dispute. Subsequently an absolute deed was given by Armor to Spalding as bishop, covering the incumbered premises. Spalding at once took exclusive possession, and has since paid all taxes insurance, and other expenses. The promissory notes held by Spalding were delivered to Armor, but at the commencement of this suit no cancellation of the trust-deeds, securing the same, appeared of record. At the time the said absolute deed was given, the property covered thereby was not worth, in the market, the full aggregate amount of the notes, together with interest. At the present time its value is estimated to be from $75,000 to $100,000. Plaintiffs in error, as the heirs of said Armor, brought suit in the court below to recover the premises in question, upon the theory that Spalding held them as mortgagee. Prior to the commencement of suit they offered to pay him the aggregate amount of indebtedness, together with interest to that time, and demanded the carrying out of the foregoing alleged mortgage agreement. Their tender and demand were refused. The answer, after specifically denying the allegations of the complaint, in so far as that pleading alleged a trust or mortgage, averred an absolute sale. It also pleaded additional defenses, which, however, need not be stated. A replication was filed, duly traversing the material new matter set up in the answer. The cause was tried to the court, and upon the evidence and pleadings a decree was rendered dismissing the complaint. To reverse that decree the present writ of error was sued out.

Wells, McNeal & Taylor and Enos Miles, for plaintiffs in error.

S.C. Hinsdale and J. L. Jerome, for defendants in error.

HELM C.J.

The complaint in the case at bar avers that the absolute deed given by John Armor to Spalding, as bishop, coupled with the alleged parol agreement existing at the time of its execution, constituted a mortgage. But in pleading the conditions of the defeasance it declares that Spalding was not only to take possession of the property under the deed, 'hold the same in trust, collect all rents and profits, pay all taxes and expenses,' but also that 'when it so enhanced in value that it could be sold so as to leave Armor a surplus, Spalding should sell, satisfy his indebtedness, and pay the overplus to Armor, his heirs or assigns, on a reasonable request.' There was no provision that the title should in any event be restored to Armor. It was conveyed to Spalding with authority to sell. This fact is somewhat inconsistent with the theory of a mortgage; for in mortgages the defeasance ordinarily provides that upon payment of the debt title to the premises incumbered shall revert to the mortgagor. Lance's Appeal, 112 Pa. St. 456, 4 A. 375; Hoffman v. Mackall, 64 Amer. Dec. 637; Reece v. Allen, 48 Amer. Dec. 336. The averments under consideration are more analogous to the conditions of an express trust. Thus regarding the transaction, however, it is obvious that the action must fail. The conditions of the alleged trust not being written, its enforcement is inhibited by the statute of frauds. No bad faith is averred on the part of Spalding in procuring the conveyance, and this case is not covered by either of the exceptions to the foregoing statutory requirement.

But counsel for plaintiffs rely, in argument, entirely upon the view that the transaction constituted a mortgage, and that plaintiffs, as the heirs of Armor, since deceased, may assert a right to the reconveyance of the property upon payment of the mortgage debt, with interest. If their major premise be correct, their conclusion correctly follows, unless the remedy is barred by limitation, or for some other reason cannot be enforced. The equitable rule that an absolute deed may be shown by parol to be in effect a mortgage has, in this state, received express legislative recognition. Civil Code, § 261. We shall assume that the mortgage issue is sufficiently presented by the pleadings, and proceed to consider whether the evidence sustains plaintiffs' theory. It should be observed at the outset that only upon clear, unequivocal, and convincing proofs will courts of equity construe an absolute deed to be in effect a mortgage. Whitsett v. Kershow, 4 Colo. 419; Lance's Appeal, supra; Gassert v. Bogk, 7 Mont. 585, 19 P. 281; Jones, Mortg. (4th Ed.) § 335, and cases cited. Plaintiffs have engaged in a difficult undertaking. They are to show a parol defeasance agreement made over 12 years prior to the commencement of suit, with an ancestor, who died soon after making the same, and upon them rests the burden of establishing this agreement so clearly that the mind of the chancellor shall be free from substantial doubt. To maintain the foregoing issue, and discharge the resulting burden, plaintiffs rely upon the following proofs:

First. A letter written October 9, 1875, by Spalding to John Armor. Armor was hard pressed for money, and, as the closing paragraph of the letter sympathizingly declares, in 'perplexity and distress.' He was seeking relief, not through the giving of an absolute deed to Spalding, but by urging the latter to release some part of the premises covered by the five trust-deeds, then securing as many notes of Armor given or assigned to Spalding, as bishop. The letter in question was written in response to this urgent appeal. Spalding therein speaks of having consulted with Mr. Kountze and other friends regarding the matter, and declines to grant the request. It is true he says incidentally: 'Of course, should I ever get out of the property more than the church dues, of which I am simply the trustee, it will be competent to consider your rights and dues in the matter; but I fear that we shall have to wait for some years, and the interest of the money will more than cover any enhancement in value.' But while the letter speaks of 'closing up the matter,' and refers Armor to Sayre for that purpose, no terms of settlement are specified. This letter was written over 14 months prior to the execution of the absolute deed. It is not in any way connected therewith by extrinsic evidence, and there is nothing to show that it was mentioned or thought of when the deed was given. But, even if coupled with the transaction, it affords little aid to plaintiffs' case. The declaration that in the unexpected contingency of a sale and surplus it would be competent to consider Armor's rights and dues in the matter is not an agreement to pay over the surplus, nor does it indicate the existence of such an agreement. It shows, at most, a disposition on the part of Spalding to favor Armor...