Ferd L. Alpert Industries, Inc. v. Oakland Metal Stamping Co.

• Decision Date: 06 June 1967
• Docket Number: No. 4,4
• Citation: 150 N.W.2d 765,379 Mich. 272
• Parties: FERD L. ALPERT INDUSTRIES, INC., a Michigan Corporation, and Norman Levy and Norman Levy d/b/a Twice Co., Ferd L. Alpert, Individually and Louis Alpert, Individually, Plaintiffs and Appellees, v. OAKLAND METAL STAMPING CO., a Michigan Corporation, Defendant and Appellant.
• Court: Michigan Supreme Court

Page 765

150 N.W.2d 765

379 Mich. 272

FERD L. ALPERT INDUSTRIES, INC., a Michigan Corporation, and

Norman Levy and Norman Levy d/b/a Twice Co., Ferd

L. Alpert, Individually and Louis

Alpert, Individually, Plaintiffs and Appellees, v. OAKLAND METAL STAMPING CO., a Michigan Corporation,

Defendant and Appellant.

No. 4.

Supreme Court of Michigan.

June 6, 1967.

Milton Y. Zussman, Detroit, and Matthews, Nank & Spier, Mount Clemens, for appellees.

Robert L. Coburn, of Johnston & Wendt, Mount Clemens, for appellant.

Before the Entire Bench.

SOURIS, Justice.

This appeal is from a judgment of dismissal of defendant's counterclaim for its failure to sate a cause of action. According to the recitals thereof the judgment was entered on plaintiffs' motion pursuant to GCR 1963, 117.2(1), immediately after counsel's opening statement on the counterclaim. The Court of Appeals affirmed the judgment. 3 Mich.App. 101, 141 N.W.2d 671. We reverse and remand for further proceedings.

Plaintiffs' complaint for damages for defendant's alleged breach of certain real and personal property leases was withdrawn, apparently by consent of all parties and of the circuit judge, several months before the case was called for trial on defendant's counterclaim. The counterclaim sought, in a single confusing count, rescission or cancellation of the leases and certain contemporaneously executed deeds, bills of sale, and assignments or, alternatively, their treatment as an equitable mortgage of all of the property involved and, as well, damages for the allegedly unlawful ouster of the cross-plaintiff from possession of the property. The opinion of the Court of Appeals quotes a portion only of the counterclaim. The balance is quoted in the margin of this opinion. ¹ The answer to the counterclaim denied its allegations of fraud, unconscionable dealing and unjust enrichment and alleged that the transaction was intended to be an outright sale and lease-back by cross-plaintiff of al of its property in precisely the manner disclosed by the written instruments executed by the parties.

One of many exceptions to the parol evidence rule is that parol evidence may be admitted to prove that a written conveyance absolute in its terms was intended by the parties to operate only as a mortgage. Wadsworth v. Loranger, Har.Ch. 113; Fuller v. Parrish (1854), 3 Mich. 211; Batty v. Snook (1858), 5 Mich. 231; Emerson v. Atwater and others (1859), 7 Mich. 12; and, of more recent vintage, Selik v. Goldman Realty Co. (1927), 240 Mich. 612, 216 N.W. 422, and Ellis v. Wayne Real Estate Company (1959), 357 Mich. 115, 97 N.W.2d 758. For citation and discussion of authority imposing a heavy burden of proof upon one who invokes this equitable doctrine, see Schmidt v. Barclay (1910), 161 Mich. 1, 125 N.W. 729. While fraud or mistake are essential elements of a cause of action for reformation, rescission or cancellation of a written conveyance, see River Rouge Savings Bank v. Fisher (1964), 372 Mich. 558, 562, 127 N.W.2d 426, and Smith v. Taber (1961), 362 Mich. 619, 107 N.W.2d 761, they are not essential to a cause seeking to establish that a conveyance absolute in form is in fact a mortgage. Mr. Justice Manning, ² in Emerson v. Atwater and others, supra, stated the equitable principles governing this class of cases as follows:

'The principle on which courts of equity proceed in this class of cases, is not that it is in contemplation of law a fraud for A, who has made a parol agreement to sell B a piece of land, to refuse to deed the land, or to live up to his parol agreement. It would be as clear a violation of the statute of frauds in a court of equity to decree a specific performance of such contract, as it would in a court of law to sustain an action on it for damages. It is upon no supposed fraud of this kind that equity bases its action. It proceeds on a different principle, viz.: The relation between the parties of debtor and creditor, or borrower and lender, and the abuse of that relation. The statute of frauds was intended for persons dealing with each other at arm's length, and on an equal footing; and even then, when the contract has subsequently been in part performed by one party, with the assent of the other, equity will compel the latter to perform on his part, as it would be a fraud on the statute for a party to invoke its protection under such circumstances.

'Courts of equity frequently set aside deeds and other contracts between trustee and Cestui que trust, attorney and client, guardian and ward, and parent and child, and other like cases, when it has reason for believing the relation between the parties has been abused, when such deed or contract, had it been between parties not so related, would have been held good. The principle the court goes on it cases of debtor and creditor, is the same as in the cases we have just mentioned. The difference is in its application only. In these last cases it is to prevent the abuse of a confidence which the relation implies. In the case of debtor and creditor, the abuse of the power of coercion which a creditor sometimes, by the force of circumstances, has over the debtor. So sensible are courts of the existence of this power, and of its abuse, and that debtor and creditor do not at all times stand on an equal footing, that the borrower, says Judge Story, 'has been significantly called the slave of the lender:' 1 Story's Eq. Juris., § 302. And Judge Green, in Fuller v. Parrish, says: 'Mortgages, and conveyances intended to operate as mortgages, are generally given by the necessitous to the more opulent, the debtor to the creditor, the borrower to the lender, the suppliant for favor to him who has power to make the terms upon which it shall be granted. The man whose property is about to be sacrificed by a creditor, will not hesitate in regard to the amount of security to be given, nor the manner of giving it, if he can loan the money to satisfy the debtor, or otherwise gain time for its payment. He will not hesitate to execute a deed, or bill of sale, absolute upon the face of it, but intended to operate as a mortgage, to four times the value of the loan, without insisting upon a written deed of defeasance:' 3 Mich. 217.

'Courts of equity have, from an early day, interfered between creditor and debtor to prevent oppression. What is now a mortgage, was at common law, and until courts of equity interfered, a conditional conveyance of land, that became absolute on the non-performance of the condition by the grantor, on or before the day mentioned in the deed. The penalty of a bond was collectible at law, until equity restrained its collection, on the payment of what was due on the condition. When the relation is mortgagor and mortgagee, once a mortgage always a mortgage, is the maxim in equity. See Leading Cas. in Eq., vol. 2, pt. 2, p. 432, where may be found a large collection of cases in which deeds have been declared to be mortgages.

'Honesty and fair...