Hunt v. Rousmaniere

On the 6th of May 1820, Rousmaniere died intestate and insolvent, having paid 200 dollars on account of the notes; and the plaintiff gave notice of his claim, to the Commissioners of Insolvency, appointed under the authority of the Insolvent Law of Rhode Island. The plaintiff in his bill alleged, that, on the return of the Nereus and Industry, he took possession of them, and offered the interest of the intestate in them, for sale; and the defendants having forbade the sale, this bill was brought to compel them to join in it.

To this bill the defendants demurred; and their demurrer was sustained in the Circuit Court; but leave was given to the plaintiff to amend. An amended bill was then filed, in which it was stated, that it was expressly agreed between the parties, that Rousmaniere was to give specific security on the Nereus and Industry, and that he offered to execute a mortgage on them. Counsel was consulted on the subject, who advised that the power of attorney, which 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 return to port. These securities were, it was alleged, executed with a full belief that they would, and with intention that they should, give to the plaintiff, as full and perfect as security, as would be given by a mortgage.

The defendants having also demurred to the amended bill, the Circuit Court decided in favour of the demurrer, and dismissed the bill; and an appeal was entered to this Court.-At the February session, 1823, this Court considered that the appellant might be entitled to the relief prayed for in Equity, but the respondents were permitted to withdraw their demurrer, and to file an answer in the Court below. 8 Wheat. 174. The answer of the defendants admits the loans of money, and the delivery of the promissory notes, and that but two hundred dollars were paid before the death of the intestate. The execution of the powers of attorney was also admitted, but it was denied that possession of the vessels was taken by the appellant; and they alleged their resistance of the attempt to take possession of them.

The answer also asserts ignorance of any agreement for a specific lien on the vessels, except that imported by the language of the powers of attorney; that they had heard and believed that the appellant meant to be concerned, as a partner, in the voyage of one of the vessels, which was relinquished, and that afterwards he offered to loan the money on security; upon which the intestate offered to give a mortgage, but the appellant preferred taking the powers of attorney, to avoid inconvenience, and took the powers of attorney, by advice of counsel. The answer also states, that a bill of sale of the vessels, dated the day before the death of the intestate, by which the vessels were intended to be conveyed to one Bateman, and which the respondents state they had heard, and believed was intended to be executed on the evening of that day. The answer also alleges the insolvency of Rousmaniere, and that it existed a long time before his death; which they assert must have been known to the appellant, and that the intestate resorted to improper modes to keep up his credit.

The evidence taken in the case, consisted of the deposition of Mr. Hazard, the counsel who drew the papers, and in which he stated, that they were intended by both parties to have the effect of a specific lien or mortgage, and he advised them they would have that effect; and also the deposition of Mr. Merchant, to show that the appellant admitted that the motive by which he was induced to make the loan, was to compensate Rousmaniere for the disappointment sustained by his not uniting with him in a voyage of one of his vessels; and, accordingly, an agreement was made, by which the appellant was to let Rousmaniere have a sum of money, and that he was to give a bill of sale of a certain vessel; but that afterwards he refused to take the same, on account of the inconvenience and difficulties which might attend the same; and that he had consulted with Mr. Hazard, upon the subject, who told him, that he could or would draw an irrevocable power of attorney to sell, which would do as well, or words to that effect; and which was accordingly done.

The Circuit Court pronounced a decree, declaring, that the appellant had no specific lien or security upon either of the vessels, and no equity to be relieved respecting them, and dismissing the bill, with costs; from which decree, an appeal was entered to this Court.

On the part of the appellants, it was contended, that the decree ought to be reversed, and a decree entered for the appellant.

That the answers to the bill do not respond to the only material facts in the cause; it being fully proved, that the powers of attorney were intended to have the effect of a specific lien, the appellant is entitled to the relief he seeks, upon the principles laid down in the former decisions of this Court.

The case was argued by Mr. Kimball and Mr. Webster, for the appellant, and by Mr. Wirt, Attorney General, and Mr. Robbins, for the appellees.

For the appellant—

The Court, in concluding their opinion in the former case between these parties, as reported in 8 Wheat. 174, use this language:-'We find no case which we think precisely in point, and are unwilling, where the effect of the instrument, the power of attorney, is acknowledged to have been entirely misunderstood by both parties, to say, that a Court of Equity will not grant relief.' In the opinion of the Court, the plaintiff having been, in equity, entitled to the relief he prayed for, the principal question now is, one of fact.

It is insisted, that no essential averment in the bill, is contradicted by the answer.

The only real difference between them, relates to the possession of the vessels.

It is not denied, that it was the express agreement and deliberate intention of the parties, that the plaintiff should have a specific security; the defendants only say they are ignorant of this fact.

The testimony of the plaintiff, then, is sufficient to entitle him to a decree, unless the defendants have introduced other facts, that are clearly inconsistent with it.

Admitting the origin of the loan to the intestate, to be such as the appellees say they have heard, and believe it to be; this may be reconciled with the alleged intention of the parties, that one should give, and the other receive, a specific security.

If the appellant did assign the reasons which the defendants say they have heard, and believe, he assigned, for not taking a bill of sale, that circumstance does not contradict the testimony of the plaintiff's witness. A refusal to take a specific legal security, surely, does not necessarily exclude an agreement for a specific equitable security. The fact mentioned in the answer, may import simply a reference to a legal right, as those stated by the plaintiff's witness, manifestly do to an equitable right. There is, then, no contradiction apparent. As to the bill of sale, found among Rousmaniere's papers, it obviously discloses a design to commit a fraud.

None of the distinct averments contained in the answer, are in opposition to the allegations of the bill; and none of them, with the exception of the bill of sale, are derived from the personal knowledge of the defendants.

The general rule of equity, therefore, that declares the testimony of a single witness against a positive averment of the answer, to be insufficient for a decree in favour of the plaintiff, does not comprehend the present case. It does not apply, where the answer contains no direct denial, nor where the facts stated, are not, or cannot, be within the defendants' own knowledge. But if it did embrace this cause, the answer ought not to prevail against this bill.

Where a single witness, in support of the bill, is corroborated by circumstances, it is sufficient for a decree in favour of the plaintiff; and this is the fact in this case. 9 Cranch, 160. Clarke's Ex'rs. vs. Van Reymsdyk, Cooth vs. Jackson. 6 Ves. 40. Heffer vs. Miller, 2 Munf. 43. Walton vs. Hobbs. 2 Atk. 19, case 17, Hunt vs. Ten Eyck. 2 ''John. Ch. R.'' 92.

The power of attorney was a part of plaintiff's security; and a letter of attorney, that is part of a security, is irrevocable. This was so declared, in the former case of Hunt vs. Rousmaniere, also in Walsh vs. Whitcomb, in 2 Esp. N. P. R. 565.

It has been ruled, that the answer containing the denial, may also contain in itself the circumstances, giving greater credit to a single witness, sufficient for a decree against the defendant. In a case cited by Chancellor Kent, in Hunt vs. Ten Eyck, 2 ''John. Chancery Reports'', 92; the fact mentioned in the answer, that the plaintiff declined taking a bill of sale, from an unwillingness to have his name appear on the vessel's papers, &c., and took, upon advice of counsel, a letter of attorney in preference, implies of itself, that a specific security was meditated by the parties; and tends to show, that the plaintiff took the power of attorney, on the recommendation or assurance of his legal adviser, that it would constitute a security as effectual as a bill of sale; insuring the advantages, without producing the inconveniences of that conveyance. The circumstances of the appellant declining to take the bill of sale, for the reasons assigned, and that the powers of attorney were intended to give a specific lien, come in aid of the appellant's witness, and he has also an auxiliary in Merchant; evidence, and the circumstances altogether, establish the fact, that a specific security was designed and agreed upon. It is an elementary principle of equity, that where parties have, by contract, given a right, but have not provided a sufficient remedy, Courts of Equity will interfere.

Where the remedy is void in law, a Court of Equity has decreed not only against simple contract, but against judgment creditors. Burgh vs. Francis, cited in Finch vs. Earl of Winchester, 1 P. Wms. 279, and Taylor vs. Wheeler, 2 Vern. 564 case 513.

But there are no judgment creditors here to be affected by a decree in favour of the plaintiff.

M. Fonblanque, in the first volume of his Treatise upon Equity, suggests, in a note, page 38, whether, in the case of Burgh vs. Francis, the second incumbrance had not notice of the former incumbrance. But nothing can be collected from the case as reported, in favour of this suggestion. The presumption is entirely the other way. The plaintiff agreed and contracted for a lien on the vessels, and the other creditors of Rousmaniere trusted to his general credit, and are entitled only to what property belonged to him, subject to the lien, which a Court of Equity would have enforced against Rousmaniere himself.

It was the manifest intention of the parties to create a specific lien. But to accomplish their object, they unhappily adopted an instrument, the legal effect of which, they misunderstood. It was a mutual mistake, and this Court appear already to have decided, that, notwithstanding this mistake in law, the plaintiff is entitled to relief.

The case is one of an agreement between parties, which has not been performed, an agreement for a specific security for a loan of money; this has been proved by the testimony of one witness, corroborated by circumstances, and not denied in the answer. It is not, therefore, within the influence of the principle, which requires something beyond the testimony of one witness, to sustain the allegations of a bill which are denied in the answer. It is a case of mutual errors, as to the law, and not one where parties have run their risks of the law. It is an agreement to lend money, not on a note, but on the vessels; and if the Court would enforce the lien against Rousmaniere, they should do it now, as the creditors are not third persons, but have no other right than he would have if alive.

For the appellees—

The whole of the proceedings, and the decisions of the Court below, upon the case, will be found in 2 Mason's Rep. 244, 8 Wheat. 174, and 3 Mason's Rep. 294. It is now a question between creditors, and is, whether the Court will attach a lien when none existed? It is a case where a party having rejected a security, now avers, and asks the Court to give him the security he refused. The allegations in the bill are denied by the answer, and they are proved by one witness only.

This is insufficient, and such evidence is dangerous, Poole vs. Cabanes et al. 8 T. Rep. 328. Upon the question, whether the Court will relieve against a mistake in law,-in 2 ''Johns. Cases in Chancery'', 51, 60, this was expressly decided not to be within the power of a Court of Equity.

Taking the fact to be as stated by him, the appellant is not entitled to relief.

This Court have decided, in this case, that the agreement made by the appellant with Rousmaniere, created no lien upon the vessels in question, though they intended it should, and thought it would create a lien; that Rousmaniere parted with no title; that the plaintiff acquired none in the vessels. The reason why this decision did not finally dispose of this case, was, that the Court entertained a doubt, whether this intention to create a lien, which was not, in fact, created, did not constitute a ground of relief in the case. And this case stands now to be argued upon this doubt.

The question is, whether a Court of Equity can relieve against a mistake made by the parties in making their contract, not in matter of fact, but in matter of law, and relieve, to the prejudice of a title vested by law in third parties? Whether equity can create a title where none does exist, and destroy a title where one does exist? This is beyond the province and power of equity; beyond the legitimate power of a sovereign legislator, and can only be done by that despotic power, which is limited only by its own will. If the parties make their agreement, and make it exactly as they intended, and it creates no title, will the Court make the title?

If it should be asked, why a Court of Equity should relieve against a mistake in matter of fact, and not in matter of law, the reason is obvious. When a mistake of fact is committed by the parties, in making their contract, the mistake is corrected, or supposed to be corrected, and the relief is given according to that corrected statement. Equity, then, does what the law would have done, had there been no such mistake. The Court keeps to its office of merely pronouncing the law upon the fact, as it was understood, and meant to be, between the parties. But when a mistake of the law is made by the parties in making their contract, if relief is given, it is given, not upon the fact, as understood and meant by the parties, but upon the conception of the parties as to the legal effect of that fact. No mistake is corrected, or supposed to be corrected, that relief might be given according to law; but the mistake is to stand, and the law is to be bent and accommodated to it. Equity is to consider the law not to be what it is, but what the parties conceived it to be, and to decree relief accordingly.

It is a principle of jurisprudence, that every one in his acts and contracts is presumed to be conversant with the law; or, if ignorant, that he is to be made to abide the consequences. This principle is essential, if not to the existence, at least to the well being of society.

Cited, the case of Lepard vs. Vernon, reported 2 Vezey & Beam, 51-2-3.

But suppose that a mistake of the law was a general ground of relief, would it avail the plaintiff, in this case? Here is only equity on his side; but on the other, there is law and equal equity combined. And it is a settled principle, that a naked equity, is never to prevail against both law and equity. The appellant never having acquired any title to the vessels, by his agreement, nor by any proceedings under it, has only a naked equity. He parted with his money, trusting to his agreement, as constituting a security therefor, upon the vessels. This is his equity. The title of the vessels being Rousmaniere's, to his death; at his death passed to his legal representatives, who the respondents are. The legal title, then, is in them. His estate being insolvent, is in them as trustees, for his general creditors; and, being greatly insolvent, they are sufferers, as well as the appellant; trusting to his property for their indemnity. In their equity he shares equally with them, and has received it; but by agreement to be without prejudice to this suit. But from his equity they are excluded. The Court will take notice, that, by the laws of Rhode Island, no priorities or preferences take place among creditors, in the distribution of intestate estates; whether solvent or insolvent.

A naked equity is never to prevail against equal equity, and title, combined.

The respondents are the creditors, for they hold in trust for the creditors. If, then, it were to be admitted, that, if mistake of the law was a principle of relief subject to this limitation, that it does not extend, and cannot be extended, to a stranger to the contract in which the mistake was committed; this case does not come within the principle; for it is excluded by this limitation.

Mr. Justice WASHINGTON delivered the opinion of the Court.--