Peugh v. Davis (1877)
Citation: 96 U.S. 332 (1877); 24 L. Ed. 775 · Court: Supreme Court of the United States · Term: October Term 1877
Foundational U.S. authority for the equity-of-redemption and the rule against clogging it. The case holds that a deed absolute in form may be shown to be a mortgage, and that the borrower’s equity of redemption is inseparable from a security instrument and cannot be waived at the time the security is given.
Facts
Samuel Peugh borrowed money from Henry Davis in a series of transactions beginning March 1857, securing the loans with a deed absolute in form to two squares of land in Washington City. Although the deed was, on its face, an outright conveyance, it actually operated as security for the debt. Peugh later obtained additional advances against the same property, and after a tax-title claim surfaced he executed a further instrument with a receipt reciting that the property had been sold to Davis. When Peugh sought to redeem, Davis asserted absolute ownership. The lower courts dismissed Peugh’s bill; the Supreme Court took the case.
Holding
- A deed absolute in form may be shown to be a mortgage. Where a conveyance is in substance security for a loan, equity will treat it as a mortgage regardless of its absolute form, and parol and circumstantial evidence is admissible to establish the true character of the transaction.
- The equity of redemption is inseparable from a mortgage and not waivable at the outset. The Court stated: “It is also an established doctrine that an equity of redemption is inseparably connected with a mortgage; that is to say, so long as the instrument is one of security, the borrower has in a court of equity a right to redeem the property upon payment of the loan. This right cannot be waived or abandoned by any stipulation of the parties made at the time, even if embodied in the mortgage.” (96 U.S. at 337.)
- A later release to the mortgagee requires a writing and adequate consideration. A subsequent surrender of the equity of redemption “must appear by a writing importing in terms a transfer of the mortgagor’s interest, or such facts … as will estop him,” and must be for adequate consideration without marked undervaluation.
The Court reversed the dismissal and remanded to permit Peugh to redeem, with interest limited to six percent and credits to Davis for taxes and costs of possession.
Reasoning
The rule against contemporaneous waiver rests on the bargaining reality of distressed borrowers. The Court explained that a mortgagor under financial pressure “will often submit to ruinous conditions, expecting or hoping to be able to repay the loan at its maturity, and thus prevent the conditions from being enforced and the property sacrificed.” (96 U.S. at 337.) Equity therefore refuses to enforce a stipulation, taken at the inception of the security, by which the lender would cut off redemption — the prohibition on a “clog on the equity of redemption.” The doctrine descends from the English chancery rule “once a mortgage, always a mortgage,” associated with Vernon v Bethell (1762) 28 ER 838.
Practical impact
- Loan structuring / anti-clogging. Options, deeds-in-lieu, and equity pledges taken simultaneously with a loan can be recharacterized as disguised mortgages and struck down as clogs on the equity of redemption; a separately negotiated release supported by adequate consideration is enforceable. This line is litigated heavily in commercial mezzanine and pledge structures.
- Redemption baseline. The case anchors the equity-of-redemption doctrine: the borrower’s right to redeem persists until foreclosure cuts it off and cannot have been signed away in the original security instrument.
- Evidence. Establishes that a deed absolute can be proven a mortgage, a recurring issue in quiet-title and void-vs-voidable disputes.
Good-law status
Still good law. Peugh v. Davis remains a leading and frequently cited Supreme Court statement of the anti-clogging rule and the equitable-mortgage doctrine. It has not been overruled.
Applies in →
All U.S. jurisdictions as persuasive/foundational equity authority; the equitable-mortgage and anti-clogging principles are recognized nationwide, with detail on equity-of-redemption.
needs_verification
- Exact decision date and pinpoint pages beyond the quoted holding (96 U.S. at 337) were not pulled from an official reporter scan; quotations corroborated via Cornell LII full text.
- The English antecedent Vernon v Bethell (1762) 28 ER 838 report citation was not independently retrieved.
Legal information, not legal advice. This page summarizes a court decision for research purposes and is not a substitute for advice from a licensed attorney in the relevant jurisdiction. Law changes; verify against the primary source before relying on it.
last_verified: 2026-06-02 Primary source: Cornell Legal Information Institute, full opinion text — https://www.law.cornell.edu/supremecourt/text/96/332