Hays v. Emerson , 75 Ark. 551 ( 1905 )

McCuleoch, J.,

(after stating the facts.) The finding of the chancellor that the deed of David Hays to appellee was intended as an absolute sale and conveyance, and not as a mortgage, is sustained by a preponderance of the testimony. The deed is absolute in form, and the burden is upon appellants to show that it was given and accepted as a mortgage, and, in the absence of fraud or imposition, the proof must be clear and decisive. Williams v. Cheatham, 19 Ark. 278; Trieber v. Andrews, 31 Ark. 163; Harman v. May, 40 Ark. 146.

It is insisted, however, that, the consideration for the deed being a pre-existing debt owing by the grantor to the grantee, the contemporaneous agreement for an immediate resale of the property to the grantor on credit for the same price stamps the conveyance as a security for the debt merely, -and not an absolute conveyance, regardless of the real intention-of the parties. Such is not the law. The contemporaneous agreement for a resale and purchase does not, of itself, make the deed a mortgage. The conveyance must be judged according to the real intent of the parties. If there is a debt subsisting between the parties, and it is the intention to continue the debt, it is a mortgage; but if the conveyance extinguishes the debt, and the parties intend that result, a contract for a resale at the same price does not destroy the character of the deed as an absolute conveyance. Porter v. Clements, 3 Ark. 364; Johnson v. Clark, 5 Ark. 321; Stryker v. Hershy, 38 Ark. 264.

Mr. Pomeroy states the rule thus: “The criterion is the continued existence of a debt or liability between the parties, so that the conveyance is in reality intended as a security for the debt or indemnity against the liability. If there is an indebtedness or liability between the parties, either a debt existing prior to the conveyance, or a debt arising from a loan made at the time of the conveyance, or from any other cause, and this debt is still left subsisting, not being discharged or satisfied by the conveyance, but the grantor is regarded as still owing and bound to pay it at some future time, so that the payment stipulated for in the agreement to reconvey is in reality the payment of the existing debt, then the whole transaction amounts to a mortgage, whatever language the parties may have used, and whatever stipulations they may have inserted in the instrument. On the contrary, if no such relation whatever of debtor and creditor is left subsisting, then the transaction is not a mortgage, but a mere sale and contract of repurchase. 3 Pom. Ecp Jur. § 1x95. See also I Jones on Mortgages, § § 260, 265; Adams v. Pilcher, 92 Ala. 474; Henley v. Hotaling, 41 Cal. 22.

“If an absolute conveyance be made and accepted in payment of an existing debt, and not merely as security for it, an agreement by the grantee to reconvey the land to the grantor upon- receiving -a certain sum within' a specified time does not create a mortgage, but a conditional sale, and the grantee holds the premises subject only to the right of the grantor to demand a reconveyance according to the terms of the agreement.” 1 Jones on Mort. § 265.

In Kraemer v. Adelsberger, 122 N. Y. 467, Judge Parker, delivering the opinion of the court on this subject, says: “In determining whether a contract is to be treated as. a mortgage, or a conditional sale, or a conveyance in fee, courts have commented upon the presence or absence of various particulars which commonly accompany mortgages, but the essential feature necessary to create a mortgage is that it should be a conveyance intended as a security.”

It follows from these authorities that a conveyance absolute in form is not converted into a mortgage by a contemporaneous agreement for a resale and purchase, where it is not shown that the parties intended to give that effect to the transaction.

The testimony in this case not only fails to show that the parties intended the deed in question as a mere security for debt, but a preponderance of the testimony established the fact affirmatively that it was intended' as an absolute conveyance in fee in satisfaction of the debt. So by no rule of construction can it be held to be a mortgage.

The decree is affirmed.