Hannah v. Vensel , 19 Idaho 796 ( 1911 )

AILSHIE, Presiding J.

This action was instituted by the plaintiff to have a certain conveyance, appearing on its face as a deed, decreed to be a mortgage only. The conveyance was executed on or about the 25th of November, 1893, in the state of Pennsylvania, and it is admitted and conceded that it was given as security for the payment of a loan of $1,000. It was understood at the time of the execution of the deed of conveyance that upon payment of the principal and interest, the defendant would redeed the property to the plaintiff. The defeasance, however, was never reduced to writing as required by the laws of Pennsylvania. The property conveyed was situated in Canyon county in this state, and the deed was recorded in the recorder’s office of that county on the 23d of April, 1894. The debt was never paid, and the matter was allowed to run along until about July 1, 1898, when the parties had a conversation over the matter, and’ the plaintiff advised defendant that he was unable to pay the debt at that time, and it is claimed by the defendant that it was then agreed and understood that the deed should be allowed to stand -as an absolute and unqualified conveyance of the property and that the plaintiff would make no further claim to the property. The defendant paid the taxes on the property from about the year 1898 until the commencement of this action. The defendant pleaded the statute of Pennsylvania, and claimed that under that statute the title had vested absolutely and unqualifiedly in defendant and that the plaintiff had no right of redemption. The trial court heard the matter and rendered and entered judgment in favor of the plaintiff and against the defendant, and the defendant prosecutes this appeal.

The first question urged by appellant is that this contract should be tested and construed by the law of Pennsylvania, the state where the contract was made and executed. The respondent, on the other hand, contends that the deed or mortgage must be tested and construed according to the laws of Idaho and that by the law of this state (sec. 3391, Rev. Codes), ‘ ‘ every transfer of an interest in property other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by an actual change of possession, in which case it is to be deemed a pledge.”

In the first place, it seems to be a well-established principle of law that every contract in the nature of a deed or a mortgage or other encumbrance affecting real property is subject exclusively to the laws of the state or government within whose jurisdiction the real estate is situated. A contract of this kind is an exception to the general rule that a contract must be construed and interpreted by the law of the place where the contract was made. The general principle as applied to mortgages is thus stated in 27 Cyc. 975: “The validity of a mortgage of real estate and its construction and effect are to be tested and determined by the laws of the state where the mortgaged property is situated, although the mortgage itself is executed and the parties reside in another state.”

In Commercial Bank v. Jackson, 7 S. D. 135, 63 N. W. 548, the supreme court of South Dakota states the rule as follows: “That the law of the sovereignty in which real property is situated governs, as to the transfer of such property, whether conveyed absolutely, or by way of mortgage, seems to be well settled.”

In Richardson v. DeGiverville, 107 Mo. 422, 28 Am. St. 426, 17 S. W. 974, the supreme court of Missouri says: “The law is well settled that a title to or interest in lands must be acquired according to the law of the place where the lands are situated. It is that law which determines the force and effect of the instrument, be it a deed, will or contract. So, too, where the deed or other instrument relates to immovables, or what the common law calls ‘real property,’ it must be construed according to the law of the place where the property is situated, or the lex loci rei sitae. ’ ’ This proposition is well supported by authority: Post v. First Nat. Bank, 138 Ill. 559, 28 N. E. 978; Bowdle v. Jencks, 18 S. D. 80, 99 N. W. 98; Morris v. Linton, 61 Neb. 537, 85 N. W. 565; Manton v. Sieberling & Co., 107 Iowa, 534, 78 N. W. 194; Washburn v. Van Steenwyk, 32 Minn. 326, 20 N. W. 324; Bramblet v. Commonwealth Land & Lbr. Co., 26 Ky. L. 1176, 83 S. W. 599; Brine v. Hartford Fire Ins. Co., 96 U. S. 627, 24 L. ed. 859; McGoon v. Scales, 9 Wall. (U. S.) 23, 19 L. ed. 545; Fessenden v. Taft, 65 N. H. 39, 17 Atl. 713; Conradt v. Lepper, 13 Wyo. 473, 81 Pac. 307, 82 Pac. 2; 9 Cyc. 680.

Although the instrument in question is a deed absolute on its face, there can be no question but that it falls within the purview, of sec. 3391, Rev. Codes, for the reason that it is admitted by the appellant that it was given as security for the payment of a loan of $1,000. It was executed as security and not as evidence of a sale, for no sale of the land had been made. As to this fact there is no dispute.

It is contended by appellant that on or about July 1, 1898, appellant and respondent had a conversation about this conveyance and the payment of the debt, and that the respondent stated that he would be unable to pay the debt, and it was there agreed and understood between them that respondent’s right to the property should thereupon cease and that the appellant should take the land in payment for the debt. At the trial appellant offered to introduce a writing or memorandum dated at Pittsburg, Penn., July 1, 1898, and signed by one C. H. Cramer, in which Cramer certifies to having noted the agreement that was on that date entered into between appellant and respondent, and the witness states in the memorandum that “said Hannah agrees to have Vensel retain the eighty acres of land in Nampa, state of Idaho, on which Vensel now has deed for, as Hannah says he is unable to pay the money back to Vensel, and now Vensel and Hannah both agree to Vensel’s keeping the land, in accordance with the provisions in said deed.” The court refused to admit this in evidence, and appellant complains of the action of the court in its ruling. This writing was not admissible on any ground whatever. It was not a writing between the parties; it does not purport to have been made in the presence of the parties or to have had the sanction of the parties that it was correct; it does not purport to be a conveyance of any kind, and it could not in any way help or aid an oral contract or agreement whereby one party agreed to waive and forego his right of redemption or to pass title to real estate.

It is next contended by appellant that since the respondent allowed this deed to stand for some nine years after the purported conversation and agreement of July 1, 1898, and allowed the appellant to pay the taxes on the land continuously thereafter, he is now guilty of such laches in the prosecution of his action that he should not be allowed or granted any relief in the premises. In a case of this kind and under the facts here disclosed, it is difficult to discover a principle of law or rule of equity upon which to base such a holding. Under the statute of this state, a mortgage on real estate does not pass the title to the mortgagee. Sec. 3388 of the Rev. Codes defines a mortgage as follows: “A mortgage is a contract by which specific property is hypothecated for the performance of an act without the necessity of a change of possession”; and sec. 4523 provides that “a mortgage of real property shall not be deemed a conveyance, whatever its terms, so as to enable the owner of the mortgage to recover possession of the real property without a foreclosure and sale. ’ ’

In Brown v. Bryan, 6 Ida. 15, 51 Pac. 995, this question was under consideration, and the court held that “a mortgage, or any contract in the nature of a mortgage, merely creates a lien, and leaves the legal title in the mortgagor or grantor, which can only be passed out of him by judicial sale, in a proper action under the statute, after which such grantor or debtor may redeem within the time provided by law for redemption of property from execution sale.” It is also the rule in this state that, “Parol evidence is admissible to show that a deed absolute on its face is in fact a mortgage.” (Thompson v. Burns, 15 Ida. 572, 19 Pac. 111.)

It will thus be seen that the legal title to the real estate covered by the deed in this case always remained in' the grantor or mortgagor, who is the respondent here, and that the mortgagee only acquired a lien on the property which might be foreclosed in the manner prescribed by law, and upon a foreclosure sale the title would pass to the purchaser, subject to the statutory period for redemption. No evidence is produced to support any claim that the mortgagee or grantee has been in the open and notorious adverse possession of this property for the statutory period of five years, Avlxich would enable him to defend the title under adverse possession, and certainly he cannot defend the title by reason of ever having acquired the legal title to the property through the medium of the conveyance set up in this ease.

See. 3385, Rev. Codes, provides that “Every person, having an interest in property subject to a lien, has a right to redeem it from the lien, at any time after the claim is due, and before his right of redemption is foreclosed. ’ ’ This statute makes the right of redemption absolute, provided the redemption is sought after the debt becomes due and before the period of redemption on foreclosure expires. (See McPherson v. Hayward, 81 Me. 329, 17 Atl. 164; Keller v. Kirby, 34 Tex. Civ. App. 404, 79 S. W. 82.)

In the face of these several statutes it is difficult to see upon what theory a court of equity could invoke the doctrine of laches against a mortgagor who seeks to redeem property after the maturity of the debt and before the period of redemption on foreclosure expired. And this is equally as true where the mortgage is in form a deed absolute on its face, as where it shows on its face that it is a mortgage only. No foreclosure has ever been had on this security. What is here said is applicable as between the parties themselves, and of course would not apply to innocent third parties, for the reason that under sec. 3393 proof could not be made against innocent purchasers and, encumbrancers that a deed absolute on its face was intended as a mortgage unless that fact appeared by the terms of the instrument itself.

The judgment in this case should be affirmed, except as to the costs incurred in the trial court. Under the peculiar facts of this case, we think it would only be just and equitable to require the plaintiff in the case to pay all legally taxable costs and disbursements incurred in establishing his contention that the conveyance made by him was given as security and constituted a mortgage instead of a conveyance of the legal title. In other words, we feel that under the facts of this case, equity and good conscience require that the defendant receive his principal and interest and all taxes paid, together with interest thereon, clear of all expense incurred. In this case no formal tender was ever made by the plaintiff to the defendant. He testified, however, that he frequently told the defendant that he had the money to pay the debt and that he was ready and willing to do so.

The judgment will be modified to this extent, and the cause is hereby remanded, with direction to the trial court to modify the judgment so as to require the costs incurred in the trial court to be paid by the plaintiff, respondent in this court.

Costs of appeal awarded in favor of respondent.

Sullivan, J., concurs.