Couts v. Winston

In 1902 the plaintiffs executed and delivered to the defendant Carolina M. Winston a deed of certain real property in San Diego County. This action was brought to have that deed declared a mortgage, and to redeem the land. The defendants answered, denying that the instrument was intended as a mortgage, and filed a cross-complaint praying judgment for possession of the premises. Upon a trial, the findings were in favor of the plaintiffs, and they had judgment granting them the right to redeem. Appeals are taken from the judgment and from an order denying the defendants' motion for a new trial.

The only contention made by appellants is that the evidence was insufficient to justify the finding of the court that the deed from plaintiffs to Carolina M. Winston was intended to be, and in fact was, a mortgage.

It is no doubt the law, as repeatedly declared in our decisions, that clear and convincing evidence is required to justify a court in finding that a deed which purports to convey the title to land in fee simple was intended to be a mortgage. "That a deed purporting on its face to convey the title absolutely may be shown by parol evidence to be something else — namely, a mortgage — is a striking exception to the general rule, and it has been universally held that the character of the instrument cannot thus be changed except upon clear and convincing evidence." (Woods v. Jensen, 130 Cal. 201, 203, [62 P. 473]; see, also, Mahoney v. Bostwick, 96 Cal. 53, [31 Am. St. Rep. 175, 30 P. 1020]; Sherman v. Sandell, 106 Cal. 373, [39 P. 797]; Ahern v. McCarthy, 107 Cal. 382, [40 P. 482];Sheehan v. Sullivan, 126 Cal. 189, [58 P. 543]; Emery v. Lowe,140 Cal. 379, [73 P. 981].) But whether or not the evidence offered to change the ostensible character of the instrument is clear and convincing is a question for the trial court. (Brison v. Brison,90 Cal. 323, 334, [27 P. 186]; Mahoney v. Bostwick, 96 Cal. 53, [31 Am. St. Rep. 175, 30 P. 1020].) In such cases, as in others, the determination of that court in favor of either party upon conflicting or contradictory evidence is not open to review in this court. (Sherman v. Sandell, 106 Cal. 373, [39 P. 797].) If, therefore, the evidence offered by plaintiffs, taken by itself, was sufficiently "clear, satisfactory and convincing" to satisfy the trial court that the deed was in fact a mortgage, the finding made cannot be overthrown merely because numerous witnesses, whose character is not impeached, gave positive testimony to the contrary effect. As was said in Wadleigh v.Phelps, 149 Cal. 627, 637, [87 P. 93], the appellate court "will not disturb the finding of the trial court to the effect that the deed is a mortgage, where there is substantial evidence warranting a clear and satisfactory conviction to that effect. All questions as to preponderance and conflict of evidence are for the trial court."

Reading the record in the light of these rules, we cannot say that the finding declaring the deed in question to be a mortgage was without sufficient support in the evidence.

The land in controversy is a tract of 233 acres, the greater part of which is farming land. The plaintiff John F. Couts had resided on the property for a number of years. The defendant Carolina M. Winston is his sister. In 1898, John F. Couts and his wife, the co-plaintiff, executed a mortgage of the property to the German American Savings Bank to secure a loan of fifteen hundred dollars. In 1902 the bank commenced suit to foreclose its mortgage. Couts testified that, while this suit was pending, he wrote to John B. Winston, the husband of his sister Carolina, asking him for help and offering to secure him with a deed if he would loan the money required to pay the mortgage. Winston replied in a letter in which he said, among other things, "If you care to accept, on the proposition to deed over the property as you suggested, I can offer you two thousand dollars." Couts then went to Los Angeles, the home of the Winstons, to close the matter up. He told Mr. Winston, as he testifies, that "it was very nice of him to help me, if he was going to lend that money I would deed him the property, you know, that when the time came if he had to have his money, there would not be any trouble between us. He could have the right to sell the property and pay himself and if I didn't have the money and he had to have his settlement with the bank (from which he was borrowing the money), I would get out of there and give him a quitclaim deed. . . . He said he hated to go into debt, but he would do it for me." On the same day the parties met at the office of Winston's attorneys, and steps were taken for consummating the transaction. It was finally concluded in this form: The plaintiffs executed and delivered to Carolina M. Winston a grant, bargain, and sale deed purporting to convey the property subject to the lien of the mortgage of the German American Savings Bank, and of unpaid taxes. The deed recited a consideration of two hundred dollars. Mrs. Winston executed and delivered to the plaintiff Susie G. Couts, an instrument, in form a lease of the property for one year from September 19, 1902, in which Mrs. Couts agreed to pay the sum of one hundred and fifty dollars as rent, and was given, on condition of her paying the rent of one hundred and fifty dollars, the option of purchasing the property at any time before the nineteenth day of September, 1903, for $2,150. This amount of $2,150 was actually paid out by Mrs. Winston. She satisfied the mortgage of the German American Savings Bank, expending $1,950 for this purpose, and paid two hundred dollars in cash to Couts. The two hundred dollars, as Couts says, is an amount which he asked Winston to loan him over and above what was needed to pay the bank. It was to pay other debts owing by Couts. The rent of one hundred and fifty dollars, fixed in the "lease" is seven per cent of $2,150, and this was the rate of interest paid by Mrs. Winston on the loan negotiated by her to raise this money.

The plaintiffs remained in possession of the property. At the end of the year Couts paid to the defendants two hundred dollars, and received an extension of the option for one year. In the following year, 1904, Couts sought further extension, and this was granted by the Winstons for a period of six months. No payment was made by the plaintiffs within the time as so extended, their efforts to make a sale of the property having been unsuccessful. In August, 1905, the plaintiffs tendered to Mrs. Winston the amount advanced by her, with interest and costs, and demanded a reconveyance. This tender and demand were refused.

At the time of the execution of the deed, in September, 1902, the land in controversy was worth, with improvements, some thousands of dollars in excess of the debt to the German American Savings Bank.

Much of the foregoing statement is based on the testimony of the plaintiff John F. Couts. In some particulars it is corroborated by other witnesses. In many important respects it is flatly contradicted by the defendants' witnesses. But, as we have said, questions of weight or preponderance of evidence are not for this court. The trial court had the right to accept Couts's testimony as true, and evidently did so. Thus accepted, it was plainly sufficient to justify the finding that the deed in question was intended as a mortgage to secure a loan of $2,150 made by the defendant Carolina M. Winston. It is urged that there is no direct evidence of a promise by either of the plaintiffs to repay the amount advanced, and that there can be no mortgage if there is no indebtedness. (Ahern v. McCarthy, 107 Cal. 382, [40 P. 482]; Henley v. Hotaling, 41 Cal. 28.) But if, as Couts says, he applied to the defendants for a loan, and they acceded to his request, a promise on his part to repay the money advanced in consequence of these negotiations is to be implied in fact as well as in law. The circumstances of the whole case, if we accept the testimony acted on by the trial court, are entirely consistent with the view that the parties, while in fact agreeing on a loan to be secured by mortgage, were desirous, for reasons of their own, of giving the transaction a different appearance. The plaintiff John F. Couts being unable to pay the mortgage upon his home, which was of much greater value than the debt, applied to his sister and her husband for help. They furnished the money necessary to pay the mortgage and other pressing debts, taking a deed of the land, and giving a paper by which the plaintiff was bound to pay interest on the amount furnished, and was given the right to get his land back within a year upon payment of the principal sum. Mrs. Winston had theretofore had unpleasant relations with a sister, from whom she had taken a mortgage which she had been compelled to foreclose. She was particularly desirous of avoiding foreclosure proceedings. Under these circumstances, it was not unreasonable for the trial court to conclude that the defendants agreed to lend Couts the money upon the security of his land, and attempted to put the transaction in such form that no foreclosure would ever become necessary. Couts's promise to give the Winstons a quitclaim deed if he did not have the money does not conflict with the theory of a loan secured by mortgage. It was merely an additional assurance to the defendants that they would not have to resort to a foreclosure to bar the plaintiffs' title. Indeed, the fact that such deed was thought necessary tends to show that the plaintiffs understood that they were retaining an equity which would not be lost by the mere failure to pay within the time specified in the lease.

On the whole case, we are satisfied that the court was justified in making the finding assailed.

The judgment and order denying a new trial are affirmed.

Angellotti, J., Lorigan, J., and McFarland, J., concurred.

Shaw, J., and Henshaw, J., dissented.

Rehearing denied.