Leland v. Morrison

October 1, 1912. The opinion of the Court was delivered by This action was commenced by the plaintiff against the defendant on January 21, 1911, and was in a general nature an action to declare as a mortgage a deed, absolute in form, conveying realty and transferring personalty, dated October 25, 1894; for an accounting of the rents and profits of the realty and a partition and division of the realty as between tenants in common. The answer denies that there was any understanding between the parties that the deed was a mortgage, and alleges that the deed was a deed absolute and the consideration an existing indebtedness between the parties and alleges facts setting up the defenses of laches and estoppel; also, invokes the equity of the Court not to aid the plaintiff in enforcing an alleged agreement by way of secret trust, where the plaintiff's purpose was to sequestrate property from his creditors. The cause was heard by his Honor, Judge Gage, on the pleadings and testimony taken before the master, who filed his decree in September, 1911, granting the relief asked for in the complaint. Thereupon, defendant appealed and asks reversal of the same.

For a proper understanding, the decree of Judge Gage should be set out in the report of the case. The exceptions are 25 in number. Exceptions 1, 2, 3 and 4, question the correctness of his ruling in holding the deed of October 24, 1896, to be a mortgage and not a deed absolute.

Exceptions 5, 6, and 7, in holding certain parol testimony competent and admitting the same.

Exceptions 8, 9, 10 and 11, question his Honor's construction and findings as to the effect of certain letters and leases introduced in evidence.

Exceptions 12, 13, and 14, question his holding and finding as to plaintiff's right to redeem and that the doctrine of estoppel does not apply under the facts of the case and the testimony does not sustain the doctrine of estoppel. The other exceptions complain of the finding of facts by the Judge, and except to pretty much all of his findings of fact and his conclusions of law. We will not undertake to discuss the exceptions in the case seriatim, but will try to dispose of them under general heads.

The pivotal point in the case hinges upon the question of law whether the conveyance of Leland to Morrison in October, 1894, was what it purported to be, a deed absolute, or a mortgage, and if it was intended as a mortgage, has Leland by his conduct and acts so conducted himself during this time as to mislead Morrison to his prejudice and to be guilty of such laches as to defeat his contention?

We will first consider and dispose of the exceptions which complain of error on the part of his Honor in admitting parol testimony. It will be borne in mind that the evidence in this case was taken before the master, and, under the law, it is his duty to take all of the testimony offered and report it to the Court. Even if incompetent testimony was in evidence, as this was not a jury trial but a trial before the Judge, it is reasonable to suppose his Honor in reaching his conclusions as to the facts of the case did not base his decision upon anything but competent, relevant, testimony.

There is no doubt that testimony is competent to show that a deed, absolute on its face, is in reality a mortgage and that this may be shown by parol evidence.Brownlee v. Martin, 21 S.C. 399; Tant v. Guess,37 S.C. 498, 16 S.E. 472; Creswell v. Smith, 61 S.C. 579,39 S.E. 757.

His Honor committed no error in admitting this testimony, and he having been satisfied by all of the competent testimony in the case that the purported deed was intended by the parties to be a mortgage and not a deed, and this being conclusively proven by the letter of Morrison to Leland, dated October 24, 1894. As to the exceptions of his Honor's finding of fact in reference thereto. For the reasons stated by the Circuit Judge, this Court is satisfied with his findings. "It was incumbent on the appellant to satisfy this Court by the preponderance of the evidence that his Honor, the presiding Judge, erred in his findings of fact which he has failed to do." Hickson Lumber Company v.Stallings, S.C., 90 S.C. 473, and these exceptions are overruled.

Having concurred with his Honor in his finding that the deed was intended as a mortgage, we will next consider has Leland so conducted himself as to have his claim that it was intended as a mortgage to be defeated by laches, estoppel or any other cause by the action and conduct of Leland during this time.

There is no doubt that where a deed, though absolute in form, is shown to be intended as a security for the payment for a debt, it will always remain a security until foreclosed by some judicial proceeding or unless the party deprives himself of the interest he has in the property by some subsequent conveyance or relinquishment of interest.

In Walling v. Aiken, McMullins' Eq., vol. I, page 13, the Court says: "We concur very fully with the presiding Chancellor, that the conveyances of the lands by Neely and Kennedy, connected with the written agreement between the complainant and the defendant, constitute a mortgage or security. And it is the well known rule of the Court that that which was originally intended as a security, shall never be turned into an absolute conveyance. Even if it be expressly stipulated, that if the money be not paid at a given day, the title shall be absolute, and the estate irredeemable; this stipulation operates nothing. And it is equally incompetent to stipulate from what source the funds to redeem shall be derived. The mortgagee is considered in this Court only as a creditor, and all that he is entitled to is his money, coming at what time (within the known limits), or from what source, it may."

In Brownlee v. Martin, 21 S.C. 400, this language is used by Chief Justice McIver: "The law looks with jealousy and suspicion upon all dealings between the mortgagee and the mortgagor, from the supposed influence which the former has over the latter. If, therefore, a deed, absolute on its face, is shown (as it may be shown by parol evidence) to have been executed merely as a security for a debt, it will operate only as a mortgage, and it cannot be converted by any subsequent written agreement into an absolute conveyance, unless such subsequent agreement is based upon a sufficient consideration, and is shown to have been fairly made, without undue influence by the creditor; and the burden of showing this is upon the mortgagee. In other words, it must amount to a sale of the equity of redemption, fairly made, upon sufficient consideration." These views are fully supported by authority. Russell v. Southard, 12 How. 139, recognized in Lee v. Lee, 11 Rich. Eq. 582, and followed by Babcock v. Wyman, 19 How. 289; Villa v.Redriquez, 12 Wall. 323; Morgan v. Shinn, 15 Wall. 105;Pough v. Davis, 96 U.S. 332; Brick v. Brick, 98 U.S. 514.

This doctrine is adhered to and affirmed in the case ofTant v. Guess, 37 S.C. 497, 16 S.E. 472.

Applying the facts of the case to these decisions, the irresistible conclusion is that Morrison only held one-half of the land as security for a debt, and that he and Leland are tenants in common of the land in dispute unless Leland is estopped by lapse of time or some other good cause from asserting his right to have deed in question declared a mortgage or security to one-half interest.

Jones on Mortgages, vol. I, sec. 330, says: "Delay in asserting an absolute deed to be a mortgage has not the same effect upon the rights of the parties that attends delay in seeking to enforce in equity the performance of an executory contract. Once a mortgage, always a mortgage, is the maxim of the law, and payment does not stand on the footing of performance in equity. The character of the deed being fixed by the evidence as conditional, the mortgagor has the same time to make payment that any other debtor has. The right to foreclose and the right to redeem are reciprocal, and if one is barred the other is also barred. The only effect that delay can have in such a case is in its bearing on the primary question of mortgage or no mortgage. The poverty of the mortgagor, and many other circumstances, may sufficiently explain this. No lapse of time short of that which is sufficient to bar the action will prevent the introduction of parol evidence to show a deed was "intended as a mortgage."

In Anding v. Davis, 77 American Decisions, 550, we find: "Parol evidence is admissible to show that deed absolute on its face, was intended by the parties to have operation only as a mortgage; and it is immaterial in this respect, as between the parties, whether the debt intended to be secured was then contracted by the mortgagor, or was contracted for the purpose of securing a pre-existing debt. Complainant's right, if competent in its inception to be established by parol evidence, will not be lost by any lapse of time not sufficient to bar it by the statute."

Under the law of this State the life of a mortgage is twenty years. Any time during that period, the owner of it has the right to foreclose it and if the statute of limitations does not bar the right to foreclose, it would not bar the right to redeem. The right to foreclose and the right to redeem are reciprocal. When the right of one exists the other exists. When one is barred, the other is barred. The question presented by these exceptions are dependent upon the findings of fact. For the reasons stated by his Honor, the Circuit Judge, this Court is satisfied with his findings of fact, mentioned in the assignment of error, and these exceptions are overruled. These conclusions practically dispose of the whole case, and while the testimony shows that Morrison behaved in the most lenient and forebearing manner with Leland and treated him with the greatest consideration and used his credit by borrowing money, when it was hard to do, and befriended him in every way and patiently tried to get the matter adjusted on the most generous terms and honestly thought later that he had an absolute deed to the land, we are constrained to hold that the deed was a mortgage, and that Leland has the right to redeem. That Morrison should have foreclosed and his leniency, forbearance and generosity has been his undoing.

This Court is satisfied with the finding of facts, set out in the assignment of error on the part of his Honor, the Circuit Judge, that the Court will not aid the plaintiff in enforcing an alleged agreement, by way of secret trust, where the purpose of the plaintiff was to sequestrate property from his creditors, for the reasons stated by the Circuit Judge. We may say, that the appellant has failed to convince this Court that there was error in the particulars mentioned in the other exceptions. All exceptions are, therefore, overruled.

It is the judgment of this Court, that the judgment of the Circuit Court be affirmed.

MR. JUSTICE FRASER did not sit in this case.