John T. Hardie & Co. v. Campbell

Watts, J. Com. App.

In the second paragraph of the charge as given, the proposition is distinctly announced that if it was the understanding and agreement of the parties at the time the deed was executed and delivered, that Campbell should' have the option of repurchasing the property at any time within twelve months, by the repayment to appellants of the consideration expressed in the deed, to wit, $7,000, then the deed involved a condition of defeasance, and, being a conveyance of the homestead, would have no validity.

That is not the settled doctrine in this state. In Astugueville v. Loustaunau, 61 Texas, 233, the court, in speaking of that clause in the constitution which provides “ that all pretended sales of the homestead involving any condition of defeasance shall be void,” remarked that, “Under this clause of the constitution, it is not every sale of the homestead involving a condition of defeasance which it declares shall be void; but it declares that all pretended sales involving such conditions shall be void.”

If it was intended by the parties that the title should vest in appellants by reason of the conveyance, but subject to be divested within the designated time by Campbell paying to appellants the specified amount, then such a transaction would amount to-a sale, as contradistinguished from a pretended sale.

But, notwithstanding the form of the conveyance, if it was the intention of the parties that the title was not to vest in appellants, but the object and intention was to secure them in the payment of a debt owing appellants by Campbell, then the transaction would amount to á pretended sale involving a defeasance, which would render the deed invalid.

By that portion of the charge under consideration the jury might well have understood that any and all conditional sales of the homestead, whether real or pretended, would fall under the condemnation of the organic law.

It is not true, as claimed, that this error was cured by the third paragraph of the charge as given. The real issue is well stated in that part of the charge, for if the deed was executed and delivered by the one party, and received by the other, upon the understanding and with the intention that it should only be a security for a debt owing by Campbell to appellants, then it would be invalid. After thus stating the law to the jury, the court reiterated the proposition that any conditional sale of the homestead is void.

From an examination of the entire charge as given, our conclusion is that it is erroneous, and that the jury, by reason of the error, may have been misled to appellants’ injury.

That a deed absolute on its face may be shown, by reason of the intention of the parties, to be a security for debt, and therefore in legal contemplation a mortgage, is so firmly settled as to admit of no question. Carter v. Carter, 5 Tex., 93; Fowler v. Stoneum, 11 Tex., 478; Hudson v. Wilkinson, 45 Tex., 445.

But the burden is upon the party who asserts that such a conveyance is, in fact, a mortgage to clearly establish the fact by competent evidence. 2 Wharton’s Evidence, § 1032, etc.

When it is claimed that such a conveyance was in fact intended as a mortgage, the usual test applied is this: Was the relation of creditor and debtor terminated by the transaction? If so, it is not a mortgage; but if the debt subsists, and that relation exists as well after as before the transaction, then the instrument will be considered as a mortgage.

In the case of Loving v. Milliken, 59 Tex., 425, Chief Justice Willie enumerates the circumstances from which courts of equity usually deduce the conclusion that a deed, though absolute in form, is in effect a mortgage. And while some of these are shown to exist in this case, there are other circumstances disclosed by the record which tend to establish the other conclusion, and which it is deemed proper here to notice, as they ought to be considered upon another trial.

As heretofore remarked, the true test is the existence or nonexistence of the relation of debtor and creditor, as between Campbell and appellants, after the execution of the deed. If, by the execution and delivery of the deed, and the receipt of the balance of the $7,000 by Campbell, the relation of debtor and creditor theretofore existing between them, was terminated, that is, after that transaction appellants held no debt against Campbell, then the conveyance would, be valid. But if the relation of debtor and creditor as between these parties continued after the execution and delivery of the conveyance, then it will be considered a pretended sale involving a defeasance, and therefore invalid so far as it affects or seeks to affect the title to the homestead.

How, the expression contained in the letter from appellants to Campbell dated June 5, 1880, in these words: “If at the end of twelve months you want to purchase the house from us, you can do so on favorable terms,” is not susceptible of the construction which seems to have been claimed for it. But when considered in connection with that part of the letter relating to the transaction, it fails to show that the transaction was a conditional sale. The following extract from the letter referred to contains all that is therein said about the transaction, viz.:

“ We will give you $7,000 for your place, you to have the deed made to us, same to be examined by some good attorney, and to give us your notes for the rent at $50 per month. The insurance on the house to be transferred to us, but - at present we could not promise to increase your salary, or to extend your note for $1,500» If at the end of twelve months you want to purchase the house from us, you can do so on favorable terms. You will please answer promptly. Your year is out with us on the 15th of this month.”

The fact that in the negotiation appellants declared to Campbell that he might repurchase the property" on favorable terms at the end of twelve months, unaided by other circumstances and other facts, would not have the effect of making the transaction a conditional sale.

There are no specific terms stated upon which Campbell had the right to repurchase. The “ favorable terms ” upon which he could do so were left entirely to appellants. They alone would have the right to determine what terms would be favorable.

Mrs. Campbell says that Campbell had told her that 16 Hardie agreed that we might redeem at the end of the year, and at the time I signed the deed he repeated the same, and showed me a letter from Hardie & Co., dated the 5th of June, 1880, to the same effect.” And Campbell says that he showed that letter to Mrs. Campbell and told her that he had the right to redeem the “ property after a year.”

That letter, unaided, does not, as before remarked, give Campbell the right to redeem the property. It is but a promise upon the part of appellants that he may repurchase at the end of twelve months upon favorable terms.

In view of another trial further comment upon the facts is deemed inappropriate.

Our conclusion is that the judgment ought to be reversed and the cause remanded.

Reversed and Remanded.

[Opinion adopted February 13, 1885.]