Eckford v. Berry

On December 22, 1883, John Eckford, in due form of law, executed the following instrument:

"Know all men by these presents, that I, John Eckford, party of the first part, in consideration of seven hundred dollars to me in hand paid, before the signing and delivery of these presents, by E. Gordon, of the county of Bexar, State of Texas, which said sum of seven hundred dollars, together with interest thereon at the rate of ten per cent per annum front date, shall be refunded by this vendor to said E. Gordon, or her heirs, executors, or administrators, on or before the first day of June, A.D. 1884, when this deed shall become null and void, otherwise to remain in full force and effect, have granted, bargained and sold, and do hereby grant, bargain, sell, alien, and convey unto the said E. Gordon, party of the second part, her heirs and assigns forever, the following tract or parcel of land, situated in the county of Dimmitt, Texas." [Here follows a description of land, proper habendum clause clause of general warranty, and also special covenant that the property was free from incumbrances, and that said Eckford had "good right and lawful authority to make this sale and conveyance of same."] Said instrument was indorsed as follows: "John Eckford to E. Gordon, conditional deed."

The money not being paid at the time fixed for payment in said instrument, E. Gordon went into possession and appears to have been in possession when this suit was filed, she having prior to filing of same become the wife of her coplaintiff, W. Berry.

John Eckford died before suit was filed, and defendants below are his heirs. Berry and wife sued J.M. Eckford and others, heirs of John Eckford, alleging the execution of said instrument; that it is a conditional deed; that Eckford did not pay the money within the time specified, and thereby the land became the property of the grantee; that the grantee went into possession upon Eckford's failure to perform the condition; that defendants claim some interest in the land by virtue of said deed, which they claim gives them the right to redeem, and that such claim and condition in said deed constitute a cloud on plaintiffs' title, which cloud they seek to remove, and to have defendants enjoined from claiming any interest in said land under the condition in said instrument.

Defendants pleaded a general denial.

Parol evidence was introduced by plaintiffs on the trial for the purpose of showing that said instrument evidences a conditional sale and not a mortgage, to the admission of which evidence defendants duly excepted, on the ground that the instrument on its face appears to be a mortgage, and its terms can not be varied or contradicted by parol evidence.

The trial court held the instrument to evidence a conditional sale, add rendered judgment for plaintiffs in accordance with the prayer of the petition, which judgment was affirmed by the Court of Civil Appeals.

The construction of this instrument by said courts is assigned as error in this court.

When the form of the instrument on its face evidences an absolute conveyance, or a conditional sale, or when, from the face of the instrument, it does not clearly appear that the real purpose of its execution was to secure the payment of a debt, in such cases parol evidence is admissible to show the real purpose of the transaction. If upon the whole case it appears that the real purpose of the transaction was to secure the payment of a debt, the instrument will be held to be a mortgage, no matter what may be its form. The introduction of parol evidence in such cases is conceded to be in direct violation of the general rule, that the terms of a written instrument can not be contradicted or varied by such evidence. The violation of this rule of evidence became necessary, in such cases, in order to give effect to the equity of redemption when first allowed in courts of equity, for otherwise such equity would have been defeated in most cases by the form of the instrument. Otherwise the skill of the conveyancer, aided by the stern rule of evidence, would have enabled the exacting creditor to overreach and finally crush the necessitous and defenseless debtor in a court of law, despite the equity of redemption created and cherished alone by the courts of equity for the protection of the debtor.

But when from the face of the instrument it clearly appeared that the purpose of the transaction was to secure the payment of a debt, the court of equity would hold it to be a mere security, without any parol evidence, and would enforce the equity of redemption by allowing the debtor a reasonable time in which to pay. In such cases, neither the debtor nor the creditor have ever been permitted to introduce parol evidence to show the instrument to be other than what it purports to be on its face. If this were not true, any written obligation to pay money secured by conveyance of land could be shown by parol evidence to be a conditional sale or an absolute conveyance, under the pretext of ascertaining the real intention of the parties; and thus the debtor could satisfy the debt by surrendering the security, or the creditor could insist upon taking the property for the sum advanced thereon, upon proof by parol evidence to the satisfaction of a court or jury that the instrument was not in fact what it purports to be, a security for money, but a conditional sale or absolute conveyance.

The true rule is, that parol evidence is not admissible to contradict or vary the terms of the written instrument except in cases where equity sets aside the general rule of evidence for the purpose of allowing the parties to show that the real transaction was the securing of a debt, as above indicated, in order that the equity of redemption may be allowed at the instance of the debtor or foreclosed at the instance of the creditor. Applying these principles to the case before us, there can be no difficulty in determining same.

The instrument above set out contains on its face all the elements of a written agreement on the part of John Eckford to pay to E. Gordon $700 on or before the 1st day of June, 1884, with interest thereon at the rate of 10 per cent per annum from December 22, 1883, the date of the instrument. The consideration was the $700 paid by E. Gordon to Eckford; the promissor was John Eckford, who signed the above instrument; the payee was IS. Gordon; the amount to be paid was $7007 with interest from December 22, 1883, until paid, at the rate of 10 per cent per annum; the time of payment was on or before June 1, 1884, and the promise to pay was aptly expressed in the imperative language, "shall be refunded." Had E. Gordon sued John Eckford on this instrument to recover the $700 and for a foreclosure on the land conveyed therein, we think there can be no doubt that she would have been entitled to a personal judgment against him for the money and interest, for a foreclosure on and sale of the land, and for execution over for any balance not realized from such sale; and Eckford could not have defeated the suit by parol proof that the conveyance was intended as a conditional sale which gave him the option to pay the money and take the land, or surrender the land and thereby escape liability for the money. This would be allowing him to vary by parol his unconditional promise to pay the money. Since Eckford was bound at all event to pay the money, the instrument must be held on its face to be a mortgage as a matter of law, and parol evidence can not be introduced to show that it was intended or treated by the parties as a conditional sale.

The judgments of the trial court and Court of Civil Appeals are reversed and the cause remanded, so that the parties may if they deem it proper amend and set up such rights and equities as the facts may authorize.

Reversed and remanded.

Delivered December 21, 1894.