Bishop v. Beecher

• Decision Date: 15 September 1960
• Docket Number: No. 6654,6654
• Citation: Bishop v. Beecher, 67 N.M. 339, 355 P.2d 277, 1960 NMSC 103 (N.M. 1960)
• Parties: Stanley A. BISHOP and Sarah Jean Bishop, his wife, Plaintiffs-Appellants, v. Hanella BEECHER and Barbara Beecher Warren, a/k/a Barbara Ellen Warren, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 277

355 P.2d 277

67 N.M. 339

Stanley A. BISHOP and Sarah Jean Bishop, his wifePlaintiffs-Appellants, v.Hanella BEECHER and Barbara Beecher Warren, a/k/a Barbara Ellen Warren, Defendants-Appellees.

No. 6654.

Supreme Court of New Mexico.

Sept. 15, 1960.

Joseph B. Zucht, Albuquerque, for appellants.

Modrall, Seymour, Sperling, Roehl & Harris, Frank H. Allen, Jr., Albuquerque, for appellees.

CARMODY, Justice.

This case is before us on stipulated facts and the appeal results from a motion for summary judgment by both parties, the court granting defendants' motion and denying plaintiffs' motion.

The facts, briefly stated, are as follows:

Plaintiff-appellants as vendees and defendant-appellees as vendors entered into a real estate contract for the purchase and sale of a house in Albuquerque, New Mexico, on July 7, 1953.By the terms of the contract, vendees assumed and agreed to pay an existing mortgage on the premises in which the vendors were mortgagors.Other than the assumption of the mortgage the contract is of the usual type calling for payment of monthly installments for a number of years, and provides, among other things, that time is of the essence and, upon default of payment by the vendees and such default continuing for 30 days after written demand, the vendor(s) may:

'at his option, either declare the whole amount remaining unpaid to be then due and proceed to enforce the payment of the same; or he may terminate this contract and retain all sums theretofore paid hereunder as rental to that date for the use of said premises, and all rights of the purchaser in the premises herein described shall thereupon cease and terminate and they shall thereafter be deemed a tenant holding over after the expiration of their term without permission.'

In order to facilitate the last-mentioned option, the contract provides for placing in escrow, along with the warranty deed of vendors, a special warranty deed of the vendees, with directions to the escrow agent to deliver the latter deed to vendors in case of default by vendees and exercise of this option by the vendors.

Vendees defaulted in March, 1959, and in accordance with the terms of the contract, vendors sent written notice of demand.Upon failure of vendees to pay the amount due on the monthly installment within the 30 days as provided by the demand notice, vendors, after giving due notice to vendees, exercised their option to terminate.Vendors then properly recorded the special warranty deed with the county clerk.Thereafter, on May 12, 1959, vendees offered to redeem the property by paying the entire balance, with interest, costs and attorney fees, which offer the vendors refused.

The vendees then instituted this action, asking that the court declare the real estate contract an equitable mortgage and grant vendees the right of redemption within a reasonable time to be fixed by the court.

The lower court held that there was no equity of redemption, upheld the forfeitre and dismissed vendees' complaint.

The first issue is whether or not a real estate contract containing the option quoted above is, as a matter of law, an equitable mortgage, giving the vendees an equity of redemption.In order to clarify this issue, we point out that this is not a case where misunderstanding, mistake, fraud or surprise are pleaded.The vendees' position is that although at the time of contracting the parties understood its terms, the contract is an equitable mortgage as a matter of law.

Vendees concede the propriety of forfeiture in a real estate contract which gives the vendor no remedy other than to forfeit out the vendee.Dorman v. Fisher, 1958, 52 N.J.Super. 70, 144 A.2d 805, affirmed 1959, 31 N.J. 13, 155 A.2d 11.But, say vendees, when the option is placed in the contract allowing either forfeiture or suit for collection of the full purchase price in case of default, then the contract becomes primarily a security device inherent in which is an equity of redemption.In support of this position, vendees cite our decisions in Joe Heaston Tractor & Implement Co. v. Claussen, 1955, 59 N.M. 486, 287 P.2d 57, andSargent v. Hamblin, 1953, 57 N.M. 559, 260 P.2d 919.These decisions are not in point.

In the Claussen case, the vendors had the option, in case of default by vendees, to: (1) forfeit out the vendee, (2) declare the full amount due and proceed to collect, or (3) take possession and sell at public sale and bring suit for any deficiency.We stated that the first two options were the ones normally found in conditional sales contracts, but the third one was normally found in mortgages.This third option, coupled with the attempt to vest title to the after-acquired property in the vendor, served as the basis of our holding that the instrument was a chattel mortgage rather than a conditional sale.

In the Sargentcase, supra, the question before us was whether a deed absolute on its face was in reality a mortgage.It is true that in that casewe stated that if the vendee can compel payment the transaction is usually regarded as a mortgage, and if he cannot it is regarded as a conditional sale.However, we further stated that:

'The intention of the parties at the time an agreement is consummated to execute a deed determines whether title to the property is to be irrevocably transferred or the conveyance, though absolute in form,...