Campbell v. Ohio Nat. Life Ins. Co.

• Decision Date: 27 January 1956
• Docket Number: No. 33837,33837
• Citation: 74 N.W.2d 546,161 Neb. 653
• Parties: Rodolphy M. CAMPBELL, Albert S. Johnston and Juanita L. Johnston, Appellees-Cross-Appellants, v. OHIO NATIONAL LIFE INSURANCE CO., Appellee, Impleaded with: I. W. Eberhart, * Successor Trustee, Appellant-Cross-Appellee.
• Court: Nebraska Supreme Court

Page 546

74 N.W.2d 546

161 Neb. 653

Rodolphy M. CAMPBELL, Albert S. Johnston and Juanita L. Johnston, Appellees-Cross-Appellants, v. OHIO NATIONAL LIFE INSURANCE CO., Appellee Impleaded with: I. W. Eberhart, ^* Successor Trustee, Appellant-Cross-Appellee.

No. 33837.

Supreme Court of Nebraska.

Jan. 27, 1956.

Syllabus by the Court.

1. If instruments are made at approximately the same time with reference to a transaction to effectuate an identical purpose they will be construed as though they were one instrument.

2. Equity in interpreting a transaction and determining the rights of the parties to it regards the substance of it and not the form.

3. If an instrument is intended by the parties to be security for a debt it is in equity, without regard to its form or name, a mortgage.

4. If a deed, absolute in form, is accompanied by a defeasance in writing and is intended as security for the payment of a debt it is a mortgage and the legal title to the real estate does not pass to the grantee named in the deed.

5. If an instrument is a mortgage in legal effect when executed and delivered its character as such is not changed by the effluence of time.

6. A deed, absolute in form, is a mortgage if it is given to secure the payment of a debt notwithstanding the parties to the transaction agreed that upon default of payment the deed should become an absolute conveyance of the real estate described in it.

7. A test to determine if a conveyance, absolute in form, is a sale or a mortgage is whether or not the relation of the parties toward each other as debtor and creditor continues. If it does, the conveyance is in legal effect a mortgage.

8. The burden of proof is on the litigant who alleges he is an innocent purchaser of property for value and without notice.

9. A good faith purchaser of real estate is one who buys it for a valuable consideration and without notice of a suspicious circumstance which would put a prudent man on inquiry.

10. The final dismissal of a litigant from a pending action with prejudice takes him out of court and his status as to all pending matters in the case is the same as if he had not been a party to the litigation.

11. The defense of laches is not a favored one and it will be sustained only if the litigant has been guilty of inexcusable neglect in protecting a right to the prejudice of his adversary.

12. If it is established that a deed, absolute in form, was intended as a mortgage the relative rights of the parties are determined by the law governing the relation of mortgagor and mortgagee.

13. A grantor who solicits the aid of equity to declare a deed, absolute in form, a mortgage is subject to the rule that he who seeks equity must do equity and accordingly he must pay the debt secured as a condition of his redemption of the property involved.

14. A mortgagee of real estate in possession before foreclosure, in the absence of an agreement upon the subject, is not entitled to credit for permanent improvements made by him but he is liable for the net rents and profits which he has received or which he might have received by the exercise of reasonable care.

15. A mortgagee in possession who claims ownership hostile to the mortgagor is not entitled in an accounting for rents and profits from the land to credit for compensation for services rendered by him in managing or supervising the real estate encumbered by the mortgage.

Armstrong & McKnight, Auburn, Joseph T. Votava, Omaha, for appellant.

Albert S. Johnston, Lincoln, Lee Kelligar, Auburn, for appellees.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE and BOSLAUGH, JJ

BOSLAUGH, Justice.

There are two tracts of land involved in this case. One is the east half of the northeast quarter of Section 14, Township 6 North, Range 13 East of the 6th P.M., in Nemaha County. This will be spoken of herein as tract 1. The other is the northeast quarter and the northeast quarter of the northwest quarter of Section 15, Township 6 North, Range 13 East of the 6th P.M., in Nemaha County. This will be referred to herein as tract 2. The land was for many years prior to the early part of 1938, the exact time does not appear, owned by Rodolphy M. Campbell, designated hereafter as Campbell, subject to mortgage on each tract securing an indebtedness owing by him to the Ohio National Life Insurance Company, which will be herein described as the company. There were defaults in performance of the obligations of the mortgages and the company insisted that the defaults be removed. Campbell in the spring of 1938 had negotiations with the company concerning an extension or renewal of the mortgages and the indebtedness secured by them. The company refused to do either because of the age of the debtor and the length of time that the loans had existed but it suggested that if the land was conveyed to Albert S. Johnston and his wife the company would consider accepting their notes and mortgages for the amount of the principal and arrearages represented and evidenced by the existing notes and mortgages securing them. On September 30, 1937, the land was conveyed to Albert S. Johnston and Juanita L. Johnston, the son-in-law and daughter of Campbell, who are hereafter designated as appellees. They executed and delivered to the company a note dated June 20, 1938, payable to its order for the sum of $6,800 with interest thereon at 5 percent per annum from May 1, 1938, and secured its payment by mortgage of that date on the land above described as tract 1. The last installment of the note matured May 1, 1948. Appellees also executed and delivered to the company a note dated June 20, 1938, payable to its order for the sum of $16,200 with interest thereon at 5 percent per annum from May 1, 1938, and secured its payment by a mortgage of that date on the land above described as tract 2. The last installment of the note matured May 1, 1948. The aggregate of the principal of the notes given by appellees was the amount of the indebtedness of Campbell to the company and secured by mortgages on the land at the time it was conveyed by Campbell to appellees and the conveyance of the land to them was made subject to it.

Appellees had not satisfied all the requirements of the notes and mortgages they gave the company and about March 1, 1940, it solicited and requested appellees to execute an instrument designated 'Tender Of Conveyance,' and an unconditional and absolute warranty deed of each of the tracts of land as prepared and furnished by the company and to deposit them with it. The purposes of these were to satisfy and discharge the indebtedness represented by the notes and secured by the mortgages of appellees to the company and to vest in it an absolute and unconditional title to and possession of the land. Appellees refused to do this.

There were additional conferences and negotiations between them and the company and these culminated in a transaction expressed in and evidenced by a letter written on behalf of the company dated May 21, 1940, signed by O. F. Neal as a manager of the company addressed to Albert S. Johnston, and conveyances of the land in the form of warranty deeds, one for each tract of land, in which O. F. Neal was named grantee, executed and delivered by appellees in reliance upon and because of the terms and conditions expressed in the letter. The contents of the letter are quoted:

'Agreeable with my telephone conversation this morning, I enclose deeds to be executed by you and your wife, to myself, for the above land. These deeds are taken with the understanding that all income received from the land shall be credited to the loans; and if at any time prior to March 1st, 1942 you are able to place the loans in current position, or sell the land and pay them off, I will re-deed the land to you or your order. Also, please assign the present leases to me and return with the deeds.

'Personally, I feel sure this is the best solution for all of us, for if Mr. Campbell is to realize anything from his equity, I think he will have a much better chance doing so if the property is not under foreclosure.

'I have instructed our attorney to hold the papers that were sent out yesterday until further notice. Will appreciate your executing and returning the deeds and assigned leases immediately.'

The land and the loans referred to in the letter were identified by the following appearing at the top of it: 'M. Ls. Nos. 6142-6149.' The deeds were executed, the leases of the land were assigned as the letter requested, and they were on May 24, 1940, transmitted to 'Ohio National Life Ins. Co., 19th & Douglas Sts., Omaha, Nebraska.' The assignment endorsed on each of the leases was to O. F. Neal of all the rents reserved in the lease to be applied on the loan secured by a mortgage on the land described in the lease. The letter of Albert S. Johnston that accompanied the deeds and leases when they were sent to the company identified the loans on the land by the numbers given them by it and stated: 'Pursuant to our correspondence I enclose herewith the deeds to the property involved in these loans on the forms which you sent me with your letter of May 21, 1940. I also inclose the original of the leases covering this property with assignment to you endorsed on the back of each. * * * We will continue to keep track of the farming operations as heretofore.'

Albert S. Johnston continued to manage the land, to collect the rentals from it, and he remitted the amounts collected to the company for a period of about 2 years after the conveyance of the land from appellees to O. F. Neal. He executed and delivered quitclaim deeds of the land, in accordance with the intention and expectation of the parties, to the company on May 12, 1942. The deeds from appellees were for the benefit of the company and O. F. Neal was only an intermediary. He had no personal interest in the transaction. The writing of May 21, 1940, quoted above made by the...