Charles v. Thacker

• Decision Date: 19 January 1916
• Citation: 167 Ky. 835,181 S.W. 611
• Parties: CHARLES ET AL. v. THACKER ET UX.
• Court: Kentucky Court of Appeals

181 S.W. 611

167 Ky. 835

CHARLES ET AL. v. THACKER ET UX.

Court of Appeals of Kentucky.

January 19, 1916

Appeal from Circuit Court, Pike County.

Action by Reuben Thacker and wife against Green Charles and others. From a judgment for plaintiffs, defendants appeal. Judgment reversed, with instructions to dismiss the petition.

Roscoe Vanover, of Pikeville, for appellants.

Stratton & Stephenson, of Pikeville, for appellees.

MILLER C.J.

On January 9, 1905, the appellees, Reuben Thacker and his wife Pricy Victoria Thacker, executed a mortgage upon a small tract of land owned by Reuben to A. J. Charles to secure him in the payment of $900, due January 1, 1906. The mortgage was the second renewal of a former mortgage between the same parties upon the same tract of land; each renewal, however being to secure additional loans of money. Shortly after the note matured in January, 1906, Charles insisted upon its payment. According to the testimony of W. R. Justice, who heard the conversation between Charles and Thacker, Thacker wanted to make a new mortgage for a year, but Charles replied that he did not want any more mortgages; that he was getting old and frail and broken down, and something might happen to him; that he wanted his money or a deed for the land, or, if that was not done, or some other suitable arrangement made he would have to enforce his lien. Justice testified that Thacker and wife did not want to make a deed, but wanted to give him a new mortgage. But this did not satisfy Charles, who finally agreed that, if Thacker and wife would convey the land to him, he would give them a writing agreeing to permit them to buy the land back at any time before January 1, 1907, upon the payment of the $1,000 purchase money. Thacker and wife accepted this proposition, and executed a deed to Charles for the land for the recited consideration of $1,000 in cash, and Charles gave them a writing to the effect that they might "annul and avoid" the deed at any time before January 1, 1907, upon the payment of the $1,000, and, if that should not be done, then the writing giving them that right should stand "null and avoided." Thacker and wife surrendered possession of the land to Charles, and he retained it until his death; and since his death his heirs have held possession of it.

On May 6, 1913, Thacker and wife instituted this action in equity against the children and grandchildren of Charles, claiming that the sale and the paper given them by A. J. Charles, above mentioned, was, in effect, a mortgage; and they asked that it be so adjudged. The chancellor granted the prayer of the petition, by declaring the deed from Thacker and wife to Charles to be a mortgage for the sum of $1,000, and directed a sale of the land to pay the debt. From that judgment the heirs of Charles prosecute this appeal.

Where land is sold with an option reserved to the vendor to repurchase it by the payment of a certain sum within a specified time, the sale is known as a conditional sale, and will become absolute upon the failure to pay the stipulated sum at the time specified. The vendor in such a transaction is not entitled to an equity of redemption, but can only enforce the agreement to resell if the payment is made as required. A conditional sale may in equity be shown to be a mortgage upon the same principles as in the case of a deed absolute on its face. If it appears that the parties intended the conditional sale to operate as a security for the debt, equity will treat the transaction in all respects as a mortgage. The intention of the parties, as ascertained by considering their situation and the surrounding facts, as well as the written memorials of the transaction, furnishes the criterion for the distinction.

Chancellor Kent states the test of distinction as follows:

"If the relation of debtor and creditor remains, and the debt still subsists, it is a mortgage; but, if the debt be extinguished by the agreement of the parties, or the money advanced is not by way of loan, and the grantor has the privilege of repayment, if he pleases, by a given time, and thereby entitles himself to a recognizance, it is a conditional sale." 4 Comm. 145.

The same rule was stated by this court in Honore v. Hutchings, 8 Bush, 695, as follows:

"The distinction between a conditional sale and a mortgage, as drawn by Greenleaf, is that: 'Where the debt forming the consideration of the conveyance still subsists, or the money is advanced by way of loan, with a personal liability on the part of the borrower to repay it, and by the terms of the agreement the land is to be reconveyed on payment of the money, it will be regarded as a mortgage; but where the relation of debtor and creditor is extinguished, or never existed, there a similar agreement will be considered as merely a conditional sale.' 2 Greenleaf's Cruise, note 1, page 74."

The true test, therefore, whether a conveyance is a mortgage or not, is to ascertain whether it is a security for the payment of money, or for the performance or nonperformance of any...