Clinton v. Utah Construction Co.

• Decision Date: 28 April 1925
• Parties: JAMES E. CLINTON and H. H. HENDERSON, Appellants, v. UTAH CONSTRUCTION COMPANY, a Corporation, Respondent; COREY BROTHERS CONSTRUCTION COMPANY, a Corporation, W. W. COREY, W. E. COREY, O. O. COREY and A. T. COREY, Defendants; UNION PORTLAND CEMENT COMPANY, a Corporation, Cross-complainant and Appellant
• Court: Idaho Supreme Court

237 P. 427

40 Idaho 659

JAMES E. CLINTON and H. H. HENDERSON, Appellants, v. UTAH CONSTRUCTION COMPANY, a Corporation, Respondent;

COREY BROTHERS CONSTRUCTION COMPANY, a Corporation, W. W. COREY, W. E. COREY, O. O. COREY and A. T. COREY, Defendants; UNION PORTLAND CEMENT COMPANY, a Corporation, Cross-complainant and Appellant

Supreme Court of Idaho

April 28, 1925

Rehearing Denied July 2, 1925.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Raymond L. Givens, Judge.

Action to declare a deed a mortgage. Judgment for defendant, Utah Construction Company. Affirmed.

Judgment affirmed. Costs awarded to respondent. Petition for rehearing denied.

Richards & Haga and Henderson & Johnson, for Appellants.

Contracts must be interpreted in the light of conditions as they existed at the time they were entered into. The primary object of construction in contract law is to discover the intention of the parties, as it existed at the time the contract was made. (4 Page on Contracts, secs. 2021, 2023 2039; Kee v. Satterfield, 46 Okla. 660, 149 P. 243; O'Brien v. Miller, 168 U.S. 287, 297, 18 S.Ct 140, 42 L.Ed. 469, 473; Boardman v. Reed, 6 Pet U.S. 328, 8 L.Ed. 415; Chesapeake & O. Canal Co. v. Hill, 15 Wall. U.S. 94, 21 L.Ed. 64.)

The court will place itself in the position of the parties who made the contract as nearly as can be done, without resorting to evidence of their intention direct. (Schurger v. Moorman, 20 Idaho 97, Ann. Cas. 1912D, 1114, 117 P. 122, 36 L. R. A., N. S., 313; 4 Page on Contracts, sec. 2060.)

Property transferred to insure the performance of an act is not held in fee simple, but the conveyance is deemed a mortgage and must be foreclosed. (C. S., sec. 6358.)

The fact that there may not be an absolute agreement to repay the money is immaterial. (Babcock v. Wyman, 19 How. (U.S.) 289, 15 L.Ed. 644; Conway v. Alexander, 7 Cranch (U.S.), 218, 3 L.Ed. 321.)

When there is an absolute conveyance by one to the other, and simultaneously a condition of defeasance delivered by the latter to the former, the court will incline to the construction that the contract was a mortgage, rather than a conditional sale. (Edrington v. Harper, 3 J. J. Marsh (Ky.) 353, 20 Am. Dec. 145; Keithley v. Wood, 151 Ill. 566, 42 Am. St. 265, 38 N.W. 149; Jeffreys v. Charlton, 72 N.J. Eq. 340, 65 A. 711; Crane v. Bonnell, 2 N.J. Eq. 264; Russell v. Southard, 12 How. (U.S.) 139, 13 L.Ed. 927.)

"Courts of equity are not favorable to conditional sales, and if it be doubtful whether the transaction was a conditional sale or a mortgage, the courts will incline to hold that the agreement was intended to be a mortgage." (Freedman v. Avery, 89 Conn. 439, 94 A. 969; Peagler v. Stabler, 91 Ala. 308, 9 So. 157.)

If the conveyance on its face is absolute, then the party asserting that it was intended as security only assumes the burden of showing such fact by clear and satisfactory proof, but once a contemporaneous agreement to reconvey is established, the rule is immediately shifted and the presumption arises that a mortgage was intended. (Murray v. Butte-Monitor Tunnel Mining Co., 41 Mont. 449, 110 P. 497, 112 P. 1132; 1 Jones on Mortgages, 7th ed., sec. 279; 8 Ency. Ev. 718, and cases there cited.)

Where the deed and defeasance are of the same date and executed at the same meeting of the parties, before the same witnesses there must be a mortgage. (Hickox v. Lowe, 10 Cal. 197; Kelly v. Leachman, 3 Idaho 392, 29 P. 849; Johansen v. Looney, 31 Idaho 754, 176 P. 778.)

In order to declare a deed a mortgage, it is not essential that there should be any promise of the mortgagor to pay the debt. (Evans v. Holdman, 244 Ill. 596, 91 N.E. 723; Joliet v. Alexander, 194 Ill. 457, 62 N.E. 861.)

The fact that the grantors or some of them may have thought it was an absolute sale and that they forfeited their right to redeem by not paying the money within the time fixed by the contract of June 17, 1914, is immaterial. (Russel v. Southard, supra; Johansen v. Looney, supra.)

Marshall, McMillan & Crow and Edwin Snow, for Respondent Utah Construction Co.

The rule that a decision of a trial court will not be disturbed when there is substantial evidence to uphold it (C. S., sec. 7170) applies to suits in equity as well as actions at law. ( Panhandle Lumber Co. v. Rancour, 24 Idaho 603, 135 P. 558; Snowy Peak etc. M. Co. v. Tamarack etc. M. Co., 17 Idaho 630, 107 P. 60; Darry v. Cox, 28 Idaho 519, 155 P. 660; Jensen v. Bumgarner, 28 Idaho 706, 156 P. 114; Jones v. Vanausdeln, 28 Idaho 743, 156 P. 615.)

There was no debt. In order that such a transaction shall be a mortgage it is necessary that there be a debt and the deed be given as security for the payment thereof. The mortgage is an incident to the debt. (Winters v. Swift, 2 Idaho 61, 72, 3 P. 15; Felland v. Vollmer, 6 Idaho 120, 53 P. 268; Shaner v. Rathdrum State Bank, 29 Idaho 576, 161 P. 90; 1 Jones on Mortgages, 7th ed., sec. 265, pp. 244, 245; 3 Pomeroy's Equity, 3d ed., sec. 1196, p. 2378; 27 Cyc. 1003, 1008.)

One asserting that a deed is a mortgage must prove clearly and satisfactorily that the instrument was signed and delivered as security for a debt and not a conveyance of absolute title. (Bergen v. Johnson, 21 Idaho 619, 123 P. 484; Shaner v. Rathdrum State Bank, 29 Idaho 576, 161 P. 90; 3 Pomeroy's Equity, 3d ed., sec. 1196; 1 Jones on Mortgages, 7th ed., sec. 279a.)

And this rule applies where the deed is accompanied by a written agreement giving the grantor the right to repurchase. ( Shaner v. Rathdrum State Bank, supra.)

"In order to convert a deed absolute in its terms into a mortgage, it is necessary that the understanding and intention of both parties, grantee as well as grantor, to that effect should be concurrent and the same." (27 Cyc. 1007, cited with approval in Bergen v. Johnson, 21 Idaho 619, 123 P. 484; West v. Hendrix, 28 Ala. 226; Chapman v. Hughes, 14 Ala. 218; Holmes v. Fresh, 9 Mo. 201.)

The fact that the grantee took possession of and improved the property is evidence that the intention was not to create a mortgage. (27 Cyc. 1015.)

Evidence that the conveyance originated in an application for a loan, which was declined, indicates that the transaction was not a mortgage. (Douglas v. Moody, 80 Ala. 61.)

Evidence that the grantee refused to take a mortgage shows that his deed accompanied by his agreement to resell was not intended merely as a mortgage. (27 Cyc. 1012.)

Evidence as to whether the negotiations preceding the transaction had to do with a sale or a loan reflect the intention of the parties. (Pierce v. Traver, 13 Nev. 526; Cake v. Shull, 45 N.J. Eq. 208, 16 A. 434; Watkins v. Williams, 123 N.C. 170, 31 S.E. 388; Williams v. McManus, 90 S.C. 490, 73 S.E. 1038; Dignan v. Moore, 8 Wash. 312, 36 P. 146; Emery v. Lowe, 140 Cal. 379, 73 P. 981.)

Whenever a principal has placed an agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in assuming that such an agent is authorized to perform, in behalf of his principal, the particular act, and such particular act has been performed, the principal is estopped from denying the agent's authority to perform it. ( Alabama Great So. R. Co. v. South, etc. R. Co., 84 Ala. 570, 5 Am. St. 401, 3 So. 286; Morgan v. Neal, 7 Idaho 629, 97 Am. St. 264, 65 P. 66; Union Stockyards Co. v. Mallary, 157 Ill. 554, 48 Am. St. 341, 41 N.E. 888; Adams Express Co. v. Carnahan, 29 Ind.App. 606, 94 Am. St. 279, 63 N.E. 245, 64 N.E. 647; Saultus v. Everett, 20 Wend. (N. Y.) 267, 32 Am. Dec. 541; Hannon v. Siegel-Cooper Co., 167 N.Y. 244, 60 N.E. 597; General Cartage etc. Co. v. Cox, 74 Ohio St. 284, 113 Am. St. 959, 78 N.E. 371; Nicholas v. Title etc. Co., 79 Ore. 226, Ann. Cas. 1917A, 1149, 154 P. 391.)

By failing to begin and prosecute their suit and permitting defendant to assume the risk on a speculative enterprise, plaintiffs have become estopped by their laches. The speculative character of the property involved is an important element in considering the effect of delay in asserting a right thereto and more than ordinary promptness must be displayed to avoid the charge of laches in such cases. (16 Cyc. 161; Johnston v. Standard Min. Co., 148 U.S. 360, 13 S.Ct. 585, 37 L.Ed. 480, 17 Morr. Min. Rep. 554; Jones Min. Co. v. Cardiff Min. & Mill. Co., 56 Utah 449, 191 P. 426; Twin Lick Co. v. Marbury, 91 U.S. 587, 23 L.Ed. 328; Burkle v. Levy, 70 Cal. 250, 11 P. 643; Hill v. Finnigan, 77 Cal. 267, 11 Am. St. 279, 19 P. 494; Attwood v. Small, 6 Clark & F. (Eng.) 356; Sunny Brook Zinc etc. Co. v. Metzler, 231 F. 304; Jackson v. Jackson, 175 F. 710, 99 C. C. A. 286.)

"A receiver is regarded as occupying a fiduciary relation, in the sense that he will not be allowed to purchase for his own benefit property connected with or forming a part of the subject-matter of his receivership, or in his possession in that capacity." (3 High on Receivers, 3d ed., sec. 193; McConnel v. Gibson, 12 Ill. 128; Winans v. Winans, 22 W.Va. 678; Ayers v. Blair, 26 W.Va. 558; 24 Cyc. 29; 13 C. J. 415, 418, 492-496.)

BUDGE, J. William A. Lee, C. J., Wm. E. Lee and Taylor, JJ., concur. Givens, J., did not sit at the hearing nor take part in the opinion.

OPINION

BUDGE, J.

This action was brought to have a deed declared a mortgage. For convenience and brevity appellants James E. Clinton and H. H. Henderson will be hereinafter referred to as plaintiffs, appellant Union Portland Cement Company as cross-complainant, respondent, Utah Construction Company as defendant, and Corey Brothers Construction Company as Corey Bros.

The complaint alleges the corporate existence of defendant and cross-complainant and that Corey Bros. was a...