Conley v. Henderson

• Decision Date: 01 February 1938
• Parties: CONLEY <I>v.</I> HENDERSON ET AL.
• Court: Oregon Supreme Court

158 Or. 309

75 P.2d 746

CONLEY

v. HENDERSON ET AL.

Supreme Court of Oregon.

Argued December 22, 1937.

Reversed February 1, 1938.

Mortgages — Deed as mortgage

1. Evidence that the grantee refused the grantor's offer of a bonus of $1,000 plus mortgages on valuable properties for a loan of $5,500, which the grantee subsequently paid for conveyances of such properties, coupled with a contract for their repurchase within four months for $6,500, plus interest, showed that the deeds, though absolute in form, were intended merely as security, and were governed by the rule, once a mortgage, always a mortgage.

Mortgages — Deed as mortgage

2. A deed absolute on its face, though knowingly executed, may be shown in equity, by parol, to be a mortgage, without any allegations of fraud, accident, or mistake.

Mortgages — Deed as mortgage

3. A conveyance of land to secure an existing debt is a mortgage, and the essential attributes thereof cannot be taken away by any stipulations, regardless of the form of the instrument.

Mortgages — Deeds — Intent

4. If the intent appears to make any identified property a security for the fulfillment of an obligation, the transaction is in equity a "mortgage," and its form is immaterial.

Mortgages — Deed as mortgage

5. That the escrow holder, directed by the grantor to purchase the required documentary stamps for the deeds, placed revenue stamps on all the deeds, including deeds intended only as a mortgage, which does not require stamps under the federal statute, did not show that all the deeds were intended as absolute conveyances.

Mortgages — Deeds — Intention

6. That insurance policies issued after the recording of a deed which, though absolute in form, was allegedly intended as a mortgage, made the loss payable to the grantee, the record owner, instead of to both the grantee and the owner of the grantor corporation, as their interests might appear, did not show that the grantee was the absolute owner.

Mortgages — Deeds — Intention

7. That a subagent acting for a grantor, whose application to the grantee for a loan secured by mortgages on two tracts of land had been refused, unauthorizedly proposed to the grantee that the grantee should purchase the tracts and give the grantor merely a contract of repurchase, did not estop the grantor from contending that deeds subsequently executed were intended as a mortgage.

Vendor and purchaser — Deeds — Mortgages

8. Where a transaction involving deeds absolute in form, with a contract for repurchase within a specified time, was in fact a mortgage, the equity of redemption was not lost by the expiration of such time or the nonpayment of the debt before the grantee sold part of the property, but was lost by reason of the sale being made to an innocent purchaser for value without notice.

Mortgages — Conversion — Damages

9. Where the grantee of realty conveyed by a deed which, though absolute in form, is intended as a mortgage, wrongfully converts the property by the sale thereof to an innocent purchaser, the measure of damage is the value of the property at the time of the conversion, diminished by the amount of the mortgage which was a lien thereon when the grantor contracted to purchase the property, and by the amount of the grantor's debt to the grantee.

                  See 19 R.C.L. 263 (6 Perm. Supp., 4633)
                  41 C.J. Mortgages, § 123
                

In Banc.

Appeal from Circuit Court, Multnomah County.

ARTHUR D. HAY, Judge.

Suit by James L. Conley against S.E. Henderson and others, to have deeds, absolute in form, declared to be a mortgage. Decree for defendants, and plaintiff appeals.

REVERSED.

S.J. Bischoff, of Portland (Bischoff & Bischoff, of Portland, on the brief), for appellant.

Nicholas Jaureguy, of Portland (Jaureguy & Tooze, of Portland, on the brief), for respondents S.E. and Dorothy K. Henderson and Harry J. DeFrancq.

RAND, J.

The plaintiff, James L. Conley, brought this suit against S.E. Henderson and others, seeking to have two deeds, absolute in form, declared to be a mortgage. In and by one of said deeds, Conley and wife had conveyed to S.E. Henderson 920 acres of timberland in Douglas county, Oregon. In and by the other deed, under Conley's direction, the Wallingwood Company, a corporation the stock of which was owned by Conley, had conveyed to Henderson the west 54 feet of lot 10, block 271, Couch Addition to the city of Portland, together with an apartment house thereon known as the Teshner Manor. Both of said conveyances were made on the same day and as a part of the same transaction.

The plaintiff in his complaint alleged that these conveyances were intended as security for the payment of a debt. This was denied by the defendant Henderson in his answer and it was therein alleged that these conveyances were intended to be absolute sales of the two properties with merely a contract of repurchase, which contract the plaintiff had failed to fulfill within the time specified and, therefore, upon the expiration of such period, all of plaintiff's rights had ceased and determined.

These allegations of the answer having been put in issue by the reply, the cause proceeded to trial and resulted in a decree in favor of the defendants, from which the plaintiff has appealed.

It appears from the evidence that shortly prior to the conveyances of these properties to Henderson, Conley had entered into a contract with one C.L. Teshner, wherein it was agreed that Conley should purchase and Teshner should sell the apartment house property subject to an outstanding mortgage for $23,800 and that Conley should pay Teshner therefor the sum of $5,550 in money and convey to him a tract of approximately 22 acres of land in Clackamas county. Conley, however, was unable to make this payment from his own moneys within the time specified in the contract and obtained from Henderson the sum of $5,500 and used said sum of money together with $50 of his own to purchase the apartment house property. In addition thereto, he conveyed to Teshner the 22 acres of land in Clackamas county and Teshner, at Conley's request, deeded the apartment house property to the Wallingwood Company and the Wallingwood Company, in turn, conveyed the same to Henderson on Conley's direction and thereby the contract between Conley and Teshner was completely performed. As to these facts there was no dispute in the evidence.

It is also undisputed that, in obtaining this money from Henderson, Conley's agent applied to Henderson for a loan of $5,500 for 60 days and offered a bonus to Henderson of $1,000 for making the loan and, to secure the payment thereof, offered to give Henderson a second mortgage on the apartment house property and a first mortgage on the 920 acres of timberland which later Conley conveyed to Henderson, and that Henderson refused to make the loan on those terms.

The evidence further shows that the negotiations with Henderson were not terminated by said refusal but continued up to and including the time when Conley's contract with Teshner was completely performed and the apartment house had been conveyed to the Wallingwood Company and, by it, to Henderson as above stated.

It appears from the evidence that, when Conley ascertained that he would have to borrow the $5,500 to pay for the apartment house property, he employed Wendell S. Poulsen to obtain the loan for him and Poulsen, not being able to do so, employed one J.C. Wagner to borrow the money from Henderson and, after Henderson's refusal to make the loan, Wagner proposed to Henderson that he should take a deed from Conley for the 920 acres of timberland and also for the apartment house property and advance the $5,500 necessary for the purchase of the apartment house property, not by way of a loan but as an absolute sale to Henderson, and give Conley merely an option to repurchase the property from Henderson for the sum of $6,500, and Henderson testified that it was with that understanding he purchased the properties and gave to Conley a contract of repurchase.

The evidence shows that Wagner's proposal to Henderson, if it was ever made, was wholly unauthorized and that Conley never had any notice thereof or consented to or ratified such a course of dealings on Henderson's part. On the contrary the evidence shows that Conley was merely informed that Henderson would advance the money only upon a conveyance of the properties to him and the giving by him of a four months' contract for its repurchase by Conley, and, upon these terms, Conley, after being assured by McMullen, one of Henderson's agents, that Henderson was financially responsible, accepted the money and consented to the conveyance of the properties to Henderson with a contract of repurchase by him on or before four months from the time the money was furnished.

It also appears from the testimony that, after Conley had agreed to the conveyance of the properties to Henderson and to take a contract of repurchase, Henderson turned the matter over to his lawyer, Harry J. DeFrancq, to arrange the details and to prepare the papers, and DeFrancq testified that, because the dealings between Conley and Henderson had originated in an application for a loan, in order to prevent Conley from ever claiming an interest in the property and to prevent litigation, the transaction should be split in two parts and that the contract of repurchase should not be made on the day the deeds were delivered, nor directly by Henderson to Conley, but should be made to a third party and, by him, be assigned to Conley at a later date.

The evidence further shows that, before turning the matter over to DeFrancq, Henderson inquired of Poulsen whether Conley was the kind of a man who would agree to pay a bonus and then sue for its recovery and had been assured that Conley was not that kind of a man.

It further appears from the evidence that all the above conveyances, together with Henderson's check for $5,500, were placed in escrow in the United States National Bank of Portland,...