Coursey v. Fairchild, 41093
| Citation | 436 P.2d 35 |
| Decision Date | 26 December 1967 |
| Docket Number | No. 41093,41093 |
| Parties | J. C. COURSEY, Plaintiff in Error, v. Emery C. FAIRCHILD and Vila Fairchild, Defendants in Error. |
| Court | Supreme Court of Oklahoma |
Syllabus by the Court
1. The terms of 42 O.S.1961, § 11 operate to invalidate any agreement, entered into by the parties, at the inception of the mortgage or contemporaneously therewith, as a part of or collateral to its execution, or as an inducement to the making of the loan, by which mortgagor waives, unduly restricts, or agrees not to exercise his statutory right of redemption to the fullest extent afforded by law, and this rule applies with equal force and effect to stipulations entered into as an inducement to the making of a renewal loan.
Appeal from District Court, Dewey County; F. B. H. Spellman, Judge.
Action by mortgagors against mortgagee for cancellation of mineral deed and leasehold estate given in connection with renewal of loan. Mortgagee appeals after trial court decree cancellation. Affirmed.
Arney, Barker & Donley, Clinton, for plaintiff in error.
Tom Hieronymus, Woodward, for defendants in error.
The mortgagor (borrower) gave a deed to minerals underlying a portion of mortgaged premises to mortgagee (lender) as additional consideration for lender's agreement to extend payment on an existing mortgage indebtedness and to accept a renewal note secured by a new mortgage. The question to be decided here is whether this deed was subject to cancellation, on redemption of the land from the lien of the new mortgage, because the mineral conveyance fell within the prohibition of 42 O.S.1961, §§ 10 and 11.
Borrowers, the Fairchilds, are owners of 718 acres of land which were encumbered by two mortgages prior to the execution of the original Coursey mortgage. The junior mortgagee procured a foreclosure judgment. The day the land was to be sold (at a foreclosure sale) subject to the lien of the senior mortgage, borrowers succeeded in obtaining a loan from J. C. Coursey, called here lender. They gave the lender a one-year note secured by a junior mortgage. With the proceeds of the new loan borrowers redeemed their property from the lien of the foreclosed second mortgage. As a part consideration for the loan borrowers let the lender use the mortgaged land for one year.
Borrowers failed to pay the one-year note when it came due and lender instituted foreclosure proceedings. Before the litigation was concluded the parties entered into a settlement. By its terms the time for payment of the one-year note was extended for a period of two years by a renewal note; the lender was granted a lease on the mortgaged premises at an agreed rental; the first year's rental was to be applied on the arrears then due on the senior mortgage and on the taxes upon the property, the balance, if any, was to be credited on the note; the second year's rental was to be used for current payments on the senior mortgage indebtedness and taxes, the remainder, if any, to be credited on the note.
Shortly before maturity date of the two-year note, the parties entered into another agreement. The evidence concerning the negotiations culminating in this agreement is in conflict but there is no dispute that the agreement was entered into for the purpose of extending the mortgage debt. By the terms of the agreement, borrowers executed a renewal note (bearing 6% Interest) due five years from its date and secured by a new second mortgage; the lender was given a lease on the mortgaged tract (less a few acres of pasture land) for a period coextensive with the note at an agreed rental which was to be applied on current payments due under the senior mortgage and on taxes, with balance to be credited on the junior mortgage note. By an instrument dated some eleven days after the date the note and mortgage were signed, borrowers executed a mineral deed conveying to lender for a term of 25 years from date 'an undivided 55 acre interest in and to all of the oil, gas and other minerals' underlying a part of the mortgaged tract. It is agreed that these instruments formed a part of a single transaction.
Eleven and a half months following the execution of their five-year note borrowers redeemed the land from the lien of lender's second mortgage by payment in full of the principal indebtedness together with all interest due. The day of the redemption lender executed a proper release of his second mortgage which was filed of record. Lender continued, however, to occupy that portion of the mortgaged premises he held under the terms of the lease agreement executed contemporaneously with the five-year note and mortgage, and declined to reconvey to the borrowers the mineral interest in the 55 acres. His refusal to vacate the land and to reconvey the mineral interest occasioned this litigation.
The trial court's judgment canceled the lease and the mineral deed. At the hearing on motion for new trial lender tendered to borrowers 'full possession of all of the surface' of the premises formerly encumbered by his second mortgage. At issue in this appeal is solely the validity of the mineral deed which, according to lender's contention, was erroneously canceled.
At common law the title and possession of mortgaged premises passed to the mortgagee. Under our statutes a mortgage does not operate as a conveyance vesting in the mortgagee any estate in the land. It creates a mere lien securing the payment of a debt. Page v. Turk, 43 Okl. 667, 143 P. 1047. The title to the land remains in the mortgagor. No matter what the contractual arrangements between the parties may be, neither a lien nor a contract for one can serve to transfer title to the property which is subject to it. 42 O.S.1961, § 10; Mills v. Reneau, Okl., 411 P.2d 516, 519. Like equity, which regarded redemption As the creature of the law rather than of contract, our statute recognizes and confers a right to redeem as inherent in every mortgage. 42 O.S.1961, § 18; Moore v. Beverlin, 186 Okl. 620, 99 P.2d 886, 888. A mortgagor cannot be divested of his title until his right to redeem is extinguished by foreclosure decree and sale held pursuant thereto. Balduff v. Griswold, 9 Okl. 438, 60 P. 223. In a jurisdiction, such as ours, where the common-law doctrine of mortgages has been abrogated and an equitable theory of mortgages prevails, what is meant by a right to redeem is that upon discharge of the debt within the maximum permissible time, the mortgagor is entitled, by force of law, to have the mortgaged premises relieved from the lien and his entire estate restored to that extent which he would have had if the mortgage transaction had never taken place. Worley v. Carter, 30 Okl. 642, 121 P. 669, 673.
The power of redemption which our statute confers upon mortgagor is regarded as a substantive property right. Worley v. Carter, supra (p. 672, 121 P. 669). By force of 42 O.S.1961, § 11, All contracts in restraint of mortgagor's right to redeem the land from a lien are void as contrary to public policy. The cited enactment, which is but declaratory of a long and firmly established doctrine of equity, operates to invalidate any agreement, entered into by the parties, at the inception of the mortgage or contemporaneously therewith, as a part of or collateral...
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