Dean v. Smith

• Decision Date: 08 August 1925
• Docket Number: No. 4780.,4780.
• Citation: 204 N.W. 987,53 N.D. 123
• Parties: DEAN v. SMITH.
• Court: North Dakota Supreme Court

53 N.D. 123

204 N.W. 987

DEAN

v.SMITH.

No. 4780.

Supreme Court of North Dakota.

Dec. 31, 1924.

After Reargument Aug. 8, 1925.

Syllabus by the Court.

The fact that a transfer of real property, in the form of a warranty deed, was made subject to a defeasance, may be shown by evidence aliunde, except as against subsequent purchasers or incumbrancers for value and without notice, under section 6729, C. L. 1913.

A warranty deed, absolute upon its face, is presumed to be an unconditional conveyance. The burden to overthrow this presumption is upon him who asserts the contrary, and the rule is that the proof, to be sufficient, must be clear, satisfactory, and specific, and of such a character as to leave in the mind of the chancellor no hesitation or substantial doubt.

When it is established by clear, satisfactory, and convincing evidence that a deed, absolute upon its face, was intended as a mortgage, the court will give effect to such intention; in case of doubt, upon the evidence, the doubt will ordinarily be resolved in favor of a mortgage.

A “mortgage” is usually a security for the payment of a debt; it is an incident of an existing obligation. It is essential that there be an agreement, express or implied, on the part of the mortgagor, or other person in whose behalf the mortgage is executed, to pay a debt, or discharge an obligation in some form, owing to the mortgagee.

One of the strongest and surest tests as to whether a conveyance, absolute in form, shall be deemed a security conveyance, is the continuance of the indebtedness or its extinguishment. If the debt continues as such, the transfer is a mortgage.

The absence of any written evidence of a debt is a circumstance, though not conclusive, indicating a sale rather than a conveyance for security. If, in the subsequent transactions of the parties, there is no recognition in any way of the relation of debtor and creditor, and the vendee for a considerable period holds possession without paying interest or rent, these facts go to show that there is only an agreement for repurchase, and not a mortgage.

When the consideration approximates the fair value of the property at the time of the conveyance, it is a circumstance tending to show that a sale rather than a mortgage was intended.

The reservation of a right to repurchase, or an agreement to reconvey, is not alone sufficient to stamp a conveyance, absolute upon its face, as a mortgage.

Persons possessing capacity to contract may enter into an engagement for the purchase and sale of real property, with a reservation to the seller of a right to repurchase the land at a certain price and within a specified time.

Where it appears that (a) there is no continuing obligation on the part of the grantor to pay a debt, either pre-existing or created at the time of the transfer; (b) the consideration expressed in the deed approximates the full value of the property described therein; (c) the grantor surrenders possession of the property to the grantee; (d) with full knowledge of all the circumstances and ample opportunity to assert whatever rights he has, the grantor permits the defendant, for over six years, to deal with the property as if an absolute conveyance has been made; (e) the written evidences of the indebtedness assumed or discharged by defendant in consideration of the transfer are all canceled, released, and, for the most part, actually delivered to the grantor, it is held that the transfer was an absolute conveyance.

Whether the conveyance is a mortgage or a deed of trust depends upon its terms, and not whether the grantee is a creditor who is to be paid out of the proceeds that may arise from the execution of the trust declared.

A “deed of trust” is, in legal effect, a mortgage. It, like a mortgage, is intended to secure an indebtedness or an obligation. There having been no obligation, existing or created at the time of the execution of the deed, it is held, for reasons stated in the opinion, that the conveyance and the contract executed simultaneously therewith do not constitute a trust deed.

Appeal from District Court, Ramsey County; W. J. Kneeshaw, Judge.

Action by Emma B. Dean against J. H. Smith. Judgment for plaintiff, and both parties appeal. Reversed and dismissed.Cuthbert & Adamson, of Devils Lake, for plaintiff.

Henry G. Middaugh, of Duluth, Minn., and A. E. Wheeler, of Devils Lake, for defendant.

JOHNSON, J.

Judgment was entered in favor of the plaintiff in the district court of Ramsey county upon findings of fact, conclusions of law, and an order for judgment. From this judgment both parties have appealed. This case was here before on appeal from an order which we held not appealable. See Dean v. Smith (N. D.) 197 N. W. 589.

The court found, as a basis for its judgment, that plaintiff's assignor, on and prior to April 17, 1915, was the owner of 526 acres of farm lands in Ramsey county; that on that date plaintiff's assignor conveyed the land by a warranty deed to the defendant; and that at the same time, and as a part of the same transaction, the parties entered into an agreement in writing, identified as Exhibit A, in the following form:

“This agreement, made and entered into this 17th day of April, 1915, by and between S. J. Dean, of Crary, N. D., party of the first part, and J. H. Smith, of the same place, party of the second part, witnesseth:

That the said party of the first part, in consideration of thirteen thousand nine hundred ($13,900) dollars, has this day conveyed to said second party by warranty deed about 526 acres of land in the townships of Odessa and South Minnewaukan, Ramsey county, N. D., said land being more fully described in said deed, whereas, there is at this date mortgages, accrued interest, and taxes against said land amounting to $13,900, which the second party assumes, and agrees to pay at this time the accrued interest and taxes, thus preventing foreclosures of mortgages and excessive rate of interest on account of taxes and interest past due.

The second party hereto agrees to allow the first party to remain on said lands, providing he pays on or before the 1st day of November, 1915, 1916, and 1917 interest on said sum of $13,900 at 8 per cent. per annum, also all taxes assessed against said lands which shall be paid when due, and pay the premium for keeping the buildings insured for a reasonable amount; further that he will, during the life of this agreement, watch over and protect all buildings and fences on said premises, and will farm and cultivate said lands in a careful and husbandlike manner.

Further the second party reserves the right to sell said lands for the sum of $16,300, paying any difference over and above said $13,900 and interest at 8 per cent. and any further sums accumulating against the premises over to the first party hereto. Further, should the party of the first part enter into an agreement to sell about 300 acres of said lands which shall not include the land on which the buildings are located, or that which naturally should go with them, he has the privilege of doing so, providing the amount for which said land is sold for is not for a price that would reduce the value of the remaining lands, and that the proceeds of said sale of lands shall be applied on said $13,900.

Provided further that in case of default by said first party in any or either of the covenants of this agreement to be kept or performed by him, he hereby agrees on demand of said second party to quietly and peaceably surrender possession of the same premises and every part thereof, thereby canceling this agreement, after which it shall be null and void, and not binding on the second party hereto.”

The court finds that the defendant sold 120 acres of this tract to one Wagner in April, 1917, and in September, 1919, the balance to one Rutten; that the total consideration was $24,500, some of which was paid in cash, and some secured by mortgages. The court also finds the rent and profits taken by defendant from the use of the land and that plaintiff's husband removed from the land in the fall of 1915, and did not pay taxes, or interest on the debt of $13,900, and that the defendant thereafter farmed the land by tenant until it was sold. The court finds that the agreement between the parties was “in the nature of a trust” and required the defendant to account to the plaintiff in the manner stated in the findings. The court finds that there was due the defendant, at the time of the trial, the sum of $3,707.73, and ordered the plaintiff to pay this sum, whereupon the defendant was directed to transfer to plaintiff, by assignment, in due form, the notes and mortgages received as a part of the consideration for the sale of the land to Wagner and Rutten. The court finds that the trustee dealt with the property in good faith, and that the only consideration for the execution of the warranty deed was Exhibit A. There is no express finding of a continuing and existing indebtedness at and after the date of the execution of the warranty deed and Exhibit A. The court also found that there was no agreement made whereby the parties annulled or canceled Exhibit A.

The trial court made findings in support of an interlocutory decree, or order, from which an appeal was taken. See Dean v. Smith, 197 N. W. 589. The court then expressly found that the plaintiff and her husband had failed and neglected to comply with the provisions of Exhibit A in this, that they had not paid interest on $13,900, on or before November 1, 1915, 1916, and 1917, nor had they paid taxes or premium on fire insurance policies as therein provided; that thereafter the plaintiff and her husband vacated the premises and the defendant took possession thereof and retained possession until the property was sold to Wagner and Rutten. The court also found at that time that the defendant treated the contract as canceled and thereafter asserted title to the land under the deed. Defendant asserts that it was...