Foard v. Snider, 9

CourtCourt of Appeals of Maryland
Citation205 Md. 435,109 A.2d 101
Docket NumberNo. 9,9
PartiesE. Carey FOARD et al. v. Cecil W. SNIDER et ux.
Decision Date15 November 1954

Louis S. Ashman, Ocean City (Ashman, Link & Merryman, Ocean City, on the brief), for appellants.

J. Albert Roney, Jr., and William G. Kemp, Elkton, (Edward D. E. Rollins, Elkton, on the brief), for appellees.



Two of the appellants, E. Carey Foard and Lily W. Foard, his wife, owned a farm in Cecil County known as Oakwood, encumbered by a first mortgage of some $5,000 held by the estate of Edward Jackson, as well as a second mortgage held by Cecil W. Snider and Esther B. Snider, his wife, the appellees, in the amount of some $4,500. The second mortgage was further secured by the livestock and farm machinery on Oakwood, and was a first lien on a dwelling owned by the Foards at Colora in Cecil County; and on an insurance policy on the life of E. Carey Foard, which had a cash value of approximately $1,000.

The Foards operated Oakwood as a dairy farm. Mr. Foard was employed and so could work on the place but little. The real work was done by Albert P. Foard, the son of the Carey Foards, the third appellant. In the spring of 1950, the testimony shows, it was apparent that the Foards would have to refinance. They were in arrears as to both principal and interest on the first mortgage and were being pressed for payments. They were in arrears on the monthly payments due the appellees under the second mortgage. The dairy company to which they shipped their milk had taken them off the premium market, with a consequent reduction in income, because of the deterioration of the herd or the barn or both. The buildings on the farm were in need of very extensive repairs.

The necessity for action brought about a transaction on April 20, 1950 which was the source of the litigation between the appellants and the appellees, and which has culminated in this appeal. On that day, the parties met in the office of the attorney for the appellees and executed the following papers: the elder Foards executed a deed and a bill of sale to the Sniders, by which there were conveyed, respectively, Oakwood, and its livestock, machinery and equipment. The Jackson mortgage was released, as was the mortgage from the Foards to the Sniders, so that the Colora property and the insurance policy became free of liens. The Sniders executed a new $5,000 mortgage on Oakwood to the Jackson estate. There was signed by the Sniders, as an integral part of the transaction, an option agreement running to Albert Foard, which purported to give him the right to buy back Oakwood and the personal property on it, within six months, upon full reimbursement to the Sniders. On the same evening, after all of the papers were signed, Mr. Snider employed Albert Foard to work the farm at a salary of $80 a month with the understanding that he and his parents could live on the place during the time of his employment. A month or so later, Snider dismissed Albert Foard and demanded possession of his farm. Foard refused to deliver possession and on June 5, 1950, the Circuit Court for Cecil County, upon the filing of a bill by the Sniders, enjoined him from denying possession. The court dissolved the preliminary injunction and dismissed the bill of complaint after hearing testimony on October 18, 1950. The next day, one day before the expiration of the six months' term of the option, the appellants delivered a letter to the appellees which demanded that they surrender possession of the farm, and expressed an intention: '* * * to redeem the said farm and personal property and to pay you in full all amounts legally due you upon your delivery * * * of a merchantable fee simple deed and a bill of sale, free of liens, to the said farm and personal property; * * *.' The appellees ignored the demand and the offer to redeem, and about a month later, the appellants filed suit at law in the Circuit Court for Cecil County against the appellees for conspiracy, assault, trespass Q.C.F., trespass D.B.A. and trover, to which the appellees pleaded the general issue. This case has not yet come to trial. In the letter of October 19, 1950, the appellants qualified the offer to pay what was due by saying that the deed and bill of sale amounted to a mortgage and that they were entitled to redeem without the payment of some $6,000, which had been expended for improvements by the appellees after the farm had been deeded to them.

Some two years after the date of the letter, after almost continuous bickering between the parties--the Sniders cut off the electricity and water in the cottage in which the appellants continued to live, and in the face of strenuous objections, restored it, again cut it off, and then again restored it, on agreement of the appellants to file a bill for declaratory relief--the appellants, on September 9, 1952, filed a bill for a declaration as to the respective rights of the parties.

The Sniders answered, and about fourteen months later, on November 10, 1953, the court, on their petition, passed an order requiring the three Foards to show cause why the case should not be submitted for decree. The Foards filed an answer and a cross petition for a mandatory injunction to compel reinstatement of the water and electricity in their cottage. On December 17, 1953, the Court, without hearing, filed its opinion and decree, holding that the deed and bill of sale of April 20, 1950 were absolute and unconditional conveyances of title and not conveyances by way of mortgage or to secure a debt, and that the option agreement of the same date was void and of no effect because of uncertainty. The appeal before us is from that decree.

We find that the decree appealed from was correct in holding the deed and bill of sale to be absolute conveyances and not mortgages, but that there was error in declaring the option void for uncertainty. In so doing, we are not to be understood as approving the deciding of a case without notice or hearing. Rakar v. Clapper, 203 Md. 265, 100 A.2d 643.

The rules which control the determination of whether a deed of an equity of redemption is a sale or a mortgage are plain and have been reiterated many times by this Court. The presumption is that the instrument is what on its face it purports to be, an absolute conveyance of the land. To overcome this presumption and to establish its character as a mortgage, the evidence must be clear, unequivocal and convincing. Obrecht v. Friese, 148 Md. 484, 491, 129 A. 657; Bailey v. Poe, 142 Md. 57, 120 A. 242; Funk v. Harshman, 110 Md. 127, 72 A. 665; Rosenstock v. Keyser, 104 Md. 380, 65 A. 37. Nevertheless, equity will look beneath the external form of an instrument and if the real transaction, the actual intention of the parties, is shown to be that the papers were executed as security, will allow the debtor to redeem the property upon payment of the debt. If the grantor continues to be bound to pay the debt, equity will treat the conveyance as a mortgage, regardless of the form of the conveyance. If the conveyance extinguished the debt, the transaction will be considered as a sale. Coster v. Arrow Building & Loan Ass'n, 184 Md. 342, 41 A.2d 83.

Testimony of disinterested witnesses established that the improvements on Oakwood had deteriorated to a serious extent. The holder of the first mortgage testified that he 'hardly felt that it was worth the price of the mortgage'. The Foards were unable to refinance the existing mortgages and were faced with the imminent possibility of foreclosure. If Oakwood should not bring enough under foreclosure, Colora might be lost. The Chancellor, referring to the testimony that the real estate was hardly worth the amount of the first mortgage, said: 'This witness was disinterested in the present controversy and one in whom I have confidence as to his judgment and integrity.' He then considered that Snider valued the farm at $9,000 and Carey Foard at $13,000 to $14,000 and went on to say: 'There is evidence of deterioration and neglect * * *. I believe from this evidence the value of the farm and chattels was between $10,000 and $11,000, but not at a forced sale. At auction this used machinery, rundown cattle and neglected farm might well have sold for less than the debt due on the mortgages.' We think that the finding of the Chancellor was justified and that the appellants have not shown that they had any real equity in the property and chattels at the time of the conveyances. Persuasive evidence that the transaction was a sale and not a mortgage is the release from lien of the Colora property, admittedly worth some $5,000, and the life insurance policy with the cash value of $1,000, in consideration of the transfer of the property. It is scarcely conceivable that the Sniders would have done this if they were to continue to be mortgagees. The Foards are intelligent, are literate and not unfamiliar with deeds and mortgages; in fact, they testified that they knew the difference between the two, and that they had read the papers before they signed them. They knew that the first mortgage held by the Jackson estate was being released and that the Sniders were executing a new mortgage to the same mortgagee. This was, of course, inconsistent with the claim that the relationship between the Foards and the Sniders was still that the mortgagors and mortgagees. The option agreement refers to the 'deed of even date' and speaks of the right to repurchase. Further, the Foards directed the milk company to make the checks payable to Snider. Snider had refused to refinance the two mortgages. It is clear, we think, that the conveyances were outright transfers of title and were not intended as security. The debt was extinguished.

It was contended by the appellees below, as it is here, that the option agreement is unenforceable because it...

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