Herrmann v. Churchill

• Decision Date: 18 September 1963
• Parties: Walter E. HERRMANN, Respondent, v. Clyde M. CHURCHILL and Aileen A. Churchill, husband and wife, Appellants.
• Court: Oregon Supreme Court

Page 190

385 P.2d 190

235 Or. 327

Walter E. HERRMANN, Respondent, v. Clyde M. CHURCHILL and Aileen A. Churchill, husband and wife, Appellants.

Supreme Court of Oregon, In Banc.

Argued and Submitted at Pendleton May 6, 1963.

Decided Sept. 18, 1963.

Leo Levenson, Portland, argued the cause for appellants. With him on the brief were LeRoy B. Skousen, Victor Levy, and Skousen & Holmes, Portland.

Ronald L. Marceau, Bend, argued the cause for respondent. With him on the brief were Roy Kilpatrick, Canyon City, and McKay, Panner & Johnson, Bend.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, GOODWIN and DENECKE, JJ.

PERRY, Justice.

The plaintiff brought this action to recover from the possession of the defendants certain lands which had been conveyed by deed from defendants to the plaintiff. The defendants filed an answer and cross-complaint in equity alleging that the deed was in effect a mortgage given to secure a debt due from defendants to plaintiff in a certain sum, and that they 'were ready, willing and able to repay [that sum] * * * upon plaintiff furnishing to defendants a sufficient deed to the property.'

The defendants prayed relief, as follows:

'1. That the deed described in the complaint from the Benders to W. E. Herrmann be deemed and declared a mortgage given to secure the $34,700 loan and not a deed.

'2. That the plaintiff be required to reconvey to the defendants the real property described in paragraph II of this Answer; the title to be in the same condition as when received by plaintiff.

'3. That the plaintiff be required to foreclose by proper foreclosure suit any interest which the defendants may have under said mortgage.

'4. That the plaintiff W. E. Herrmann be declared to have no right, title, or interest in and to the real property described herein other than a mortgage.

'5. That in the event W. E. Herrmann fails to give a deed as above described to the defendants that this decree shall serve and act as said deed.

'6. For such other and further relief as to the court may seem just and proper.'

The trial court sitting in equity on the cross-complaint of the defendants found that a debt greater than the amount alleged by defendants was due the plaintiff and that the deed was given as security for the debt, and therefore to be considered as a mortgage to secure the debt. The court then entered a judgment for the amount found due from the defendants to the plaintiff and decreed that the defendants should have the right to redeem the land upon payment of the amounts due plaintiff, and on failure to redeem, they were 'forever barred and foreclosed' from any interest in the land. From the decree entered by the court, the defendants appeal.

The defendants' first contention is that a court of equity having found the deed to have been given to secure a debt, and thus in law to be treated as a mortgage, did not have the power to enter a judgment in the nature of a strict foreclosure, but was required to order foreclosure in accordance with the provisions of ORS 88.070. The defendants also contend that if a court of equity was the power to enter a decree in the nature of strict foreclosure, nevertheless it should not have done so under the facts in this case. While this proceeding is in equity and this court is permitted to re-try the facts, we cannot consider this latter question, as the record made in the trial court was not placed before us, though there is no question but that if the facts of the case require a sale of the land to effect justice, a court of equity may so decree. Libel v. Pierce, 147 Or. 132, 31 P.2d 1106; Sheehan v. McKinstry et al., 105 Or. 473, 210 P. 167, 34 A.L.R. 1315.

As to the defendants' first contention, it must be pointed out that this is not a suit to foreclose a mortgage.

The plaintiff claimed to be the owner in fee of the premises and entitled to the possession thereof. The defendants, if they desired to submit this matter of right of possession of a court of law, could have established a complete defense on proof that the deed was in contemplation of law a mortgage, for ORS 86.010 provides in part:

'A mortgage of real property is not a conveyance so as to enable the owner of the mortgage to recover possession of the property without a foreclosure and sale. * * *'

A deed absolute on its face may be shown in an action at law to be a mortgage. Purdy v. Underwood, 87 Or. 56, 169 P. 536; Nellas v. Carline, 161 Minn. 157, 201 N.W. 299; Jordan v. Warner's Estate, 107 Wis. 539, 83 N.W. 946.

Under a statute of the same tenor as ORS 86.010, the court held that possession of real property under a deed absolute, in law a mortgage, if wrongfully obtained, was wrongful. Fond v. McCreery, 55 Idaho 144, 39 P.2d 766.

As is apparent, the defendants were not content to defend only their right of possession, but called upon a court of equity to determine all of the rights of the parties in and to the land in question. They sought to have the amount of their debt determined and the right to require the plaintiff to reconvey the property to them.

A suit to foreclose a mortgage would not accomplish this, for on determination of the debt, the property would be sold to the highest and best bidder at sheriff's sale. Also, in this suit, the question as to the fee simple title to the property had to be decided. A statutory foreclosure suit is not for the determination of any right of title in realty, but the right to have certain property adjudged sold to satisfy an enforceable debt. Schleef v. Purdy et al., 107 Or. 71, 214 P. 137.

As stated, we do not have the record before us, but from the pleading and judgment entered, it appears the defendants did not agree at the time the debt was created to repay the debt, but only agreed that if they did not repay in a certain time the land should become the property of the plaintiff. This, of course, distinguishes a transaction where a deed is given, from a mortgage transaction where the mortgage is given as security for the promise to pay the debt. It is clear, therefore, the defendants, in enlisting the aid of equity, were seeking the right to redeem after they had failed to pay the moneys due in the time agreed upon. In other words, although defendants could not be required by the agreement to pay the debt, they now wished however to do so that they might retain title to the land.

It is well established that he who seeks equity must do equity, and 'Where a party seeks relief by having a deed adjudged a mortgage, he must show willingness to do equity * * *,' that is, by offering to pay the debt. Colahan v. Smyth, 159 Or. 569, 576, 81 P.2d 112, 115; Kinney v. Smith, 58 Or. 158, 113 P. 854. This offer to do equity is a condition precedent to any relief. Weatherwax v. Heflin, 244 Ala. 210, 12 So.2d 554; 59 C.J.S. Mortgages § 58 b, p. 99; 36 Am.Jur. 790, Mortgages, § 196; 2 Jones on Mortgages, 8th Ed., 882, § 1398.

It is thus seen that the trial court's decree is not based upon the foreclosure of the deed as a mortgage, but is based upon the power of equity to prevent forfeitures by declaring the deed to be a mortgage and permitting redemption or discharge of the debt on an equitable basis. Having sought relief in equity, the defendants are required to do equity by making the plaintiff whole--this by paying in full the moneys due him and not leaving to chance a sale of the land sufficient after foreclosure to make him whole.

Every jurisdiction in this country which has passed upon this question, insofar as our research discloses, has held that the statutes as to foreclosure of mortgages are inapplicable in a suit to have a deed absolute declared a mortgage.

At this point it should be understood that there is a clear distinction between the statutory right of redemption and the equitable right of redemption. Portland Mtg. Co. v. Creditors Prot. Ass'n., 199 Or. 432, 262 P.2d 918; Higgs v. McDuffie, 81 Or. 256, 157 P. 794, 158 P. 953; Sellwood v. Gray & DeLashmutt, 11 Or. 534, 5 P. 196. 'The right of redemption is a creature of the statute, and * * * arises only after a sale upon a decree including a personal judgment against a defendant * * *' (Higgs v. McDuffie, supra, 81 Or. at 263, 157 P. at 796), while the equitable right of redemption is a creature of equity to relieve against forfeitures and 'is entirely independent of the statutory right to redeem after sale, * * *.' Sellwood v. Gray & DeLashmutt, supra; 59 C.J.S. Mortgages § 817, p. 1560. Since the defendants, as plaintiffs on their cross-complaint, are in equity seeking redemption, they are entitled as a matter of right only to the equitable right of redemption, not statutory, if the statutes governing foreclosure do not apply. This court so held in Murray v. Wiley, 169 Or. 381, 127 P.2d 112, 129 P.2d 66, a suit to have a deed absolute declared a mortgage, where we carefully pointed out:

'* * * We were under the impression that in the event of plaintiff's failure to redeem after accounting, a sale on foreclosure, subject to redemption, would be necessary in order to extinguish the plaintiff's interest in the property, in accordance with O.C.L.A. § 9-501 [now ORS 88.010], which provides in substance that liens on real property shall be foreclosed and the property advertised to be sold to satisfy the debt secured thereby. Upon further consideration, however, we have concluded that the statute is not controlling under the facts of this case. It is obvious that by reason of the redemption from the sale on the first mortgage by the purchasing defendants, the plaintiff has, as to that sale, already enjoyed more than a year after the foreclosure sale within which he will be entitled to redeem. There is no reason in equity and good conscience for allowing him another year for redemption after another sale on foreclosure. Furthermore, this is not a suit instituted by the mortgagees to foreclose a mortgage. It is a suit by the mortgagor to redeem. * * *' (169...