Jones v. Eichholz

• Citation: 48 S.E.2d 21,212 S.C. 411
• Decision Date: 25 May 1948
• Docket Number: 16083.
• Parties: JONES v. EICHHOLZ et al.
• Court: South Carolina Supreme Court

48 S.E.2d 21

212 S.C. 411

JONES v. EICHHOLZ et al.

No. 16083.

Supreme Court of South Carolina

May 25, 1948

Behling & Behling and St. Clair Muckenfuss Jr., all of St. George, for appellants.

J D. Parler and St. Clair Muckenfuss, Sr., both of St. George and E. M. Parler, of Lancaster, for respondent.

BAKER Chief Justice.

This is an action in equity to have an instrument in writing appearing on its face to be a deed, regular in form, declared to be in fact a mortgage, said written instrument bearing date, October 10, 1938, and being from the respondent, Mabel Holmes Jones, to one of the appellants, Bernard B. Eichholz; and for certain incidental relief relevant to the foregoing. Involved, is a tract of land in Dorchester County containing eighty-six (86) acres. On July 30, 1941, Eichholz conveyed the land in question to the appellant, R. E. Burkholder, Jr., who claims to be an innocent purchaser for value without notice of any defect in the title of Eichholz.

The complaint of the respondent (plaintiff) in addition to alleging that the deed she executed to the appellant, Eichholz, was intended as a mortgage to secure him for the payment of certain outstanding indebtedness represented by a mortgage over the land here involved which she had executed to one, W. T. Brown, alleged that when Eichholz conveyed this land to Burkholder, the latter knew the terms and conditions under which the former held the legal title to same, and that the deed to the former was intended to be and was in fact a mortgage, and that both of the appellants (defendants) were engaged in a scheme and plan to overreach her and to trick, defraud and swindle her out of her tract of land. And the complaint further alleged that there should be an accounting to ascertain what balance, if any, the respondent (plaintiff) was due the appellant, Eichholz, on her mortgage to him, which appeared on its face, as aforesaid, to be a deed.

The answer of the appellant Eichholz is more or less a general denial of the material allegations of the complaint with an affirmative declaration to the effect that the deed to him is a regular and absolute deed in fee simple for which he paid ample consideration; that it does not constitute a mortgage and was not intended as such; that he purchased the premises in good faith and had the legal right to sell and convey the premises to his co-appellant Burkholder, and was paid the full purchase price for the premises.

The appellant Burkholder, in his answer, also denied the material allegations of the complaint, his principal defense being based upon allegations that he is an innocent purchaser for value without notice, paying the full value of the land to Eichholz, after title investigation by competent attorneys had disclosed that his co-appellant was seized and possessed in fee simple of the premises; that he is in possession of the land and has been since July 30, 1941, paying the taxes, and expended large sums of money in making improvements thereon.

The case was referred to the Master of Dorchester County to hear and determine all issues of law and fact two references were held, one on March 21, 1945, and one on September 17, 1945, at which references testimony was introduced in behalf of respondent and appellants, but appellants did not attend either reference. The Master, in his Report, found against the respondent, and from this Report an appeal was taken to the Circuit Court and heard by Judge M. M. Mann, who, in a strong decree, reversed the Master in every particular.

It should be noted at this point that the issue of the remaining indebtedness, if any, of the respondent to Eichholz, upon the trial of the case in the court below, became so obscured by the other issues, that it could be said to have ceased to exist as an issue. However, the Circuit Judge held that the indebtedness had been paid in full, and we will hereafter make further reference to this phase of the case.

The two predominant issues arising out of this appeal are: (1) Was the instrument of writing, on its face a deed, in fact intended as a mortgage, and (2) was the appellant, Burkholder, an innocent purchaser for value, without notice?

The established law in this State governing the first issue is clearly set forth in Petty v. Petty, 52 S.C. 54, 29 S.E. 406, from which we quote:

'As is said in 3 Pom Eq.Jur., § 1196: 'Any conveyance of land, absolute on its face, without anything in its terms to indicate that it is otherwise than an absolute conveyance, and without any accompanying written defeasance, contract of repurchase, or other agreement, may, in equity, by means of extrinsic and parol evidence, be shown to be in reality a mortgage as between the original parties,' &c. The principle upon which this doctrine is founded is that it would be a virtual fraud for the grantee to insist upon the deed as an absolute conveyance, when it was understood at the time to be intended merely as a security and in reality as a mortgage. But, as is further said by the same distinguished author in the same section: 'The presumption, of course, arises that the instrument is what it purports on its face to be,--an absolute conveyance of the land. To overcome this presumption, and to establish its character as a mortgage, the cases all agree that the evidence must be clear, unequivocal, and convincing, for otherwise the natural presumption will prevail.' See, also, our own case of Arnold v. Mattison, 3 Rich.Eq., 153, to the same effect. Indeed, the plaintiff's counsel very properly concedes this to be the rule, which seems to be everywhere recognized, and is based upon the soundest reason; for, before a court of equity can be expected to convert a solemn written instrument under seal into something very different from what it purports on its face to be, there should be strong evidence to show that such was the intention of the parties to such instrument. To use the language of Johnston, Ch., in Arnold v. Mattison, supra, 'The evidence must be very clear and convincing.''

It is sufficient to state that the law as above quoted has been consistently following in subsequent cases coming before this Court. A citation of these cases is unnecessary as it would only tend to convert this opinion into a digest.

This issue requires a discussion of the testimony, beginning as of the date that the property was acquired by respondent, which was on October 5, 1931, and for a consideration of $299.50. The respondent failed to pay the taxes for some year or years prior to 1936 as they became due and, in November of 1936 the property was sold by the Sheriff for delinquent taxes, purchased by a third party, who in turn reconveyed the premises to respondent in December of 1936, for a consideration of $33.10 (probably the amount of the delinquent taxes, plus costs.) On October 2, 1937, the respondent mortgaged the property to W. T. Brown, to secure an indebtedness of $213.80 and it is this indebtedness that is the focal point of the controversy. The maturity date of this mortage was October 2, 1938, and according to respondent, in September of 1938 Mr. Brown began to ask for the payment of his money, whereupon respondent consulted appellant, Eichholz (both of whom were living in Savannah, Ga.), and requested him to pay the mortgage, which he agreed to do. (It afterwards appeared that Mr. Brown was interested in the payment of a chattel mortgage due him by the respondent). Respondent further related that on October 10, 1938, she and Mr. Eichholz went to see Mr. Brown, and at that time, either in the yard or in Mr. Brown's office, Mr. Eichholz stated, 'I will pay Mr. Brown, but I will not pay him and hold the mortgage. If you will give me a deed to secure me, then I will pay it, but I will not pay it and hold a mortgage.' Respondent then said if she had to give a deed to secure the money she would do so, to which Mr. Eichholz replied, 'I do not want the property. I only want a deed to secure my money until you can pay me back.' This conversation was had in the presence of a Mr. Coleman who came there with Eichholz. The parties, accompanied by Mr. Brown, then went to the law offices of Messrs. Behling & Behling, in St. George, S. C., and consulted with Mr. John Henry Behling, Sr. Up to this point the testimony of the respondent is uncontradicted as to what she said to Mr. Eichholz and what this appellant told her. This uncontradicted testimony by respondent has a very vital bearing on the case in that this evidence was given at the first reference held on March 21, 1945, and after hearing additional testimony, on the same date, the reference was adjourned until further notice and completed on September 17, 1945. Appellant, Eichholz, was not present at either reference and his failure to appear at the second reference certainly tends to lend credence to respondent's version as to...