McGuin v. Lee

• Decision Date: 23 April 1901
• Court: North Dakota Supreme Court

86 N.W. 714

10 N.D. 160

HENRY MCGUIN, et al v. JOSEPH E. LEE, et al

Supreme Court of North Dakota

April 23, 1901

Appeal from District Court, Pembina County; Sauter, J.

Suit by Henry McGuin and wife against Joseph E. Lee and others to have a certain deed construed to be a mortgage. From a judgment in favor of defendants, plaintiffs appeal.

Affirmed.

Templeton & Rex, for appellants.

As to Mrs. McGuin the so-called deed must be held to be a mortgage. The intent at the time of the delivery of the deed governs. Where a husband and wife make a conveyance absolute in terms of property belonging to the wife, the husband conducting the negotiation with the grantee, the intent of the wife in delivering the deed governs as to the nature of the transaction. If she understood the deed was security for her husband's debt, the transaction is a mortgage, whatever may have been the intention as between the husband and his creditor before the instrument was delivered. Jones on Mtgs § 324; Davis v. Brewster, 59 Tex. 93; Regan v. Simpson, 27 Wis. 355; Gilbert v. Deshon, 107 N.Y. 324. Defendants Williams and the Fargo Loan Agency are in no better position than Lee. Plaintiffs were in the actual possession of the premises at the time of the transfer to them, and notice of plaintiff's rights was imputed to them. O'Toole v. Omlie, 8 N.D. 444. The inadequacy of the consideration and the embarrassed circumstances of the grantors strongly support the theory that the transaction was a mortgage. Reed v. Reed, 75 N.W. 264; Huscheon v. Huscheon, 12 P. 410; Macauley v. Smith, 132 N.Y. 524, 30 N.E. 997; Book v. Beasley, 40 S.W. 101; Caldwell v Melvedt, 61 N.W. 1091; Gilchrist v. Beswick, 10 S.E. 371; Cobb v. Day, 17 S.W. 323. The retention by Lee of the notes constitutes most potent evidence in support of plaintiff's contention. Schierl v. Newburg, 78 N.W. 761; Ferris v. Wilcox, 51 Mich. 105, 16 N.W 252. The agreement to pay interest on the consideration named in the deed establishes to a certainty that the transaction was a mortgage. Voss v. Eller, 109 Ind. 260, 10 N.E 74; Murphy v. Calley, 1 Allen, 107; Bearss v. Ford, 108 Ill. 16. A lease seems to be a common resort to strengthen the apparent legal title when taken merely as security. Hoile v. Bailey, 17 N.W. 322. But notwithstanding a lease was taken back the transaction was nevertheless a mortgage transaction. Steele v. Bond, 28 Minn. 267; Wright v. Bates, 13 Vt. 341; Regan v. Simpson, 27 Wis. 355; Robb v. Vos, 155 U.S. 13; Boatright v. Peck, 33 Tex. 68; Rogers v. Davis, 59 N.W. 265; Haggerty v. Brower, 75 N.W. 321; Grand Order of Odd Fellows v. Menlin, 5 At. Rep. 544; Guither v. Clark, 8 At. Rep. 544; Lounsberry v. Norton, 22 At. Rep. 153; Mears v. Strobach, 40 P. 621. The court in similar cases have considered the whole evidence and determined the effect of the entire transaction. Horn v. Keteltas, 46 N.Y. 607; Carr v. Carr, 52 N.Y. 257; Meyer v. Elev. Co., 80 N.W. 189; Nightingale v. Barens, 47 Wis. 389; Pico v. Cuyas, 47 Cal. 180. In many states it is held that a deed and contemporaneous agreement to reconvey on payment of the amount of the indebtedness owing by the grantor to the grantee is conclusively presumed to be a mortgage. Clark v. Landon, 51 N.W. 357; Watkins v. Williams, 31 S.E. 388; Kelley v. Leachman, 29 P. 849; Snow v. Pressey, 20 At. Rep. 78; Copeland v. Yoakum, 38 Mo. 350; Gunn's Appeal, 10 At. Rep. 498; Weisham v. Hocker, 54 P. 464; Frey v. Campbell, 3 S.W. 368. In other jurisdictions where a deed is executed and an agreement to reconvey given back as part of the same transaction, presumptively the deal is for security and not an absolute sale. Mears v. Strobach, 40 P. 621; Keithley v. Wood, 38 N.E. 149; Crosby v. Buchanan, 1 So. Rep. 898. When the evidence leaves the mind of the court in doubt the transaction should be held a mortgage. Jeffrey v. Robbins, 167 Ill. 375; Rockwell v. Humphrey, 15 N.W. 394; Book v. Beasley, 40 S.W. 101; Niggeler v. Mauvin, 34 Minn 118, 24 N.W. 369; O'Toole v. Omlie, 8 N.D. 444.

Cochrane & Corliss, for respondents.

The most convincing proof is required to overthrow the most solemn of all written instruments--a deed of real property. 1 Jones on Mtgs., § 355; May v. May, 42 N.E. 56; Burgett v. Osborne, 50 N.E. 206; Jasper v. Hazen, 4 N.D. 1. Where it appears that the parties to the deed, absolute on its face, intended an absolute sale, with simply the right to re-purchase the land and takes a bond for reconveyance containing no condition which might stamp the transaction as a mortgage, such intention must control, and the instrument be declared a deed. 1 Pingree on Mtgs., § 90; Dignan v. Moore, 26 P. 146; Conway v. Alexander, 7 Cranch, 218; Henley v. Hotaling, 41 Cal. 22; 1 Jones on Mtgs., § 256. Where the grantor has in terms, declared that his sole right is that of an option to re-purchase, the same degree of evidence to overthrow the writing and show that the transaction was a mere mortgage should be required of him as when he attempts to overthrow the terms of a deed absolute on its face. 1 Jones on Mtgs., §§ 260, 261; 1 Pingree on Mtgs., § 99; Wallace v. Johnstone, 9 S.Ct. 245. It is not at all important that the price at which the grantor is to have the right to repurchase is exactly equal to the amount of the debt specified by the conveyance of the land to the grantor. Vance v. Anderson, 45 P. 816; Rue v. Dole, 107 Ill. 275; Robertson v. Company, 76 N.W. 736; 15 A. & E. Enc. L. 785; Jones on Mtgs., §§ 265, 267; Tygrett v. Potter, 29 S.W. 976; Great Western Mfg. Co. v. Bank, 50 P. 941. The really controlling question in this class of cases is, whether the debt is or is not extinguished. 15 A. & E. Enc. L. 780, 781, 785; 2 Pom. Eq. Jur. § 1195; 1 Jones on Mtgs., §§ 258, 265, 267, 269; Wallace v. Smith, 25 At. Rep. 811; Rue v. Dole, 107 Ill. 275; Burgett v. Osborne, 50 N.E. 206; Bacheller v. Bacheller, 33 N.E. 24; Henley v. Hotaling, 41 Cal. 27. Inadequacy of price is not at all decisive in favor of the transaction being a mortgage. 15 A. & E. Enc. L. 781; Story v. Springer, 39 N.E. 572; Rue v. Dole, 107 Ill. 283; Bogk v. Gassert, 13 S.Ct. 738; Carr v. Rising, 62 Ill. 14. That the grantor in an absolute deed cannot have a decree adjudging it a mortgage on mere proof, however strong, that he had a secret undisclosed intention that the instrument should be merely a mortgage, the grantee appearing to have treated the instrument as an absolute transfer and altered his position on such assumption, is plain. 1 Jones on Mtgs. § 335; 1 Pingree on Mtgs., § 66; Holmes v. French, 9 Mo. 201; Phoenix v. Gardner, 13 Minn. 430; Jones v. Jones, 17 N.Y.S. 905; Willson v. Parshall, 29 N.E. 297; Wallace v. Smith, 25 At. Rep. 807; Baxter v. Willey, 31 Am. Dec. 623.

OPINION

MORGAN, J.

The principal issue in this case is raised by the allegations of the complaint, stated substantially as follows: That the plaintiffs, husband and wife, made and delivered to LaMoure & Lee, defendants, on March 7, 1894, a warranty deed of two quarter sections of land in Pembina county, one of such quarters owned by the wife, and the other the homestead of the plaintiffs. That such warranty deed was thus delivered to said defendants as security for certain debts due said defendants and as security for debts due to others, which debts were to be assumed and paid by defendants; which was not intended or understood by the parties thereto to be given as an absolute deed. The complaint demands that such deed be declared a mortgage upon payment of all sums intended to be secured thereby. An accounting is demanded, and other relief, not necessary to mention here. The answer denies that such deed was intended to be given as security, and alleges that it was given, and understood to be given, as an absolute deed. The trial court found for the defendants. The plaintiffs appeal, and ask for a trial anew.

The evidence given on the trial is quite voluminous, but the following summary of it will suffice to give a correct understanding of the facts out of which this litigation has grown: Henry McGuin, one of the plaintiffs, and Judson LaMoure had business dealings from about 1883 up to date of the giving of this deed, on March 7, 1894, and during all this time McGuin was LaMoure's debtor. About this latter date Mr. McGuin was deeply involved in debt. On the lands in suit taxes were due and unpaid to the amount of $ 127.13. There were mortgage liens on the lands, amounting, with accrued interest, to $ 2,342.60. One of these mortgages amounting, with interest, to $ 749.00, was being foreclosed. On these lands Mr. LaMoure held a second mortgage, originally given in 1890, amounting, with interest to March, 1894, to $ 1,151.60, which mortgage is included in the total of mortgages given above. Mr. McGuin also owed Mr. LaMoure and LaMoure & Lee unsecured debts amounting, with interest, to $ 289.82. He also owed Randall & Norton between $ 700 and $ 800, secured by chattel mortgage. In the winter of 1894 the $ 660 mortgage, amounting to $ 749, was about to be foreclosed. McGuin was anxious to avoid this foreclosure, and so was Mr. LaMoure, as such foreclosure would cut off his second mortgage, or make it necessary for him to redeem. He desired to avoid paying the costs of foreclosure of the $ 660 mortgage. So Mr. McGuin and Mr. LaMoure met, and talked over the situation. Mr. McGuin testifies as to this meeting as follows: "My first conversation was with Mr. LaMoure in the store at Neche, I think. I told him that Mr. Norton had made a proposition to me to pay my debts, and take a deed, and take half of the crop until it was paid, --until I paid off the debt, with 12 per cent interest. LaMoure said he would take it that way. I think that day and the day we made arrangements was the only time that I talked with...