Miller v. Smith

• Decision Date: 03 May 1910
• Parties: MILLER v. SMITH et al.
• Court: North Dakota Supreme Court

20 N.D. 96

126 N.W. 499

MILLER

v.SMITH et al.

Supreme Court of North Dakota.

May 3, 1910.

Syllabus by the Court.

A deed of real estate, absolute in terms, will not be declared a mortgage, unless the evidence is clear, specific, satisfactory, and convincing that such was the intention of the parties when the conveyance was executed.

One of the most decisive tests to determine what the intention of the parties was is whether there exists a debt from the grantor to the grantee, as there can be no mortgage without a debt or liability to be secured.

The form of the conveyance is not controlling, and parol evidence is admissible to show what the real agreement was.

The declarations of the parties at the time and subsequently are also admissible to determine what the real intention was.

A contract to reconvey on fixed terms does not necessarily show that the transaction was for security purposes, although the sum to be paid on a reconveyance is a sum equal in amount to the sum secured by a former mortgage.

A security contract may be changed to an absolute conveyance, subject to an option to repurchase under fixed terms. On such issues the intention of the parties is the test, but the fairness of the transaction will be scrutinized to see that the act was not influenced by financial circumstances of the debtor or the oppression of the creditor.

Evidence considered, and held not to show that a deed and accompanying contract are a mortgage, but an absolute deed, with the privilege of a reconveyance on payment of a definite sum on or before a day certain.

Appeal from District Court, Stutsman County; Burke, Judge.

Action by C. L. Miller against Gussie R. Smith and others. Judgment for plaintiff, and defendants appeal. Affirmed.John Knauf, for appellants. Geo. W. Thorpe and Rickel & Dennis, for respondent.

MORGAN, C. J.

Action to quiet title, involving the title and ownership of the E. 1/2 of section 29, township 138 N., range 65 W., in Stutsman county. The plaintiff claims the title thereto in fee simple. Defendants contend that the conveyance under which plaintiff holds the land is a mortgage, and ask for an accounting, and to be allowed to redeem from such mortgage on payment of the amount found due. Plaintiff recovered judgment in the district court. Defendants appeal, and ask for a review of the entire case under section 7229, Rev. Codes 1905.

The leading facts are the following:

In August, 1899, the defendant Gussie R. Smith and her husband, R. R. Smith, since deceased, leased a hotel in Cedar Rapids, Iowa, owned by the plaintiff's wife. The plaintiff acted as his wife's agent in that matter, and in all matters connected with the hotel. This lease was for five years. The Smiths were not able to furnish the hotel without borrowing money, and, in place of mortgaging the hotel furniture, they concluded to make other arrangements, and thereafter the plaintiff agreed to become surety for them at one of the banks for the sum of $1,000 for 90 days, and the Smiths agreed to indemnify him by giving him a mortgage on this land. Subsequently it was found that it would take $1,250 to buy the required furniture, and plaintiff thereupon indemnified the bank for $250 additional. On August 16, 1899, a note and mortgage were executed and delivered to the plaintiff to secure him on his liability to the bank. The note at the bank was extended at the end of every 90 days until October 16, 1900. About this time the plaintiff informed Mrs. Smith that the bank did not wish to extend the note again, and in consequence thereof the following arrangement was agreed upon between the Smiths and plaintiff: The Smiths were to give him a warranty deed of this land, absolute in terms. Plaintiff was to retain the note and mortgage for $1,250. Plaintiff was to give, and did give, the Smiths a contract as follows, to wit: “Whereas, said C. L. Miller, at the special instance and request of the said Gussie R. and R. R. Smith, signed a note as surety for them for the sum of $1,250.00, payable to the Merchants National Bank of the city of Cedar Rapids, aforesaid, which said note is now due and payable, and whereas, the said Gussie R. and R. R. Smith are unable to pay the same, and whereas, the said Gussie R. and R. R. Smith, on the 16th day of August, A. D. 1899, executed a certain land mortgage to the said C. L. Miller to indemnify and hold him harmless against the payment of said note on-(premises described), now it is agreed by and between the parties that the said C. L. Miller is to pay the said note and the said Gussie R. and R. R. Smith to make a deed for the above described premises to the said C. L. Miller upon the following conditions, to wit: The said C. L. Miller to still retain said note and mortgage, and if the said Gussie R. and R. R. Smith shall pay to the said C. L. Miller, on or before Oct. 16, 1901, all moneys including costs, taxes and other expenses, together with seven per cent. interest per annum on the same, then the said C. L. Miller will sell and reconvey the said premises back to the said Gussie R. and R. R. Smith or their heirs or assigns, and deliver up and duly cancel the said note and mortgage, or, if the same is not paid by the said time, the said C. L. Miller will deliver up to them said note and mortgage, if no other incumbrance is found against said land, and in which case said Gussie R. and R. R. Smith are to have no other or further claim at law or in equity upon said premises so conveyed to him, but his title to be absolute and perfect in fee simple.”

The deed was immediately placed on record by the plaintiff. During the year following the delivery of this deed nothing transpired to change the relation of the parties to the land or to the contract, except that the plaintiff paid the bank the sum of $1,250 after the execution of the papers on the 16th day of October, 1900. The Smiths had paid the interest to the bank on the $1,250 note up to that date. When the year was about to expire, Mrs. Smith sent for the plaintiff to come to the hotel, and they talked over matters there, and she then gave him $3,200 worth of notes for collection, out of which when collected, he was to pay the rent in ar rears due his wife. At this same interview, plaintiff handed her the mortgage of August 16, 1899, and the $1,250 note, and a satisfaction or written discharge of the mortgage, which she says “he told me at the same time I should put it away, as I might need it again.” In regard to this interview there is some conflict. Mrs. Smith says that she was to have the right to redeem at any time, and that the plaintiff so stated to her at this interview. Plaintiff positively denies that any such talk was had or promise made at any time after the surrender of the mortgage and other papers, about October 16, 1901.

After the turning over and acceptance of the note, mortgage, and satisfaction piece, nothing transpired between the parties concerning this matter until March 25, 1902, when Mrs. Smith wrote the plaintiff as follows: “Patterson, Mrs. 25, 1902: My Dear Mr. Miller: Your letter was forwarded me from Reading. I am glad to know everything is all right in Cedar Rapids and as far as money is concerned we are square, but in kindness and consideration I am still your debtor.” The letter to which this was a reply referred to all arrears of rent having been paid out of the notes placed in plaintiff's hands for collection. On September 11, 1902. Mrs. Smith wrote to the plaintiff as follows: “We are expecting in a few days to go to Dakota to attend to matters out there, and I would like to know if you are still willing to allow me to redeem the half section of land you have for what it cost you.” In response to this letter, the plaintiff wrote her that he had given another party an option or agreement to sell this property. It is claimed by Mrs. Smith that she answered this letter of plaintiff's, and complained that he should have given another party an option on the land when he had agreed to let her redeem it. The plaintiff, however, testifies that he never received this letter. On June 20, 1903, Mrs. Smith wrote the plaintiff, and in the letter used this language: “Now I want to know if you will allow me to keep the control of twenty-nine until you dispose of it otherwise. I inclose you a diagram. The black lines are the lands I am interested in. The crosses are your half of twenty-nine, and the ring is the farmer's. Now you can see how convenient your land is for the farmer to pasture his stock on, which he is now doing, and how inconvenient it is for me to have him there. Indeed, I can see how foolish it was not to redeem this land myself when I had the chance, and I wish you would set a price on it and give me an option on it until after harvest-not that I have not land enough, and more than I will ever need, but it makes it very inconvenient to have a half mile right in the middle of my farm belonging to some one else.” The land was uncultivated land, with no one in actual possession thereof. From these papers and letters and the evidence we are to determine whether the defendant should, on equitable principles, be permitted to redeem at this time. This must depend upon what was the intention of the parties on October 16, 1900, when the deed and accompanying contract were executed and delivered. It is the intention of the parties at that time that must govern, and parol evidence is admissible on that issue, under section 6153, Rev. Codes 1905. Subsequent acts and declarations are admitted in evidence only as having bearing on what the original intention was. If the parties intended the deed to be security simply, it should be deemed a mortgage, whatever its language may be. The degree of proof required before a deed absolute in form will be declared a mortgage is well established. It requires that the evidence must be clear, convincing and specific before the deed will be declared a mortgage. It must be such...