Pusser v. A.J. Thompson & Co.

• Decision Date: 10 March 1909
• Citation: 64 S.E. 75,132 Ga. 280
• Parties: PUSSER et ux. v. A. J. THOMPSON & CO.
• Court: Georgia Supreme Court

64 S.E. 75

132 Ga. 280

PUSSER et ux. v. A. J. THOMPSON & CO.

Supreme Court of Georgia

March 10, 1909

Syllabus by the Court.

Where a deed under seal was made, conveying title in order to secure an indebtedness represented by a promissory note, under Civ Code 1895, § 2771 et seq., and on its face it recited the debt and the purpose to secure it, although suit on the note became barred by the statute of limitations, the creditor could foreclose the deed as an equitable mortgage within 20 years from its execution.

[Ed Note-For other cases, see Limitation of Actions, Cent. Dig. § 652; Dec. Dig. § 167. ^[*]]

While an instruction to the jury "that the presumption of law is against usury, and the burden would then be upon the defendant in this case, who sets up usury as a defense, to establish the existence of usury in the contract to your satisfaction," was not entirely apt or exact in expression, yet, when taken in connection with the entire charge, it does not require a reversal.

[Ed Note.-For other cases, see Trial, Cent. Dig. §§ 703-717; Dec Dig. § 295. ^[*]]

There was no error in overruling the motion for a new trial.

Error from Superior Court, Pulaski County; J. H. Martin, Judge.

Action by A. J. Thompson & Co. against David Pusser and wife. Judgment for plaintiffs, and defendants bring error. Affirmed.

On February 6, 1892, David Pusser made to A. J. Thompson & Co. a promissory note for $410.71, due on the 1st day of October after date. It was not a sealed instrument, under the law of this state. On the same day he executed to Thompson & Co., who were stated to be a firm composed of A. J. Thompson and G. P. Stubbs, a deed conveying certain described land. In the body of the instrument, as set out in the record, was the following clause: "This conveyance is intended to operate as provided in sections 1969, 1970, and 1971 of the Code of 1882, in regard to the sale of property to secure debts, and to pass the title of the property described into the said A. J. Thompson & Co., the debt hereby secured being one promissory note, for $10.71 [$410.71?], dated this day and due October 1, 1892." It was also provided that, if the debt should not be paid promptly at maturity, the grantees, their agents, or legal representatives, should be authorized to advertise the property and sell it at public outcry, making a conveyance to the purchaser in fee simple, "thereby divesting out of the said David Pusser all right and equity that he may have in and to said property, and vesting the same in the purchaser or purchasers aforesaid." In that event the proceeds were to be first applied to the payment of the debt and expenses of the sale, and the balance, if any, to be paid to Pusser. The note was not paid at maturity, and thereafter the right to bring suit on it became barred by the statute of limitations. In 1906 the holder of the security deed (the surviving partner of the firm) filed a petition in the superior court, alleging the making of the note, the giving of the deed to secure the debt, that it had not been paid, and that Pusser had remained in possession continuously since the note and deed were made. It was prayed that the security deed be foreclosed as an equitable mortgage; that the land be sold, the proceeds be applied to the liquidation of the debt specified in such deed and the payment of costs of the proceeding, and the surplus, if any, be paid over to Pusser; and that his equity of redemption be forever barred. A general judgment on the note and for attorney's fees was also prayed, but this was stricken on demurrer. A demurrer was interposed on the grounds that the instrument referred to in the petition was not a mortgage, but a deed to secure a debt, and could not be foreclosed as a mortgage, and that the plaintiff had an adequate remedy at law, and was not entitled to any decree of foreclosure. These grounds of demurrer were overruled. The defendants pleaded that there was usury in the transaction, that the title which the deed purported to convey was thereby rendered void, and that accordingly the instrument could not be foreclosed or enforced. The jury found for the plaintiff. A motion for a new trial was made and overruled, and the defendants (Pusser's wife having been joined with him) excepted.

Herbert L. Grice and Tomlinson Fort, for plaintiffs in error.

H. F. Lawson and W. G. & Warren Grice, for defendants in

p>Page error.

LUMPKIN J.

1. The principal question in this case is whether the plaintiff could proceed by equitable petition to foreclose the security deed as an equitable mortgage. At common law a mortgage was originally treated as a conveyance of property, defeasible by the payment of the debt secured when due. The title conveyed was like other estates defeasible upon condition subsequent. To relieve debtors from the hardship resulting from a forfeiture or loss of the property by mere failure to pay promptly, often resulting in an unconscionable advantage to the creditor and the obtaining by him of property valued far beyond the debt secured, equity interposed and permitted them to redeem the land by the payment of principal and interest, instead of losing it entirely. Efforts were made by creditors to shape contracts which would forfeit the property to them on nonpayment, or prevent redemption; but such attempts met with but little favor in courts of equity. Thus grew up the somewhat peculiar situation that in courts of law a mortgage conveyed a title defeasible upon condition, while in courts of equity the real nature of the transaction-the securing of payment to the creditor-was considered, and redemption was allowed after default in making payment according to the promise. Thus came to be established what is known as the "equity of redemption," which in modern times has been recognized as the right of the mortgagor, and for many purposes he has been treated as the substantial owner of the land, except as against the secured creditor. Lord Mansfield went quite far in expressing this view, and in referring to a mortgage as only a security. In America a number of states have adopted the plan of treating a mortgage only as a security or lien, rather than as a conveyance of title. 1 Jones on Mortgages (6th Ed.) § 6 et seq. Such is the status of a mortgage in Georgia, where Civ. Code 1895, § 2723, declares that "a mortgage in this state is only a security for debt, and passes no title." As a natural result of holding a mortgage to be a mere lien, other things might intervene and seriously interfere with the security. A power of sale contained in a mortgage was held to terminate upon the death of the mortgagor. A year's support for the family or dower for the widow might claim precedence. In order to provide greater security for the creditor, and to prevent matters of the kind referred to from endangering the collection of the debt, the Legislature provided that a conveyance of the actual title could be made, with bond to reconvey upon payment. Provision was also made by which the creditor, upon upon recovering judgment against his debtor, might file and have recorded a deed reconveying the property to the latter, and levy on and sell it for the debt; and priority was given to him, upon pursuing the statutory remedy, over other judgments against the debtor.

It will be observed that this authorized the conveyance of title as security, somewhat analogous to the common-law mortgage. Upon nonpayment, the creditor could proceed as above indicated, or he could bring ejectment against his debtor, and recover possession of the land. Still the substantial fact that this conveyance was for the purpose of security, and not to convey an indefeasible title, was recognized. In 1889 the Legislature passed an act providing that, where such deed was made to secure a debt, the surrender and cancellation of the deed in the same manner that mortgages are canceled, on payment of the debt, should operate to reconvey the title, "and such cancellation may be entered of record by the clerk of the superior court in the same manner that cancellations of mortgages are now entered." Civ. Code 1895,§ 2774. By section 2775 it is declared that the vendor's right to reconveyance of the property, upon compliance with the contract, shall not be affected by any liens, incumbrances, or rights which would otherwise attach to the property by virtue of the title being in the vendee; but the right of the vendor to a reconveyance shall be absolute and permanent upon his compliance with his contract with the vendee, according to the terms thereof. It has been held that if the holder of such a deed sues the maker in ejectment or complaint for land, and recovers possession, he does not hold it absolutely freed from all claim on the part of the debtor; but the latter may still bring him to an accounting, and repossess himself of the land upon payment of the debt. Polhill v. Brown, 84 Ga. 338(10), 10 S.E. 921. If suit is brought by the holder of the deed to recover possession of the land from the maker, the latter may file an equitable plea, and prevent the recovery by paying the amount due. Id.; Lackey v. Bostwick, 54 Ga. 45. As against the rest of the world, except the creditor or one claiming under him, the debtor remaining in possession is so far treated as the owner that he may defend an action of ejection, or may bring one if evicted, and the security deed which he has made, subject to the contract to reconvey on payment of the debt, cannot be set up against him as paramount outstanding title by a person who does not connect his title therewith. Ashley v. Cook, 109 Ga. 653, 35 S.E. 89.

These illustrations will suffice to show that while a conveyance may be made to secure a debt, which will carry the title, and not stand exactly like a...