Shaner v. Rathdrum State Bank

• Decision Date: 10 November 1916
• Citation: 29 Idaho 576,161 P. 90
• Parties: KATIE SHANER, as Executrix of the Estate of JOSEPH SHANER, Deceased, and KATIE SHANER in Her Own Individual Capacity, Appellant, v. RATHDRUM STATE BANK, a Corporation, Respondent
• Court: Idaho Supreme Court

161 P. 90

29 Idaho 576

KATIE SHANER, as Executrix of the Estate of JOSEPH SHANER, Deceased, and KATIE SHANER in Her Own Individual Capacity, Appellant, v. RATHDRUM STATE BANK, a Corporation, Respondent

Supreme Court of Idaho

November 10, 1916

DEED-ABSOLUTE ON FACE-WHEN A MORTGAGE-INTENTION OF PARTIES-CONDITIONAL SALE-CONTRACT TO RECONVEY-CANCELATION OF DEBT-TRANSFER OF MORTGAGED PROPERTY-EVIDENCE.

1. S and wife on June 6, 1912, borrowed $8,800 of a bank and on the same day executed a promissory note and a mortgage to secure the payment of said debt. Default was made in payment of interest, taxes and insurance, and the debt became due and the bank demanded payment on October 29, 1914, and S. and wife were unable to pay, and at that time there was found to be due $10,879, and a contract was entered into between the parties whereby S. and wife were to sell the property to the bank, and they executed a warranty deed conveying the mortgaged property to the bank in ex- tinguishment of the debt; and at the same time a separate agreement was entered into between the parties, giving the mortgagors the right to repurchase said property within a year from said date, and the promissory note was canceled and surrendered to S. Held, that the transaction was a purchase and sale of said property and not a mortgage to secure the payment of said debt.

2. Held, that the borrowing of said money and the execution of said mortgage and the subsequent contract of sale made over two years thereafter were two separate and distinct transactions.

3. Held, that the evidence sustains the findings and judgment of the court.

4. Held, under the evidence, that the value of the property conveyed was a little more than the amount of the debt at the time the deed was executed, but not sufficient difference to indicate that there was any fraud or over-reaching in the transaction, and no fraud or undue influence is charged in the complaint.

5. It is a well-settled rule that where one asserts that a deed absolute on its face, with a conditional contract to repurchase within a certain date, is simply a mortgage given as security for the payment of a debt, he must show by clear and convincing evidence that it was intended as a mortgage and not as a sale.

6. A payment of a mortgage indebtedness may be made by the transfer to the mortgagee by the mortgagor of the mortgaged premises.

7. A deed absolute on its face cannot be held to be a mortgage unless there is a debt to be secured thereby, since a mortgage is a defeasible conveyance made simply to secure a debt; and where there in no continuing debt, the agreement to reconvey the property within a certain period of time provided certain payments are made, does not make the conveyance a mortgage.

8. The evidence to support the claim that a deed, absolute on its face, is a mortgage, must be clear and satisfactory, and show the intent of the parties to be that such deed is security for a debt and not a conveyance of absolute title.

9. Where it is claimed that a deed, absolute on its face, is a mortgage, the claimant ought not to recover without tendering the amount of the debt.

10. Held, that the evidence is sufficient to support the findings and decree.

[As to deed absolute with agreement to reconvey, see note in 17 Am.Dec. 300]

APPEAL from the District Court of the Eighth Judicial District for Kootenai County. Hon. R. N. Dunn, Judge.

Action to have a deed, absolute on its face, declared a mortgage. Judgment for the defendant. Affirmed.

Judgment affirmed. Costs in favor of respondent.

C. L. Heitman, for Appellant.

There was a pre-existing antecedent debt, evidenced by the promissory note and mortgage. The transaction therefore amounts to a mortgage, whatever language the parties may have used and whatever stipulation they may have inserted in the instrument. (3 Pomeroy's Eq. Jur., 3d ed., sec. 1195, and cases cited; Keithley v. Wood, 151 Ill. 566, 42 Am. St. 265, 38 N.E. 149; Hickox v. Lowe, 10 Cal. 197; Robertson v. Wheeler, 162 Ill. 566, 44 N.E. 60; Kelleran v. Brown, 4 Mass. 443; Colwell v. Woods, 3 Watts, 188, 27 Am. Dec. 345; Phillips v. Hulsizer, 20 N.J. Eq. 308, 315.)

The fact that the grantor, Shaner, was left in possession of all of the property and that his estate still holds possession of the same is important, and throws much light upon the real intent and nature of the transaction, as tending to show the existence of a debt and the whole character of the instrument as constituting a mortgage. (3 Pomeroy's Eq. Jur., sec. 1195, and cases cited; Kelly v. Leachman (2 Idaho 1112), 3 Idaho 392, 129 P. 849; Worley v. Carter, 30 Okla. 642, 121 P. 672.)

"While the debt assumed a new form, when all the evidence and circumstances are considered, we do not think it was paid and discharged, but, on the other hand, it was enlarged by appellant advancing an additional sum." (Smith v. Hoff, 23 N.D. 37, Ann. Cas. 1914C, 1072, 135 N.W. 772; Gray v. Shelby, 83 Tex. 405, 18 S.W. 809.)

The embarrassed financial condition of Shaner, his inability to pay interest, taxes and insurance, and the threat of foreclosure, are all circumstances favorable to appellant's contention that the transaction constituted a mortgage. (Reed v. Reed, 75 Me. 264; Villa v. Rodriguez, 12 Wall. 339, 20 L.Ed. 406.)

"A deed absolute on its face, and a separate agreement by the grantee for reconveyance of the same tract of land to the grantor upon payment of the consideration named in the deed, with interest, taxes, etc., by a specified time, bearing the same date as the deed, constitute a mortgage." (Smith v. Hoff, supra; Kelly v. Leachman, supra.)

Ezra R. Whitla, for Respondent.

"Where a deed absolute in form is executed with or without a contemporaneous agreement for a resale of the property, in the absence of anything on the face of the collateral papers to show a contrary intent, the presumption of law, independent of evidence, is that the transaction is what it appears to be, and he who asserts that the writing shall be given a different construction must show, by clear and convincing evidence, that a mortgage, and not a sale with the right to repurchase, was intended." (Johnson v. National Bank of Commerce, 65 Wash. 261, 118 P. 21, L. R. A. 1916B, 4; Miller v. Smith, 20 N.D. 96, 126 N.W. 499; Pomeroy, Eq. Jur., 3d ed., par. 1196; Harmon v. Grants Pass Banking & Trust Co., 60 Ore. 69, 118 P. 188; Bogk v. Gassert, 149 U.S. 17, 13 S.Ct. 738, 37 L.Ed. 634.)

Payment of an indebtedness may be made by the transfer to the mortgagee of the mortgaged premises and the acceptance thereof by him. (27 Cyc. 1390.)

Cancelation and satisfaction of the note cancels and satisfies the mortgage. (Harmon v. Grants Pass Banking & Trust Co., supra; Brown v. Thomas, 37 Kan. 282, 15 P. 211.)

"The test is the existence or nonexistence of a debt. If after the transaction no debt remains, there is no mortgage, but only a conditional sale." (McNamara v. Culver, 22 Kan. 661; Saxton v. Hitchcock, 47 Barb. 227; Hays v. Emerson, 75 Ark. 551, 87 S.W. 1027; Vance v. Anderson, 113 Cal. 532, 45 P. 816; Woods v. Jansen, 130 Cal. 200, 62 P. 473; Felland v. Vollmer Milling etc. Co., 6 Idaho 120, 53 P. 268.)

"Before a deed can be declared to be an equitable mortgage there must exist a debt which must be personal in its nature and enforceable against the person independent of the security." (Fabrique v. Cherokee & P. Coal & Mining Co., 69 Kan. 733, 77 P. 584; Rushton v. McIllvene, 88 Ark. 299, 114 S.W. 709; Miller v. Smith, 20 N.D. 96, 126 N.W. 499; Bradbury v. Davenport, 120 Cal. 152, 52 P. 301; Vance v. Anderson, 113 Cal. 532, 45 P. 814.)

"In an action for the purpose of declaring a deed a mortgage, the evidence to support the claim of the plaintiff must be clear and satisfactory and show the intent of the parties to be that the instrument delivered is security for a debt, and not a conveyance of absolute title." (Bergen v. Johnson, 21 Idaho 619, 123 P. 484; Jasper v. Hazen, 4 N.D. 1, 58 N.W. 454, 23 L. R. A. 58.)

In attempting to have a deed declared a mortgage, equity requires the party so asking to tender and offer to pay the amount of the debt and interest before he is entitled to any standing in a court of equity. (Hicks v. Hicks (Tex. Civ.), 26 S.W. 227; Dawson v. Overmyer, 141 Ind. 438, 40 N.E. 1065; Rodriguez v. Haynes, 76 Tex. 225, 13 S.W. 296; Jones on Mortgages, 2d ed., par. 1095.)

SULLIVAN, C. J. Budge and Morgan, JJ., concur.

OPINION

SULLIVAN, C. J.

This action was brought to have a warranty deed, conveying certain real estate, executed by Joseph Shaner and wife to the Rathdrum State Bank, declared a mortgage, and a contract for the reconveyance of the land described in the deed by the bank to Shaner and wife declared void and of no force and effect.

Upon the issues made by the pleadings the cause was tried by the court without a jury and the court made findings and entered judgment in favor of the respondent bank, whereby it was held that said warranty deed was not a mortgage but a deed in fact, and that said contract to reconvey the real estate involved was a valid contract.

This appeal is from the judgment.

The insufficiency of the evidence to sustain the findings and judgment is the principal error assigned. The following facts appear from the record:

Joseph Shaner on June 6, 1912, borrowed $ 8,800 from the respondent bank and he and his wife, Katie Shaner, the plaintiff and appellant in this action, executed their promissory note for said amount. Said note bore interest at the rate of 10% per annum from date, interest payable semi-annually. The principal was made payable on June 6, 1915. On that date to secure the payment of said note, Joseph Shaner and the appellant herein executed a certain mortgage...