Smith v. Smith

• Decision Date: 05 October 1926
• Citation: 135 A. 25
• Parties: SMITH v. SMITH
• Court: New Hampshire Supreme Court

135 A. 25

SMITH

v. SMITH

Supreme Court of New Hampshire. Rockingham.

Oct. 5, 1926.

Transferred from Superior Court, Rockingham County; Sawyer, Judge.

Suit by Wells C. Smith against Chester C. Smith, transferred from the Superior Court. Case discharged.

Bill in equity praying that an express trust in certain real estate be decreed in the plaintiffs favor, and for an injunction. Chester C. Smith has died since the case was entered in this court, and the defense has been assumed by his executor. For convenience Chester C. Smith is referred to as the defendant.

The plaintiff was the defendant's son. In 1913 the defendant purchased a home for himself, paying $2,300 therefor. Of this sum, $2,000 was advanced by the plaintiff, who received a note payable two years after date, with interest at 5 per cent., secured by a mortgage on the property. The parties also entered into the following agreement:

"* * * The said Wells C. Smith, party of the first part, hereby covenants and agrees to take a mortgage of $2,000 at 5 per cent. interest on the place bought of D. J. Flanders, and the said Chester C. Smith, party of the second part, in consideration of this agreement, agrees and binds himself that when he, the said Chester C. Smith, sells or leaves the place at his decease, the said Wells C. Smith, for the payment of $300, shall have the place or shall have what it sells for less $300 to be paid to the estate of Chester C. Smith."

The question whether this agreement defeated the defendant's right of redemption or barred him from any right in the premises beyond the $300 invested by him was transfered by Sawyer, C. J., without a ruling.

Perley Gardner, of Exeter, and Ernest L. Guptill, of Portsmouth (Gardner, orally), for plaintiff.

Murchie & Murchie, Amos Blandin, Jr., and Alexander Murchie, all of Concord, for executor.

MARBLE, J. The executor contends that the agreement is invalid because it contravenes the general rule that a mortgagor cannot divest himself of his equity of redemption by any provision in the mortgage or by any agreement collateral thereto. 3 Pom. Eq. Jur. § 1193; 2 Washb. Real Prop. (6th Ed.) J 998; 1 Page, Con., § 192; 24 A. L. R. 822; 19 R. C. L. 502.

On the other hand, the plaintiff claims that upon the execution of the contract he became, as between himself and the defendant, the real owner of the property subject to an informal mortgage for $300 in the defendant's favor.

It is a sufficient answer to the plaintiff's claim to point to the mortgage note. The defendant was the borrower, and the theory that his payment of taxes and interest was in reality the payment of rent is fanciful and unsupported by facts. The legal import of the written instruments is clear. The defendant had an absolute deed of the property as well as its beneficial use, while, apart from the mortgage, the plaintiff owned only an executory contract in the nature of an option, which he might or might not choose to exercise. Hall v. Hall, 70 N. H. 47, 48, 47 A 79. If, as the plaintiff asserts, the documents do not express the real intention of the parties, there is no evidence before this, court which would justify reformation even if that particular relief could be decreed.

So far as the mortgagor's right to redeem is concerned, there is nothing in the agreement which bars or in any degree curtails that right. Although the provision that the plaintiff should "have the place" was one of the terms of the loan, and therefore supported by adequate consideration (Kann v. Company, 81 N. H. 535, 540, 129 A. 374; Webber v. Loranger, 79 N. H. 3, 5, 103 A. 1050, 25 A. L. R. 773; Hutt v. Hickey, 67 N. H. 411, 417, 29 A. 456), it was entirely independent of the mortgage. It did not relate to the payment of the loan but to the death of the defendant and to a possible sale of the property. The failure of the defendant to pay the note entitled the plaintiff to no greater remedy than that afforded by law to all mortgagees, and no collateral advantage could inure to him by reason of such failure. If he had foreclosed the mortgage, the defendant could have redeemed at any time within the statutory period by paying the plaintiff $2,000, with interest and costs. P. S. c. 139, § 13 (P. L. c. 215, § 16). During the defendant's lifetime he was entitled to occupy the premises with all the privileges of ownership. He could have paid the note at its maturity and have had the mortgage discharged, leaving the property unincumbered.

It is true that there are cases which hold inoperative any contract or mortgage stipulation whereby the mortgagor as an inducement to the making the loan agrees to confer upon the mortgagee any benefit other than the payment of interest, but the better and more modern rule requires the enforcement of such contracts and stipulations unless they annul or restrict the right of the mortgagor to redeem the land from the lien of the mortgage, or unless they are oppressive and unconscionable, or violate some legislative enactment. 27 Cyc. 1099; Kreglinger v. New Patagonia Meat, etc., Co., [1914; H. L.] A. C. 25, 6 B. R. C. 394, 83 L. J. Ch. N. S. 79, 109 L. T. N. S. 802, 30 Times L. R. 114, 58 Sol. Jo. 97, 51 Scot. L. R. 843, Ann. Cas. 1914B, 428.

The doctrine that "a man shall not have interest for his money and a collateral advantage for the loan of it, or clog the redemption with any by-agreement" has prevailed since the case of Jennings v. Ward, 2 Vern. 520. But in many of the cases which have followed Jennings v. Ward the failure to distinguish between an actual interference with the equity of redemption, on the one hand, and usury or extortion, on the other, has led to hopeless confusion. 21 Harv. Law Rev. 459, 468, 469.

In the Kreglinger Case Viscount Haldane attributes the origin of the mortgagor's right to redeem to the influence of the church in the courts of the chancellors, and states that as early as the Council of Lateran in 1179, we find "that famous assembly of ecclesiastics condemning usurers and laying down that when a creditor had been paid his debt he should restore his pledge." He...