Stotts v. Swallow

• Decision Date: 19 January 1944
• Docket Number: 8539
• Citation: 12 N.W.2d 808,69 S.D. 558
• Parties: FRED C. STOTTS, Appellant, v. JOHN SWALLOW, Vinetta Cozad, J. C. Cozad, Respondents
• Court: South Dakota Supreme Court

69 SD 558, 12 NW2d 808 (1944)

FRED C. STOTTS, Appellant v. JOHN SWALLOW,

Vinetta Cozad, J. C. Cozad,

Respondents

South Dakota Supreme Court

Appeal from Circuit Court, Bennett County, SD

Hon. J. R. Cash, Judge.

#8539—Reversed

Davenport, Evans & Hurwitz, Sioux Falls, SD

Attorneys for Appellant

W. J. Hooper, Gregory, SD

Attorney for Respondents

Opinion filed Jan 19, 1944

ROBERTS, J.

This is an action to determine adverse claims to real property. Prior to December 27, 1939, Vinetta Cozad was the owner of the property in controversy. On that date, she and her husband, J. C. Cozad, conveyed the property by quitclaim deed to H. B. Cherry. At the time of the execution of the deed the following agreement was entered into

“The attached envelope contains a Quit Claim deed to the premises described as Lot (15) Fifteen in Block (8) Eight Original town of Martin, So. Dak. Such deed running from H. B. Cherry and Marion Cherry, grantors to LaVerne Pike. The deed and envelope is deposited with David F. Heffron, Attorney

With instructions that upon the payment to the said Heffron of the sum of $360.00 by LaVerne Pike then the said envelope and deed shall be delivered to LaVern Pike and delivery of the deed made. That such payment may be made at any time on or before the lst day of September, 1940, but, not later. If and in the event the said LaVerne Pike shall fail to pay such sum of $360.00 to the said Heffron by the said lst day of September, 1940, then and in that event the said Heffron shall return such envelope and deed to H. B. Cherry

It is agreed that J. C. Cozad or Vinetta Cozad shall have the right to use and occupation of such premises and to its rents and profits until September 1st, 1940.

Time shall be of the essence of this contract and Sept. 1st, shall expire as of midnight that day

Dated December 27th, 1939

H, B. Cherry, Selle

LaVerne Pike, Buye

David Heffron, Escrow holder.”

This agreement duly acknowledged and the quitclaim deed to H. B. Cherry were filed for record on December 28, 1939.

On February 24, 1941, H. B. Cherry sold, and by quitclaim conveyed, the property to plaintiff Fred C. Stotts. The trial court found that the conveyance from the Cozads to Cherry, though a deed in form, was in fact a mortgage; that LaVerne Pike, daughter of the Cozads, “was to take title to said property solely for the benefit of her mother”; that the value of the property greatly exceeded the amount of the consideration paid by plaintiff for the property; and that at the time plaintiff “took his deed to the premises ... he had notice of defendants’, Vinetta Cozad and J. C. Cozad, interest in and to the said premises and the agreement which had been executed.” Plaintiff appeals from the judgment contending that the findings of the court are not supported by the evidence.

It is the claim of plaintiff that the agreement referred to was simply an option on the part of LaVerne Pike to purchase the property within a specified time and she having failed to exercise the option within the stipulated time, the contract was thereby effectually terminated. Defendants contend that the deed and this instrument were executed at the same time and as one and the same transaction and that the deed to Cherry was intended by the parties as mere security for money loaned by him to the Cozads for the purpose of paying taxes that had accrued against the property. A conveyance, though in form a deed, intended and understood by the parties thereto to be security for the payment of an indebtedness, is a mortgage and the parties thereto have the rights and remedies of mortgagor and mortgagee. SDC 39.0202, 39.0203.The fact, however, that an absolute conveyance is accompanied by an agreement that the grantor may repurchase the property within a given time will not in itself suffice to constitute the deed a mortgage. Thus, in Henley v. Hotaling, 41 Cal. .22, in discussing the rule regarding the determination whether a deed absolute on its face, accompanied by a contemporaneous agreement to reconvey or option to repurchase, is a mortgage or conditional sale, the court said: “There can be no question that a party may make a purchase of lands either in satisfaction of a precedent debt or for a consideration then paid, and may at the same time contract to reconvey the lands upon the payment of a certain sum, without any intention on the part of either party that the transaction should be, in effect, a mortgage. There is no absolute rule that the covenant to reconvey shall be regarded either in law or equity, as a defeasance.” The character of a mortgage attaches only when the deed was intended as a form of security. In determining whether the transaction as between the parties and those having notice constitutes a mortgage or conditional sale, the intention of the parties is controlling and the rule is definitely settled that such intention may be ascertained from the written memorials of the transaction and the attendant facts and circumstances. Wilson v. McWilliams, 16 SD 96, 91 NW 453; Bernardy v. Colonial & United States Mortg. Co., 20 SD 193, 105 NW 737; Krug v. Kautz, 21 SD 461, 113 NW 623; Warren et al. v. Lincoln et al., 58 SD 196, 235 NW 597.

The deed from the Cozads to Cherry contains no defeasance. The so-called escrow agreement makes no mention of this deed. There is no mention in these instruments of a debt and there is no indication therein that the transaction was an equitable mortgage. Plaintiff contends that because the record gave no notice that the deed to Cherry was in fact a mortgage, the deed from the grantee in such conveyance to a subsequent purchaser without actual notice conveyed the legal title. SDC 39.0307 (§ 1575, R. C. 1919) provides: “When a grant of real property purports to be an absolute conveyance, but is intended to be defeasible on the performance of certain conditions, such grant is not defeated or affected as against any person other than the grantee, or his heirs, or devisees, or persons having actual notice, unless an instrument of defeasance, duly executed and acknowledged, shall have been recorded in the office of the register of deeds of the county where the property is situated.”

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