Thomas v. Board of Sup'rs of Holmes County

• Decision Date: 28 April 1890
• Citation: 67 Miss. 754,7 So. 552
• Court: Mississippi Supreme Court
• Parties: ADELINE THOMAS v. BOARD OF SUPERVISORS OF HOLMES COUNTY

7 So. 552

67 Miss. 754

ADELINE THOMAS v. BOARD OF SUPERVISORS OF HOLMES COUNTY

Supreme Court of Mississippi

April 28, 1890

FROM the circuit court of Holmes county, HON. C. H. CAMPBELL Judge.

The opinion states the facts.

Judgment reversed.

Hooker & Wilson, for appellant.

There is no hint in the record that the parties to the contract intended to fraudulently evade the payment of any taxes. The sole evidence in the case shows that the transaction was intended to be a sale with right to repurchase. We therefore will discuss the contract as it appears on its face and in the light of the evidence.

That the instrument was not intended as a mortgage, clearly appears.

1. The lands were not worth more than the purchase price.

2. The essence of a mortgage is that it is a security for a debt which the grantor remains under a legal obligation to pay and where no such legal obligation exists, an agreement to reconvey will not be deemed a mortgage but a privilege to repurchase. Hoopes v. Bailey, 28 Miss. 328; Magee v. Catching, 33 Ib. 672; Klein v McNamara, 54 Ib. 90. A continuing and subsisting debt must be shown. 1 Jones on Mort., 269, et seq.; 1 Dev. [N. C.] Eq., 373; 8 Tex. 389; 5 Wait, A. & D. 550; 2 Ib., 168; 26 Ala. 312; 29 Ib. 254; 2 Yerg. 215; 4 Jones Eq. [N. C.] 349; 2 Barb. 28. If the instrument extinguishes the debt, it is a sale notwithstanding the right to redeem. Am. & Eng. Encyl. Law, 425, citing 3 Pa. 208; 52 Vt. 32; 65 N.C. 520; 41 Mich. 488; 13 Vroom, 476; 30 Tex. 332; 46 Wis. 660; 29 Ala. 254; 31 N.Y. 542; 16 Iowa 234; 26 Col. 514; 44 Mo. 429. If the exercise of the right to repurchase is optional with the grantor, and cannot be compelled by the grantee, there is no mortgage. 7 Cranch, 218; 60 Ala. 417; 8 Tex. 389; 18 Wend. 518.

3. The fact that the price to be paid and the value of the land are about the same is indicative of a sale.

4. While it is a circumstance tending to show the contract a mortgage, that interest on the price is to be paid, this is not conclusive. 1 Jones on Mort., 273. In this case neither the principal nor the interest was a legal obligation. The interest was paid for the continuing right to repurchase at a fixed price. Keirn did not avail of this option, but waived his right to repurchase. He owed Thomas no more immediately after making the contract than he does now. He owes nothing now, and owed nothing then.

5. The action of the board of supervisors causes a double taxation, as the land has been taxed and the taxes paid.

6. A sale will be held conditional where the vendor reserves the right to resell on the buyer's default. 2 Benj. Sales, 806; Lamond v. Davall, 9 Q. B. 1030 [58 E. C. L.]. It would be equally true where the power reserved is the power to repurchase within a time which is fixed and limited.

7. The notes of Keirn bearing ten per cent. interest were cancelled, and other land secured by the mortgage was released, and the interest to be paid, if he wished to keep alive his option to repurchase, was at the rate of six per cent. This shows that the debt was not kept alive, but that a sale with a right to repurchase was intended.

C. V. Gwin, for appellee.

The form of the conveyance is immaterial, as it is obvious that its legal effect is to secure the payment of money--the repayment of a principal sum, and annual interest thereon at the stipulated rate of six per cent. The true inquiry is, what was the subject-matter of the negotiation between the parties?

The terms, stipulations and provisions of the instrument preclude the idea that a purchase and sale was intended, and make it plain that the use of money and the security for the payment thereof was alone treated of by the parties. The effect of the transaction was to continue the old debt due to Thomas, and enable him to make a further and additional investment, perfectly secured, by taking up the debts against Keirn in the hands of other persons, and to consolidate the debts in his hands as sole creditor.

While it is true that a debt or the performance of a duty is the basis of a mortgage, it is by no means true that there must be a personal liability for the payment of the debt or performance. The debt or duty may, and often does exist only as against the thing mortgaged. 1 Jones on Mort., 70, 272, 273.

In this case the grantor retained possession, paid taxes, and interest eo nomine was annually to be paid. It is more difficult to conceive of interest without a debt than of a mortgage without personal liability. See 1 Jones on Mort., 242-246; 35 Am. Dec. 356; 20 Ib. 145; 27 Ib. 346; 23 Ib. 722; 50 Ib. 196; 55 Ib. 779; 6 Watts, 405; 3 Tex. 1.

In this instrument nothing appears to indicate an intent to make a conditional sale in substance and in fact. In a contest between Keirn and Thomas no court would hesitate to decide that the former had the right to redeem. The technical term redeem is used by them. The stipulations in the instrument are such as are incident to every mortgage. 1. The grantor retains right of possession, and pays nothing for the use of the land. 2. He assumes to pay taxes and assessments. 3. He paid annual interest on the debt against his land. 4. The right was reserved not to buy back the land, but to redeem it.

Public policy demands that the state's revenues be protected from fraud and evasions, and forbids that one should put his money out at interest, take security for its payment and evade just taxation by calling the security a conditional sale.

The instrument in this case being a security, the money secured was properly assessed for taxes under 497, code 1880.

OPINION

COOPER, J.

This is a controversy between the board of supervisors of Holmes county and appellant touching the liability of appellant to be assessed and pay taxes for the years 1884, 1885, 1886 1887 and 1888 on the sum of $ 46,071.05, which the board contends she owned as personal property during such years. The facts are, that prior to the year 1884 one Keirn was indebted to William S. Thomas, the husband of appellant [who is now dead, leaving her his sole heir-at-law and distributee], in a large sum of money, the payment of which was secured by a mortgage on a large body of lands in Holmes county. Keirn was also indebted to many other persons whose debts were secured by mortgages on other lands. On the 17th of May, 1884, an arrangement was entered into between Keirn and Thomas by which Thomas surrendered and cancelled the notes he then held against Keirn, and assumed the payment of a note of $ 6181.25 due by Keirn to one Jenkins. The sum of the notes surrendered and of that the payment of which Thomas assumed was $ 46,071.05. In consideration of this surrender of his debt by Thomas and of his assumption to pay the debt to Jenkins, Keirn on that day executed a conveyance of a large quantity of lands, being the same lands before that time mortgaged to secure the payment of the notes above mentioned. The conveyance is in usual form in its recital of the consideration paid and the...