Thornley Land & Livestock Co v. Gailey

• Decision Date: 26 November 1943
• Docket Number: 6645
• Parties: THORNLEY LAND & LIVESTOCK CO v. GAILEY et al
• Court: Utah Supreme Court

143 P.2d 283

105 Utah 519

THORNLEY LAND & LIVESTOCK CO v. GAILEY et al

No. 6645

Supreme Court of Utah

November 26, 1943

Appeal from District Court, Second District, Davis County; L. v Trueman, Judge.

Suit by Thornley Land & Livestock Company against John R. Gailey sometimes known as J. R. Gailey, and others, to have a quitclaim deed declared a mortgage, and for other relief. From a judgment of non-suit and dismissal, plaintiff appeals.

Affirmed.

Thomas & Thomas, Judd, Ray, Quinney & Nebeker, and Thornley K. Swan all of Salt Lake City, for appellant.

Howell, Stine & Olmstead, of Ogden, and Fabian, Clendenin, Moffat & Mabey, of Salt Lake City, for respondents.

LARSON Justice. McDONOUGH, MOFFAT, and WADE, JJ., WOLFE, Chief Justice, concurring.

OPINION

LARSON, Justice.

Plaintiff filed suit in the district Court of Davis County to have a certain quitclaim deed executed by it declared a mortgage, asking an accounting, and offering to pay such sum as the accounting showed still due and owing to defendants. At the close of plaintiff's case, the court granted a non-suit, and dismissed the action. Plaintiff appeals.

In 1936, plaintiff was the owner of the lands in question, subject to certain mortgages originally given to persons not here involved. Defendant Gailey became the owner of such notes and mortgages. October 24, 1936, plaintiff executed to defendant Gailey a quitclaim deed to the land and at the same time an agreement hereinafter set out was executed between plaintiff and Gailey. Gailey went into possession of the land, received the rents and profits therefrom, and paid the taxes. This situation continued without protest from plaintiff until March, 1943, when plaintiff tendered payment of the amount of the original mortgage indebtedness, and demanded a reconveyance of the land from defendant. Upon refusal of defendant to reconvey, suit was filed to have the deed declared a mortgage and to redeem therefrom. The defendants admit the execution of the deed and the agreement, but contend that the transaction between the parties was one of conveyance of the land in satisfaction of the mortgage indebtedness; and that by the agreement plaintiff was given an option to repurchase the land within one year by payment of an amount equal to the mortgage debt, with interest. Upon the agreement, the deed and an agreed statement of receipts and disbursements, plaintiff rested its case. Since the agreement is the only evidence as to the intention of the parties, and the case turns on the interpretation thereof--that is, was it a mortgage or an option to repurchase--we set it out in full:

"Sale Agreement

"This agreement made and entered into this 24th day of October, 1936, by and between J. R. Gailey, hereinafter referred to as party of the first part, and the Thornley Land and Livestock Company, a corporation, hereinafter referred to as party of the second part, both of Kaysville, Davis County, State of Utah.

"Witnesseth:

"Whereas, the second party has this day deeded to the first party the property hereinafter described for the consideration of Forty-eight Thousand, Nine Hundred Eighty Dollars ($ 48,980.00) which sum was owing the first party by virtue of notes and mortgages assigned to him by the Barnes Banking Company, and the Fisher Corporation, and

"Whereas, the first party has agreed to permit the second party to redeem said property upon payment of the amount owing him and to permit the second party to sell all or any part of the property herein mentioned in payment of said obligation.

"Now, Therefore, it is hereby agreed that the second party may within one year from the date of this agreement pay to the first party the sum of Forty-eight Thousand, Nine Hundred Eighty Dollars, ($ 48,980.00), together with interest thereon at the rate of six per cent per annum, and the first party upon receipt of said sum agrees to reconvey to the second party or to such purchasers as it may designate the following described property located in Morgan and Davis Counties, State of Utah:

(Description)

"It is understood and agreed that separate parcels of the property shall not be sold to the disadvantage of the whole, and that the sale price for the separate parcels must be reasonable. In the event of the failure of the parties to agree upon the reasonableness and advisability of selling parcels of said property, the parties shall submit the matter to arbitration upon such terms and conditions as they shall agree upon. All moneys received from the sale of parcels shall be paid over to the first party to be applied upon the obligation owing him.

"In witness whereof the parties have hereunto set their hands and the party of the second party affixed its seal, the date herein above written."

(Signed and Acknowledged)

At first glance, there are some things about the agreement which tend to indicate that it is a mortgage, as for example, use of the word "redeem" which is usually associated with the regaining of some property which has been pledged to secure an obligation, and use of the phrases "upon payment of the amount owing him," "in payment of said obligation," and "to be applied upon the obligation owing him." All of these phrases connote a present and existing obligation, which would be one of the essentials for a mortgage relationship to arise. Also, the payment of interest is an unusual feature if the agreement is one to sell. On the other hand, the agreement itself is denominated "Sale Agreement," and the consideration is referred to as a sum "which was owing the first party by virtue of certain notes and mortgages" (italics added) indicating that the deed was given in payment of the indebtedness, and this agreement is merely an option to repurchase within a year, as contended by defendants.

But does the word "redeem" necessarily import a mortgage, and payment of the debt to regain the property? In Pace v. Bartles, 47 N.J. Eq. 170, 20 A. 352, at page 359, the court in considering this question says:

"That the mere use of the word 'redeem' is not sufficient to make a contract for reconveyance a defeasance is well settled. * * * The word 'redeem' means 'repurchase.' The words are synonyms, and the first has come into use with lawyers, to describe the right of a mortgagor of lands, by reason of the old practice which prevailed in England of making absolute conveyances of lands by way of mortgage, with a covenant to reconvey upon the payment of the debt, an actual reconveyance being made."

To like effect is Cold v. Beh, 152 Iowa 368, 132 N.W. 73, at page 77, where it is said:

"The word [redeem ] has no definite significance. It means to repurchase or to regain, and does not necessarily imply the existence of a valid existing indebtedness." (Bracket added.)

And in Carson v. Lee, 281 Mo. 166, 219 S.W. 629, 632, the court, in considering the same problem presented in the case at bar, said:

"The word 'redeem' was appropriate to express the equitable right left * * * if the instrument was a mortgage made to secure a debt to the grantee, as the word 'purchaser' was the proper designation of the grantee, if the conveyance was pursuant to a sale. Neither word fixes, necessarily, the nature of the instrument, and both have more than one meaning in law. * * * Whereas, 'redeem' is used in a wider sense than retrieving the title to mortgaged land, and as signifying 'to purchase back.'"

Also in Steinour v. Oakley State Bank, 45 Idaho 472, 262 P. 1052, 1055, where the court merely states:

"That title, before it can become available to plaintiff, must be redeemed; and 'redeemed' means nothing less than "bought back' from one who legally holds."

The use of the word "redeem" is not inconsistent with defendants' contention that this is merely an option to repurchase rather than a mortgage. Plaintiff places much reliance on the various references to the "obligation" owing defendant, as going to show a present existing debt. The court in Giesy v. American Nat. Bank of Portland, Or., D. C. 31 F.Supp. 524, 527, made the following observation, quoting from Deputy v. Du Pont, 308 U.S. 488, 60 S.Ct. 363, 84 L.Ed. 416: "although an indebtedness is an obligation, an obligation is not necessarily an 'indebtedness' * * *."

And in Exchange Bank of Denver v. Ford, 7 Colo. 314, 3 P. 449, 450, 451:

"This word [obligation ] has two well-defined legal meanings--one is where it is a name given to the contract itself; the other includes those cases where it refers to the duty imposed upon a person in connection with his contract, to perform it, or to a liability arising from his contract, or from his actionable tortious conduct." (Italics in...