Worley v. Carter

• Decision Date: 09 January 1912
• Citation: 121 P. 669,30 Okla. 642,1912 OK 86
• Parties: WORLEY v. CARTER et al.
• Court: Oklahoma Supreme Court

121 P. 669

30 Okla. 642, 1912 OK 86

WORLEY v. CARTER et al.

Supreme Court of Oklahoma

January 9, 1912

Syllabus by the Court.

A deed absolute in form is, in fact, a mortgage, when given to secure the payment of money, even though the parties may have agreed that, upon default in payment within a fixed time, the deed should become absolute.

Although a deed may be absolute on its face, if given merely as a security for debt, and is so intended by the parties, it will be held to be a mortgage, with the right of redemption.

Where a deed absolute on its face is given in security for a debt and an agreement is entered into by the parties that the grantee shall execute a reconveyance, conditioned upon the payment by the grantor of the debt secured, and the deed and agreement are of the same date and parts of one transaction they will be deemed to be a mortgage, with all the qualities and incidents that attach thereto.

Whether any particular transaction amounts to a mortgage, or a sale upon condition, or with agreement to reconvey upon a contingency, is to be determined by ascertaining whether the transaction was intended as a loan. If there remains a debt for which the conveyance was only a security, and the collection of which may be enforced independently of the security, the whole transaction amounts to a mortgage whatever language the parties may have used in expressing their agreement. In such cases, it matters not that the transaction is evidenced by one or more instruments, or what the writings may or may not show, if, nevertheless, the agreement in fact exists. The real intention of the parties either as shown upon the face of the writing, or as disclosed by extrinsic evidence, must govern in equity.

Under the testimony, an instruction which charged the jury that, if they found from the evidence that a deed was executed for the purpose of securing an indebtedness, and that it was further understood and agreed by the parties that, if the debtor failed to repay the indebtedness within a time fixed, then, and in that event, the indebtedness was to become absolute, and the property to become that of the grantee, and payment was not made within said time, the jury should find in favor of the grantee in said suit constitutes reversible error, as it would in effect deprive the debtor of its equity of redemption.

Commissioners' Opinion, Division No. 1. Error from District Court, Coal County; A. T. West, Judge.

Action by T. A. Worley, receiver of the Citizens' Bank of Owl, against Mrs. R. E. Carter and others. Judgment for defendants, and plaintiff brings error. Reversed and remanded.

Winfield S. Farmer, for plaintiff in error.

D. H. Linebaugh, for defendants in error.

SHARP C.

On June 18, 1906, acting through its officers, the Citizens' Bank of Owl, Ind. T., executed and delivered to J. W. Craine a warranty deed to lots 1 and 2 in block 38, in the town of Owl, Ind. T., now Centrahoma, Okl.; the deed reciting a cash consideration of $4,000. On April 3, 1907, plaintiff in error was, by the United States Court in and for the Central District of Indian Territory, appointed receiver of the bank. On May 6, 1907, the grantee in said deed, J. W. Craine, died intestate, and T. W. Tyler was duly appointed administrator of his estate.

This suit is brought to recover possession of the premises and for the cancellation of the above-mentioned deed. According to the issues joined in the pleadings, the question for determination was whether or not the transactions of June 18, 1906, were intended as a sale or as a mortgage to secure an indebtedness. To sustain the issue that the deed was given merely as a security for a debt, plaintiff introduced H. W. Beard, a director, John W. Beard, president, and D. A. Spears, cashier of the bank; also W. F. Weaver, a merchant who had formerly occupied the stores situated on the lots in controversy, and John Vincent, a notary public. The defendants offered no testimony. We have read the record with care, and there can be no doubt, if the testimony is to be believed, that the giving of the deed by the bank was intended merely as a security for a loan of $1,000, to be repaid by the bank in 60 days.

That the witness D. A. Spears was guilty of reprehensible conduct in procuring the notary public, Vincent, to take the acknowledgment to the contract in January, 1907, there is little room for doubt; but from other testimony it appears that an instrument was originally signed and acknowledged before E. P. Boland, a notary public, which was of like tenor and effect, if not the same, as the second. Therefore the testimony of Spears is of secondary importance only. The minutes of the directors' meeting, while undated, recite the conditions upon which the deed was executed by the bank to Craine, and are, in part, as follows: "After going over the condition of the bank, it was decided that it would be necessary to secure some money to run the bank successfully during the summer months, and Mr. Craine agreed to furnish some on the following conditions: For a deed to be made to the lots on which the brick building now stands, and for him to furnish $1,000 and to give a contract for deed and the deed to be placed in escrow to be placed on record when the money was paid back. Be it resolved, that the directors of the Citizens' Bank of Owl do hereby execute a deed to J. W. Craine to lots one and two in block 38 in the city of Owl, Ind. Ter., for a consideration of $4,000. This deed is to be considered as a mortgage for the sum of $1,000, this amount being borrowed from said Craine for a period of sixty days at ten per cent. interest. Said Craine is to give a contract for deed to the Citizens' Bank of Owl, Ind. Ter., and said deed to be executed and delivered to said bank on the payment of the $1,000, with interest, to the said Craine by the said bank."

That a note for $1,000 and a contract were executed on the same day with the deed is clearly established. The conduct of the witness Spears is not to be easily condoned; but his testimony finds support in that of the witnesses H. W. Beard, John W. Beard, W. F. Weaver, and John Vincent, the minutes of the directors' meeting, and the other facts and circumstances surrounding and comprising the entire transaction.

That a deed absolute on its face, if given merely as security for a deed, and intended by the parties as such, will be held to be a mortgage, with the attendant right of redemption, is a rule so well established that a citation of authorities is hardly necessary. Porter v. Clements, 3 Ark. 364; Johnson's Executors v. Clark, 5 Ark. 321; Blakemore v. Byrneside, 7 Ark. 505; Rushton v. McIlvene, 88 Ark. 299, 114 S.W. 709; Wiswell v. Simmons et al., 77 Kan. 622, 95 P. 407; Weiseham v. Hocker, 7 Okl. 250, 54 P. 464; Balduff v. Griswold, 9 Okl. 438, 60 P. 223; Yingling v. Redwine, 12 Okl. 64, 69 P. 810; Wagg v. Herbert et al., 19 Okl. 525, 92 P. 250; 12 Cur. Law, 881. Pomeroy on Equity Jur. art. 1196; Warvelle on Vendors, p. 801; Tiffany on Real Property, art. 512.

In reaching a conclusion as to whether or not a given transaction amounts to a mortgage or a sale, the question to be ascertained is that of the real intention of the parties, either as shown on the face of the writings, or as disclosed by extraneous evidence. In the instant case, if we believe the testimony, the relation of debtor and creditor between the bank and Craine was created--not that of vendor and vendee. The subsequent conduct of the parties goes far to show that Craine understood that the deed was given only as a security for the loan of the $1,000. He made no effort to take possession of the property described in the deed until on or about November 1st following, during which time the bank collected the rent from the occupants of the building. That Craine afterwards collected the rent and asserted his rights in the premises was due, as appears from the testimony, to the fact that the bank had failed to pay the note; and that therefore he (Craine) was of the belief that he was entitled to take charge of the property and collect the rents. This conclusion is irresistible, as shown by the undisputed testimony of the witnesses Weaver and Vincent.

Among other instructions given, and to which exceptions were saved was the following: "If, however, you find that the deed in question, executed by the Citizens' Bank of Owl to John W. Craine, was executed for the purpose of securing an indebtedness due to said John W. Craine, but it was further understood and agreed by and between them that if the parties would repay this indebtedness within a certain length of time, and in the event of their failure to do so the deed was to become absolute, and the property was to become the property of the said John W. Craine, and you further find that the Citizens' Bank of Owl did not comply with said agreement, and did not pay the money that they borrowed or received from John W. Craine, within the time specified, then you will find in favor of the defendants for the property." There is no testimony in the record to warrant the giving of this instruction. The transaction constituted either a sale outright of the lots, or a mortgage thereof. A mortgage and a conditional sale differ materially; the latter is not a security for money, while the former is. "A conditional sale is not a security for money, but is what its designation imports, namely, a sale in good faith, and a sale on condition that the vendor may repurchase on certain terms, which must be strictly complied with. Of course, therefore, no equity of redemption is incident to such a sale, because, as it is not the design of the transaction to secure the payment of money, a court of equity has no ground to say the substantial object can as well...