Hopper v. Smyser

Pearce, J., delivered the opinion of the Court. This record presents cross-appeals from two decrees of Circuit Court No. 2, of Baltimore City, and all the questions arise upon four conveyances of real estate from Harrison Hopper to Henry A. Smyser, as follows : 1st. A deed of August 15th, 1890, for certain Baltimore City property in consideration of $3,500. 2nd. A deed of August 20th, 1890, for thirty-five acres of land in Baltimore County, designated as Garrison Forest, for five dollars and other valuable considerations. 3rd. A deed of August 22nd, 1890, for the Waverly lots in Baltimore County, for five dollars and other valuable considerations. 4th. A deed of August 28th, 1890, for a farm in Harford County, called the Callahan farm, for five dollars and other valuable considerations, subject to a mortgage for $5,000 previously made by Hopper to Isaac S. George upon this, and four other properties, known as Harford Avenue, Silverwood, Montreal, and the above-mentioned Waverly lots. When these conveyances were made Hopper was indebted to Smyser upon a certain bank-account kept by Smyser, *376 with him, in the sum of $6,213.90, as Smyser claims, oras Hopper claims, in the sum oí $5,187.50. Smyser also claims that Hopper was further indebted, to him at that time in the sum of $3,119.33, being one-half the profits of an oyster business carried on by Hopper and Smyser in 1881 and 1882, but Hopper claims that these profits had been long since settled. The respective contentions°as to these conveyances are as follows : Hopper claims that they all constitute one transaction, and were made, in his own language, “ to secure any difference that might be between them’’ and for no other consideration or purpose. Smyser claims that the Baltimore City and Garrison Forest properties covered by the first and second deeds, were absolute purchases for full value, fully paid, but admits that the Waverly lots and the Callahan farm, covered by the third and fourth deeds, were conveyed inpayment of Hopper’s indebtedness to him at that time, with the privilege of repurchase upon the repayment of the same amount, and declares that he is now, and always has been, ready to reconvey upon these terms. Smyser filed a bill in equity against Hopper and George alleging that he purchased the Waverly lots with special warranty from Hopper, and upon the understanding and agreement with him that Hopper should discharge the George mortgage, without which he would not have made the purchase, but that George refused either to release said Waverly lots from his mortgage or to assign the same to Smyser upon payment by him, but was ready to assign the same upon payment, either to Hopper or anyone he should name, and the prayer of the bill was that George should be restrained from assigning his mortgage to anyone pending that proceeding, and that the other properties covered by the mortgage, might be sold in exoneration of the Waverly lots, unless George should release the same. Answers were filed and it was agreed that Hopper’s answer should be treated as a cross-bill praying for an accounting between the parties, and a reconveyance of the property conveyed by Hopper *377 to Smyser, and that decree might be made according to the proof. Testimony was taken, and the Court on March 25th, 1898, decreed the Waverly lots be exonerated from the George mortgage, provided the other properties covered by the mortgage should sell for sufficient to pay the mortgage debt, and that if not sufficient, then the Callahan farm should be sold before the Waverly lots, that in any event the Callahan farm must contribute to the payment of the George mortgage rateably with the other properties according to their respective values ; and that the conveyances of the Callahan farm and the Waverly lots were conditional sales, and not mortgages. The decree directed the auditor to state an account of Hopper’s indebtedness to Smyser at the date of the conveyances, and to report the profits realized by Smyser in the purchase and subsequent sale by him of the Baltimore City and Garrison Forest properties, and the amount due on the George mortgage. All other matters were reserved for the future decision of the Court. From this decree both parties appealed, but neither party sent up the record. The auditor filed three accounts, A, B and C : Account A showed Hopper’s indebtedness to Smyser on the bank-book to be on August 28th, 1890...........$6,213 19 And on the oyster business at the same date . $3,119 33 $9,332 52 Account B showed Smyser’s profit on the Baltimore City and Garrison Forest to be . . $1,775 51 And Account C showed amount due on George mortgage April 9, 1898, to be.....$5,300 00 Hopper excepted to all these accounts, pleading payment and the statute of limitation to the item of $3,119.33, and claiming credits of $1,026.40 upon the bank-account as allowed by the auditor. To account B he excepted because it did not allow certain items which would increase Smyser’s profits from $1,775.51 to $2,973.68. To account *378 C he excepted because it only ascertained the amount due on the George mortgage at the date of that account, and not the amount due at the date of the conveyance, together with the interest since paid thereon and the expenses incurred to prevent foreclosure by George, for all of which he claims the Callahan farm is liable to contribute. The Court on January 26, 1899, decreed that the conveyances of th'e Baltimore City and Garrison Forest properties were absolute and independent sales for considerations then paid, and that the claim for any profits therefrom be disallowed, thereby eliminating account B from its further consideration. It overruled Hopper’s exception to account C and ratified the same, saving as between Hopper and Smyser their contribution to the George mortgage as thereafter directed by that decree. It sustained Hopper’s exception to the item of $3,119.63 as barred by limitation, or if not so barred, as a stale claim, and ndt satisfactorily shown to have been in the contemplation of the parties as part of the debt to be paid. All Hopper’s other exceptions to account A were overruled, and the same as modified was ratified, the decree declaring $6,213.19 to be the indebtedness from Hopper to Smyser, August 28, 1890, for which the Callahan farm and the Waverly lots were conveyed to him, and ordering that upon payment of said sum by Hopper within thirty days from that date, Smyser should reconvey said properties to Hopper at his cost, and that on Hopper’s failure to comply with said order he should be forever barred from the right to repurchase, but that the Callahan farm in that event should contribute to the payment of the George mortgage, as of August 28, 1890, with the other three properties covered thereby, in proportion to the valuations fixed thereon by the decree: From this decree, and from all previous decretal orders passed in the cause both parties have appealed. So much of the decree of March 25th, 1898, as exonerated the Waverly lots from the George mortgage until the exhaustion of the other mortgaged properties, is in the *379 nature of a final decree, and such orders and decrees were held in Tome v. Stump, 89 Md. 264, not to be open for revision under sec. 26 of Art. 5 of the Code, but only on appeal directly therefrom under sec. 24 of Art. 5. We cannot therefore now consider that question. But if we could do so we should be compelled to affirm that part of the decree, because it is too well settled to require the citation of authorities that where one person has a lien upon two or more pieces of property, and another has a lien but upon one of these pieces, the first lienor will be compelled in equity first to exhaust those pieces not covered by the lien of the second lienor; and that where one creates a mortgage upon several pieces of property, and subsequently conveys his equity of redemption in one of these pieces, retaining his equity in the others, the equity of redemption conveyed cannot be sold by the mortgagee until that retained by the mortgagor has been exhausted. This case does not fall within the exception mentioned in Burger v. Greif, 55 Md. 528, where the purchaser’s liability to pay part of the mortgage debt forms part of the consideration, nor do we perceive anything in Nat. Savings Bank v. Creswell, 100 U. S. 630, to prevent the application of the principle to which we have alluded. The other matters determined by the decree of March 25th, 1898, which directed the statement of accounts to make the decree effective, are of course open for revision here under sec. 25 of Art. 5 of the Code, together with the matters determined by the decree of January 26, 1899. The questions we are to decide may be stated thus : 1st. Were the conveyance of the Baltimore City and Garrison Forest properties absolute and independent sales, or do they stand on the same basis as the Waverly lots and the Callahan farm ? 2nd. Were the conveyances of the Waverly lots and the Callahan farm conditional sales, or mortgages ? 3rd. What was Hopper’s indebtedness for which the Waverly lots and the Callahan farm were conveyed ? *380 4th. Must the Callahan farm contribute rateably with the Harford avenue, the Silverwood, and the Montreal properties, to the payment of the George mortgage, and if so, upon what basis ? We will consider these questions in the order in which they are stated.. 1st. The conveyances of-the Baltimore City and the Garrison Forest properties, though not set out in full in the record, are described therein as absolute deeds upon their face for valuable and full considerations. These conveyances are attacked by Hopper in the answer which is treated as a cross-bill, and his effort is to establish by parol, an express trust in the face of the Statute of Frauds pleaded by Smyser. We may say here, as was said in Kidd v. Carson, 33 Md. 42 : “It is not alleged that this deed is different in form and character from what the parties intended at the time of its execution. On the contrary, it is admitted to be just such a deed as they intended to make. * * * To enforce the agreement set up here would be to change the character of the deed drawn up and executed as the parties intended it and to set up a conventional trust on the foundation of a special parol agreement. This cannot be done.” But if it could be done, it would be incumbent upon Hopper to establish the agreement by satisfactory proof, and in this it is proper to say we think he has failed. He says he owed Smyser a considei-able sum which both parties were anxious to have paid, and then he says, “ I suggested to him the delivery to him of these two deeds (for the Callahan farm and Waverly lots) and not one cent of consideration passed. I gave them to him to secure the old indebtedness.” He had previously admitted that Smyser paid $3,500 for the Baltimore City property, of which $2,000 was applied to his debts assumed by Smyser,. and he received $ 1 ¡500 ; also that Smyser had paid $2,500 for Garrison Forest, of which $1,475 was applied to alien created by him thereon, and that he received $975. It is most significant that he should thus confine this declaration *381 to the ¿así two deeds, and it is impossible to believe that if all these conveyances had been made for the purpose claimed by Hopper, Smyser would not have applied these sums of $1,500 and $975 to Hopper’s indebtedness instead of handing it over to him. Upon every view of this branch of the case we are of opinion the Circuit Court was correct in declaring these two conveyances to be absolute and independent sales. 2nd. The material distinctions between a conditional sale and a mortgage, are that in the first there is no right of redemption in the vendor after the expiration of the time fixed for payment of the stipulated price, while in the other, the right of redemption continues until sale actually made under decree, or until twenty years after strict foreclosure ; and that in the first there is not, and in the latter there is, a continuing personal liability for the amount named as the consideration of the conveyance. It is often difficult to draw the line between a mortgage and a conditional sale. ‘ ‘ The intention of the parties is the only true and infallible test, and this intention is to be gathered from the circumstances surrounding the transaction, and the conduct of the parties.” Jones on Mortgages, sec. 258. “ The inquiry is, and always must be, whether the contract in the particular case, is a clear actual sale, or a security for a continuing debt.” Dougherty v. McColgan, 6 G. & J. 281. If the relation of debtor and creditor exists when the conveyance is made, and this relation is regarded as subsisting after the conveyance is made, the transaction will be regarded as a mortgage; but if the debt is treated as extinguished, and the vendor has the privilege merely of refunding the price, the transaction is a conditional sale. With these principles in view, we find that Hopper says he wanted the notes paid, and made the deeds for that purpose ; that Smyser was to sell the property, retain the amount due at the date of the conveyances, and the surplus was to revert to him. Smyser says: “When I purchased the property, Mr. Hopper thought it was worth *382 more than he owed me, and I then told him I would give him the privilege of paying what he owed me, and I would deed the property back.” These declarations certainly comport better with a conditional sale than with a mortgage, and the conduct of the parties points to the same conclusion. . Had the transaction been intended as a mortgage, the natural course would have been for Hopper to retain some possession or control of the property, to select the tenants, determine improvements, collect the rents, and pay interest on the debt, and taxes on the property. But he did none of these things. On the contrary we find Smyser exercising all the rights of absolute owner—selecting tenants, paying taxes, repairing fences, making improvements, and even purchasing a road as a better outlet from .the farm, and keeping no account of receipts as the basis of a future accounting with Hopper. There is no evidence of any recognition by either party of any subsisting debt, Hopper neither paying, nor offering to pay, either principal or interest, and Smyser making no demand for either. What was .said by Chief Justice Marshall in the leading case of Conway v. Alexander, 7 Cranch 218, is precisely in point here: “An action at law for the recovery of the money certainly could not have been sustained, and if, to a bill in chancery praying a sale of the premises and a decree for so much as might remain due, Robert Alexander had answered that this was a sale, and not a mortgage, clear proof to the contrary must have been produced to justify a decree against him.” We are, for the reasons indicated, of opinion that these two conveyances were conditional sales. 3rd. As to the amount of Hopper’s indebtedness to Smyser, which formed the consideration for these two conveyances, we think the decree was correct. Upon Hopper’s examination-in-chief, he was asked if he had examined the bank-book, which showed an indebtedness thereon of $6,213,90, and if so, what he had to say as to the correctness of the various charges and credits therein, and to point out *383 any erroneous or irregular items, and he distinctly admitted that that account was correct, except the Ijams note of $125, which he says was never paid. But Smyser on his cross-examination states positively that he paid this note. Smyser’s testimony, being supported by the bank-book, must prevail over Hopper’s testimony which is contradicted thereby and is not otherwise confirmed. Without considering whether the sum of $3,119.33, allowed by the auditor as profits from the oyster business, had been settled, as claimed by Hopper, we thinkt his exception thereto was properly sustained. This claim dated back to 1882 or 1883, and was open to the plea of limitations four years before the making of these conveyances. It is true that Hopper says the conveyances were made to secure “any indebtedness that might be between us,” and That Smyser says that he took this item into account in estimang Hopper’s indebtedness at that time, but he does not say that Hopper knew he took this into account. Hopper testifies that it was never mentioned between them for fourteen or fifteen years before the taking of the testimony in this case, and Smyser was not recalled to rebut this. Indeed his testimony leads us to infer that the last time he mentioned the subject to Hopper was in 1883, when he asked him to put it on the bank-book, but could not get him to do it. We cannot find in the record any satisfactory evidence that this item was then within the contemplation of Hopper as the bank-account clearly was, and if not within his contemplation, the execution of these conveyances cannot remove the bar of the statute. 4th. This brings us to the last question presented, the liability of the Callahan farm to contribute to the George mortgage, and this depends upon the effect'to be given to the covenant of special warranty in the deed from Hopper to Smyser, which covenant immediately follows the habendum. Counsel for Smyser contends that the covenant of warranty binds Hopper to pay the mortgage, because it is not expressly excepted in the covenant itself from the opera *384 tion of the covenant, and he has cited certain passages from Jones on Mortgages and Razvle on Covenants for Title, as well as certain decisions, which at first sight give some color to his contention; but without pausing to analyse these authorities and to determine how far they do in fact sustain him, we are of opinion that our own decisions are clearly adverse to his contention, and that these decisions correctly announce the law upon the subject. In Zittle v. Weller, 63 Md. 190, the Court says on page 198 : “There is a covenant of warranty in the deed, and for further assurances, but these covenants can only relate to and operate to assure the interest and estate which is described as conveyed'In the subsequent case of Second Universalist Society v. Dugan, 65 Md. 460 ; the Court said : “The covenant is to be construed with reference to the estate and interest which is described as conveyed ; and which the habendum clause limits ; and the obligation to assure, which is thereby enacted, can, and should only be held to be an obligation to assure the precise estate 'granted in the deed and nothing more. Being co-extensive with the estate granted, it ceases when that ceases. This was the view maintained in Zittle v. Weller, 63 Md. 190. No authority is there cited, but abundant authority exists. In 2 Coke Littleton, 385b, it is said 'a warrantie of itsself cannot enlarge an estate’ * * The same statement of the law is made in Sheppard's Touchstone vol. 1, 182. In Rawle on Coveiiants for Titles, p. 415, it is said to be a familiar principle that warranty will not enlarge an estate. Warranty is a defence and nota title.” There is no conflict between this decision, and that of Winter v. Gorsuch, 51 Md. 180; where the habendum was declared void because it cut down to a life-estate the absolute and unqualified interest given by the premises. In this case the habendum has no such effect. The estate of inheritance granted by the premises is not cut down by the habendum. The inheritance is charged with its proportion of the George mortgage, but it is none, the less an inheritance : ño changé is worked in the character or quality of the estate by the *385 terms of the habendum, and there is no repugnance unless the habendum divests the estate granted and substitutes some other estate therefor. (Decided January 9th, 1900). Apart from the effect of the habendum and the covenant of warranty, we cannot find sufficient evidence of an agreement by Hopper to pay this mortgage. Smyser’s testimony that Hopper did agree to pay it, not being excepted to, is in this case and must be allowed its full force (Gibbs v. Gale, 7 Md. 76); but it is flatly denied by Hopper, and the deed is in accord with his statement. It was argued, however, that Hopper’s continued payment of the interest on this mortgage is a recognition of his liability under the alleged agreement; but we cannot give such far reaching effect to this conduct. That mortgage covers other valuable property of Hopper’s, and his payment of the interest may well have been made to prevent a sale of the other property. We deem it unnecessary to prolong this opinion by any inquiry into the valuation put upon the Callahan farm for the purpose- of determining its contribution to the mortgage. There is a wide divergence among the witnesses as to its present value but there is a substantial concurrence that it was worth from $40 to $60 per acre in 1890, and we therefore think the Court’s valuation reasonable and fair to all parties. Both decrees of the Circuit Court No. 2 are affirmed, and the costs in that Court and also in this Court will be equally divided between the appellant and the appellee. Decree affirmed.