Perry v. Southern Surety Co.

Yasser, J. The defendant is not entitled to reform the contract and the deed for the Wineke Apartment property on the evidence. There is no evidence to support either the allegations of mutual mis *289 take, inadvertence, or fraud. The defendant’s witness, Butler, testified that he read the contract of 11 September, 1923; that a mortgage on the Wineke Apartment property was discussed, but a deed was finally written and recorded. The parties knew the contents of the contract and deed. Nothing was done to prevent a full understanding. Parties are required to exercise ordinary i diligence in executing contracts, and they are fixed with all knowledge that diligence would have disclosed. School Committee v. Kesler, 67 N. C., 448; Floars v. Ins. Co., 144 N. C., 241; Dellinger v. Gillespie, 118 N. C., 739; Newbern v. Newbern, 178 N. C., 4; Griffin v. Lumber Co., 140 N. C., 520; Harvester Co. v. Carter, 173 N. C., 229; Colt v. Kimball, ante, 169. It is also settled, in this jurisdiction, now, that a deed absolute upon its face cannot be converted into a mortgage unless it shall be established that the clause of defeasance was omitted by ignorance, mistake, fraud, or undue influence. Chilton v. Smith, 180 N. C., 472; Gaylord v. Gaylord, 150 N. C., 222; Williamson v. Rabon, 177 N. C., 304. This latter case overrules Fuller v. Jenkins, 130 N. C., 554. It is well settled that parol trusts cannot arise between the parties to a deed. Gaylord v. Gaylord, supra; Bonham v. Craig, 80 N. C., 224; Newton v. Clark, 174 N. C., 394; Newbern v. Newbern, supra. These holdings do not, however, affect the main question in the case at bar. The defendant contends that the contract of 1 July, 1922 (which consists of the plaintiff’s application for bond accepted by defendant, and the indemnity bond to secure the owner of the buildings against the plaintiff’s default in his building contract), creates such a relation between plaintiff and defendant that -all subsequent transactions are, as a matter of law, a security. The defendant on 1 July, 1922, solemnly covenanted with defendant that his execution of “any other instrument, whether relative to the bond hereby applied for, or to any other, former or subsequent bonds executed for us, or at our request, shall not release us from liability under the foregoing covenants, unless such other instrument shall expressly stipulate that we shall be released from such liability.” These “foregoing covenants” undertake, with much particularity, to provide for a continuing obligation to save the defendant harmless on account of its suretyship and it assigns all rights of plaintiff in “all tools, plant equipment and materials of every nature and description” that plaintiff may have, for use in and about the work, both on hand, in storage, or in transportation, as well as an assignment of all moneys “due or to become due,” as provided in the building contract, with full power of attorney to execute all necessary papers to accomplish the desired result, to wit, the complete indemnity of defendant from loss. *290 Tbe agreement of 11 September, 1923, on wbicb plaintiff bases bis action, refers to tbe transactions of 1 July, 1922, and tbe plaintiff’s present need of financial assistance “for tbe purpose of completing tbe buildings” as contracted for, “wbicb finances tbe Southern Surety Company bas agreed to supply,” as therein set out, and recites that tbe said Perry is desirous of saving said Southern Surety Company harmless, and does not stipulate that plaintiff is.released from tbe liability on bis covenants in tbe application for bond. Tbe consideration is thus recited: “In consideration of tbe mutual benefits to be derived.” Tbe conveyance of tbe Wineke Apartment property is one of tbe things to be done by plaintiff in consideration of tbe recited desire to save tbe defendant harmless, and tbe stipulation provides that it shall be conveyed by “proper deed.” There is no legal obstacle presented by tbe encumbrance on tbe Wineke Apartment property. Tbe assumption of, and payment of this mortgage, by defendant, is only another item in tbe final accounting. Veeder v. Veeder, 141 Iowa, 492; Dunton v. McCook, 93 Iowa, 258. We are minded to bold that, upon tbe contract of 1 July, 1922, and tbe agreement of 11 September, 1923, and tbe deed to defendant for tbe Wineke Apartment property, on same date, wbicb deed is an express part of this agreement, that tbe whole transaction constitutes itself into that of “advancement and security,” and debtor and creditor. Tbe same rule that prevents defendant in its effort to reform tbe contract and deed of 11 September, 1923, bolds tbe plaintiff to tbe performance of tbe covenants of 1 July, 1922. Whenever a transaction resolves itself into a security, whatever may be its form, and whatever name tbe parties may eb'oose to give it, it is, in equity, a mortgage. Hames v. Williams, 92 Maine, 483; L. R. A., 1916 B, 55 note, even if on its face, it may be a deed. Edrington v. Harper, 26 Ky., 353. There are no special words required to constitute a mortgage. Tbe test is whether tbe conveyance, or tbe whole transaction, is a security for tbe payment of money, or tbe performance of any act or thing. Sandlin v. Kearney, 154 N. C., 596; 37 L. R. A. (N. S.), 525, note; L. R. A., 1916 B, 144, note, 287, note. In Sandlin v. Kearney, supra, tbe material facts were admitted in tbe pleadings, and in tbe case at bar, tbe admitted written instruments show tbe intention to create a security. Tbe three written instruments, though executed on two different dates, are so linked together by express references and evident intention, that it is conclusive that they constitute only one transaction. 19 R. C. L., 244, sec. 7, 246 sec. 9; Wilcox v. Morris, 5 N. C., 116. Tbe conveyance was intended to indemnify tbe *291 grantee, the defendant, for the assumption of some outstanding obligations of the plaintiff related to the subject-matter of the original contract. Therefore, it is security. Watkins v. Williams, 123 N. C., 170; Robinson v. Willoughby, 65 N. C., 520; Noland v. Osborne, 177 N. C., 14; Russell v. Southard, 13 L. Ed. (U. S.), 927. The recitals in the agreement of 11 September, 1923, have the same effect, inter partes, as recitals in the deed itself. A deed which recites that it is security for a debt is a mortgage. Devlin on Real Estate (3 ed.) Vol. 2, sec. 1125; Wilson v. Fisher, 148 N. C., 535. Equity will, in doubtful cases, construe the transaction to be a security and not a sale, because this subserves the ends of justice and prevents imposition. If the idea of security appears with reasonable distinctness by the writings and no evil practice or mistake appear, courts will incline so to regard it, because the general rule which favors written evidence concurs with the reasons of justice. Cornell v. Hall, 22 Mich., 377; Honore v. Hutchings, 71 Ky., 687. When two or more papers are executed by the same parties at the same time, or at different times, and show on their face that each was executed to carry out the common intent, they should be construed together. Chicago Auditorium Assn. v. Corporation of Fine Arts Bldg., 244 Ill., 532; 18 Ann. Cas., 253; Canadian Coal Co. v. Lynch, 115 Pac., 466; Brake v. Blain, 153 Pac., 158; Longfellow v. Huffman, 57 Org., 338, 112 Pac., 8; Parker v. Supply Co., 186 Pa. St., 294, 40 Atlantic, 518. It is proper, in the interpretation of a written contract, to consider all the attendant circumstances, the relation of the parties, and the object it had in view. Bank v. Redwine, 171 N. C., 559; McMahan v. R. R., 170 N. C., 456; Simmons v. Groom, 167 N. C., 271; Neal v. Ferry Co., 166 N. C., 563; Slocumb v. R. R., 165 N. C., 338; Hornthal v. Howcott, 154 N. C., 228; Hardy v. Ward, 150 N. C., 385; Fowle v. Kerchner, 87 N. C., 49. Regarding these rules and construing the application executed by plaintiff to the defendant 1 July, 1922, and the agreement of 11 September, 1923, and the Wineke Apartment deed together, and being fully conscious of the common intent of the parties, we hold that the dealings between the plaintiff and the defendant, thus evidenced, constitute an advancement on the part of the defendant, and a security therefor on the part of the plaintiff. Bunn v. Braswell, 139 N. C., 135; Watkins v. Williams, supra; Robinson v. Willoughby, 65 N. C., 520; Sandlin v. Kearney, supra; Mason v. Hearne, 45 N. C., 88; Cheek v. B. & L. Association, 126 N. C., 244; Lutz v. Hoyle, 167 N. C., 632; Ray v. Patterson, 170 N. C., 228; citing Robinson v. Willoughby, supra; Mason v. Hearne, supra; Porter v. White, 128 N. C., 44. This latter *292 case is an apt illustration of tbe instant case; the doctrine of reformation was denied, but, construing the papers together, the same result was reached. Our ruling approves the judgment rendered by the court below, and if its rulings challenged by plaintiff’s exceptions are erroneous, and its judgment is correct, it will not be disturbed. We do not presume prejudicial error and the burden is upon the appellant to show, not only error, but that it is prejudicial. The judgment will be affirmed if, upon the entire record, no substantial right to the appellant has been denied', and, even if irregular, when the correct result has been accomplished. The appellant is -not, upon any view of the record, entitled to recover. Blevins v. R. R., 184 N. C., 324; Quelch v. Futch, 175 N. C., 694; Mercer v. Lumber Co., 173 N. C., 49; Oil Co. v. Burney, 174 N. C., 382; In re Will of Edens, 182 N. C., 398; Rankin v. Oates, 183 N. C., 517; Lindsey v. Bank, 115 N. C., 553; Ewbank v. Lyman, 170 N. C., 505; Butts v. Screws, 95 N. C., 215; Cherry v. Canal Co., 140 N. C., 422; Shackelford v. Staton, 117 N. C., 73; Rierson v. Iron Co., 184 N. C., 363. The right result having been reached in the court below, we conclude that there is No error.