Ferguson v. . Blanchard

DeviN, J. The plaintiffs filed exception to the referee’s conclusions of law, making no objection to his findings of fact as such, and challenge the judgment rendered below solely on the ground that the deed executed by J. W. Ferguson and wife to defendant Blanchard in 1924, together with the agreement appearing in the record, as a matter of law, constituted the relationship of mortgagor and mortgagee between these parties, which relationship still continues and entitles the plaintiffs, heirs and personal representatives of J. W. Ferguson, to the right of redemption and to an accounting with defendant Blanchard as mortgagee in posses- *6 síoil. Tbe plaintiffs supported their exception by a motion for an interlocutory decree based upon the same ground. The material facts are not controverted. They sufficiently appear from the pleadings. No oral evidence was offered. In 1922 J. W. Ferguson borrowed $20,000 from J. 0. Blanchard and to secure the same executed deed of trust conveying to a trustee 4,000 acres of unimproved mountain land. Nothing was paid on this debt, principal or interest, and in April, 1924, after maturity, J. W. Ferguson and wife conveyed the land to J. O. Blanchard by deed absolute with covenants of seizin and warranty, and the deeds of trust were canceled of record. By an agreement, dated the same time but executed subsequently, Blanchard gave Ferguson the option to repurchase the land for the amount of the debt and interest, agreed to be then $22,500. By express terms, unless this option was exercised on or before 22 September, 1924, it became null and void. The option was not exercised. The agreement, however, gave to Ferguson, in the event he did not repurchase, the right to effect a sale of the land on or before 19 June, 1929, and, if he could do so within that time at a price in excess of $22,500, plus additional interest and taxes paid, Ferguson should receive 90% of the excess; and in addition it was provided that if Ferguson could, before 19 June, 1929, sell the timber on the land for an amount sufficient to pay the stipulated amount, Blanchard would convey to Ferguson the land subject to the timber sale. This agreement contained this stipulation: “It is further understood and agreed that this contract is given and accepted in full settlement of all dealings or agreements heretofore made by and between the parties hereto, and all matters between them have been settled in full, and that this contract contains all agreements between said parties.” The referee found that in the execution of the deed there was no evidence of coercion or imposition on the part of defendant Blanchard, that the dealings between Ferguson and Blanchard were tona fide and entered into between men of equal business ability and understanding. It seems to be well settled that where land has been conveyed to a trustee to secure the debt of a third person, the relationship between the trustor and the secured creditor is not such as to characterize a subsequent conveyance of the land by the trustor to the creditor as in law presumptively fraudulent. Murphy v. Taylor, 214 N. C., 393, 199 S. E., 382; Simpson v. Fry, 194 N. C., 623, 140 S. E., 295. It is also settled that a deed absolute on its face cannot be converted into a mortgage unless it be established that the clause of defeasance was omitted by ignorance, mistake, fraud, or undue influence. Perry v. Surety Co., 190 N. C., 284, 129 S. E., 721. However, there is neither allegation nor proof in the instant ease that a clause of defeasance was omitted from the deed by mistake or inequitable conduct. *7 But plaintiffs do not base tbeir exception to tbe referee’s conclusion of law on tbis ground. Tbe plaintiffs’ contention is tbat tbe intention to constitute tbe relationship of mortgagor and mortgagee appears from tbe contract, and tbat, taking it in connection witb tbe transmutation of tbe legal title by tbe deed, all tbe elements of a mortgage conclusively appear. They rely upon tbe principle enunciated in Perry v. Surety Co., supra: “Whenever a transaction resolves itself into a security, whatever may be its form, and whatever name tbe parties may choose to give it, it is, in equity, a mortgage. . . . 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.” It is true tbat when a debtor conveys land to a creditor by deed absolute in form and at tbe same time gives a note or otherwise obligates himself to pay tbe debt, and takes from tbe grantee an agreement to reconvey upon payment of tbe debt, tbe transaction is a mortgage. Robinson v. Willoughby, 65 N. C., 520. But if tbe agreement leaves it entirely optional witb tbe debtor whether be will pay tbe debt and redeem tbe land or not, and does not bind him to do so, or continue bis obligation to pay, tbe relationship of mortgagor and mortgagee may not be held to continue unless tbe parties have so intended. Tbe distinction is pointed out in O’Briant v. Lee, 212 N. C., 793, 195 S. E., 15, where Connor, J., speaking for tbe Court, quotes witb approval from 41 C. J., 325, as follows: “If it is a debt which tbe grantor is bound to pay, which tbe grantee might collect by proper proceedings, and for which tbe deed to tbe land is to stand as security, tbe transaction is a mortgage; but if it is entirely optional witb tbe grantor to pay tbe money and receive a reconveyance, be has not tbe rights of a mortgagor, but only tbe privilege of repurchasing tbe property.” And in Pomeroy’s Equity Jurisprudence (sec. 1194) it is said: “Where land is conveyed by an absolute deed, and an instrument is given back as a part of tbe same transaction, not containing tbe condition ordinarily inserted in mortgages, but being an agreement tbat tbe grantee will reconvey tbe premises if tbe grantor shall pay a certain sum of money at or before a specified time, tbe two taken together may be what on tbeir face they purport to be — a mere sale witb a contract of repurchase, or they may constitute a mortgage.” Whether any particular transaction amounts to a mortgage or an option of repurchase depends upon tbe real intention of tbe parties, as shown on tbe face of tbe writings, or by extrinsic evidence, and tbe distinction seems to be whether tbe debt existing prior to tbe conveyance is still left subsisting or has been entirely discharged or satisfied by tbe conveyance. If no relation whatsoever of debtor and creditor is left *8 subsisting, the transaction is a sale with contract of repurchase, since there is no debt to be secured. Pomeroy’s Equity Jurisprudence, sec. 1195. Is the relation of debtor and creditor still existing? Was the deed intended as security? The answer to these questions determines the character of the transaction. The real intention of the parties at the time of the execution of the instrument controls. It was said in Watkins v. Williams, 123 N. C., 170, 31 S. E., 388, that the intention that the deed shall constitute a mortgage or security for a debt must be established by proof of facts and circumstances dehors the deed inconsistent with the idea of an absolute conveyance. In O’Briant v. Lee, 214 N. C., 723, 200 S. E., 865, Barnhill, J., discussed this subject, with citation of numerous authorities, supporting the ruling in the former opinion in that case wherein it was held that if the facts were susceptible of different interpretations, an issue for the jury was presented. Here such inferences as are capable of being drawn from the facts in evidence were found by the referee against the plaintiffs. We are unable to concur in the view that a deed absolute on its face coupled with a contract of reconveyance for a stipulated amount within a limited time should be held, as a matter of law, without further evidence, to constitute a mortgage. There is here no extrinsic evidence of facts and circumstances that would tend to stamp the transaction as a mortgage or to give to the deed the effect of security for a subsisting obligation. It is not denied that upon the execution of the deed the deeds of trust were canceled of record, and that the defendant Blanchard thereafter listed and paid all taxes on the land. No acts of possession on this land were exercised by Ferguson. Nothing was done pursuant to the agreement save the sale of a portion of the land for which Blanchard received only notes still unpaid. The authority given to sell the land or the timber, and, if for enough to pay the stipulated amount, obligating the defendant to convey the balance, was expressly limited in time,- and expired 19 June, 1929. This may not be held conclusively to denominate the transaction as a mortgage and the deed as security for a debt. We cannot hold on this record that all the elements of a mortgage conclusively appear on the face of the written instruments. The referee’s conclusion, upon the facts found, that the deed and agreement did not have the effect of a mortgage, was approved by the trial judge. In this we find no error. The order decreeing foreclosure of the Hood deed of trust was proper. The ruling of the court below on the plaintiffs’ exception to the referee’s report, and on their motion for interlocutory judgment, must be Affirmed.