Musgat v. Pumpelly

Tayloe, J. In the absence of all testimony showing the circumstances under which this agreement was made, and in view of the well settled rule of law that courts in cases of doubt are disposed to hold that a contract is a mortgage rather than a conditional bill of sale, we are inclined to hold that the contract between the parties in this case, standing alone and uncontrolled by evidence of the existing relations between the parties at the time the same was executed, must be held to be a mortgage rather than a conditional sale. See Herman on Chattel Mortgages, p. 54, § 23, and cases cited; Thomas on Mortgages, 23. The matters in the contract which induce us to consider it a mortgage are these: I. The property claimed to have been sold to the respondent was to remain in the possession of the appellants for six months after the date of the claimed sale, without any com — 664 — pensation being made for the use of the same during that period. As a sale of personal property the contract is unusual in this respect. II. The condition in the contract, that if, at or before the expiration of said six months, the appellant should pay a sum in the aggregate amounting to very nearly the sum mentioned as the consideration of the sale, with interest at the rate of ten per cent, per annum from the date of the agreement until the time of payment, then the sale should be void, is quite consistent with the conclusion that the contract is a mortgage. III. The peculiar language of the contract as to the effect of the payments when made, indicates that the sale was not a mere conditional sale. The contract says that, when certain payments are made, “ then this instrument, as to the articles so redeemed, shall be void; and said party of the second part agrees to let said Pwrvpelly redeem said chattels severally and separately, by the payment of said respective sums, and to resell, assign and transfer to said Pumpelly, by bill of sale, any separate chattels so redeemed.” We think the use of the words redeem and redeemed in this contract are of some significance in determining its legal effect. Although the use of the word redeem is strictly proper to express the right to repurchase property sold conditionally, still, when used in legal documents and contracts, it is ordinarily understood to mean the right to release property pledged or mortgaged from the lien or claim of the pledgee or mortgagee. The right of a mortgagor as against the mortgagee, at common law, to discharge his estate from the claim of the mortgagee, after condition broken, is called his equity of redemption; and the same phrase is always used by the courts to express the right of a mortgagor of personal property to discharge the same from the claim of the mortgagee after condition broken. Smith v. Coolbaugh, 21 Wis., 427; Flanders v. Thomas, 12 Wis., 410; Rosebrook v. Runals, 32 Wis., 415-420. The proceeding to enforce such equity of redemption is denominated — 665 — a bill to redeem, or, under tbe code, an action to redeem. Ee-deemable rights are defined to be “ those rights which return to the conveyor or disposer of land, etc., upon payment of the sum for which such rights are granted.” 5 Jacob’s Law Dic., 422; Wharton’s Law Dic., 871. Giving to these words their ordinary signification, it would seem that the parties understood that the claim of the respondent to the property in question was rather in the nature of a pledge or mortgage, than of a conditional sale; and the fact that the respondent agreed to reconvey on such redemption being made, does not fully destroy the. inference derived from their use. IY. The respondent permitted the property to remain in the possession of the appellants for several months after he was entitled to the possession by the terms of the contract, and, so far as the evidence in the case shows, without making any claim that the possession should be delivered to him. These considerations constrain us to hold that the learned circuit judge erred in construing the written contract into a conditional sale. The following authorities, we- think, fully sustain our construction of this contract: Wood v. Dudley, 8 Vt., 430-435; Morrow v. Turney’s Adm’r, 35 Ala., 131; Barnes v. Holcomb, 12 Sm. & M., 306; Hammonds v. Hopkins, 3 Yerg., 525; Brown v. Bement, 8 Johns., 96; Brown v. Dewey, 1 Sandf. Ch., 56-7; Clark v. Henry, 2 Cow., 324; Herman on Chattel Mortgages, 46 and note; Newhall v. Burt, 7 Pick., 157; Rice v. Rice, 4 Pick., 349. It is urged by the learned counsel for the defendant, that the contract, standing alone and unexplained by the circumstances under which it was executed, must be held to be a conditional sale, because there is no covenant in the same on the part of the defendants, or either of them, to repay to the plaintiff the money he had advanced upon the property. If it were a fact, that the relation of debtor and creditor did not exist between the defendants, or either of them, and the plaintiff, .after the execution and delivery of such contract, it would be — 666 — a very strong circumstance against tbe construction we have concluded the contract must receive standing by itself-; but upon that subject the proof is entirely silent. The only proof on that subject is the statement of the plaintiff “ that he had had business dealings with the defendants; and that Mr. Pumpelly owed him for goods from the store.” -This evidence certainly does not show that the relation of debtor and creditor did not exist, nor have we given it any weight in favor of construing the contract to be a mortgage, as it is not in any way connected with the execution of the contract, nor is there any amount of indebtedness shown which in any way corresponds to the sum stated as the consideration therein. In the absence of any express evidence to show the contrary, we would be justified in presuming that the relation of debtor and creditor did exist between the parties from the very fact that the contract executed was in its nature a chattel mortgage, and therefore a security for an existing debt. Horn v. Keteltas, 46 N. Y., 605; Conway’s Ex’rs v. Alexander, 7 Cranch, 218; Flagg v. Mann, 14 Pick., 467; Herman on Chattel Mortgages, p. 55, § 24, and cases cited; Russell v. Southard, 12 How., 139-152. That a mortgage of real estate can be made in this state, without any personal liability' in favor of the mortgagee, which can be enforced against the mortgagor, is evident from the fact that sec 2204, R. S. 1878, expressly provides that unless the mortgage contains an express covenant to pay, or there is a bond or other separate instrument to' secure such payment, the mortgagee shall not have a personal action to recover the money secured by the mortgage. It is, however, unnecessary to the determination of this case, to decide whether there can be a chattel mortgage in the absence of any personal liability on the part of the mortgagor, or some other person, to the mortgagee, for the sum or debt secured by such mortgage. In this case, the evidence does not show that no such per — 667 — sonal obligation exists, and, in the absence of proof on that point, the fact that the written contract is in the nature of a mortgage, raises a presumption that such personal obligation does exist. As we have remarked above, this contract is somewhat obscure and doubtful as to its real character, and, in the absence of any evidence explanatory of the circumstances under which it was executed, we have felt constrained to hold it to be a mortgage rather than a conditional sale; but we do not intend to hold that this construction could not be changed by extrinsic evidence showing the circumstances under which the contract was made. That these circumstances might be given in evidence, in order to enable the court to give a construction to a contract of the doubtful character of the one in question, is fully established by the authorities, and it has been so expressly adjudicated by this court. Lyman v. Babcock, 40 Wis., 503. In that case, the chief justice, in delivering the opinion, says: “Had the pleadings and proofs disclosed the circumstances under which the contract between the parties was made, their respective relations to the subject matter, and to each other respecting the subject matter, we might have been better able to put a construction on the contract, and the construction might have been more satisfactory to ourselves. Such evidence is always admissible, not to vary the terms of a written contract, or to explain patent ambiguities, but to facilitate the construction of terms obscure in themselves, in relation to the subject matter, on the face of the contract.” The authorities cited in that case to sustain the rule are very clear and satisfactory, and it will be found, upon an examination of the cases in which the question has arisen, whether a written contract was a mortgage or a conditional sale, that parol evidence was almost invariably resorted to for the purpose of aiding the court in the construction of the contract. In the'case at bar, if the evidence had disclosed that this.contract was made without any application for a loan on the part of the defendants, — 668 — or tbat no loan was, in fact made by'tbe. plaintiff to tbe defendants, and tbat tbe same was not made as a security for an.existing debt due from tbe defendants to tbe plaintiff, a different construction might be given td it. It was said upon the argument of this case, tbat such evidence was offered by tbe plaintiff in tbe court below, and tbat tbe same was rejected upon tbe objection of tbe defendants. If such evidence was offered, we think there can be no doubt that tbe court erred in rejecting it.; but, as tbe judgment in tbe court below was in favor of the plaintiff, and tbe case was tried by a jury, no exceptions taken to tbe rejection of evidence offered by tbe plaintiff can be considered upon this appeal. The error of tbe court in bolding tbat the contract, unexplained by tbe circumstances attending its execution, was a conditional sale, is not cured by the fact tbat tbe plaintiff offered evidence which should have been admitted, and which might have shown tbat it was in fact a conditional sale and not a mortgage. Tbe evidence was not before the court below, and is not before this court; and -it is therefore impossible to say what its effect would have been, had it been received. It is urged by tbe counsel for the plaintiff, tbat if it be admitted that tbe contract is a mortgage and not a conditional sale, still tbe plaintiff was entitled to recover in this action; that if a mortgage, tbe day for the payment of the mortgage debt bad passed long before any tender of tbe amount due was made,.and long before this action was commenced, and, there being no agreement in tbe mortgage that the mortgagee should sell tbe property and satisfy bis debt out of tbe proceeds, and return tbe surplus of tbe proceeds of such sale, if any, to tbe mortgagor, tbe title to tbe mortgaged property became ábsolute in tbe mortgagee at law, after the-day of payment bad passed and tbe debt remained unpaid; and tbat, in such case, the only remedy of tbe mortgagor was an equitable action to redeem. This seems to' be the • rule as established in tbe courts of — 669 — New York, and tbis court has, with perhaps some modification, followed that rule. Nichols v. Webster, 2 Pin., 234; Cotton v. Marsh, 3 Wis., 221; Cotton v. Watkins, 6 Wis., 629; Bates v. Wilbur, 10 Wis., 415; Flanders v. Thomas, 12 Wis., 410; Welsh v, Sackett, id., 244; Smith v. Coolbaugh, 21 Wis., 427; Rosebrook v. Runals, 32 Wis., 415; Appleton Iron Co. v. Assur. Co., ante, p. 23; Blakeslee v. Rossman, 43 Wis., 116-127. The cases cited recognize the doctrine that the legal title of the property mortgaged vests in the mortgagee after the condition is broken by nonpayment at the time fixed in the mortgage, and, at the same time, they recognize the fact that the mortgagor has an equity of redemption, notwithstanding the forfeiture; and some of them hold that the mortgagee will be estopped from asserting his legal right to the property, if the mortgagor, while still in possession of the mortgaged property, has a set-off or counterclaim against the mortgagee equal to or greater than the mortgage debt. This was held in the case of Rosebrook v. Runals, supra. But, without deciding the question whether a tender of the mortgage debt after condition broken, to the mortgagee in possession of the mortgaged property, would entitle the mortgagor to recover the possession of the property in an action at law, we have no hesitation in holding that a tender made by the mortgagor after condition broken, he being in possession of the mortgaged property, and keeping the tender good by bringing the money into court, when the mortgagee brings an action to recover the possession, is a good defense-to such action. We -think it may be held a good defense at law, when the tender is made before a demand of possession is made by the mortgagee, on the ground that his acquiescence in the continued possession of the mortgagor, without any assertion of his right under the forfeiture, is a waiver of the strict legal forfeiture according to the conditions of the mortgage, and that a tender before such demand made will therefore have the same effect — 670 — in law as though made on the day the money became due. .It is clearly a good equitable defense to an action to recover the possession of the property. As an equitable defense to such action, the facts alleged are all the facts which would be necessary to allege in an action to redeem, if the property had been in the possession of the mortgagee, and are, therefore, under the code, a good equitable defense to the action of replevin. Had the appellants brought an action to redeem this property from the mortgage claim of the respondent, the allegations, that they had retained the possession of the property mortgaged, after condition broken, without objection on the part of the mortgagee; that before he demanded possession they had tendered to him the full amount due on the mortgage, with interest to the date of such tender; that they now brought the amount tendered into court for the use of the mortgagee; and that he refused to receive the sum tendered, and threatened to bring an action at law to recover the possession of such mortgaged property, — would certainly make out a case in favor of the plaintiff. The answer of the defendants sets forth, in substance, all these facts as a defense to the plaintiff’s action; and, they having brought the money tendered into court for the benefit of the plaintiff, a complete equitable defense is established under the code, and must defeat the plaintiff’s right to recover at law, if any ever existed in his favor. Upon the whole evidence in the record, we are of the opinion that the learned circuit judge erred in directing a verdict for the plaintiff. By the Court. — The judgment of the circuit court is reversed, and the cause remanded for a new trial.