Brown v. Bank of Sumter

The opinion of the Court was delivered by Mr. Chief Justice McIver. [68] i [66] was commenced by individuals, and as copartners under the firm name of A. S. W. A. Brown, as plaintiffs, against the above named defendants, on the 22d of November, 1897. Owing to the death of A. S. Brown, one of said plaintiffs, shortly after answers were filed, an order was granted substituting the persons named in the title of this opinion, as plaintiffs, other W. A. Brown, in the place of A. S. Brown, deceased, continuing the action under said title. The defendants answered separately, and the plaintiffs demurred to both answers upon grounds which were reduced to. writing and are forth in the “Case.” The questions presented by the demurrers came before his Honor, Judge Watts, who, after argument, granted an order overruling the demurrers. From this order plaintiffs appeal upon the several exceptions set out in the record. Inasmuch as the primal and controlling question raised by this appeal is whether the facts stated in the answers are sufficient to constitute a defense to the action, all the pleadings should be reported, together with the order of the Circuit Judge and the exceptions. It is stated in the “Case” that: “At the conclusion of the argument, the presiding Judge announced, orally, his decision that the demurrers should be overruled, and further stated that, in his judgment, the transactions mentioned-in the pleadings were never intended and did not constitute [67] a mortgage, but that the same were intended and did constitute an absolute sale in fee simple by the Browns to the bank, the grantors by the terms of "the accompanying written agreement simply reserving the right to repurchase said lands at certain fixed prices, at any time whilst the bank remained the owner of the 'same. Upon the order being handed up for his signature, the presiding Judge stated that he would strike out all of the same after the word ‘overruled’ —because, whilst the remaining words therein expressed his judgment, yet he was not sure that said words properly belonged to an order of the kind; but that if there was no objection, he would allow them to remain in the order. To this counsel for the plaintiffs replied that, whilst he was not to be regarded as, in any sense, consenting, yet he had no objection to said words remaining in the order beyond his general objection to the order as a whole; and thereupon his Honor signed the order as prepared.” It seems that the deed in question was executed by A. S. Brown, through his attorney in fact under a power of attorney, a copy of which is set out in the “Case,” which, as part and parcel of the deed, was before the Circuit Judge when he heard the case on demurrer. It also appears that, during the argument; counsel for defendants moved the Court, in case the demurrers were sustained, to allow them to amend their answers by alleging certain additional facts, not set forth in their answers, which additional facts are stated, substantially, in the “Case.” ° By agreement, the following was added to the “Case:” “The appellants contend that the action should be determined upon the pleadings, the construction of the deed, the power of attorney, and the written agreement accompanying the deed; and that all parol testimony is irrelevant. But if the Court deems the statements therein made to be relevant, then we agree that the same may be considered by the Court in its decision herein, with a view of allowing the defendants to amend by setting them up in their answers.” Exactly what this means we do not know that we fully comprehend; but in the view which we take, [68] that is immaterial. As we understand it, the Circuit Judge heard the case, in the only way in which he could properly have heard it, when presented by demurrer — that is, upon the pleadings, including the deed therein mentioned, with the accompanying power of attorney, under which the deed was executed by one of the grantors, and not including the additional facts which defendants desire to insert in their answers — which facts were not properly before the Circuit Judge, and could not, and, so far as appears, were not, considered by him; for he expressly declares in his order that his judgment was based upon what appears in the pleadings. The only question before the Circuit Judge was whether the facts stated in the answers were sufficient to consitute a defense, and that question could only be determined by an examination of the pleadings; and the only question before this Court is whether there was any error in the conclusion reached by the Circuit Judge; and this Court, being an appellate tribunal, has no power to go outside of the case as made in the Court below. We must, therefore, decline the request of counsel to consider the additional facts above referred to, and confine our attention to the case as made before the Circuit Judge when he rendered the judgment appealed from, without regard to the additional facts mentioned in the “Case,” which counsel for defendants stated they were then ready to prove — not, however, because we consider that parol evidence was either incompetent or irrelevant in a case like this, but simply because this Court being an appellate tribunal, is limited to a review of what occurred in the Court below. In the case of Bermingham v. Forsythe, 26 S. C., at page 363, grave doubts were expressed as to the power of this Court to consider any fact, even though admitted by counsel, which was not before the Court below when the judgment appealed from was rendered; and although the point was not then decided, inasmuch as it was not necessary to do so in that case, yet subsequent reflection and examination has only served to increase the doubt there expressed; and we are [69] now satisfied that this Court, if it should undertake to- consider any facts not properly before the Circuit Court, would be assuming original jurisdiction, at least so far as such facts are concerned, which, under the Constitution, this Court has no power to exercise, except in certain specified classes of cases, of which the present case is not one. The question here presented arises on a demurrer, and in the determination of such a question neither this Court nor the Circuit Court can-consider any fact not appearing in the pleadings. If, however, the judgment overruling the demurrers is sustained — as it will be presently seen it must be ■ — then the defendants may, if so advised, amend their answers by inserting the additional facts which they claim will show that the deed in question was not intended to be a mortgage, but is, in fact, what it appears to be on its face, an absolute conveyance. For when the demurrers are overruled, the plaintiffs will still be at liberty to have the issues presented by the pleadings tried upon their merits. [69] We will now proceed to the consideration of what we regard as the controlling question in this case, waiving, for the purposes of this inquiry, what may be termed the formal objections to the demurrers. The real question is whether the facts stated in the answers are sufficient to constitute a defense to the action. The main object of the action is to have the deed mentioned in the complaint, which appears on its face to be an absolute conveyance, declared to be a mortgage; and the question is narrowed down to the inquiry whether the facts stated in the answers are sufficient to show that such deed is, in fact, what it purports to be on its face, an absolute conveyance, and also whether the denials in the answers of certain allegations in the complaint are sufficient to raise the issue as to whether such deed was intended to be, and is, in fact, a mere security for the payment of a debt. For while it is undoubtedly true that a deed, which appears on its face to be an absolute conveyance, may, in equity, be declared to be a mortgage, if the evidence be sufficient to show that such was the intention of [70] the parties; yet it is equally true that the presumption is that the deed is what, on its face, it purports to be, an absolute conveyance, and to establish its character as a mortgage, the evidence must be clear, unequivocal and convincing, for otherwise the natural presumption will prevail. 3 Pom. Ecp Jur., sec. 1196; Arnold v. Mathison, Rich. Eq., 153; Petty v. Petty, 52 S. C., 54. Whether any particular transaction amounts to a mortgage or to an absolute sale, with an agreement allowing the vendor to repurchase the lands at a special price and within a time limited, “must to a large extent depend upon its own special circumstances; for the question finalfy turns in all cases upon the real intention of the parties as shown upon the face of the writings, or as disclosed by the extrinsic evidence.” 3 Pom. Eq., sec. 1195. It appears from the pleadings that the Browns were indebted to the Bank of Sumter in a large sum of money — $13,500, as alleged in the complaint— $14,500, as alleged in the answers — which indebtedness was secured by several mortgages on real estate, one on the “Providence Place,” one on the “DuBose land,” one on the “Rocky Pine” place, one on the interest of A. S. Brown on certain lots in the city of Sumter,'and another mortgage on a lot at the corner of Main and Liberty streets, in the city of Sumter, ocaipied by Brown, Cuttino & Delgar. When these several mortgages were executed, or when the debts which they were given to secure arose, does not appear. On the 26th day of March, 1895, the Browns executed a deed, absolute in form, to the Bank of Sumter for all the real estate covered by the said mortgages, except the city lot occupied by Brown, Cuttino & Delgar. The consideration stated in said deed was the sum of $10,000, and the deed contained a provision that said mortgages were to be “left open to protect the grantee and its successors and assigns against all incumbrances and dower.” This deed was executed by A. S. Brown through an attorney in fact under a power of attorney attached to the deed, the terms of which will hereinafter be referred to. On the same day, to wit: [71] the 26th of March, 1895, the Bank of Sumter executed an agreement, in writing, the terms of which are fully set forth in the complaint and admitted in the answers. It seems that the Bank of Sumter immediately wrent into possession of the lands conveyed to it, and on the 5th of November, 1896, sold and conveyed the same to its codefendant, Marion Moise, Esq., the consideration mentioned in the deed being the sum of $12,000, and that said Moise shortly afterwards sold and conveyed the “Providence Place” to H. T. Edens, the consideration mentioned in the deed being the sum of $10,000, though Mr. Moise, in his answer, alleges that the true consideration of said deed was an exchange of the “Providence Place” for a tract of land in Marlboro County, and that the consideration actually received was considerably less than that expressed in the deed. 4 The plaintiffs in their complaint allege that the true object and real intent of the deed to the Bank of Sumter was to secure the indebtedness of the Browns to said bank and not to convey the land therein mentioned absolutely, and such conveyance really constitutes a mortgage. This allegation is distinctly denied in both answers, and on the contrary it is there alleged that the real object and true intent of said deed was just what it purports on its face to be, an absolute conveyance; and Mr. Moise in his answer alleges specifically “that at the time of the said conveyance the said bank held bona fide mortgages executed by the plaintiffs (meaning the Browns) to the bank covering all of the lands described in said conveyance, and in addition thereto one of the mortgages executed by the plaintiffs to W. F. B. Haynsworth for the benefit of the bank, covering the storehouse and lot in the city of Sumter, then occupied by Brown, Cuttino & Delgar. This defendant alleges that it was expressly agreed that said city lot should not be sold and conveyed to the bank, but that the bank should release and satisfy its mortgage aforesaid upon said lot of land upon the payment to it'of the sum of $2,000, and interest from the day of the date of said conveyances; that the negotia [72] tions and sale by the plaintiffs to the bank were conducted with this defendant, and it was not intimated nor contemplated by either of the said parties that the bank was taking a security for a debt; but, on the contrary, it was expressly understood that the bank was making a bona fide purchase, and to that end the liens of the various mortgages covering the lands described in said deed were left open to’ perfect the title against dower, and all.other incumbrances, and thereby make said conveyance effectual.” Now if, as said by Pomeroy in the passage quoted above, “the question finally turns in all cases upon the real intention of the parties as shown upon the face of the writings, or as disclosed by the extrinsic evidence,” it would-seem to be clear that where, as in this case, it is alleged in the complaint that the deed in question, though absolute on its face, was really intended as a mere security for the payment of a debt, and that allegation is not only distinctly denied in the answer, but, on the contrary, it is positively averred that it was never even intimated that the deed was to be a mere security for the payment of a debt, but that it was expressly understood to be a bona fide purchase of the absolute title, a direct and material issue is raised by the pleadings, and the answer could not be regarded as amenable to a demurrer upon the ground that the facts therein stated are not sufficient to constitute a defense. [72] But in addition to this, when the pleadings show, as they do in this case (for it must be remembered that facts alleged in the complaint which are admitted by the answer become a part of the answer, and may be referred to in testing the sufficiency of such answer), that the bank already held mortgages not only upon all the property covered by the deed, but also upon an additional piece of property — the city lot occupied by Brown, Cuttino & Delgar — not conveyed by the deed, it seems impossible to conceive that the bank would take another mortgage upon only a portion of the property already covered by mortgages in favor of the bank; and yet the contention of plaintiffs rests upon that theory. But, as we understand it, the contention of appellants rests [73] not so much upon the omission of allegations in the answers to constitute a defense to the action, but the admission of certain facts alleged in the complaint, which, it is claimed, defeat the defense sought to be set up by the answers. In subdivision “a” of exception i, the point is made that the answers having admitted the allegation in the complaint that the relation of mortgagor and mortgagee originally existed between the parties, and alleged no new consideration for the deed of 26th March, 1895, they thereby admitted that said deed was a mortgage. If that deed had been an agreement that the original mortgages should be converted into absolute conveyances, we can well understand how a new consideration would be necessary to the validity of such agreement. But where, as in this case, a creditor holding mortgages on several parcels of real estate to secure the oayment of a debt, purchases the mortgaged premises, or rather a part thereof, at a price less than the amount of his debt and takes from his debtor an absolute conveyance, we are not prepared to admit that any new consideration is necessary to the validity of such conveyance; for it is well settled that where the mortgagee purchases the mortgaged premises, at a sale other than for foreclosure of the mortgage, the mortgage debt is thereby extinguished. Devereux v. Taft, 20 S. C., 555, and the cases therein cited; and the same principle applies pro tanto where only a portion of the mortgaged premises are purchased. Trimmier v. Vise, 17 S. C., 499. If, therefore, any new consideration, as it is called, be necessary, it would be found in the extinguishment of the mortgage debt, either, in whole or in part, according to the fact, whether the purchase was in whole or only in part of the mortgaged premises. But even if an entirely new consideration was necessary to the validity of the deed in question, as an absolute conveyance, it can be found in the fact that the bank agreed to satisfy the mortgage on the city lot, occupied by Brown, Cuttino & Delgar (which is not a part of the premises conveyed) to secure a note for $2,500, upon the payment of $2,000 and interest, to [74] the bank; which agreement, it is alleged in the complaint and admitted in the answers, has been complied with. It seems to us, therefore, that subdivision (a) of the first exception cannot be sustained. 6 In subdivision (b) of that exception the point is made that the admission in the answers that the deed contains a provision that the original mortgages were to be “left open to protect the grantee and its successors and assigns against all incumbrances and dower,” amounts to an admission that said deed was intended to be a mortgage. It seems to us that the insertion of this provision in the deed has precisely the contrary effect to that contended for by appellants. For while it has a very appropriate place in an absolute conveyance from a mortgagor to a mortgagee of the mortgaged premises, and serves a very important purpose in such a conveyance, we do not think it has any place or serves any purpose in a new mortgage. In an absolute conveyance, its function is to protect the grantee against the claim of dower by the wife of the mortgagor, or any incumbrance subsequent to the original mortgage, and has been made to serve that purpose in Agnew v. Railroad Co., 24 S. C., 18, and that is its sole purpose here, as declared by the express terms of the provision. It does not keep the original debt alive as against the mortgagor, for that, as we have seen, is extinguished by the conveyance. On the contrary, its sole purpose and its only effect is to protect the grantee against subsequent incumbrances. The test of this' is that the grantee never could enforce his original debt against the mortgagor. It seems to us, therefore, that the insertion of this provision in the deed under consideration, instead of showing that such deed was intended to be a mortgage, shows that it was intended to be just what it purports, on its face, to be, an absolute conveyance. [74] The second exception imputes error to the Circuit Judge in not construing the deed of the 26th of March, 1895, in-connection with the agreement of the same date, fully set out in the complaint, and admitted in both answers, to constitute a [75] mortgage. It seems to us that the provisions of that agreement show that the real object arid- true intent of the whole transaction was that the Browns should make an absolute conveyance of the lands described in the deed to the bank, and that they should be allowed the privilege of buying back the lands or parts thereof, as long as the bank continued to be the owner thereof, at certain specified prices. ‘ Take the terms of the 5th paragraph of the agreement, whereby the Browns, or either of them, are allowed the privilege, as long as the bank may continue fo be the owner thereof, to “purchase all the real estate so conveyed as aforesaid from the bank at a sum equal to their present indebtedness to the bank (before any of said credits hereinbefore mentioned were applied), with interest, and taxes and all costs and expenses added, the bank to allow credit for everything received in the meantime; and as long as the same is owned by the bank, it will convey any of said property to the said Albertus S. Brown or W. Alston Brown, the heirs, executors or administrators of either of them, at the following sums respectively, adding interest as if said credits had not been made, taxes, costs and expenses, and giving credit for rents and profits received and payments made, if any, viz: the 'Providence Place’ at $8,000; the ‘DuBose lands’ at $1,500, and the 'Rocky Pine’ place at $2,000.” Now observe the language used: The bank is spoken of as the owner of the property conveyed — the Browns are authorized to purchase the whole or any part of said property, “as long as the same may be ozvned by the Bank of Stimter,” which necessarily implies the right of the bank to sell or dispose of the property, at any time, and in any way, it might see fit. Then the provision that the Browns, or either of them, as long as the bank continued to be the owner, might repurchase either of the parcels conveyed at certain specified prices. Then again the provision in the first paragraph of the agreement : “That the sum of $10,000 is to be entered as a credit as of this date upon the indebtedness of” the said Browns to the bank — which is the amount mentioned as the consider [76] ation of the deed. These provisions, couched in such language, show that the real object and true intent of the deed was that it should be an absolute conveyance, and not a security for a debt, for which the bank already held mortgages on all the land conveyed, as well as on another parcel not embraced in the conveyance. For if the intention had been merely to give the bank security for the amount due it by the Browns, very different language would have been employed. The bank did not obligate itself to' reconvey the property upon the payment of the amount due within a specified time, or even within a reasonable time. On the contrary, by the express terms of the agreement, it was contemplated that the bank might, at any time it saw fit, sell or otherwise dispose of the property conveyed, just as an absolute owner could do; and the Browns were only allowed the privilege of buying back the property at certain specified prices, as long as the bank continued to be the owner. In addition to this, the allegation in the answer of Mr. Moise, who seems to have acted for the bank in this whole transaction, that W. A. Brown, the survivor of A. S. & W. A. Brown, on more than one occasion endeavored to buy from the bank portions of the property conveyed, upon terms other than those provided for in the agreement, serves to strengthen the conclusion that the intention of the parties, at the time of the transaction, was that the deed was an absolute conveyance, and was not intended to be a mere security for the payment of a debt. 8 Again, the terms of the power of attorney, attached to the deed, under which the same was executed by one of the grantors, tend to show that the intention was to execute an absolute conveyance, and not a mere mortgage. By that paper one of the original plaintiffs, S. Brown, appoints the other plaintiff, W. Alston Brown, his true and lawful attorney in fact, “To sell and dispose of any and all lands that I own, or have any interest in, in the State of South Carolina', and particularly in Sumter County, upon such terms as he may deem proper, and to sign, seal, make [77] and deliver good and sufficient deeds of conveyance for the same.” This language, while very appropriate to create a power to sell and convey by absolute deeds, does not imply a power to mortgage. This power of attorney was executed a short time before the deed in question was executed, and, of course, both the donor and donee of the power knew that 'they were then largely indebted to the bank, which indebtedness was already secured by mortgages on their property; and if it was in the contemplation of the parties to give another mortgage, or a deed intended to operate as such, it is inconceivable that they should have omitted from the power of attorney any words indicating such an intent. But if their intention was to execute absolute conveyances, then the words used were just such as would express such an intention. Counsel for appellants rely upon the words “dispose of,” as expressive of an intention to authorize the execution of a mortgage, and cites the case of Platt v. Union Pacific R. R. Co., 99 U. S., 48. In that case, Congress, for the purpose of aiding in the construction of this trans-continental railroad, made a grant of lands to the company, and the act making such grant contained a provision that all such lands as were not “sold or disposed of” by the company before the expiration of three years after the completion of the entire road, should be subject to settlement and pre-emption like other public lands. The company executed a mortgage covering these lands, with a view to raise money to continue and complete the construction of their road, and the question was whether the mortgage of these lands was such a disposition thereof, as would relieve them from being subject to the right of pre-emption. It was held that the mortgage was such a disposition; but this conclusion was based upon the manifest object of the act of Congress, which was to aid the company in raising the funds necessary to construct their railroad, and cannot be regarded as authority in this case. Even in that case there was a strong dissent by three of the Justices. In 18 Am. & Eng. Ency. of Law, 871, it is said, in speaking of the construction of powers of attorneys : “The [78] obvious meaning of terms is not to be extended by implication in the absence of necessity.” And again, at page 873, it is said: “Where authority to perform specific acts is given and general words are also employed, such words'are limited to the particular acts authorized.” It seems to us that the terms used in this power of attorney — “to sell and dispose of” real estate, and to execute “good and sufficient deeds of conveyance for the same” — obviously mean to make absolute conveyance and cannot be extended by implication so as to confer a power to mortgage. Indeed, in the case of Ivy v. Caston, 21 S. C., 583, it was doubted whether even a mortgage of personal property, which does operate as a transfer of title, after condition broken, could be regarded as a “disposition” of property, within the meaning of the terms used in the attachment act; and certainly a mortgage of real property, which does not operate as a conveyance of title, cannot be regarded as a “disposition” of such real estate. Under the view which we have taken of the main question in the case, the points presented by the remaining exceptions do not properly arise and need not, therefore, be considered. The judgment of this Court is, that the order of the Circuia Court, overruling the demurrers to the answers of defendants, be affirmed, and that the case be remanded to the Circuit Court for such other proceedings as may be necessary, with leave to the defendants, if they shall be so advised, to amend their answers as hereinabove indicated.