Ladd v. Johnson

Mr. Justice Bean, after making the foregoing statement, delivered the opinion of the court. 1. In support of the ruling of the court below it is claimed, in the first place, that the deed and agreement set out in the complaint created a mortgage to secure Johnson’s indebtedness to Ladd & Tilton and his other creditors, enforceable only in equity, and that the legal title to the property covered thereby remained in Johnson, subject to attachment. But we cannot agree with this contention. It is clear from the declaration of trust accompanying the conveyance that the transaction was intended by the parties as an unconditional conveyance to the plaintiff for the purpose of raising a fund to pay the grantor’s debts then existing, between which and a mortgage or deed of trust in the nature of a mortgage there is a well-récognized distinction. In the one case the grantor parts absolutely with his title, and it vests in the grantee for the purposes of the trust. In the other the convey — 200 — anee is conditional and subject to be defeated by performance on the part of the grantor. A mortgage or deed of trust in the nature of a mortgage is intended as security for the payment of money, or for the performance of some collateral act, and becomes void upon such payment or performance, (Wing v. Cooper, 37 Vt. 179; Mitchell v. Burnham, 44 Me. 299; Harrington v. City of Port Huron, 86 Mich. 46 [13 L. R. A. 664, 48 N. W. 641]; Newman v. Samuels, 17 Iowa, 528); while a deed of trust of the character under consideration here is an absolute and indefeasible conveyance of the whole of the grantor’s title, for the purpose expressed. The former, whatever the form of the instrument, or whatever name may be given it by the parties, creates a mere lien, while the latter conveys title. It is manifest from this distinction that the conveyance in controversy in this suit is not a mortgage or deed of trust in the nature of a mortgage, but an absolute conveyance of the legal title of the property in controversy to the plaintiff. It was not made as security for Johnson’s debts, or for the performance of any other act by him. The intention of the parties, apparent upon the face of the instruments, was to vest the title absolutely in the grantee for the purposes of the trust. It was never contemplated that anything more than the surplus remaining after the payment of Johnson’s debts should be returned to him. The deed is in the usual form, and, standing alone, certainly operates to convey title; and there is nothing in the declaration of trust to show the contrary. There is no statement — 201 — that it was intended .as a security for Johnson’s debts, nor is there anything from which such an intention can be inferred. There is no contingency upon the happening of which the instrument shall be void or inoperative. There is no right of redemption remaining in Johnson. Indeed, it has none of the incidents and characteristics of a mortgage or instrument given as security. On the other hand, it is expressly declared that the deed was not intended as a mortgage, but as a conveyance in trust, with full power to convey and incumber; and while this expression, standing alone, might not be sufficient to give character to the transaction, yet it is entitled to great weight in determining what it really was; Moreover, it appears that, at the time of the conveyance and agreement, •Johnson was in a state of mortal illness, of which he shortly thereafter died; that he desired to make provision for the payment of his debts, so as to •avoid the delay and expense incident to administrative proceedings, and, to that end, chose to convey a portion of his property to the plaintiff to be converted into money for that purpose; and we know of no rule of Law- which will prohibit- the •carrying out of his intention so clearly and definitely expressed in the instruments evidencing the transaction. It is claimed that the case of Thompson v. Marshall, 21 Or. 171 (27 Pac. 957), is antagonistic to this view; but it will be observed that it appeared in that case, either from the instruments themselves -or from tire averments of the complaint, that the — 202 — transactions were expressly intended and designed as mortgages to secure the payment of money, and. had attached to them all the incidents of redemption and right of foreclosure; and the only question before the court, or considered by it, was whether a power of sale contained in a mortgage was valid in this state. The court did not undertake to hold-that the owner of property could not convey it absolutely to a trustee for the purpose of raising a. fund with which to pay his debts, or that such a. trust could not be enforced without the aid of a, court of equity. The distinction between such an instrument and a mortgage or deed of trust designed as security for a debt is everywhere recognized, and is pointed out with clearness in the following authorities: 2 Pomeroy’s Equity Jurisprudence, § 995; Kinney v. Heatley, 13 Or. 45 (7 Pac. 359); Flagg v. Walker, 113 U. S. 659 (5 Sup. Ct. 697); Hoffman v. Mackall, 5 Ohio St. 124 (64 Am. Dec. 637); Woodruff v. Robb, 19 Ohio, 212; Turner v. Watkins, 31 Ark. 429; Soutter v. Miller, 15 Fla. 625; Title Guarantee Company v. Northern Counties Trust, 73 Fed. 931; Catlett v. Starr, 70 Tex. 485 (7 S. W. 844); Newman v. Samuels, 17 Iowa, 518;. McDonald v. Kellogg, 30 Kan. 170 (2 Pac. 507). 2. It is further claimed that the transaction between Johnson and the plaintiff is, in legal effect, a. voluntary assignment for the benefit of creditors, and void, under section 3173, Hill’s Ann. Laws, because it is partial, and creates a preference in favor of certain creditors. The section referred to provides that “no general assignment of property by — 203 — an insolvent, or in contemplation of insolvency, shall be valid unless it be made for the benefit of all the creditors in proportion to the amount of their respective claims.” The operation of this section is limited to general assignments, and was designed to cut up by the roots the common law doctrine that a debtor could lawfully make an assignment with preferences in favor of certain creditors. But it does not prohibit him from preferring one creditor to another, or from making a partial assignment for the benefit of creditors, unless it is done in contemplation of and as part of a general assignment. And the conveyance or assignment in question here does not come within its provisions, because it was neither a general assignment, nor made by an insolvent or in contemplation of insolvency. The complaint avers, and the demurrer in effect admits, that Johnson was wholly solvent at the time, and that the deed and agreement wei'e intended to transfer and cover only a portion of his property. Hence it cannot be said that such a transaction comes within the provisions of the section quoted. Its provisions are confined to general assignments for the benefit of creditors, made by an insolvent debtor or in contemplation of insolvency, and does not affect the common law right of a debtor to prefer one creditor to another, if done in good faith: Inman v. Sprague, 30 Or. 321 (47 Pac. 826); Sabin v. Wilkins, 31 Or. 450 (37 L. R. A. 465, 48 Pac. 427); Loomis v. Stewart, 75 Iowa, 389 (39 N. W. 660); Campbell v. Colorado Iron Company, 9 Colo. 60 (10 Pac. 251). — 204 — It follows that the decree of the court below must be reversed and a decree rendered here reforming the deed and agreement set out in the complaint, as prayed for, and declaring the plaintiff to be the legal owner of the property therein described, with the right and power to dispose of the same according to the terms of his trust. Reversed.