Harmon v. Grants Pass Banking & Trust Co.

Mr. Justice Moore delivered the opinion of the court. It is contended that a consideration of the situation of the parties to the deed, of the price stipulated as a consideration for the mines, when compared with their value, of the conduct of the parties before and after the deed was given, and of the circumstances attending the transaction shows that in executing and accepting the deed it was intended that the sealed instrument should be security for the payment of a debt, and such being the case errors were committed in dismissing the suit and in not granting the relief sought. 1. The intention of the parties at the time an agreement is consummated to execute a deed determines whether or not title to property was to be irrevocably transferred, or the conveyance, though absolute, was to operate as security for the payment of a debt or the performance of an obligation. Kramer v. Wilson, 49 Or. 333 (90 Pac. 183) Hall v. O’Connell, 52 Or. 164 (95 Pac. 717: 96 Pac. 1070); Elliott v. Bozorth, 52 Or. 391 (97 Pac. 632). 2. Based on the maxim that a person takes ordinary care,of his own concerns (Section 799, subd. 4, L. O. L.,) a disputable presumption arises from the execution of an absolute deed that the conveyance evidences the inten — 74 — tion of the parties, except in the cases of fraud: Parrish v. Parrish, 33 Or. 486 (54 Pac. 352). In order to overcome the deduction which the law thus expressly directs to be made from particular facts, the burden of proving that a sealed instrument is not what it purports to be is cast upon the party who asserts a different signification. Parol evidence is sufficient for that purpose; but, in order that title to real property may be rendered secure, proof of that character ought clearly to preponderate. Plaintiffs’ counsel seems to place much reliance upon the case of Stephens v. Allen, 11 Or. 188, 190 (3 Pac. 168, 169), where, in referring to evidence tending to establish the subordinate elements of fact relied upon herein to disclose the intention of the parties, it is said: “As a consequence of this doctrine, each case must be scrutinized and judged by its own surrounding facts and circumstances, and when the result of the evidence is to produce doubt the courts incline to construe the instrument to be a mortgage.” The authorities cited to support this declaration of a legal principle are Jones, Mort., § 279; Conway’s Ex’r v. Alexander, 7 Cranch 218 (3 L. Ed. 321); Edrington v. Harper, 3 J. J. Marsh (Ky.) 354 (20 Am. Dec. 145), each of which refers to a transaction where doubt exists as to whether the conveyance was intended as a mortgage or a conditional sale. 3, 4. If the transfer of a title is made to depend upon the performance of a condition, and at the termination of the limit prescribed for a reconveyance the grantor is not in a situation to keep his promise, or does not desire to perform his engagement, no legal obligation rests upon him to do so. The conditional sale reserves to him a mere option, permitting him to speculate upon the possibility of an enhanced value of the property, and, if his expectations are disappointed in this particular, allowing him to escape liability, but, if his desires are — 75 — realized, authorizing him to demand a reconveyance. When, however, the transaction is regarded at its inauguration as a mortgage, the opportunity for hazard respecting any fluctuation in the value of the property is eliminated, and the doctrine of once a mortgage, always a mortgage, controls. Jones, Mort. (6 ed.) § 256. “A mortgage and a conditional sale,” say the court, in Turner v. Kerr, 44 Mo. 429, 431, “are said to be nearly allied to each other; the difference between them being defined to consist in this: That the former is a security for a debt, while the latter is a purchase, accompanied by an agreement to resell on particular terms.” A conveyance intended as a sale upon conditions must contain, either in the body of the instrument or in another memoranda, acknowledged by the grantee, the express provisions, the performance of which authorizes a reconveyance of the premises, since, aside from the question of a reformation in consequence of omission by mistake, the deed must speak for itself, and a condition cannot be ingrafted upon a deed, absolute in form, by parol evidence. 2 Devlin, Deeds (2 ed.) § 976. Based on these considerations, the rule has been established in equity that, where doubt exists as to whether the deed evidences a conditional sale or a mortgage, the uncertainty will be resolved in favor of a conveyance designed as a security for the payment of money. The doctrine thus announced has no application to the case at' bar, for it is not pretended that an agreement, oral or written, was ever consummated, whereby the mines were to have been reconveyed to the grantors. The co-operative elements relied upon to reveal an intention to execute and accept a conveyance by way of indemnity will be examined in the order hereinbefore stated. The evidence shows that in January, 1909, no payments had been made on the $3,000 promissory note, though it was due. J. T. Tuffs, the managing — 76 — agent of the trust company, demanded a partial payment, with which Jewell and J. R. Bailey could have complied, but the other makers of the note were unable to respond. The requests for a settlement became more urgent as the time elapsed; Tuffs threatening to have the mortgage foreclosed, unless the debt was speedily paid. Several conferences were had with him by Harmon and both Baileys, in an effort to retain an equity in the mines, the title to which they offered to convey to the trust company, if they could secure from the latter a bond for a deed covenanting to reconvey the premises upon payment of the mortgage debt; but these offers were declined. Jewell was not then on friendly terms with any of the agents of the trust company, and never consulted, with them. His interest, however, were represented by the other cotenants, who reported to him the results of all their interviews with Tuffs. A term of court was drawing near, at which the mortgage could have been foreclosed, thereby incurring costs of suit, attorney’s fees stipulated for in the note, and the possibility of a deficiency judgment, if the property did not bring enough at a forced sale to satisfy the decree, to prevent which consequence Harmon, Jewell, and J. R. Bailey, and the wife of each, on January 6, 1909, joined in executing a deed of the property to the trust company. G. N. Bailey or his wife did not sign or acknowledge the conveyance until January 10¡th, on which day the deed was taken to the bank of the trust company for delivery. At that time the grantors, thinking they might, in a few days, be able to effect a sale of the mines to a party with whom they had been negotiating, Tuffs acceded to their request for an extension, and wrote on the back of the deed: “Hold until Thursday Jan. 21, 1909.” The expectations of a sale not having been realized, the deed was filed for record the day following the time so limited, whereupon the — 77 — secured note was surrendered to its makers, and the mortgage record satisfied. The plaintiffs severally testified that at the time their deed was executed the value of the mine was $25,000 or more. The evidence shows that a long tunnel had been run, and many improvements made on the prop-' erty, which included a five-stamp mill. The mines had been owned by the grantors several years, but with the appliances which they possessed all the gold could not be saved, and for that reason the speculation had never been profitable. It will be remembered that on March 8, 1909, the trust company engaged to sell the property for $10,000, of which sum only $500 was then paid. T. J. Brinkerhoff, who negotiated this purchase for the mines company, testified that after the contract had been effected Harmon told him the premises could have been secured from the mortgagors for $5,000, which sworn statement was not denied. Jewell testified that as much as $20,000 had been expended in developing the mines, the base ore from which could not be successfuly treated with their mill. On cross-examination this witness, having stated that he had seen the time he would have given $20,000 for the property, was asked: “That was before you knew as much about it as you do now?” He replied: “Yes sir; before I knew as much about mining as I do now.” Q. You wouldn’t buy it now? A. Two fools might meet. - Q. In other words, buying a mine is a good deal like buying a gold brick, is it not? A. To a certain extent, I think it is. These replies, made by a man who had learned wisdom by experience, afford the best explanation of the value of most mines, the worth of which is whatever — 78 — sum can be obtained from such a buyer as Jewell describes. The testimony shows that prior to the execution of the deed, Tuifs repeatedly stated to the mortgagors who conversed with him about the matter that the trust company did not desire the property, but needed its money. His granting an extentsion of five days in which to effect a sale of the mines after the deed was tendered confirms his declaration. G. N. Bailey testified that on January 16, 1909, and prior to signing the deed which he then had in his possession, he saw Tuffs, to whom he said: “I told him that I was ready, working to sell the property, and asked him if he was in a hurry to have the deed turned over. He said he was. • I told him I did not feel like sacrificing my 18 years work, and turn it over to the bank, but should receive something out of it. He said he didn’t care if I received $20,000. He didn’t want the mine; all he wanted was the deed signed over, so as to secure him, so he could sell the property to get the money for the bank, and we could have what was over.” And that the witness and his wife soon thereafter executed the deed. This sworn declaration respecting the conversation detailed is substantially corroborated by the testimony of W. Harmon, who states that it occurred at Grants Pass, saying: “I stood probably 20 feet away from Mr. Bailey down the street,” but plainly heard the colloquy, in narrating which and referring to Mr Bailey, he deposed as follows: “George says, T don’t propose giving 18 years work away.’ Mr. Tuffs says, ‘We are not asking you to. All the bank cares for is its money; we don’t care a damn for the mine, if you make $15,000 out of it; you can have all over what is coming to the bank.’ ” T. J. Tuffs testified that about the time and at the place stated he met G. N. Bailey, to whom he said: “I — 79 — don’t want the mine; the bank wanted its money. I was giving them every opportunity to avoid taking over the mine;” but that he did not promise to pay over any surplus in case the deed was executed to the trust company. The chief circumstances attending and explaining the transaction were the urgent demand of the agent of the trust company that the note for $3,000 and interest be paid; his threat to foreclose the mortgage lien, unless the money was forthcoming prior to a session of the court soon to convene; the inability of the mortgagors to liquidate the indebtedness, or to secure a purchaser of the mines; and their desire to avoid the consequences of a suit. These subsidiary facts induced the execution of the deed. The plaintiff Harmon wrote a letter to G. N. Bailey, in which, in referring to the proposed conveyance of the mines to the trust company and to what its agent offered, he states: “Tuffs has agreed to give us what money he gets over and above what is coming to them.” The person to whom the letter was mailed testified that, relying upon the declaration quoted, he executed the deed. Jewell also testified that, confiding in the representations made to him by his cotenants that the money received from a sale of the mines by the trust company, after discharging its debt, was to have been paid over to the mortgagors, impelled him to join in the execution of the deed, saying that it was his “understanding” that the surplus was to be returned. Harmon testified that such was his “understanding.” 5. The foregoing is thought to be a fair synopsis of the material testimony, which has been set forth at unusual length in order to show the co-operating incidents that seemed to influence the execution of the deed. Looking at all these circumstances in the light most — 80 — favorable to the plaintiffs, we do not think that they have made a case which so preponderates as to entitle them to a decree. From a consideration of all the testimony, some doubt may arise respecting the nature of the transaction, but if a decree of evidence amounting only to a mere state of uncertainty is sufficient to warrant the alteration of a deed, purporting to be absolute, and to authorize it to be construed as a mortgage, when the burden of proof rest upon the party who attempts to establish that fact, it is safe to predict that faith in the certainty of legal titles, the transfer of which is undertaken to be evidenced by formal conveyances, would be very much impaired. 6. The plaintiffs have not made, in our opinion, such a case as the law requires; nor could they well do so without an averment and proof of fraud. No rule of equity inhibits a mortgagor from conveying to the mortgagee the incumbered property in consideration of a discharge of the indebtedness and a cancellation of the lien. One of the crucial tests by which to determine that a deed, absolute in form and executed under the circumstances indicated, shall forever retain the character which it assumes is the extinguishment of the secured debt, or the abolishment of a part thereof, equal to the value of the property described. If the debt is not diminished by the execution of a deed of the property subject to the lien, it is reasonably to be inferred from the transaction that the conveyance was intended by the parties as further security, or was executed to protect or advance their interests. 7. The surrender of the mortgage note and the cancellation of the lien established the fact beyond the possibility .of .a doubt that the entire debt was extinguished. 8. Some latent equity is invoked in aid of Jewell, on the ground that, .relying upon the representations made — 81 — to him by Harmon and J. R. Bailey, he was induced to join in executing the deed, believing that in case of a sale of the mines by the trust company any sum of money received in excess of the mortgage debt would be paid over to him on the basis of his undivided interest in the premises. The same legal principle is sought in behalf of G. N. Bailey, on the ground that he relied upon a declaration to that effect contained in Harmon’s letter. In order to secure equitable intervention, it was incumbent upon Jewell and G. N. Bailey to do equity. They never repudiated a surrender of the notes or a cancellation of the mortgage, or offered to place the trust company in statu quo, so far as they or either of them were capable of doing so. They do not allege or attempt to prove any fraud on the part of the persons who made the representations, and by retaining the fruits of the transaction, With full knowledge thereof, they surely ratified the acts of their agents. Believing that the testimony fully supports the decree, it is affirmed. Affirmed.