Niehaus v. Shetter

Mr. Justice Bean delivered the opinion of the court. It appears that on August 12, 1889, Frederick Shetter and Emily G. Shetter, his wife, deeded the real property in question to one Thomas Harkins, by a general warranty deed absolute upon its face, which was intended by the parties and was in force and effect a mortgage to secure the payment of the sum of $3,000, with interest at 8 per cent from that date. The deed was duly recorded in the records of Coos County. Frederick Shetter paid the interest accruing on the lien up to April 1,1898, and also paid all the taxes assessed against the property up to the time of his death on April 23, 3902. In March, 1903, Otto Shetter was appointed sole executor of the last will and testament of Frederick Shetter, deceased, and thereafter continued to pay the taxes on the property up to and including the year 1905. On December 19, 1903, Thomas Harkins and Kate Harkins, his wife, conveyed the real estate in controversy to Edward F. Niehaus, husband of the plaintiff, to secure the payment of certain advances made by [450] him to Harkins, amounting, as alleged in the answer, to about $5,000. This deed was also intended by the parties to be, and was in effect, a mortgage. It is shown by the evidence that at the time of the execution of the last-named conveyance Edward Niehaus was informed by Thomas Harkins that the property was held by him as security for the lien of $3,000 and interest. Harkins having died, his widow testified that, at the time of obtaining the advances from Niehaus, her husband, a sea captain, was about to make a voyage to Panama, and desired to obtain stores for his schooner, which necessitated the advances made by Mr. Niehaus; that pursuant to the directions of the latter she and her husband proceeded to the office of the attorney of Mr. Niehaus, in San Francisco, who prepared the deed which they signed, and also a writing, in duplicate, to the effect that when the debt incurred by Captain Harkins was paid the property should be returned. One copy was retained by Harkins and his wife, and was destroyed in the San Francisco fire. The other was left with the attorney for Mr. Niehaus. Captain Harkins did not return from his voyage. At one time Otto Shetter, as executor of the estate of Frederick Shetter, deceased, entered into an arrangement with Edward F. Niehaus, during his lifetime, for a sale of the land in question, and for a disposition of the proceeds. Niehaus claimed at the time that there was about $6,000 due. A deed was executed by him and his wife and placed in escrow in a bank at Marshfield, Oregon. Some time afterward, no sale having been made, the deed was returned to him, with the expectation that he would make a sale thereof in San Francisco,- California, and forward the balance agreed upon to the executor. [451] 1, 2. It is a well-settled rule of law that a deed absolute upon its face may be shown by parol to have been intended by the parties as security for the payment of the debt, and that it is in effect a mortgage: Kramer v. Wilson, 49 Or. 333, 337, 338 (90 Pac. 183); Elliott v. Bozorth, 52 Or. 391, 395 (97 Pac. 632); Grover v. Hawthorne, 62 Or. 77 (114 Pac. 472, 121 Pac. 808); Miles v. Hemenway, 59 Or. 318 (111 Pac. 696, 117 Pac. 273). It is also a well-known maxim of the law that “once a mortgage, always a mortgage”: Reilly v. Cullen, 159 Mo. 322 (60 S. W. 126). 3. Counsel for plaintiff invoke the principle of laches as a bar, citing and relying upon the case of Raymond v. Flavel, 27 Or. 219, 237 (40 Pac. 158), in support of their position. The facts there, however, are materially different from those in the case under consideration. In Raymond v. Flavel, 27 Or. 219, 237 (40 Pac. 158), the grantee, defendant, was let into possession of the land, and so remained for a great number of years, making extensive improvements, with the knowledge and consent of the grantor, the plaintiff. Here the original grantor, Frederick' Shetter, remained in possession of the land and paid the taxes thereon up to the time of his death in April, 1902. Thereafter his son Otto, as executor, continued in such possession and paid the taxes up to and including the year 1905, when it appears he entered into an agreement with Mr. Niehaus whereby the latter was to pay the taxes, pending a prospective sale of the premises. It is not evident that Niehaus at any time disavowed his trust, or questioned that the deed to him, and also one from Shetter to Harkins, were intended as a mortgage. [452] 4. The contention of counsel for plaintiff is in effect that in a case like the one in hand there must be a written deed of defeasance in order to constitute the deed a mortgage. With this claim we are unable to agree. 5, 6. In the determination of the question as to whether or not such a deed is in effect a mortgage, the legal test is this: Was a debt created, or was a preexisting debt continued, and was the instrument designed as security? If the pre-existing debt was not extinguished, or if a new debt was intended to be created, and the conveyance was given as security, then it should be declared to be in effect a mortgage: Bickel v. Wessinger, 58 Or. 98 (113 Pac. 34); Grover v. Hawthorne, 62 Or., at page 93 (114 Pac. 472, 121 Pac. 808). When the deed from Shetter to Harkins was executed, a debt was created, and the conveyance was designed as security therefor. In the case of the conveyance from Harkins to Niehaus, the former debt was not extinguished, the same was augmented, and the deed was given as security. The evidence shows that Niehaus had actual knowledge of the condition of the Shetter-Harkins deed; therefore these deeds should be declared in effect mortgages as decreed by the trial court. 7. The lower court did not foreclose the declared mortgage, and left that matter for another proceeding. We are of the opinion, however, that the controversy should be fully adjusted in this suit. For that purpose, the cause will be remanded to the lower court, where the parties should be allowed to take all such proceedings as may be necessary to determine the amount of the lien upon the land and complete the foreclosure of the mortgage deed. The costs upon this [453] Dec.T5.] Northern Brewery Co. v. Princess Hotel. appeal should he paid as other costs and disbursements in the foreclosure suit. Reversed and Remanded. ' Mr. Justice Bakin and Mr. Justice Harris took no part in the consideration of this case.