Smith v. Headlee

BEAN, J. A careful reading of the testimony, fragments of which we have referred to, shows that the deed executed by the plaintiff to defendant J. R. Headlee was for the purpose of securing the payment of $100 loaned by Headlee to Smith with interest thereon, and any further sums of money paid by defendant J. R. Headlee as expenses for plaintiff, together with any taxes and insurance premiums on the real property paid by Headlee, and that it was understood and agreed between the parties that when the plaintiff paid defendant Headlee such sums with interest, he should “have his land back,” that is, Headlee and his wife would reconvey the land to plaintiff, and that the deed although absolute on its face was in effect a mortgage. It appears from the record that at the time of the execution of the deed, the plaintiff desired and was [262] practically compelled to have some financial assistance in order for Mm to receive medical attention and proper care, and that he applied to tlie defendant Headlee who was his friend and neighbor for help. He was perfectly willing to secure the payment of all that he then owed Headlee as well as all future ad-' vanees, Headlee agreed to make and should make. It seems that it was agreeable to both that when Smith should repay Headlee in full that Smith should have his land back. In case he did not recover his health so as to be about again, and failed to make such payment, Headlee did not want to have the deed in such a condition that he would have to foreclose, or so that any of Smith’s heirs could make trouble for him. At no time did Headlee seem unwilling to agree to re-convey the land if Smith paid him in full. On tMs point, he does not dispute the plaintiff as to the substance of what was said in regard thereto. Indeed when the matter was broached by plaintiff’s attorneys, defendant Headlee offered to reconvey the land to plaintiff upon the payment of $850, which was more than the plaintiff was willing to pay, and more than the trial court found to be due from plaintiff to defendant Headlee. It is fair to conclude that defendant made this offer for the purpose of showing that he was ready to carry out the agreement made at the time of the execution of the deed. The trial court carefully ascertained the amount due from plaintiff to Headlee, and fixed the same as $575.04. No error is assigned in this respect. The story is an old one. Headlee, while he was satisfied to have Smith rest assured that the land would be deeded back to him if he made payment, was not willing to make such agreement in writing, and in case Smith failed to pay, then, he desired to have the [263] deed an absolute one. He was advised by an attorney as to wbat the law was in regard to a deed given as security, but be did not seem willing to follow such advice. He undertook like many others to have the deed absolute, when in reality it was given as security, and for no other purpose, and was in effect a mortgage. It is a maxim of equity that: “Once a mortgage always a mortgage.” By this is meant that the character of a transaction involving the conveyance of property is fixed at its inception, and if at that time the conveyance is intended to operate by way of security and as a mortgage, a mortgage it must remain with all the incidents thereof despite express stipulations to the contrary in the instrument of conveyance looking to the abrogation of the mortgagor’s equity of redemption. A court of equity never deviates from this doctrine. Its maintenance is deemed essential to the protection of the debtor, who, under pressing necessities, will submit to ruinous conditions, waiving the equity of redemption allowed him on breach of his obligation, in the expectation and hope of repaying the loan at the stipulated time and thus preventing forfeiture. It is. axiomatic that a conveyance cannot be a mortgage unless given to secure the performance of an obligation. Conversely, if the conveyance is intended to secure an obligation, it will be construed in equity as a mortgage and as nothing else. The form or letter of an instrument of conveyance is not conclusive of its character, but its purpose is the decisive factor; and if that be security, then the instrument, irrespective of its form, must be construed to be a mortgage. The question is one of intention to be decided from a consideration of the whole transaction and not from any particular feature of it. Therefore, [264] the characterization of the transaction by the parties may be fairly disregarded: 19 R. C. L., p. 244, par. 7. 1. From the controlling principle that a conveyance is a mortgage irrespective of its form; if designed to secure the performance of an obligation, it results that a deed, though absolute in form and unqualified by any accompanying agreement for a reconveyance of the property or a defeasance, must be.construed to be a mortgage subject to redemption where it is made manifest from a consideration of all surrounding facts and circumstances that the parties thereto intended the conveyance ■ to operate by way of security and in no other mode. This rule is frequently enunciated and applied: 19 R. C. L., p. 261, par. 29. 2. There can be no question'but that the burden of proof rests upon one whose claim is founded upon the theory that the real character of the transaction is different from that which is imported by the language of the deed of conveyance. The presumption exists that a deed absolute on its face is what it purports to be: Harmon v. Grants Pass Banking & Trust Co., 60 Or. 69 (118 Pac. 188); Beall v. Beall, 67 Or. 38 (128 Pac. 835, 135 Pac. 185); Parrish v. Parrish, 33 Or. 486 (54 Pac. 352). Plaintiff has borne that burden by proving the allegations of his complaint. 3. In order to determine whether a deed absolute on its face is in effect a mortgage, the test is, was a debt created, or was * a pre-existing 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 therefor, then it should be declared to be a mortgage: Bickel v. Wessinger, 58 Or. 98 (113 Pac. 34); Caro v. Wollenberg, 68 Or. 420, 427 (136 Pac. 866); Grover v. Hawthorne Estate, 62 Or. 77 (114 [265] Pac. 472, 121 Pac. 808); Reilly v. Cullen, 159 Mo. 322 (60 S. W. 126). 4. In the case at bar, there was a pre-existing debt owing from plaintiff to defendant J. R. Headlee of $100, which was not extinguished at the time of the execution of the deed. Headlee retained the note given as evidence thereof, and also kept the mortgage. There was also a new obligation, indefinite in amount, from Headlee to Smith, created in making the arrangements for the payment of medical services and hospital expenses, etc. The whole transaction plainly shows that the deed was given as security to Mr. Headlee for the several amounts. The testimony fully sustains the findings of the trial court. We fully concur in such findings. Finding no error in the record, the decree of the lower court is affirmed. Affirmed. McBride, C. J., and JohNS and BeNNett, JJ., concur.