Burgett v. Osborne

Mr. Justice Magruder delivered the opinion of the court: The main question in this case is, whether the original transaction was a purchase by the appellant, Frank S. Osborne, with a privilege to Heffron to buy, or whether it amounted to a loan to Heffron, so as to make the deéd absolute to Frank S. Osborne a mortgage. This question is mainly one of fact. The evidence is somewhat conflicting. The chancellor, before whom the case was tried below, heard the witnesses testify orally, except that, perhaps, the testimony of one witness, not particularly material, was presented in the form of a deposition. The record is large, and the evidence is voluminous. We do not deem it necessary to enter into a minute discussion of all the facts and circumstances, bearing upon the question here presented. When the trial court has had an opportunity of seeing the witnesses, and of hearing their testimony as it is delivered orally, the findings of such court upon mere questions of fact, when the testimony is conflicting, will not, ordinarily, be disturbed on appeal, unless such findings are clearly and manifestly against the preponderance of the evidence. (Lane v. Lesser, 135 Ill. 567). After a careful examination 6f the record, we are not able to say that the findings of the lower court are clearly and manifestly ag'ainst the preponderance of the evidence. Such findings are entitled to much weight, where the witnesses are seen and examined orally, inasmuch as a better opportunity is thus afforded of arriving at a correct conclusion as to the facts. (Rackley v. Rackley, 151 Ill. 332). In such cases a reversal is not authorized, unless the error in the findings of the court below as to the facts is clear and palpable. (Coari v. Olsen, 91 Ill. 273). There are, however, some features of the transaction, tending to confirm the correctness of the findings of the lower court, which may be here briefly referred to. A foreclosure decree had been rendered against the appellant, Heffron, for a very large amount; and, under this decree, the hotel property, located upon lots 15 and 16, had been sold to Horace E. Hurlbut on March 19,1894, for $146,747.15. A certificate of purchase was issued by the master in chancery, who made the sale, to Hurlbut. The time of redemption, allowed to Heffron to redeem from this sale, expired on March 19, 1895. On April 17, 1895, the certificate of sale was transferred to the appellee, Frank S. Osborne. When such transfer was made, Heffron had no interest whatever in the property. His right to redeem, which lasted during the year from March 19,1894, to March 19, 1895,’had expired. During the three months thereafter up to June 19, 1895, only his judgment creditors had a right to redeem. It is said by counsel for appellants, that the purchase of the certificate of sale after the expiration of twelve months from the date of the foreclosure sale is not material to the rights of Heffron in the hotel property. This may be true where the facts are such as are set forth in most, or many, of the adjudged cases referred to by counsel. It is impossible for us to examine or comment upon all of these cases. We will refer to only two. One of them is the case of Moore v. Pickett, 62 Ill. 158, and the other is the case of Trogdon v. Trogdon, 164 Ill. 144. In Moore v. Pickett, supra, the owner of land, which had been sold under execution, made an arrangement with the tenant, living upon the land, to redeem the same, and the tenant took an assignment of the certificate of purchase in his own name, while acting* as the ag'ent of the owner, his landlord, and after-wards procured the sheriff to make a deed to himself, instead of having it made to his principal; under these circumstances, it was there held, that, in equity, the agent was the trustee of his principal. In the case at bar, however, Frank S. Osborne was not, at the time when he purchased the certificate of sale, the attorney or agent of the appellant, Heffron. He had retired from the active practice of the law some years before these occurrences. The money, with which the certificate was purchased, did not belong to Frank S. Osborne, but belonged to his wife, Louise N. Osborne. This fact was well known to Heffron. The evidence tends to show that Heffron, having learned of the fact that Mrs. Osborne had recently received a large remittance from New York, urged upon her husband, Frank S. Osborne, with whom he was upon terms of friendship, that such money should be used to buy the certificate. Reluctantly, but after much solicitation, Frank S. Osborne and his wife consented to make the purchase. In Trogdon v. Trogdon, supra, it appears, that there was a written agreement, made between the purchaser of the certificate and the judgment debtor, providing for the cancellation of the same at a certain time Upon the payment of a certain amount by the judgment debtor; that, in addition to this, a part of the money for the purchase of the certificate was furnished by the judgment debtor himself. No such facts, as are thus indicated, exist in the present case. Here, there was not only an absolute transfer of the certificate of sale to Prank S. Osborne, and subsequently an execution of the master’s deed to him, but parol evidence only is relied upon for the purpose of showing, that such transfer and deed were intended as a mortgage, or security for a debt. In such cases, when the deed is absolute, and parol evidence is relied upon to show that there is a mortgage, the party, affirming that the instruments were intended as securities for a debt, must show that such was the intention by clear and convincing evidence. (Keithley v. Wood, 151 Ill. 566). Here, there was no such clear and convincing evidence. In Helm v. Boyd, 124 Ill. 370, we said (p. 374): “A deed absolute on its face may be shown by parol to be a mortgage. The law will, however, presume, in the absence of proof to the contrary, that such a deed is what it purports to be,—an absolute conveyance. The party, who claims an absolute deed to be a mortgage, must sustain his claim by proof sufcient to overcome this presumption of the law. Before a deed, absolute in form, will be held to be a mortgage, the evidence must be clear, satisfactory and convincing. It must be made to appear clearly that such a conveyance was intended to be a mortgage at the time of its execution. The question is one of intention to be ascertained from all the circumstances.” (Fisher v. Green, 142 Ill. 80; Jeffery v. Robbins, 167 id. 375). In the latter case we said: “The question, whether a contract of re-sale and purchase is to be construed as a mortgage, depends on the intention of the parties at the time of the transfer.” We are unable to say, that the court below erred in holding that here there was not such intention. ’The rule, that the doubt as to the intention will be resolved in favor of the construction, that the conveyance is a security for a debt, is not so rigidly applied when oral evidence is introduced to show that the conveyance was a mortgage, as when it appears from a separate written instrument, that the transaction is not an unconditional sale, but is either a mortgage, or sale with right to re-purchase. (Keithley v. Wood, supra). Ag'ain, neither when the certificate of sale was assigned to Frank S. Osborne, nor when the master’s deed was executed to him, did any indebtedness exist from Heffron to Frank S. Osborne. In Rue v. Dole, 107 Ill. 275, the question arose, whether a transaction was an absolute sale or a mortgage, and we held it to be the former on the ground that there was no debt, and “that it is an essential element of a mortgage that some obligation should exist to be secured.” In that case we said (p. 280): “The deed purports upon its face to convey the premises absolutely, and the contract is a mere re-sale of the premises upon the payment of a certain sum at a specified time. So far, then, as appears from the terms of the deed and contract, there is nothing to indicate that the transaction was a mortg-age. * * There is nothing" in the circumstances that surround the arrangement that tends to show that the parties intended that the relation of mortgagor and mortgagee should still continue. * * * The land could not be conveyed as security for a debt* because there was no debt to secure.” The language thus used in Rue v. Dole, supra, is precisely applicable to the present case. Again, in Freer v. Lake, 115 Ill. 662, it was held that “a debt or obligation of some kind is an essential element in the transaction to create the relation of mortgagor and mortgagee.” (Kerting v. Hilton, 152 Ill. 658.) It is undoubtedly true, that Frank S. Osborne’s motive was a desire to help Heffron, and that the transaction was for Heffron’s benefit. But the proof clearly shows, that it was not the intention of Frank S. Osborne, or of his wife, to remain out of possession of their money longer than September 1, 1895. Hurlbut, from whom the certificate of sale was purchased, had given the parties to understand, that, when the title should be perfected by the execution of a master’s deed, he would be able to effect a loan upon the premises for the whole amount of the money advanced, so that thereby Heffron could purchase back the property. It turned out, however, that Hurlbut was unable to make the promised loan. The agreement substantially was, that Frank S. Osborne, acting" for his wife, would borrow $80,000.00 of the Hibernian Bank, and with this $80,000.00 and other money of Mrs. Osborne, would buy the certificate of sale, and, if it ripened without redemption into a title absolute, whatever might be necessary to acquire the interest of the Gore trustees should be done, so far as Mr. and Mrs. Osborne might deem it proper to make an additional investment of money; that Heffron should have the privilege of purchasing the property of them at any time on or before the first of the following September for what they might, at the time of such purchase, have put into it and a reasonable advance, the amount of which was not agreed upon at the time, but was afterwards fixed at $25,000.00, and that, if Heffron did not succeed in purchasing the property by the first of September, they might sell it to any one else. The facts of the case at bar thus bring it within the ruling of this court in the case of Eames v. Hardin, 111 Ill. 634, the facts of which are very much like the facts here. There, certain lots of a part owner, having been sold at a judicial sale more than twelve months, he employed another to obtain the certificates of purchase and acquire the title, under an agreement on his part to purchase the same at an advance of $2000.00 on the sum required to be paid, besides the legal rate of interest, to enable him to perform a contract of sale to another; he also conveyed other land to the purchaser as security for his performance of the contract to re-purchase the lots; and it was held, that the advances made to acquire the title to the lots were not a loan, and that the title so acquired was not in the nature of a mortgage. In that case we said (p. 641): “The doctrine is well settled that a party may purchase land for another, take the deed in his own name, and bind himself to convey it to the person at whose instance it was purchased, on being paid the purchase price agreed upon between the parties. The doctrine is well established that one person may purchase land of another, and sell it back to him on the payment of a stipulated price. Such purchases and re-sales are always sustained where the transaction is in good faith, and is not resorted to for the purpose of evading the usury laws, or the transaction is not tainted with fraud. This doctrine is so familiar that it requires the citation of no authorities in its support. * * * The facts in this case are as strong as in Magnusson v. Johnson, 73 Ill. 156, Hanford v. Blessing, 80 id. 188, and Caprez v. Trover, 96 id. 456, in all of which the transactions were held to be sales and re-purchases. This case falls clearly within the principles announced in those cases, and should be governed by them.” (Stephenson v. Thompson, 13 Ill. 186; Taintor v. Keys, 43 id. 332; Sutphen v. Cushman, 35 id. 186; Fisher v. Green, supra). Counsel for appellants speak of the transaction as one, where Osborne advanced half of the money to purchase the certificate of sale and Heffron borrowed the other half from the Hibernian Banking Association. As matter of fact, such was not the case. It required $161,-399.79 to purchase the certificate of sale. If the bank had advanced half of this amount to Heffron, and Osborne had advanced the other half to Heffron, then the certificate, if a security for the amounts advanced, would have been made out to the bank, or its president, and to Osborne, so that each would have held the title to an undivided half of the property as security for each advance. But the matter was not thus arranged. Osborne paid Hurlbut $81,399.79 in cash for his wife, and took an assignment of the certificate from Hurlbut to himself. Thereupon, Osborne borrowed $80,000.00 from the Hibernian Bank, and assigned the certificate of sale to the Hibernian Bank as security for the amount so borrowed, and also paid over the amount so borrowed to Hurlbut. Osborne thus dealt with the certificate as his own property by himself borrowing upon it, as security, from the bank $80,000.00. Hefiron borrowed nothing. In an ordinary transaction, when a party advances money to another to purchase a certificate of sale, and has it assigned to himself, he may hold the title to the certificate as security for the money which he has advanced. But, in this case, Osborne went farther, and himself pledged the certificate for a loan from the bank to himself. So also, when the master’s deed was executed, the deed was not made to the bank and to Osborne. The deed of the property was made by the master to Osborne. Osborne thereupon executed a trust deed upon the property to secure an indebtedness of his own of $100,000.00 to the bank, which indebtedness was guaranteed by his wife. If the master’s deed was security in the hands of Osborne for a loan made to Hefiron, the title obtained by it was also at once made security in the hands of the bank for a loan of $100,000.00 advanced by the bank to Osborne. How can it be said that the transaction was a mortgage securing an indebtedness from Hefiron to Osborne, when, as matter of fact, the title was pledged to secure an indebtedness from Osborne to the bank? It must be observed, that Hefiron is asking" no relief in this case. Hefiron has filed no bill to redeem. The bill in this case is filed by the appellant, Burgett. It is in the nature of a creditor’s bill, setting up the recovery of a judgment against Hefiron, the issuance of an execution thereon, and the return of the same unsatisfied. The complainant in the bill seeks to establish an interest in Hefiron, in order that he may make the judgment out of such interest. The bill filed by Burgett alleges, that the title held by Osborne was held, not only as security for the benefit of Heffron, but for the benefit of the owners of the judgment for $100,000.00. We discover no satisfactory evidence, that there was any agreement on the part of Osborne and his wife to hold the property as. security for the amount due upon this judgment. The judgment was evidently entered up for a larger amount than was equitably due, because, by agreement, it is scaled down in this case from $100,000.00 to $40,000.00. The judgment appears to have been entered up for the purposes of redemption, in case it should be necessary to use it for such purpose, and in pursuance of a scheme to prevent the executors and trustees of the Gore estate from asserting any rights in the property. The Gore trustees owned the furniture in the hotel which was in full operation, as well as the west half of the leasehold estate on which the Open Board building was located. If the transaction was a mortgage, and not a bona fide purchase by Frank S. Osborne for his wife, then it is evident that the appellants intended to give the transaction the form of an absolute purchase, in order to deceive and defraud the Gore trustees and Hefiron’s judgment creditors. This being so, it cannot be said that the complainant, who filed this bill, comes into court with altogether clean hands. He who seeks equity must do equity. The decree, which was entered on July 21, 1896, mig'ht well have found that appellants were not entitled to exercise the right to re-purchase the property at all, because the period, ending with September 1, 1895, during which, by the agreement, Héffron was to be allowed to re-purchase, had passed. But the cross-complainants, in their cross-bill, offered to allow the appellants to repurchase the property upon reimbursing them for their advances; and they do not insist upon, and were not allowed by the decree, the agreed bonus of $25,000.00. In pursuance of this offer in the cross-bill, the court below, in its final decree, gave the appellant, Heffron, until December 5,1896, and the appellant, Burg'ett, until February 5, 1897, to buy back the property, in case they should be able to raise the money to do so. They, however, have not paid, or offered to pay, any part of the advances made by Mr. and Mrs. Osborne. Nor before the filing of the present bill did Heffron ever offer to pay back to the Osbornes any portion of their advances. Some complaint is made of that portion of the decree, which requires the appellants to pay back the amount paid out by the appellees for the purchase of the outstanding interest of the Gore trustees in the furniture and in the leasehold interest upon the west half of the property. We think, that this purchase from the Gore trustees was part of the same transaction with the purchase of the cértificate of sale, and stands on the same footing. The Gore trustees were in possession of the furniture and of the west half of the property. It was impossible to operate the hotel without the possession of the furniture and of the interest owned by the Gore trustees. It was necessary to purchase their interest, in order to make the property of any value. There is testimony tending to show, that Heffron himself acceded to the wisdom and necessity of making the purchase from the Gore trustees. There is also testimony tending tó show, that the certificate of sale was purchased with the understanding, that the interest of the Gore trustees should be bought, if it should become necessary to do so. The court below found in its decree: “that the furniture and fixtures in said hotel building and the rights of said trustees in the property made it essential to acquire their interest in the whole property, before the purchase of lots 15 and 16 could be rendered of value.” We are of the opinion that this finding is sustained by the evidence. Our conclusion, upon a careful examination of the whole record, is that the decree of the chancellor, who tried the case below, and the judgment of the Appellate Court, affirming that decree, have done substantial justice between the parties, and that there is no good reason for a reversal of the action of the lower courts in this case. Accordingly, the judgment of the Appellate Court and the decree of the Superior Court are affirmed. Judgment affirmed.