Kidwell v. White

Mr. Justice Van Orsdex, delivered the opinion of the Court: The principal question is whether or not the conveyance of February 19, 1913, should be treated as a mortgage. The court below held it to be an absolute conveyance of all the interest of plaintiff, and denied an accounting. We think this conveyance must be treated as a mortgage. The law is well settled that where a conveyance, absolute on its face, is made merely for the purpose of securing a loan or contemporaneous debt, a court of equity will disregard the mere, form of the instrument, and will look to the intent of the parties. Russell v. Southard, 12 How. 139, 13 L. ed. 927; Brown v. Hight, 33 App. D. C. 260; Brown v. Reilly, 72 Md. 489, 20 Atl. 239; Artz v. Grove, 21 Md. 456; Campbell v. Dearborn, 109 Mass. 130, 12 Am. Rep. 671. What have we here? Plaintiff applied to defendant for a loan, — not to sell his interest in the property. The amount requested — $100—was furnished, and the deed and lease executed. That defendant regarded it as a loan, and the deed as security, conclusively appears from his own conduct. On February 21, 1913, two days after this transaction, he entered a credit in the passbook of $18 on the original purchase price of the lots. This must have been paid from the loan, since it can be accounted for from no other source. The testimony of defendant discloses that plaintiff had paid nothing on the loans or on the rent; that at the time of making this loan the former loan was more than exhausted; that plaintiff, after the cash payment of $10, had personally paid but $6 on the purchase price [604] of the lots, and that there remained due on the lots after this last credit, $210. It may be here suggested, Why did defendant make this credit on the purchase contract if, as he contends, the deed devested plaintiff of all his interest in the property ? Defendant testified that he “had to advance the additional $100 to complete the house,” -which money'he retained for that purpose. If the conveyance was absolute, devesting plaintiff of any further title in the premises, why did the consideration not pass to plaintiff ? Why the stipulation that this money be expended for the improvement of the property conveyed ? On the theory of defendant, the property was his. He could spend as much or as little as he pleased upon it; yet he considered himself bound to spend the consideration on the house, — the purpose for which plaintiff applied for the loan, and the purpose for which we must hold it was made. It is also significant of defendant’s understanding that on March 19, 1913, one month after the execution of the deed, he delivered a statement of account to plaintiff in which he charges him with the $100 item as a loan. Under the evidence in this case, to deprive plaintiff of his equity in the proceeds of the sale of this property would shock the conscience of a court of equity. Contracts for the purchase of real estate, like the one before us, common in this District, are not overcharged with equity in favor of the purchaser. In fact, the burden usually assumed by him under such a contract is a heavy one, and a court of equity should scrutinize closely such transactions, and lend its strong arm to prevent the almost certain injustice which the enforcement of its penalties and forfeitures inflict. As to the $75 deducted by defendant from the $175 loan for alleged services in making the loan and looking after the completion of the house, we think, in the circumstances of this case, it should be charged as usury. While there is some conflict as to the amount of service rendered, this method, common among brokers and real estate agents, of exacting exorbitant commissions from borrowers under the pretense of services to be rem dered in the future, affords such a convenient avenue through [605] which to conceal an evasion of the law that, before a court of equity will lend its approval to such a transaction, those claiming its benefits must appear with hands untainted with even the suspicion of usury. It appears that defendant rendered a statement of account showing the amount claimed to be due him from plaintiff, including interest, on March 19, 1913, as follows: “Balance on lots............................. $210.00 Balance on loan No. 1 ....................... 455.00 Balance on loan No. 2....................... 100.50 Insurance ................................. 5.00 $770.50” Defendant will be held to this statement, and not now allowed to dispute its correctness. From this amount should be deducted $75, with interest at 6 per cent from October 29, 1912, the date of the $475 loan, to March 19, 1913. Defendant should be allowed interest at the same rate on the balance from March 19, 1913, to June 3, 1913, the date of the sale of the property. Defendant should also be allowed for whatever expense he incurred for labor and materials after March 19, 1913, in putting the property in salable condition. The difference between the amount so found and the selling price of the property represents the equity of plaintiff, for which he should be given a decree, with interest. Counsel for plaintiff generously suggested at bar the willingness of plaintiff, in lieu of the satisfaction of the decree by payment in cash, to accept from defendant an assignment of sufficient number of the last notes becoming due, representing the monthly payments on the purchase price of the property, to satisfy the amount found due under said decree. Defendant should be granted this privilege, if he so elects. The decree is reversed, with costs, and the cause is remanded for an accounting and decree consistent with this opinion. Reversed and remanded.