Phillips v. Hulsizer

The Chancellor. The bill in this case is filed for the redemption and re-conveyance of one half of a peach orchard planted by complainant on the land of defendant, under a written agreement that each should have one half of the proceeds; and also for an account. In July, 1863, the complainant, by an endorsement on the agreement, and for the consideration of $100, assigned his interest in the agreement to the defendant, who at the same time signed and delivered to the complainant a writing, stating that such, assignment was' upon the condition that the complainant might, on the 1st day of April, 1864, pay the $100 and interest from date, and “ then it is agreed by the parties, that the said Hulsizer, by receiving such payment, shall again return the said agreement so assigned by said O. T. Phillips to J. C. Hulsizer, to the said Phillips.” Phillips did not pay the money on the day set for the purpose, but tendered $112, as the amount due with interest, on the 29 th of May, 1865. The defendant refused to accept it, denying that the complainant had any right in the [313] ’premises, and claiming that he had forfeited all right by omitting to pay the amount on the day specified. The question in the case is, whether, under the circumstances, this transaction was a mortgage, or a contract to reconvey on payment of the price stipulated. If it was a mortgage, the complainant is entitled to redeem; and the defendant, who has been in possession and received all the produce of the orchard, must account for it to the complainant. By the original agreement the complainant was bound to plant the orchard and cultivate it, and to furnish and put upon it every year manure to the value of $25. On the day of the transfer he applied to the defendant for the loan of $25 for that purpose, offering his interest in the orchard as security. The defendant declined to make that loan, but •offered to advance him $100 if he would transfer his interest in the orchard to him, and that he would reconvey the same if the money and interest should be repaid on the first of April next. The complainant says that this advance was as a loan, and the transfer was made only as security for its repayment. The defendant says it was advanced as purchase money, and that the paper executed by him was given only for the purpose of giving the complainant the right to repurchase the same, if he should elect so to do, by the 1st day of April, 1864. Each testifies to his own account of the transaction as the truth. Two of the witnesses of the complainant, Isaac Bogert and Thomas A. Standish, testify, that in conversations had with them severally about this transaction, the defendant stated that he had loaned this $100 to the complainant, and had taken the assignment of the orchard as security for the payment, and that the complainant had forfeited his right by neglecting to pay at the day stipulated. It is well settled that a transfer absolute on its face' may be shown by parol proof, to have been given as a mortgage only. In this case the testimony of the two parties themselves is on equal footing, but the clear positive evidence of [314] the two witnesses referred to, whose testimony or credibility is not impeached, leaves the decided weight of evidence against the defendant. Did the case depend on this evidence only, the transfer must be considered a- mortgage. If a deed or transfer absolute on its face is made only as security for a loan, or an antecedent debt, it will be considered a mortgage, and the fact that it was so made may be shown by parol. This doctrine has been acknowledged and acted upon by this court-in several cases. Clark v. Condit, 3 C. K. Green 358; De Camp v. Crane, 4 C. E. Green 166; Van Keuren v. McLaughlin, Ibid. 187. It is also laid down and approved by text writers of authority, as law. 4 Kent’s Com. 142; 2 Story's Eq. Jur., §§ 1018, 1019. In this case, the fact that the advance was a loan and the transfer intended as security only; is strongly supported by the circumstances. The amount which had been expended by the complainant upon the peach orchard exceeded $150, besides the time, skill, and labor of himself. The trees were in their second year, and were thrifty and in good condition; so far as could be judged the experiment was a success. The object for which the money was got, at least so far as $25, the amount applied for, was concerned, was to procure manure to put around the trees. It was bought the same day, and put upon the ground that day and the next. The purpose and its execution, were both known to the defendant. It can hardly be conceived that this would be done, if the complainant understood that he had sold the property absolutely, or that the transaction was anything else than security for a loan. The amount really received was, after taking off the sum spent for manure, only $75, or one half of the sum that complainant had expended; and of this, $10 was retained by defendant for the board of complainant and his workmen, while laboring at the trees. The fact that there is no continuing debt, is a strong circumstance, where there is any doubt, to show that a transaction [315] is a contract for repurchase, and not a mortgage. This was clearly and strongly stated, in the opinion of this court, in Hogan v. Jaques, 4 C. E. Green, 128; DeCamp v. Crane, Ibid. 171. But if tho evidence of the complainant, and of Bogert and Standish, is believed, the money was a loan, and the complainant was personally liable for its repayment. A loan always constitutes a debt, and it does not require a note, or bond, or covenant to make it such, nor is it extinguished by or merged in a mortgage taken for its security. But in this case, the papers themselves, in my opinion, constitute a mortgage, and are clearly a mortgage were there no other proof of the object or intention of the parties. Such papers, when executed at one time, and part of the same bargain and transaction, must be construed as if one instrument. Then the transfer is made on condition, that if the money and interest is repaid on the first of April, 1864, Ilulsizer shall return to Phillips the agreement so assigned by Phillips to Ilulsizer. These are in substance the very terms which are most commonly used to convert a deed into a mortgage. Mortgages are generally drawn in precisely the same terms as absolute deeds, with a condition that the conveyance shall be void, or that the property shall be re-conveyed upon repayment. This defeasance contains that condition, and expressly states that the assignment of the agreement was made upon that condition. On both grounds, this transfer must be held to be a mortgage only, and the complainant must be allowed to redeem. The defendant having taken possession of the mortgaged property, and taken the rents, issues, and profits, must account for them, and there must be a reference to a master to take an account of what is duo to the defendant for principal and interest on the loan of $100, and to take an account of the net profits received by the defendant from the orchard since April 1st, 1864. In this account he must be charged only with the amounts actually received by him, and not what he might have possibly made or received, unless he has [316] been guilty of laches or fraud in managing the property ; and if a sale made, in the beginning of a season, of part of ■the crop, was made in good faith and without fraud, he will only be chargeable with what he received, although it may appear that by a different course, as the crop turned out in that season, considerable more might have been made out of' it. He must be allowed all expenses, actually and in good, faith incurred, in managing and taking care of the property,, and compensation for his labor, if he gave his own time and-labor to the cultivation, gathering, and sale of the crop. • As to costs. A mortgagor on a bill to redeem is obliged to pay the cpsts; when the conduct of the mortgagee has been unfair or oppressive, he may be made liable. The defendant-in this case erred in refusing to accept the money when tendered, and neglecting to reconvey the estate or contract. But he no doubt acted in good faith, supposing that the transaction was not a mortgage, but a mere contract to convey, which had been forfeited. The complainant, on the other hand, was in laches, in not fulfilling his contract and paying the money on the day mentioned in the condition. He had compelled the defendant to take possession of the-property, and allowed him to cultivate it at his own expense for more than one year before tender, and had thus made an account necessary, extending much beyond the amount of principal and interest due. On the whole, I do not think that there is sufficient ground to take this case out of the-general rule, that the costs must be paid by the mortgagor..