Beebe v. Wisconsin Mortgage Loan Co.

MaRsutaut., J. Tbe main question to be decided is, Did tbe court err in concluding from tbe evidence tbat tbe relations of mortgagor and mortgagee were created between plaintiff and the loan company? It is suggested as a conclusive circumstance in favor of appellant tbat after tbe land contract was assigned to tbe company and it gave back tbe agreement to respondent, tbe relations of debtor and creditor did not exist between them, an element ordinarily vital to tbe relations of mortgagor and mortgagee. True, a mortgage, not being an interest in land, but only a lien on land, a mere incident of something it stands for, as security, there must be tbe principal thing or else there cannot be the incident. If there were tbe latter in this case it must have been an indebtedness of plaintiff to' the loan company which tbe assignment was given to secure. In determining what tbe real relations were between tbe parties, after tbe exchange of tbe assignment of tbe contract for tbe receipt and agreement, we may look to tbe situation of tbe parties at tbat time, all tbe circumstances of tbe transaction, and their conduct in reference thereto subsequently, and all tbe evidence bearing on tbe question. Three elementary principles must be kept clearly in mind in. dealing with cases of this sort: (a) A transfer of property as security, regardless of tbe form thereof, is a mortgage, and, as regards rights or remedies, must be dealt with as such. Starks v. Redfield, 52 Wis. 349, 9 N. W. 168; Brayton v. Jones, 5 Wis. 117; Cumps v. Kiyo, 104 Wis. 656, 80 N. W. 937. (b) If from all the circumstances of the case it appears — 333 — clearly that the parties intended to create the relation of debtor and creditor between themselves or to recognize that relation as existing as a basis for a mortgage, their purpose in that regard will be deemed to have been accomplished so far as necessary to carry into effect the incidental purpose to create tire relation of mortgagor and mortgagee to secure payment of the indebtedness, though it does not appear that there was the express promise to pay which generally characterizes the creation of such principal relation. Schriber v. Le Clair, 66 Wis. 579, 29 N. W. 570, 889; Gettelman v. Comm. U. Ass. Co. 97 Wis. 237, 241, 72 N. W. 627. (c) Parol evidence is admissible to show that the purpose of a writing, or several writings taken together, was to create the relation of mortgagor and mortgagee, even though the writing or writings do not bear upon their face any suggestion of such character, and such evidence alone may be effective to establish such purpose if it has sufficient probative force to clearly indicate the same. Plato v. Roe, 14 Wis. 453 ; Sweet v. Mitchell, 15 Wis. 641; Jordan v. Warner’s Estate, 107 Wis. 539, 550, 83 N. W. 946. Under some circumstances the evidence must be more convincing than in others. It is said that to turn an instrument which is absolute on its face into a mortgage by parol evidence, the proof should be so strong that such was the intention of the parties as to leave no substantial doubt on the subject. Becker v. Howard, 75 Wis. 415, 44 N. W. 755; McCormick v. Herndon, 67 Wis. 648, 31 N. W. 303; Jordan v. Warner's Estate, 107 Wis. 552. The most familiar cases where all of the above principles were applied are those where one person, at the request of another whose land was sold upon execution or foreclosure, bought the same at the sale and took title thereto, agreeing verbally to convey the same to such other upon his repaying the money expended in the transaction, with interest. Sweet v. Mitchell, 15 Wis. 641; Spencer v. Fredendall, 15 Wis. 666; Wilcox v. Bates, 26 Wis. 465; Hoile v. Bailey, 58 Wis. — 334 — 434, 448, 17 N. W. 322; Schriber v. Le Clair, 66 Wis. 579, 29 N. W. 570, 889; Phelan v. Fitzpatrick, 84 Wis. 240, 54 N. W. 614. It will be observed that one of tbe most common claims made in such, cases was that there was no indebtedness created because there was no promise to pay, and that therefore no mortgage relation was created. That is the claim urged now. The answer of the court uniformly was, either expressly or in effect, that an implied promise to pay arose from the conduct of the parties, and that an express promise was unnecessary. Phelan v. Fitzpatrick is a very strong case on the subject. In Schriber v. Le Clair, supra, the facts were somewhat different, but the element of indebtedness and promise to pay was found by inference from the conduct of the parties. The general idea governing the cases is this: If a person requests another to pay off an indebtedness on his property and take title thereto and convey the same to such person upon his repaying the money, it is competent to find from such circumstances alone, there being nothing to impair the probative force thereof, an implied promise to refund the money upon the one side and an implied promise upon the other to convey the property upon such repayment being made. Applying the foregoing to the evidence in this case, it sufficiently indicates the creation of the relation found by the trial court to preclude us from holding that the decision in that regard is against the clear preponderance of the evidence. We are inclined to agree with the suggestion of respondent’s counsel that the instrument given to respondent by the loan company shows upon its face that the title to the property was taken as security only. It shows all the circumstances usually characterizing the cases where one person took title to the property of another at a judicial sale to protect such other. The loan company acknowledged receipt of the land contract, plainly indicating that the parties did not intend that it should, by the assignment thereof, become the absolute — 335 — owner of respondent’s interest in the land. It contained an agreement that the company would pay the vendor in the contract the balance due thereon, thereby becoming liable to such vendor. It further contained an agreement to take the title to the land and to convey the same to respondent at any time within two years from the date of the receipt upon his paying $11*7 with interest thereon at the rate of eight per cent, per annum. From those features of the paper, applying the rules we have referred to, the court was fully warranted in inferring that the understanding between the parties was that plaintiff should pay the $117 and interest within two years, that there were mutual promises between the parties, and that the respondent’s interest in the land was agreed to be held by the company to secure the performance of his promise. In Phelan v. Fitzpatrick there was no evidence of any express promise to pay. The decision of the court went upon the theory that since the person who took the title did so at the request of the person who was about to be divested thereof by a judicial sale, he impliedly agreed to convey the land to such person upon her request whenever she' might choose to repay the money, and that she impliedly agreed to make such payment within a reasonable time upon being requested to do so. That is quite an extreme case, yet this court did not feel justified in reversing the decision of the trial court that the relations of debtor and creditor and mortgagor and mortgagee were created between the parties. When we refer to the oral testimony in aid of the writings, a very strong case is made in favor of respondent. It appears that, as a part of the transaction which included the making of the papers, the loan company agreed to compromise its claim of $148 against respondent for $75, on condition of payment of the latter sum and the sum necessary to pay the balance due upon the contract, being secured by an assignment to it of such contract, and-that the papers were made in execution of such agreement. That indicates that, while the par — 336 — ties contemplated an extinguishment of the old indebtedness, a new one of $76 was intended to be created in its place, with the further indebtedness of $42, to secure the company for its obligation to pay the balance upon the contract. Before and after the two years mentioned in the paper respondent was recognized as having an interest in the property. He was consulted with reference to mating contracts for sales of land; he was requested to pay the taxes; and money was received of him by appellant Allen for expenses incurred by him in removing incumbrances from the property. Such circumstances and others that might be mentioned are inconsistent with the idea that there was no promise on the part of respondent to pay the $117 to the loan company, and that the agreement to convey the land was a mere unilateral promise or option. Appellants’ counsel contend that there is no support for the finding that Allen, Erickson, and Anderson were severally purchasers with notice of plaintiff’s rights. That is based solely on the theory that they cannot be rightly charged with knowledge of more than what appeared upon the face of the paper given to respondent denominated by him a contract for the property. As we have held that such paper was sufficient of itself to indicate that the loan company obtained only a mortgage interest in the property, such contention is immaterial. The evidence shows that the parties all knew respondent claimed that his paper gave him the interest of a vendee under a land contract in all the property. Allen’s evidence indicates that he knew just what respondent claimed. Respondent testified that he told Erickson and Anderson that his land contract covered the land; that he had several conversations with them about the matter; that he told them the title was in Allen and that there was money to be paid to him; that he negotiated with them, as owner of the land, to sell portions thereof. Looking at the evidence in the whole, it seems quite — 337 — clear tbat Allen knew as much about plaintiff’s interest in tbe property as be did; tbat Allen made tbe common mistake of supposing tbat wben default was made by respondent bis rights in tbe land were forfeited, and tbat Erickson and Anderson took Allen’s version of bis legal rights instead of respondent’s. They certainly bad sufficient knowledge of respondent’s rights to put them on inquiry in respect to all tbe facts. Therefore, they were chargeable with knowledge of tbe legal effect thereof, and tbe court was warranted in finding that they were not innocent purchasers. Complaint is made because, while Osse is not a party to tbe litigation, appellant Allen is required by tbe judgment to transfer tbe land contract with him, and the lien affected thereby, to respondent, so tbat, while Allen is not released from carrying out bis agreement with Osse, be is by such judgment deprived of power to do so. It is claimed such relief should not be granted, since Osse was not made a party to tbe litigation. We are unable to see any ground for complaint in tbat on Allen’s part. Ossets rights axe not affected by tbe suit, and could not have been, properly, in any event, if be was an innocent party. lie stands as such, and bis equitable rights are all protected. Upon paying out bis contract to tbe person entitled to tbe money be will be entitled to a conveyance from whomsoever shall bold tbe legal title to tbe land .in trust for him. Tbe danger tbat be may make a claim against Allen which tbe latter may not be able to discharge according to tbe terms of tbe contract is hardly one, under the circumstances, which a court of equity is bound to provide against. Allen must be held to have bad knowledge, wben be made tbe contract with Osse, tbat be might not be able to perform as be agreed; tbat be might be placed in tbe exact situation in which be now finds himself by reason of this litigation. Osse has all the protection tbe couyt could give him, equitably, if he were a party to tbe cause. He is accorded tbe — 338 — Tight to all the title to the land which Allen is required to convey to respondent, and his right to protection by Allen according to the covenants in his contract. Neither he nor Allen has any equitable right to complain. By the Court. — The judgment is affirmed.