Opinion
No. 32091.
March 9, 1936. Suggestion of Error Overruled, April 6, 1936.
1. VENDOR AND PURCHASER.
Phrase "reasonable price" in contract permitting vendor to repurchase property within eighteen months after date of agreement at reasonable price meant a reasonable price at time of repurchase by vendor.
2. MORTGAGES.
Where bill seeking to have deed, in connection with contemporaneous written agreement giving option to repurchase, declared to be a mortgage, contained no allegation of fraud, statute barring parol evidence to show that instrument constituted mortgage held applicable (Code 1930, section 3351).
3. MORTGAGES.
Essence of "mortgage" is that it stands as security for debt which mortgagor remains under obligation to pay, and, whenever no such obligation exists, agreement to reconvey property is not "mortgage," but mere privilege of repurchase.
4. MORTGAGES.
Deed and contemporaneous written agreement giving grantor right to repurchase within eighteen months at reasonable price did not constitute "mortgage," where contract to repurchase was not binding on grantor, but was purely optional, and grantor was under no binding obligation to pay grantee any fixed sum.
APPEAL from Chancery Court of Hinds county. HON. V.J. STRICKER, Chancellor.
John E. Stone and D.C. Enochs, both of Jackson, for appellant.
The deed is absolute on its face, and the contract permitting a repurchase is optional with, and not compulsory upon, Wright.
27 Cyc. 1003; Magee v. Catching, 33 Miss. 672; Wallace v. Johnstone, 129 U.S. 58; Chandler v. Chandler, 76 Iowa, 574.
On the face of the two instruments it is manifest they do not constitute a mortgage in the case at bar, as they clearly show no obligation on the part of Wright to pay any indebtedness to Dixon, and an indebtedness, says Chief Justice GEORGE, in the Magee v. Catching case, is of the essence of a mortgage.
Collins v. Vandever, 1 Iowa, 573; Johnson v. Staley, 32 Ind. App. 628; Hoopes v. Bailey, 28 Miss. 328.
The complainant Wright having parted with the possession of the property conveyed by the deed, parol evidence could not be considered by the court in decreeing the deed a mortgage.
Section 3351, Code of 1930; Culp v. Wooten, 79 Miss. 503, 31 So. 1; Jordan v. Jordan, 145 Miss. 779, 111 So. 102.
If parol evidence could be considered by the court, the same was insufficient to prove the deed a mortgage.
27 Cyc. 1024.
When it is sought to destroy the sanctity of an instrument, such as a deed, by parol proof, and change its form from the absolute to the conditional, the proof necessary to alter or change the written instrument must be clear, unequivocal and convincing.
Jordan v. Jordan, 145 Miss. 779, 111 So. 102; 45 C.J. 345; Wallace v. Johnstone, 129 U.S. 58; 2 Bobbs-Merrill Miss. Dig., page 166, par. 400.
It is manifest Wright could not have exercised the option in the eighteen months, and was not prevented from doing so by any alleged statement Dixon made. If the alleged statement of Dixon was before the papers were executed, as Wright says, it was merged in the writing. And if the alleged statement of Dixon was after the execution of the papers, it was nudum pactum, without a consideration.
66 C.J. 502, 503; Liddell v. Sims, 9 S. M. 596, 609; Hoopes v. Bailey, 28 Miss. 328; Railroad Co. v. Land, etc., Co., 82 Miss. 188.
And on the "reasonable price" feature of the option to repurchase, that is no different from a fixed price, which it is in legal effect, and may be enforced, says the courts, without difficulty.
Wallace v. Johnstone, 129 U.S. 58; Hoopes v. Bailey, 28 Miss. 328; R.T. Clark Co. v. Miller, State Revenue Agent, 154 Miss. 233, 122 So. 475.
Horton Sanders, of Jackson, for appellant.
Counsel for appellee contends that there was only one objection in the entire record, and that counsel for appellant himself interrogated the witnesses about the same matter, and therefore the appellant cannot object to the evidence in this court.
We respectfully submit that appellant did not lose his right to object, in this court, to the evidence, by virtue of the fact that he did not object over and over again, and repeat his insistence upon it.
Section 580, Griffith on Equity Chancery Practice; Edrington v. Stephens, 114 So. 387; Kendrick v. Robertson, 111 So. 99.
We respectfully submit that counsel for appellees is wrong in his contention that this matter is a rule of evidence. It is plain from the law that it is a rule of substantive law.
Section 3351, Code of 1930; Jordan v. Jordan, 111 So. 102. L.F. Easterling and J.E. Skinner, both of Jackson, for appellee.
If it be admitted that the facts were in dispute between the parties, a decision of the court below on the facts will not be reversed where the court had the witnesses before him, and the opportunity of a trier of fact to judge and weigh the evidence.
First Miss. Digest, page 150; Mutual Life Ins. Co. v. Herron, 79 Miss. 381, 30 So. 691; Davis v. Richardson, 45 Miss. 499, 7 Am. Rep. 732; Apple v. Ganong, 47 Miss. 189; Harrington v. Allen, 48 Miss. 492; Wilson v. Beauchamp, 50 Miss. 24; Suttle v. Mechanics' Aid., etc., Assn., 29 So. 758; Vaughan v. Commercial Bank, 18 So. 270; Coffee v. Coffee, 24 So. 262.
There being no objection to the evidence in the court below, none can be raised here.
Burroughs Land Co. v. Murphy, 95 So. 515, 131 Miss. 526; Williams v. Butts, 87 So. 145, 124 Miss. 661; Weaver v. Turner, 87 So. 641, 125 Miss. 250; Mitchell v. Finley, 137 So. 30; De Laval Separator Co. v. Cults, 107 So. 522, 142 Miss. 379; Morris v. Robinson Bros., 110 So. 683, 144 Miss. 861; Woodmen of the World v. Sloom, 101 So. 195, 136 Miss. 549.
The declarations and statements of the parties made pending the negotiations and at the time of the final execution of the deed and contract are admissible, and the rule that the terms and conditions of a written contract cannot be varied does not apply to such evidence. The law is well settled that a deed absolute on its face may be shown by parol to have been executed for the payment of money, when it will be treated in equity as a mortgage.
Miller v. Thomas, 14 Ill. 430; Keithly v. Wood, 151 Ill. 566, 42 A.S.R. 265; Helberg v. Schuman, 150 Ill. 12, 42 A.S.R. 339.
It has been said that the fact that no consideration whatever moved to the grantor except money advanced to be expended upon the land tends very strongly to show that there was no sale.
Rubo v. Bennett, 85 Ill. App. 473; Freeman v. Wilson, 51 Miss. 329.
In construing an absolute deed as a mortgage the following tests are of almost exclusive weight: 1. Was the treaty in reference to a borrowing and lending of money, and was the obligation to repay incurred? 2. Did the relation of creditor and debtor exist before the conveyance and did that relation continue? 3. Was there great disparity in the price of the property?
Klein v. McNamara, 54 Miss. 90; Freeman v. Wilson, 51 Miss. 329; Thomas v. Holmes County, 67 Miss. 754; Fultz v. Peterson, 78 Miss. 128, 28 So. 829; Culp v. Wooten, 79 Miss. 503, 31 So. 1; Lee v. Wilkinson, 105 Miss. 358, 62 So. 275; McGehee v. Weeks, 112 Miss. 483, 73 So. 287.
The general rule everywhere seems to be that where a warranty deed is made and at the same time a contract of reconveyance that the decree of proof required is not as strong as where there was a deed absolute in terms standing alone. The contract shows that the deed is not what it purports to be. The agreement shows that the deed is not an absolute conveyance. In case of doubt the court will always lean towards the theory that the instrument constitutes a mortgage, as this secures the interest of all parties and works a hardship upon none. Equity has always carefully scrutinized such transactions, and if any doubt exists the courts will hold the transaction to be a mortgage.
Schmidt v. Barkley, 161 Mich. 1, 20 Ann. Cas. 1194; McArthur v. Robinson, 104 Mich. 540, 62 N.W. 713; Reed v. Reed, 75 Me. 264; Rich v. Doane, 35 Vt. 125; Cobb v. Day, 106 Mo. 278, 17 S.W. 323; Wilson v. Patrick, 34 La. 362; Gossum v. Gossum, 15 S.W. 1057; Russell v. Southard, 12 How. 148.
When sued, appellant attempted to stand upon the words of contract, but admits that he never would put any price on it.
Campbell v. Dearborn, 109 Mass. 130, 12 Am. Rep. 671.
Parol evidence is admissible under the statute.
Barkwell v. Swan, 69 Miss. 907; Schwartz v. Lieder, 79 Miss. 257, 30 So. 649; Culp v. Wooten, 79 Miss. 503, 31 So. 1; Fultz v. Peterson, 78 Miss. 128, 28 So. 829; Cosby v. Buccannan, 1 So. 899.
The decree of the court below is right on any theory, and is supported by the pleadings and the evidence.
Dease v. Moody, 31 Miss. 618; Steward v. Gates, 30 Miss. 100; Eckford v. Halburt, 30 Miss. 273; Joslin v. Caughlin, 30 Miss. 502; Burrough v. Jones, 30 So. 605; Bonds v. Holcomb, 12 S. M. 316.
Appellee filed his bill against appellant in the chancery court of Hinds county to cancel a deed executed by him to appellant on the twenty-eighth day of March, 1931, to certain real estate situated in the city of Jackson; to have the deed, in connection with a contemporaneous written agreement, declared to be a mortgage; for an accounting as to the amount due by him under the mortgage; and for an opportunity to pay the same. The cause was heard on original bill, answer, and proofs, resulting in a decree as prayed for. The decree appointed a master for an accounting, and granted an appeal to settle the principles of the cause.
Section 3351, Code of 1930, is in this language: "A conveyance or other writing absolute on its face, where the maker parts with the possession of the property conveyed by it, shall not be proved, at the instance of any of the parties, by parol evidence, to be a mortgage only, unless fraud in its procurement be the issue to be tried."
The deed involved, leaving off the caption, signature, acknowledgment, and description of the property, reads as follows: "For and in consideration of $100.00 to me cash in hand paid, receipt of which is hereby acknowledged, and for the assumption of the balance of indebtedness due the Magnolia Building Loan Association on the after described property, and the assumption of pavement and sewer notes falling due after this date, I, the undersigned Hiram M. Wright, Jr., hereby sell, convey and warrant unto John W. Dixon, the following described land and property, situated in the City of Jackson, First Judicial District of Hinds County, Mississippi, to-wit: . . . It being intended to convey hereby all of the property conveyed by me in trust to the Magnolia Building Loan Association as described in the deed of trust of record in Book No. 178 at page 302 of the Records of Deeds of Trust in the office of the said Chancery Clerk. Grantee assumes the payment of taxes for the year 1931."
The contemporaneous written agreement, which was executed in duplicate, leaving off the caption, description of the property, and signatures, follows:
"This agreement entered into this the 28th day of March, A.D. 1931, between John W. Dixon and H.M. Wright, witnesseth:
"That for and in consideration of the payment of $200.00 to the Magnolia Building Loan Association, of Jackson, Mississippi, and the assumption of the balance due on the deed of trust on the after described property, and the option and occupancy agreement herein contained, by John W. Dixon, and the payment to Wright of $100.00.
"Hiram Wright agrees to pay all taxes, assessments, and sewer, sidewalk and paving notes now due, and to execute a conveyance to John W. Dixon of property described as: . . .
"Hiram Wright may have possession of the garage on said above described premises, and possession of the North house thereon, known as 811 Rose Street, with the right to occupy or lease the same, for a period of one year after the date of this agreement.
"Hiram Wright also has the option to purchase all of the above described property within 18 months after the date of this agreement at a reasonable price."
In his bill appellee tendered no amount. There was no allegation as to what was a reasonable price of the property. He proceeded on the idea that he was indebted to appellant in the amount of the indebtedness against the property and the costs of any permanent improvements made by appellant, with interest, with credit for rents received by appellant from the property, and that his conveyance of the property to appellant by the deed of March 28, 1931, and the contemporaneous written agreement executed therewith, constituted a mortgage to secure that indebtedness.
It will be observed that the last clause in the contemporaneous agreement provides that appellee shall have the right to repurchase the property "within eighteen months after the date of this agreement at a reasonable price." Appellee contends that "a reasonable price" meant the indebtedness against the property, and interest, with the rent credits; and the chancellor took that view. There is no ambiguity about the phrase "a reasonable price;" it meant a reasonable price at the time of the repurchase by appellee. The testimony of Mr. Calhoun, the lawyer employed by both parties to draw up the deed and the repurchase agreement, which is without substantial contradiction, shows that the parties so understood it. He testified, in substance, that they had agreed on a repurchase when appellee became able, and he at once suggested the question as to what the price should be, that it ought to appear in the contract, and appellant thereupon stated that he did not want any such provision in the contract, "that he would do the right thing," and that, if appellee became able to repurchase the property, they would doubtless have no trouble in agreeing on the terms; that appellee then stated that he acceded to appellant's views. Mr. Calhoun testified that he informed them that the repurchase clause as provided in the contract was worthless, but still they wanted it that way.
With appellant's consent, appellee occupied the garage and the house known as 811 Rose street for more than a year and then moved out. Possession of the entire property, however, was delivered to appellant at the time of the execution of the deed and agreement. Appellee's occupancy of part of it for something over a year was as appellant's tenant, not under any claim of ownership.
It was not within eighteen months after the conveyance and agreement that appellee made a move to assert the rights he claims, but more than two years thereafter, and in this manner: The Congress had provided for the organization of the Home Owners Loan Corporation; appellee made application to the Jackson branch of that organization for a loan in a sufficient amount to discharge all lien indebtedness against the property. Before the corporation would proceed, it required the consent of appellant and also of the building and loan company which held a mortgage against the property. Appellant refused to give his consent.
There is no allegation in the bill that the deed and agreement were obtained through fraud, therefore section 3351, barring parol evidence to show that they constituted a mortgage, applies with full force and effect. The option to repurchase within eighteen months is what is given by the agreement; the absolute right to repurchase is not given.
We know of no better definition of a mortgage than that given in Magee v. Catching, 33 Miss. 672. The court there said that the essence of a mortgage was that it stood as security for a debt which the mortgagor remained under legal obligation to pay, and, whenever no such obligation existed, an agreement to reconvey the property would not be a mortgage, but a mere privilege of repurchase. That definition is sustained by the authorities generally. 41 C.J., p. 326, sec. 88, where this language is used: "Where a deed is made for a consideration paid at the time, whether the payment is made in cash or by the surrender and satisfaction of a precedent debt, an agreement on the part of the grantee to allow the vendor to repurchase the property at a future day, for the same or an advanced price, does not convert the transaction into a mortgage." See, also. Mason v. Moody, 26 Miss. 184; Prewett v. Dobbs, 13 Smedes M. (21 Miss.) 431.
The contract to repurchase was not binding on the part of appellee; it was purely optional; he was under no binding obligation to pay appellant any fixed sum for the property; in other words, there was no indebtedness existing between them. We are of opinion, therefore, that the deed and the agreement did not constitute a mortgage, but only an optional contract to repurchase, the option to be exercised within eighteen months.
Construing the deed and agreement together, if there were any ambiguity, parol testimony might be admissible to explain what was meant, but there is no ambiguity.
Reversed and remanded.