Opinion
(December Term, 1833.)
1. A memorandum given by the bargainee at the time of receiving an absolute deed, whereby he stipulated that if the land was sold within two years he would refund to the bargainor the excess received over the purchase money, and interest together with the costs of repairs, unexplained and without evidence to the contrary, makes the deed a mortgage.
2. On an appeal in equity the Supreme Court is confined to the proofs upon which the decree sought is to be reversed was founded.
3. An answer replied to is evidence for the defendant only when it is responsive to the bill.
4. An agreement at the execution of a mortgage that in default of the debtor it should become absolute is never a bar to redemption.
5. A mortgagee in possession is entitled to the costs of repairs and interest thereon.
6. But generally it is otherwise as to improvements, because by allowing for their cost, the difficulty of redemption is increased.
7. But where the mortgagor, thinking himself to be the owner, bona fide makes improvements which exhaust the rent, he is allowed for their costs.
8. Upon a bill for redemption, a sale is never ordered unless by consent. It is otherwise when a foreclosure is sought.
THE bill was filed by the widow and heirs at law of Malcolm Gillis for the redemption of a town lot in Lawrenceville, and a piece of land conveyed by him to the defendant, by an absolute deed, dated 21 November, 1822, which the plaintiffs alleged was intended only as a security for a debt of $169, which they said had been discharged by the profits that had come or ought to have come to the defendant's hands. The character given to the conveyance was founded on a written agreement of the defendant, of the same date, in which he stated that he had purchased the premises at the price of $169, but that if sold within two years for more than that sum and the interest on it, and such necessary repairs as might be done on the house, he would pay the surplus to Gillis.
No counsel for plaintiff.
Mendenhall for defendant.
The answer admitted the agreement, but denied that it was intended to make the deed merely a security, and averred that the purchase was an absolute one. The defendant gave this account of the transaction: (471) That Gillis was indebted to him in the sum of $69, and to secure the payment had made a deed of trust for the premises in dispute; that he was about removing to Alabama, and was unable to pay the defendant, or remove without selling the land, which he could not effect to anybody else, and that at length the defendant was prevailed on to purchase, and give $100 more than his debt, which was the full value, upon which he surrendered the deed of trust and took an absolute conveyance; that after the contract was completed and the deed executed and delivered, Gillis mentioned that his family might be dissatisfied at the price, and requested the defendant would agree to sell the premises and pay him the surplus, which he readily agreed to, as he only wanted his money and interest, and had made the purchase only to oblige the other, and that thereupon he executed the writing, that it might satisfy the family. But that it was not at all understood that the paper was to be connected with the deed, or in any event give the right of redemption, or change the purchase from an absolute one, or have any effect but to give him a claim to the surplus of the money that might be had upon a resale, after discharging the sum advanced by the defendant. The answer averred that Gillis had before applied for further advances, and to secure them by mortgage, which the defendant refused; that Gillis then, wishing to remove from the State, determined to sell, and made the sale to the defendant. The defendant further stated that he made rpeated [repeated] efforts to sell, but was unable to do so at any price, up to August, 1825, at which time the houses having become ruinous and untentable, he made some repairs, and personally occupied them, and that believing the absolute property to be in himself, he had since erected several outhouses, and made such repairs and additions as were indispensable to the comfortable occupation by his family.
To the answer there was a general replication, and the cause was then set down for hearing, and was heard without proofs on either side, and a decree made by DANIEL, J., declaring that the plaintiffs (472) had a right to redeem, and referring it to the master to take an account of the sum due on the mortgage, including necessary repairs, deducting therefrom the rents and profits.
The master reported, and submitted two views, in the first of which he gave the defendant credit for repairs made within the two years limited in the agreement, and charging him, after the subsequent improvements, an improved rent, upon which he found a balance due to the defendant of $44.93. In the second, he gave him credit for all the repairs and improvements, and charged the like rent, upon which he found the balance to be $746.55. The master reported that the defendant endeavored to sell or lease the premises, but that he could get neither a purchaser nor a tenant until 1824, on account of their uncomfortable situation; that he made some repairs, and then got a rent of $6, and that soon afterwards he entered into possession himself, and made considerable repairs and improvements, so as to make the rent worth $35; that all the repairs and improvements were necessary for a convenient and comfortable residence, and were made by the defendant with that view.
The cause came on again in the Superior Court, upon a motion for further directions, when the report was confirmed pro forma, according to the first view submitted by the master, and a decree pronounced accordingly, from which the defendant appealed to this Court.
For the defendant it is insisted that both decrees are erroneous, for that the purchase was absolute; but, if not, that the defendant had a right to make the improvements, or, at all events, is not to be charged with rents as for those improvements.
The case is not free from doubt upon the first point. The character of the conveyance is to be determined by the intention of the parties, and if that, however ascertained, was that it should operate as a security, the Court so regards it, and the debtor will be entitled (473) to redeem. The difficulty is always in ascertaining the intention.
Here the instrument called by the plaintiffs a defeasance is admitted in the answer, but the defendant denies that it was given with the view of turning his purchase into a security. For the purpose of supporting that assertion he states that the price mentioned in it was a full one; that he then gave up a former and more effectual securities for the debt which Gillis owed him, which he would not have done if he had considered that he was only taking a mortgage for that and the additional sum then paid, and that Gillis was about removing to distant parts, and had no expectation or wish to redeem the premises, and therefore cannot be supposed to have stipulated for it. These circumstances would be very strong to repel the inference, from the words of the agreement, if they appeared in a way for the Court to take notice of them. But they do not. It nowhere appears that the defendant ever had a deed of trust. It is true that upon the evidence before the master, upon the taking of the account, it appears that $169 was the full value, and that Gillis was about to remove to Alabama. But the Court is confined, on an appeal, to the proofs upon which the decree impeached for error was founded. When the decree for redemption and an account was made, there were no proofs but the exhibits and the defendant's answer; and the answer, after replication, is not evidence for the defendant except as it is made so by discoveries called for in the bill, and which are responsive to direct charges or special interrogatories. Here the bill charges nothing but the execution of the agreement, which is appended to the bill, by force of which alone the right to redemption is claimed, and interrogates the defendant as to its execution. That the answer admits. The other circumstances brought forward in the answer are new matters, and must therefore be proved by the defendant before they can vary the decree.
Confining ourselves to the instrument itself, the first decree pronounced in the Superior Court seems to us to be correct. The (474) transaction cannot be regarded as a sale, accompanied by an agreement for a repurchase by the vendor, upon which he must come strictly within time; for nothing of that sort is pretended on either side. If it were so, it would be supported, though the Court watches such agreements, and construes them to be securities unless a contrary intention be manifest from the circumstances. Poindexter v. McCannon, 16 N.C. 373. But here no payment by Gillis is stipulated for, to be made at any time, as a price for the land. But it is contended the agreement was not for redemption, which might be had at any time, but that an eventual arrangement of property was contemplated, and that this was at least a conditional sale, to become absolute in the defendant in the event he did not sell to another within two years. It is difficult to say that, on the face of the papers. An interest is reserved to Gillis in the sum that might be got for it upon a sale to another; which is the surplus, not above a particular sum in numero, but above the advances then, and the disbursements on the property, and interest. The question is, Does this show that the object was primarily to secure those advances? for if it does, then redemption and all other incidents of a mortgage follow. To us the affirmative seems true. It cannot be doubted that if the defendant had sold, he would have been obliged to pay the surplus to Gillis; nor that if Gillis had within two years tendered what was due, he would have had a right to a reconveyance, and that, not upon the ground of a stipulation to that effect — for there is none such in the instrument — but upon the equity raised for him here, by seeing that since he was to have the surplus, the defendant's interest was limited to the sum due him and beyond that Gillis was the real owner. Besides, upon a settlement either before or after a sale, what is made the basis of it? The debt and interest, and the outlays for necessary repairs and interest. The defendant, then, does not go into possession as owners generally do, and erect or pull down buildings at his pleasure, but restrains himself to necessary improvements, and as to them he is to keep accounts against either the debtor or the estate; which, we think, in the (475) absence of evidence of the value of the estate, and all other circumstances, is conclusive upon the character of the conveyance originally. If it was then a security, it remains so in the hands of the defendant, although it would be otherwise in the hands of a bona fide purchaser, even with notice, upon the score of a personal confidence in the defendant to make a sale and receive the purchase money, to the application of which the purchaser would therefore not be bound to see. But no agreement at the time of the contract that the purchase shall in default of the debtor become absolute owner even at an increased price is permitted by the Courts to bar redemption, if the subject was once redeemable. Willet v. Winnell, 1 Vern., 488; Seton v. Slade, 7 Ves., 273.
The last decree was merely formal, and seems to have been made to enable the parties to bring the other speedily under revision. We think it too rigorous towards the defendant under the circumstances of the case. Every mortgagee in possession, if not bound to repair, is at least entitled to his expenditures for that purpose, and they form part of the debt on which the interest runs. Godfrey v. Watson, 3 Atk., 518. And so for other outlays for the preservation of the estate. Hardy v. Reeves, 4 Ves., 466. As to new improvements, the general rule is otherwise, but is not unyielding. 4 Kent's Com. It is adopted by the Court as necessary to protect the mortgagor from imposition, and from having increased difficulties thrown in the way of redemption. The creditor is not, therefore, allowed to improve the debtor out of his estate. But where the mortgagee takes possession, not only by the consent, but, as it were, at the instance of the mortgagor, and the improvement is permanent and beneficial, and, without it, the estate would be altogether unproductive, so that the mortgagor as a prudent man would make it if he were himself in possession, and the mortgagee really made it under the belief that the estate was his own, and that he was rendering the property more valuable as for himself, and not with a view of bringing the expense into account against his debtor, there seems to be ground for (476) repelling the application of the rule. The principle upon which it is founded does not reach such a case; which stands rather on another, that he who takes benefit by the labor or money of another person, not laid out against his will or his interest, shall make compensation. Upon this ground improvements were allowed for by this Court in Bissell v. Bozman, ante, 229, when last before us, because they were proper, and Bozman, at the time of making them, deemed himself the owner, and it was held to be otherwise only upon a nice legal construction. There is no doubt, upon the evidence before the master in this case, that either the defendant's was a purchase or that he conceived it, and with much reason, to be so; and that he acted with good faith in his endeavor to sell, before he laid out more money, and also in making his expenditures. It is in proof that the sum he advanced was a full price; that the debtor was then removing and did remove to Alabama, and therefore had no actual intention to redeem, but expected at most a sale, and that he could not get a tenant at any price without improvements, and that all which the defendant made were absolutely necessary to make the place even comfortable. These circumstances seem to render the case peculiar, and to entitle the defendant to be protected in his expenditures, for as they were incurred honestly, he may claim at least to be a bailiff or steward, endeavoring to serve the owner, instead of a creditor, striving to make a pledge his own property. Moreover, the difference is not very great, for the first view taken by the master could not possibly stand, since it charges the defendant with a rent the premises ought to bring both under the repairs and improvements. The rent thus given exceeds the interest upon both the debt and the repairs and improvements, and the proof is that if repairs alone had been made, no tenant could have been had. The whole rent is therefore justly attributable to the improvements, and will nearly discharge the cost of them, so as to make the balance (477) of the account consist almost entirely of the debt, repairs, and interest, for which the mortgaged premises are undoubtedly answerable. But we think the case upon its own circumstances forms an exception, if any can, which appeals to the sound discretion of the Court to make those allowances, upon the footing of fair dealing between these parties, and as no exception is taken to the estimates of the master, as contained in either view submitted by him, but only to the principles upon which they are respectively based, the former decree must be reversed, and the report of the master, finding the balance due to the defendant on 15 March, 1833, to be $746.55, as exhibited in the account annexed to the report, must be confirmed, and a decree made accordingly; that the plaintiff pay the same to the defendant within four months from the day of making this decree, together with the costs of his suit in the Superior Court; and upon such payment being made by the plaintiff, Mary B. Gillis, the widow, that the defendant convey the mortgaged premises to her by way of assignment of his title to the same as a mortgage; or, if the payment be made by the other plaintiffs, that the defendant do convey to the plaintiffs John E., Amanda A., and Eliza M., the children and heirs at law of the mortgagor; and in default of such payment, the bill to stand dismissed.
Upon a bill for foreclosure, the practice in this Court has been to decree a sale as being more advantageous to the debtor, and as the creditor is seeking in that suit the recovery of his debt. But upon a bill to redeem, a sale cannot be ordered except upon consent, because the mortgagee ought not to be compelled to relinquish the estate upon any other terms than receiving his whole debt, which he might ultimately get by reception of the rents, and may not by a sale. Troughton v. Binkes, 6 Ves., 573.
PER CURIAM. Decree reversed.
Cited: Lyerly v. Wheeler, 38 N.C. 601; Hughes v. Blackwell, 59 N.C. 77; Jones v. Boyd, 80 N.C. 260; Coates v. Wilkes, 92 N.C. 382; Bunn v. Braswell, 139 N.C. 140; Alston v. Connell, 145 N.C. 6.
(478)