Case ID: nc_154/html/0596-01.html
Source: Caselaw Access Project
Author: {"author": "Walker, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN W. SANDLIN, Administrator, et al., v. B. S. KEARNEY.
    (Filed 12 April, 1911.)
    1. Deeds and Conveyances — Interpretation of Deeds — Security— Debt — Equitable Mortgages.
    When the real object of a conveyance of land is to provide a security for a loan or debt, equity will regard the conveyance as a mortgage, and will look beyond the mere form of the conveyance and the words therein employed, to ascertain the true intent of the parties respecting the transaction.
    2. Same — Debtor and Creditor — Implied Promise of Repayment.
    When one, at the request of another, purchases and pays for land for the latter, the law implies a promise on the part of the one for whom the purchase was made that he will repay the purchase price, with interest, thus establishing the relationship of creditor and debtor; and when the one thus acting for the other takes the deed to himself, equity will regard the deed as being in the nature of a mortgage to secure the money advanced by him.
    3. Same — Legal Title — Principal and Agent.
    S., at the request of K., purchased certain lands for him, paid the purchase price and had the deed made to himself, and from the admissions in the pleadings it appears that it was done under a parol agreement that he was to convey to K. upon the repayment by the latter of the purchase price and interest. The statute of frauds was not pleaded: Held, (1) under the admissions in the pleadings, equity will regard the deed to S. in the nature of a mortgage to secure the repayment of the purchase price of the land; (2) the purchase of the land by K. through S. was in effect as if K. had made the purchase himself; (3) it was not necessary to the equity of K. that he should have held the legal title; (4) the effect of the transaction was governed by the agreement between S. and K. without regard to what the vendor may have understood.
    4. Deeds and Conveyances — Debtor and Creditor — Equitable Mortgage — Limitations of Actions.
    As the deed for the land to S. was in effect a mortgage to secure the repayment of the purchase price of land he had bought for K., and it appearing that K. had entered into possession of the land since the last payment on the debt, and retained the same for a sufficient length óf time, under the statute of limitations, to bar the right of S.: Held, that S. is not entitled to recover in this action, which was brought to have the land sold in order to pay the amount advanced by him.
    Appeal from Guión, J., at April Term, 1910, of FraNklIN.
    This action was brought by the plaintiffs on the theory that their intestate and ancestor, C. H. Sandlin, at the request of the defendant B. S. Kearney, who wished to own the same, but was unable to raise the money, had purchased a tract of land on 1 March, 1880, at public auction from "W". A. Davis, administrator, and commissioner of the court, for the sum of $712, and received a deed therefor to himself, upon the agreement and trust that he would “reeonvey” the land to Kearney when he paid the amount of Sandlin’s bid at the sale, and, in the complaint, it is added, in the way of what seems to be' a conclusion of fact or law, “the said B. S. Kearney agreeing to purchase the land from said Sandlin and to pay the amount of the bid, with interest.” It is then alleged that Kearney took possession of the land and has been allowed to occupy it ever since the deed was made to Sandlin. There are other allegations to the effect that Kearney was related to Sandlin, and for this reason he was permitted to remain in possession of tbe laud, but tbat be paid interest on tbe debt to Sandlin up to 1 January, 1885. Plaintiffs demand judgment for tbe possession of tbe land; tbat it be declared tbat tbe defendant is indebted to them in tbe sum of $112, with, interest from 1 January, 1885; tbat, on default of tbe payment of tbe same, tbe plaintiffs be adjudged to bave a lien upon tbe land for their claim, and tbat it be sold to pay tbe same. Tbe defendant admits tbe allegations of tbe complaint, -subject to tbe following explanation, namely, tbat tbe land was bought at tbe sale by Sandlin at tbe request of tbe defendant and for bim, Sandlin agreeing to bold tbe title for tbe defendant until be should pay tbe amount advanced by Sandlin or tbe price paid by bim to Davis, with 8 per cent interest from 1 March, 1880, and tbat defendant paid tbe interest to January, 1885, but has paid nothing on tbe debt since tbat time. This separate averment of tbe answer is admitted in plaintiffs’ reply. Tbe defendant then sets up a counterclaim, in which be alleges tbat in 1880 be contracted to buy from E. G-. Brown, whose tenant be then was, a lot in tbe town of Eranklinton for $1,000, to be paid in cash, but tbat, having only $300, be paid tbat amount on tbe purchase money and applied to C. H. Sandlin for the loan of tbe balance, $700, which was advanced to bim by Sandlin upon the agreement tbat the land should be conveyed to Sandlin by E. G-. Brown, tbe vendor, as security for tbe said loan by Sandlin to bim, which was to bear 8 per cent interest until paid. Tbat interest was paid to 1 January, 1885, when Sandlin took possession of tbe land and retained it until tbe time of bis death, and plaintiffs bave since bad possession of it.
    Tbe plaintiffs, in their reply, admit these allegations of tbe counterclaim, but deny tbat C. H. Sandlin took possession of tbe lot in 1885 under any agreement with tbe defendant other than this, tbat Kearney, being unable, on 1 January, 1885, to pay tbe loan of $700 made to bim, which with accumulated interest amounted to $938, surrendered possession of tbe lot to Sandlin, and formally abandoned bis equity therein.
    Tbe jury, upon a single issue submitted to them, found tbat Kearney bad not “formally” abandoned bis equity. Botb parties pleaded tbe statute of limitations, in every conceivable form, and tbe case was beard by tbe court upon tbe pleadings and admissions of tbe parties, as herein set forth, and tbe deposition of B. F. Bullock, a witness for tbe defendant, whose testimony tended to sustain tbe plaintiffs’ version of tbe facts, so far as they relate to tbe lot transaction. There was no request for tbe submission of any issue to tbe jury, except tbe one already mentioned, and no prayer for instructions. Tbe court adjudged that as to tbe Davis tract, containing 13 acres, tbe relation^ of vendor and vendee bad been established, and tbe possession of Kearney from 1 January, 1885, without any payment to Sandlin, did not bar tbe right of tbe plaintiffs, under tbe statute, to' have tbe land sold to pay tbe purchase money, and a sale was thereupon ordered. As to tbe town lot, tbe court held that tbe transaction between tbe parties created tbe relation of mortgagor and mortgagee, and that tbe possession of Sandlin since 1 January, 1885, without any payment on the debt or any accounting for rents and profits, barred tbe defendant’s recovery, under tbe statute, upon bis counterclaim. Judgment was entered according to these rulings and for costs in tbe action, against tbe defendant, who has appealed therefrom to this Court.
    
      F. S. Spruill and Bicleett & White for plaintiffs.
    
    
      W. M. Person and T. T. Hicks for defendant.
    
   Walker, J.,

after stating tbe case: There is a, suggestion in tbe defendant’s assignment of errors that be was entitled to have tbe two transactions in regard to tbe Davis tract and tbe town lot considered together, and that, when so coupled, tbe court should have decided that tbe debt secured by tbe deed to Sandlin for tbe Davis tract bad been fully satisfied and discharged by tbe receipt of rents and profits by tbe plaintiff while in possession under tbe other deed. No connection between tbe two matters is shown by proof, though it is alleged in tbe answer that by a sale of a part of tbe town lot and tbe collection of rents, Sandlin bad received enough to pay botb debts. But as our decision will practically achieve tbe same result for tbe defendant, we need take no further notice of this contention, if it is in such tangible form as to permit us to do so.

In our opinion, tbe judge erred in bolding that tbe relation of vendor and vendee was created between tbe parties by their arrangement with respect to tbe Davis tract. There is no point made as to tbe statute of frauds, and tbe case must be determined upon tbe admission of tbe parties. If tbe deed of Davis to Sandlin is to be considered, upon tbe facts relevant to that question, as a mortgage, then it must follow from tbe other facts that tbe statute of limitations, which is pleaded in the answer, is a bar to plaintiff’s recovery. If tbe plaintiff’s own statement, in bis complaint, of tbe transaction does not make him a mortgagee and tbe defendant a mortgagor — and this we need not decide — tbe defendant’s allegation, which be admits, surely impresses that character upon tbe relation of tbe parties.

There are no special words required to constitute a mortgage. Tbe true tost is to ascertain whether tbe conveyance is a security for tbe payment of money or tbe performance of any act or thing. If tbe transaction resolves itself into a security, whatever be its form, it is, in equity, a mortgage. “Tbe rule which converts an absolute deed into a mortgage, in accordance with tbe intention of tbe parties that it should be held only as security, applies not only to conveyances,' voluntarily made by tbe grantor, but also to deeds received by purchasers at judicial sales, when tbe purchase was made under an agreement or arrangement with tbe debtor that tbe title should be held only as security for a debt or loan, and should be defeasible on payment of tbe money due. Nor need tbe deed even be made by tbe debtor; it is sufficient if tbe debtor, who claims to occupy tbe position of a mortgagor with tbe right of redemption, has an interest, legal or equitable, in the premises, and tbe grantee of tbe legal title acquired it by tbe act and assent of tbe debtor and as security for bis debt.” 27 Cyc., 993. Tbe law looks to tbe substance and not tbe phraseology. It goes behind tbe mere words of tbe parties to find their real meaning and intent, and when found, it administers their rights accordingly, and it matters not how this intent may be veiled or concealed by language. It searches for the trae, and not the false, and brushes aside all impediments in the way of finding it. Chancery suffers itself to be little embarrassed with the forms which any transaction may assume, and, therefore, in whatever hand the fee may remain or however disguised may be the terms, if the real object be the taking or holding of land for the security of a loan or debt, it is, in equity, a mortgage, and, if necessary, the subsequent conduct of the parties with reference to the matter may be examined to ascertain their true, intent, as the giving a note for the money or receiving part payment or interest on the same. Campbell v. Worthington, 6 Vermont, 448; 20 Am. and Eng. Enc. (2 Ed.), 944-949. It can make no difference, in the application of the principle, whether the deed is made directly from the vendor to the party alleged to hold as mortgagee, or by the party claiming the equity of redemption to him, or that the legal title never was in the debtor. Carr v. Carr, 52 N. Y., 251; Balduff v. Griswald, 9 Okla., 438. It all comes back to the same test, Was the deed made to secure a debt or was the land bought by one party for himself, with an agreement to sell it to another? In our case it appears that Sandlin advanced the money, at the request of Kearney, and the land was bought for the latter. His equity, is, therefore, as complete as if he had bought it himself. "When Kearney requested Sandlin to advance the money to him for the purpose of making the purchase, the law implied a promise by Kearney to pay back the amount so advanced, with interest, and this established the relation of debtor and creditor, as much so as if Sandlin had directly loaned the money to Kear-ney and delivered it to him, and the latter had, in turn, paid it to the vendor. The making of the deed by the vendor, at Kearney’s instance, to Sandlin, is the same, at least in equity, as if it had been made to Kearney and he had conveyed it to Sandlin; otherwise, we would sacrifice the very substance of the transaction to its form. Suppose Sandlin had given Kear-ney a writing expressing the same agreement as that admitted in this case. Would it not be a mortgage? As we have it, the admission of the parties in their pleadings stand for the writing. The contract is the same, though it is not written. It must be borne in mind that Sandlin, according to the facts and not merely his contention, bought for Kearney and not for himself. He who does an act through the medium of another is, in law, considered as doing it himself, and it was, therefore, substantially a purchase by Kearney from Davis. Looking at the real transaction, we find that Kearney bought the land and Sandlin, at his request; loaned him the money to pay for it, taking the title to himself as security for its pay- . ment. These are the naked facts when stripped of mere verbiage. In the Yermont case we have cited, the distinction between a contract for a sale of land and a mortgage is sharply drawn, and it was held by that Court that as advancements were made by the party having the legal title, they became a loan, and consequently a debt against the party to whom they were made, and he was subject to suit therefor, and that in this feature of the case the deed was really a mortgage; and of like import is Carr v. Carr, supra,, wherein it was said:

“It is well established that a deed, absolute on its face, can be shown by parol or other extrinsic evidence to- have been intended as a mortgage; and that the relation of mortgagor and mortgagee being thus established, all the rights and obligations incident to that relation attach to the parties. It is not material that the conveyance should be made by the debtor or by him in whom the equity of redemption will exist. It is sufficient if the debtor and he who claims to occupy the position of mortgagor with the right of redemption has an interest, legal or equitable, in the premises, and the grantee of the legal title has and acquired such title by the act and assent of the debtor, and as a security for his debt. (Stoddard v. Whiting, 46 N. Y., 627.) In the case cited the plaintiff sought to redeem the premises from the defendant, who had taken the title upon paying a balance due upon a contract of purchase held by the assignor of the plaintiff, who had entered under the contract and paid a part of the purchase money before the arrangement with the defendant, who took the conveyance directly from tbe original vendor. But tbe principle of tbe ease is decisive of tbis appeal. Tbat tbe contract was in writing, and tbe vendee bad made partial payment of tbe purchase money, and was in possession of tbe premises, only make tbe two cases to differ, circumstantially, and affect tbe degree ratber than tbe character of tbe evidence to establish tbe relationship of mortgagor and mortgagee. Tbe purchase here was by tbe borrower of tbe money from tbe plaintiff, and bis rights as purchaser were recognized by tbe seller; tbe possession of tbe actual buyer followed immediately upon tbe purchase, and be paid a part of tbe purchase money at tbe time, and became a debtor to tbe plaintiff for tbe amount advanced by him. Tbe circumstances a are as significant and the- equities as palpable as in Stoddard v. Whiting; and it needs no extension of tbe rule there adjudged to declare tbe conveyance to tbe plaintiff to have been intended as a mortgage.”

Tbat case is not distinguishable in principle from tbis one. It appeared there, it is true, tbat tbe seller bad recognized tbe borrower of tbe money as tbe purchaser of tbe land by receiving a part of tbe purchase money from him, but that' fact does not differentiate tbe cases, and was merely mentioned by tbe court because it happened to be one of tbe facts in tbe case. Sandlin bought for Kearney, paying tbe price for him, and thereby recognized him as tbe real purchaser. Tbe character of tbe transaction must be determined, not so much by tbe understanding of Davis, tbe seller, as by tbe agreement between Sandlin and Kearney. Many authorities can be cited to sustain our view of tbe matter. 20 Am. and Eng. Enc., p. 943 et seq. and notes; Jones on Mortgages (6 Ed.), secs. 281 and 332; Klock v. Walter, 70 Ill., 416; Robinson v. Lincoln Savings Bank, 85 Tenn., 363; Thacker v. Morris, 52 W. Va., 220 (94 Am. St., 928). We are not without analogous decisions of tbis Court. The case of Crudup v. Thomas, 126 N. C., 333, is substantially like ours. There E. A. Orudup advanced tbe money at tbe request of A. D. Crudup and bought tbe land at a sale, taking tbe deed to himself. It was held tbat be was a mortgagee and liable to account as such. Mfg. Co. v. Gray, 124 N. C., 322. In Watkins v. Williams, 123 N. C., 170, it was held that whenever a deed is really taken as a security for a debt, it is substantially a mortgage, whatever may be the formal agreement between the parties, and, in equity, it will be treated as a mortgage, with all the rights and remedies incident thereto; and the same principle was announced in the previous case of Robinson v. Willoughby, 65 N. C., 520, wherein Justice Rodman, speaking for the Court, said: “A mortgage is a conveyance by a debtor to his creditor, or to some one in trust for him, as a security for the debt. Whatever is substantially this is held to be a mortgage in a court of equity, and the debtor has a right to redeem. Coote Mort., 22; Fisher Mort., 68. It is immaterial whether the contract be in one writing or in several; Mason v. Hearne, 45 N. C., 88; and it is also immaterial (as between the parties) whether the agreement for redemption be in writing or oral; and such agreement may be implied from the attending circumstances. Of these principles, and of the circumstances which will cause a deed absolute on its face to be construed as a mortgage, numerous illustrations may be' found in the treatises above cited, and in our own Reports. ... In determining the question whether a transaction amounted to a mortgage, or to a defeasible purchase, it has always been considered of the greatest importance whether the vendor was a debtor to the vendee, and if he was, and if after the supposed sale he continued to be a debtor, the inference was irresistible that the transaction was a mortgage, and that he could redeem by paying the debt. (Coote Mort., 24.) Otherwise, the debtor would have parted with his land without any consideration whatever. ... If a transaction be a mortgage in substance, the most solemn engagement to the contrary, made at the time, cannot deprive the debtor of his right to redeem; such a case being, on grounds of equity, an exception to the maxim 'modus et cowventio vincunt legem/ ... In addition to this, the fact that the supposed vendor continued in possession after the sale, without the demand or payment of rent, is a circumstance which, remaining unexplained, is inconsistent with the idea of an absolute sale. Taking this view of the case, Chris-tenbury retained an equity of redemption, which at least his deed conveyed to Willoughby.” Porter v. White, 128 N. C., 42; Waters v. Crabtree, 105 N. C., 394. A comparison of these decisions, and others of the same class, with the case at bar will disclose a striking similarity between them. But Mason v. Hearne, 45 N. C., 88, seems to be “on all-fours” with our case, the only difference being that, though the deed was absolute in form, the agreement for redemption was in writing; but this, as we have seen, makes no difference. In that case it appeared that the defendant bought a tract of land for the plaintiff from one Davis, and paid the purchase money to him, under an agreement that he would convey the. land to the plaintiff when she paid the amount so advanced by him. It was held to be a mortgage, Judge Pearson saying that “the Court regards not the form, whenever the real intention was merely to secure the payment of money, and will, upon the ground of the intention, relieve against the forfeiture of conditions” and permit the party having the equity to redeem. Our case shows not only an express agreement for a redemption, which was evidently omitted from ignorance or mistake, but facts dehors the deed inconsistent with the idea of an absolute purchase by Sandlin, and thus it is brought within the familiar principle established in the following decisions: Streator v. Jones, 10 N. C., 423; Kelly v. Bryan, 41 N. C., 283; Clement v. Clement, 54 N. C., 184; Sowell v. Barrett, 45 N. C., 50.

We close this part of the discussion with the words of Chief Justice Smith in the oft-cited case of Mulholland v. York, 82 N. C., 510: “Can a trust attaching to land be created by a parol contract entered into between the debtor and his attorney, that the latter will buy the debtor’s land at the execution sale, hold for his benefit, and reconvey on being reimbursed the money paid for it? In our opinion, a trust may be thus formed, and it will be enforced on the ground of fraud in the purchaser in obtaining the property of another under a promise to allow him to redeem, -and attempting afterwards to appropriate it to his own use. The principle is illustrated in several cases in our own Reports, which will be briefly adverted to. In Turner v. King, 37 N. C., 132, the defendant verbally agreed with, tbe plaintiff to buy in bis lands, about to be sold under execution, and allow bim to redeem on repayment of tbe purchase money; and tbis being known to tbe bidders, two of them desisted, and tbe defendant bought for $190 lands worth $450. On a bill to redeem, Daniel, J., uses tbis language: ‘The attempt of tbe defendant to set up an irredeemable title, after tbe agreement be entered into, is such a fraud as tbis Court will relieve against.’ ” Tbe learned jurist used tbe word “trust” in its general sense, as every mortgagee is a trustee, first for himself to secure bis debt, - and then for tbe mortgagor.

If tbis deed must be considered as a mortgage, tbe deed for tbe town lot must receive tbe same construction. Kearney actually bought tbe lot himself and paid a part of tbe purchase money, Sandlin advancing tbe balance, upon an agreement of Kearney to pay it back to bim. Tbis created a debt, and tbe deed was a security for its payment.

Having concluded that both deeds must be regarded as mortgages, it follows that tbe plaintiff’s cause of action is barred by tbe statute, Kearney, tbe mortgagor, having been in possession of tbe Davis tract since tbe last payment on tbe debt was made in January, 1885 (Revisal, secs. 391 (3) and 399), and tbe defendant’s cause of action, alleged in bis counterclaim, is likewise barred, Sandlin, tbe mortgagee, having held tbe possession of tbe lot since January, 1885, when tbe last payment on that debt was made. Brown v. Brown, 103 Ind., 23.

Tbe result is that there was error in tbe ruling as to tbe Davis tract, and no error as to tbe town lot, and we modify tbe judgment accordingly and direct it to be adjudged in tbe Superior Court that tbe defendant is tbe absolute owner of tbe Davis tract and tbe plaintiff of tbe town lot.

Modified.