Case Name: The National Bank of Columbus v. The Tennessee Coal, Iron and Railroad Company et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1900-05-08
Citations: 62 Ohio St. 564
Docket Number: 
Parties: The National Bank of Columbus v. The Tennessee Coal, Iron and Railroad Company et al.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 62
Pages: 564–589

Head Matter:
The National Bank of Columbus v. The Tennessee Coal, Iron and Railroad Company et al.
A written instrument in form of deed of conveyance of land — Is in legal effect a mortgage, when — Not effective as to third parties until delivered for record — Priority of lien in contest between grantee and judgment creditor of grantor.
1. A written instrument duly witnessed and acknowledged, with granting clause in due form as an absolute deed of conveyance of real estate, had the following habendum and trust clause:
“To have and to hold said premises with all privileges and appurtenances unto said the National Bank of Columbus, its successors and assigns forever; in trust, nevertheless, and upon condition that said Alexander G-. Patton is to hold possession of said premises as fully as if this conveyance had not been made, until said the National Bank of Columbus shall require and make a sale thereof, as hereinafter provided, that is to say; This conveyance is made for the purpose of securing to said the National Bank of Columbus the sum of twenty-five thousand ($25,000) dollars, with interest thereon now past due, and evidenced by the promissory note of said Patton heretofore executed and delivered to said bank, dated October 19, 1891, and it shall be lawful for said the National Bank of Columbus, after six months notice in writing, at any time within five years from the date hereof, in case said principal sum of twenty-five thousand ($25,000) dollars and the unpaid accrued interest there on shall not he paid on demand, after the notice aforesaid, to sell said land at private sale or public auction, for cash or on credit, and apply the proceeds to the payment of whatever amount may then he due said hank on account of said indebtedness, principal and interest, and the surplus, if any, after such payment, shall be paid over to said Alexander G. Patton, and no payment or receipt of interest, or on account of said principal shall he taken, held or construed as an extension of time for payment of said past due indebtedness; and further it is agreed and promised by said the National Bank of Columbus for itself, its successors and assigns, that if said Patton shall pay said indebtedness and the interest thereon at any time, with or without demand, this deed shall he null and void, and a proper quit-claim deed of all interest in the premises aforesaid shall be executed by said bank to said Alexander G. Patton, his heirs and assigns forever.” A judgment was recovered against the grantor in the court of common pleas of the county where the real estate described in said instrument was situated. In a contest between such judgment creditors, and the grantee in said instrument, as to the priority of lien upon said real estate: Held — That said instrument is in legal effect a mortgage, and did not take effect, as to third parties, until delivered for record; that said judgment became a lien on said real estate from the first day of the term of court at which it was rendered, and said day being prior in time to the date of the delivery of the mortgage for record, the judgment was the prior lien.
2. Where a vested interest remains in the grantor in a deed with a trust clause, such deed, as to the rights of third persons, is a mortgage, and is required to he recorded as such.
3. Under section 5374, Revised Statutes, all vested interests in lands and tenements may he levied upon and sold upon execution to pay debts.
(Decided May 8, 1900.)
Error to the Circuit Court of Franklin county.
The agreed statement of facts iB in substance as follows:
On October 19, 1891, Alexander C. Patton, one of the defendants in error, made to the plaintiff in error his promissory note, in the words and figures follow-in?. to-wit:
“$25,000.00. Columbus, O., Oct. 19, 1891.
One day after date, we promise to pay to the order of A. Gr. Patton, twenty-five thousand and no hundredths dollars, at the National Bank of Columbus, Ohio. Value received.
Alex. G. Patton.
Indorsed: A. G. Patton.”
On October 31, 1891, Alexander G. Patton and his wife executed and delivered to the bank the following instrument:
“warranty deed.
“Know all men by these presents: That Alexander G. Patton, of the county of Franklin, and state of Ohio, in consideration of the sum of twenty-five thousand dollars to him paid by the National Bank of Columbus, a corporation organized under the laws of the United States, the receipt whereof is hereby acknowledged, does hereby grant, bargain, sell and convey to the said The National Bank of Columbus, its successors and assigns forever, the following real estate, situated in the county of Franklin, in the state of Ohio, and in the city of Columbus, and bounded and described as follows: (Descriptions omitted.)
“To have and to hold said premises with all privileges and appurtenances unto said The National Bank of Columbus, its successors and assigns forever; in trust, nevertheless, and upon condition that said Alexander G. Patton is to hold possession of said premises as fully as if this conveyance had not been made, until said The National Bank of Columbus shall require and make a sale thereof, as hereinafter provided, that is to say: This conveyance is made for the purpose of securing to said The National Bank of Columbus the sum of twenty-five thousand ($25,000) dollars, with interest thereon now past, due and evidenced by the promissory note of said Patton heretofore executed and delivered to said bank, dated October 19, 1891, and it shall be lawful for said The National Bank of Oolumbus, after six months notice in writing, at any time within five years from the date hereof, in case said principal sum of twenty-five thousand ($25,000) dollars and the unpaid accrued interest thereon shall not be paid on demand, after the notice aforesaid, to sell said land at private sale or public auction, for cash or on credit, and apply the-proceeds to the payment of whatever amount may then be due said bank on account of said indebtedness, principal and interest, and the surplus, if any, -after such payment, shall be paid over to said Alexander G. Patton, and no payment or receipt of interest, or on account of said principal shall be taken, held or construed as an extension of time for payment of said past due indebtedness; and further it is agreed and promised by said The National Bank of Columbus for itself, its successors and assigns, that if said Patton shall pay said indebtedness and the interest thereon at any time, with or without demand, this deed shall be null and void, and a proper quit-claim deed of all interest in the premises aforesaid shall be executed by said bank to said Alexander G. Patton, his heirs and assigns forever.
“In witness whereof, the said Alexander G. Patton and Mary G. Patton, his wife, who hereby releases her right of dower in the premises, have hereunto set their hands this thirty-first day of October, in the year of our Lord one thousand eight hundred and ninety-one.
“Alexander G. Patton,
“Mart G. Patton.”
This instrument was duly witnessed and acknowledged.
On October 13, 1894, The Tennessee Ooal, Iron & Railroad Company, being a creditor of Alexander G-. Patton, doing business under the firm name of the Patton Manufacturing Company, commenced its action aginst him, in that form, in the Franklin common pleas, and such action was pending, on issue joined therein, until July 2, 1896, when the plaintiff therein recovered a judgment against Alexander G. Patton for the sum of $1,631.34, with interest thereon, from the date thereof, and costs. That term of the common pleas began April 7, 1894.
Between the 1st and the 14th days of May, 1896, the bank took actual possession and control of said real estate and thereafter retained the same until the sale thereof under the order of said common pleas court, Alexander G. Patton had been in possession thereof from October 31, 1891, pursuant to the stipulation in said instrument.
On May 14, 1896, the bank having held said deed from the date of its delivery unrecorded, the property, therein described, was transferred on the duplicate in the county auditor’s office, and on the 18th day of that month the deed was filed with the county recorder and was thereafter duly recorded in the record of deeds of said county.
On May 18, 1896, after the filing of the deed for record, the property and business of said Patton went into the hands of receivers under the orders of different courts, in fact, of the courts of different states, and still remain in the hands of receivers.
The company had no knowledge of the deed before it was filed.
On September 17, 1896, execution issued on said judgment in favor of the company and a levy thereof was declared and returned by the sheriff as made on the real estate described in said deed.
Pursuant to an order of the common pleas court said lands were sold for the sum of $19,370.00 and the proceeds of such sale brought into that court and distributed, except about $2,300.00 retained to meet the issue on the subject of distribution, raised and pending between the bank and the company.
At the date of said levy of execution Mr. Patton had no other property subject to levy of execution. The unpaid balance of the bank’s $25,000 claim, after the partial distribution, was and is some $7,000, and the judgment of the company was and is wholly unpaid. The bank claims the undistributed fund, $2,299.36, by virtue of its deed. The company as against said instrument, claims a preference, or first lien on said fund, to the extent of its judgment, interest and costs. ’ ,
The issue was heard in the common pleas and decided in favor of the company. On appeal to the circuit court the same judgment was rendered, and the bank now brings the record here seeking to reverse the judgment of the circuit court.
J. T. Holmes, for plaintiff in error.
The issue between the bank and the company may be stated in various forms; it comes down at last, however, upon the undisputed facts, to a question which may be thus framed:
Did the legal title to the premises described in the deed of Patton and wife pass, by force of its terms and provisions, into the National Bank of Columbus?
The bank affirms; the company denies.
Or thus:
Did the company’s judgment against Patton become a lien on the real estate described in the deed to the bank as of the first day of the April term, towit, April 7, 1896?
The company affirms; the bank denies.
If the bank held the legal title to the lands, under favor of the deed, the lien of the judgment in favor of the company against Patton did not, and could not, attach thereto for that, such liens affect legal titles only; they do not attach to equitable rights or titles.
If the bank held the legal title to the land, on the issues made by the pleadings and the facts, whether or when its deed was recorded, or not, is wholly immaterial, and it is entitled to the fund as its property.
If it did not hold the legal title under the deed; if the fee simple remained in Patton and the instrument was an ordinary mortgage, then the company’s judgment became a lien on the land as of April 7, 1896, and has passed with its precedent character to and now obtains against the fund.
The deed to the bank has some of the features of a mortgage, but it is more than a mortgage by its terms and provisions.
The bank took the fee with full power to convey it to a purchaser at either public or private sale under sis months’ notice.
The instrument of conveyance is not in the general or the special form of a power merely to sell real estate. There is no mention or provision of such a power, as a power, in the deed. In other words, it is important to note that the power to sell is not conferred as a specific thing. It passed to the bank with, and as one of the inherents of, the fee and in no other form can it be found actively and actually Tested in the grantee. That it was so Tested cannot he successfully gainsaid.
If the six months’ notice was an indispensable condition precedent to the exercise of the power of sale, then, it is true that the bank could not exercise it after the first day of May, 1896, for want of time within which to give the notice. This fact did not affect the title held by the bank, howeTer; it did not 'reimvest Patton with any part of the fee, or with any part of the power to conTey the fee, which had passed to the bank.
A mortgagee, strictly so-called, in Ohio, has no power to conTey the fee of the mortgagor’s property pledged to him.
The mortgagor holds the legal title, at least until condition broken, and his interest is liable to leTy and sale on execution. Moore v. Rittenhouse, 15 Ohio St., 314; McArthur v. Franklin, 16 Ohio St., 206.
The doctrine that a mortgagor’s interest in mortgaged property is subject to leTy and sale under execution is of long standing in this state. Ely v. McGuire, 2 Ohio, 223; Phelps v. Butler, Id., 244; Miami, etc., Co. v. Bank; W., 249; Bank v. Bank, 10 Ohio, 71.
This has beén because the mortgagor, as the cases show, has been held to retain the legal title to the mortgaged premises.
As will appear in the discussion, much stress will be laid on three words of this paragraph, to-wit, “null and Toid.” They will be treated again and again as though their force obliterated from the document the words which follow immediately, commencing with the copulative conjunction “and.” They were appropriate words, not strong enough to cut down the title which had passed in trust to the bank and destroy the provision and the necessity for a re-conveyance, but, to operate as a check on the grantee in the hands of the grantor whenever, if ever, he should pay the debt. Then he could say to the bank: “You now have no beneficial right in my property; you hold nothing except the naked title in fee, the trust around which has been hulled off. I want my property.” On the transaction in such position, this language would have lain in the grantor’s mouth, put there by the legal effect of express stipulation “null and void,” and he could, upon declination or hesitation, have gone into equity to enforce the return of the title which the stipulation provided should be re-conveyed to him. Roads v. Symmes, 1 Ohio, 281; Jackman v. Hallock, 1 Ohio, 318; Baird v. Kirtland, 8 Ohio, 21.
Although there were two instruments in this 8 Ohio case, it is exactly in point, on the legal or equitable status, with the case at bar. Loring v. Melendy, 11 Ohio, 355; Haynes v. Baker, 5 Ohio St., 253; Gorrell v. Kelsey, 40 Ohio St., 117.
The case of Martin v. Alter, 42 Ohio St., 94, in one view comes quite near to the case at bar in its facts and its law.
If the legal title to this property was in Colonel Patton and never passed to the bank, the lien of the judgment, in legal effect, is, as already stated, substantially as defined by the company’s pleading.
What conld the sheriff have sold under the execution which he attempted to levy, by virtue of the company’s judgment, in September, 1896? The situation was widely different from that of a levy by the judgment creditor in the Martin-Alter case. There he would have levied on the legal title and upon sale would have passed the legal title to the lands to a purchaser. Here the fee had passed as part of the security and, as in Baird v. Kirtland, supra, it was beyond the reach of a legal lien. If the fee had passed to the bank, for its protection, it was beyond an execution, and the omission to record the deed could not change its character or prejudice the holder. A purchaser of the real estate, after six months from the execution and delivery of the deed, might obtain a prior right by obtaining and recording his deed, but a judgment creditor is not in any sense such purchaser. Tousley v. Tousley, 5 Ohio St., 78.
’ If we are not in error, the reported case in Ohio, which comes nearest in principle to the case at bar, is Morris v. Way, 16 Ohio, 469; Birchard v. Edwards, 11 Ohio St., 84.
A trust is created in our deed. As already suggested, it related to — embraced—something, and that something was the fee, the legal title, for the benefit and protection of the bank, the trustee. It was something which, under the notice, the bank could, without additional conveyance to it, have conveyed to a public or private purchaser, as its grantee; it had that thing when the trust deed was delivered to it and at no time forfeited or aliened it and that thing was to be re-deeded to Patton, his heirs and assigns, on payment of the debt. Such a posture of the legal title was regarded by the parties to the trust deed as necessary to the protection of the trustee. Rife v. Geyer, 59 Pa. St., 393.
One looked in vain through the discussion of counsel for authority or reasoning which showed that Patton held, or had power, after 1891, to grant the fee of the property. 26 Am. & Eng. Ency. Law, 860.
The deed, the title, in the case at bar fall within the first class mentioned by Judge Dillon. It was a parting with the fee to the trustee absolutely for the purpose of raising a fund to pay the debt. The debt was past due and expressly not extended or to be extended. The limitation of notice did not qualify the title held and which the bank’s deed would have conveyed to a purchaser. Woodruff v. Robb, 19 Ohio, 212; Hoffman v. Mackall, 5 Ohio St., 130; Kemper v. Campbell, 44 Ohio St., 210; 2 Pom. Eq., Sec. 995.
The bank had paid and Patton had received its $25,000, good and lawful money. In the light of the facts as they then appeared to bank and grantors and as they appear from the standpoint of the present time, the bank was entitled to the fee in equity and justice and if under notice it could have sold and conveyed it, in law it took the fee to the property for all the purposes of the trust created and declared by the deed, and Patton held nothing that could be liened by a judgment.
The case at bar does not fall within the definition of the judge, page 423 of the opinion, in Sun Fire Office v. Clark, 53 Ohio St., where he says:
“The mortgage being simply a security for the debt, is extinguished by its payment without- any reconveyance.”
As' germane to more than one phase of our case, I stop to quote at this point the definition entire of the last Law Dictionary issued from the press.
1 Bouvier. “Defeasance. An instrument which defeats the force or operation of some other deed or of an estate. That which is in the same deed is called a condition; and that which is in another deed is called a defeasance. Comyns. Dig. Defeasance.
This case is in equity and not at law.
A condition of defeasance may consist with the passage of the fee simple title. 50 N. H., 552; 50 Mo., 284; 6 Met., 415.
The “null and void” used in this deed is to be read and reconciled with the reconveyance clause with which it is intimately and immediately connected. No case is recalled in which this court has made itself more definite and certain than in Arnold v. Fuller, 1 Ohio, 467.
The books say that technical accuracy applies the words “null and void” io contracts that are of no effect whatever. Van Schaack v. Robbins, 36 Iowa, 203.
The legal effect of the “null and void” clause in this deed was to render the deed inoperative and set in motion the right to the reconveyance provided for when and if the debt was paid in full.
Under the maxim noscitur a sociis “null” and “void” are equivalents.
Null is defined “of no legal force or effect; void.”
Void is defined “having no legal force; entirely null; incapable of .confirmation or ratification.” Standard Dictionary; Turner v. Ins. Co., 16 Fed., 454; Hinckley v. Insurance Co., 140 Mass., 47; 28 Am. & Eng. Ency. Law, 473; Terrill v. Anchauer, 14 Ohio St., 80.
Standing alone, where the legal effect of the words is settled by judicial interpretation, they are properly given that effect. Standing in a context, where that effect is not demanded by judicial determination, they must be read with the context and given that force and effect, and that only, which their collocation and “the four corners” of the written instrument authorize and require, under the rules of construction.
The authorities and cases touching the “null and void” feature of the deed, in connection with the re-conveyance condition, leave it clearer, if that he possible, that they may easily stand together, and each must be given its appropriate meaning, purpose and office in the instrument.
Technically, as we have seen, the words, under the definitions and cases, do not apply, and, under the rule tersely expressed in the New Hampshire case requiring that they be taken in a legal sense subject to large qualifications in view of all the circumstances calling for their application, and the rights and interests to be affected in a given case, and under the rule of interpretation that “an instrument must be so construed, if practicable, that the whole may stand; ut res magis valeat, quam pereat”; Ashland Mut. Fire Ins. Co. v. Housinger, 10 Ohio St., 12—the words “null and void” cannot be allowed silently, or otherwise, to destroy the reconveyance provision and the latter must be given its plain and obvious meaning and force. Broom — L. M. *541.
It has not been supposed that any of the Ohio cases covering the rules of interpretation — and they are numerous and clear — need be cited; they are very familiar to judges and all good lawyers in the state. Most of them are grouped in 1 Bates’ Complete Digest, Columns 488-492.
Two or three citations may not be inappropriate, however. Chamberlain case, 15 Ohio St., 24B; Mc-Clelland v. Bishop, 42 Ohio St., 124.
As to the legal and equitable principles involved there can be but little controversy. The debate will be over their application. The crucial point lies here; is the instrument a deed of trust or a mortgage? Did the legal title pass to the bank in trust, or remain in the grantors? Wright v. Bank, 59 Ohio St., 80.
Booth, Keating & Peters, and .James M. Butler, for defendants in error.
Whatever may be the rule elsewhere, in this state a judgment lien takes precedence of an unrecorded mortgage. The following shows how clearly an eminent text-writer has summed up the Ohio doctrine: 1 Jones on Mortgages, pp. 393, 395, sec. 465; Building Association v. Clark, 43 Ohio St., 427; Betz v. Snyder, 48 Ohio St., 492; Mayham v. Coombs, 14 Ohio, 429; Jackson v. Luce, 14 Ohio, 514;; White v. Denman, 1 Ohio St., 131.
The railroad company had no notice or knowledge of Patton’s conveyance to the bank until it was filed for record on May 18, 1896.
The conveyance by Patton to the bank was a mortgage within the intention and the letter of section 4133, and consequently it as without any effect against the railroad company until it was delivered to the recorder for record.
Any analysis of the instrument will disclose the essentials of a mortgage.
1. The terms of this conveyance, down to and including the habendum, are the same as usually appear in warranty deeds. But this similarity does not affect the argument on either side, because those terms are in common use in both deeds and mortgages.
2. It will be observed that we are not contending that this conveyance should be declared a mortgage for equitable reasons. In this deed there is no separate independent agreement. No testimony has been offered, no extraneous evidence introduced, to show the object and purpose of the parties in delivering and accepting the conveyance. The conveyance, complete in itself and embracing the whole contract between the parties, is presented to the court. Its provisions furnish the evidence of a legal mortgage. No equity case is presented to the court. Patton’s conveyance should be squared by the statute.
3. It was never intended that the bank should take absolute title to, or possession and control of, the property. Not only did the instrument not clothe the bank with the right to possess, control or enjoy the property, but also, out of abundant caution, it was expressly stipulated that the bank should not be clothed with these indicia of absolute title and OAvnership.
4. The instrument was executed and delivered for the purpose of securing the grantor’s debt.
No more appropriate language could be found by which to say that Patton had borrowed $25,000 from the bank, and that he Avas mortgaging his property to the bank for the purpose of securing the payment of the loan.
5. The conveyance contained a defeasance clause, the unfailing test of a mortgage. As in a mortgage, the title never passed to the grantee, as against third parties, and it was never intended that is should.
6. The instrument contains an additional provision.
This provision is simply a power of sale, and the whole instrument becomes a mortgage containing a poAver of sale. But the power of sale makes the instrument none the less a mortgage in the contemplation of our statutes.
7. Giving to the foregoing provisions their obvious effect, it is apparent that there could have been, and that there was, no default under the mortgage for at least six months subsequent to its execution and delivery. In other words, neither the bank nor any other person claiming by or under the mortgage had the slightest claim upon the property for at least six months. Patton was to hold possession of the premises as fully as if the conveyance had not been made, “until said The National Bank of Columbus shall require and make a sale thereof, as hereinafter provided.” But this sale could not be made by the bank until after six months’ notice in writing, and upon a failure to pay the principal with accrued interest on demand. It is a significant fact that the deed forever barred the grantee from taking possession of the property conveyed. 2 Pingrey on Mortgages, pp. 1225,1227; 1 Jones on Mortgages (5th edition), sec. 62; 26 Am. & Eng. Ency. Law, 860, 861; 26 Am. & Eng. Ency. Law, foot-note, p. 860; 1 Jones on Mortgages, sec. 62, p. 40; 2 Pomeroy’s Eq. Jur. (2nd Ed), 1459; Wolfe v. Doe, 13 S. & M. (Miss.), 103; 2 Jones on Mortgages (5th Ed.), part sec. 1769, p. 654; 2 Beach on Trusts and Trustees, sec. 629, p. 1440; 2 Beach on Trusts and Trustees, sec. 661, p. 1517; Team v. Baum (Sup. Court of S. C., 1896), 25 S. E. Rep., 275; McLean v. Paschal, 47 Tex., 365, Eaton v. Whiting, 3 Pick. (Mass.), 484.
Newman v. Samuels, 17 Iowa, 528, will be found a clear recognition of the correct doctrine, and a reliance upon Woodruff v. Robb, 19 Ohio, 212, a leading case in our own state.
Another leading case is Turner v. Watkins, 31 Ark., 429; Bennett v. Union Bank, 5 Hump., 612; Brantley & Bro. v. Wood & Bro., 97 Ga., 755.
The Ohio law applicable to this case is settled. Perkins v. Dibble, 10 Ohio, 434; Martin v. Alter, 42 Ohio St., 94.
In addition to the three cases we have just discussed, there are two decisions of this court which should be critically examined: Hoffman v. Mackall, 5 Ohio St., 124; Kemper v. Campbell, 44 Ohio St., 210.
And finally, in the case of The Sun Fire Office of London v. Clark, 53 Ohio St., 414, goes further than is necessary to sustain our position in the case at bar.
We are not asking that this conveyance be declared a mortgage for equitable reasons. In the pending case there is no separate independent agreement. No testimony has been offered — none could have been offered, in any way showing or explaining, or tending to show dr explain, the intentions of the parties to the instrument. A conveyance complete in itself is presented, an instrument embracing the whole contract between the parties. If the instrument withifi its four corners bears the evidence of a legal mortgage, such as the statute contemplates, the railroad company wins. If the whole instrument constitutes a deed, the bank wins. Consequently cases wherein the conveyances were absolute with separate independent contracts of condition or defeasance are not controlling. Connected with this is the no less important principle that the rules applied by a court of equity in working out the respective rights of the grantor and the grantee in a conveyance are not the rules that obtain when the rights of an innocent third party under the registry law áre to be determined.
In other words, it was claimed that the deed provided that Patton’s possession should continue, until the bank “shall require possession and make a sale thereof.” Such an argument refutes itself.
This and other language found in the brief indicates that counsel believes that, because the bank might have conveyed the fee to a purchaser, it necessarily had the fee. Such a conclusion destroys the purpose of the well-known power of sale in a mort gage. The fact that the bank, under the instrument, had the power to sell the property and to convey the fee, is neither controlling nor indicative. This court has held that a mortgage under the statute is none the less a mortgage because it gives the grantee the right to sell the property and to convey the fee. The naked mortgage and the mortgage with the power of sale superadded have the same legal effect, are subject to the same principles, to the same requirements as to registration and to the same rules concerning judgment, execution and levy. Indeed, the very purpose of the power is to enable a person to convey that which he does not possess. The whole argument has been crystallized in one of the briefs in Eaton v. Whitney, 3 Pick., 484.

Opinion:
Burket, J.
As the statutes of this state stood before the revision of 1880, "lands and tenements" could be levied upon and sold to pay debts, sec. 420 of the Code of Civil Procedure, and statutes prior thereto. Under those statutes it was held that an equity could not be levied upon and sold to pay debts, and that a judgment did not create a lien upon an equity. Baird v. Kirtland, 8 Ohio, 21; Morris v. Way, 16 Ohio, 469; Loring v. Melendy, 11 Ohio, 355, and many other cases.
The statute was amended in 1880, sec. 5374, so as to make "lands and tenements, including vested interests therein," subject to levy and sale for the payment of debts.
Manifestly the interest which Mr. Patton retained in the surplus of the value of the real estate over and above the amount required to pay his note, and which was to be returned to him by the terms of the instrument, was a vested interest, and therefore subject to levy and sale to pay his debts.
By the next section, 5375, it is provided that "Such lands and tenements, within the county where the judgment is entered, shall be bound for the satisfaction thereof from the first day of the term at which judgment is rendered." "Such lands and tenements," in this section, embraces the same as "lands and tenements, including vested interests therein," in the preceding section. It is therefore clear that the judgment in question became a lien upon the vested interest of Mr. Patton in the lands covered by this instrument, from the first day of the April term, 1894, of the court of common pleas, that is, April 7, 1894, and that the lien of the judgment attached, by relation, under the statute, to such vested interest as he then had in said lands.
Let us next inquire what vested interest he then had in the lands upon which a lien could attach in favor of the judgment creditor, and against Mr. Patton and his grantee, the bank.
Section 4106, Revised Statutes, provides how "A deed, mortgage, or lease of any estate or interest in real property" shall be executed. The instrument in question was either a deed or mortgage. It was not a lease. The plaintiff in error claims that it was in legal effect a deed, while the defendant in error claims that it was in legal effect a mortgage. The statute does not define either a deed or a mortgage, but seems to take it for granted that those terms are well understood and need no definition. It must be clear that this instrument is not simply a deed, as that word is usually understood, because a deed conveys full title for a certain consideration without any interest remaining in the grantor in the realty conveyed. True, there may be conveyances by deed upon conditions, but in all such cases the grantor retains no vested interest in the estate or interest conveyed. and if it ever returns to him, it returns upon breach of a condition, and in such cases his interest is contingent and not vested. A conveyance may also be made by deed in trust for the benefit of creditors, and in such cases the title passes under the deed to the trustee, even though the surplus, .if any, after payment of all debts, comes back to the grantor. But even in such cases it is usually regarded safer to make the grantor a party to the proceedings to sell the real estate conveyed by the deed of assignment.
While the instrument in question is not a straight, ordinary deed, it is claimed to be what is known as a trust deed, or deed in trust conveying the title to the bank, and out of Mr. Patton, so as to be good against the world, without record, except as against a subsequent bona fide purchaser without notice.
The question whether this instrument is a deed in legal effect as claimed, or a mortgage, is not without difficulty. The granting clause is that of an absolute deed of conveyance, and so is the habendum down to the word "forever;" and then, after a semicolon, comes the following:
"In trust, nevertheless, and upon condition that said Alexander G. Patton is to hold possession of said premises as fully as if this conveyance had not been made, until said The National Bank of Columbus shall require and make a sale thereof, as hereinafter provided, that is to say; this conveyance is made for the purpose of securing to said The National Bank of Columbus the sum of twenty-five thousand (|25,000) dollars, Avith interest thereon now past due and evidenced by the promissory note of said Patton heretofore executed and delivered to said bank, dated October 19, 1891, and it shall be lawful 'for said The National Bank of Columbus, after six months notice in writing, at any time within five years from the date hereof, in ease said principal sum of twenty-five thousand ($25,000) dollars and the unpaid accrued interest thereon shall not be paid on demand, after the notice aforesaid, to sell said land at private sale or public auction, for cash or on credit, and apply the proceeds to the payment of whatever amount may then be due said bank on account of said indebtedness, principal and interest, and the surplus, if any, after such payment, shall be paid over to said Alexander G. Patton, and no payment or receipt of interest, or on account of said principal shall be taken, held or construed as an extension of time for payment of said past-due indebtedness ; and further, it is agreed and promised by said The National Bank of Columbus for itself, its successors and assigns, that if said Patton shall pay' said indebtedness and the interest thereon at any time, with or without demand, this deed shall be null and void, and a proper quit-claim deed of all interest in the premises aforesaid shall be executed by said bank to said Alexander G. Patton, his heirs and assigns forever."
Everything contained in this trust part, of the instrument is inconsistent with, and irreconcilably opposed to, a deed passing title from Mr. Patton to the bank. He retains possession of the premises until the bank shall require and make a sale of the property. The conveyance is made for the purpose of seeurmg to the bank $25,000 evidenced by a past-due note. If not paid within five years the bank may sell the real estate after six months notice, and apply the proceeds upon the note, and pay the surplus, if any, to Mr. Patton. No extension shall be made, and if Mr. Patton shall pay the debt at any time, the deed shall be null and void, and the bank shall ex ecute a quit-claim deed to Mr. Patton, his heirs and assigns forever.
If the instrument had been intended to pass title and not operate merely as a security, the bank would have taken immediate possession of the premises; it would not have stated that the conveyance was for the purpose of security; it would not have provided for a power of sale, because a grantee in an absolute deed may sell when and as he pleases; it would not have agreed to pay any surplus to Mr. Patton; it would not have agreed that upon payment of the debt the deed should be null and void; and it would not have agreed to make a quit-claim deed.
The trust part of the instrument is throughout in legal effect the same as the condition, or defeasance clause in a mortgage. Possession is retained by the grantor (mortgagor), the instrument states that it is for the purpose of security; a power of sale is given to the grantee (mortgagee); the surplus, if any, is to be paid to the grantor (mortgagor) ; upon payment of the debt the deed is to be null and void, and a quit-claim deed is to be made. Those are the ear-marks of a mortgage, and both upon principle and authority this instrument must be held to be a mortgage in so far as it concerns the rights of third persons. Martin v. Alter, 42 Ohio St., 94; Perkins v. Dibble, 10 Ohio, 434; Woodruff v. Robb, 19 Ohio, 212; Brantley v. Wood, 97 Ga., 755; Bennett v. Union Bank, 5 Humph., 612; Turner v. Watkins, 31 Ark., 429; Newman v. Samuels, 17 Iowa, 528; Eaton v. Whiting, 3 Pick., 484.
On principle and authority, the , rule seems to be, that if by the terms of such an instrument the grantor retains a vested interest in the premises, the instrument, in view of our recording acts, must be held to be, in legal effect, as to the rights of third per sons, a mortgage; but if no vested interest remains in the grantor, the instrument will be regarded as a deed.
It is usual in deeds of trust made by railroad companies and other corporations, to independent trustees, securing bonds to be sold to raise funds, to make them in form so as to pass title, and with a power of sale; yet such instruments are held to be, in legal effect, only mortgages, and that when one such trust deed has been made, the company may make others, that in legal effect the company retains a vested interest as mortgagor in possession, and that upon default such trust deeds may be foreclosed as mortgages. A case in point in our own state is Coe v. Railroad Co., 10 Ohio St., 372.
Much stress is laid by plaintiff in error upon the promise in the instrument in question, upon payment of the debt, to make a quit-claim deed, and it is urged that that provision shows that the title passed. We do not so construe it. The instrument was evidently intended to serve as a mortgage security to the bank, but to be so far in the form of a deed as to permit its record in the record of deeds instead of mortgages, and it was so recorded. Under these circumstances, upon payment of the debt by Mr. Patton, the instrument, even though made null and void by such payment, could not be released as a mortgage upon the margin of the deed record, without leaving a blur upon the title, and therefore for the protection of the title in case of payment, the provision for a quitclaim deed was very properly inserted. But that provision did not make the instrument a deed, but was á strong confirmation of its being a- mortgage, because it showed that the grantor still had a vested interest in the property, the title to which he was careful to protect. The intention was to secure the bank and shield Mr. Patton. That intention failed of its purpose, as is often the case, when the rights of third parties intervene. In such cases courts disregard mere forms, and consider the substance and legal effect of the transaction.
It is urged that as Mr. Patton was to hold possession of the premises until the bank should "require and make a sale thereof," he was to hold possession until the bank should require possession and make a sale. The instrument will not bear that construction. The meaning is that he should hold possession until the bank should require a sale, and make a sale thereof.
The power of sale, instead of showing the instrument to be a deed passing title to the grantee, has the contrary effect, and aids in showing the instrument to be a mortgage, as no such power is necessary in a deed which passes title, because the deed, by its own vigor, carries with it a power of sale to the grantee, while a mortgage does not carry such power unless expressly granted therein. The power of sale in this instrument is in the nature of a power of attorney to sell and convey lands, in which case the legal title remains in the grantor until the power is executed.
The only purpose to be served, or advantage to be gained, by a power of sale in a trust deed or mortgage, is to enable the trustee to take possession of the property and sell it under the power, and thereby cut off the vested rights of the grantor without the aid or delay of a proceeding in court. The grantee may, however, refuse to exercise the power of sale, and invoke the aid of a court to make the sale as upon foreclosure; and where subsequent liens have attached, such a course becomes necessary, because a sale by the trustees would convey a title burdened with such subsequent liens. Until a sale shall be made, either under the power or by the order of court, the grantor will retain his vested rights in the property, and such rights will be subject to liens the same as his other lands and tenements.
The agreed statement of facts also shows that about the middle of May, 1891, the bank took possession of the property and held possession thereafter until the levy of the execution thereon, and the plaintiff in error urges this fact as a point in its. favor. But this possession does not appear to have been by virtue of the instrument in question, but under some other arrangement between Mr. Patton and the bank. But even if it had been made under and by virtue of this instrument, it could not have aided the bank, because this possession was late in May, after the judgment had attached as a lien on April 7 of the same year. True the judgment was not recovered until in July, but it related back and became a lien from the first day of the term, April 7, and the rights of the parties are the same as if the judgment had in fact been recovered and entered on the first day of the term, though not recovered until July, and the conveyed the same to a purchaser on the day the bank took possession, the lien of the judgment would have attached to the property as of the first day of the term. If Mr. Patton had sold his property and lien would have continued against the property in the hands of such purchaser. It is because of this statute that when transactions in real estate take place during a term of court, search of the records must be made for pending actions.
The instrument in question being therefore in legal effect a mortgage, Mr. Patton owned and held the legal title, and the judgment in favor of the defendant in error became a lien on the property covered by the mortgage on April 7, 1894, and the mortgage being then not filed for record, the judgment has priority over the mortgage, and must be first paid.
Judgment affirmed.