Court Opinion

ID: 9550995
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:46:23.194803+00
Date Added: 2024-06-11T15:22:51.908671
License: Public Domain

O’CONNELL, J.,
dissenting.
If defendants had executed a mortgage in the usual form they would have had the right to insist upon a foreclosure by sale. OHS 88.010 and 86.010 express the *335policy that foreclosure by sale is the exclusive method of foreclosing a mortgage in this state.①
An absolute deed given to secure a debt is a mortgage. As Osborne on Mortgages (p. 187) states: “Whenever a deed absolute on its face is established as a mortgage, the general rule is that as between the *336parties it will "be treated as though it were a mortgage executed in regular form.” The rule arose because equity deemed it necessary to protect the borrower, usually in necessitous circumstances, from the importunity of the lender who sought to deprive the borrower of the benefits of foreclosure. This policy of protecting the borrower’s equity of redemption by requiring foreclosure is essentially the same as that which underlies ORS 88.010. Under the statute, the borrower can demand that foreclosure take the form of a judicial sale.② The statute does not empower the court to substitute strict foreclosure in lieu of the prescribed foreclosure by sale. The mortgagor should have the same right to insist on foreclosure by judicial sale whether the mortgage is cast in the usual form or takes the form of an absolute deed.
Osborne on Mortgages, p. 187, after noting that the lender-transferee of a deed absolute mortgage has the same right of foreclosure as a mortgagee holding a mortgage in usual form, explains: “This general doctrine, however, does not apply to permit a strict foreclosure of a deed absolute mortgage.” As authority for this statement Osborne cites Libel v. Pierce, 147 Or 132, 31 P2d 1106 (1934). In that case we said:
“* * * [T]he said deed, though absolute on its face, is merely a mortgage. * * * In this state a mortgage does not convey title to real property, but only creates a lien thereon * * *. A lien upon real property must be foreclosed in the manner provided by law. [Quoting ORS 88.010] ” 147 Or at 136.
*337The opinion went on to hold that the lower court had erred in granting strict foreclosure. The cause was remanded with directions to foreclose the mortgage by judicial sale. There is no essential difference between the Libel case and the case at bar.
The majority attach significance to the manner in which the borrower asserts his right to foreclosure by sale. Apparently if defendants had sought only to defend their right of possession, plaintiff would have been forced to foreclose the mortgage by judicial sale. However, the majority holds, that because defendants “called upon a court of equity to determine all of the rights” under their agreement, they must settle for strict foreclosure.
Why should the legislative policy of guaranteeing foreclosure by judicial sale apply only when the mortgagor acts defensively and not when he asks for affirmative relief? Neither the statute nor its legislative history provide the basis for argument that the mortgagor’s right should be so limited. This is not to say that the strict foreclosure cannot be decreed if the mortgagor asks for it. In Murray v. Wiley, 169 Or 381, 127 P2d 112, 129 P2d 66 (1942) the court held that where plaintiff mortgagor prayed only for relief in the nature of strict foreclosure the decree was properly entered in that form.
It is true that in the Murray case the court emphasized the point that the mortgagor had brought a suit to redeem and that it “was not a suit by the mortgagees to foreclose a mortgage.” Id. at 420, 129 P2d at 67. However, the contrast was alluded to in developing the point that “[t]he requirement that in suits brought for the foreclosure of a mortgage the property shall be sold subject to the right of redemption by the mortgagor is obviously for the benefit of the mortgagor. ” *338Ibid. The court went on to clarify the fact that the mortgagor had not asked for a sale subject to redemption, but prayed only for relief in the nature of strict foreclosure.” Id. at 424.
Admittedly, some of our cases leave doubt as to the right of a mortgagor to insist upon foreclosure by sale. Colahan v. Smyth, 159 Or 569, 81 P2d 112 (1938) contains general language to the effect that one who seeks to have a deed declared a mortgage must show a willingness to do equity by paying the mortgage debt. The court did not expressly hold that under such circumstances OES 88.010 would be inapplicable. Kinney v. Smith, 58 Or 158, 113 P 854 (1911) clearly demonstrates that this court does not regard the “seek equity — do equity” formula as incompatible with the right of the mortgagor to insist upon foreclosure by sale. In that case, after stating that when plaintiff seeks to have a deed adjudged a mortgage he must show a willingness to do equity by paying the mortgage debt, the court went on to say that when an absolute deed is given for security purposes “[t]he title to the property cannot pass to the mortgagee except by foreclosure, as provided by the statute or a relinquishment by the mortgagor.” Id. at 162. A decree of strict foreclosure was modified and the property was ordered to “be sold as upon foreclosure in the manner provided by law.” Ibid.
Although the cases are in conflict, authority in other jurisdictions supports the proposition that a mortgagor need not pay the mortgage debt as a condition to relief in a suit seeking to have a deed declared a mortgage. Illustrative is Reese v. Rhodes, 3 Ariz 235, 73 P 446, 447 (1890), where the court said:
“* * * We do not think that the appellant in such a case should be required to pay or tender the *339amount of the indebtedness before seeking the relief he here asks. To do so would or might be to deny him relief at all, for he might not be able to pay. But that fact should not deprive him of his right to have the mortgage foreclosed, and the payment to him of the surplus of the proceeds of a sale of the property above the amount necessary to pay the mortgage debt. The court could do full justice to the parties, if, in fact, the transaction constituted a mortgage, by fixing a new day for the payment of the debt, and in default thereof order a sale of the premises to pay the debt and foreclosure of the mortgagor’s equity of redemption.”③
The case of Stone v. Leavitt, 40 S D 467, 470, 168 NW 28, 29 (1918) is closely in point. In that case defendant Leavitt contracted to purchase land and assigned his rights under the contract to one Boyd as security for certain debts owed by Leavitt to Boyd. Boyd made payments called for by the contract of purchase and received the deed from the vendor. Boyd’s administrator sought and received a strict foreclosure in the lower court. In holding that the lower court erred in allowing strict foreclosure instead of foreclosure by sale, the South Dakota Supreme Court said:
“* * * Boyd’s rights against L. are to be measured by the contract between them, and not by the contract which L. assigned to Boyd. If Boyd, instead of taking the assignment of the land contract, had taken a deed from the vendor subject to such land contract, and defendant L. had defaulted in his payments under such land contract, then plaintiffs, under chapter 138, Laws 1913, would have been entitled to strict foreclosure; but plaintiffs’ rights rested entirely upon the terms of the assignment from the vendee, which assignment was confessedly given as security, rendering such assignment nothing more nor less than a mortgage. *340When Boyd took the deed to this land he held the same as security under the terms of the contract between him and L., and L. could not be deprived of his rights except by ordinary foreclosure. There was no more right of strict foreclosure than there would have been if L., instead of holding a contract for the purchase of said land, had held the title to said land and had conveyed said land to Boyd by a conveyance in form a deed, but intended as a mortgage. Under such circumstances plaintiffs’ rights would be those of a mortgagee, and could only be enforced by an ordinary foreclosure. # * #
The foregoing reasoning is applicable to the case at bar. Defendants are entitled to a foreclosure by judi- . cial sale.
The majority opinion makes it possible for a lender to render OBS 88.010 completely inoperable simply by putting the mortgage transaction in the form of an absolute deed. He can dispense with foreclosure by sale and proceed in ejectment, insisting upon strict foreclosure if the mortgagor attempts to assert his rights as a mortgagor. This the legislature did not intend.
McAllister, C. J., and Denecke, J., join in this dissent.

 ORS 88.010 provides as follows:
“Except as otherwise provided by law, a lien upon real or personal property, other than that of a judgment or decree, whether created by mortgage or otherwise, shall be foreclosed, and the property adjudged to be sold to satisfy the debt secured thereby by a suit. Except as provided in ORS 88.070, in addition to the decree of foreclosure and sale, if a promissory note or other personal obligation for the payment of the debt has been given by the lien debtor or any other person as principal or otherwise, the court also shall decree a recovery of the amount of the debt against such person or persons, as the case may be, as in the case of an ordinary decree for the recovery of money. The provisions of this chapter as to liens upon personal property are not intended to exclude a person having such lien from any other remedy or right in regard to such property.”
ORS 86.010 provides as follows:
“A mortgage of real property is not a conveyance so as to enable the owner of the mortgage to recover possession of the property without a foreclosure and sale. This section is not intended as a limitation upon the right of the owner of real property to mortgage or pledge the rents and profits thereof, nor as prohibiting the mortgagee or pledgee of such rents and profits, or any trustee under a mortgage or trust deed from entering into possession of any real property, other than farm lands or xhe homestead of the mortgagor or his successor in interest, for the purpose of operating the same and collecting the rents and profits thereof for application in accordance with the provisions of the mortgage or trust deed or other instrument creating the lien, nor as any limitation upon the power of a court of equity to appoint a receiver to take charge of the property and collect the rents and profits thereof.”
Murray v. Wiley, 169 Or 381, 401, 127 P2d 112, 129 P2d 66 (1942); Harper v. Interstate Brewery Co., 168 Or 26, 120 P2d 757 (1942); Libel v. Pierce, 147 Or 132, 31 P2d 1106 (1934); Cordrey v. Steamship “Bee,” 102 Or 636, 656, 201 P 202 (1922); Caro v. Wollenberg, 68 Or 420, 136 P 866 (1914); Marquam v. Ross, 47 Or 374, 78 P 698, 83 P 852, 86 P 1 (1905); Thompson v. Marshall, 21 Or 171, 27 P 957 (1891).

 Libel v. Pierce, 147 Or 132, 31 P2d 1106 (1934); Cordrey v. Steamship “Bee,” 102 Or 636, 656, 201 P 202 (1922); Caro v. Wollenberg, 68 Or 420, 136 P 866 (1914); Marquam v. Ross, 47 Or 374, 78 P 698, 83 P 852, 86 P 1 (1905); Thompson v. Marshall, 21 Or 171, 27 P 957 (1891).

 Cf., Reitze v. Humphreys, 53 Colo 177, 125 P 518 (1912).