Court Opinion

ID: 6887110
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:31:31.233283+00
Date Added: 2024-06-11T16:05:44.581996
License: Public Domain

LINDLEY, District Judge
(dissenting in part).
I agree with everything the majority has said, except that I cannot escape the conviction that under the Illinois authorities a merger was effected.
In Illinois, every deed under which the grantor reserves, either by parol or express provision, a right to redeem, i.e., an equity of redemption, is a mortgage. Illinois Revised Stat.Chap. 95, Sec. 13 provides that “every deed conveying real estate, which shall appear to have been intended only as a security in the nature of a mortgage, though it be an absolute conveyance in terms, shall be considered as a mortgage.” This includes every conveyance to secure a debt (Fitch v. Wetherbee, 110 Ill. 475); an oral agreement to permit a title in fee simple to stand as security (Worden *91v. Crist, 106 Ill. 326); a deed, absolute on its face, given to secure a previously existing debt (De Wolf v. Strader, 26 Ill. 225, 79 Am.Dec. 371; Bullock v. Battenhousen, 108 Ill. 28); a conveyance with a separate agreement to reconvey on payment of a certain sum (Miller v. Thomas, 14 Ill. 428; De Voigne v. Chicago T. & Tr. Co., 304 Ill. 177, 136 N.E. 498); and this, though the agreement rests in parol (Scanlan v. Scanlan, 134 Ill. 630, 25 N.E. 652; Gannon v. Moles, 209 Ill. 180, 70 N.E. 689; Deadman v. Yantis, 230 Ill. 243, 82 N.E. 592, 120 Am.St.Rep. 291); and even though the parties stipulate that title shall become absolute and unredeemable on failure of the grantor to pay the debt on the day fixed (Bane v. Pritchett, 223 Ill.App. 617) for “once a mortgage is always a mortgage.” Mann v. Jobusch, 70 Ill.App. 440. The right of redemption can be barred only by the method recognized by law. Kelly v. Lehmann, 297 Ill. 33, 130 N.E. 375; Kulik v. Kapusta, 303 Ill. 208, 135 N.E. 402; Bane v. Pritchett, 223 Ill.App. 617. So when the mortgagee received a quitclaim deed from the holder of the equity of redemption, it did one of two things, (1), it took the title as additional security, (as it insists), and, if so, its title was still only that of a mortgagee, or (2), it took the fee and merged its mortgage therein and then and thereby put an end to its lien.
But if it was its intention to achieve (1), i. e., remain a mortgagee, it could later perfect its title and wipe out the equity of redemption only by foreclosure, — for, on its own admission, its title was still that of a mortgagee, and its rights and remedies were only those fixed by the Illinois statute. Ill.Rev.Stat. C. 95, Sec. 23. That Act reads: “No real estate within this state, shall be sold by virtue of any power of sale, contained in any mortgage, trust deed or other conveyances in the nature of a mortgage, executed after the taking effect of this act; but all such mortgages, trust deeds or other conveyances in the nature of a mortgage, shall only be foreclosed, in the manner provided for foreclosing mortgages containing no power of sale; and no real estate shall be sold to satisfy any such mortgage, trust deed or other conveyance in the nature of a mortgage, except in pursuance of a judgment or decree of a court of competent jurisdiction.”
Thus it is expressly provided that a mortgage or “other conveyances in the nature of a mortgage” shall be foreclosed only in the “manner provided for foreclosing mortgages”, and that “no real estate shall be sold to satisfy any such .mortgage * * * or other conveyance in the nature of a mortgage, except in pursuance of a judgment or decree of a court of competent jurisdiction.” The purpose of this statute is to prevent sales of the equity of redemption and no scheme or device to evade the statute or circumvent it by provision depriving the debtor of his equity of redemption will be upheld. De Voigne v. Chicago T. & T. Co., 304 Ill. 177, 136 N.E. 498, 79 Am.Dec. 371; Knox v. Hunter, 150 Ill.App. 392. The equity of redemption exists by virtue of the statute, not by virtue of the mortgage. Strause v. Dutch, 250 Ill. 326, 95 N.E. 286, 35 L.R.A.,N.S., 413; Chicago Sav. Bank & T. Co. v. Coleman, 283 Ill. 611, 119 N.E. 587. So if the quit-claim deed was taken, not in satisfaction of the debt, but, as plaintiff contends, as additional security, plaintiff’s rights were the same after receiving the deed as before. It still had only a conveyance in the nature of a mortgage; its title was still only security for the debt and could be perfected, under the quoted statute, only by foreclosure in a court of competent jurisdiction.
But this it never did; rather, it treated its title not as an unforeclosed mortgage, but as the fee simple. It even conveyed the property with warranty of such title. Consequently it must fall into alternative (2) above, for by its actions, it has unequivocably and emphatically dealt with the property as its undisputed unincumbered owner. It must be held legally to have done what it professes not to have done but what it, by its acts, has actually done, when those acts are considered and construed in the light of the Illinois statute, — accepted the title in fee, merged its mortgage in such fee and forever discharged it. Bradley v. Lightcap, 202 Ill. 154, 67 N.E. 45, reversed on other grounds, 195 U.S. 1, 5, 24 S.Ct. 748, 49 L.Ed. 65; Forthman v. Deters, 206 Ill. 159, 69 N.E. 97, 99 Am.St.Rep. 145. This is only another instance of proof of the wisdom of the adage that one may not eat his cake and have it too.
A merger occurs when the mortgagee acquires title to the property mortgaged, either from the mortgagor or his grantee. Weiner v. Heintz, 17 Ill. 259; Shinn v. Fredericks, 56 Ill. 439; First Nat. Bank of Chrisman v. Watson, 277 Ill. 186, 115 N.E. 156; Home Bldg. & Loan Ass'n of *92Paris v. Gaumer, 269 Ill.App. 196. The fundamental principle lying behind this doctrine is that a man can not be both debtor and creditor with respect to the same debt at the same time, and when a situation arises where the hand that is obliged to pay the debt is the same hand that is entitled to receive it, the debt is extinguished. Wright v. Anderson, 62 S.D. 444, 253 N.W. 484, 487, 95 A.L.R. 81.
Thus in Woodward v. McCollum, 16 N.D. 42, 111 N.W. 623, the court held that when the mortgagee conveyed his entire interest in the land to third persons without mentioning the mortgage, his interest became merged in the fee title. And in Ames v. Miller, 65 Neb. 204, 205, 91 N.W. 250, 253, the court said: “It is quite obvious that as to appellee’s grantor, after professing to convey the entire estate to his grantee, and executing an instrument to that effect, this would be conclusive on the question of merger, and no intention to keep the estates separate could be inferred, but on the contrary, the merger would be held irrevocably to have taken place.” See also Pearson v. Bailey, 180 Mass. 229, 62 N.E. 265; James v. Morey, 2 Cow., N.Y., 246, 14 Am.Dec. 475; Mulligan v. Farmers’ Nat. Bank, 194 Minn. 451, 260 N.W. 630; Woodward v. McCollum, 16 N.D. 42, 111 N.W. 623; James v. Newman, 147 Iowa 574, 126 N.W. 781; Thomas v. Simmons, 103 Ind. 538, 2 N.E. 203, 3 N.E. 381.
In Novak v. Kruse, 288 Ill. 363, 123 N.E. 519, 520, the mortgagee took a quitclaim deed from the mortgagor. After default, mortgagee recorded its deed, took possession of the property and then conveyed it by warranty deed. The court declared the mortgage debt extinguished, saying: “By its deed the association covenanted that the property was clear and free from all incumbrance. * * * We are convinced that the quitclaim deed was given by Ayres (mortgagor) to the association (mortgagee), with authority to record the same and take title to the property on default of payments under the bond, and that when the quitclaim deed was recorded the title passed to the association. * * * This is further borne out by the fact * * * and it recited in its warranty deed to James Novak and in the resolution of its board of directors that it owned the premises. This being the clear understanding ■ of the parties to the deed, such must be the effect of the instrument.” And, in Lyman v. Gedney, 114 Ill. 388, at page 406, 29 N.E. 282, at page 286, 55 Am.Rep. 871, the court held r “Objection is urged that a mortgage made by Broomfield to Sizer March 2, 1842, is not shown to have been satisfied; but it is. proved that Broomfield, after executing the mortgage, conveyed the fee to Sizer, the-mortgagee, and W. PI. Cushman, and that Sizer subsequently conveyed to Cushman.. That extinguished the mortgage.” “Ob-viously, one cannot hold a mortgage on his own property.” Tabero v. Sutkowski, 286 Ill.App. 225, at page 232, 3 N.E.2d 115, at page 118. A mortgagee will lose his right to sue by so dealing with the mortgaged-property as to put it out of his power forestare the property upon a tender of full payment. 3 Jones on Mortgages (8th Ed.), Sec. 1582, p. 16.
I think defendants should prevail. '