Court Opinion

ID: 5461283
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:37:11.454723+00
Date Added: 2024-06-11T08:32:52.354466
License: Public Domain

By the Court, Miller, J.
The principal question which arises in this case is, whether the deed from Zelam Hitchcock to Daniel I. Hitchcock was intended by the parties as a sale, or as security for money loaned. The deed is absolute upon its face, but is accompanied by an agreement to reconvey the premises upon certain conditions. These conditions were not complied with, and hence the right to a reconveyance was forfeited, unless the deed, with the accompanying instrument, can be considered as a mortgage.
To constitute a mortgage, under such circumstances, it must be made to appear from the instrument or otherwise, that the transaction was originally intended as security for money—that it was, in fact, a mere loan of money. (Brown v. Dewey, 2 Barb. 28. Robinson v. Cropsey, 6 Paige, 280. Holmes v. Grant, 8 id. 257. Brown v. Dean, 3 Wend. 208.)
If there be a salé, with an agreement to repurchase within a given time, then it is not a mortgage, but what is usually termed a conditional sale. (1 Hil. on Mort. 63.) Such conditional sales, or defeasahle purchases, as they are also commonly called, are valid, and to be taken strictly as independent dealings between strangers, and the time limited for the repurchase must be precisely observed, or the vendor’s *226right1 to a reconveyance of the property will be lost. (4 Kent’s Com. 144.)
The distinction between a mortgage thus executed, and a •conditional sale, is very close, and often so nicely balanced that it is difficult to define the true character of instruments thus bearing, so many features which assimilate to each other.
The authorities upon the question are not entirely harmonious, and it requires no little discrimination to determine the precise character and bearing of many of the cases which arise involving questions of this nature. It may be observed, however, that to no inconsiderable extent, every case is dependent upon the peculiar circumstances by which it is surrounded; and in disposing of it we must look at the facts to determine what the parties actually intended by the transaction. (Slee v. Manhattan Co., 1 Paige, 48. Whittich v. Kane, Id. 202. Cook v. Eaton, 16 Barb. 439. Grimstone v. Carter, 3 Paige, 421.)
I am inclined to think that the transaction presented in the case at bar is characterized by all the leading features which constitute a conditional sale, and that it must be thus considered.
The rule applicable to such a case is very clearly laid down in 4 Kent’s Com. 144, note a. It is as follows : “ The test of the distinction is this; if the relation of debtor and" creditor remains, and a debt still subsists, it is a mortgage; but if the debt is extinguished by the agreement of the parties, or the money advanced is not by way of loan, and the grantor has the privilege of refunding, if he pleases, in a given time, and ■thereby entitle himself to a reconveyance, it is a conditional sale.”
ThO evidence in the present case does not establish that there was a loan of money, which the deed and agreement were executed for the purpose of securing. And the agreement in. writing which, after all, is the true test, and upon the construction of which, mainly, the question, presented must be' determined, provides for a repurchase by Zelam *227Hitchcock, .of the premises, upon certain conditions, if they were complied with within the time limited by the agreement. It also appears that the grantee in the deed took possession and had the control of the premises, occupying and enjoying them as his own.
The conveyance does not appear to have been made to secure a debt, but in payment of it. It was a sale of the premises, with an agreement to resell upon certain terms and . conditions. The liability of the defendant, the grantor, was discharged and the relation of debtor and creditor did not exist, as by this sale the debt was extinguished, within the rule cited.
An example will illustrate whether the debt -still existed. Suppose a suit had been instituted to recover the money shown to have been paid, in favor of the grantee, could the action be maintained ? The plaintiff in such a suit would not have been able to prove a loan of money- and a promise to refund it, or any agreement to pay it back, different from what the deed and agreement furnished. The deed itself was absolute upon its face, and' the agreemeent contained no provision which recognized the fact that the debt still existed, and was to be refunded. The grantee held the land, and hence was paid, and the debt was canceled. It is quite plain„that the action for the money could not be upheld. So also, within the rule laid down, the grantor had the privilege of refunding the money if he chose to do So, by a given time, and was thereby entitled to a reconveyance, which made the transaction a conditional sale. I think a conditional sale, in the present case, is established, within the, rule laid down, and in accordance with numerous decisions of the courts. (See Brown v. Dewey, 2 Barb. 28; Baker v. Thrasher, 4 Denio, 493; White v. Schuyler, MS. G. T. 3d dist.)
We have been referred to numerous authorities which sus-' ■ tain the general principle applicable to such cases, that when the instrument is intended to secure the payment of money which is treated as a debt, it should be construed as a mort*228gage. (See Murray v. Walker, 31 N. Y. Rep. 399 ; Henry v. Davis, 7 John. Ch. 40, affirmed 2 Cowen, 324; Roach v. Cosine, 9 Wend. 227, 232; Brown v. Dean, 3 id. 208; Jackson v. Green, 4 John. 186 ; Peterson v. Clark, 15 id. 205; Stewart v. Hutchins, 13 Wend. 485, 487; Parsons v. Mumford, 3 Barb. Ch, 152; Barton v. May, 3 Sandf. Ch. 450 ; Lawrence v. Farmers’ Loan and Trust Co., 13 N. Y. Rep. 200, 642.)
A careful examination of these authorities shows, with great distinctness, that in all of the cases cited, it was very obvious that the object and intention of the instruments made was to secure a debt, and that there was no design to make a conditional sale of the premises. None of them, I think, establish a case which exhibits the striking and marked features of an absolute sale which are apparent here. I do not think, therefore, that any of them are adverse to upholding the transaction between the parties in the case now .considered, as a conditional sale.
If the conveyance and the accompanying papers prove a conditional sale, as I think they do, beyond any question, then there can be no doubt that the title of Daniel I. Hitchcock became absolute, and that he had a perfect right to mortgage the property thus conveyed to him, and to which his title had become perfect by an entire failure on the part of the grantor to fulfil the conditions, upon the performance of which he was entitled to a reconveyance.
The plaintiff claims that he had no notice of the defeasance, or of any' infirmity in the title to the premises, and hence he should be protected. The conveyance to Daniel I. Hitchcock was recorded as a deed, and the defeasance was not recorded. The evidence as to notice to the plaintiff is somewhat uncertain, and is certainly conflicting. It is entirely denied by the plaintiff that he had any knowledge of any other paper than the deed, prior to the execution of the mortgages, or at least that there was any thing more than an agreement to the effect that if the incumbrances were all *229paid up by a certain time the farm was to be conveyed back. As the evidence stood, the referee would have been justified, I think, in refusing to find that the plaintiff took the mortgages with full knowledge that the conveyance was only intended as a mortgage. As, however, I have arrived at the conclusion that there was a conditional sale of the premises, it is not important to enter upon a full discussion of the question made as to notice to the plaintiff of the defendant’s claim.
[Albany General Term,
May 7, 1866.
As this is not an action between Daniel I. Hitchcock and Zelam Hitchcock, and there is evidence to show that the plaintiff was an innocent purchaser without notice, I do not think that the question arises, whether the default of Zelam Hitchcock would be excused by the alleged refusal of Daniel I. Hitchcock to render an account, so as to enable Zelam to pay him the moneys which Daniel had advanced.
The evidence in the case shows that Zelam Hitchcock was in possession of a portion of the premises covered by the mortgages, and he was therefore necessarily a proper party to this action.
There may, perhaps, be some doubt whether the exceptions taken by the defendant, upon the trial, are sufficiently specific to present the questions which I have discussed, as there Vas no special request made to find that the nights of the appellant were superior to those of Daniel I. Hitchcock, or even in the form of the exceptions as stated in the case; but as I have arrived at a conclusion adverse to the appellant, upon the main question which arises, a discussion of that point becomes unimportant and unnecessary. The decision of the referee was right, and the judgment should be affirmed, with costs of appeal.
Miller, Ingalls and Hogeboom, Justices.]