Green v. Turner

Beck, J.

l. raoimiAGE: an forms of ciebtuty 01 — I. It is a familiar doctrine that any conveyance of lands, intended to operate as a security for the payment of money, or for the performance of any contract will be regarded m equity as a mortgage, and the rights of parties under it will be enforced and protected accordingly. In order to establish and enforce such rights, courts ascertain the intentions of the parties. If it be found that the intention was simply to create a security for a debt, whatever may be the form of the transaction and of the instruments witnessing it, the transaction will be treated as a mortgage. The courts, in searching after the intention of the parties, are not confined to the consideration of the written instruments executed by them, or the terms thereof. Russell v. Southard et al., 12 Howard, 139 . The condition and conduct of the parties, and all the surrounding circumstances will be considered 'and weighed. Parol evidence is admissible to *115 show that a deed, absolute on its face, was intended as a security for a debt. So if the transaction between the parties is presented by writings as a conditional sale or contract for a repurchase, yet if the true intention was to secure the payment of a debt, and the writings were but a devise to conceal it, parol evidence is admissible to uncover the real character of the arrangement. The true nature of the transaction will determine whether it shall be regarded as a mortgage, or an absolute conveyance or a conditional sale. This will be determined upon the consideration of all the attendant circumstances and facts, and the situation and condition of the parties. Hughes c& Heal v. Sheaff, 19 Iowa, 344 ; Trueles v. Lindsey, 18 Iowa, 504 ; Key v. McCleary, 25 Iowa, 191 ; Richardson v. Barrick, 16 Iowa, 407 . 2 _. eTi_ ciencc.

The petition before us alleges that the deed and bond of defendant were but contrivances intended to operate as a mortgage. This averment may be supported by evidence other than these writings themselves. See Russell v. Southard et al., supra. Without passing upon the effect of these instruments, it is very plain, under the authorities above cited, that if they do not support the allegations of the petition, plaintiff could have introduced other evidence for that purpose. The true intention of the parties could have been established by parol evidence, by proof of their condition and situation, and of other competent matters outside of the writings themselves. If such evidence had been introduced sufficiently supporting the allegations of the petition, the transaction would have been considered as a mortgage. In this view the petition, in fact, sets out a sufficient cause of action, and the first ground of demurrer was not, therefore, well taken.

3.--: foreclosure: usury. II. The plaintiff assails in her petition the transactions between Turner and Lyon as usurious. It has been ruled by this court that the grantee of lands mortgaged to . ° . ° ° ,, secure a usurious contract cannot interpose the plea of usury against an action to foreclose. See Perry v. Kearns, 13 Iowa, 174 ; Greither v. Alexander et al., 15 Iowa, 470 , and authorities cited. Plaintiff being a purchaser at sheriff’s sale, stands in no other or more favorable position *116 than a grantee by voluntary sale. The demurrer attacking the allegations of the petition in regard to the usurious character of the transaction was properly sustained.

4. ---.- session6: stattíonsflmuta III. The demurrer assailing the petition on the ground that it shows the action to be barred by the statute of limitations in our judgment was improperly sustained. The petition alleges that the defendant, Turner, has been fully paid by the sale of a part of the land, by the rents and profits of the property and by the proceeds of wood and timber cut off the land and sold by him. It cannot be denied that, if the transaction was really a mortgage, and the creditor received proceeds of' the land in the manner charged, to the full amount of his debt, this would operate as payment. It is not shown at what time the payment was made. The petition to be obnoxious to demurrer must show affirmatively the existence of the defense under the statute. But it does not show that payment was made at a date subsequent to which the statute had run for the time required to bar plaintiff’s remedy accruing on account of such payment; neither does it show that defendant has held the adverse possession of the land for such length of time after the payment, as under the statute, would operate to protect his title to, and possession of, the property.

It is proper briefly to support the position just announced by argument and authorities, and incidentally to consider certain positions assumed to be in conflict therewith.

In Gower et al. v. Winchester et al., 33 Iowa, 303 , it is held that a junior mortgagor is barred by the statute from redeeming under his mortgage from a prior foreclosure and sale upon a senior mortgage in ten years thereafter. The decision is based upon the ground that the right of redemption being exercised under the mortgage, is limited by the statute to the time within which a foreclosure of the same instrument may be maintained. It may be admitted to be the rule that the rights of foreclosure and redemption are mutual and commensurable, and that the lapse of time which will, under the statute, bar the first, will have a like effect upon the last. Caufman v. Sayre, 2 B. Mon. 206 ; Cunningham v. Hawkings, 24 Cal. 409 ; Grattan *117 v. Wiggins, 23 Cal. 35 ; Koch v. Briggs, 14 Cal. 262 ; 2 Hilliard on Mortgages, p. 1, eb seg.

But this doctrine has no application to the case before us, at least to one state of facts upon which relief is claimed. It is alleged that Turner has received payment in full of the debt secured by the conveyance, by rents and profits realized from the land, by the proceeds of timber sold, and by large sums received for a part of the land conveyed by him. Money received from such sources by the mortgagee in possession, while the right of redemption still exists, a court of chancery will apply as payment upon the debts secured by the mortgage. See authorities cited in 1 Hilliard on Mortgages (2 ed.), pp. 213, 417, 420, 422, 423, 438.

If the instrument was intended to secure the payment of money loaned, and such is alleged to be the fact in the petition, it is, as we have seen, a mortgage, and the right of redemption cannot be cut off by agreement of the parties made at the time of its execution, nor by the possession of the land by the mortgagee. See authorities cited in 1 Hilliard on Mortgages, (2d Ed.) p. 59, eb seg. (Chap. IV.) The right of redemption exists there until barred by the statute and the mortgagee will be required to account for rents, profits, waste, and for the proceeds realized by the sale of a part of the mortgaged premises. It cannot be doubted that a junior mortgagor or one holding the equity of redemption of a conveyance under the mortgagor may require the mortgagee in possession to account for money realized from such sources. Lewis v. DeForrest, 20 Conn. 427 .

Now the petition alleges that the debt secured by the conveyance was paid in the manner stated. The time of these payments is not shown further than it was before the commencement of the suit. It may be admitted for the purpose of this inquiry that if the debt had been paid ten years or more before the commencement of the suit and defendant in the mean time had held adverse possession of the land, plaintiff’s right of action would be barred. But the petition shows no such facts and no presumption thereof can be based upon its averments. Under the provisions of the *118 bond or agreement executed by Turner, the grantor or mortgagor of the land had until the 1st day of November, 1859 to pay the debt. The suit was commenced December 17, 1869. In order to hold that payment , was made ten years before the commencement of the suit, thus giving effect to the statute, we must presume that it was made before the maturity of the debt or within forty-seven days thereafter. We cannot be expected, in the absence of averments, to presume either fact.

A mortgagee in possession, after having received payment of the debt, will not be protected by the statute of limitations unless it be shown that he holds adversely to the mortgagor and has so held for the time which limits recovery of the land. Some act other than mere possession under the mortgage after payment must be shown, to establish the adverse character of his possession. In equity, payment of a mortgage debt before forfeiture extinguishes the title of the mortgagee, and payment thereafter leaves the mortgagor in a condition to recover possession of the land by suit in equity. 1 Hilliard on Mortgages, (2 Ed.) 447, et seq. (Chap. XVII.)

The relation of mortgagee and mortgagor is analogous to that existing between the trustee and eestui que trust and the possession by either of the land covered by the mortgage is not as to the other adverse. The mortgagee while bolding under the mortgage cannot disseize the mortgagor. 2 Hil. liard on Mortgages (2 Ed.) 16, et seq. Equity regards the estate of the mortgagee as a trust estate; when the debt is discharged there is a resulting trust for the mortgagor. Concord v. The Atlantic Insurance Co., 1 Pet. 386 .

In this state the mortgagee holds, not air estate in the lauds, but a mere lien thereon. Without stopping to inquire whether a different rule is applicable to the grantee in an absolute deed given to secure a debt, we conclude his interest cannot be greater than under a like conveyance at common law and that he cannot hold more than a trust estate.

No principle of law or equity will permit a trustee to set up the statute of limitations to defeat the recovery of the trust property by the party entitled to it. The statute will not *119 begin to run until he has ceased to hold under the trust and sets up in himself a title of possession adverse to the rights of the eestui que trust. Eegarding the mortgagee in possession after payment of the debt as a trustee of the mortgagor, the statute of limitations will not run in his favor while he holds under the mortgage. When his possession and claim become adverse and not before will he be entitled to its protection. That this rule is applicable to the case of an absolute deed given to secure a debt and treated by the law as a mortgage, there can be no doubt.

In this state the foreclosure of a mortgage is barred in ten years. The rule is based upon the consideration that the mortgage creates not an estate but simply a lien or charge upon the land to secure the debt. If recovery of the debt be barred, then there can be no remedy upon the mortgage. Newman v. DeLorimer, 19 Iowa 244 . As the rights of the mortgagor and mortgagee are reciprocal and commensurable, redemption under the mortgage will be cut off at the expiration of the same time. Eut it is evident that upon payment in full of the mortgage debt, the relations and rights of the parties are changed, and that the reasons upon which the rule is based no longer'exist. The mortgagor by the payment has redeemed from the mortgage; its lien is discharged. The mortgagee in possession after payment holds the premises for the mortgagor, as a trustee, or otherwise and not adversely;

The petition in the case before us alleges redemption from the mortgage by the payment in foil of the debt, and asks that the deed which 'is regarded as a mortgage, being a cloud upon plaintiff’s title, be cancelled. The ground of the relief is the payment of the redemption. It does not seek to enforce the right of redemption, for redemption has been made by payment of the debt, but it asks thati^ights existing after redemption be enforced, namely, that the land be declared redeemed from the encumbrance and the deed be cancelled. If there were in tact a redemption, equity will not permit the encumbrance to stand. The petition alleges that there was redemption by payment in full and asks that the deed be declared discharged and be cancelled. Can it be claimed that after actual *120 redemption by payment tbe mortgagor’s remedy is by bill to redeem, or that a bill for relief on the ground of actual redemption is to be regarded as a bill to redeem? The question is too plain to admit of any doubt or confusion in the answer. Yet just here is the trouble. Defendants insist on regarding the petition as presenting a claim to redeem and nothing more. If this were so the statute might well be held to apply. There ought to be no difference of opinion upon facts and legal principles so easy to be understood. The petition in one court alleges actual redemption; it does not show adverse possession in defendants. It is not therefore obnoxious to the demurrer based upon the statute of limitations, which should have been overruled.

Reversed;