Madigan v. Mead

Vanderburgh, J.

In 1871, the plaintiff, owning the house and lot in controversy, which were heavily incumbered with mortgages and judgment liens, and being otherwise also indebted, entered into an agreement by parol with the defendant Roach, by which, as he alleges in substance, the latter would take a conveyance of the premises as security for all sums which should be advanced by him in the payment of such debts, and, on being reimbursed therefor out of the rents of the premises, or by repayment thereof by plaintiff, together with interest and expenses, he should reconvey the same to plaintiff. The defendant Roach, accordingly, received a conveyance of the premises from plaintiff, and entered into possession. Thereafter, on the first of April, 1872, by the mutual agreement and understanding of all the parties, and at the request of the defendant Roach and the plaintiff, the defendant Mead, being fully, advised in the premises, accepted a conveyance of the land in question upon the same terms and conditions, and thereafter entered into possession, paid off all the debts and liabilities of plaintiff, together with certain sums for taxes and insurance, and in the mean time, and to the time of the commencement of the action, received the rents. The consideration expressed in the deed is the sum of $400. Such conveyance is not necessarily fraudulent, and may be interpreted to be a mortgage.

1. That a deed absolute on its face may be shown to have been intended as security merely, and be established as a mortgage, is well settled. Phœnix v. Gardner, 13 Minn. 396 , (430;) Holton v. Meighen, 15 Minn. 50 , (69.) And it is not material whether the security be intended for an existing debt, for future advances, or indemnity for a contingent or uncertain liability, nor that a money consideration is *97 recited in the deed which is not in fact paid. If the purpose is an honest one, and the instrument is really intended for security, whether for a present or future, actual or contingent, liability, the real nature of the transaction may be shown in equity, because its real character must be determined by the actual facts, and not by words merely. Parol evidence may, therefore, be permitted, not to contradict the terms of the writing, but to show the plaintiff’s equities in the case, or, as it is sometimes said, to establish an equity superior to the terms of the deed, and because it would be a fraudulent act, which a court of equity would not permit, for the holder of the deed to use it contrary to the terms and understanding upon which he received it. 1 Jones on Mortgages, §§ 285, 288. It is enough, however, to say, as held in Peugh v. Davis, 96 U. S. 332 , that, as the equity upon which the court acts arises from the real character of the transaction, either parol or written evidence is admissible to establish it.

2. Any conveyance intended to be a security for the payment of money, or the performance of some duty, is a mortgage. 2 Washb. Real Prop. (4th Ed.) 42. And, in order to carry out the actual intention in such case, an enlarged view of the facts constituting the transaction will be taken by the court. Steel v. Steel, 4 Allen, 417 ; Lanfair v. Lanfair, 18 Pick. 299 ; Wilcox v. Bates, 26 Wis. 465 .

In the ease at bar, assuming the complaint to be true, the intention of the parties must be construed to be that the defendant was to-take the deed as security for his advances and expenses in settling and paying off the incumbrances against the property, and other debts of plaintiff, and, on being reimbursed therefor, to reeonvey the land to the plaintiff. Accepting the conveyance on these conditions, he could hold the property on no other.

The terms of the agreement, as alleged; are indefinite and uncertain as to the time and method of its execution, yet they are sufficient to sustain the transaction as a mortgage. And if the defendant failed to make provision for the debts as they matured, creditors interested might, under such circumstances, compel an appropriation of the property and the satisfaction of their demands. Roberts v. Richards, 36 Ill. 339 ; Saylors v. Saylors, 3 Heisk. 525 . And doubtless, also, upon plaintiff’s payment of the debts, even if the obligation *98 to pay them on defendant’s part is to be deemed optional merely, the latter would be bound to surrender tbe security to plaintiff on equitable terms, if unwilling or unable to comply with the conditions as expressly understood or necessarily implied in tbe agreement. There is no controversy over tbe facts, and no facts appear or are suggested indicating a fraudulent purpose. Roberts v. Richards, supra; Haigh v. Kaye, L. R. 7 Ch. App. 469. If the instrument had been in form a mortgage, and the conditions, instead of resting in parol, had been expressed on its face, it would have been upheld as a valid mortgage. Myers’s Appeal, 42 Pa. St. 518. And so, upon the facts as alleged, which are consistent with an honest intent to provide for the creditors of plaintiff, this deed may be construed and upheld as a mort.gage to secure the advances which the defendant might make, under the alleged agreement, for the accommodation of plaintiff. In Wilcox v. Bates, supra, the defendant took title upon a foreclosure sale, under a previous parol arrangement that he should hold it as security for the sum to be advanced on the purchase of the premises; held, a mortgage.

As between the parties, at least, the doctrine is well established that a mortgage may be made to secure future optional advances, or to secure the mortgagee in advance for an optional liability as indorser or security. Robinson v. Williams, 22 N. Y. 380 ; Ackerman v. Hunsicker, 85 N. Y. 43 ; Babcock v. Bridge, 29 Barb. 427 ; 1 Jones on Mortgages, §§ 369, 372, etc.; Boswell v. Goodwin, 31 Conn. 74 ; McDaniels v. Colvin, 16 Vt. 300 . “Mortgages may as well be given to secure future advances and contingent debts as those which already exist, •and are certain and due. The only question that properly arises in such cases is the bona Jides of the transaction.” Conard v. Atlantic Ins. Co., 1 Pet. 386, 448 ; Myers’s Appeal, supra.

We are of the opinion, therefore, that the plaintiff was entitled to maintain this action for an accounting and redemption of the premises from the defendant in possession.

The appellant claims that there were errors made in the accounting to his prejudice, and that he is charged with moneys he never received, etc. He did not appear at the trial, and evidence taken •before the referee is not properly before us. It was not properly part *99 of his report, and no case has been made and settled so as to make the evidence part of the record. We cannot, therefore, consider the objections to the accounting, as there is nothing properly in the record to show the errors complained of.

Judgment affirmed.