Cornell, J.
When the real nature of a transaction between the parties is confessedly that of a loan, advanced upon the security of real estate granted to the party making the loan, whatever the form of the instrument of conveyance taken as the security, it is always treated in equity as a mortgage, to which is annexed, as an inseparable incident, the right to the equity of redemption, which can only be extinguished by foreclosure, or voluntary surrender by the party vested with the right by some new agreement founded on an adequate consideration. Neither is it any the less a mortgage that the advance is made wholly upon the security, and without any personal obligation on the part of the borrower to make repayment. 2 Lead. Cas. Eq. (4th Am. Ed.) part 2, p. 1990. Nor is it at all important, as affecting the rights and obligations of the party taking the conveyance, that he received it from another who happens to hold the legal title, instead of the borrower, in whom is vested the equity of redemption, so that it is obtained through the instance and request of the latter, and for his benefit. Ryan v. Dox, 34 N. Y. 307; Carr v. Carr, 52 N. Y. 251. These principles are decisive of all the questions necessarily involved in the case at bar, save that of the statute of limitations.
This case is before us upon a demurrer to the complaint, by which, of course, all its material averments are admitted. The allegations of fact thus stated and admitted are substantially as follows: One Chase having purchased the premises in question at a mortgage foreclosure sale, subject to the right of redemption, and the plaintiffs, having become the owners of the equity of redemption some time prior to the expiration of the year allowed by law for such redemp[106] tion, entered into an arrangement with one Bennett to borrow of him the money necessary to redeem the premises from said sale, and to give him a mortgage or lien thereon to secure-its repayment. To carry this arrangement into effect it was mutually agreed, by parol, by and between the plaintiffs, the-said Bennett and the said Chase, that the title to said premises should mature in the said Chase, under said foreclosure-sale, and that he should then receive a sheriff’s deed therefor, and thereupon convey the same to Bennett, upon being paid the agreed amount of Chase’s claim, to-wit, $910, and that Bennett should thereupon hold said title merely as a mortgage security for the repayment of said money and interest, and not otherwise; and that, in pursuance thereof, the title was-allowed to mature in said Chase, under said foreclosure sale, who received thereupon the said sheriff’s deed, which was duly recorded; that the said Bennett thereupon paid to the said Chase, for the plaintiffs, said sum so agreed upon, and the said Chase, at the request of said plaintiffs, then conveyed the legal title to said premises to Bennett, merely as security as aforesaid, and the said Bennett received the said deed of conveyance merely as such security, and not otherwise. At the time this transaction was entered into, one Murray, a brother-in-law of plaintiffs, was living on the premises, under a parol agreement, or understanding, that plaintiffs would convey a portion thereof to him whenever the incumbrancesshould be removed, and it was a part of the parol undertanding between plaintiffs and Bennett, at the time of the loan,, that the latter, as a matter of form, should execute a written lease to Murray of the premises, with a provision that the-latter should pay a yearly rental to Bennett equivalent to and as and for the interest agreed upon to be paid him upon the-money by him advanced and loaned to plaintiffs, and also* containing a stipulation giving Murray the privilege of buying: the premises within the time of the lease for the sum of $910,. and the rent. And the said lease was executed accordingly.
The defendant, an intimate friend of the plaintiffs and [107] Murray, with full knowledge of these facts, and the fact that Bennett held the legal title to the property merely as security as aforesaid, representing to them that he had $1,000 to loan for an eastern party, who wanted as security the legal title to property, the same as Bennett held the title to the premises in question, proposed to plaintiffs and the said Murray that he would loan to the said plaintiffs the said sum, to pay off said Bennett, and that, as security for its repayment, with interest, Bennett should convey to him the legal title to said premises, and that defendant woidd then and thereupon hold such title merely as security for such repayment, the same as the title was then being held by Bennett, and that by keeping the interest paid up said loan could stand as long as plaintiffs might desire. This proposition was accepted by plaintiffs upon the distinct parol understanding that defendant was to take and hold the title to the premises merely as security for the repayment of the loan and interest, so to be advanced for plaintiffs to pay off the said lien and claim of the said Bennett. Defendant thereupon advanced and paid the said sum to said Bennett, at the request, and for and on account, of the plaintiffs, and Bennett, at their request, transferred to defendant the legal title to the premises by an absolute deed. The said plaintiffs and the Murrays also, about the same time, quit-claimed to the defendant their interest in the same premises. All this was done, and all said deeds were executed and delivered, and were accepted and received, by defendant, as is alleged, merely and only as security for the repayment of said loan and interest, and for the sole purpose of making the title as such security satisfactory; that this was. the only consideration for such conveyances, although the said property was then worth and of the value of not less than $25,000.
Free access — add to your briefcase to read the full text and ask questions with AI
Cornell, J.
When the real nature of a transaction between the parties is confessedly that of a loan, advanced upon the security of real estate granted to the party making the loan, whatever the form of the instrument of conveyance taken as the security, it is always treated in equity as a mortgage, to which is annexed, as an inseparable incident, the right to the equity of redemption, which can only be extinguished by foreclosure, or voluntary surrender by the party vested with the right by some new agreement founded on an adequate consideration. Neither is it any the less a mortgage that the advance is made wholly upon the security, and without any personal obligation on the part of the borrower to make repayment. 2 Lead. Cas. Eq. (4th Am. Ed.) part 2, p. 1990. Nor is it at all important, as affecting the rights and obligations of the party taking the conveyance, that he received it from another who happens to hold the legal title, instead of the borrower, in whom is vested the equity of redemption, so that it is obtained through the instance and request of the latter, and for his benefit. Ryan v. Dox, 34 N. Y. 307; Carr v. Carr, 52 N. Y. 251. These principles are decisive of all the questions necessarily involved in the case at bar, save that of the statute of limitations.
This case is before us upon a demurrer to the complaint, by which, of course, all its material averments are admitted. The allegations of fact thus stated and admitted are substantially as follows: One Chase having purchased the premises in question at a mortgage foreclosure sale, subject to the right of redemption, and the plaintiffs, having become the owners of the equity of redemption some time prior to the expiration of the year allowed by law for such redemp[106] tion, entered into an arrangement with one Bennett to borrow of him the money necessary to redeem the premises from said sale, and to give him a mortgage or lien thereon to secure-its repayment. To carry this arrangement into effect it was mutually agreed, by parol, by and between the plaintiffs, the-said Bennett and the said Chase, that the title to said premises should mature in the said Chase, under said foreclosure-sale, and that he should then receive a sheriff’s deed therefor, and thereupon convey the same to Bennett, upon being paid the agreed amount of Chase’s claim, to-wit, $910, and that Bennett should thereupon hold said title merely as a mortgage security for the repayment of said money and interest, and not otherwise; and that, in pursuance thereof, the title was-allowed to mature in said Chase, under said foreclosure sale, who received thereupon the said sheriff’s deed, which was duly recorded; that the said Bennett thereupon paid to the said Chase, for the plaintiffs, said sum so agreed upon, and the said Chase, at the request of said plaintiffs, then conveyed the legal title to said premises to Bennett, merely as security as aforesaid, and the said Bennett received the said deed of conveyance merely as such security, and not otherwise. At the time this transaction was entered into, one Murray, a brother-in-law of plaintiffs, was living on the premises, under a parol agreement, or understanding, that plaintiffs would convey a portion thereof to him whenever the incumbrancesshould be removed, and it was a part of the parol undertanding between plaintiffs and Bennett, at the time of the loan,, that the latter, as a matter of form, should execute a written lease to Murray of the premises, with a provision that the-latter should pay a yearly rental to Bennett equivalent to and as and for the interest agreed upon to be paid him upon the-money by him advanced and loaned to plaintiffs, and also* containing a stipulation giving Murray the privilege of buying: the premises within the time of the lease for the sum of $910,. and the rent. And the said lease was executed accordingly.
The defendant, an intimate friend of the plaintiffs and [107] Murray, with full knowledge of these facts, and the fact that Bennett held the legal title to the property merely as security as aforesaid, representing to them that he had $1,000 to loan for an eastern party, who wanted as security the legal title to property, the same as Bennett held the title to the premises in question, proposed to plaintiffs and the said Murray that he would loan to the said plaintiffs the said sum, to pay off said Bennett, and that, as security for its repayment, with interest, Bennett should convey to him the legal title to said premises, and that defendant woidd then and thereupon hold such title merely as security for such repayment, the same as the title was then being held by Bennett, and that by keeping the interest paid up said loan could stand as long as plaintiffs might desire. This proposition was accepted by plaintiffs upon the distinct parol understanding that defendant was to take and hold the title to the premises merely as security for the repayment of the loan and interest, so to be advanced for plaintiffs to pay off the said lien and claim of the said Bennett. Defendant thereupon advanced and paid the said sum to said Bennett, at the request, and for and on account, of the plaintiffs, and Bennett, at their request, transferred to defendant the legal title to the premises by an absolute deed. The said plaintiffs and the Murrays also, about the same time, quit-claimed to the defendant their interest in the same premises. All this was done, and all said deeds were executed and delivered, and were accepted and received, by defendant, as is alleged, merely and only as security for the repayment of said loan and interest, and for the sole purpose of making the title as such security satisfactory; that this was. the only consideration for such conveyances, although the said property was then worth and of the value of not less than $25,000.
The complaint further avers that it was also a part of the parol understanding between the plaintiffs and defendant that, the said John B. Murray, the brother-in-law of the plaintiffs, was to continue in the occupancy and use of the said prem[108] ises, under an arrangement between him and the plaintiffs whereby he was to remainin the possession andcare of the property, keep the interest on said loan paid up to the defendant, and also pay off the principal, if he could do so from the income of the property; that he should take a written lease of the premises from defendant of a like character and for a like purpose as that which had existed between him and the said Bennett, at an expressed rental, which should be equivalent to, and stand as and for, the interest agreed to be paid on said loan; that such a written lease was entered into for the term of one year, containing a stipulation giving the lessee the privilege of purchasing from defendant all his estate, right, title and interest in the premises, at any time during the term, upon paying the rent specified and $1,200, the rent in fact representing the interest agreed on, and the $1,200, the amount of the loan, the difference between the last named sum and the amount of the loan being accounted for by the alleged fact represented to be true by the defendant, and believed and acted upon by Murray at the time, that the loan Was made in gold, which was worth a premium of $200; that said Murray continued to occupy the premises under ¡this arrangement till February, 1869, the yearly rental being changed from time to time, by parol, between him and the defendant, 'to correspond to the annual interest charged on the .loan, and the same was paid annually, in satisfaction of such ■interest, until 1868. Prior to this time the defendant never set :up, asserted or claimed the ownership of said premises, except in trust as security for said loan, but all the time recognized .-and admitted the right of plaintiffs to redeem the same by jpaying off said loan and interest.
Upon these facts, thus stated in the complaint, the truth of which is admitted by the demurrer, no question necessarily ■arises under what circumstances, or to what extent, parol .evidence would be admissible to control the operation and effect of a deed absolute in terms, where the character of the transaction is put in issue and controverted; for it stands [109] admitted by the pleadings that the sole consideration of the conveyance vesting the title in the defendant was a loan of' money advanced thereon merely as security for its repayment, with interest. The transaction originating in a loan,, and the conceded purpose and object of the instruments, being that of security and not a sale of the property, a court of equity must treat them as a mortgage, and plaintiffs are-entitled to redeem the property upon payment of the loan and interest, unless such right has become barred by the statute of limitations. This brings us to the consideration of the second point made by appellant.
As alleged, the loan was. made in January, 1862, with the-understanding that it could stand as long as plaintiffs might desire, upon the interest being kept paid up, and that Murray, as the agent for and on behalf of the plaintiffs, continued to pay the interest annually to the defendant, according to agreement, until, and up to, the year 1868, prior to which time defendant never set up, asserted, or claimed the ownership of' the premises, except in trust, as security for said loan, but recognized and admitted plaintiffs’ right of redemption during all said time. This had the effect of renewing or continuing-the agreement, so far as to suspend the operation of the statute upon either the right of foreclosure or redemption. Conceding the correctness of appellant’s position, that, as .no definite time was expressly fixed by the contract for the repayment of the loan, the- debt became immediately due and payable, and, therefore, the statute began to run from that time, it cannot be that the defendant could be permitted to recognize the continued existence nf the agreement, by receiving yearly payments of interest upon the loan, for the whole statutory period of limitation of ten years, and then, after the expiration of that period, without any prior notice or intimation of his intention, repudiate the trust, and, by the interposition of the statute, effectually cut off the conceded equities of the plaintiffs. The action having been brought within ten years from the last payment of interest, and the time when [110] both parties plainly recognized and treated the agreement as still subsisting, was clearly not barred by the statute of limitations. Gen. St. c. 66, § 24; Hughes v. Edwards, 9 Wheat. 489; Dowling v. Ford, 11 Mees. & Wels. 329; Martin v. Bowker, 19 Vt. 526; Hough v. Bailey, 32 Conn. 288; vide, also, Hall v. Fenton, 105 Mass. 516.
Order affirmed.