King v. McCarthy

52 N.W. 648, 50 Minn. 222, 1892 Minn. LEXIS 284

• Court: Supreme Court of Minnesota
• Decided: June 22, 1892
• Status: Published

Opinion

Mitchell, J.

On the trial of this action the sole issue was whether a conveyance from plaintiff’s intestate to the defendant Richard W. Bell (the grantor of his codefendants, Mary McCarthy and Mary Bell) was a mortgage or a conditional sale, and the only question on this appeal is whether the finding of the court that it was the former, and not the latter, was justified by the evidence.

No conclusive test of universal application can be suggested to determine whether such transactions are mortgages or conditional sales. Each case must be decided in view of its own peculiar circumstances. The true test is, what was the intention of the parties? Did they intend security or sale ? This is to be gathered from the surrounding facts and the situation of the parties, as well as from the written memorials of the transaction. And while it is undoubtedly true that, in order to convert what appears on the face of the written contract to be a sale into a mortgage the evidence should be clear that the real intention of the parties was to execute .a mortgage, yet the inclination of the courts is to construe the contract to be a mortgage rather than a conditional sale, whenever the evidence will reasonably admit of it. We shall not attempt any extended discussion of the evidence.

Notwithstanding the testimony of Bell (which was the only direct evidence as to the negotiations between the parties at the time of the conveyance) that he refused to take a mortgage, and that the understanding was that it was a sale conditioned that McCarthy might buy the property back within one year upon paying what he (Bell) should advance to remove the incumbrances, yet an examination of the entire record satisfies us that the real intention and understanding of the parties was that Bell was to advance for McCarthy the money necessary to relieve the property of incumbrances, and take the deed as security; in other words, that Bell was to carry the property for the McCarthys, or, as Bell himself expressed it in one place, he was “to clear up the entire property for them." The subsequent conduct of the parties in the treatment of the property tends strongly to prove that the understanding of both parties was that-the property still belonged to the McCarthys, and that Bell merely held the title to secure his advances. It is true that Bell took control of it so far as to collect most of the rents. But these were all needed, as he says, to pay taxes and assessments. It also appears that the McOartbys still continued to occupy part of the property as a residence, and it does not appear that they ever paid, or that Bell ever demanded, any rent from them. And finally, in 1887, nearly two years-after the alleged year’s option to buy the property back had expired, Bell, after consultation with the widow of McCarthy and with her consent, executed á mortgage on the property, on which he realized enough to reimburse him for all he had advanced, and then, without receiving any consideration, quitclaimed the property to McCarthy’s widow and daughter, taking back from them a bond, with security, to indemnify him against the mortgage which he had executed on the property, and against any claim of the creditors of the estate of Jeremiah C. McCarthy.

He testifies that he did this at the solicitation of his parents, for certain family considerations, his brother having married McCarthy’s daughter; but men do not often, for such reasons, give away property worth $35,000. His conduct can be much more reasonably accounted for upon the theory that it was the understanding that he held the property merely as security for his advances, and, these having been reimbursed out of the proceeds of the mortgage, he had no further claim upon it, and therefore transferred it to McCarthy’s family, to whom it rightfully belonged. It is true, as counsel claims, that the character of the transaction, whether a mortgage or a conditional sale, was fixed at its inception; but the subsequent conduct of the parties in such cases may throw a flood of light upon their original intention and understanding.

Another circumstance entitled to weight is the disproportion between the amount Bell was to advance to remove incumbrances and the value of the property. The amount of the incumbrances did not exceed $10,000, while Bell admits that at the time he obtained the deed from McCarthy the property was worth $22,000.

It is often laid down in the books that the existence of a debt is the test whether a transaction is a mortgage or a conditional sale, and much stress is laid by defendant’s counsel upon the fact that there was no note or bond given by McCarthy as evidence of any debt to Bell, and .that there was no covenant or any personal obligation to pay what Bell should advance to clear the property. This, if true, would be a circumstance of no inconsiderable importance, but it is not complete or conclusive evidence that a transaction was a sale, and not a mortgage.

(Opinion published 52 N. W. Eep. 648.)

This court has twice held that, where the real nature of the transaction is a loan advanced upon the security of real estate conveyed to the party making the loan-, it is none the less a mortgage because the advance is made wholly upon the security, and without any personal obligation on the part of the borrower. Fisk v. Stewart, 24 Minn. 97; Niggeler v. Maurin, 34 Minn. 118, (24 N. W. Rep. 369.) See, also, Brown v. Dewey, 1 Sandf. Ch. 56. But it is not necessary to go that far in order to sustain the finding in this case, for we are satisfied that the evidence would warrant the conclusion that the relation of debtor and creditor was actually created between McCarthy and Bell, and that there was an implied promise on part of the former to repay the latter as for money paid at his request and for his use.

Order affirmed.