Mr. Justice Carter
¶1
(dissenting) : This case, which was comes to this Court on appeal from the decree of his Honor, tried in the Court of Common Pleas for Dillon County, Judge G. Dewey Oxner, who heard the case on the Circuit. The facts and issues involved are sufficiently set forth in the decree of Judge Oxner, and for the reasons stated therein I think the judgment of the lower Court should be affirmed. I therefore most respectfully dissent from the leading opinion.
Mr. Justice Fishburne concurs.
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Case posture Posture Before OXNER, J., Dillon, April, 1935. Reversed and remanded with directions.Action by Wade Stackhouse against H.C. Stanton. Decree for plaintiff, and defendant appeals.
Decree of Judge Oxner directed to be reported follows:
The above-entitled suit, commenced in the Court of Common Pleas for Dillon County on the 23d day of November, 1934, sought the recovery of the tract of land mentioned and described in the complaint, which was regular in form, containing 155 acres, more or less, located in the said county, and bounded on the north by lands of H.M. Rogers; on the east by lands of J.E. Cottingham; on the south by lands of J.E. Cottingham and R.M. Jackson, and on the west by lands of R.M. Jackson and lands formerly of Mrs. Effie Evans.
In due time the defendant answered admitting the execution of a deed to the plaintiff on or about the 14th day of January, 1929, but alleging that at the time of the conveyance defendant was indebted to plaintiff in the sum of approximately $600.00, and to other parties in varying amounts, all of which were secured by mortgages on the property, and that the plaintiff agreed at the time of the execution of the deed to cancel his mortgage and to assume the other mortgages and carry them for the defendant, with the right on his part to pay the said indebtedness, upon which being done the premises should be reconveyed to the defendant; in other words, that the deed was intended as security for debt, and hence a mortgage.
The cause came on to be heard before me in open Court during the April term of the Court of Common Pleas for Dillon County. The testimony was taken, and it was agreed among counsel that it should be argued before me at Chesterfield, S.C. Arguments were duly had, and briefs were filed with me by counsel for both plaintiff and defendant.
As appears from the testimony, the facts are as follows:
That at the date of the execution of the deed on the 14th day of January, 1929, the defendant, H.C. Stanton, was indebted to the Federal Land Bank of Columbia in the sum of $3,992.40, two of the payments on the mortgage being delinquent; to the Bank of Dillon in the sum of $1,111.36 as of March 16, 1928; to Edgar Stanton in the sum of $200.00 as of February 20, 1928, and to the plaintiff, Wade Stackhouse,
in the sum of $600.00 as of the 16th day of March, 1927, and to the said Stackhouse in an additional sum of $90.00. He was also due on his land taxes for two years, 1927 and 1928, amounting to $312.70, making a total of $6,306.46, liens against the property at that date, without interest. The Bank of Dillon had gone into the hands of a receiver and was pressing for its indebtedness and the Federal Land Bank was insisting upon the payment of its past due installments. The Bank of Dillon, the only banking institution in the community, which was a consolidation of three banks existing in that Town of Dillon, had closed its doors on November 6, 1928, just about sixty days before the transaction herein questioned. The South Carolina State Bank had opened up a branch in the town, and, perhaps the People State Bank, and a few days before the execution of the deed the defendant had gone to Dillon and had learned that the banks probably would not make advances during the subsequent year to any considerable extent. He therefore went to the plaintiff, and, according to the testimony, sought to make arrangements for advances during the following year. The plaintiff, however, refused to consider making such advances. Financial conditions in the community were at a low ebb, and it appears that the plaintiff, instead of having money to lend, or to make advances with, had himself just a short time previously borrowed on school bonds from the South Carolina State Bank the sum of $7,500.00, to run with during the year, and in the year 1929 bought all of his fertilizer on credit. He was not a money lender and at no time made investments in the way of loans. The indebtedness from the defendant to the plaintiff was a result of advancing him supplies during the year 1927, the defendant failing to that extent to pay the indebtedness due plaintiff.
It is not clear from the testimony who made the proposition, but it does appear that the parties finally agreed that the defendant would convey to the plaintiff the tract of land mentioned and described in the complaint by warranty deed, and that the plaintiff would allow the defendant to remain
on the premises as a share cropper. The plaintiff thereupon went to attorneys and conferred with them about making the deed and subsequently the defendant went to the offices of Gibson and Muller, attorneys, and executed it.
It was admitted in open Court that neither party made the slightest suggestion to the attorneys that the deed was intended as anything else than what it purported to be, namely, an absolute conveyance, upon the consideration of Dr. Stackhouse canceling the debt that was due by the defendant to him and assuming the other outstanding obligations against the property.
Immediately upon the execution and delivery of the deed, on January 14, 1929, the plaintiff canceled the note and mortgage of the defendant. On September 17, 1929, he took over from the Bank of Dillon its mortgage and had it canceled on the records as of that day, and on the same day paid and had canceled the mortgage to Edgar Stanton. He also paid up the delinquent installments on the mortgage of the Federal Land Bank, and has since that time regularly made the payments thereon. On September 31, 1929, he paid the 1927 and 1928 taxes, and has since kept the taxes paid on the premises.
The defendant, Stanton, testifies that on the day of the execution of the deed, or immediately prior thereto, he and the plaintiff had an oral agreement that he might repay the plaintiff within a short time, or that if he could not do this that the plaintiff would permit him to stay upon the premises, work the same, and apply the net proceeds of crops made to the indebtedness until it was paid in full, when he would reconvey. This the plaintiff denies and testified equally as positively that there was nothing said at the time as to any reconveyance. The deed was duly recorded on the 21st day of January, 1929, and the defendant remained upon the premises and since that time has been working a share crop thereon. During the years 1931, 1932, and 1933, Dr. Stackhouse has had another share cropper on the place working
a part of it, which share cropper was employed by Dr. Stackhouse and accounted to him.
On March 6, 1929, in response to a letter written by defendant to plaintiff, plaintiff wrote defendant agreeing to let him buy back the place if he would pay back the money he had advanced. On April 30, 1929, he gave him a letter in the nature of an option giving him the right, on or before December 1, 1929, to buy back the place upon the payment of all indebtedness and the further sum of $1,000.00. In this letter it is stated, If you fail to buy back the farm on this basis it is agreed and understood that the one-half share contract — verbally made — is to stand. If on the share contract, I agree to furnish land, fertilizer, and you do all the labor, and we to divide the crop half and half, including cotton seed. This agreement was extended to December 1, 1930, and on November 20, 1930, was again extended to December 1, 1931.
Defendant testified that some time in the early part of 1929 he carried to the plaintiff a check of H.M. Rogers, signed in blank, with authority from Mr. Rogers for the plaintiff to fill it in for the amount due him, and Mr. Rogers testified that he did give the defendant such check; that he was a neighbor and that he stated that he had deeded the lands to Dr. Stackhouse and was worried about the transaction; that he made arrangements to advance the money as a neighborly act. The plaintiff testified that he had no recollection of the tender of the check and that he does not believe it was ever presented to him, but that in any event there was no request to deed the land back to Mr. Stanton, but in a conversation with Mr. Rogers, Mr. Rogers wanted the land deeded to him. This, however, is denied by Mr. Rogers. The defendant remained on the land, received advances from Dr. Stackhouse each year and divided the crop with him each year up to the time of the institution of this action.
It appears that during the year 1934, Dr. Stackhouse again made the defendant the proposition to sell the land
back to him if he could get a government loan sufficient to pay him a certain amount. The parties disagreed as to what this amount was, the defendant contending that it was $4,100.00, for which amount the Land Bank approved the loan, the plaintiff that it was this amount in addition to the book account which Stanton owed him amounting to approximately $2,000.00. However this may be, the plaintiff testified on the stand that he was willing now to sell back and had offered for some time past to sell back to the plaintiff for a consideration of $8,000.00, which amount would include the sum now due on the Federal Land Bank mortgage, which is approximately $2,000.00.
After due consideration of the testimony and the law applicable to such transaction, I have reached the conclusion that at the time of the execution of the deed it was intended by both parties to be merely a fee-simple title to the premises. There are numerous decisions in the reports in such cases, but in the last analysis certain legal principles must be applied to the facts of each case, and each case has to be determined largely upon its own facts. I think the following may be stated as the chief legal principles upon which such cases must be determined:
1. The intention of the parties on the date of the execution of the instrument must determine whether it is a deed or a mortgage.
2. That in order to convert an absolute conveyance into a mortgage, the Court must be satisfied from the evidence that at the time of its execution the parties intended that it should be a mortgage instead of a deed. In other words, that it must be intended as security for indebtedness. 3 Pomeroy Eq. Jur. § 1196; Brownlee v. Martin , 28 S.C. 364 , 6 S.E., 148 ; Reid v. Gambill , 125 S.C. 187 , 118 S.E., 308 ; Miller v. Price , 66 S.C. 85 , 44 S.E., 584 ; Leland v. Morrison , 92 S.C. 501 , 75 S.E., 889 , Ann. Cas., 1914-B, 349; Brockington v. Lynch , 119 S.C. 273 , 309 , 112 S.E., 94 .
3. A test generally accepted as decisive is the mutuality and reciprocity of the remedies of the parties; that is to say,
if the grantee enjoys a right, reciprocal to that of the grantor to demand reconveyance, personally to compel the latter to pay the consideration named in the stipulation for reconveyance, the transaction is a mortgage. Brockington v. Lynch , 119 S.C. 273 , 309 , 112 S.E., 94 ; Hodge v. Weeks , 31 S.C. 276 , 9 S.E., 953 ; Creswell v. Smith , 61 S.C. 575 , 39 S.E., 757 .
4. A Court of equity will not allow a grantee fraudulently to take advantage of the necessities of a grantor and use fraud as a means of taking away from a grantor his property under a mortgage which is in the form of a deed. Mason v. Finley , 129 S.C. 367 , 382 , 124 S.E., 780 .
Relying upon the principle last announced, the defendant contends that he went to Dr. Stackhouse in the early part of 1929 to obtain advances for the year 1929, and that he took advantage of his necessities to require him to execute the deed. I do not think the testimony sustains this position. It is admitted by all parties and witnesses that real estate was largely without market value in the County of Dillon in the early part of 1929 and for some time thereafter. The plaintiff was under no obligation to furnish the defendant. In fact, instead of being a lender he was a borrower himself. The testimony demonstrates throughout that Dr. Stackhouse was entirely friendly to the defendant, Stanton, and was desirous of helping him in any way he could. I do not think, however, the testimony justifies the position taken by the defendant that such confidential relations existed between the plaintiff and defendant as would cause the defendant to implicitly place himself in the hands of the plaintiff without considering the consequences. In fact, I am convinced that the defendant at the time of the execution of the deed realized he had no equity in the property, and with conditions as they were he was desirous of making some arrangements so that he could stay upon the premises at least for a while longer.
There is no testimony that Dr. Stackhouse was pushing for his indebtedness, but the testimony shows other creditors
were, and I am convinced that his only interest in the matter was to protect his mortgage indebtedness and try to work out some plan that would enable the defendant, for the time being, to remain upon the property. He already had security for his indebtedness and it would be a vain and foolish thing for him, with conditions as distressed as they were, to assume an indebtedness of approximately $5,500.00 to $6,000.00, when he could have easily held his security in the condition that it was without becoming personally responsible for this large additional indebtedness. The Court will take judicial notice that financial conditions were extremely bad at the time of the conveyance, and no one could prophesy what the outcome would be.
I am further forced to this conclusion by the indefinite testimony of the defendant as to his alleged oral agreement. While as to other transactions he could give the conversations as to them in detail, yet in connection with the transactions leading up to his alleged agreement he could state nothing, except the bald fact that there was such an agreement. He also testified that since the execution of the deed, although he had been upon the lands and had been turning over to Dr. Stackhouse from year to year the crops, or their proceeds, yet he had made no attempt to find out what progress was being made in the settlement of the indebtedness, nor in the correspondence introduced in evidence is there any reference whatsoever to any oral agreement made at the time of the execution of the deed. It is reasonable to conclude from the letter of March 6th that he had written Dr. Stackhouse about the necessity of taking up the Land Bank mortgage, and perhaps that he wanted Dr. Stackhouse to convey the lands to some other person, for in the reply (defendant's letter not having been introduced in evidence), Dr. Stackhouse expressed unwillingness to convey to any one else, but agrees that Stanton himself may buy the land back, and, according to defendant's own testimony, it was he that went to the plaintiff and got the letter of April 30th, which contains an option of repurchasing at the indebtedness, plus
$1,000.00, on or before December 1, 1929, and it was he that likewise obtained the extensions for 1930 and 1931.
Defendant relies strongly on these letters as an interpretation of the deed by the plaintiff as a mortgage. I do not think under the facts and circumstances of the case they can be so construed. Defendant alleges and testifies that prior to the letter of April 30th he had tendered a check for the full amount of the indebtedness. Notwithstanding his claimed oral agreement that the deed was intended as a mortgage, he went to the plaintiff and got the option to repurchase. It seems inconceivable that if at that time the defendant was of the view that his deed was a mortgage that he would not have consulted counsel for the protection of his interest when the plaintiff so clearly gave him notice that the paper that he held was not a mortgage, but a deed. This fact in itself is strong proof that defendant realized that plaintiff was the actual owner of the property, and this realization is further emphasized by the fact of his obtaining an option to repurchase shortly thereafter, and by the further fact that at no time, according to the testimony, up to the time of the bringing of the suit, was there any contention that the deed was other than what it purported to be.
Testing it by the other principles mentioned, the conclusion is the same. At the time the deed was executed the plaintiff satisfied his evidence of indebtedness and took no new note evidencing it. Many months later, when he paid the Bank of Dillon and the Edgar Stanton indebtedness, the notes and mortgages were marked paid by the holders and the plaintiff had them taken off of the record. There was no transfer of the indebtedness to him so that he could hold the same as a claim against the defendant. It is plain, therefore, that certainly so far as the plaintiff was concerned, he not even contemplated that the defendant was indebted to him, and, as above suggested, the defendant not having made any effort to ascertain what his indebtedness might be to the plaintiff, certainly gives rise to the implication that he had no idea that he was indebted to plaintiff. If there was no indebtedness
which Dr. Stackhouse could enforce against the defendant, then unquestionably there was no mutuality of obligation existing, and hence the transaction was closed.
Defendant, however, contends that the satisfaction of the obligations was merely a part of a scheme on the part of the plaintiff to deprive defendant of his property. I do not think the testimony sustains such a position. As above suggested, I do not think, under the testimony, that defendant had any substantial equity in the property at the time the deed was executed. It is true that testimony was offered of the sale of the premises several years before for a consideration of $10,000.00, and some ten or fifteen years before for a consideration of approximately $15,000.00, but the Court will take judicial notice of the fact that in the last few years the market value of farm lands has decreased considerably in value, and especially in view of conditions existing at the time the deed was made, the testimony convinces the Court that if the property had been sold at a forced sale at that time it would not have brought more than the mortgage indebtedness. In addition to this the plaintiff, according to his testimony, is ready and willing at the present time to sell the premises to anybody for the sum of $8,000.00. Defendant questions the good faith of the offer, but I am convinced that the proposition was made in good faith.
Defendant relies strongly on the case of Mason v. Finley, supra. As I view the facts, I am of the opinion that the legal principles set forth in that case are not applicable to this. There, there was no outstanding indebtedness, and the plaintiff went to the defendant for the purpose of obtaining a loan. The loan was made and a deed was taken. In the case at bar the consideration was not new. Plaintiff already had a mortgage for his indebtedness and was under no obligation to assume the indebtedness to the other parties. I therefore think that the case falls rather under the principle announced in the cases of Hodge v. Weeks , 31 S.C. 276 , 9 S.E., 953 ; Creswell v. Smith , 61 S.C. 575 , 39 S.E., 757 , and Brockington v. Lynch , 119 S.C. 273 , 112 S.E., 94 . The
opinions in both the Mason-Finley cases and the Brockington-Lynch cases were written by the late Mr. Justice Cothran, and in my opinion are illustrative of the distinction between deeds intended as deeds and deeds intended as mortgages, and the principles upon which the question must be determined. While there is an existing indebtedness and the transaction is fair and to the advantage of both parties, the deed should be sustained as a deed. Where there is no existing indebtedness and money is advanced, and one party approaches the other for a loan, and a deed is taken, the presumption at least easily arises that the deed was intended as a mortgage.
Viewing the case as a whole, I am satisfied of the good faith of the plaintiff; that it was the intention of both parties at the time of the execution of the deed to execute a deed; that there was nothing unfair on the part of either party in the transaction, and that, therefore, the instrument executed by defendant to plaintiff should be construed and held to be what it purports to be, namely, a deed in fee simple to the premises. It is, therefore.
Ordered, adjudged, and decreed, that plaintiff is entitled to the immediate possession of the premises mentioned and described in the complaint, and that the defendant do forthwith surrender same to the plaintiff. Source: CourtListener
