DANIEL GREEN v. JOSEPH E. BUTLER, JOSEPH S. LEAVITT, R. MORTON, - VANDYKE, and W. POLAND, 26 Cal. 595

By the Court, Sawyer, J. A large portion of the briefs on both sides is devoted to a discussion of the evidence. But no appeal has been taken from the order denying a new trial, and the parties must be presumed to have been satisfied with the facts as found. Whether they were or not, the appeal is from the judgment alone, and, on such appeal, we cannot review the evidence. The practice is the same in all cases, whether at law or in equity. (Allen v. Fennon, post.) Whatever doubt there might formerly have been on this point as to cases in equity, there can be none since the passage of the Act of 1861, the first

section of which provides “that no distinction as to the mode of taking or perfecting appeals, or as to the effect of them, shall be made between cases at law and cases in equity, but the provisions of the Practice Act shall apply in like manner to all cases of appeal.” (Laws 1861, p. 589.) Nor did the parties, when the appeal was taken, seem to contemplate that we should re-examine the evidence.

It is stipulated that certain papers on file shall constitute the statement on appeal (there does not appear to have been any statement on motion for new trial), and the grounds of appeal specified in the statement are, substantially, that the referee erred in his conclusions of law, and, as a consequence, that the judgment is erroneous. No error as to the facts found is alleged in the statement as a ground of appeal.

The referee finds, among other facts, that, prior to the 14th of August, 1854, the plaintiff was in possession of the lands described in the complaint; that on that day, for a valuable consideration, he conveyed the said lands and improvements thereon by a deed, absolute on its face, to the defendant, Butler; that,-although the deed was absolute on its face, it was intended-as a mortgage, to secure to said defendant certain'"nnoi)e.'ys) d'tie and to grow due, for erecting buildings and improvements -thereon, for a firm composed of plaintiff and defqridant, Leavitt; That on the 20th of October, 1854, the said ',firm óf-;Gréen ¿ti Leavitt had an accounting with defendant', Butler,.’apd that upon said accounting it was found and agrebd'ji.y- all parties that said firm was indebted to said Butler for constructing said improvements in the sum of eight thousand five hundred dollars; that on said 20th day of October, said Butler executed and delivered to said Green & Leavitt, a written defeasance, whereby he bound himself, upon the payment by them to him on or before March 1, 1855, the said sum of eight thousand five hundred dollars, to convey, by quitclaim, to said Green & Leavitt, the said premises, and covenanted in said defeasance that if, after said 1st day of March, he should sell said premises he would pay over to said parties any surplus that might arise over his debt and costs; that said defendant, Butler, on the 1st of February, 1855, with the consent of said plaintiff and said defendant, Leavitt, entered into possession of said premises, and continued in possession till the 27th day of February, 1855. *• That on the said 27th day of February, A.

D. 1855, at said city and county, the said plaintiff and the said defendant, Joseph E. Butler, had an accounting and settlement of and concerning the said plaintiff’s interest in and to the land described in said complaint, and the improvements then thereon, and of the furniture then in said ‘Ocean House;’ on which accounting and settlement the said defendant, Joseph E.

Butler, paid to the said plaintiff the sum of two thousand dollars, in four promissory notes, for said plaintiff’s interest in and to said land and the improvements thereon, and the furniture then in said house, which said notes were subsequently paid; and the said plaintiff then and there, in consideration of said sum of two thousand dollars, surrendered the said written defeasance to the said defendant, Joseph E.

Butler, for cancellation, and the same was thereby cancelled as against the said plaintiff.” The only question arising on the record tiae'eiiei upon the rights of the parties as to the rapa ÉSugljein rnis’l action, of the surrender of the defeasance tqfüe ^nceljjgde under the agreement found by the refer®, j^h^rincijjel stated in the numerous cases cited by app&lbMt’s ^hns^a generally admitted to be correct.

But thef&*an In? ntodqn&t that a mortgagee can make a bona fide purchase of tmWKjuity of redemption—if, indeed, w^e may use these terms in the present condition of the law as to mortgages in this State— and thereby acquire an absolute title. The principle is well stated in Remsen v. Hay, 2 Edw. Ch.

Rep. 535, in the following terms: “ There is nothing in the policy of the law to prevent a mortgagee from acquiring an absolute ownership by purchase from the mortgagor at any time subsequent to the taking of the mortgage, and by a fresh contract to be made between them.- Courts view with jealousy and suspicion any dealings between the mortgagor and mortgagee to extinguish the equity of redemption ; but if it be fair and honest on the part of the mortgagee, the purchase will not be disturbed.

The law only prohibits a mortgagee from availing himself of a stipulation contained in the mortgage deed, or of some covenant or agreement, forming part of the same transaction with the loan and the taking of the security, by which he shall attempt upon the happening of some future event or contingency to render the estate irredeemable and obtain an absolute ownership. In such cases the maxim applies of once a ‘mortgage always a mortgage.’ (Henry v. Davis, 7 John. Ch. R. 40; Clark v.

Henry, 2 Cow. 332.) But it cannot interfere with the right to foreclose when the mortgage has become forfeited, nor with any fresh contract which the mortgagor may choose to make with the mortgagee for a sale or relinquishment of the equity of redemption and vesting the latter with an irredeemable estate.” There are numerous authorities to the same effect. (1 Wash. Real Prop. p. 496, Secs. 23, 24; Dougherty v. McColgan, 6 Gill. & Johns. 275; Russell v. Southard, 12 How. U. S. C. R. 154; Adams v.

McKenzie, 18 Ala. 698.) Independent of authority, no argument is necessary to show that, upon principie, a mortgagor has the same capacity to contract with reference to his interest in the mortgaged property that he has in respect to any other property. Nor has

section two hundred and sixty of the Practice Act, or any of the former decisions in this State relating to mortgages, placed any restriction upon the authority of the mortgagor to make other and further contracts affecting his title to the land, subsequent to the execution of the mortgage. The language of Mr. Justice Field, in McMillan v. Richards, cited by counsel, thatli The owner of a mortgage in this State can in no case become the owner of the mortgaged premises, except by purchase upon sale under judicial decree, consummated by conveyance,” must be limited to the question then under discussion.

He was simply endeavoring to show that no title passed by the mortgage alone, either before or after default, or could be acquired under it by strict foreclosure, or in any other mapner than by a sale under a decree of a Court, and that in such case the title did not vest till consummated by a conveyanee, after the period for redemption had expired. He had no reference to a contract affecting the title, made by the mortgagor himself subsequent to the making of the mortgage.

Reference was only made to the possibility of acquiring title through the mortgage, independent of any further action on the part of the mortgagor.

In this case, according to the finding of the referee, there was a settlement between the plaintiff and defendant Butler, by which the said Butler paid to plaintiff for his interest'in the lands and improvements in dispute, and the furniture in the Ocean House, situated on the premises, the sum of two thousand" dollars, and the plaintiff, in consideration thereof, surrendered the defeasance to defendant Butler “for cancellation, and the same was thereby cancelled as against the said plaintiff.’’ According to the finding the sum of eight thousand five hundred dollars was secured on the premises, which premises, on said 27th of February, 1855, were only worth seven thousand five hundred dollars.

The referee found that there was no fraud in any of the particulars charged in the complaint, and the finding in respect to the charges of fraud are sufficiently specific, as it negatives every allegation of fraud. He does not say, in so many words, in his finding, that the mortgage debt remained unpaid; but it is the necessary result of the findings that such was the case, and that the full amount was due. If we were permitted to re-examine the evidence in the record, we are not prepared to say he erred.

The parties, at the time of the execution of the defeasance, struck a balance themselves, and the evidence to disturb their own settlement is exceedingly loose and unsatisfactory. The surrender of the defeasance to be cancelled with an intent to vest the entire estate in Butler, did not in law convert the mortgage into a deed or operate as a conveyance of Green’s title to Butler. Whether it operated by way of estoppel in equity, to vest the title in Butler, or not, it is not now necessary to determine. The deed to Butler being absolute on its face, the title upon the record is apparently in him.

The plaintiff seeks the aid of a Court of equity to compel a conveyance of the land in controversy on the ground that the conveyance to Butler was a mortgage, and that the mortgage has been satisfied. The defendant Butler contests the claim and shows that, instead of the mortgage being satisfied, he had paid the full value of the premises, with the understanding that he had purchased the plaintiff’s interest, and that tire defeasance was surrendered to be cancelled in pursuance of the agreement between the parties. Butler afterward continued in possession as owner.

If Butler did not obtain the title in law, he paid for it its full value, and supposed the title to be vested in him by the surrender and cancellation of the defeasance with the intention of so vesting it. The surrender of the defeasance to Butler to be cancelled, and the retention of it by him, is in law a cancellation of that instrument, though not actually destroyed. A Court of equity will not aid plaintiff to obtain a conveyance, under the circumstances of this case, in direct violation of his own agreement, and in fraud of the rights of defendant Butler.

Upon the allegations of the plaintiff’s complaint, it is at least extremely doubtful whether the conveyance to Butler can be regarded as a mortgage at all.

The distinct allegations of the complaint are, not that the land was conveyed by plaintiff to secure the amount due Butler, but that Butler represented that there were certain mechanics’ liens on the Ocean House which the claimants were pressing and threatening to foreclose—that “said Butler was unable to procure the money from his own means to satisfy the said demands, and could not procure the money for that purpose, unless the said plaintiff would convey to the said Butler the said twenty-five acres of land, in order that the said Butler might mortgage the said land and buildings to procure the necessary funds; and that the said plaintiff, confiding, etc., did, on the said 14th day of August, 1854, make, execute and deliver to the said Butler a deed of the said twenty-five acres of land, for the purpose aforesaid, and not absolutely, nor for any other purpose,” and plaintiff’s counsel contends that the testimony really established these very allegations, and nothing more, with respect to' the object of the conveyance at the time; and if we could look at the testimony, it does seem to tend strongly in that direction.

Now if this was the only object of the conveyance at the time it was made, it certainly was not at that time in any sense a mortgage. It wTas a conveyance of the title to Butler, not to secure his demand, but to enable Butler to mortgage it to raise money to pay off the liens of the mechanics. And such a conveyance certainly passed the fee at the time.

True, Butler would have held the legal title in trust for plaintiff, but upon what principle can it be said that afterwards, in October following, the execution of the instrument, which has been called a defeasance—an entirely distinct transaction— transmuted the original conveyance in fee into a mortgage? In Trull v.

Skinner, 17 Pick. 216, it was held that where a deed was executed and at a subsequent time a defeasance was also executed, the deed and defeasance subsequently executed did not together constitute a mortgage, because the defeasance was not executed at the same time with the deed, and was-not a part of one and the same transaction.

From the execution of the instrument called a defeasance, and the facts found by the referee, it is evident that the parties, at the time of the execution of the defeasance, intended to make the two instruments serve the purpose of a mortgage, whatever the legal effect of the transactions might be, as they also intended to vest full title in Butler, by the subsequent surrender of the defeasance. The referee found the transaction to be a mortgage, contrary, perhaps, to these allegations of the complaint, and against the protest of the plaintiff.

If not a mortgage, the legal title is certainly in the defendant, Butler. But it is not necessary to determine, whether upon the facts alleged in the complaint, the two instruments in law constituted a mortgage or not; for in either view, taken in connection with the other findings, we think the plaintiff is not entitled to any relief, upon the case made by the record. The judgment is therefore affirmed.