Ferguson v. Miller

This was an action brought on the 25th of August, 1852, by * the plaintiff against Jonathan Miller, to [98] recover the amount of a note for $650, secured by a mortgage on certain real estate in the city of Marysville, and for a forecloseure of the mortgage and a sale of the premises, with a notice to various claimants and incumbrancers thereon, under the following circumstances: On the 1st of August, 1850, Ira Eaton sold to John Parks, one of the defendants, the lot of ground in controversy, and he, on the same day, resold it to John S. Kelly, to whom, in order to save expenses, it was conveyed directly by Eaton. The consideration of both sales was $1,600 each, and in order to secure the payment of the last mentioned sum of $1,600, Kelly conveyed the lot to Parks by a deed, dated August 1st, 1850, with the following condition underwritten:

1 ‘ This indenture is conditioned on the payment of a certain promissory note of $1,600, and bearing even date with these presents to John Parks or order, at twelve months from date, which payment, if duly made, will render this conveyance void; otherwise, to be and remain in full force and virtue.”

This conveyance was duly recorded in the Becorder’s office of Tuba County, August 3d, 1850. Afterwards, Kelly having failed to pay the money, Parks took possession of the property, and on the 1st of September, 1851, sold it to one James "W. Winters for the sum of $1,400, but failed to make a deed at the time; soon afterwards, to wit, on the 30th of September, 1851, Winters sold it to the defendant Jonathan Miller, to whom, by agreement of the parties, Parks conveyed it directly. On the same day Miller executed the note and mortgage in question to the plaintiff Ferguson. In addition to Miller, the following persons were made parties defendant, viz: S. T. Watts, to whom said Miller executed a mortgage on the property for $1,230, on the 13th of October, 1851, with interest at the rate of ten per cent, per month till paid, a part of which, viz, $775, was paid; Thomas Boach, to whom the said Miller sold

said property on the 5th of January, 1852; John Banks and Jonas Green, whom Miller, before he sold to Boach, had employed as mechanics to do work and labor on the house, situated on the lot, to the amount of $388, for which, on the 26th of December, 1851, they filed their notice [99] of lien. Subsequently, * Miller gave his note for this amount, on which judgment was recovered, an execution issued, and under it, this property levied on and sold at Sheriff’s sale to Blands Fuller, also made a defendant; John Y, Berry, who purchased of Kelly the lot in question, after the institution of this suit, by deed dated December 6th, 1852, who, with John Parks, by ah amendment, were made parties to the suit; A. L. Merriam, to whom Berry, during the pendency of the suit, to wit, on the 22d day of May, conveyed his interest for $1,000. .

On the trial, John S. Kelly was examined as a witness, and testified as follows: On the 1st day of August, 1850, I wished to purchase the lot in question of John Parks. John Parks had, on the same day, purchased the lot of Ira A Eaton. I was unable to pay Parks any money, and it was finally agreed, between Parks and myself, that I should take a deed of the lot for $1,600, and if I paid within a year the $1,600, with interest thereon at the rate of five per cent, per month, the property should be mine; otherwise it should revert to John Parks. In order to carry out this arrangement and to save expense, Ira A. Eaton, by direction of John Parks, executed and delivered an absolnte conveyance of the lot to me, and I thereupon, at the same time, executed and delivered to John Parks the indenture mentioned above, and also the note mentioned therein. At the close of the year 1850, I left for the States, and was unable to return until the summer of 1852. I had forgotten all about the matter, nor did I think, before that time, I had any claim to that lot, until I arrived in Marysville in November of the same year. I was then informed of the difficulty by Judge Berry and others. I sold to Judge Berry for $500. I never paid any of the purchase money of said lot. When Parks took possession of the lot I considered

the note settled. I do not consider that I am indebted to Parks in any amount whatever.

Cross-examined. — The rent of the property, whilst in the possession of Parks, was worth about $90 per month. After my return to California John Y. Berry applied to me for the purchase of any interest I might have in the lot, and I sold the same to him and gave him a quit claim deed. * Berry knew all the circumstances of the [100] transaction with Parks at the time of the purchase from me.

It also appears m the statement that Kelly told Parks to take possession of the lot, as he could not pay the consideration money, and Parks accordingly took possession of it, and retained possession of it until he sold the same.

In delivering its opinion in the case, the Court said:

“ The first question that presents itself, is as to the character of the conveyance from Kelly to Parks, dated August 1st, 1850. In manner and form the instrument purports to be a deed conveying the property in fee, until, at the very conclusion, the following condition is inserted (reciting it). If this is to be construed into and as having the effect of a mortgage, then the legal title remains in the mortgagee, and J. S. Kelly and his assignees, have only the right of redemption; on the contrary, if it only amounts to a conditional sale, and the condition has been broken by the vendee having failed to perform the same, then the title remains in Parks.

“It is oftentimes very difficult to distinguish between a conditional sale which will absolutely determine and vest an estate, when either party fails to perform the same, and a mortgage; and this difficulty has occurred with the Court in the present instance, and the conclusion must be arrived at by a careful consideration of the peculiar circumstances attending the transaction. The instrument itself shows that it was drawn and prepared by some one learned and skillful in such matters, and it is fair to suppose that it means simply what it contains and expresses on its face, and that it implies nothing more. It is true that the word mortgage is not contained in the body of the writing; yet it is not to be

denied, that a written contract may be, and very often is, essentially a mortgage, when the term is omitted, or failed to be used. Judging from all the circumstances, I am inclined to believe that it was the intention of the parties that it should be a conditional sale; for was it a mortgage by the intendment of Kelly and Parks, the skillful draughtsman would most probably have drawn it in the usual form of such instruments, and not left its construction, as such, in doubt. This opinion is further strengthened from [101] the fact that this * writing was made and recorded as early as August, 1850, and Kelly having failed to pay any part of the $1600 within the time mentioned, Parks, after the lapse of a year, took possession of the property, and subsequently sold it as his own to Miller, during all which time Kelly made no effort to perform the conditions of the contract and his covenants, nor did he in any manner interfere or object to the acts of Parks, until he sold his right and interest to J. Y. Berry, a lawyer in the ease, whilst the suit was pending; and further, that Kelly knew of most, if not all, of the acts of Parks.

‘ ‘ If this view of the case be correct, then it follows that both the legal and equitable estate was in Parks at the time he took possession, and consequently he had a right to dispose of the same to Miller, or any other person.

“The claims of the mortgage creditors must be paid off from the proceeds of the sale of the house and lot, according to the priority of the same, and must be in this order: 1st, A. H. Ferguson, 2d, S. T. Watts, and Bd, such other person, or persons, as rightfully represent the mechanics’ lien,” etc.

Decree accordingly, from which all of the defendants, except Watts, appealed.

The conveyance from Kelly to Parks was a mortgage, and not a conditional sale. ( 12 How. 139 ; 2 Cow. 325 ; 2 Johns. Ch. 30 ; 7 lb. 40; 4 Johns. 186 ; 5 lb. 261; 3 Cow. 166 ; 2

Wend. 296 ; 12 Ib. 61, 227; 15 Ib. 212, 224; 4 Kent’s Com. 144; Powell on Mort. 17, 23; Stat. of Cal. 1850, p 253, g 40; lb. 1851, p. 58, 60, 93.)

It is found as a fact that tbe parties intended a conditional sale, and this should govern, unless the rights of third parties have intervened. (2 Story’s Eq. Jur. \ 791, 793; 2 Mun. 40; 2 Cal. 429 ; 1 A. K. Marsh. 124 ; 8 Paige, 259, 260; 19 Wend. 520 .) The words mortgage or security do not occur. There was no loan of money, no security intended. ( 2 Barb. 31 , 33; 4 Kent’s Com. p. 148.) Assuming it to be a mortgage, the fee, *after [102] condition broken, vested in Parks (see 2 Cruise’s Digest, p. 66, \ 8), and the legal estate passed to Miller under his conveyance. Section 260 of the Practice Act can only apply to mortgages made after it became a law. The mortgage is to be judged by the common law of England, as it existed in 1776. (2 Black. Com. p. 158; 4 Kent’s Com. p. 136, 137; 1 lb. 473, and note.) Kelly and his assignees are es-topped from asserting title. ( 1 Johns. Ch. 352 ; 5 lb. 184; 6 lb. 167; 2 Greenl. Ev. § 207; 2 Watts & S. 323 ; 7 Watts, 394 ; 2 Story Eq. Jur. 791, 1040.)