216 S.W.2d 972 | Tex. | 1949
W.R. McDonald brought this suit against J.C. Bradshaw, Effie Marie Bradshaw, a minor, and her guardian, the South Texas Commercial National Bank of Houston, in form of trespass to try title for the purpose of establishing that a warranty deed McDonald had made to Bradshaw was a mortgage. The trial was to a jury, and upon a verdict favorable to McDonald judgment was rendered declaring the deed a mortgage and awarding the land to McDonald upon his repaying Bradshaw the net unpaid amount the jury found the latter had expended on the land described in the deed. The Court of Civil Appeals affirmed the action of the trial court in determining that the deed was in fact a mortgage, but reversed and remanded because of an error in the charge to the jury.
Prior to September 9, 1939, the date on which the deed in question was executed, McDonald owned four lots in South Houston which were encumbered by a deed of trust lien securing an indebtedness of $2,730.00. The monthly installments on this debt were $21.90, and at the time McDonald executed the deed his payments were delinquent to the extent of $181.39.
McDonald alleged that immediately prior to the date upon which the deed was executed to Bradshaw, plaintiff's sister, *458 Effie Bradshaw, the wife of defendant Bradshaw, stated that if he, McDonald, would execute a mortgage on the property to them, she and her husband would lend him the money to pay the amount owing for back installments on the note and that the Bradshaws would pay what might become due upon the note in the future "until such time as plaintiff became physically able to repair the house on said premises and to rent the same."
The deed is, in form, one of general warranty, reciting that McDonald, a single man, conveyed the land to Bradshaw and wife for a nominal cash consideration and the assumption by "J.C. Bradshaw and wife, Effie Bradshaw, of and their promise to pay the present unpaid balance of principal and interest on that one certain promissory note dated June 24, 1934, executed by W.R. McDonald, in the principal sum of $2,730.00, payable to the order of the Home Owners' Loan Corporation * * *."
After the deed was delivered to Bradshaw, he paid the delinquent installments, and on September 30, 1939, executed an agreement with the lienholder assuming the payment of McDonald's note. On December 27, 1943, Bradshaw paid off the balance due.
On April 23, 1946, when McDonald brought this suit, his sister, Effie Bradshaw, had died.
The trial court submitted no issues on fraud, accident, or mistake, and the plaintiff requested none. So these issues, although pleaded, passed out of the case. Upon the issues submitted, the jury found that McDonald had made the deed upon the understanding with Effie Bradshaw, acting as agent for her husband, that the instrument would be held as security for the repayment of the money Bradshaw was to pay out for McDonald, and that the amount Bradshaw had so paid, including interest, was $4,403.47.
Bradshaw's application for writ of error was granted on a point which is in substance that since the deed recited a contractual consideration which had been fully performed by Bradshaw, parol evidence was not admissible to show that the deed was intended as a mortgage. He asserts that the ruling of the Court of Civil Appeals is in conflict with the following cases: Mann v. Wright, Texas Civ. App.,
When the common law rules of evidence were incorporated into Texas law (Acts 1836, Dec. 20; now Rule 184, Texas Rules of Civil Procedure), there were certain firmly established limitations or exceptions to the rule that parol evidence was inadmissible to contradict or vary the terms of an instrument in writing. Among these there was the principle that parol evidence was admissible to vary or contradict a recital of consideration in a written instrument. This exception, developed in the common law courts of England, was based on the reasoning that proof of a different consideration did not come within the abuses sought to be prevented by the parol evidence rule. Where, however, the consideration expressed in the writing was not a mere recital but was contractual in nature, the exception did not operate and parol evidence was not let in to show an additional or different consideration.
Yet another exception to the parol evidence rule had been developed in the equity courts of England — the rule that an instrument purporting on its face to be an absolute deed could be shown by extrinsic evidence to be in fact a mortgage. Recognizing the force of circumstances which might impel a necessitous debtor to execute the more onerous instrument, equity courts relaxed the parol evidence rule for the debtor's protection and extended him relief provided he offer proof of a clear and convincing character. In England, where this rule developed, and in the vast majority of American jurisdictions, allegation of fraud, accident, or mistake is not necessary in such cases to admit parol proof. The rationalization of this is that the instrument in such cases is usually the deliberate act of the parties. Accordingly, there could be no mistake, nor could fraud be predicated upon what the parties had deliberately done. So the debtor who had signed an outright deed, intending it as a mortgage, would, if obliged to show fraud, accident, or mistake, be cut off from all relief in practically every case.
1 The rule allowing an absolute deed to be proved a mortgage originated as a purely equitable doctrine. It relates to that one *460 type of document and to that sole purpose. On the other hand, the rules relating to varying the recitals of consideration have no peculiarly equitable foundation, and are applicable equally to every type of written instrument and for every purpose. The rationale of each of the two principles is entirely different, and they operate in separate, distinct orbits. As has been observed, the prohibition against allowing proof of parol to vary a contractual consideration is simply an application of the common law parol evidence rule; but for the purpose of converting an absolute deed into a mortgage the equity rule supersedes the conflicting common law rule.
2 As early as 1848 this court declared that it was established beyond question that parol evidence was admissible to control the clear import of an absolute deed, and to show that the deed, though absolute on its face, was intended as a mortgage. Stampers. v. Johnson,
"That a deed, absolute on its face, may be controlled by parol evidence, showing that it was intended as a mortgage, has long been the settled law in this State. (Citations.) The character of the transaction is determined, not by the form of the contract, or the name given it by the parties, but by their real agreement and intention, and the construction which the law affixes thereto. (Citations.) If the conveyance is in fact designed as a security for the payment of money, equity treats it as a mortgage."
Associate Justice Denman forcefully stated the policy of this rule in Eckford v. Berry,
"When the form of the instrument, on its face, evidences an absolute conveyance or a conditional sale, or when, from the face of the instrument, it does not clearly appear that the real *461 purpose of its execution was to secure the payment of a debt, in such cases parol evidence is admissible to show the real purpose of the transaction. If, upon the whole case, it appears that the real purpose of the transaction was to secure the payment of a debt, the instrument will be held to be a mortgage, no matter what may be its form. The introduction of parol evidence, in such cases, is conceded to be in direct violation of the general rule that the terms of a written instrument cannot be contradicted or varied by such evidence. The violation of this rule of evidence became necessary, in such cases, in order to give effect to the equity of redemption, when first allowed in courts of equity for otherwise such equity would have been defeated, in most cases, by the form of the instrument. Otherwise, the skill of the conveyancer, aided by the tern rule of evidence, would have enabled the exacting creditor to overreach, and finally crush, the necessitous and defenseless debtor in a court of law, despite the equity of redemption, created and cherished alone by the courts of equity for the protection of the debtor."
These holdings of the Texas courts are in accord with the almost unanimous rule of decision in other jurisdictions. See 4 Pomeroy, Equity Jurisprudence, 5th Ed., sec. 1196; 1 Jones, Mortgages, 8th Ed., sec. 393; 36 Am. Jur., Mortgages, sec. 140; Annotation, L.R.A. 1916B, 18, at pp. 47, 76-77.
In none of the cases outside of Texas, nor in our own cases prior to 1925, has any holding been found to indicate that the form in which the consideration is expressed is controlling. On the contrary, in McLean v. Ellis,
"The defendant objected to the introduction of any parol evidence to disprove the recitals in the deed of the considerations of which it was made.* It is well settled that the true consideration of a deed may be proved by parol evidence, and that a deed absolute on its face may be shown to have been executed in fact as a security for money, and for that reason be treated as a mortgage. Gibbs v. Penny,
And that most eminent jurist, Chief Justice Willie, in Loving v. Milliken,
"In determining whether an instrument is to be construed as an absolute conveyance or a mortgage when there is no defeasance expressly agreed upon, equity looks to all the circumstances preceding and attending the execution of the instrument, and sometimes to those which have subsequently occurred. (Citations.) From these the transaction will take its hue, no matter what coloring the declarations and apparent agreement of the parties have attempted to give it.
"If there was a debt due from the grantor to the grantee, or a loan made, which the instrument secures, the transaction will be deemed a mortgage, let it be disguised as it may. * * *"
During the first eighty years of statehood Texas courts recognized unqualifiedly the rule permitting oral proof that a deed was intended as a mortgage. The first intimation of a qualification upon the rule occurred in Mann v. Wright, Texas Civ. App.,
Since the decision of Mann v. Wright, several other cases have repeated its dictum. Smith v. Koennecke, Texas Civ. App.,
Bradshaw also claims that the holding of the Court of Civil Appeals is in conflict with Pridgen v. Furnish, Texas Com. App.,
3 Dictum in Sisk v. Random,
4 As has been observed, the exact question at bar was directly before this court in the recent case of Austin v. Austin,
"We recognize the general rule that parol agreements may not be allowed to destroy, impair or vary the effect of the plain recitals in a deed. But there are a few well recognized exceptions to this general rule. We are here concerned with only one of them. It is settled that parol evidence may be received to show that a purported deed was in fact intended as a mortgage. (Citations.) Therefore, parol evidence was admissible to show that the real purpose of the parties involved in this transaction was merely to create a lien, and having shown such purpose no greater effect will be given the instrument than that designed by the parties."
5 The Court of Civil Appeals held that the facts proven were sufficient to entitle the plaintiff to go to the jury on the question of whether the deed was a mortgage. A careful reading of the statement of facts indicate that it cannot be said as a matter of law there was no evidence to warrant the submission of the issue, and the Court of Civil Appeals ruling in this regard is approved. That court reversed and remanded the case to the district court because it appeared that the charge assumed as a fact that the wife of the defendant Bradshaw was his agent in her dealings with the plaintiff. This agency was not established as a matter of law, and the Court of Civil Appeals correctly held that the trial court fell into error in so assuming.
The judgment of the Court of Civil Appeals is affirmed.
Opinion delivered January 12, 1949.
Rehearing overruled February 16, 1949.