251 N.W. 180 | Minn. | 1933
Three questions are involved:
(1) Are the deed and the contract for deed effective according to their terms, or did the mortgage relationship continue despite these instruments so that only foreclosure could terminate it?
(2) If the instruments were otherwise effective, was there present such duress or overreaching on the part of defendant as to render them merely further security for the mortgage indebtedness and not absolute?
(3) Was it error to admit testimony of the present value of the land as bearing on the question of the adequacy of the consideration paid by defendant for the conveyance?
1. It is firmly established that a mortgagor may not, at the time of, nor as a part of the mortgage transaction, bargain away his equity of redemption. Any attempt by the mortgagor so to do will not be enforced by a court of equity. So a deed, absolute on its face, if given to secure a debt, will be construed by a court of equity as a mortgage. King v. McCarthy,
However, it is settled equally well that a mortgagor may bargain away, sell, or convey to the mortgagee his equity of redemption subsequent to the time that he executed the mortgage, De Lancey v. Finnegan,
The courts will, however, scan such a transaction carefully to see that the mortgagee took no undue advantage of the mortgagor's necessities. From the early case of Niggeler v. Maurin,
"The mortgagee may always purchase from the mortgagor his right of redemption, for a fair consideration, if the transaction is untainted by any oppression or advantage taken by the mortgagee of the necessities of the mortgagor. Equity will scan sales of the equity of redemption with jealous care, and require their fairness to be clearly established."
Accord, see Marshall v. Thompson,
"That a mortgagee may purchase the mortgagor's equity of redemption was doubted in some early cases, but is as a general proposition true, though the transaction will be closely scrutinized, so as to prevent any oppression of the debtor. The maxim 'once a mortgage always a mortgage,' does not prohibit the mortgagor from releasing his equity of redemption to the mortgagee."
Where as in the instant case a mortgagor conveys the mortgaged land to the mortgagee and takes a contract for deed back, the transaction may be one of two things. Either it is a furnishing *181
of further security for the payment of the mortgage debt, or it is an absolute deed, terminating the relationship of mortgagor and mortgagee, extinguishing the mortgage debt, and vesting legal title to the land in the mortgagee. Whether one or the other of these results is reached depends, within limits, upon the intention of the parties. By virtue of 2 Mason Minn. St. 1927, § 9573, there no longer is a presumption that conveyances between the mortgagor and the mortgagee are intended merely as additional security. See Jentzen v. Pruter,
In determining whether a conveyance from a mortgagor to a mortgagee constitutes further security for the mortgage debt or whether such is an absolute conveyance ending the mortgage relationship and vesting legal title to the land in the mortgagee, any one of the following factors, if found, will control: (a) If the mortgagee used oppressive means to exact the conveyance or took unconscionable advantage of the mortgagor's necessities; (b) if the mortgagee paid the mortgagor an inadequate consideration for the conveyance, Holien v. Slee,
The fact here that the deed to Schwan and the contract from him back to the O'Connors were contemporaneous in point of time is of little consequence in this case. It has been contended that where, between a mortgagor and a mortgagee, a deed and contract for deed back are contemporaneous in point of time, this fact should be given careful consideration in connection with other facts in deciding whether it was intended that the mortgage relationship should continue. The force of this contention must however be considered in the light of the recent decision of McKinley v. State,
"The deed of June 7, 1928, from Mrs. Brown [mortgagor] to the state [mortgagee] put the title in the state; and the contract back of the same date gave her the equitable title. * * * There was nothing in the law preventing Mrs. Brown at the time of the transaction on June 7, 1928, transferring such title as she had to whomsoever would buy it; or she could transfer it to the state, which held the mortgage, in extinguishment of the mortgage debt; or, extinguishing the mortgage debt by her deed, she could take a contract for a deed, * * *."
Since this latter case there can be no question but that the law attaches no particular significance to the contemporaneousness of the deed and contract back. See also De Lancey v. Finnegan,
2. Under the rule that equity regards with great jealousy transactions whereby a mortgagor conveys his equity of redemption to a mortgagee, we come now to an examination of the facts of the instant case to ascertain whether there was present any one of the *183 above mentioned three factors which, it was pointed out, will if present render a conveyance such as this merely additional security for the mortgage indebtedness and not a termination of the mortgage relationship.
The trial court found "that there was no duress or undue influence exercised by defendant." This finding finds ample support in the record. At the time of the execution of the deed and contract for deed, plaintiffs were indebted to defendant for the principal sum as well as $206.52 for back taxes and $1,237.54 for interest. Defendant, in advising plaintiffs that he would foreclose forthwith if they did not give him a deed, was simply making a statement of his plain legal right. There was no threat of a deficiency judgment or of further embarrassment to plaintiffs except such as might result from foreclosure. That is defendant's testimony, which apparently was accepted by the court. Nor do plaintiffs, O'Connors, indicate any such condition or facts as to show oppression. Plaintiffs had been advised as to their rights. Their banker drew the deed and contract and was present at the meeting where they were executed. It must be recalled also that by the terms of the contract for deed nothing was due and payable on the same for a year, at which time plaintiffs were obliged to pay only a sum equal to the back taxes. Thus plaintiffs were granted and did enjoy one entire year of possession and income from the farm free from any payments except the sum of one dollar paid at the time of the execution of the contract. True, the present economic depression and the prevailing hardship affecting all agricultural interests in the state has reached the plaintiffs, increased their burden, and made compliance with the terms of the mortgage agreement more difficult and onerous than would be the case under ordinary conditions. However much may be properly said respecting the plaintiffs' position and the difficulties attendant upon an economic mal-adjustment affecting all agricultural interests, still we can by no process of reasoning translate that situation into oppression and duress by this defendant. We find after reviewing the record with care that here there was only the expressed purpose of the defendant *184 to exercise his legal rights, and that nowhere is there evidence of duress, overreaching, or oppression.
3. The trial court specifically finds, and his finding is supported by the evidence, that the value of the land at the time of the conveyance was less than the amount of the mortgage indebtedness. Plaintiffs contend that it was error for the trial court to receive evidence as to the value of the land at this time. That the value of the land was material in determining whether or not defendant, mortgagee, paid an adequate consideration for the conveyance from the mortgagor cannot be doubted. That it was proper for the court to receive evidence of the value of the land as of the time of the execution of the deed and contract, even though land values were at that time generally depressed, there can be no serious question under the decisions of this court. In De Lancey v. Finnegan,
"Was the contract to purchase for a fair consideration, and free from any oppression or advantage taken by the mortgagee of the necessities of the mortgagor? The question must be considered from the viewpoint of the facts as they existed at that time, and not as they were five years later, when prosperity had come to brighten and bless, and the land had materially increased in value."
There was in this case no attempt to prove an oral agreement that the deed and contract were to be merely a part of the mortgage security.
From the foregoing, we conclude that the deed and contract for deed were effective according to their terms; that there was no duress, oppression, or undue influence practiced by the mortgagee on the mortgagor; that the court was not in error in receiving evidence of the present value of the land, and therefore decree that the order below denying plaintiffs' motion for a new trial be affirmed.
Order affirmed. *185