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the jury, charging that it was quite clear that the original transaction between these parties, as to which there seems to be no dispute, was a loan by Mrs. La Bau to Mrs. Reich of $3,133, and that this loan was secured by the deed delivered to Mrs. La Bau upon the understanding that the deed was to operate as a mortgage; that this transaction made Mrs. La Bau the mortgagee of the property; that upon the face of the transaction she was the owner, but the substance of it was that she was a mortgagee for the security of her $3,133; that in March of the following year the property was leased to one Moyer; that the contention of the plaintiff is that Mrs. La Bau "about this time expressed her intention to purchase the property, and to exercise the option which had been previously given to her, namely, to take the property for $40,000, the consideration specified in the deed"; that "proof has been given to you tending to show that she did exercise that option, and that the transaction which had previously been a mortgage was, by the understanding and agreement of the parties, left to its natural operation as a deed—that is, turned into a sale-and that the deed then already on record was to remain thereafter just as it read, as a deed transferring the property to Mrs. La Bau. She was no longer to be the mortgagee, but the owner. Well, the evidence on that head is all one way. The defendants have no independent evidence with regard to it.” And then, after calling the attention of the jury to the evidence, it is summarized as follows:
"You have the uncontradicted testimony of Reich and Bell as to the main facts claimed to be corroborated by the documentary evidence in the case. Taking that testimony, and scrutinizing it with the utmost care and caution, if you believe it to be true, and find that a bargain at or about the time was made when the Moyer lease was executed that thereafter the property should be the property of Mrs. La Bau for $10,000 (the amount specified in the deed, which was already on record), and that thereafter the mortgage debt was paid by the transfer of the personal property and the application of the balance to the consideration for the purchase of the real estate, and that thereupon, by the clear understanding of the parties--I mean an understanding clear to you -Mrs. La Bau held the property as owner for the agreed consideration, and no longer as mortgagee, then your verdict should be for the plaintiff.”
To that charge the defendants excepted, and the court was specifically asked to charge that, “the plaintiff having admitted that the original deed of October 31, 1894, was really a mortgage, she cannot rely on such a deed as a consideration to support a promise to pay by Mrs. La Bau in March, 1896, and unless the jury are fully satisfied that a new deed in the form heretofore charged was made and delivered in March, 1895, by Mrs. Reich to Mrs. La Bau, the defendants are entitled to a verdict," which was declined, and the defendants excepted, and this presents the main question in this case.
In determining this question it is quite necessary that we should have a clear conception of the rights and obligations of the respective parties to this transaction upon the execution and delivery in October, 1894, of the deed in question. It recited a consideration of $40,000, but there was no promise to pay that sum. In consideration of that amount it purported to convey to Mrs. La Bau the property in question ; but it is conceded that that conveyance, though absolute upon its face, was, in effect, a mortgage to secure the payment of the sum and 120 New York State Reporter of $3,133, with an option to Mrs. La Bau to purchase the property within one year for the consideration expressed in the deed. No liability could be predicated upon the statement in the deed that the consideration for the conveyance was the payment of $40,000, as a recovery of that amount was barred by the statute of limitations prior to the death of Mrs. La Bau, and the defense of the statute was pleaded in the answer. Coleman v. Second Ave. R. R. Co., 38 N. Y. 201. The deed was absolute on its face, but was in effect a mortgage. Therefore the relation between the plaintiff and Mrs. La Bau was that of mortgagor and mortgagee, with all the rights and obligations incident to that relation. The fact once established, either by the terms of the conveyance or by other evidence, that the grant was intended as a mortgage, the rights of the parties are measured by the rules of law applicable to mortgagors and mortgagees; and the conveyance remains but a mortgage until the equity of redemption is foreclosed, and the mortgagee cannot have ejectment against the mortgagor, or those claiming under him, until after foreclosure.” Carr v. Carr, 52 N. Y. 251 ; Horn v. Keteltas, 46 N. Y. 605; Murray v. Walker, 31 N. Y. 399; Clark v. Henry, 2 Cow. 324.
In Murray v. Walker, 31 N. Y. 399, in discussing the rights as between a mortgagor and mortgagee, it was said:
"What is a mortgage in its comprehensive sense? Kent says (volume 4, p. 151, of his Commentaries): 'A mortgage is the conveyance of an estate by way of pledge for the security of debt, and to become void on payment of it. The legal ownership is vested in the creditor, but in equity the mortgagor remains the actual owner until he is debarred by his own default or by judicial decree.' In this case the plaintiff, by the assignment of the certificate and the patent, became the legal owner.
Plaintiff has at all times since the transfer of the certificate to him been virtually the legal owner; while Stanford was at all times down to the foreclosure sale the actual owner. This is simply. therefore, an action of ejectment by the mortgagee against the owner of the equity of redemption; in other words, the actual owner in possession. The fact that the conveyance under which the plaintiff claims, namely, the patent. is absolute on its face, makes no difference. The certificate which was the foundation of the patent, and as holder of which the plaintiff procured the patent, recited that it was assigned merely as security."
In Clark v. Henry, 2 Cow. 327, the chancellor said:
“Though the conveyance be absolute in terms, yet, if the intention appears to make the estate redeemable, it will continue so until foreclosure; for the maxim of equity is that the estate cannot be a mortgage at one time and an absolute purchase at another."
And on appeal, in discussing the effect of an assignment of a mortgage, which, though absolute on its face, was intended as security, Woodworth, J., in the Court of Errors, says:
“There is no exception to the rule, ‘once a mortgage, and always a mortgage.' No agreement of the parties can affect the doctrine as to redemption in a court of equity."
And Savage, C. J., says:
"That a deed absolute on its face, but accompanied by an agreement, in writing or by parol, operating as a defeasance, is a mere mortgage, is perfectly well settled. The character of the transaction between the parties being established, the rights of mortgagor and mortgagee are easily ascertained. It is a well-settled principle that chancery will not suffer any agreement in a mort
gage to prevail which shall change it into an absolute conveyance upon any condition or event whatever.
'Once a mortgage, always a mortgage.'”
In Newcomb v. Bonhan, 1 Vern. 7, where an absolute conveyance was given, with a defeasance upon payment of £1,000 during the life of the grantor, and the grantor covenanted that it should never be redeemed after his death, yet redemption was decreed; and the chancellor, in deciding the question from which the appeal was taken, says:
"There is no principle better settled than that every contract for the security of a debt by the conveyance of real estate is a mortgage; and all agreements of the parties tending to alter, in any subsequent event, the original nature of the mortgage, and prevent the equity of redemption, are void. If the conveyance or assignment was a mortgage in the beginning, the right of redemption is an inseparable incident, and cannot be restrained or clogged by agreement. Though the conveyance be absolute in terms, yet, if the intention appear to make the estate redeemable, it will continue so until foreclosure, for the maxim of equity is that the estate cannot be a mortgage at one time and an absolute purchase at another. This is an elementary rule on this subject, and the object of it is to prevent imposition and fraud on the mortgagor."
In Odell v. Montross, 68 N. Y. 499, it was found that the plaintiff, being indebted to the defendant for money advanced, executed to the defendant a deed of the premises described in the complaint, which deed was absolute on its face, and purported to convey the fee, but that it was executed as and intended as a security for the said indebtedness then existing and what might thereafter accrue; but it was agreed and intended by the parties that the plaintiff, upon payment, should have the right to redeem, and should be entitled to a reconveyance; that in September, 1866, the defendant paid to the plaintiff, at his request, the sum of $50, and the plaintiff then and there signed and delivered to the defendant a paper, of which the following is a copy: “New York, Sept. 17, 1866. Received from William Montross fifty dollars, in full satisfaction for all claims and demands whatsoever as to the conveyance of property, or otherwise, up to this date. Thomas B. Odell;" and that such payment was made and received and such receipt signed and delivered with the intention of the parties that the same should be a full settlement of all claims of the plaintiff to said lands and premises and of all claims to any reconveyance thereof. As a conclusion of law the court found “that the deed was to be considered as a mortgage; that the payment of the fifty dollars and the receipt given therefor did not operate to change the nature of the deed from a security to an absolute conveyance, nor to release plaintiff's right to redeem, and that upon payment of the sums due from plaintiff to defendant and the sums paid out by the latter plaintiff
was entitled to redeem”; and judgment was directed accordingly. This judgment was reversed by the General Term of the Supreme Court upon the ground that the rule "once a mortgage, always a mortgage,” may be forfeited or surrendered by the grantor for a valuable consideration when the agreement that a deed absolute on its face was a mortgage was by parol (6 Hun, 155); but on appeal to the Court of Appeals the judgment of the General Term was reversed, and that of the Special Term affirmed. Judge Allen, delivering the opinion of the court, said: "Prior to the transaction of the 17th of September. 1866,
the relation of the parties in respect to the lands now sought to be redeemed was
and 120 New York State Reporter that of mortgagor and mortgagee with all the incidents of that relation.
A conveyance absolute in terms given as a security is a mortgage with all the incidents of a mortgage, and the rights and obligations of the parties to the instrument are the same as if the deed had been subject to a defeasance expressed in the body of the instrument, or executed simultaneously with it.
The estate remaining in the mortgagor after the law day has passed, before foreclosure, is popularly but erroneously called an equity of redemption, retaining the name it had when the legal estate was in the mortgagee, and the right to redeem existed only in equity. Although a misnomer, it does not mislead. The legal estate remains in the mortgagor, and is subject to dower and curtesy, to the lien of judgments, may be sold on execution, and may be mortgaged or sold as any other estate in lands; while the mortgagee has but a lien upon the lands as a security for his debt, and the land is not liable to his debts, or subject to dower or curtesy, or any of the incidents of an estate in lands.
So far as the entire estate is concerned, there is but one title, and this is shared between the mortgagor and mortgagee; the one being the general owner and the other having a lien, which, upon a foreclosure of the right to redeem, may ripen into an absolute title; their respective parts, when united, constituting one title. The defendant claims to have extinguished the right of redemption and acquired the entire estate by the payment of the fifty dollars, and in virtue of the written acknowledgment of its payment for the purposes named in it. The paper is, in terms, ambiguous.
But the transaction was explained upon the trial, and shown to have been intended as a full settlement of all claims of the plaintiff to the lands and premises and of all claims to a reconveyance thereof. If this payment and receipt did operate to change the nature of the deed from a mortgage to an absolute conveyance, and is a release of the right to redeem, so that the mortgagee became seised in fee simple by a union of the estate of the mortgagor and mortgagee discharged of the mortgage, the defense to the action is perfect. It cannot be claimed that the written paper ex proprio vigore could have that effect. It does not profess to release the right of redemption, or to convey any lands or interest in lands. No lands in particular are referred to. No agreement can be spelled out of the instrument which would be specially performed, and it could not be aided and made a per. fect contract to release or convey lands by parol proof. The whole force of the transaction, as affecting the rights of the plaintitf, is in the payment and receipt of the fifty dollars with intent to extinguish the title of the plaintiff. This cannot operate as an estoppel, or take the case out of the statute of frauds.
The plaintiff having a recognized legal estate in fee, he could only be divested of it (except by way of estoppel, which does not exist) by some instrument which would be valid under the statute of frauds, and in compliance with the statute prescribing the mode and manner of conveying lands. The statute of frauds (2 Rev. St. p. 136, pt. 2, c. 7, tit. 2, § 8) is very explicit, and needs no interpretation in its application to this case. It declares that every contract for the sale of any lands, or any interest in lands, shall be void, unless in writing, and subscribed by the party by whom the sale is to be made. The whole contract—that is, the agreement to sell, and the description of the lands or the interest in lands agreed to be sold-must be in writing, and subscribed by the party. The other statute referred to (1 Rev. St. p. 738, pt. 2, c. 1, tit. 2, § 137) is equally applicable to this case. To hold that the plaintiff had not a fee would be to overthrow the well-established relation of mortgagor and mortgagee, and reverse their respective positions in respect of the legal estate in the lands mortgaged. The statute declares that every grant in fee or of a freehold estate shall be subscribed and sealed by the person making the grant or his lawful agent. If a seal only was wanting to make the instrument relied upon by the defendant valid for the purposes intended, it is possible the court might compel the sealing, but that would not supply the intrinsic defects of the paper writing itself.
The defendant could have acquired the estate and interest of the plaintiff either by a deed poll as a release, or a grant in any form sufficient in terms and mode of execution to convey an estate in lands.
The rights of the mortgagor and his estate can only be fore closed by due process of law, or a release by deed in proper form, or a conveyance sufficient to pass the title to an estate in fee. The defendant has not
purchased the equity of redemption or acquired the estate of the plaintiff by any proper release or conveyance."
I do not find that this case has ever been questioned; but it has been cited in Kraemer v. Adelsberger, 122 N. Y. 476, 25 N. E. 859, and in Cooley v. Lobdell, 153 N. Y. 600, 47 N. E. 783. This, then, was the relation between the parties. They stood as mortgagor and mortgagee, with the rights incident to that relation, and no agreement between the parties could change that relation, except such as would be sufficient to divest the plaintiff of her title to the property. It is entirely clear that, if this plaintiff had filed a bill to redeem at any time within 10 years after the execution of this instrument, she would have been entitled to redeem, and no agreement between the parties not sufficient to legally divest the plaintiff of her legal title to the property would have been sufficient to foreclose her of that right of redemption; and it would seem to follow that no verbal agreement between the parties could vest the legal title to the mortgaged premises in the mortgagee, or impose upon her an obligation to pay an ainount verbally agreed upon as the consideration for a conveyance of the property. The recital of the consideration in the convevance becomes unimportant when the fact is once established that the instrument was not an actual conveyance, but a mortgage.
The plaintiff's right to recover must depend upon a valid agreement to pay the sum of $40,000 for a legal conveyance of the property in March, 1897, and to sustain such a promise it must appear that the defendants did at that time convey or assure to Mrs. La Bau a valid title to the property. If this instrument had been upon its face a mortgage when executed and delivered in October, 1894—and, as I understand the rule, the rights of the parties are exactly the same as if the instrument had been on its face a mortgage—the question is whether there was a valid conveyance, or agreement to convey, by which Mrs. La Bau then agreed to pay $40,000, so that the agreement to pay that sum can be enforced in an action at law; for, if there was no such contract or conveyance, it seems to follow that no obligation existed on behalf of Mrs. La Bau to pay to the plaintiff the $40,000, the amount mentioned in the conveyance. Keeping in mind that the legal title to this property has never passed from the plaintiff to Mrs. La Bau; that this instrument was a mortgage, and not a conveyance; and that Mrs. La Bau's interest in this property was that of a mortgagee, and nothing more—to vest in her a legal title to the property it was necessary that the plaintiff slould execute a conveyance sufficient to pass title to real estate. The learned trial judge considered that a parol agreement made after the execution of the mortgage could notify the parol agreement by which the conveyance, though absolute on its face, was a mortgage, and thereupon the mortgage was converted into an absolute deed; or, as the court states it in denying the motion to dismiss the complaint:
"The argument overlooks the fact that it was not a mortgage. It was an absolute deed in fee. It is made a mortgage by parol evidence, and all that the plaintiff does here is to show (also by parol evidence) that the mortgage which was intended when the absolute deed was given by Mrs. Reich, and that the tenor of the deed as originally drawn, delivered, and recorded, continued in