Summary
In Cartee, T.A. Cartee filed a bill seeking to confirm title to certain lands that he had received as a result of the foreclosure of a deed of trust which had been assigned to him.
Summary of this case from McKinley v. Lamar BankOpinion
No. 31742.
May 20, 1935.
1. EVIDENCE.
Receipt which is not contractual in its nature is subject to variation by parol proof.
2. DEEDS.
While land can only be conveyed by written instruments, and redelivery of executed deed does not operate as a reconveyance, grantor to whom deed is surrendered in satisfaction of purchase-money debt of land conveyed in deed has an equity in land embraced in deed which is enforceable against persons having notice of such equity.
3. DEEDS.
Grantor to whom deed was surrendered in satisfaction of purchase-money debt of land conveyed in deed could, in equity, foreclose trust deed which was executed in connection with deed, in accordance with terms of trust deed, or could have court direct reconveyance to grantor.
4. DEEDS.
Assignee of deed of trust who had notice that assignor had equity in property by reason of surrender by assignor's grantee of deed in connection with which deed of trust was executed in satisfaction of purchase-money debt of land conveyed in deed was bound by such equity, as respects right of assignee to foreclose deed of trust.
5. MORTGAGES.
Payment of debt for which deed of trust had been assigned as collateral security extinguished debt, so that assignee could not foreclose deed of trust (Code 1930, section 2152).
6. MORTGAGES.
Conveyance of property by warranty deed to secure a debt constituted a "mortgage" on such property.
7. DEEDS.
Where grantee surrendered deed in satisfaction of purchase-money debt of land conveyed in deed, and grantor assigned deed of trust which had been executed in connection with deed to creditor who had notice of surrender of deed, and grantor subsequently conveyed premises by warranty deed to another to secure a debt, grantor and grantee named in warranty deed both had enforceable equity, and, as against creditor, were entitled to cancellation and redelivery of trust deed or to a foreclosure of trust deed in their favor, or decree conveying land to grantor as of date of surrender of deed.
8. MORTGAGES.
Assignee who paid one hundred dollars at trustee's sale on foreclosure of two thousand five hundred dollars trust deed on one hundred fifty acres of land, which had been assigned as collateral security for eight hundred thirty-four dollars and eighty-three cents debt, could not have his title to land confirmed.
APPEAL from the chancery court of Smith county.
HON. T. PRICE DALE, Chancellor.
Bill by T.A. Cartee against Elizabeth S. Blacketor, in which A.J. Davis intervened as a party defendant. From the decree, the defendants appeal. Reversed and remanded.
F.M. Morris, of Hattiesburg, for appellants.
Let it be admitted that the defendant, A.J. Davis, having sold the land to J.W. Kersh, and having executed to him a warranty deed, which deed was delivered but never placed on record, and later returned to Davis unrecorded. We frankly admit that this did not reconvey the title to Davis, but that the title to the land remained vested in J.W. Kersh.
McAllister v. Mitchenar, 68 Miss. 672, 9 So. 829; Connor v. Tippett et al., 57 Miss. 495; Partee, Admx., v. Matthews, 53 Miss. 142.
The assignment of the mortgage indebtedness by Davis to Cartee carried with it the title to the mortgage, and the right to foreclose the deed of trust for its collection.
Brown v. Yarbrough, 130 Miss. 715, 94 So. 887.
But when Davis paid to Cartee the full amount of his indebtedness, for which the mortgage had been collaterally assigned to secure the same, all interest therein of T.A. Cartee ceased, and he had no further right to deal with the mortgage in any respect whatsoever; and Cartee having procured the foreclosure by the trustee after he had been paid in full for all interest in the mortgage collaterally assigned to him, said foreclosure was a nullity and void, and the deed of trust from Kersh to Davis stood unaffected by the invalid acts of Cartee.
Section 2152, Code of 1930; 41 C.J. 811, par. 960; 11 C.J. 667, pars. 419 and 961; Lowery v. Haley, 12 Ala. App. 448, 68 So. 539; 2 Words Phrases, first series, page 1252; 1 Words Phrases, second series, page 757; 5 C.J. 958, par. 143.
Where the debt for which the collateral is given is paid, the right to hold the collateral ceases, and after that time the assignee has no interest in the collateral that he can transfer to another.
Wilbur v. Almy, 12 How. 180, 13 L.Ed. 944; Chicago R.R. Co. v. Provolt, 42 Colo. 103, 93 P. 1126, 16 L.R.A. (N.S.) 587; Collins v. Jennings, 42 Iowa, 447; Shropshire v. Combs, 100 S.W. 252, 30 Ky. L. 1120; Hamlin v. European R.R. Co., 72 Maine, 83; Parks v. Hall, 2 Pick. 206; Lewy v. Gilliard, 76 Tex. 400; 13 S.W. 304; Palmer v. Chandler, 158 Miss. 604, 131 So. 104; Freeman v. Wilson, 51 Miss. 329.
It is now a well settled doctrine in courts of equity, that they will examine into the true character of a conveyance, which, on its face, imports an absolute title, and will give it effect, as contemplated by the parties, to be ascertained by their contemporaneous and subsequent conduct.
Anding v. Davis, 38 Miss. 594; Barkwell v. Swan, 69 Miss. 907, 13 So. 809; Mason v. Moody, 26 Miss. 184; Section 3351, Code of 1930.
It can, therefore, readily be seen that sections 526 and 527, Code of 1930, do not require this receipt to be exhibited, and, in fact, its exhibition to the answer and cross-bill amounts to mere surplusage. The action was not based upon this receipt, the relief prayed for in the cross-bill was not depending upon the receipt, but upon the effect of same, and the receipt was but an evidence of payment.
Clark v. Miller, 142 Miss. 123, 105 So. 502; Quarles v. Hucherson, 139 Miss. 356, 104 So. 148; Andrews Stevens Pleadings (2 Ed.), 256; 31 Cyc. 547; 16 Encyc. of Pleadings Practice, 1082; Eastman Gardner Hardware Co. v. Hall, 137 Miss. 354, 102 So. 270.
Clearly the cross-bill alleges the full and complete payment of the debt to Cartee, which extinguished and cancelled all right which Cartee had in and to the deed of trust and notes, and automatically operated as an equitable reassignment of the notes and deed of trust.
Starke v. Fulton, 136 Miss. 637, 101 So. 857; Blum v. Planters Bank Trust Co., 161 Miss. 226, 135 So. 353.
Homer Currie, of Raleigh, for appellee.
If appellants had any title at all to the land it is certainly and unquestionably a legal title, yet appellee denies that they have any legal title, under section 2152, Code of 1930.
Munn v. Potter, 111 Miss. 180, 71 So. 315.
The argument of appellants as to their equitable rights and title is untenable, and is such as would not concern the appellee and his rights, under the authorities as cited.
Sections 3343, 3344 and 3348, Code of 1930; Clearman v. Cotton, 66 Miss. 467, 6 So. 156; Howie v. Swaggard, 142 Miss. 409, 107 So. 556; Sections 299, 300 and 301 of Griffith's Mississippi Chancery Practice.
A demurrer admits only facts that are well pleaded, and does not admit conclusions, either of fact or of law, and the mere recital in a declaration of an alleged claim or defense of the defendant is not an averment of a fact, the existence of which is admitted by a demurrer.
Barns v. Jones, 103 So. 773, 139 Miss. 675; Section 288, Griffith's Chancery Practice.
Appellants maintain that the indebtedness owing by Davis to Cartee, for which the assignment was made to secure, was fully paid before the foreclosure of the deed of trust, and they plead payment. Payment is an affirmative defense and must be set up by answer, except in such an unusual case that it should happen to appear in the very allegations of the bill itself.
Section 301, Griffith's Chancery Practice; Smith v. Jassen, 105 Miss. 229, 62 So. 172.
This exhibit becomes and is a part of the answering cross-bill of the appellants, and they are bound thereby.
Section 374, Code of 1930; House v. Gumble, 78 Miss. 259, 29 So. 71; McNeill v. Lee, 79 Miss. 455, 30 So. 821.
Argued orally by F.M. Morris, for appellant.
T.A. Cartee, appellee, filed his bill in the chancery court of Smith county against Elizabeth S. Blacketor, a nonresident, for the purpose of confirming his title to certain lands described in the bill. It was alleged in the bill that the complainant and defendant claimed from a common source of title, to-wit, A.J. Davis, and that on the 27th day of October, 1928, said A.J. Davis conveyed said land to J.W. Kersh, taking a deed of trust for two thousand five hundred dollars thereon, with Homer Currie as trustee. The deed was filed for record on January 22, 1932, and the deed of trust on October 29, 1928, and the bill alleges that on March 5, 1929, A.J. Davis transferred and assigned to T.A. Cartee an interest in the deed of trust to the extent of eight hundred thirty-four dollars and eighty-three cents, which assignment was duly recorded; that the note secured by the deed of trust was not paid, and the trustee, Homer Currie, upon the request of Cartee, after a foreclosure, executed a trustee's deed to Cartee.
It was further alleged that on the 31st day of December, 1931, the said A.J. Davis executed and delivered to Elizabeth S. Blacketor a warranty deed attempting to convey said land. It was further alleged that A.J. Davis had no title at this time, and the bill prayed for the confirmation of the title conveyed to T.A. Cartee, and for the cancellation of the deed to Elizabeth S. Blacketor. There was exhibited to the bill, as finally amended, a notice of the trustee's sale, proof of publication of the notice, deed from Davis to Kersh, deed of trust from Kersh to Davis, and the assignment, to the extent of eight hundred thirty-four dollars and eighty-three cents, of the deed of trust to T.A. Cartee.
A.J. Davis appeared, without having been made a defendant, and sought to answer the bill, and on objection thereto made application to be admitted as a defendant, which was granted. Elizabeth S. Blacketor appeared and answered, which answer was made a cross-bill.
The answer and cross-bill denied that Cartee was in possession of the land involved, and asserted that the land was held by tenants of defendant and Davis; admitted that A.J. Davis sold said land to J.W. Kersh by warranty deed, and that Kersh executed a trust deed for two thousand five hundred dollars, to secure the purchase price. It further alleged that Kersh never recorded his deed, and, being unable to meet the payments, returned the warranty deed to A.J. Davis, and relinquished verbally all right, title, and interest in and to said property. However, the bill and answer alleged that A.J. Davis had assigned, to the extent of eight hundred thirty-four dollars and eighty-three cents, the deed of trust then duly of record to T.A. Cartee to secure an indebtedness due by Davis to Cartee, with an agreement that, when said eight hundred thirty-four dollars and eighty-three cents was paid, the said T.A. Cartee would reassign said deed of trust to A.J. Davis. It was further alleged that the debt of eight hundred thirty-four dollars and eighty-three cents due by Davis to Cartee had been fully paid, and that Cartee had failed and refused to return the deed of trust to Davis. It was further alleged that, after Kersh relinquished his right in said property and returned the deed executed to him, the appellant, A.J. Davis, acting in good faith with his assignee, Cartee, delivered to him the unrecorded deed made to Kersh, to be held by Cartee until the payment of the indebtedness due him by Davis. It was further alleged that A.J. Davis was indebted to Elizabeth S. Blacketor in the sum of six hundred dollars, and that he conveyed to her his interest in said land to secure this debt, but that it was understood and agreed between them that, upon the payment of said six hundred dollars, she would reconvey said land to him, and that the said A.J. Davis continued thereafter, and is now, in possession thereof by his tenant. It was further alleged that the indebtedness of eight hundred thirty-four dollars and eighty-three cents due by Davis to Cartee, for which the Kersh deed of trust had been assigned, had been paid in full prior to the time of the attempted foreclosure, and that A.J. Davis had a receipt in full therefor, which was attached to the answer and cross-bill, prior to the time when Cartee undertook to have said trustee's deed executed. The amended answer and cross-bill set up payments in the following amounts:
1929 October 1st check paid to T.A. Cartee ............................. $190.00 December 23, two yearlings ........................................ 75.00 December 23, two ducks ............................................ 2.00 Paid for oil for Buckhalter ....................................... 7.50 Feb. 10, 1930, one drum of gas .................................... 9.07 Oct. 18, 1930, paid cash .......................................... 100.00 Dec. 10, 1930, 65 gallons of gas .................................. 7.80 Dec. 10, 1930, 6 1/2 gallons of oil ............................... 3.25 Dec. 10, 1930, cash paid T.A. Cartee .............................. 15.00 March 31, 1931, paid to J.S. Garraway for account of T.A. Cartee at his request ................................... 133.38 March 31, 1931, paid to J.E. Davis for T.A. Cartee at his request ........................................... 30.00 Amount shown by receipt Exhibit "A" ............................... 530.00 ________ Total .......................................................... $1103.00 T.A. Cartee demurred to the cross-bill as amended on the following grounds: (1) That it shows on its face that A.J. Davis has no legal or equitable title to the land involved in this suit, having conveyed the title to Kersh; (2) that said cross-bill shows that Elizabeth S. Blacketor has no title to any part of said land, her only source of title being from A.J. Davis at a time when he had no title; (3) because it is shown by Exhibit A attached to the cross-bill that the receipt given by Cartee to Davis was in payment for the personal property described in the deed of trust, and was not in payment of the deed of trust on the land; and (4) because it was shown that T.A. Cartee has both the legal and equitable title to the said land.The quitclaim deed from Kersh to Cartee made an exhibit to his bill shows that it was acquired after the original suit was filed, and was for a nominal consideration.
It seems to be the theory of Cartee and the court below that the receipt controls the allegations of the cross-bill. If this is the theory, it is manifestly wrong, because the relief is not sought on the instrument, and the receipt was merely made an exhibit for the purpose of showing payment, and a receipt, unless contractual in its nature, is subject to variation by parol proof.
It will be seen from the statement of this case that Davis made a deed to Kersh to the lands involved, taking the deed of trust mentioned as security for the purchase price, and this was assigned thereafter to Cartee; that Kersh desired to rescind the transaction, and, accordingly, surrendered his deed to Davis, and verbally relinquished his right and title thereunder. This deed was then delivered to Cartee along with the deed of trust, and Cartee had knowledge, if the allegations of the cross-bill and answer are true, of the fact that Kersh had surrendered his claim verbally and redelivered the deed to the grantor.
While it is true that lands can only be conveyed by instruments in writing, and that redelivery of a deed executed does not operate as a reconveyance, yet, when an agreement is made that it will be surrendered in satisfaction of a debt for the purchase money of the property conveyed in the deed, the original grantor has an equity in the land embraced in the deed which will be enforceable as against persons having notice of such equity.
Under the facts set forth in the answer and cross-bill, Davis had the right to go into a court of equity and set up the transactions and either have the deed of trust foreclosed by a sale under its terms or by having the chancery court to direct a reconveyance so as to transfer title back to the original grantor.
Cartee, having notice of this equity, is bound by it.
It is alleged in the answer and cross-bill that the debt to Cartee was paid, and, by virtue of section 2152, Code 1930, this payment extinguished the debt of Davis to Cartee, and revested in Davis the equitable title to the land.
In 41 C.J., p. 811, par. 960, it is said: "Where a mortgage is executed as collateral security for the debt of a third person, the property stands in the position of a surety of the debtor, and any change in the contract of suretyship which would discharge a surety will release and discharge the property held as collateral."
In 11 C.J., p. 667, par. 419, it is said: "The assignment of the mortgage before maturity, by delivery and indorsement of the mortgage and note as collateral security for a loan not yet due, vests in the assignee only the equitable title."
In 5 C.J., p. 958, par. 143, it is said: "Where the debt for which the collateral is given is paid, the right to hold the collateral ceases, and after that time the assignee has no interest in the collateral that he can transfer to another" — citing authorities.
It is clear, therefore, that, if the statements in the answer and cross-bill are true, Cartee had no right to have the lands sold under the deed of trust.
As to the right of Elizabeth S. Blacketor in these lands, if the statements in the answer and cross-bill are true, the conveyance to her was to secure a debt, and amounted merely to a mortgage on the property. Palmer v. Chandler, 158 Miss. 604, 131 So. 104; Freeman v. Wilson, 51 Miss. 329, in which case Judge Simrall, speaking for the court, said: "It is now well settled doctrine in courts of equity, that they will examine into the true character of a conveyance, which, on its face, imports an absolute title, and will give it effect, as contemplated by the parties, to be ascertained by their contemporaneous and subsequent conduct. If they are dealing with respect to a loan, and the deed was intended as a security for the debt, parol evidence may be received to explain the true character, and limit the absolute deed into a mere security for the money, so that when the debt is paid the debtor will be entitled to a reconveyance of the estate."
See, also, Anding v. Davis, 38 Miss. 574, 77 Am. Dec. 658; Barkwell v. Swan, 69 Miss. 907, 13 So. 809; Mason v. Moody, 26 Miss. 184.
It is true that section 3351, Code 1930, provides a limitation upon the right to introduce parol evidence where the grantee has gone into possession. Just who was in possession of the land involved in the case at bar is a disputed issue of facts.
Upon the allegations of the cross-bill, we think that both Davis and Elizabeth S. Blacketor had enforceable equities, and, if said allegations are found to be true in fact, are entitled to a cancellation of the trust deed, and to a redelivery of the deed of trust, or to a foreclosure of the trust deed in their favor, or a decee conveying to Davis the land in the deed executed by Kersh as of the date of delivery of the deed by him to Davis.
Furthermore, it appears that the deed of trust given by Kersh for the purchase money was for two thousand five hundred dollars, and that there were one hundred fifty acres of land, and that the debt due to Cartee was eight hundred thirty-four dollars and eighty-three cents, and that the amount paid at the trustee's sale was only one hundred dollars, which amount is entirely out of proportion, apparently, to the real value of the property, being such as to shock the conscience; and, if so, under the original bill no relief should be granted.
We are therefore of the opinion that the court below was in error in sustaining the demurrer and in granting the relief prayed for upon the facts in this record, and the judgment of the court below will be reversed, the demurrer overruled, and the cause remanded for further proceedings therein.
Revesed and remanded.