This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
Veyance otherwise than as a mortgage, contrary to the intention of the parties, is regarded as itself constituting a fraud, authorizing the introduction of oral evidence of the. real intention of the parties.10 And a somewhat similar view has been expressed by a distinguished writer, to the effect that when a conveyance absolute in terms is made for purposes of security, a court of equity will not permit the grantee to retain the property in violation of the agreement by which he obtained it, but will regard him as a constructive trustee and require him to reconvey upon payment of the sum secured.11 Another writer undertakes to base the admissibility of evidence to show the purpose of the conveyance upon the theory that the instrument itself was intended merely to indicate the quantum of the estate conveyed, and not the purpose of the conveyance, and that consequently evidence in the latter regard is merely in reference to a "collateral agreement" so called, and so within a well recognized exception to the parol evidence rule.12
Apart from any of the theories above suggested, it would seem that the recognition of the right to relief in the case of an absolute conveyance made for the purpose of security, and the consequent right to introduce evidence of such purpose, involves little more than an application of the equitable rule that any agreement or device by which it is sought to defeat the
10. Babcock v. Wyman, 19 How. (U. S.) 289, 15 L. Ed. 644; Richter v. Noll, 128 Ala. 198, 30 So. 740; Hershey v. Luce, 56 Ark. 320, 19 S. W. 963, 20 S. W. 6; Pierce v. Robinson, 13 Cal. 116; Bigler v. Jack, 114 Iowa, 667, 87 N. W. 700; O'Neill v. Capelle, 62 Mo. 202; Wallace v. Smith, 155 Pa. St. 78, 35 Am. St. Rep. 868, 25 Atl. 807; Wright v. Bates, 13 Vt. 341. See Ruckman v. Alwood, 71 III. 155; Hassam v. Barrett,
115 Mass. 256; Jordan v. Warner's Estate, 107 Wis. 539, 83 N. W. 946; 3 Pomeroy, Eq. Jur. Sec. 1196.
11. Professor James Barr Ames, in 20 Harv. Law Rev. at p. 553, Lectures on Legal History 429. A like view is expressed in an able article by Professor Harlan F. Stone in 6 Columbia Law Rev. 326.
12. 4 Wigmore, Evidence, Sec. 2437.
3 R. P.- 8 mortgagor's right of redemption is invalid. Such a rule affords but little protection to the mortgagor if its application can be excluded by the simple device of putting the mortgage in the form of an absolute conveyance.13 To some extent in accord with this view are the cases in which the admissibility of evidence as to the purpose of the conveyance is asserted by the court without specific reference to any theory of fraud, accident or mistake, and without any suggestion that the case involves an application of the "collateral agreement" doctrine.14
In order that a conveyance absolute in form may be regarded as a mortgage on oral evidence to that effect, the evidence that it was so intended must, in the ordinary case,15 be clear and convincing, the presumption being that the conveyance is what it purports to be.16
13. See Campbell v. Dearborn, 109 Mass. 130, 12 Am. Rep. 671; Ruckman v. Alwood, 71 III. 155; Eckford v. Berry, 87 Tex. 415, 28 S. W. 937.
14. See Brick v. Brick, 98 U. S. 514, 25 L. Ed. 256; Gibbons v. Joseph Gibbons Consol. Mining & Milling Co., 37 Colo. 96, 11 Ann. Cas. 323, 86 Pac. 94; First Nat. Bank of Florida v. Ashmead, 23 Fla. 379, 2 So. 657, 665; Pickett v. Wadlow, 94 Md. 564, 51 Atl. 423; State Bank of O'Neill v. Mathews, 45 Neb. 659, 50 Am. St. Rep. 565, 63 N. W. 930; Mooney v. Byrne, 163 N. Y. 86, 57 N. E. 163; Williams v. Purcell, 45 Okla. 489, 145 Pac. 1151; Mills v. Sumter Lumber Co., - S. C. -, 95 S. E. 355; Gibson v. Hopkins, 80 W. Va. 756, 93 S. E. 826.
15. A different rule prevails when there is an agreement in terms that the grantor may repurchase the property. See post, this section, note 27.
16. Coyle v. Davis, 116 U. S. 108, 29 L. Ed. 583; Reeves v. Abercrombie, 108 Ala. 535, 19 So. 41; Prickett v. Williams, 110 Ark. 632, 161 S. W. 1023; Mahoney v. Bostwick, 96 Cal. 53, 31 Am. St. Rep. 175, 30 Pac. 1020; Perot v. Cooper, 17 Colo. 80, 31 Am. St. Rep. 258, 28 Pac. 391; Keithley v. Wood, 151 III. 566, 42 Am. St. Rep. 265, 38 N. E. 149; Rasch v. Rasch, 278 III. 261, 115 N. E. 871; Betts v. Betts, 132 Iowa, 72, 106 N. W. 928; Winston v. Burnell, 44 Kan. 367, 21 Am. St. Rep. 289, 24 Pac. 477; Jackson v. Maxwell, 113 Me. 366, 94 Atl. 116; Kellogg v. North-rup, 115 Mich. 327, 73 N. W. 230; Young v. Bake, 128 Minn. 398, 151 N. W. 132; Brightwell v. McAfee, 249 Mo. 562, 155 S. W. 820; Gibson v. Morris State Bank, 49 Mont. 60, 140 Pac. 76; Hogan v.
(c) Considerations determining character of transaction. In determining the question whether an absolute conveyance is a mortgage, the fact that an indebtedness on the part of the grantor to the grantee is created by the transaction, or that a former indebtedness is thereby continued in force, is usually conclusive that it is a mortgage.17 And conversely, the fact that no indebtedness exists, which the conveyance can be regarded as intended to secure, is conclusive that it is not a mortgage.18 The absence, however, of a covenant or other express agreement to pay is not conclusive evidence that the conveyance is not a mortgage, there being other evidence on which to base a personal liability on the part of the grantor,19 and even though no personal liability exists, still the conveyance may, it seems, be regarded as a mortgage,20 since such a liability does not invariably exist in the case of a mortgage.21 The language ordinarily used by the judges, however, suggests that a personal indebtedness is necessary in order that the conveyance may be regarded as a mortgage.
Jaques, 19 N. J. Eq. 123, 97 Am. Dec. 644; Beall v. Beall, 67 Ore. 33, 128 Pac. 835, 135 Pac. 185; Wallace v. Smith, 155 Pa. St. 78, 35 Am. St. Rep. 868, 25 Atl. 807; Bryan v. Boyd, 100 S. C. 397, 84 S. E. 992: Commercial & Savings Bank v. Cassem, 33 S. D. 294, 145 N. W. 551; McLean v. Ellis, 79 Tex. 389, 15 S. W. 394; Motley's Adm'r. v. Carstairs, 114 Va. 429, 76 S. E. 948; Nutter v. Cowley Inv. Co., 85 Wash. 207, 147 Pac. 896. But a different rule appears to control in Kentucky. Castillo v. McBeath, 162 Ky. 382, 172 S. W. 669; Carr v. Morrison, 178 Ky. 683, 199 S. W. 783.