Smith v. J. R. Newberry Co.

California Court of Appeal Mar 11, 1913 No. Civ. No. 1271.Published

Before: Allen

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Holding. The court held that a deed intended as a mortgage, when conveyed by the mortgagee to a third party with knowledge of its character, does not operate as an assignment of the mortgage debt where there is no evidence of an intent to transfer the debt, rendering the conveyance a nullity. Consequently, the plaintiff was entitled to a decree quieting title upon payment of the debt into court.

Issues

Whether a deed absolute in form but intended as a mortgage conveys the underlying debt to a third-party purchaser with notice.
Whether a tender of the mortgage debt to the original mortgagee is sufficient to support a decree quieting title when the debt was not assigned to the subsequent purchaser.
Whether the evidence supports the trial court's findings regarding the character of the deed and the purchaser's notice.

Disposition. affirmed

Quotations verified verbatim against the opinion

“It is very clear that the deed to the Newberry Company was by way of mortgage.”

“Under these circumstances, we are of opinion that the conveyance by the Newberry Company to McGinnis, under the facts, was a nullity and conveyed nothing.”

“Upon such payment, and under the facts found by the court, plaintiff was entitled to his decree quieting title.”

Synopsis

Vendor and Vendee—Putting on Inquiry—Deed Intended as Mortgage.—Where a grantor in a deed absolute intended as a mortgage notifies a third person through intermediaries that he still owns the property, such person is put on inquiry as to the condition of the title, and if'he fails to investigate, he cannot become a 6 ona, fide purchaser.

Id.—Bona Pide Purchaser—Burden op Proop.—The burden of proof is upon one who buys, where the title is in such condition, to show that he paid the purchase money in good faith without notice, actual or constructive, of the grantor’s claim.

Id.—Quieting Title—Tender op Mortgage Debt.—-Where the grantee in a deed intended as a mortgage conveys the property to a person who, though put upon inquiry, contends that he purchased without notice of the condition of title, the grantor, in a suit to quiet title, need not make personal tender of the debt, but a judgment directing the payment thereof is sufficient.

ALLEN, P. J.

The action was one to quiet title. Findings and judgment went in favor of plaintiff, and defendants appeal from such judgment and an order denying a new trial.

The court finds that in February, 1906, plaintiff was indebted to J. R. Newberry Company, a corporation, in the sum of one hundred and thirty-five dollars; that on said date plaintiff, being the owner and in possession of certain described premises, in order to secure the payment of said sum, executed to said J. R. Newberry Company an instrument, in form a grant deed, conveying the premises in controversy ; that notwithstanding the form of the deed, it was intended to be by way of mortgage to secure the debt; that such instrument was duly recorded, and on the third day of December, 1906, J. R. Newberry Company, in consideration of the sum of three 'hundred dollars, granted the premises to J. K. McGinnis; that McGinnis purchased said premises with knowledge of the fact that said instrument from plaintiff to Newberry Company was a mortgage and intended as such; that in June 1910, plaintiff tendered to defendant Newberry Company two hundred dollars in cash, being the amount of the principal and interest of the mortgage debt, and demanded a reconveyance, which was refused; that plaintiff thereupon paid into court the sum of two hundred dollars for the benefit of defendant Newberry Company, the same being the principal of said debt and interest, and the sum of $9.85, the amount of the taxes assessed against said lands advanced and paid by McGinnis.

Appellants specify as error the insufficiency of the evidence to support the findings with reference to the character of the deed, and as to the fact of McGinnis’s acquirement of the premises with notice. An examination of the record satisfies us that there is to be found therein ample evidence to support the findings of the court, not only from the circumstances of the case, but from admissions. It is very clear that the deed to the Newberry Company was by way of mortgage. There is evidence tending to show that in October, 1906, plaintiff

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notified McGinnis, before he purchased the premises through an intermediary, that he still held an equity in the land and still owned it. This was sufficient to put McGinnis upon inquiry as to the condition of title. The rule is that the burden is upon the one claiming to he a

Smith v. J. R. Newberry Co.

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Synopsis

ALLEN, P. J.

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