is an elementary rule on this subject,
and the object of it is, to prevent im-
position and fraud upon the mortga-
gor." The decision thus made was
subsequently affirmed by the Court
of Errors ; Clark v. Henri/, 2 Cowen,
324.
The same principles apply, when
the deed is made in consideration of
money paid at the time ; proof that
the consideration is a loan or credit,
necessarily involving the conclusion
that the conveyance is a mortgage,
without regard to the form in which
it is executed, or to the want of writ-
ten evidence of the creation of a debt,
or even of any personal obligation for
its payment; Colwell v. Woods, 3
Watts, 188; Wharf v. Howell, 5
Binney, 503. And it would seem
plain, that a conveyance may be
shown to be a security for money,
640 MORTGAGES. — REDEMPTION. — CONDITIONAL SALES.
and consequently a mortgage by parol,
even when it has been made absolute
intentionally, and from an ill-founded
confidence in the assurances of the
grantee, that the contract shall be con-
strued or take effect, as if the defeasance
had not been omitted ; Taylor x. Luther,
2 Sumner, 228 ; Jenkins v. Eldridye,
3 Story, 181, 293 ; Bahcock v. Wy-
man, 19 Howard, 289. For although
equity will, in general, refuse to aid
those who choose to rely solely on the
honor of others, and throw away the
protection given by the law, and the
rules of evidence, to all who pursue
the ordinary course of business, to es-
cape from the consequences of their
own folly and indiscretion ; yet this
rule does not preclude the right to
control the operation of a deed or con-
tract, by proving the nature or source
of the consideration on which it is
founded j see vol. 1, pp. 241, 272 j
vol. 2, p. 713 ; and when a deed is
executed merely as a security for a
debt, payment of the debt must neces-
sarily put an end to the estate or in-
terest conferred by the deed.
It has been said on a number of oc-
casions, that when an absolute or con-
ditional deed is made as the result of
an application for a loan, and for an
inadequate consideration, equity will
presume, that it is a mere security and
not a conveyance j Bentley v. Phetys,
2 Woodbury ct Miuot, 427 ; Cola-ell
v. Woods, 3 Watts, 188 j Kerr v. Gil-
more, 6 Id. 405. There can be no
doubt that under these circumstances,
the transaction will be subjected to a
rigid scrutiny, and that if it appear
that the creditor has taken advantage
of his position, and the debtor's dis-
tress, to obtain an absolute or condi-
tional conveyance, which is a mere
cover to an irredeemable mortgage, or
even to force him into a hard and
disadvantageous sale, equity will in-
terfere and give effect to the right of
redemption. But it can hardly be
contended that an application for a
loan, can disable the party to whom
it is addressed, from refusing the
loan and agreeing to purchase the pro-
perty offered as security, or render
the execution of such an agreement
by a deed, invalid, in the absence of
fraud or undue influence, merely be-
cause the price is inadequate ; McDon-
ald v. M-Leod, 1 Iredell, Equity, 221 ;
Lewis v. Owen, lb. 290. Thus, in
Flagg v. Mann, 14 Pick. 467, the
vendor applied to the vendee for a
loan, which was refused by the latter,
who declined having anything to do
with the transaction, unless on the
LDg of a conditional sale. A con-
ditional conveyance having been ac-
cordingly executed, a bill was filed
alter the period for taking advantage
of the condition had gone by, to com-
pel a re-conveyance on the ground
that the deed was a mortgage. This
was, however, refused by the court, on
the ground that a sale could not be
converted into loan, by evidence that
the vendee had refused to make a
loan, and insisted upon a sale, unless
there was something further to show
that the one was resorted to as a mere
cover for the other. The same course
of decision was pursued in Holmes v.
Fresh, 9 Missouri, 206, where a loan
having been refused, and a conditional
sale made at an inadequate price, the
court held that the vendee had a right
to make his own terms, and that the
contract would not be set aside, in
the absence of evidence that it was
merely colorable, or the result of
THORNBROUGH V. BAKER. — HOWARD V. HARRIS. 641
undue influence exerted on the ven-
dor.
There are, notwithstanding, some
decisions, which treat a conveyance
conditioned to re-convey on the pay-
ment of a fixed sum, at a day certain,
as prima facie a mortgage, in the ab-
sence of evidence showing the exist-
ence of a debt, or that the payment is
the discharge of an obligation, and
not the urere voluntary act of the
grantor ; Peterson v. Clark, 15 John-
son, 205 ; Watkins v. Gregory, 6
Blackford, 113 J and in Rice Y.Rice,
4 Pick. 349, an absolute conveyance
made by a debtor to a creditor, and a
bond executed at the same time by
the latter, conditioned to reconvey the
land on the payment of four hundred
dollars with interest, which was the
amount of the debt, were held to be
manifestly intended to create a defea-
sible security, and thus constitute a
mortgage. Here, however, parol evi-
dence was given, to show the exist-
ence of the debt, and its correspond-
ence in amount, with the sum fixed
as the consideration of the reconvey-
ance.
In Kerr v. Gihnorc, 6 Watts, 405,
the Supreme Court of Pennsylvania
went beyond this decision, and as it
would seem, every other to be found
in the books, by holding not only, that
a deed absolute on its face, but coupled
with an agreement for the reconvey-
ance of the property, on the repay-
ment of the consideration, took effect
as a mortgage, independently of evi-
dence to show, that the transaction
was a security for a loan, and not
what it purported to be, a conditional
sale; but that parol evidence was in-
admissible to disprove this presump-
tion, by proving that the parties had
VOL. III. — 41
no view to the creation of a debt or
loan, and that the agreement to re-
convey was an after-thought, arising
after the original contract had been
not only made, but executed by the
delivery of the deed. This decision,
which is full to the point, that the
law will not give effect to a sale, when
attended by an agreement that the
vendor shall be entitled to re-purchase,
is in opposition to the whole current
of authority on this subject, and has
nothing better to support it, than the
difficulty of determining whether a
defeasible conveyance is really a con-
ditional sale, or intended as a mere
cover to a mortgage, and the inexpe-
diency of entering upon an investiga-
tion, which cannot be conducted to a
successful termination. It was, not-
withstanding, followed in Brown v.
Nickle, 6 Barr, 390, where parol evi-
dence was held inadmissible to show,
that an absolute deed conditioned for
a re-conveyance, upon the repayment
of the consideration, with interest,
before a certain period, was a condi-
tional sale, and not a mortgage. The
court treated the case as one in which
the intention of the parties must be
sought in the instrument, and not
proved by extraneous testimony. But
it seems to have been forgotten, that
the prima facie effect of a purchase,
with an attendant agreement for a re-
sale, is not to create a mortgage, but
to vest the property absolutely in the
vendee, subject to the right of the
vendor to a reconveyance, on comply-
ing with the terms of the agreement.
Such a transaction will no doubt be
construed as a mortgage, if it appear
either on the face of the writings or
from any other source, that it is a
mere security for an antecedent or con-
642 MORTGAGES. — REDEMPTION. — CONDITIONAL SALES.
ternporaneous debt. But this con-
struction is purely equitable, and like
every similar equity, subject to be re-
butted by parol evidence. The ques-
tion in such cases, is a question of in-
tention, and although equity will lean
against construing the transaction as
a conditional sale, Flagg v. Mason ;
Eiland v. Radford, 7 Alabama, 724 ;
Crane v. Bommell, 1 Green, Chan-
cery, 264 ; Ketchum v. Johnson, 3 Id.
370; Gellis v. Martin, 2 Dev. Eq.
470, it will not do violence to the
understanding between the parties,
for the sake of converting it into a
mortgage; Robinson v. Cropsey, 6
Paige, 480 ; Holmes v. Grant, 8 Id.
243.
The right to show that a deed ab-
solute on its face is security for a
loan, and compel a reconveyance,
on repayment of the amount lent, is
an equity which may, like other equi-
ties, be enforced as between the ori-
ginal parties and those claiming un-
der them, as purchasers with notice,
or volunteers ; Walton v. Cronly, 14
Wend. 63 ; Cole v. Ballard, 10 Har-
ris, 431 ; Kunkle v. Wol/ersberger, 6
Watts, 126; Eldredge v. Jenkins, 3
Story, 181, 293 ; but not against bona
fide purchasers, or creditors, whose
rights have attached without notice
of the equity; McLaughlin v. Shep-
herd, 32 Maine, 143 ; Purrington
v. Pierce, 38 Id. 447; Cornell v.
Pierson, 4 Halsted, Ch. 478 ; Jaques
v. Weeks, 7 Watts, 261, 279. What
shall amount to notice of the exist-
ence of a defeasance, not duly record-
ed, nor apparent on the face of the
deed, is often a difficult question, de-
pending on a variety of circumstances;
and while the continuance of the
grantor in possession, has been held,
in some instances, enough to apprise
subsequent purchasers that he has
rights paramount to, or inconsistent
with the grant ; 3I'Laiighlin v. Shep-
herd, 32 Maine, 143 ; it has been
said in others, that he will be pre-
cluded by his own wrong or negli-
gence, in allowing the transaction to be
put on the record in a form to mislead
others, and will not be permitted to
recover against a purchaser who has
bought on the faith of the absolute
and recorded deed ; Jaques v. Weeks.
However this may be, it is well set-
tled, that a deed may be shown to
be a mortgage, in any controversy
which may arise between either of the
parties to the instrument, and a third
person, who is not a purchaser, and
has not been led into expenditure of
money, in reliance upon the absolute
character of the conveyance; and in
Hodges v. The Tennessee F. d- M.
Insurance Company, 4 Seldcn, 416,
the plaintiff, in an action upon a
policy of insurance, was permitted
to show, that a grant, which appeared
to be absolute on its face, had really
been made for the purpose of a secu-
rity, and thus rebut a defence, based
on the ground that the conditions of
the policy had been violated, and all
insurable interest destroyed by the
conveyance. Similar ground was
taken in Walterv. Croidy, 14 Wend.
63, and the assignee of a term, who
was sued for rent reserved in the ori-
ginal lease to the assignor, allowed to
show by parol, that the assignment
was really a defeasible security, in the
nature of a mortgage. This decision
would seem sound, in point of equity,
and would probably be followed by
most of the tribunals, which hold
that a mortgagee is not liable for rent,
THORNBROUGH V. BAKER. — HOWARD V. HARRIS. 613
before actual entry; Calvert v. Brad-
ley, 16 Howard, 580 ; Astor v. Hoyt,
5 "Wend. 603. In Abbott v â– . Hanson,
4 Zabriskie, 493, however, a landlord
was denied permission to rebut an al-
legation by the tenant, that the rever-
sion had been assigned to a third per-
son, by proof that the assignment,
though absolute on its face, was really
a mortgage; and this decision may,
perhaps, be justified by strict common
law principles, although the rule which
forbids the variation of a deed or other
writing, is commonly said to be con-
fined to the parties to the instrument,
and not to extend to third persons.
And the right to show that a deed or
writing of any description, does not
show the real nature of the grant or
contract, must necessarily cease when
the transaction has been designedly
mis-stated or falsified, for the purpose
of practising a fraud upon the law,
or upon creditors ; Carroll v. The
Marine Ins. Co., 8 Mass. 515; 2
American Leading Cases, 619, 4th
ed. ; ante, vol. 1, p. 153.
It is a necessary result of the doc-
trine, that the right of redemption,
attached by chancery to every deed,
made merely as a security, qualifies
the deed itself, that when an absolute
deed, subject to an express or implied
defeasance, is recorded without the
defeasance, the record is invalid, and
consequently inoperative as notice to
a subsequent purchaser from the mort-
gagor. For, under these circumstan-
ces, the instrument put on record, is
only a part of the contract between
the parties, and does not satisfy the
exigencies of the law, which requires
that the whole should be recorded;
Dey v. Dunham, 2 Johnson, Ch. 182;
15 Johnson, 555 ; Jaques v. Weeks,
7 Watts, 261,; The Manuf. & Mecha-
nics Bank v. The Pennsylvania Bank,
7 W. & S. 335; Friedley v. Hamil-
ton, 17 S. & R. 70. In this case,
however, as in most others, notice may
supply the place of the record, and
charge subsequent purchasers with the
equity of redemption, created by the
unrecorded defeasance ; Jaques v.
Weeks, 7 Watts, 261; The Manuf.
& Mechanics Bank v. The Bank of
Pennsylvania, 7 W. & S. 335. Whe-
ther the continuance of the mortgagor
in possession should operate as notice,
has been stated to be a disputed ques-
tion ; ante; and in Jaques v. Weeks,
Kennedy, J., was of opinion, that where
the defeasance is in writing, and sus-
ceptible of being recorded, the failure
to record it cannot be supplied by any-
thing short of actual notice ; but that a
different rule should prevail, when the
facts and circumstances which consti-
tute the mortgage are not evidenced
by, or reduced to writing, and are con-
sequently insusceptible of being placed
on record ; see vol. 2, p. 180.
A subsequent agreement tending to
defeat or impair the right of redemp-
tion, will be as invalid, as if made co-
temporaneously with the execution ;
Henry v. Davis, 7 Johnson, Ch. 40 ;
Clark v. Henry, 2 Cowen, 324;
Wrights v. Bates, 13 Vermont, 341 ;
Dougherty v. Colgan, 6 Grill & J.
275. The sale or release of an equi-
ty of redemption to the mortgagee,
will, therefore, be closely examined,
and be set aside, if from inadequacy
of price or otherwise, there is reason
to suspect, that undue influence has
been exerted on the mortgagor, or
undue advantage taken of the neces-
sities of his situation ; Perkins v.
Drye, 3 Dana, 174; Hyndman v.
644 MORTGAGES.— REDEMPTION.— CONDITIONAL SALES.
Hyndman, 19 Vermont, 9. In Hol-
ridge v. Gillespie, 2 Johnson, Ch.
30, a mortgagee of a terra in posses-
sion, obtained a release of the equity
of redemption from the mortgagor,
for a nominal or insufficient conside-
ration, and then effected a renewal of
the lease for his own benefit. But a
bill having been filed by the mort-
gagor, to set aside the release, and re-
deem the premises, the prayer of the
bill was granted, not only as to the
term originally mortgaged, but as to
that held under the renewal of the
lease, on the ground, that where a con-
veyance is originally a mortgage, it
will retain that character to the end,
unless a new one is impressed on it
by the free and deliberate act of the
mortgagor, and that the mortgagee is
not entitled to make any other use of
his hold on the land, than that of ob-
taining payment of the debt, for
which it was conveyed to him in the
first instance. And in Reitenbawjh
v. Ludioig, 7 Casey, 171, the mort-
gagor was allowed to show, by parol,
that a release of the equity of redemp-
tion had been executed merely with a
view to a particular object, and with-
out any intention of waiving the rights
or remedies which existed previously ;
while it was held in Sice v. The
Manhattan Co., 1 Paige, 48, that a
party to whom a mortgage had been
aligned as security, could not buy in
the mortgaged premises at a sale un-
der the mortgage, for less than their
value, and hold them absolutely against
the assignor. A similar wish to pro-
tect the mortgagor against undue in-
fluence, has led to the rule, that where
a mortgage has once been made, and
the relation of debtor and creditor
created, subsequent transfers of pro-
perty, on account of the debt, are to
be regarded prima facie as securities,
and subject to the right of redemp-
tion ; Blooilgood v. Zeihj, 2 Caines,
Cases, 124; Wakeman v. Hazht>>u,
3 Barbour, Ch. 148 ; Parson v. Mum-
•ford, lb. 152.
There is, however, nothing in the
relative position of mortgagor and
mortgagee, to prevent their dealing
with each other as vendor and pur-
chaser, and an agreement for a release
of the equity of redemption, will not
be set aside unless for inadequacy of
consideration, or manifest unfairness ;
M'Kin&try v. Conly, 12 Alabama,
678 ; Trull x. Skinner, 17 Pick. 213 ;
Hicks v. Hicks, 5 Gill & Johnson, 75;
Ramson v. Hay, 2 Edwards, 631.
And it seems to have been thought in
Bergin v. Bennett, 1 Caines, Cases,
1, that the mortgagee might him-
self become the purchaser, when the
land is sold at public sale, although
under a power contained in the mort-
gage. But a fraudulent attempt en
the part of the mortgagee, either
singly or in collusion with a third
person, to bid in the mortgaged pre-
mises for less than their value, will of
course be frustrated by the interfer-
ence of equity; Jencks v. Alexander,
11 Paige, 620 ; Tripp v. Cook, 26
'Wend 143. And the weight of au-
thority unquestionably is, that a
mortgagee who sells under a power to
that effect from the mortgagor, con-
tained in the mortgage or given sub-
sequently to it, will be under the same
restraints as ordinary trustees and
agents, and cannot buy the laud for
his own benefit, free from the equity
of redemption of the mortgagor;
Hyndman v. JTyndman, 19 Vermont,
9; Benham v. Roicc, 2 California,
TnORNBROUGH V. BAKER. — HOWARD V. HARRIS. 645
387; She v. The Manhattan Co., 1
Paige, 48 ; Dobson v. Racey, 4 Sei-
dell, 216; Hoyt v. Martense, 16 New
York R. 231 ; ante, vol. 1, p. 197, 211.
The doctrine that a mortgage, al-
though in form a conditional convey-
ance of the freehold, is in truth a
mere security, controls all the other
relations between the mortgagor and
mortgagee, as 'well as those which
have been made the subject of con-
sideration. A mortgage unquestion-
ably operates as a conveyance, but as
a conveyance limited to the purposes
of a security. The mortgagee is con-
sequently entitled to recover posses-
sion of the premises, by entry or eject-
ment, as against the mortgagor, and
those claiming under him subsequent-
ly to the mortgage ; Keech v. Hall,
Douglass, 21; 1 Smith, Lead. Cases,
666, 5th Am. ed. ; Blaney v. Bearce,
2 Maine, 132; Brown v. Cram, 1 New
Hampshire, 169 ; Erskine v. Town-
y send, 2 Mass. 493 ; Reed v. Davis, 4
Pick. 216; Mayo v. Fletcher, 14 Id.
525 ; Simpson v. Ammons, 1 Binncy,
176; Smith v. Shuler, 12 S. & R.
243 ; Bagley v. Wallace, 16 Id. 245 ;
Knaub v. Essik, 2 Watts, 282 ; Hen-
shaw v. Wells, 9 Humphreys, 568;
Stoney V. Shultz, 1 Hill, Ch. 464 ;
The Trustees of Jefferson College v.
Dickson, 1 Freeman, Ch. 474; and
may, as assignee of the reversion, de-
mand payment of the rent due on
leases made before the mortgage was
executed ; Moss v. Gallimore, Doug-
lass, 279 ; 1 Smith, Lead. Cases, 697,
5th Am. ed. ; Burden v. Thayer, 3 Met-
calf, 76 ; Babcock v. Kennedy, 1 Ver-
mont, 457; Masseyv. The U. S.Bank,
4 Alabama, 735; but the possession
thus acquired, whether by an actual
entry on the land, or by the attorn-
ment of the tenants, will be subject
not merely to the equity of redemp-
tion of the mortgagor, but to the duty
of applying the rents and profits in
discharge of the debt, and rendering
an account of their receipt and appli-
cation ; Saunders v. Frost, 5 Pick.
260 ; Moore v. Cable, 1 Johnson, Ch.
385 ; Van Buren v. Olmstead, 5
Paige, 9 ; Bell v. The Mayor of New
York, 10 Id. 49 ; Raiding v. Stewart,
1 Bland, 22. And as the title of the
mortgagor to redeem the land by the
payment of the debt, is patent on the
face of the mortgage, it is necessarily
binding on subsequent purchasers.
Hence, when a mortgage is assigned,
the assignee takes subject to the state
of accounts between the mortgagor
and mortgagee, and will acquire no
title, when the mortgage has been
legally or equitably satisfied ; The
Ipswich Manufacturing Co. v. Story,
5 Metcalf, 310 ; M Given v. Wheelock,
7 Barbour, S. C. 22 ; ante, 240. For,
as the conveyance is a mere incident,
and the debt the principal, it neces-
sarily follows that the extinguishment
of the one, is an equitable determina-
tion of the estate passed by the other;
Ackla v. Ackla, 6 Barr, 228 ; Waring
v. Smyth, 2 Barb. Ch. 119 ; Deadly
v. Chapin, 11 Paige, 245; Ruckman
v. Astor, 9 Id. 517. It is a further
consequence, of the general subordi-
nation of the estate in the land to the
purposes of the debt, that an assign-
ment of the latter will draw the for-
mer with it ; ante, 369 ; Betz v. Heeb-
ner, 1 Penna. R. 280 ; Donley v. Days,
17 S. & R. 400 ; Jackson v. Blodget,
5 Cowen, 202 ; Emmanuel v. Hunt,
2 Alabama, 190 ; but that the estate
in the land cannot be assigned apart
from the debt ; Bell v. Morse, 6 New
640 MORTGAGES. — REDEMPTION. — CONDITIONAL SALES.
Hampshire, 205 ; Ellison v. Daniels,
11 Id. 274; Jackson v. Bronson, 19
Johnson, 325; Wilson v. Troup, 2
Cowen, 195; Bailey x. Gould, "Walker,
478 ; although a conveyance of the
mortgagee's estate will take effect, as
assignment of the debt, when such
is the intention of the parties; Dork-
ray v. Noble, 8 Maine, 278 ; Hunt v.
Hunt, 14 Pick. 374; Freeman v.
31'Gato, 15 Id. 82. And so far is
this reasoning pushed to its extreme
consequences, that the interest of the
mortgagor is generally held liable to
a levy and sale under a judgment,
while that of the mortgagee is regard-
ed as a chose in action, and the only
mode of proceeding against it is by
attachment; Glass v. Ellison, 9 New
Hampshire, 69; Jackson v. Willard,
4 Johnson, 41 ; The Farmers Bank
v. The Commercial Bank, 10 Ohio,
71; Dougherty v. Linthicum, 8 Dana,
194 ; Watkins v. Gregory, 6 Black-
ford, 113 ; Eaton v. Whiting, 3 Pick.
489; Blanchardv. Colburn, 16 Mass.
345. Thismaybe reconciled with strict
common law principle, so far as it re-
gards the estate of the mortgagee, for
every court may refuse an execution,
which would work injustice, but no
levy can be made on the equity of the
mortgagor, save on the ground of an
equitable or statutory jurisdiction ;
Thornhill v. Gilmer, 4 Smedes &
Marshall, 153 ; Mordecai v. Parker,
3 Devereux, 425 ; Van Ness v. Hyatt,
13 Peters, 294.
From what has been stated, it is
evident, that a parol assignment of
the debt will be as effectual for the
equitable transfer of the mortgage,
as an assignment under seal. But
it may be presumed, that an assign-
ment which is insufficient to trans-
fer the estate in the land at law, will
be postponed to one duly executed
for that purpose, to a subsequent as-
signee for value, and without notice
of the first; ante, 375. In Betz v.
Heebner, 1 Pennsylvania R. 280, the
assignee of one of several bonds se-
cured by a mortgage, was allowed to
come in pro rata with a subsequent
assignee of another bond, who had
obtained an assignment of the mort-
gage, but in this case the mortgage
obviously carried notice on its face, of
an outstanding equity for the payment
of all the bonds, for which it had been
given as security; Roberts v. Hal-
sted, 9 Barr, 32.
Some conflict of opinion exists a3
to the rights arising out of successive
assignments of different debts or obli-
gations secured by the same mort-
gage ; and it has been said, that the
assignee, who is first in point of time,
is entitled to have the mortgage ap-
plied to the satisfaction of the debt
assigned to him, even to the exclusion
of those claiming under subsequent
assignments; Gicafhmeysw. Ragland,
1 Randolph, 466 ; Cullen v. Eu-en, 4
Alabama, 452; The Bank of Mobile
v. The Planters Bank, 9 Id. 645.
In other cases, however, a different
view has been taken, and it has been
held, that under these circumstances,
priority in time does not confer supe-
riority of right; and that where two
bonds or notes secured by the same
mortgage, are assigned successively to
different persons, the first assignee
has no better title to the security
afforded by the mortgage, than the
second; Donley v. Hays, 17 S. & R.
400; Mahler's Appeal, 5 Barr, 418;
Henderson v. Herrod, 10 Smedes &
Marshall, 631; Cooper v. Ullman,
THORNBROUGH V.
BAKER. — HOWARD V. HARRIS. 647
Walker, Ch. 251. The question seems