Wednesday, March 7, 2007

Equitable Mortgage Doctrine In California

The equitable mortgage doctrine has been an issue that has been litigated many times in the California case law. Because the cases generally tend to be very fact specific, each fact pattern is decided on a case by case basis.

Because there are quite a number of cases, and because my time constraints preclude me from reading and attempting to dissect these cases (and then try to write something about them in a semi-coherent way), I am simply going to put up links to a number of California Supreme Court cases for those who don't mind doing a little reading and research. These cases, and the cases cited therein, should provide a pretty good basis for understanding the equitable mortgage doctrine in California.


1) Hamud v. Hawthorne, Supreme Court of California, 52 Cal. 2d 78; 338 P.2d 387; 1959

The lower court invoked the equitable mortgage doctrine on behalf of the party asserting it and treated a deed as a mortgage. Upon review, the high court generally agreed that the facts were present to treat the deed in question as a mortgage. However, the high court reversed the lower court. Their reasoning essentially was based on laches and bad faith on the part of the party asserting the equitable mortgage claim. Therefore, they refused to allow equity to be asserted regarding the equitable mortgage claim when the party asserting it was guilty of laches and bad faith. The following quote from the case will give you an idea of how the court felt about the party claiming equitable mortgage (and did so with "unclean hands"):

  • "[P]laintiffs appear to be opportunists who are trying to pervert equity to recover a title and possession voluntarily surrendered in 1951, for which they then received fair value, and which they now seek to reclaim, not to right a wrong suffered by them in 1951 but to procure from defendants a value which was apparently unknown to either party until 1955."

2) Beeler v. American Trust Co., Supreme Court of California, 24 Cal. 2d 1; 147 P.2d 583; 1944 (affirming a judgment holding that a deed absolute in form was in fact an equitable mortgage.)

3) Wilson v. Bailey, Supreme Court of California, 8 Cal. 2d 416; 65 P.2d 770; 1937

A party failed to assert an equitable mortgage claim in a case where the high court observed, in dicta, that such a claim would have been sustained, given the facts of the case, had the party asserted it. The interesting quote in this regard follows (bold text is my emphasis):

  • "We have decided this appeal upon the issues as presented by the parties, although we are somewhat at a loss to understand why plaintiff did not seek to redeem said property as a deed absolute given merely as security, in which event she would have been entitled to redeem at any time until her right had been foreclosed by an action of foreclosure brought by the defendant."

  • "There seems to be little doubt, in view of the written option agreement which was entered into simultaneously with the conveyance by the plaintiff to the defendant and the fact that the payment of rent was applied by the defendant to the debt owing from the plaintiff, that the conveyance from the plaintiff to the defendant was in fact a mortgage."

  • "However, this issue was neither presented to the trial court, nor argued in the briefs of the parties, although there was a passing reference in the respondent's reply brief that "The whole transaction was intended not as an outright sale but as a conveyance for the purpose of securing to Bailey the indebtedness owed to him by Mrs. Wilson." In view of our holding that the option was in fact properly exercised by the plaintiff, it is not necessary for us to discuss the rights and remedies of the parties under a deed absolute which was in fact a mortgage."

4) Carlson v. Robinson, Supreme Court of California, 7 Cal. 2d 235; 60 P.2d 426; 1936 (affirming a judgment holding that a deed absolute in form was in fact an equitable mortgage)

One comment made in passing by the court was:

  • "The courts have been watchful against all schemes of money lenders to deprive unfortunate debtors of their lands at less than their true value under the claim that the transaction is a purchase and not a loan, and the rule is well settled that a deed absolute in form, if intended as security for the payment of a debt, is a mortgage. (Civ. Code, secs. 2924, 2925; 17 Cal. Jur., sec. 41, p. 735 et seq.) The question is primarily one of fact, upon which the findings of the trial court, if supported by proper evidence, will not be disturbed, notwithstanding conflict in the testimony. (17 Cal. Jur., sec. 59, p. 758 et seq.)"

5) Goodfellow v. Goodfellow, Supreme Court of California, 219 Cal. 548; 27 P.2d 898; 1933 (affirming lower court ruling that a deed was an absolute conveyance and not given as security for a mortgage).

6) Wehle v. Price, Supreme Court of California, 202 Cal. 394; 260 P. 878; 1927 (affirming lower court ruling that a deed was an absolute conveyance and not given as security for a mortgage).

7) Boal v. Gassen, Supreme Court of California, Department One, 178 Cal. 132; 172 P. 588; 1918 (affirming lower court ruling that a deed was an absolute conveyance and not given as security for a mortgage).

8) Todd v. Todd, Supreme Court of California, Department One, 164 Cal. 255; 128 P. 413; 1912 (affirming lower court ruling that a deed absolute was a mortgage and not an absolute conveyance; the equitable mortgage claim survived a claim of laches.)

Note:

The linked cases above are to Findlaw.com, which provides free electronic access to California cases going back to 1934. Registration required.

For those who are unaware, the State of California offers free access to its Supreme Court and intermediate appellate decisions through Lexis going back to 1850. To go there, click California Courts: Opinions of the Supreme Court and the Courts of Appeal - For those unfamiliar with this website, once at this page, click "Searchable Opinions 1850 - Present" in the left hand column, then click "Continue", after reading and agreeing to the Terms of Service click the box to acknowledge same, then click "View Opinions", at which point you can enter the case citation in the appropriate search box and pull up the case.

For those of you who want to see additional California cases, including those of California's intermediate appellate, and you are unfamiliar with searching cases on the California/Lexis website, you might want to try this. Once you arrive at the page containing the Search Box titled "Search California Opinions", (A) click on the words "Click Here For Advanced Search" (located about 3/4s down the box); then (B) on the page containing the search box titled "Enter Search Terms", click the radio button titled "Terms and Connectors"; then enter the following search command in the box (include all parenthesis and forward slashes):

(deed or title or conveyance) w/6 absolute w/10 (mortgage or debt or loan)

Then, click the "Search" button. Your search should return around 365 cases (going back to 1850) containing the above search words, most of which will have something to do with the equitable mortgage doctrine (although many won't actually use the phrase "equitable mortgage"). One more tip: to help you sift through all these cases, click the word "Cite" in the upper left hand corner; this will give you a list of the cases and the text containing the search words. This may help you decide whether you want to see the "Full" version of the cited case, or go on to the next cited case. If you want to see the "Full" version of any case, just click the name of the case, which will link you to the full version.

An alternative to all this would be to just familiarize yourself with the website, and particularly, the instructions for the various search techniques and commands. For example, you can narrow your search solely to the California Supreme Court cases, or solely to the intermediate appellate court cases. You can also narrow your search by date (so you don't have to read all 365 cases going back to 1850).

For other posts on this blog addressing California cases, see:

Go here for other posts on the equitable mortgage doctrine in California. California equitable mortgage valedictorian

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Posted by Home Equity Theft Reporter at 5:11 PM

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