Equitable Mortgage Doctrine In Idaho

This post is a reprint of a part of a longer post which originally appeared in this blog in March, 2007.

Dickens v. Heston

53 Idaho 91; 21 P.2d 905

(Id. 1933)

.

In this action for ejectment, the financially strapped property owner successfully asserted an equitable mortgage defense in the lower court against the title holder who, the court found, acquired said title as security for a debt. On appeal, the Idaho Supreme Court unanimously affirmed the lower court decision and listed the following factors as being some, but not necessarily all, the factors to be considered when determining whether instruments constitute a mortgage:

1. Existence of debt to be secured
2. Satisfaction or survival of the debt
3. Previous negotiations of parties
4. Inadequacy of price
5. Financial condition of grantor
6. Intention of parties

Commenting specifically on the issue of inadequacy of price, the Idaho high court commented as follows (bold text is my emphasis):

"It is said in 41 C. J. 288, sec. 24, that:

• If the grantor was severely pressed for money at the time of the transfer, so as not to be able to exercise a perfectly free choice as to the disposition of his property, and raised the sum needed by conveying his property in fee with a right of repurchase, his necessitous condition, especially in connection with the inadequacy of the price, will go far to show that a mortgage was intended."

"In Johansen v. Looney, 31 Idaho 754, 761, 176 P. 778, 780, this court said:

• Notwithstanding some apparent conflict in the above authorities, the holding is general that the transaction must be fairly made for a consideration not grossly inadequate, and that any fraudulent or oppressive conduct on the part of the mortgagee is sufficient to annul the absolute character of the transfer. ( Alexander v. Rodriguez (79 U.S. 323, 12 Wall. 323, 20 L. Ed. 406), Gassert v. Strong, (38 Mont. 18, 98 P. 497), Stoutz v. Rouse, (84 Ala. 309, 4 So. 170), Russell v. Southard, (53 U.S. 139, 12 HOW 139, 13 L. Ed. 927), Bradbury v. Davenport, (114 Cal. 593, 46 P. 1062, 55 Am. St. 92), Fort v. Colby, (165 Iowa 95, 144 N.W. 393), and Liskey v. Snyder, (56 W. Va. 610, 49 S.E. 515), supra; Keeline v. Clark, (132 Iowa 360, 106 N.W. 257.)"

"The following pertinent statement is made in Alexander v. Rodriguez, 79 U.S. 323, 12 Wall. 323, 339, 20 L. Ed. 406, 411:

• The law upon the subject of the right to redeem where the mortgagor has conveyed to the mortgagee the equity of redemption, is well settled. It is characterized by a jealous and salutary policy. Principles almost as stern are applied as those which govern where a sale by a cestui qui trust to his trustee is drawn in question. To give validity to such a sale by a mortgagor it must be shown that the conduct of the mortgagee was, in all things, fair and frank, and that he paid for the property what it was worth. He must hold out no delusive hopes; he must exercise no undue influence; he must take no advantage of the fears or poverty of the other party. Any indirection or obliquity of conduct is fatal to his title. Every doubt will be resolved against him. Where confidential relations and the means of oppression exist, the scrutiny is severer than in cases of a different character. The form of the instruments employed is immaterial. That the mortgagor knowingly surrendered and never intended to reclaim is of no consequence. If there is vice in the transaction, the law, while it will secure to the mortgagee his debt, with interest, will compel him to give back that which he has taken with unclean hands. Public policy, sound morals, and the protection due to those whose property is thus involved, require that such should be the law."

"It cannot be successfully contended, in the light of the record before us, that Heston acted as a free man. He was in a situation, being without funds, where he was compelled, as expressed in the language of Dickens, to enter into the contract in question and make an absolute conveyance of his property, or nothing."

------------------

There is much more in this case than the above observations of the Idaho court. Further, the Idaho high court reaches its decision on the reliance both on its prior decisions, and also to high court decisions of other states (ie. Kansas, California, Illinois, Iowa, Michigan, Montana, Alabama, West Virginia, and Colorado), not to mention a couple of citations to U.S. Supreme Court cases, thereby representing a seemingly broad view of the equitable mortgage case law. To read the whole case, see:

Dickens v. Heston, 53 Idaho 91; 21 P.2d 905; (Id. 1933)

Alexander v. Rodriguez (aka Villa v. Rodriguez), 79 U.S. 323, 12 Wall. 323, 339, 20 L. Ed. 406, 411 (1870) (available online courtesy of Justia - US Supreme Court Center). Idaho equitable mortgage doctrine beta