On an appeal from the Supreme Court of Porto Rico, the power of
this Court is confined to determining whether error of law was
committed in admitting or rejecting evidence and whether the
findings of fact are adequate to sustain the conclusions based on
them.
Rosaly v. Graham, 227 U. S. 584.
Although the appellate court held that the trial court erred in
admitting over objection testimony offered to show that a contract
of conditional sale was really a mortgage, as that court also
considered the evidence and based the exclusion thereof on the
ground of its character, and because it did not have probative
force to accomplish the result, the testimony was weighed
sufficiently for the purpose of finding that the instrument is what
it purports to be, and the findings and conclusions of law to the
effect that the instrument is one of conditional sale and not of
mortgage are adequate to support the judgment.
17 P.R. 684 affirmed.
The facts, which involve the extent of the power of this Court
on appeal from the Supreme Court of Porto Rico and also the
validity of a judgment of that court holding that a transfer of
property was a conditional sale that had become absolute and was
not a mortgage, are stated in the opinion.
MR. CHIEF JUSTICE WHITE delivered the opinion of the Court.
Only that which is deemed necessary for the decision of the case
is stated, bearing in mind that our power is confined
Page 235 U. S. 82
to determining whether error of law was committed in admitting
or rejecting evidence and whether the findings of fact are adequate
to sustain the conclusions based on them.
Rosaly v.
Graham, 227 U. S. 584,
227 U. S.
590.
The appellants sued in August, 1909, to recover immovable
property upon the ground that a contract of sale made by them of
the property in September, 1906, subject to a right to redeem, was
not a sale subject to condition, but a mortgage, and therefore,
although the period for redemption had long expired without the
exercise of that right, they were entitled to a decree for
cancellation of the recorded sale on payment of the mortgage debt.
Moreover, a right to recover rents and revenues was sought for the
purpose of imputing the amount to the extinction of the mortgage
debt. At the trial, Juan A. Monagas, one of the plaintiffs, was
tendered in their behalf as a witness, and he was permitted to
testify over objection made and exception reserved by the
defendant. The court substantially awarded the relief prayed. The
prayer, however, for an accounting, was denied upon the ground
that, although there was no agreement as to rate of interest,
nevertheless it was contemplated that the lender should go into
possession of the property, collect the rents and revenues, and
appropriate them in lieu of collecting interest on the debt. Both
sides appealed.
On the appeal, it developed in the argument that neither side
had complied with the rules as to assigning errors. The case was
heard and taken under advisement with leave to file assignments of
errors within a time fixed. In its opinion, the court came first to
the appeal of the defendant below. Directing attention to the fact
that the permission to file assignments had not been complied with,
the court then considered what was open, and after referring to the
exception concerning the testimony of the witness, offered for the
purpose of showing that the deed was not a sale, but was a
mortgage, treated the exception
Page 235 U. S. 83
as covering two considerations: first, was parol evidence
admissible, "under our Civil Code, to vary the terms of the sale?"
and second, whether "an improper construction was put on the
written contract entered into between the parties," evidently
considering therefore that, even if parol evidence was admissible,
it was yet necessary, as a result of the exception, to determine
whether the contract had been improperly construed by a wrongful
effect given to the evidence admitted over objection.
The contention as to mere inadmissibility was at once disposed
of by stating that the real question to be decided was not whether
any testimony could have been received, but the character and
probative force of that which was admissible. The court said:
"The whole case really turns on the question of whether the
written instrument in controversy was a mortgage or a conditional
sale. If it is the latter, it must be complied with according to
its terms; if the former, the plaintiff must be allowed to repay
the money received and take a reconveyance of the land. The real
intention of the parties at the time the written instrument was
made must govern in the interpretation given to it by the courts.
This must be ascertained from the circumstances surrounding the
transaction and from the language of the document itself. The
correct test, where it can be applied, is the continued existence
of a debt or liability between the parties. If such exists, the
conveyance may be held to be merely a security for the debt or an
indemnity against the liability. On the contrary, if no debt or
liability is found to exist, then the transaction is not a
mortgage, but merely a sale with a contract of repurchase within a
fixed time. While every case depends on its own special facts,
certain circumstances are considered as important, and the courts
regard them as throwing much light upon the real intent of the
parties and upon the nature of such transactions. Such are the
existence of a collateral agreement made by
Page 235 U. S. 84
the grantor for the payment of money to the grantee, his
liability to pay interest, inadequacy of price paid for the
conveyance, the grantor still remaining in possession of the land
conveyed, and any negotiation or application for a loan made
preceding or during the transaction resulting in the conveyance.
The American doctrine on this subject does not differ materially
from the principles set forth in our Civil Code. 3 Pomeroy's Equity
Jurisprudence, paragraphs 1194 and 1195. Civil Code of Porto Rico,
paragraphs 1248-1250, 1348, 1410, and 1421."
Coming, then, presumably to analyze the testimony admitted over
the objection for the purpose of ascertaining whether it was of a
character to engender any probative force proper to be considered
for the purpose of showing that the minds of the parties met not on
a conditional sale, but a mortgage, and therefore justified
construing the written contract to be not what it purported to be,
it was held that it did not, the court saying:
"In accordance with these principles, we must consider the
conveyance in this case as a conditional sale and that plaintiff
has failed to comply therewith,"
it being added,
"We are further satisfied that the exception of the defendant
was well taken, and ought to have been sustained, and that the
court consequently erred in its judgment."
The decree was reversed with direction to dismiss the suit.
The court in subsequently making its findings of fact and
stating its conclusions included therein the testimony of the
witness which had been admitted at the trial over objection, that
testimony being to the following effect:
"The witness then proceeded to testify in substance that he
applied to the defendant for a loan, and she made him an offer to
make negotiations, taking the house in question as security under
the conditions stated in the written contract; that he had no
intention of selling the house to the defendant, as he had other
better offers, and that the contract was made in the form of a deed
of sale
Page 235 U. S. 85
with option of return because she requested it and he had no
objection."
As there is no contention that the findings if accepted do not
support the conclusion which the court based on them, it is
sufficient to give the following summary: the contract in question
was notarial in form, on its face a sale transferring ownership and
possession to the purchaser for a stipulated cash price,
conditioned, however, on the right of the sellers to redeem within
two years on paying a sum equal to the purchase price, no interest
being provided for, with the right to extend the time to redeem for
one year further if it was elected to do so before the expiration
of the original time, and conferring on the purchaser the power of
noting on the public records the fact of the failure to redeem, if
it took place, and to convert the title if recorded into an
unconditional one. The findings disclose that there was no evidence
that the right to redeem had been exercised within the time fixed
by the contract, that the purchaser inscribed that fact upon the
records, and that thereby she became apparently the indefeasible
owner. The following facts, however, relating to this subject, were
found: (a) that shortly before the original redemption period
elapsed, one of the sellers in behalf of all, wrote a letter to the
purchaser asking her to name a time when, before a notary, an
agreement of extension could be signed in accordance with the
original contract of repurchase, and that no answer appears to have
been made to this letter -- at all events, that nothing was shown
establishing that anything was done under it. (b) That, after the
original period had expired and the failure to avail of the
condition had been noted on the public records, three several
letters were written, one on October 17th, 1908, one on December
24th, 1908, and the last on May 5th, 1909, the two first requesting
the appointment of a day for the purpose of signing an extension of
the original time because an agreement expressed in a letter
Page 235 U. S. 86
to give such extension had been made, and the last offering to
pay the amount fixed in the condition of redemption on the ground
that there was a right to do so because of an assent to an
extension which had been previously given by letter; but, as we
have said, the findings recite that nothing as to the existence of
the letter referred to was shown in the record. All four of the
letters in unequivocal terms treated the contract as having been
one of sale, and sought to enforce it accordingly, and contained
nothing in the slightest degree asserting the existence of a
mortgage as now relied upon. Indeed, the findings fail to show
anything directly or indirectly asserting that view of the contract
prior to its being made the basis of this suit, filed, as we have
seen, in August, 1909.
The conclusions drawn from the findings were as follows:
"This supreme court disposed of the appeal by its judgment of
June the 5th of the last year, reversing that rendered by the court
below and ordering the dismissal of the complaint not only upon the
ground that the exception to which we have already referred was
well taken and should have been sustained, but also because the
agreement made by the parties was a conditional sale."
As we are bound by the conclusion as to the character of the
contract if it is supported by the findings, and as there is no
dispute that, if the findings be accepted as legal, they do support
such conclusion, it follows that there must be an affirmance, since
the real question for decision is was the court right in holding
that the contract in question was a conditional sale, and not a
mortgage? But it is insisted -- and that is really the only issue
in the case -- that the findings cannot be accepted and treated as
conclusive without previously determining the correctness of the
ruling of the court on the exception to the testimony, since, if
that ruling be held to have been wrongful, it will follow either
that there were no findings or, if there were such findings in
Page 235 U. S. 87
form, that they were legally inadequate because made from an
incomplete and partial consideration of the evidence resulting from
excluding from view the testimony which was wrongfully held to be
inadmissible. Indeed, the argument is that this must be the case
unless it be assumed that the court, after excluding the testimony
on the ground that it was inadmissible, and hence wrong to consider
it, proceeded at once to consider it for the purpose of making its
findings. From this it is urged that there must be a reversal and
remanding for a new trial, or at least for the purpose of enabling
the court below to make new findings and express new conclusions
upon all the evidence, including that which it should consider if
it be found that it was wrong in holding that the evidence excluded
was inadmissible.
But when the statement we have made of the case is considered,
the proposition rests upon the plainest misconception of the action
of the court below, since, as we have seen, its conclusion that
error had been committed by the trial court in holding that the
contract of sale was one of mortgage did not arise from a ruling
that there was a want of power to admit any testimony for such
purpose, but from the fact that the particular testimony which was
offered and received over objection was found, after considering
and weighing it, to bear no legal relation to such purpose, and
hence not to afford any probative force tending to support the
varying of the contract. This clearly is made manifest by the
excerpt from the opinion of the court which we have quoted, and
becomes indisputable when it is observed that the authorities which
the court cited and relied upon as sustaining its action expressly
recognized that testimony was admissible for the purpose of showing
that a contract of conditional sale was one of mortgage, but
pointed out the nature and character of the testimony and the force
of the proof required to accomplish such result. The error of the
contention, hence,
Page 235 U. S. 88
consists in assuming that testimony was not considered and
weighed for the purpose of the findings, when in fact, on the face
of the record, it is apparent that all the testimony offered was
considered and weighed. When this is borne in mind, it results that
the contention at last reduces itself to the proposition that the
decree below should be reversed and the case remanded because of an
error never committed -- that is, to enable a duty to be legally
performed which the record discloses had already been completely
and lawfully discharged.
Affirmed.