Summary of Peugh v. Davis, S. Ct. U.S. 1877
Facts: The complainant, Samuel A. Peugh, borrowed from the defendant, Henry S. Davis, the sum of $2,000, and executed as security for its payment a deed of the two squares. This loan was paid at its maturity, and the deed returned to the grantor. The complainant then borrowed another sum from the defendant,$1,500,and as security for its payment redelivered to him the same deed. The defendant placed the deed on record, and a party claiming the squares under a tax title brought two suits in ejectment. The defendant then demanded payment of his loan, without success. The complainant obtained from the defendant the further sum of $500. That sale and conveyance were made with the assurance and promise of a good title in fee-simple. A special covenant to pay and refund to the defendant the costs and expenses, for any claim or litigation. Accompanying this instrument, the complainant gave the defendant a receipt for $2,000, purporting to be in full for the purchase of the land.
Issue: Whether the right of redemption can be defeated or waived by any agreement making a mortgage a conditional sale?
Procedure: Appeal from the S. Ct. of the District of Columbia. A suit in equity to redeem certain real property in Washington City. The decree of the S Ct of the District is reversed, and the cause remanded for further proceedings.
Rule: The right of a mortgagor to redeem property from the mortgagee, even if payment is late, is an essential part of mortgage, and mortgagor cannot waive her/his right to redeem tardily as part of the consideration for obtaining a loan.
Ct. Rationale: The court looks beyond the terms of the instrument to the real transaction; and when that is shown to be one of security, and not of sale, it will give effect to the actual contract of the parties. It is also an established doctrine that an equity of redemption is inseparably connected with a mortgage; that is to say, so long as the instrument is one of security, the borrower has in a court of equity a right to redeem the property upon payment of the loan. This right cannot be waived or abandoned by any stipulation of the parties made at the time, even if embodied in the mortgage. This is a doctrine from which a court of equity never deviates. Its maintenance is deemed essential to the protection of the debtor, who, under pressing necessities, will often submit to ruinous conditions, expecting or hoping to be able to repay the loan at its maturity, and thus prevent the conditions from being enforced and the property sacrificed.
PL A: The $500 paid by the PL was made in purchase of the mortgagor’s interest in the property.
Def A: The money paid by the PL was for a release of the equity of redemption as a condition to the mortgage on the property.