## Facts

- A husband owned several parcels of real property and sought funds from his wife.
- The wife, acting through an agent, provided money to the husband under a transaction structured as an absolute deed to the wife plus an option allowing the husband to repurchase within one year for a stated price plus 7% interest.
- The husband treated the transaction as a loan secured by the property; the wife asserted it was an outright conveyance.
- After the transaction, the wife sold one parcel for \$1,000 with the husband’s knowledge and consent and kept the proceeds as a partial repayment.
- Over many years, the wife wrote multiple letters describing the property as “mortgaged” or “encumbered” to her and referring to having “loaned” the money.
- More than a decade later, the husband sued in equity to have the deed declared a mortgage and to redeem the remaining property after crediting the \$1,000 proceeds.

## Issues

1. Whether a deed absolute in form, accompanied by an option to repurchase, may be treated in equity as a mortgage when surrounding evidence shows it was intended as security for a debt.
2. Whether the evidence was sufficient to support the trial court’s finding that the transaction was a secured loan rather than a sale.

## Decision

- The California Supreme Court affirmed the judgment for the husband.
- The Court held the deed operated in equity as a mortgage because the parties intended the transaction as security for a loan.
- The husband retained an equitable right of redemption in the unsold property upon payment of the amount due, with credit for the \$1,000 received from the parcel sale.
- The Court deferred to the trial court’s fact-finding because substantial evidence supported the determination of intent.

## Legal Principles

- A deed absolute on its face may be shown by parol and circumstantial evidence to have been intended as security for a debt; equity will then treat it as a mortgage.
- Courts determining whether an instrument is a mortgage look to the parties’ intent as shown by surrounding circumstances, subsequent conduct, and documentary admissions.
- When a conveyance is recharacterized as a mortgage, the grantor’s equitable right of redemption is preserved despite the form of the written instruments.
- On appeal, findings that an absolute deed was intended as security will be upheld where supported by substantial evidence.

## Conclusion

The court treated an absolute deed and repurchase option between spouses as a secured loan because the evidence—particularly the wife’s repeated written references to a “loan” and a “mortgage”—supported the trial court’s finding that the instruments were intended as security, entitling the husband to redeem the remaining property after accounting for proceeds already applied to the debt.


Todd v. Todd, 164 Cal. 255 (Cal. 1912)