The Absolute Deed Intended as Security
Parol evidence is admissible to establish that a deed purporting to be an absolute conveyance of real estate was intended to serve as security for an obligation, and should therefore be deemed a mortgage. The obligation may have been created prior to or contemporaneous with the conveyance and need not be the personal liability of any person.
Intent that the deed serve as security must be proved by clear and convincing evidence. Such intent may be interred from the totally of the circumstances, including the following factors:
Statements of the parties
The present of the substantial disparity between the value received by the grantor and the fair market value of the real estate at the time of the conveyance;
The fact that the grantor retained possession of the real estate;
The fact that the grantor continue to pay real estate taxes;
The fact that the grantor made post-conveyance improvements to the real estate
The nature of the parties and their relationship prior to and after the conveyance
The conditional sale intended as security
Parol evidence is admissible to establish that a deed purporting to be an absolute conveyance of real estate accompanied by a written agreement conferring on the grantor a right to purchase the real estate, was intended to serve as a security for an obligation, and should therefore be deemed a mortgage. The obligation may have been created prior to or contemporaneous with the conveyance and need not be the personal liability of any person.
Difference between absolute deed and conditional sale, note that Flack represents a pure “absolute deed” transaction. The only writing we are confronted with is a deed from the grantor to the grantee. On the face of things, it appears that the grantor has “sold” the real estate to the grantee. Here parol evidence is used to establish that the deed did not reflect a sale transaction, but rather was intended as security for a loan or obligation. If grantor successes, she will be permitted to “redeem” the land by paying the obligation.
Sannerund, on the other hand, is usually described as a “conditional sale” transaction. In this latter situation there not only is a deed to the grantee, but a second written document that normally purports to confer on the grantor the obligation or option to purchase the real estate described in the deed. Thus, unlike in the absolute deed setting, here it is clear from the second writing that the grantor has the right to reacquire the real estate.