REPORTS OF CASES DETERMINED IN THE SUPREME COURT OF THE STATE OF NEVADA. APRIL TERM, 1874. J. F. COOKES, RESPONDENT, v. O. H. P. CULBERTSON, APPELLANT. MORTGAGEE IN POSSESSION TO ACCOUNT FOR RENTS AND PROFITS. Where the circumstances show that a person in possession of real estate under a deed absolute on its face holds it in fact only as security for a debt, he will be compelled to account for the rents and profits. STATUTE OF LIMITATIONS-ACTION ON MORTGAGE WHERE REMEDY ON DEBT BARRED. Where money is loaned without note or writing and a mortgage is given to secure its repayment, though the statute of limitations may run against an action on the debt in two years, it does not run against a foreclosure of the mortgage in less than four years. IMPROVEMENTS BY MORTGAGEE IN POSSESSION. A mortgagee in possession is entitled to allowance for necessary and proper repairs, but he will not be credited with costly improvements, though the value of the estate be increased thereby, unless made with the mortgagor's consent. IMPROVEMENTS IN GOOD FAITH AS OFF-SET TO RENTS AND PROFITS. If beneficial improvements are made by a person in good faith under the belief of absolute ownership, their value will be allowed him, on an accounting between him and the true owner for rents and profits. APPEAL from the District Court of the Second Judicial District, Washoe County. Cookes v. Culbertson. This was an action for an accounting of the rents and profits of certain real estate in the town of Reno, Washoe County, held by defendant under a deed absolute upon its face but claimed to be a mortgage, and for a decree that plaintiff might redeem the same. There were findings and decree in favor of the plaintiff; and, among other things, that defendant had received payment, in the way of rents and profits, of his debt and of all the incidental expenses which should be allowed him, such as taxes and necessary repairs. Defendant was ordered to make a deed to plaintiff and to deliver over to him the possession of the property. Defendant moved for a new trial, which was denied; and he then took this appeal from the judgment and order. BO Haydon & Cain, for Appellant. I. The deed from Piper to Geller was not intended to be a mortgage securing a valid binding debt from Cookes to Geller; for the amount paid by Geller, $1750, was to be refunded to him with interest at 2 per cent. a month. Geller had no legal remedy to enforce this parol obligation to pay interest at that rate by foreclosure; but, having the deed and the legal title, he could refuse to convey the property to Cookes until Cookes complied with his terms. This makes the transaction a conveyance of the estate from Piper to Geller in fee simple absolute-with a secret parol trust by Geller to re-convey the estate to Cookes upon his due performance of the conditions of the trust on his part. Such a trust is not binding; and if therefore Geller upon non-performance of the conditions denies his trust, and there is no written agreement or document establishing it, he cannot be in equity compelled to convey, this being in the teeth of the statute of frauds. 2 Story's Eq. Jur., 637; Lathrop v. Hoyt, 7 Barbour, 59. Again, the defendant had no notice that Geller held only a mortgage of the property. Cookes v. Culbertson. By putting the absolute deed from Piper to Geller on record, they are estopped from relying on the continuance in possession as notice that Cookes was a mortgagor only. Fair v. Howard, 5 Nevada, 307; Mesick v. Sunderland, 6 Cal., 315. But the possession of Cookes was perfectly consistent with our theory that Geller held the legal title under a secret parol trust to convey the same to Cookes on his due performance of certain conditions. Geller gave Cookes ample opportunity to earn or to borrow the money that would pay him his claims against Cookes; but this, although known to defendant, was no notice of a mortgage to him. II. The time wherein the deed might be declared a mortgage had elapsed by limitation. The debt (if there was any) from Cookes to Geller, and, according to plaintiff's theory, by novation transferred to Culbertson, was parol, and created July 18, 1870. It was therefore barred at the commencement of this action. Espinosa v. Gregory, 40 Cal. 62; Hughes v. Davis, 40 Cal. 117; Henley v. Hotaling, 41 Cal. 27; Conway's Exrs. v. Alexander, 7 Cranch, 237. III. Whether defendant entered into possession as a mortgagee or the holder of a trust of a trust deed, he is only to account for the net proceeds of the estate. The repairs made were actually necessary, and defendant only received rents over and above necessary repairs and taxes. Without repairs it could not have rented at such a price. Hidden v. Jordan, 28 Cal. 301; Hughes v. Davis, 40 Cal. 117; 14 Wendell, 233; 15 Wendell, 248; 4 Kent's Com. 166. IV. To declare an absolute deed to be a mortgage the evidence must be so cogent, weighty and convincing as to leave no doubt upon the mind; and such proof, and such proof alone, ought to overcome it, and not by an appeal ad misericordiam or the bare cry of fraud. Bingham v. Thompson, 4 Nev. 224; Henley v. Hotaling, 41 Cal. 26; Roberts v. Ware, 40 Cal. 636. Cookes v. Culbertson. Webster & Knox and R. M. Clarke, for Respondent. I. Under the findings, which are clearly supported by the evidence, Geller became a trustee for Cookes; and the deed from Piper to Geller, though absolute in its terms, was in equity a mortgage. Coates v. Woodworth, 13 Ills. 654; Page v. Page, 8 N. H. 187; Boyd v. McLean, 1 John. Ch. 582; Hidden v. Jordan, 21 Cal. 92; Leahigh v. White, 8 Nev. 149; Lodge v. Turman, 24 Cal. 385. Parol evidence is admissible to show a deed absolute on its face to be a mortgage; and where the deed was given to secure a debt or loan, a right to redeem exists, and the case is not within the statute of frauds. Thornburg v. Burke, 3 Leading Cases in Eq. 624; 21 Cal. 93; Ruhling v. Hackett, 1 Nev. 360; 8 Nev. 147; 15 Cal. 291. A mortgagee, after receiving his debt, is considered as a trustee for the mortgagor. Hilliard on Mort. 359; Pierce v. Robinson, 13 Cal. 116. II. When possession is taken by the mortgagee after condition broken by consent of the mortgagor, it will be presumed in the absence of clear proof to the contrary, to be with the understanding that the mortgagee is to receive the rents and profits, and apply them to the debt secured; and unless a limitation of the period of possession is fixed at the time, it will be considered as extending until the satisfaction of the debt. Dutton v. Warschauer, 21 Cal. 609. A court of equity will enforce a trust against all persons who, with notice of the trust, come into possession of the trust property, in the same manner and with like effect as against the original trustee. Lathrop v. Beaupton, 31 Cal. 17. The fact that the party receiving the conveyance of land, verbally agreed at the time with the person paying the consideration, that the former should on demand execute to the latter a conveyance of the premises, does not make the trust express, as distinguished from one implied by law from the act of the parties, so as to exclude proof of it by parol under the Cookes v. Culbertson. operation of the statute of frauds. Breyler v. Baxter, 22 Cal. 575-6. III. The debt secured by the mortgage (in form an absolute deed) could be enforced by foreclosure, in an action commenced at any time within four years from the date of the mortgage, or from the maturity of the debt as secured. Millard v. Hathaway, 27 Cal. 146; 40 Cal. 120; Henry v. Confidence Co., 1 Nev. 622; Mackey v. Lansing, 2 Nev. 302. IV. The claim for the value of permanent improvements cannot be maintained and was correctly disallowed by the court. Taylor's Landlord and Tenant, 448. A lessee cannot bind his landlord by an agreement with a sub-lessee to pay for improvements thereon without his consent. No agreement on the part of Cookes to pay for any improvements is shown. There is a clear distinction between necessary repairs and permanent improvements. V. Defendant was not an innocent purchaser he had ample notice that the deed was a security for money loaned. The findings are conclusive "that this defendant had full knowledge *** within ten days after the deed was executed by Piper to Geller, that said deed was executed, and said property was held by the said Geller as a security for the payment of said sum of $1,750 and interest by plaintiff to said Geller." This finding is fully sustained by the testimony. By the Court, BELKNAP, J.: This action is brought for equitable relief and an accounting of the rents and profits of certain real property conveyed to defendant by deed, absolute upon its face, but which complainant alleges was intended as a mortgage. In the year 1868 the complainant was the lessee of an unimproved town lot in Reno. He erected buildings thereon of the value of $2,000, retaining the right to remove them in |