(dissenting). The plaintiff Bilbo was desirous of borrowing money and on August 3, 1916 he went to the abstract and loan office of D. Davenport at Crestón, Iowa to secure a loan of $7,000 to finance the purchase of a large tract of Wyoming land. Mr. Davenport told him '‘that he did not have any money of his own to invest, but he would go over to the bank [appellee State Savings of which he was president] and see what he could do. ’ ’ At that time plaintiff was indebted to the bank on an unsecured note in the sum of $6,471.58.
As a result of further negotiations with the president and Cashier Ball of said bank an option contract was entered into August 3, 1916 between Bilbó and the officers of the bank, but *896the agreement was executed in their individual names and without reference to their official positions. One paragraph of the written option reads as follows: ‘ ‘ That in consideration of the second parties (Davenport and Ball) furnishing or causing to be furnished to Geo. W. Bilbo the sum of seven thousand dollars in cash to carry through a certain trade for land in Sweetwater County, Wyo., involving about 14,000 acres of land, the first party agrees” etc.
Bilbo further agreed to secure the loan by a first mortgage on the Wyoming land, “together with the amount now due said bank, same to be payable March 1, 1917.” Another paragraph of this contract provided that Davenport and Ball had an option, good at any time up to and including the 3d day of October 1916, to purchase from Bilbo a 240-acre tract of land owned by him and situated in Union County, Iowa at a price of $160 per acre, settlement to be made March 1, 1917. It was also provided that Bilbo had the privilege on and after October 3, 1916 to sell the said Iorva land, “it being contemplated that either party may make sale and in ease sale is made by either the other party is to be notified thereof within twenty-four hours.”
The axrpellee bank furnished the money to Bilbo under the terms of this contract, and plaintiff signed and delivered to the bank his notes representing the unsecured loan and the advance loan of $7,000 and also executed the mortgage on the Wyoming land. Nothing ivas left undone except the executory .provisions of the contract."
. On January 1, 1917 plaintiff’s Iowa farm remained unsold and all option rights expired by time limitation, and the contract in its entirety terminated.
On March 24, 1917 upon request of the bank, and in consideration of the extension to March 1, 1918 of the paymen't of the Bilbo notes held by the bank the option given to Davenport and Ball was extended one year from date thereof, and all the terms of the original contract were to remain in full force. By the terms of the renewed option Davenport and Ball should have the right to purchase the Iowa farm until October 3, 1917, and plaintiff should have the concurrent right to sell the land from the latter date to January 1, 1918, when the option contract would again expire.
*897Subsequently and on September 20, 1917. a contract of sale signed by plaintiff and F. D. Ball was executed whereby plaintiff “bargained and sold” the Iowa farm to Ball for a consideration of $38,400 of which $1,000 was paid and receipt acknowledged. This initial payment was credited on plaintiff’s first note to the bank.
On October 13, 1917 a one-half interest in this land contract was assigned by Ball without the knowledge of plaintiff or the express consent of Davenport to defendant Frank L. Stream at $165 per aer.e.
On December 19, 1917 plaintiff and his wife conveyed by warranty deed to Ball and Stream the land described in the contract of sale. At this time plaintiff was being hard pressed by creditors and judgments had been entered against him in courts of adjoining counties. On Ball’s insistence this deed was executed in order to prevent liens attaching on the farm through transcripts of judgments to the county where the land was situated.
On March 1, 1918 possession of the real estate in question was taken by Ball and Stream who rented the land on a crop basis for the year receiving in value $3,029.25.
Ball and Stream sold the land in question to Judson Walker at $200 per acre, and later Walker sold the land at $205 per acre. Although the deed was executed by Bilbo on December 19, 1917 it bears date November 23, 1917. Bilbo’s notes were not at that time canceled and paid. Why not, if an actual sale was intended and accomplished? The notes themselves are marked paid “November 21, 18 as of September 1-18.” It is further shown that this land was sold to Walker in November 1918 and it was only after that sale that any money was applied on the debts of plaintiff to the appellee bank. The record is not clear or explicit as to what disposition was made of the proceeds of the sale in full nor does it show how much of the proceeds of the sale was received by the bank. It is shown that Ball and Stream each held a mortgage of $12,500 on the Iowa farm, presumably given by the purchaser thereof.
Prior to the trial of this cause the cashier Ball died and the administratrix not having been substituted trial proceeded as against the other defendants. By the death of Mr. Ball the *898action abated as to him. In passing it may be said that defendant Stream is not a necessary party defendant.
The answer of the defendant State Savings Bank admits that plaintiff on August 3, 1916 applied for a loan from the appellee bank, admits making the loan, and “giving the security demanded by said bank, with the cashier and the president of said bank.”
The primary and controlling question presented by this appeal involves the nature and character of the initial contract between the parties thereto. All subsequent agreements pursuant thereto must be construed in the light of the initial agreement. If the first contract coexistent and concurrent with the Wyoming mortgage was also conceived as a mortgage, and when born was a mortgage, the subsequent contract of sale and deed being dependent thereon and made in pursuance thereof can take no other form or color than the original instrument. This is a rule of presumptive evidence and not of substantive law. As was said in Newman v. Samuels, 17 Iowa 528; “If a transaction resolve itself into a security, whatever may be its form, and whatever name the parties may choose to give it, it is in equity a mortgage.” Both Bilbo and President Davenport testify that the option contract was given as a security and the defendant bank in answer admits expressly the contract of option was “given as security.” This being the practical and agreed construction, what authority has any court to give it any other meaning or construction? Furthermore Bilbo never dealt with Ball and Davenport as individuals and the bank does not so contend. They acted as officials and agents of the bank when the money was loaned and continued to be. There is no evidence or presumption to the contrary.
Primarily it is a question of intent, and this intent must be found in the nature of the transaction and what ivas said and done at the time and immediately prior to its execution. If the transaction in question is, in substance, a loan of money upon the security of the farm, a court of equity is bound to look through the forms in which the contrivance of the lender has enveloped it, and declare the instrument to be a mortgage.
“The fundamental principle of equity is, that whenever a conveyance of land is given for the purpose of securing pay-*899meiit of an existing debt, it is a mortgage. If the fact is established that a debt exists between the parties, and the transaction did not amount to a present payment, satisfaction, Or discharge of that debt, but recognized it as still continuing', to be paid at some future time, and was intended to be a security for such payment, then the instrument is always regarded in equity as a mortgage, whatever be its form.” 3 Pomeroy on Equity Jurisprudence (4th Ed.), Section 1192.
An equitable mortgage is an instrument of conveyance in legal effect a mortgage, but cognizable as such only in a court of equity. It is well established that an agreement in writing to give a mortgage, or a mortgage imperfectly or defectively executed, or an agreement to appropriate specific property to the discharge of a particular debt, or a deed or bond intended to be a mortgage creates an equitable mortgage. This doctrine is based on the maxim that equity regards that as done which ought to be done.
The form of the instrument is not conclusive against either party. There is no magic in the words used. When, however, the plain intent of the contract is disclosed, not only by the instrument itself, but by the surrounding facts and circumstances, equity will not by legal legerdemain give words a meaning contrary to the expressed and plain intent. See Fort v. Colby, 165 Iowa 95; In re Assignment of Snyder, 138 Iowa 553 (19 L. R. A. [N. S.] 206); Cullen v. Butterfield, 178 Iowa 621.
The option contract in the instant case is not self-executing. It required a novus actus on the part of plaintiff, and this act is evidenced by the contract of sale preliminary to the execution of the deed.
This is not a ease where there was no previous debt, no loan in contemplation, no stipulation for the repayment of the money advanced, no proposition for or conversations about a mortgage. Plaintiff himself testified: ‘ ‘ They [Davenport and Ball] finally agreed; one of them, I forget which one of them, said, they would make me that loan of $7,000 to take up my check that was already out and secure the $6,000 that I owed the bank, if I would give them the Bunzendahl place as security in addition to the 14,000 acres of Wyoming land, which I agreed to do.”
He further testified: “There was said about the Bunzen-*900dahl farm this: I told them I would give them a fourth mortgage on the Bunzendahl farm; there were three mortgages on the farm then (amounting to $26,500). The conversation was: ‘The bank can’t take a fourth mortgage. We will let you have the $7,000 provided you give us, pledge your interest in, the Bunzendahl place, as additional security besides the 14,000 acfes of Wyoming land.’ Mr. Ball said he would prepare a writing. I told him I would do it; I had nothing else to do.”
Prior to the execution of the contract of sale a conversation was had relative to the land contract between plaintiff and Ball. Plaintiff testified: “Mr. Ball came to me, prepared a land contract, and told me I must execute to him a land contract for this land. I protested. He told me that he wanted to be sure and get protected for what I owed the bank, and ’he was going to ask me to make a land contract so he could go ahead and sell it. At that time I was having trouble. I Was sued in Des Moines, and they got a judgment against me for $17,000. I was also sued at Osceola, and they were procuring a judgment against me. Mr. Ball told me that, if I did sign the contract, he was going to proceed to collect those three notes. Mr. Ball came to me and said my attorney had told him that they had rendered judgment against me that day at Osceola and they would transcript it up here, and that the judgment would come in ahead of the security that the bank held; that they held for what I owed the bank the Bunzendahl place, and -he was going to ask me and my wife to come up to the bank and make a deed for the property. My wife and I signed the deed to him. It was late, and I had the recorder stay down there until 6 o’clock to record it. It was signed the very day we got home from the trial at Osceola.”
It is very important, since the lips of Mr. Ball are forever closed, to understand Mr. Davenport’s version of this transaction. His testimony in part is as follows: “When I first saw Exhibit P [the initial contract], Mr. Ball brought it to me some time in the forenoon. He came down and told me what Mr. Bilbo was proposing, and asked me what I thought of it, and I consented to the statement that he made. I signed it. I knew the money Bilbo was to get was a loan from the bank. Q. And he was also to secure the sum which he owed the bank ? *901A. Yes; whatever is set out in here [Exhibit P], Q. But let me ask you, all your dealing with that land was to secure the bank, was it not? A. Well, that was one of the objects of our getting the Bunzendahl land. Q. Do you understand Mr. Davenport that, at the time the bank was loaning Bilbo the money that you ánd the cashier were taking in the same instrument, an option whereby you could sell the land at $160 an acre, or buy the land, and all you got over that belonged to you and Ball personally? Is that your conception of the contract when you signed it ? A. I understood we had a right to take it under this contract. Q. And as a banker you believe you had a right to do that? A. I just took this contract as it was, I signed it and consented to it. Q. And you believe, as the president of the bank, that you had a right to make that deal whereby you and the cashier would profit personally from that transaction? Is that it ? A. No; we were not expecting any profit. Q. But in case'the land sold for $200.? A. Well, I didn’t take that into consideration. Q. All you took into consideration was you had a chance to sell the land for $160, to pay the bank, wasn’t that it? A. That was the object of this; yes, sir. I didn’t take into consideration who would get the difference if the land sold for more than $160 an acre. We didn’t expect to do that. The contract [Exhibit P] ran to me and Ball. I was president and he was cashier of the bank. That is all we expected to get out of it was to secure the bank for what we were going to loan Bilbo and what he already.owed us. I heard that Bilbo was deeply involved financially. Ball told me that we were to get an option on that land to buy it or sell it, and I understood we were securing these other claims. I don’t know anything about the extension written on the contract. I didn’t assign away any right that I had in Exhibit P. I didn’t care to do it.” This is the bank’s own interpretation of the contract in question through its president. It is the equitable and true construction.
It is suggested by appellee that a court must view the deed as a deed of'trust. In other words that there was a conveyance to a person other than a creditor with power to sell and apply the proceeds on the debt of the creditor. A deed of trust under such circumstances is considered nothing more than a lien. A mortgage is but a lien. Under our statute the mortgagor retains *902the legal title and the right of possession. Section 2922 Code 1897. A deed of trust “shall be considered as, and foreclosed like, mortgages.” Code Sections 4284 and 4287. See also Nowman v. Samuels, supra.
It must be admitted under the evidence, and it is admitted by the answer of the appellee bank that the bank made this loan, that it took security for past due debts and for an additional loan, and that it was the party in whose favor and for whose benefit the lien was created. There is no escape from this position. May it be contended that the bank could have successfully sued to collect the two notes before their due date % Upon what, then, may the contention of appellees rest that the initial contract gave to Ball and Davenport the right to sell the land or to buy the land within the stipulated period and to make a personal gain thereby when the notes were not due and payable until seven months from the date of the instrument? If the mortgage character attaches at the commencement of a transaction so that the instrument, whatever its form, is regarded in equity as a mortgage that character must and will always continue. Courts of equity have never recognized the clogging of the equity of redemption.
An equitable mortgage possesses an implied defeasance clause, and equity permits a verbal defeasance to be proved and read into the instrument. The relation of debtor and creditor did not exist between plaintiff and defendant Ball or his official associate, Davenport. It did exist between plaintiff and appellee bank. The answer to a few pertinent questions may clarify this record.
Who made this loan ? The bank. Who approved the loan ? The cashier .and president of the bank. Did any consideration pass between Davenport and Ball as individuals and plaintiff? No; unless it may be said that the former caused the money “to be furnished,” but this was caused'by their official act. Was the option contract entered into by reason of any personal gain or with the thought of a private contract on the part of Ball or Davenport? No; and Mr. Davenport so states. The transaction resolves itself into a security, and all of the surrounding circumstances sustain this view. The conversations leading up to the making of the contract contemplate the giving of a security.
*903If tlie option contract was intended in tbe first instance as a mortgage, wlien did it cease to be such? The contract of sale was dependent upon it and was made, in pursuance thereof. The form and terms adopted by the instruments were a veil to a transaction differing in reality from the appearance those instruments assume. The bank itself could not engage in the purchase and sale of real estate, but it did permit a contract to be made in the name of its-president and cashier as individuals., By this contract Ball and Davenport became trustees for the bank and obligated themselves as such in the event of sale of the land to apply the proceeds thereof to the payment of the indebtedness owing by the plaintiff to the bank, and to the liquidation of any indebtedness secured by other liens on the land then payable, and to turn the balance, if any, to the equitable title holder. This is the defeasance clause which equity reads into the instrument.
We are not denying the right and power of two or more competent persons to make an option contract for the purchase and sale of land, as that would transfer to a court of equity in a large degree the guardianship of adults as well as of infants.. But equity will watch vigilantly any exercise of skill on the part of the scrivener when a suspicion arises, lest that should be made effectual which equity forbids.
The contracts and deed were not quite voluntary on plaintiff's part, and there were necessitous circumstances known to the adverse parties which must be taken into consideration in determining doubtful cases. Plaintiff was heavily indebted. The Iowa farm had three mortgages thereon, and when a fourth was tendered the bank it was refused. The option contract was then evolved to give the bank additional security. This was the plain intent. It may be said, furthermore, that the consideration named in the contract of purchase was not adequate and proportionate to the true value of the land at the time of sale. This is not a controlling consideration, but a circumstance which a court may consider.
Plaintiff's claim should find favor under the benign doctrine of equity jurisprudence. The option contract around which this ease gravitates is a security for the loan made. It would be inequitable for the purchasers, who were in the eyes of *904equity quasi trustees or mortgagees, to reap a personal advantage by virtue of giving to certain instruments a meaning that was not intended in,their creation. The appellee bank is the real party in interest.
This action is strictly one for an accounting. We are not concerned with the bona fides of Stream’s erstwhile title. He ceased to be even an assignee before the commencement of this action. The same results would obtain if Stream were not a party to this action, and if he had demurred, his position would have been well taken. His bona fides is no more involved than the good faith of the grantee Walker or his subsequent grantee. Whatever the interests of Mr. Stream may be in relation to the real party in interest (the appellee bank) can be determined by the lower court upon the retrial and decreed accordingly.
The appellant is entitled to an accounting. I would reverse.
Weaver and Arthur, JJ., join in the dissent.