Also known as: absolute deed · deeds absolute
Written by attorneys · grounded in primary & secondary sources — see below
An instrument that conveys legal title to real property without conditions or reservations on its face. When the parties intend the conveyance solely as security for a debt, equity treats the instrument as a mortgage. The grantor retains an equitable right to redeem upon repayment of the obligation, and parol evidence is admissible to prove the security intent.
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Dorothy Daniels conveyed her apartment building to Dominion Capital by warranty deed absolute on its face. At closing the parties also signed a schedule listing an obligation balance and stating that Daniels would manage the property and apply net rents to reduce the balance. After Daniels paid the full balance, Dominion Capital refused to reconvey. The court treated the deed as an equitable mortgage and ordered reconveyance upon proof of repayment.
Dwight Dorsey conveyed his residence by absolute deed to Dawson Steel to secure an antecedent subcontract debt and prevent a mechanic's lien filing. Contemporaneous project notes stated the property was to be held until paid, and Dorsey told Dawson Steel's principal the deed was only temporary security. After Dorsey tendered the subcontract balance, the court recognized his equitable right of redemption and required reconveyance.
Courts examine the totality of the circumstances, including any contemporaneous writings describing a debt or right to reclaim the property, the grantor's continued possession and payment of taxes or rents applied to a balance, the relationship between the amount advanced and the property's value, and statements by the parties at the time of the transfer. No single factor controls, and parol evidence is freely admitted because the deed alone does not embody the full agreement.
The instrument is recharacterized as an equitable mortgage. The grantor retains the right to redeem by tendering the amount due, and the grantee must reconvey legal title upon satisfaction of the obligation. The transaction is then subject to ordinary mortgage rules governing redemption and foreclosure.
No. Courts treat the absolute deed as incomplete on its face when surrounding circumstances indicate a security purpose. Parol evidence, including oral statements, side letters, emails, and board minutes created at the time of transfer, is admissible to establish the parties' true intent.
Equity looks to substance over form to prevent lenders from evading mortgagor protections through disguised transactions. Allowing a lender to retain outright ownership after repayment would produce an unjust forfeiture, contrary to the long-standing prohibition on clogging the equity of redemption.