Shaw v. Walbridge

In Shaw v. Walbridge (1877), 33 Ohio St. 1, the Ohio Supreme Court held that: "there is no rule of law which prevents a mortgagor from disposing of his equity of redemption to a mortgagee by private arrangement, but courts of equity will not permit a mortgagee to take advantage of his position so as to wrest from the mortgagor his equity, by an unconscionable bargain. The transaction will be jealously scrutinized, but if the agreement is a fair one, under all the circumstances of the case, it will be upheld. "Id. at paragraph 2 of the syllabus. In explaining this concept, the court stressed that: "it is true that at the time the mortgage is made no agreement can be made to deprive the mortgagee of his right to redeem. "But it is equally true that he may subsequently part with this right and the rule on the subject may be thus stated: Courts will scrutinize such a transaction, and will not allow the mortgagee to take any undue advantage; he will not be allowed to use his position as creditor to oppress, or to drive an unconscionable bargain. But where such a sale is a fair one, under all the circumstances, it will be upheld. "Id. at pp. 5-6 The Second District concluded that under Shaw, the parties could not enter into an agreement at the time of the mortgage that would deprive the mortgagor of his right to redeem. Id. In that case, the parties executed the note and mortgage on the same day as an agreement to escrow a deed in lieu of foreclosure. The court found that without the deed in lieu of foreclosure, the mortgagee would not have provided the financing to the mortgagor. The court noted that all of the documents were signed as a part of the same transaction. It then pointed to general contract law that documents executed as part of the same transaction should be read together. Id.