Britz v. Kinsvater
Decision Date | 04 May 1960 |
Docket Number | No. 6621,6621 |
Citation | 351 P.2d 986,87 Ariz. 385 |
Parties | Maurice BRITZ and Clare A. Britz, husband and wife, Appellants, v. Mathilda KINSVATER, a single woman, Appellee. |
Court | Arizona Supreme Court |
Shute & Elsing, Phoenix, for appellants.
Marvin Johnson, Phoenix, for appellee.
This is an appeal from a judgment in favor of plaintiff, Mathilda Kinsvater, and against defendants-appellants, Maurice A. and Clare A. Britz. The action was one to recover payments of interest which were allegedly usurious, i. e., in violation of A.R.S. § 44-1202. The case was tried to the court, sitting without a jury. The parties will hereinafter be designated as they appeared in the trial court, i. e., plaintiff and defendant.
There are two claimed errors:
1. The conclusions of law are not supported by the findings of fact;
2. The judgment is not supported by the evidence.
Inasmuch as the trial court's findings of fact are not themselves challenged by this appeal, we may assume that their accuracy is conceded. In any event the evidence must be considered in the light most favorable to a sustaining of the judgment. We paraphrase these findings as follows:
Plaintiff was the owner of certain real property in Tempe, Arizona, which she had transferred under an executory contract of sale. This contract, dated August 3, 1954, called for periodic payments which were to be applied toward the reduction of the principal debt of $75,000 (the sale price), and which also were to include interest at 4% per annum on the principal amount.
On November 9, 1955, the payments theretofore made by the buyer of the property had reduced the principal amount of the obligation to $63,200. Shortly prior to that date, plaintiff had found herself in pressing need of some $15,000. In an effort to acquire that sum, she had made several unsuccessful efforts to borrow money on the security of her executory sales contract. One of the prospective lenders approached for this purpose was defendant, who refused to lend any money on such terms. This proposal was made on behalf of plaintiff by an intermediary, one Joan Demand, a real estate broker. Some time later defendant advised Demand that he would 'purchase' the sales contract for $12,000, with an option to plaintiff to repurchase the instrument at some later time. Demand communicated this proposition to plaintiff, who agreed thereto. Up to this point plaintiff and defendant had never met.
An escrow agreement was set up on November 9, 1955, with Phoenix Title and Trust Company as escrow agent, for the 'sale' of said contract by plaintiff to defendant. Under the terms of the escrow, plaintiff was to put up her contract, and defendant was to pay in the $12,000. The following provision was also contained in the escrow instructions:
In accordance with the terms of the escrow, plaintiff assigned or, as defendants maintained, 'sold' the contract to defendant on November 14, 1955. On the same date, the parties executed a collateral agreement which was not made a part of the escrow instructions. This was called a 'reassignment agreement', and it defined the continuing rights and obligations of the parties to this 'sale'. This instrument provided that: (1) defendant would reassign the contract to plaintiff 'when the obligation has been reduced to $51,200, however, not for a period of at least six months from date;' (2) defendant was 'purchasing outright the interest and the principal in connection with the above mentioned contract of sale, subject, however, to an option in favor of [plaintiff] to repurchase at any time after one year as above stated;' and (3) 'the terms of the contract of sale cannot be changed, altered, or amended, sold, transferred, or conveyed, without the consent of [plaintiff].'
In June of 1956, some seven months after the above described transaction, it became necessary for plaintiff to reacquire the contract. Pursuant to plaintiff's instructions, the escrow agent paid $13,686.07 to defendant, who thereupon reassigned the instrument to plaintiff. The sum of $13,686.07 represented the following items: the $12,000 received by plaintiff from defendant; approximately 4% interest on $63,200 from the date of the purported sale of the contract; $115.20 for unearned insurance premiums, plus a small payment of interest on the latter.
On the basis of these facts, the trial court entered six conclusions of law, the essence of which is that the transaction set out above was in reality a loan rather than a sale, and that the compensation therefor received by defendant (the lender) was usurious. The court thus rendered judgment for the plaintiff in the amount of $1,570.87-the total amount of interest found to have been exacted--which is in accordance with A.R.S. § 44-1202. This appeal followed.
The main contention of defendant on appeal is that, on the given facts, this transaction does not fit into the accepted definition of a usurious loan. Usury has been defined by the legislature, in A.R.S. § 44-1202, supra:
A judicial definition was declared in Blaisdell v. Steinfeld, 15 Ariz. 155, 137 P. 555, and reaffirmed in Seargent v. Smith, 63 Ariz. 466, 163 P.2d 680. Therein it was held:
Seargeant v. Smith, 63 Ariz. 466, 468, 163 P.2d 680, 681.
The position taken by defendant appears to rest upon three specific points:
1. That this was a sale rather than a loan;
2. That the sum paid to plaintiff was not subject to the usury law, since it was contingently, not absolutely, repayable;
3. That there was no intent on the part of defendant to contravene the statute by exacting usurious interest.
Each of these points contradicts the following conclusion of law entered by the trial court, viz.:
'The transaction amounted to a loan of money, absolutely repayable, with an unlawful intent for the exaction for its use of something in excess of the amount allowed by law.'
The sole question before us, then, is whether this conclusion is legally supportable upon the facts shown by the record. We shall consider defendant's three points seriatim.
1. Sale or loan. The trial court was clearly correct in its determination of this basic issue. It is unquestionably the law that a 'sale' absolute on its face may be treated as a mortgage if the intention of the parties so indicates. De Wulf v. Bissell, 83 Ariz. 68, 316 P.2d 492; Rogers v. Greer, 70 Ariz. 264, 219 P.2d 760; Farrell v. West, 57 Ariz. 332, 113 P.2d 866; Coffin v. Green, 21 Ariz. 54, 185 P. 361; Stephen v. Patterson, 21 Ariz. 308, 188 P. 131. An examination of all the facts surrounding this escrow sale agreement manifestly reveals that the parties envisaged a security transaction rather than a sale. Evidence adduced at the trial shows that the defendant had no familiarity with the property involved, i. e., the Tempe real estate. The reassignment agreement indicates the extent to which the 'seller' reserved her interest in the proeprty. Not only was she given an option to repurchase at an advanced price (the $12,000 'sale' price plus an amount equal to 4% interest on $63,200 for one year), but it was specifically provided that the contract would revert to her after the payments thereunder (with interest on the principal amount) had reduced the principal by $12,000. Furthermore, the 'buyer' bound himself as a trustee of the property conveyed; he could assert no dominion--other than the receipt of the proceeds--over his 'purchase' without the consent of the 'seller'. Even defendant, in spite of his repeated protestations that this was a bona fide sale, suffered a lapse at one point and gave the following answer during direct examination by his attorney:
The device of disguising a usurious loan contract as a resale with option to repurchase is not new. In Wilcox v. Moore, 354 Mich. 499, 93 N.W.2d 288, wherein a similar transaction was before the Michigan court, it was said:
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Merryweather v. Pendleton
...to secure the repayment thereof. A sale absolute on its face will be treated as a mortgage if the parties so intend. Britz v. Kinsvater, 87 Ariz. 385, 351 P.2d 986. In the instant case the repurchase agreement executed contemporaneous with the transfer prima facie evidences the intention of......
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