Kjar v. Brimley, 12441

• Decision Date: 08 May 1972
• Docket Number: No. 12441,12441
• Citation: 27 Utah 2d 411,497 P.2d 23
• Parties: d 411 Evan B. KJAR and Donna S. Kjar, Plaintiffs and Appellants, v. Sterling N. BRIMLEY et al., Defendants and Respondents.
• Court: Utah Supreme Court

Page 23

497 P.2d 23

27 Utah 2d 411

Evan B. KJAR and Donna S. Kjar, Plaintiffs and Appellants, v. Sterling N. BRIMLEY et al., Defendants and Respondents.

No. 12441.

Supreme Court of Utah.

May 8, 1972.

Orval C. Harrison, of Fuller, Beesley & Decker, Salt Lake City, for plaintiffs and appellants.

Kay M. Lewis, Samuel E. Blackham, of Jensen & Lewis, Salt Lake City, for defendants and respondents.

CALLISTER, Chief Justice:

Plaintiffs initiated this action to recover the statutory penalty (three times the amount of interest paid, as provided in Section 15--1--7, U.C.A.1953) on an alleged loan transaction with defendants, wherein an alleged usurious rate of interest was exacted. Defendants moved for summary judgment, which the trial court granted; plaintiffs appealed therefrom.

At the inception of this opinion it should be related that in defendants' motion for summary jdugment there was no assertion that there was no genuine issue as to a material fact but merely a claim that defendants were entitled to judgment as a matter of law. Plaintiffs filed an affidavit in opposition to defendants' motion, wherein the facts supporting plaintiffs' version of the transaction were related. The disputed issues as to material facts raised by the pleadings, interrogatories, and the affidavit were sufficient so as to preclude the trial court from granting summary judgment under Rule 56, U.R.C.P. On appeal, defendants merely assert that the trial court did not abuse its discretion in granting judgment. Under Rule 56(c), U.R.C.P., as amended 1965, the trial court has no discretion, judgment shall be rendered forthwith, if the moving party shows that there is no genuine issue as to any material fact and such party is entitled to a judgment as a matter of law. Conversely, if the standard has not been met by the moving party, the motion must be denied.

In July 1966, the plaintiffs were in default on a mortgage on their home. The institutional mortgagee declined to refinance the obligation and referred plaintiffs to defendants. According to plaintiffs, defendants proposed to refinance by means of a security agreement in the form of an absolute deed with an option to repurchase. Plaintiffs contend that the parties intended from its inception that the transaction was a loan, secured by a mortgage on plaintiffs' home. Defendants have urged that the transaction was a conditional sale, i.e., a sale with an option to repurchase at an advanced price; and, therefore, there was no usury.

On July 31, 1966, defendants executed an earnest money agreement to purchase plaintiffs' home for.$19,000; they agreed to pay $6,000 down payment and to secure the remaining sum with a first mortgage. On August 1, 1966, the parties executed a rental agreement, wherein plaintiffs agreed to pay a monthly rental to defendant Mr. Brimley, in the sum of $118, which the agreement recited was to go to principal and interest, plus an amount equal to the monthly amortization of annual taxes and insurance. The maintenance and upkeep were designated the responsibility of plaintiffs. Plaintiffs were granted an exclusive option to sell or buy the house for a period of three years, with plaintiffs to assume and pay all finance costs incident to the transaction. The agreement provided that an attached amortization chart or schedule of payoffs should determine the price of repurchase. The sales price was designated to be the current mortgage balance, plus all finance costs incident to the transaction, plus the amount indicated on the payoff chart for the current month at the time the repurchase was consummated. The initial payoff was $1500 and progressed to $4500, during the thirty-sixth month.

On August 31, 1966, plaintiffs executed a warranty deed to the defendants Brimley. On this same date, Beehive State Bank loaned Brimleys $13,300, which was secured by a mortgage from them on the home; the interest rate was 7 per cent per annum. A closing statement was prepared by the bank, which indicated that plaintiffs had received $6,000; in fact, both parties concede that this was a paper figure and that no money was exchanged. The proceeds from the loan from the bank discharged the prior liens on plaintiffs' home.

There were allegations concerning plaintiffs' subsequent default under the rental agreement. Ultimately, the home was sold on November 1968, to a third party. Plaintiffs executed a closing statement and conveyed by quitclaim deed. Defendants received $3400, in accordance with the payoff schedule in the rental agreement. Plaintiffs' action is predicated on the assertion that this payoff figure together with the portion of monthly payments applied to interest equaled an interest rate in excess of 20 per cent, a usurious rate.

In the instant action, there must be an initial determination as to the nature of the transaction, was it a loan or a sale, since only the former would provide a basis to claim usury.

Whether a transaction in the form of a sale with an option to repurchase is in fact a sale, or a loan disguised as a sale to cover up a scheme to collect usurious interest is an issue for the trier of fact. ¹ The controlling question is what was the intention of the parties as it existed at the time of the execution and delivery of the instrument? ² A mortgage may exist, although the mortgagee has no right to compel payment. The law may imply a promise to repay a debt under particular circumstances of any case, where it is clear that the lender had relied on the property for his security, being satisfied that he is protected by its high value in relation to the amount loaned. If there be a large margin between the debt or sum advanced and the value of the land conveyed, this represents an assurance of payment stronger than any promise or bond of a necessitous borrower or debtor. ³

In Rizo v. Macbeth ⁴ the court cited circumstances relevant to the determination of whether an instrument was a deed or a security device:

. . . The adequacy or inadequacy of consideration as compared to the value of the property, which is often stated to be the single most important factor. Retention or nonretention of possession. The conduct of the parties before and after the execution of the instrument. The...