Larson v. Hinds

• Citation: 155 Colo. 282,394 P.2d 129
• Decision Date: 13 July 1964
• Docket Number: No. 20396,20396
• Parties: Walter E. LARSON, Vernon E. Larson and George D. Larson, deceased, by Beatrice Larson, Plaintiffs in Error, v. Oscar HINDS, Defendant in Error.
• Court: Supreme Court of Colorado

Page 129

394 P.2d 129

155 Colo. 282

Walter E. LARSON, Vernon E. Larson and George D. Larson deceased, by Beatrice Larson, Plaintiffs in Error, v. Oscar HINDS, Defendant in Error.

No. 20396.

Supreme Court of Colorado, In Department.

July 13, 1964.

William Pehr, Westminster, Allan R. Cooter, Denver, for plaintiffs in error.

Mason, Reuler & Peek, Denver, for defendant in error.

PRINGLE, Justice.

The parties appear here in reverse order of their appearance in the trial court. We will refer to them as they appeared below or by name.

Plaintiff Hinds instituted this action in unlawful detainer in the Superior Court of the City and County of Denver and alleged in his complaint that he was the owner of certain described premises, to-wit: 4881 Lowell Boulevard; that said premises were leased to the defendants from month to month at a rental of $60.00 per month; that the defendants had failed to pay the said monthly rental; that the plaintiff had elected to terminate said tenancy on June 30, 1961; that a demand in writing for the payment of rent due or possession of the premises had been duly served on June 19, 1961; that defendants wrongfully held possession of the premises; and that defendants were indebted to plaintiff in the sum of $960.00 for rent. The prayer of the complaint was for possession of the premises and past rent due.

The defendants' amended answer contained a general denial and an affirmative allegation that they were the owners of the premises in question and that the relationship of mortgagors and mortgagee existed as between them and the plaintiff.

When it became apparent, during the course of trial in the superior court, that the litigation concerned title to property the value of which exceeded the jurisdictional limits of that court, the proceeding was terminated and certified to the district court pursuant to statute. Trial was thereafter had in the district court and judgment entered for the plaintiff for possession of 4881 Lowell Boulevard but denying the plaintiff's request for damages for rent. From this judgment the defendants sue out writ of error here.

The pertinent facts giving rise to this controversy have their inception in 1955. At that time the following instruments were drawn by the plaintiff's attorney and were executed by the parties:

(1) A warranty deed whereby Jennie Bloomquist, George Larson, Beatrice Larson, Walter Larson and Vernon Larson conveyed 4881 Lowell Boulevard to the plaintiff. The deed recites that the property was free from all encumbrances except a first deed of trust to the Midland Savings and Loan Association.

(2) A promissory note signed by the defendants payable to the plaintiff in the principal amount of $800.00.

(3) An escrow agreement whereby the Larsons and Jennie Bloomquist agreed to pay to the plaintiff the principal amount of the note, together with interest thereon at the rate of 1% per month, within sixty days.

'Schedule A' of this agreement recited the following:

'In the event the parties of the first part fail to perform in accordance with the terms and conditions of this agreement and the note of even date herewith and hereto attached, executed in favor of the party of the second part, The Escrow Holder, upon demand of the party of the second part in writing, and without notice to the parties of the first part, shall immediately deliver the attached warranty deed to the party of the second part; and should such event occur, this transaction shall be deemed a sale of all right, title and interest of the parties of the first part for the amount of said note together with all interest accrued thereon, and the note shall be delivered by the Escrow Holder to the parties of the first part upon the written request of the parties of the part (sic) and each of them.'

Each of the above instruments was delivered to The Central Bank & Trust Company as escrow holder.

The record discloses that George Larson had made several overtures to the plaintiff in an attempt to borrow $800.00 from him and that the plaintiff refused to lend him the money, presumably because of George's weak financial position.

Plaintiff, according to his testimony, was in the business of lending money for many years and denominated his pursuits as 'real estate, factor in accounts receivable, consulting.' After the plaintiff refused George's requests for the loan, George approached the members of his family--his mother Jennie Bloomquist and his brothers and sister--and proposed that they sign the instruments, the nature of which are now in controversy. No rights of any third parties are involved.

Vernon Larson testified that the understanding of the family was that the transaction amounted to a mortgage being placed on 4881 Lowell Boulevard to secure the loan of $800.00 from the plaintiff. The plaintiff's understanding of the transaction is illustrated by the following excerpts from his testimony:

'Q: Now, as I understand also, George Larson borrowed the $800 from you, is that correct?

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'A: In a form, yes. I can't answer that direct because it's hardly correct. It is and it isn't. It wasn't exactly a loan. It was an escrow agreement put up----

'Q: Let me just say it this way. George Larson came to you and wanted to borrow $800. You turned him down for lack of security, is that right?

'A: George Larson came to me several times before I ever would do anything. I kept turning him down but he was so pushed, I came around.

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'Q: All right. But he came to you one more time and you decided to make him a loan, is that right?

'A: I decided to make him a deal under certain conditions.

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'Q: Now then did you buy the property at the time?

'A: It was an escrow agreement of where he could pay off for so many days, as I remember.

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'Q: Now, the deed was put there for the purpose of giving you some security for the note, is that right, for the $800 that you loaned to George?

'A: It would be put up--if he didn't pay, I would have the property. If he did pay, he'd get it back.

'Q: (by Mr. Pehr) For the 60-day period that the note--within which the note was to be paid, the deed was to act as security for the note?

'A: He had the privilege of paying.

'Q: Certainly.

'A: But the escrow was--if it wasn't paid, I was to get the deed. If he paid, he was to get it. Is that what you mean? That's the only way I can answer it.

'Q: Were you buying the property?

'A: Well, how would you know? The way the deal, was made, you couldn't say I bought it or loaned on it; it was an escrow agreement.

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'Q: * * * As I understand the arrangement, George Larson, or the Larsons and Bloomquist could pay off the $800 during the 60-day period, is that right, and they would get back the deed?

'A: That is, I believe according to the agreement--whatever it says, they could do, but at the bank, not to me.'

It is the true nature of the transaction which concerns us here and if the true nature is that of security, the transaction will be given that effect no matter how many papers may be executed that give to the transaction an appearance other than the true one. The arrangement between the plaintiff and the defendants certainly comes as close to a formal security transaction as could have been accomplished without the execution of a mortgage or deed of trust. See Reitze v. Humphreys, 53 Colo. 177, 125 P. 518. A deed purporting to be an absolute conveyance may be proven by extrinsic evidence, either parol or written, to be in effect a mortgage. Pullara v. Hed, 121 Colo. 234, 215 P.2d 321; Jones v. Hazen, 116 Colo. 462, 181 P.2d 1016; Oppegard v. Oppegard, 90 Colo. 483, 10 P.2d 333.

Particularly pertinent to the situation before us is the following statement in 9 Thompson on Real Property, 1958 Replacement, Sec. 4713, p. 246...