Marple v. Wyoming Production Credit Ass'n

• Decision Date: 29 February 1988
• Docket Number: No. 87-170,87-170
• Citation: 750 P.2d 1315
• Parties: George D. MARPLE and Esther M. Marple, Appellants (Plaintiffs), v. WYOMING PRODUCTION CREDIT ASSOCIATION; and to all Other Persons Unknown Claiming any Legal Equitable Right, Title, Estate, Lien or Interest in the Real Property Described in the Complaint Adverse to Plaintiffs' Title or any Cloud on Plaintiffs' Title Thereto, Named as Does I to XX, Inclusive, Appellees (Defendants), James E. Pyer and Betty J. Pyer, (Defendants).
• Court: Wyoming Supreme Court

Page 1315

750 P.2d 1315

George D. MARPLE and Esther M. Marple, Appellants (Plaintiffs), v. WYOMING PRODUCTION CREDIT ASSOCIATION; and to all Other Persons Unknown Claiming any Legal Equitable Right, Title, Estate, Lien or Interest in the Real Property Described in the Complaint Adverse to Plaintiffs' Title or any Cloud on Plaintiffs' Title Thereto, Named as Does I to XX, Inclusive, Appellees (Defendants) James E. Pyer and Betty J. Pyer, (Defendants).

No. 87-170.

Supreme Court of Wyoming.

Feb. 29, 1988.

H. Richard Hopkinson, Worland, for Marple.

William R. Shelledy, Jr., Worland, for Wyoming Production Credit Ass'n.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT and MACY, JJ.

URBIGKIT, Justice.

This documentarily misconstructed and mispleaded real estate sales transaction case is presented on appeal from summary judgment granted against the property seller in favor of the chronologically subsequent lender to whom the buyer mortgaged the property. In application of recorded instruments and record demonstration of the lender's knowledge of the retained vendor security interest and unpaid purchase price, we reverse and remand, and do not address other academically interesting but legally unpersuasive inquiries involving vendor's liens or merger as being inapplicable to the facts of this case. Tri-State National Bank v. Saffren, Wyo., 726 P.2d 1081 (1986).

In July 1978, George and Esther Marple, as sellers (appellants), entered into a real estate sales arrangement for the sale of their 15-acre home and subdivision tract to James and Betty Pyer for a purchase price of $145,000. The unusual nature of the litigation was begun by the curious arrangement initiated by the sales transaction which has been considered by litigants and the trial court to be an installment sales transaction. We do not concur with that exception since title was not retained in seller. E. George Rudolph, The Wyoming Law of Real Mortgages at 147 (1969). See Baldwin v. McDonald, 24 Wyo. 108, 156 P. 27, 37 (1916):

" ' * * * Whether any particular transaction does thus amount to a mortgage or to a sale with a contract of repurchase must, to a large extent, depend upon its own special circumstances; for the question finally turns, in all cases, upon the real intention of the parties as shown upon the face of the writings, or as disclosed by intrinsic evidence.' " Quoting from Pomeroy's Equity Jurisprudence § 1195 (3d ed.).

Cf. Angus Hunt Ranch v. REB, Inc., Wyo., 577 P.2d 645 (1978).

The agreement provided for conveyance of the property to buyer, and was arranged by two separate deeds, since apparently a portion of the real estate was not warrantable in title. Provision was then made in sales agreement for an escrow to be established in which a "default" quitclaim deed would be escrowed to reconvey upon buyer default. A self-standing promissory note was also executed, evidencing the purchase price balance as computed from a sales price of $145,000, an earnest money deposit of $1,000, and a "down payment" of $49,500 which was realized by the apparently expected action of the buyer borrowing the down payment by means of a loan on the property following conveyance. The remaining balance of $94,500, as documented in the promissory note and defined in the agreement, was payable on an amortized schedule of 20 annual installments. Consequently, the transaction invoked a sale with no significant down payment, in which the buyers borrowed the down payment based upon the security of the purchased property. All this occurred, most surprisingly, with apparent "assistance" of legal advice. ¹

One other step occurred in the process as apparently part of the organized plan and arrangement, which involved the recording of the agreement in order to make a record of the retained security interest in the property held by seller. Why the normal, usual, and customary arrangements of subordination agreement, reconveyance, or even the execution of a normal form mortgage were not used is not demonstrated in the record, but it is indicated that sellers' attorney thought that conveyance could provide opportunity for foreclosure of the real estate lien without the necessity of formal foreclosure proceeding by the use of an escrowed reconveyance quitclaim default deed as apparently provided in order to bypass debtor right of redemption.

Buyers did obtain the down payment by executing a mortgage on the purchased property in favor of the First National Bank of Worland (First National Bank) in an amount undefined in the record, but apparently of about $49,500, and sequentially, pursuant to recording dates and in accord with the indicated intent of the parties, from available documents, the arrangement was completed by the First National Bank, providing a first lien and arranging to retain for sellers a security interest subordinate thereto in the amount of the unpaid purchase price of $94,500, by recording the sales agreement. Since no initial reconveyance of the property was included in the transactional scheme, title in fee was vested in the buyer, subject to First National Bank's first lien, and secondary lien rights for seller. Contrary to the concept of litigants and the trial court, we do not find presented an installment sales contract since legal title to the property is vested in buyer and all that remained in seller was a right to payment and reserved security interest. Baldwin v. McDonald, supra. Concurrently executed sales transaction documents should be considered together. Hensley v. Williams, Wyo., 726 P.2d 90 (1986); DeLoney v. Dillard, 183 Ark. 1053, 40 S.W.2d 772 (1931); Ashbrook v. Briner, 137 Neb. 104, 288 N.W. 374 (1939). See Rush v. Anestos, 104 Idaho 630, 661 P.2d 1229 (1983). Although the court gives effect to the intention of the parties as defined by the text of written agreements made, a security interest arrangement, in case of doubt, should be defined as a mortgage in order to protect all parties by denial of forfeiture and affording statutory rights of redemption. Martino v. Frumkin, 11 Ariz.App. 160, 462 P.2d 853 (1970). The status of executory sales agreement is foreclosed by actual conveyance of fee title. Rush v. Anestos, supra.

Thereafter, as expectably occurred in the nature of events, Pyers commenced business financing for a greenhouse operation about three years later by executing real estate mortgages as encumbrances on the property to the Wyoming Production Credit Association (PCA), first in the amount of $22,500, and then in the amount of an additional $100,000. After financial troubles developed (or continued), Pyers filed bankruptcy. With the recognized first lien position of the First National Bank, this litigation ensued as a Marple quiet-title action to contest priority security rights for themselves, as sellers, against the PCA, who by counterclaim sought an order of foreclosure and a declaration of priority. Never to keep the case simplified, sellers had earlier extracted the quitclaim deed from the escrow file upon default of payments on the promissory note and recorded, followed by a notice to quit served on Pyers. The litigation included as defendants both Pyers, as buyers, and the PCA, as holder of the two mortgages, and was immediately delayed by automatic stay under 11 U.S.C. § 362(a) (1982) derived from Pyers' bankruptcy.

After vacation of bankruptcy stay, the case matured to present status by a motion for summary judgment filed by Marples which contended in trial brief that justification existed for judgment as a matter of law by a priority equitable mortgage arising from the sales transaction. PCA reciprocated with a summary judgment motion, conversely contending for a priority interest by recorded mortgages as adverse to the retained interest of vendors, with the resulting court decision being to favor the lender over the vendors. ² Disposition of the case occurred in summary-judgment order, wherein a decision on the litigated issues between Pyers and Marples was not made, but:

" * * * [T]he motion for summary judgment filed by the Plaintiffs [Marples] is hereby denied and * * * the motion for summary judgment of the defendant is hereby granted and the Court further states that the subject land of said lawsuit is subject to a mortgage in favor of the FIRST NATIONAL BANK and is subject to a mortgage in second position to the Defendant, WYOMING PRODUCTION CREDIT ASSOCIATION."

No order of foreclosure, for which the prayer had been made and to which PCA was clearly entitled, was included with the litigated issue being one of lien priority only. Financial statements furnished by Pyers to PCA predating the first recorded PCA mortgage referred to the 15-acre tract "Mortgage to Marple" with balance due in 1981 of $89,361 as a listed long-term liability, and showed the property with a stated value of $178,292 as borrowers' principal asset. The total of all asset equity of $77,643 was derived after the $89,361 long-term mortgage indebtedness of Marples was deducted. The record also contains evidence that some portion of the advances from PCA loan proceeds was knowingly provided to make payments on the...