Robar v. Ellingson, 9830

• Decision Date: 29 January 1981
• Docket Number: No. 9830,9830
• Citation: 301 N.W.2d 653
• Parties: Charles ROBAR, a/k/a Charles L. Robar, and Floureine Robar, a/k/a Floureine W. Robar, Plaintiffs and Appellees, v. Robert ELLINGSON, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 653

301 N.W.2d 653

Charles ROBAR, a/k/a Charles L. Robar, and Floureine Robar, a/k/a Floureine W. Robar, Plaintiffs and Appellees, v. Robert ELLINGSON, Defendant and Appellant.

Civ. No. 9830.

Supreme Court of North Dakota.

Jan. 29, 1981.

J. Thomas Traynor, of Traynor & Rutten, Devils Lake, for plaintiffs and appellees.

Scott R. Thompson, of Foughty, Christianson & Thompson, Devils Lake, for defendant and appellant.

VANDE WALLE, Justice.

Robert Ellingson appeals from a judgment against him and in favor of Charles and Floureine Robar rendered in the district court of Ramsey County. This judgment resulted from a dispute over ownership of property. We affirm.

In 1957, the Robars purchased the property, a parcel of land with a house, which is the subject of this suit. In 1974, the Robars rented the property to Robert and Audrey Ellingson. Approximately one year later the Robars conveyed the property to the Ellingons. The purchase price was $10,000 and the terms were $2,000 down with a note and mortgage for $8,000 payable in monthly installments of $95 with an annual interest rate of 71/2 percent.

Marital difficulties beset the Ellingsons within two years after they purchased the property. Audrey filed for divorce on March 10, 1977. By that time the Ellingsons had fallen in arrears on their mortgage payments and on March 16, 1977, Robert Ellingson made a lump-sum payment which brought the account up to date.

Apparently bitter conflict prevailed in the divorce negotiations regarding settlement of property and custody issues. During this period the Ellingsons again became delinquent in their monthly payments.

On August 26, 1977, Audrey signed a quitclaim deed conveying her interest in the property to the Charles Robars. Five days later, the Ellingsons executed a stipulation in the divorce case. The stipulation provided, in part:

"I

"That the defendant shall pay to the plaintiff a lump sum payment of One Thousand Dollars ($1,000.00) and that immediately upon receipt thereof, plaintiff shall vacate the house and premises heretofore owned by the parties located at 110 6th Ave., Devils Lake, North Dakota.

"II

"That immediately upon execution of this Stipulation and settlement agreement the parties hereto shall execute a Quit Claim Deed on the house and premises located at 110 6th Ave., Devils Lake, North Dakota, to Charles Robar.

"XV

"That the plaintiff shall upon the payment of the lump sum settlement, provided in Paragraph I of this Stipulation deliver that home and premises located at 110 6th Avenue, Devils Lake, North Dakota, to Charles Robar, in a fit and proper condition and that the plaintiff agrees to indemnify said Robert Ellingson for any damages caused to said premises."

On September 19, 1977, Robert Ellingson and Charles Robar met with Ellingson's attorney, Richard Clapp, in his office. The nature of the conversation at that meeting has become an issue in this appeal, with Ellingson contending that an oral agreement was reached whereby the quitclaim deeds from Robert and Audrey Ellingson would serve as extra security on the original mortgage and that Robar would reconvey the property to Robert Ellingson sometime during the spring of 1978. At any rate, after some discussion, it was decided that Ellingson would pay Robar $100 per month after Ellingson took possession of the house from Audrey. Ellingson then signed a quitclaim deed conveying his interest in the premises to Robar. The two men then delivered the quitclaim deed signed by Audrey Ellingson and the quitclaim deed signed by Robert Ellingson to Howard Toso, a banker who was overseeing Robar's accounts in Devils Lake. At the same time, Ellingson gave Toso $600 and thus brought his delinquent house payments up to date.

Pursuant to the divorce stipulation, Robert paid Audrey $1,000. Ellingson then took possession of the house during the fall of 1977. While in possession he painted the exterior and interior of the house and carpeted the living room. However, he again fell behind in his monthly payments to Robar. The payment record reveals that he made a $100 payment on December 8, 1978, and payments of $500 and $170.43 on January 20, 1978, and February 28, 1978, respectively, for back taxes for the years 1975, 1976, and for all but $10.91 of the 1977 taxes.

By letter dated March 2, 1978, Robar asked Toso to check his account "from September 1975 thru February 1978, to make sure just how many $95.00 a month payments Robert Ellingson has made on the house." The letter continued:

"I believe we have done all that is possible to help him keep up the payments.

"We just can't go on this way, as much as we hate to take the house back, it seem like we will have to and resell it to some one else."

By July 28, 1978, Robar, figuring that Ellingson was about $700 to $800 behind in payments, contacted Ellingson and discussed the situation with him. At that time Ellingson paid Robar $200 cash, gave him a check for $500, and also gave him the remaining $10.91 for the 1977 real estate taxes. Later that same day, Mrs. Robar went to see Ellingson for the purpose of introducing him to one of the new owners of the property and to instruct him to begin making his monthly payments to the new owners. Ellingson immediately stopped payment on the $500 check but continued to live in the house until October 1978, when he rented the house to a third party for $175 per month.

On September 1, 1978, the new owners instituted a forcible entry and detainer action against Ellingson. Because Ellingson's answer raised a question of real estate title the matter was transferred from county court to district court. Subsequently, Ellingson initiated a quiet-title action. Shortly thereafter, the Robars and the new owners canceled their sale-purchase agreement and the Robars were then substituted as the plaintiffs in this action. Ellingson's action was tried with this action on stipulation of the parties. This case was heard before the district court without a jury and by memorandum opinion the court concluded that Ellingson had not met his burden of proving "that the quit claim deed, or deeds, absolute in its or their terms, was or were mortgages." This appeal followed.

The primary issue raised on this appeal is whether the quitclaim deeds from the Ellingsons to Robar were meant to serve as only added security on the original mortgage or were intended to reflect an absolute sale. ¹

The long-standing rule in this State is that in determining if a deed is in fact a mortgage, the court looks at all the surrounding circumstances. Hyland v. Tousley, 67 N.D. 612, 275 N.W. 340 (1937). Further, the burden of proof in a case of this nature is more stringent than in the normal situation:

"The presumption that an instrument executed with the formality of a deed or a contract deliberately entered into, expresses on its face its true intent and purpose, is so pervasive that he who would establish the contrary must go far beyond the ordinary rule of preponderance. To demand less would be to lose sight of the presumption, which is one of the strongest disputable presumptions known to law. Hence, courts have, with great uniformity, in this class of cases, required the proof that should destroy the recitals in a solemn instrument to be clear, specific, satisfactory, and of such character as to leave in the mind of the chancellor no hesitation or substantial doubt." Jasper v. Hagen, 4 N.D. 1, 6, 58 N.W. 454, 456 (1894). ²

This standard is not only applicable at the trial level, but is also the measure which this court employs on review to determine whether or not a deed operates as a mortgage. Jasper v. Hagen, supra.

Ellingson begins his argument by claiming:

"The proper ruling should have been that due to the relationship of mortgagor and mortgagee existing prior to the conveyance by the Ellingsons to Charles Robar, that the deeds were only given as further security for the mortgage between the parties, ..."

Essentially, Ellingson is asking this court to declare the transaction in dispute a mortgage and thereby preserve his equity of redemption. This equity of redemption has long been regarded as an incident of every mortgage. Peugh v. Davis, 96 U.S. 332, 24 L.Ed. 775 (1878). However, the sole fact that a mortgagor-mortgagee relationship exists as to the same property involved in the creation of a grantor-grantee relationship does not compel us to declare a deed, absolute on its face, a mortgage. There exists no prohibition against a separate and distinct contract, entered into in good faith and for good consideration, wherein a mortgagor conveys his interest in the mortgaged property along with his corresponding equity of redemption to the mortgagee. While Ellingson directs us to the maxim "Once a mortgage, always a mortgage," we refuse to interpret that doctrine as applying to future contracts.

Generally speaking, a mortgagor who contends that his deed to the mortgagee was actually a mortgage rather than a sale has two avenues of attack to choose from or to use simultaneously. First, the contesting party may allege that under the circumstances surrounding the transaction he was treated unfairly through overreaching on the part of the mortgagee. Second, the mortgagor may attempt to demonstrate that all the facts and circumstances leading up to, during, and subsequent to the transaction reflect that the intentions of the parties were that the deeds serve as security rather than as instruments for an absolute sale. While Ellingson alludes to the former argument, he concentrates on the latter.

The attitude of courts of equity toward a transaction in which the equity of redemption is conveyed from the mortgagor to the mortgagee has been one of suspicion. Generally, where such a transaction is brought before the court, it is subject to close scrutiny in an effort to determine whether it was voluntarily entered into on the part of the mortgagor under conditions free of undue...