Robinson v. Durston

• Decision Date: 25 September 1967
• Docket Number: No. 5044,5044
• Citation: 432 P.2d 75,83 Nev. 337
• Parties: W. Scott ROBINSON, Appellant, v. Wes DURSTON and Thunderbird Field, Inc., a Nevada corporation, Respondents.
• Court: Nevada Supreme Court

Page 75

432 P.2d 75

83 Nev. 337

W. Scott ROBINSON, Appellant, v. Wes DURSTON and Thunderbird Field, Inc., a Nevada corporation, Respondents.

No. 5044.

Supreme Court of Nevada.

Sept. 25, 1967.

[83 Nev. 338] Jones & Holt, Las Vegas, for appellant.

Harry E. Claiborne, Las Vegas, for respondents.

OPINION

GABRIELLI, District Judge:

This appeal is from judgment of trial court in favor of respondents (plaintiffs below) Wes Durston and Thunderbird Field, Inc., a Nevada corporation (hereinafter, unless otherwise indicated, the Court will use the name Durston to refer to both plaintiffs--since it was an exclusively Durston owned corporation--and he was not personally a party in interest but acted only for the corporate plaintiff) and against appellant (defendant below) W. Scott Robinson.

Durston commenced this action to have a grant deed absolute on its face, executed and delivered simultaneously with an option to repurchase declared to be a mortgage as security for a loan.

After trial, the Court held the transaction to be a loan with grant deed duly executed to secure same and Durston was ordered to pay Robinson 7% interest per annum on the actual sums, i.e., $95,000 ($70,000 December 29, 1961--$25,000 April 3, 1962), used from date they were made available to plaintiff until actual date paid and further ordered the 15.45 acres of unimproved land here involved returned to plaintiff.

Appellant assigns error in that the findings and judgment of the trial court are contrary to and unsupported by the law and evidence, and for its refusal to strike certain findings and to grant ones requested by appellant.

The question presented is whether the transaction was a loan and security or an absolute sale with option to repurchase. The applicable principles of law are not greatly in dispute. A deed absolute on its face may be shown to be a mortgage in equity and particularly so where the claim of usury is made or indicated. In such cases the form of the transaction will be disregarded and its substance and the intention of the parties at the time will control. The only question we need consider is: Did the parties intend that the transaction should be a mortgage? Either party has the right to testify at to what that intention was--weight is for trier of fact. Pomeroy's Equity Jurisprudence, Vol. 4, §§ 1192-1196 (5th ed. 1941); Annotations 79 A.L.R. 937; 155 A.L.R. 1104; 111 A.L.R. 448; and cases hereinafter cited. For convenience and clarity, Pomeroy's classic statement of the equitable principles here involved is quoted from his Section 1193:

"In general, all persons able to contract are permitted to determine and control their own legal relations by any agreements which are not illegal, or opposed to good morals or to public policy; but the mortgage forms a marked exception to this principle. The doctrine has been firmly established from an early day that when the character of a mortgage has attached at the commencement of the transaction, so that the instrument, whatever be its form, is regarded in equity as a mortgage, that character of mortgage must and will always continue. If the instrument is in its essence a mortgage, the parties cannot by any stipulations, however express and positive, render it anything but a mortgage, or deprive it of the essential attributes belonging to a mortgage in equity. The debtor or mortgagor cannot, in the inception of the instrument, as a part of or collateral to its execution, in any manner deprive himself of his equitable right to come in after a default in paying the money at the stipulated time, and to pay the debt and interest, and thereby to redeem the land from the lien and encumbrance of the mortgage; the equitable right of redemption, after a default is preserved, remains in full force and will be protected and enforced by a court of equity, no matter what stipulations the parties may have made in the original transaction purporting to cut off this right.

"This doctrine is based upon the relative situation of the debtor and the creditor; it recognizes the fact that the creditor necessarily has a power over his debtor which may be exercised inequitably; that the debtor is liable to yield to the exertion of such power; and it protects the debtor absolutely from the consequences of his inferiority, and of his own acts done through infirmity of will. The doctrine is universal in its application, and underlies many special rules of equity. ***"

This Court recently, in Kline v. Robinson, 83 Nev. 244, 428 P.2d 190 (1967) (incidentally the same Mr. Robinson here involved in a similar type transaction), stated in connection with the factual situation there presented:

"The trial judge in concluding there was no disputed factual issues to be presented to the jury, ruled that the evidence clearly and convincingly disclosed a sale with right of repurchase, and not a loan. Hence there was no question of usury. In light of the evidence reviewed above, he was not entitled to withdraw from the jury's consideration the nature of the transaction, as either a loan or a sale. The distinction between a sale and a loan has been succinctly defined in Milana v. Credit Discount Co., 27 Cal.2d 365, 163 P.2d 869, 165 A.L.R. 621 (1945);

" 'A sale is a transfer of the property in a thing for a price in money. The transfer of the property in the thing sold for a price is the essence of the transaction. The transfer is that of the general or absolute interest in property as distinguished from a special property interest. A loan, on the other hand, is the delivery of a sum of money to another under a contract to return at some future time an equivalent amount with or without an additional sum agreed upon for its use; and if such be the intent of the parties the transaction will be deemed a loan regardless of its form. [ Citations]

" 'In a sale the delivery of the absolute property in a thing and the receipt of a price therefor consummate the transaction. In a loan the initial transaction creates a debit and credit relationship which is not terminated until replacement of the sum borrowed with agreed interest.' Whether a transaction in the form of a sale with option to repurchase is in fact a sale, or a loan disguised as a sale so cover up a scheme to collect usurious interest is an issue for the jury. Cannon v. Seattle Title Trust Co., 142 Wash. 213, 252 P. 699 (1927); Rosemead Co. v. Shipley Company, 207 Cal. 414, 278 P. 1038 (1929); Britz v. Kinsvater, 87 Ariz. 385, 351 P.2d 986 (1960); Kawauchi v. Tabata, 413 P.2d 221 (Hawaii 1966).

"There is a wealth of evidence in this case from which a jury might find there was a loan rather than a sale, especially when instructed they can disregard form and look to the substance of the transaction and intent of the parties. Fiedler v. Darrin, 50 N.Y. 437 (1872), Annot., 154 A.L.R. 1065."

The burden of proof is upon the one asserting it was a loan and he must establish that fact by evidence which is cogent, clear, and convincing and leaves no doubt upon the mind. Bingham v. Thompson, 4 Nev. 224 (1868); Pierce v. Traver, 13 Nev. 526 (1878). Durston is entitled to have it enforced as a mortgage if he can carry his burden of proof. It is not our function to weigh the testimony, but only to determine whether there is sufficient evidence to support the trial court's findings and judgment. This Court stated inMcCall v. Carlson, 63 Nev. 390, 413, 172 P.2d 171, 182 (1946), "Having the witnesses before him, and the opportunity of observing their demeanor and manner of giving their testimony, he was in a better position than we are to evaluate such testimony and determine its proper weight. There being a conflict in the evidence as to the question of adequacy or inadequacy of consideration we shall follow the well-established rule and not disturb the findings in that respect, of the trial court, there being substantial evidence to support them." Citing cases. The facts and circumstances of each case are always carefully examined.

We have concluded, giving due deference to the findings of the learned trial court, upon the facts presented as to the intention and purpose of the parties at that time (December 29, 1961) that there is substantial evidence to support the conclusion and judgment reached.

The facts fairly and substantially established by this record are as follows:

That prior to December 29, 1961, Durston and Robinson were personal friends and at the time were members of Board of Trustees of the First Methodist Church in Las Vegas. Prior to May, 1961, Durston had acquired an option to purchase from one Hickson approximately 61 acres of unimproved land (the 15.45 acres here involved being a portion thereof) fronting on Highway 95, approximately four and one-half miles northwest of Las Vegas in the vicinity of what was then the Thunderbird Airport owned and operated by Durston. The purchase price was $1,000 per acre, option was to expire on January 1, 1962. Durston opened an escrow for the purpose of exercising his option but was "in dire need of money" (Robinson's words) at the time he was seeking a loan and at all other times material hereto. He was compelled to obtain extensions of time on the option from Hickson. Some time before the close of this escrow on December 29, 1961, Durston had sought out his good friend Robinson who was interested in investing money privately, resulting in Robinson's $70,000 deposit in escrow on December 29, 1961, two days before expiration date. The escrow was then closed with deeds being recorded from Hickson to Durston and Durston to Robinson and option to repurchase from Robinson to Durston for $85,000 to be exercised not sooner than July 15, 1962, or later than January 1, 1963. $77 in Internal Revenue Stamps were affixed. Attached to the deed was the necessary corporate certificate authorizing the "conveyance" to Robinson. Of the $70,000 put in escrow by Robinson, $8,189.48 went to Durston--the balance was...