Thomas v. Ogden State Bank

• Decision Date: 18 August 1932
• Docket Number: 5180
• Citation: 13 P.2d 636,80 Utah 138
• Court: Utah Supreme Court
• Parties: THOMAS v. OGDEN STATE BANK et al

13 P.2d 636

80 Utah 138

THOMAS v. OGDEN STATE BANK et al

No. 5180

Supreme Court of Utah

August 18, 1932

Appeal from District Court, First District, Box Elder County; M. C Harris, Judge.

Action by Thomas Thomas against the Ogden State Bank and others. From a judgment dismissing the action, plaintiff appeals.

AFFIRMED.

Harley W. Gustin and R. Leslie Hedrick, both of Salt Lake City, for appellant.

Wade M Johnson and Valentine Gideon, both of Ogden, for respondents.

STRAUP J. CHERRY, C. J., and ELIAS HANSEN, FOLLAND, and EPHRAIM HANSON, JJ., concur.

OPINION

STRAUP, J.

The court below sustained a general demurrer to the amended complaint of the plaintiff, Thomas Thomas, and upon his refusal to further plead, the action was dismissed. He appeals. The ruling sustaining the demurrer is thus the only question presented for review.

By the complaint it in substance is alleged that the plaintiff, in September, 1923, and prior thereto and at the commencement of the action, was the owner and entitled to the possession, "subject to certain liens and encumbrances," of about 53 tracts of land described in the complaint aggregating about 24,000 acres consisting of grazing lands situate in Box Elder county; that in September, 1923, the plaintiff was indebted to the defendant the Ogden State Bank in the sum of $ 70,000, to Charles S. Morris $ 47,700, H. C. Simpson $ 15,500, and Warren L. Shobert $ 1,300, "all of which indebtedness was then secured by various liens and encumbrances on portions of the real property" described in the complaint, which real estate was used for grazing, breeding, and raising a large number of sheep; that the "plaintiff was unable to meet the obligations" referred to "as the same became due," and that "it then was an inopportune time to secure the full value for said land then owned and possessed by the plaintiff or to sell the same on execution sale or otherwise, and satisfy said obligations therefrom"; that the defendant creditors, just referred to, for the purpose of securing the several indebtednesses due them and to cause the indebtedness "to be paid, liquidated and discharged and in furtherance thereof to retain plaintiff's holdings and ownership in and to the said real property intact, and to operate the same for their benefit and to the end that their respective claims be paid as aforesaid," in September, 1923, caused the defendant Grouse Creek Land and Livestock Company to be incorporated and induced the plaintiff "to convey by deeds and conveyances absolute in form to the said defendant Grouse Creek Land and Livestock Company for the purposes aforesaid and to secure said indebtednesses, the legal title to all the several pieces and parcels of real property" described in the complaint, but that "said deeds and conveyances were intended by said parties as security for the payment of said indebtedness and said deeds and conveyances were made to the Grouse Creek Land and Livestock Company for the purpose of holding the legal title to said real property and to manage and operate the same for the purpose of grazing, raising and breeding of sheep thereon, and all to the end that the several claims and indebtedness in favor of said creditors be liquidated and discharged as aforesaid"; that in pursuance of such plan, and as a part of such transaction, "the capitalization of the Grouse Creek Land and Livestock Company in April, 1924, was increased to the sum of $ 200,000 divided into 2,000 shares of the par value of $ 100 a share and that the several creditors," heretofore mentioned, "released on record their several liens and encumbrances against the real property conveyed by the plaintiff to the Grouse Creek Land and Livestock Company as aforesaid, and took in lieu thereof and as a substitute therefor capital stock of the said Grouse Creek Land and Livestock Company in the amount of the par value of their respective claims and indebtednesses as aforesaid; that said capital stock so issued represents and evidences the debts owing to said creditors, respectively, by the plaintiff"; that at the same time a written agreement was entered into by and between the plaintiff as party of the first part, the Grouse Creek Land & Livestock Company as party of the second part, and the defendant creditors heretofore mentioned as parties of the third part, a copy of which agreement was attached to the complaint and made a part thereof, which, among other things, recited the organization of the Grouse Creek Land & Livestock Company; that the plaintiff had deeded to it "his equity in certain lands situate in Box Elder County" described in the complaint, "subject, however, to the claims of the parties of the third part"; that the plaintiff was indebted to the third parties, to the Ogden State Bank $ 70,000, to Charles S. Morris $ 47,700, to Heber C. Simpson $ 15,500, and to Warren L. Shobert $ 1,300. Such contract further recited that it was "mutually understood and agreed that the parties of the third part shall relinquish their claims against said property and in lieu of said claims and in payment of their respective indebtedness shall take capital stock in the said party of the second part of the par value of said claims, it being further understood and agreed that the said parties of the third part are simultaneously herewith to give and grant to the party of the first part an option to purchase said stock upon the terms and conditions as set out in said option, and that said option shall represent and embody all the right, title and interest of said party of the first part in said real estate and said stock shall be in full payment of the claims of the respective parties of the third part."

It further is alleged that simultaneously with the execution of the agreement just referred to, a further agreement was entered into by and between the plaintiff as party of the first part and the defendant creditors heretofore mentioned as parties of the second part, by the terms of which the second parties granted unto the plaintiff an option to purchase the capital stock of the Grouse Creek Land & Livestock Company issued to them, a copy of which agreement was also attached to the complaint and made a part thereof, which, among other things, recited that the second parties were "the owners of the amount of capital stock of the Grouse Creek Land and Livestock Company, Ogden State Bank 700 shares, Charles S. Morris 477 shares, Heber C. Simpson 155 shares, and Warren L. Shobert 13 shares"; that the plaintiff was desirous of purchasing such stock, whereupon, for a consideration of $ 10 and other valuable consideration, the second parties granted unto him "an option to purchase said stock at the price of $ 100 a share with interest at the rate of 11% per annum for the first three years after date of the agreement (April 1924), 9% for the following year, and 8% for the last year"; that the option granted was to be exercised at any time within five years from the date of the agreement; "and that in the event that the said party of the first part shall not exercise his option within said period, all his right, title and interest under and in pursuance of this agreement shall terminate." The contract further provided that the stock was to be put in escrow and when paid for as by the option provided was to be delivered to the plaintiff and that the "option hereby granted is as to said stock as a whole."

It then further is alleged in the complaint that the deeds of conveyances made by the plaintiff to the Grouse Creek Land & Livestock Company and the contracts heretofore referred to, while on their face absolute and unconditional, yet in fact were "agreements of mortgage and for security and intended as such by and between" all of the parties concerned, and "were a part of the plan whereby the Grouse Creek Land and Livestock Company was to take over the title to the real property, possess, occupy and manage the same," to the end "that the several indebtednesses due and owing and existing in favor of the said creditors be paid and discharged, and said real property to then become subject to the use, control, ownership and possession of the plaintiff"; that to the extent that such agreements or conveyances "purported to release or relinquish plaintiff's equity of redemption in and to said real property, they and each of them were unlawful and void"; and that, unless the court declared the conveyances and agreements to be a mortgage or mortgages, "the defendants will deprive the plaintiff of his right of redemption therefrom."

The prayer is that the conveyances and contracts referred to in the complaint be declared to be a mortgage or mortgages, the plaintiff the mortgagor and redemptioner and "entitled to the redemption in and to the several pieces and parcels of real property" mentioned and described in the complaint, "subject only to the payment of all proper claims and demands to which said defendants or any of them may be lawfully entitled," and for general relief.

It is not alleged what the "liens and encumbrances" on the real estate were when in September, 1923, the plaintiff by deed conveyed the properties to the livestock company. It is alleged that the indebtedness then owing the several defendant creditors "was secured by various liens and encumbrances"; but the character of such liens, whether mortgages or otherwise, is not alleged. They were of record for it is alleged they "were released on record." The allegations in such particular were not challenged by special demurrer, and thereunder the plaintiff would be permitted to prove that the liens were mortgages. Neither by brief not argument did the plaintiff in any way characterize the liens. The respondents, however, in their brief referred to them as mortgages....