Walker v. Brooks

• Decision Date: 28 October 2015
• Docket Number: No. 27583.,Appellate Case No. 2013–001377.,27583.
• Citation: 778 S.E.2d 477,414 S.C. 343
• Parties: Roger Wendell WALKER, as the Personal Representative of the Estate of Kenneth Ray Walker and individually as a surviving child and Devisee of the Decedent, Kenneth Ray Walker (d/o/d 09/20/2008), Jimmy Ray Walker, and Wilson Whitney Walker as surviving children and Devisees of the Decedent, Kenneth Ray Walker, who died testate on 09/20/2008, Petitioners, v. Catherine W. BROOKS, Respondent.
• Court: South Carolina Supreme Court

414 S.C. 343

778 S.E.2d 477

Roger Wendell WALKER, as the Personal Representative of the Estate of Kenneth Ray Walker and individually as a surviving child and Devisee of the Decedent, Kenneth Ray Walker (d/o/d 09/20/2008), Jimmy Ray Walker, and Wilson Whitney Walker as surviving children and Devisees of the Decedent, Kenneth Ray Walker, who died testate on 09/20/2008, Petitioners,

v.Catherine W. BROOKS, Respondent.

Appellate Case No. 2013–001377.

No. 27583.

Supreme Court of South Carolina.

Heard May 5, 2015.

Decided Oct. 28, 2015.

Gregory S. Forman, of Gregory S. Forman, PC, of Charleston, for petitioners.

Everett H. Garnerand Benjamin A. Dunn, II, both of Holler, Garner, Corbett, Ormond, Plante & Dunn, of Columbia, for respondent.

Opinion

Justice HEARN.

In this familial dispute over property, it is uncontradicted that Kenneth Walker (Decedent) deeded to his sister, Catherine Brooks, approximately forty acres of property in two separate transfers before his death. The question is whether the property was deeded to Brooks freely, or subject to an equitable mortgage which would require her now to return it to Decedent's estate. We hold no equitable mortgage exists; accordingly, we remand.

FACTUAL/PROCEDURAL HISTORY

Decedent owned and lived on a 200–acre farm in Colleton County. In 1996, Decedent conveyed 26.52 acres of the farm to Brooks for the purported amount of $13,250.00.¹In 2002, Decedent conveyed an additional 15.16 acres to Brooks for $5.00.

Brooks was Decedent's older sister, and the two had a close relationship. Beginning in 1993, Brooks helped Decedent with his outstanding debts, paid his electric and telephone bills, bought groceries, and gave him cash for living expenses. Additionally, Brooks helped Decedent receive social security benefits and served as trustee for those benefits.

According to Brooks, Decedent gifted the property to her in exchange for this considerable emotional and financial assistance; however, Brooks did not exercise dominion or control over the property after the conveyances. Not only did Decedent continue to live and work on the farm, but he often cashed the rent checks from a commercial tenant occupying a building there, only periodically giving money to Brooks.

In 2004, at Decedent's request, Brooks handwrote a note stating the following:

[Decedent] would like for all the money from Larry Herndon²to be paid to [Brooks] until she is paid sixty thousand dollars, at that time she is to release to [Decedent] all the property off Cooks Hill Road at Walterboro, S.C. Any money [Decedent] pays [Brooks] will be toward the sixty thousand dollars.

The parties also generated a ledger documenting payments purportedly made from Decedent to Brooks. The ledger begins at $60,000 and the last entry shows $27,400 remaining to be paid. Brooks' initials appear next to many of the entries.

Before Decedent's death, his attorney sent a letter to Brooks citing the above agreement, and requesting her to tender the deed in exchange for $2,893.87.³Brooks refused. After Decedent's death, his son and personal representative, Roger Walker, offered to pay Brooks $27,400 in exchange for her returning title to the farm. After Brooks denied his offer, this dispute arose.

Initially, Brooks filed a complaint against Walker for converting funds and resources related to the property she alleged rightfully belonged to her. Walker then filed a separate complaint for specific performance of a contract for sale of land and a declaratory judgment action based on an express, constructive, or resulting trust theory. The cases were consolidated and tried before a special referee.

The special referee held that although testimony from both parties was inconsistent, the handwritten note and ledger showed Decedent was indebted to Brooks at the time of his death, and thus the conveyance was intended as security for this debt. Accordingly, the special referee held that “while this is equally susceptible of being a resulting trust, I am more of the opinion that it so closely tracks the facts of [F. Gregorie & Son v. Hamlin,273 S.C. 412, 257 S.E.2d 699 (1979)] that it is more properly an equitable mortgage.” The special referee held the estate was entitled to the property upon payment to Brooks of $27,400, and did not reach Walker's specific performance argument.

Brooks appealed to the court of appeals, and Walker raised specific performance as an additional ground to sustain the special referee's order. The court of appeals reversed the special referee's equitable mortgage finding, but did not address Walker's specific performance argument.Walker v. Brooks,403 S.C. 212, 742 S.E.2d 869 (2013). This Court granted certiorari to review the opinion of the court of appeals.

ISSUE PRESENTED

Did the court of appeals err in reversing the special referee's finding that an equitable mortgage existed?

STANDARD OF REVIEW

On appeal from an action in equity, this Court may find facts in accordance with its view of the preponderance of the evidence. Townes Assoc., Ltd. v. City of Greenville,266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976). However, we need not disregard the findings of the special referee, who was in a better position to weigh the credibility of witnesses. Tiger, Inc. v. Fisher Agro, Inc.,301 S.C. 229, 237, 391 S.E.2d 538, 543 (1989).

LAW/ANALYSIS

Walker argues the court of appeals erred in reversing the special referee's finding that an equitable mortgage existed. We disagree.

“[A]n equitable mortgage is a transaction that has the intent but not the form of a mortgage which a court will enforce in equity to the same extent as a mortgage.” 59 C.J.S. Mortgages§ 36. Stated simply, where one party conveys a deed to another, but the evidence surrounding the transaction indicates the land transfer was intended only to secure a debt, a court may refuse to treat the conveyance as a sale and instead equitably impose on the parties the mortgage they intended to create. Id.

“The essential feature or essence of an equitable mortgage is the intent of the parties.” Id.The intent of the parties is to be evaluated at the time of conveyance. 59 C.J.S Mortgages§ 71. As explained in § 71:

The character of the transaction is fixed at its inception, and as a general rule, the only facts and circumstances that may be considered in determining whether a mortgage was intended are those which existed at the time the instrument was executed. Subsequent developments may throw a light on the original meaning of the parties, however.

Id.; see Gregorie,273 S.C. at 417, 257 S.E.2d at 701(“[A court] must search for the intention of the parties at the time of the transaction and not as any of them may interpret their intentions at this time.”); see alsoWilliams v. Griffith,310 Ill.App. 574, 35 N.E.2d 95, 97 (1941)(“The conveyance, in such instance, takes effect when delivered, and its character is fixed at that time, and the intention of the parties at that time is controlling.”). The existence of an equitable mortgage must be shown by clear and convincing evidence. Gregorie,273 S.C. at 434, 257 S.E.2d at 709(Ness, J., dissenting).

This Court recognized the existence of an equitable mortgage in Gregorie,a case relied on heavily by the special referee. There, the Gregorie family owned a 600–acre piece of property in Mount Pleasant called “Oakland Plantation.” Id.at 415, 257 S.E.2d at 700. The family also owned an oil distributorship, known as F. Gregorie & Son, which was experiencing financial difficulty. Id.Osgood F. Hamlin, neighbor and friend to the Gregorie family, had loaned money to the business in the past. Id.Facing heavy debt and possible foreclosure of its business from major creditors, F. Gregorie & Son entered into a transaction which had the effect of borrowing $35,000 from Hamlin. Id.at 416–17, 257 S.E.2d at 701. The Gregorie family in turn deeded to Hamlin its 600–acre tract in Mount Pleasant. Id.Contemporaneously with this loan, the parties entered into an agreement which provided “the aforesaid tract of land would simultaneously be conveyed by Ferdinand Gregorie to O.D. Hamlin as security for his additional financial assistance,” and provided the Gregorie family could repurchase the property from Hamlin for $79,000. Id.at 418, 421, 257 S.E.2d at 702–03.

Analyzing the transaction to determine whether the conveyance to Hamlin was an outright sale or an equitable mortgage, the court found it important that prior to the conveyance, there was an existing debt between F. Gregorie & Son and Hamlin. Id.at 419, 257 S.E.2d at 702. The Court also noted that because the parties entered into the separate agreement contemporaneously with the conveyance, it evidenced the parties' intentions for the property to act as security. Id.at 422, 257 S.E.2d at 703. Additionally, the Court considered that the discussions and dealings between the parties prior to the conveyance never indicated that an outright sale was contemplated. Id.at 423, 257 S.E.2d at 704. Finally, the Court found it crucial that although the debt between the parties was only $35,000, the property was valued at approximately $600,000. Such a great disparity, according to the Court, indicated the conveyance of the property to Hamlin was intended only as security, and not a sale. Id.at 424–25, 257 S.E.2d at 705.

We find the facts of the instant case inapposite to the facts of Gregorie.Walker offers no evidence—apart from his own self-serving testimony and the fact Brooks did not exercise control over the property—that the parties intended to establish an equitable mortgage at the timethe property was conveyed to Brooks. While Walker's argument seemingly depends on the efficacy of the handwritten note and ledger, his own testimony indicates these were conceived and completed at a later time:

Q: Tell us what your understanding of [the ledger] was, or your knowledge of it.

A: How this got started is shortly after 2002, when the last deeds were done ... my dad wanted to—when he gave her money, he wanted to—he wanted a ledger to show

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