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A creditor sought review of a judgment holding a deed was a mortgage. A debt relationship existed between the creditor and plaintiff debtor, the court held. The debtor deeded property to the creditor in return for payment of a funeral bill. The creditor refused payment and recorded the deed; the debtor brought a quiet title action.
A creditor sought review of a judgment holding a deed was a mortgage. A debt relationship existed between the creditor and plaintiff debtor, the court held. The debtor deeded property to the creditor in return for payment of a funeral bill. The creditor refused payment and recorded the deed; the debtor brought a quiet title action.
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A creditor sought review of a judgment holding a deed was a mortgage. A debt relationship existed between the creditor and plaintiff debtor, the court held. The debtor deeded property to the creditor in return for payment of a funeral bill. The creditor refused payment and recorded the deed; the debtor brought a quiet title action.
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JOHN McGILL, Plaintiff-Appellee, v. JOHNNY BIGGS, Defendant-Appellant
No. 81-394
Appellate Court of Illinois, Third District
105 Ill. App. 3d 706; 434 N.E.2d 772; 1982 Ill. App. LEXIS 1715; 61 Ill. Dec. 417
March 19, 1982, Filed
PRIOR HISTORY: [***1] (1) the parties had discussed
collateral for the payment; (2) the creditor had attempted to collect the Appeal from the Circuit Court of debt; (3) the consideration as Kankakee County; the Hon. WAYNE P. compared to the payback amount had DYER, Judge, presiding. been in line with an installment loan agreement; (4) the consideration had DISPOSITION: been inadequate; and (5) the debtor Judgment affirmed. had retained the property and had paid the taxes. Finally, the court noted CASE SUMMARY: that the deed's recording had been delayed and that an agreement to reconvey had been part of the PROCEDURAL POSTURE: Defendant creditor transaction. sought review of a judgment from the Circuit Court of Kankakee County OUTCOME: The court affirmed the (Illinois), which held that a debt judgment. relationship existed between the creditor and plaintiff debtor and that CORE TERMS: mortgage, funeral, deed, the debtor's warranty deed to the warranty deed, reconvey, conveyance, creditor was a mortgage. collateral, ownership, quitclaim deed, half-sister, died, deed absolute, OVERVIEW: After the debtor deeded inadequacy, grantor, owed, property to the creditor in return for relationship existed, contract to pay, the creditor's payment of a funeral unsuccessful, repurchase, delivery, bill, the debtor continued to use the payback, falling, signing, intend, property and to pay the taxes. When borrow the debtor attempted to pay the debt, the creditor refused payment and LexisNexis(R) Headnotes recorded the deed. Consequently, the debtor brought a quiet title action against the creditor, and the trial court held that a debt relationship Contracts Law > Contract had existed between the parties and Interpretation > General Overview that the deed had been a mortgage. Real Property Law > Deeds > Thereafter, the creditor sought Construction & Interpretation review. Under the circumstances, the Real Property Law > Financing > court held that a debt relationship Mortgages & Other Security Instruments had existed between the parties and > Definitions & Interpretation that the deed had been intended to [HN1] Every deed conveying real operate as a mortgage and not a sale. estate, which shall appear to have In so holding, the court noted that: been intended only as a security in the nature of a mortgage, though it be Real Property Law > Deeds > an absolute conveyance in terms, shall Construction & Interpretation be considered as a mortgage. Ill. Rev. Real Property Law > Financing > Stat. ch. 95, para. 55 (1977). Mortgages & Other Security Instruments > Definitions & Interpretation [HN5] The fact that a grantor in a Contracts Law > Contract deed absolute in form remains in Interpretation > General Overview possession of the property so conveyed Real Property Law > Deeds > and controls the property after the Construction & Interpretation conveyance is evidence tending to show Real Property Law > Financing > that the transaction, in fact, is a Mortgages & Other Security Instruments mortgage, as is also the payment of > Definitions & Interpretation taxes by the grantor after the [HN2] In order to convert a deed conveyance. A grantee in an absolute on its face into a mortgage, unqualified deed is entitled to the proof must be clear, satisfactory, immediate possession and becomes and convincing, and can come from liable for payment of taxes. almost every conceivable fact that could legitimately aid that determination. Each case will depend Contracts Law > Contract upon its own special circumstances. Interpretation > General Overview Real Property Law > Deeds > Construction & Interpretation Contracts Law > Contract Real Property Law > Financing > Interpretation > General Overview Mortgages & Other Security Instruments Real Property Law > Deeds > > Definitions & Interpretation Construction & Interpretation [HN6] Delay in recording a deed, while Real Property Law > Financing > not of great significance standing Mortgages & Other Security Instruments alone, is a circumstance indicating a > Definitions & Interpretation lack of intention by a person to claim [HN3] In order to convert a deed immediate ownership. absolute on its face into a mortgage, direct evidence is not required. In fact, no particular kind of evidence Contracts Law > Contract is required. However, a debt Interpretation > General Overview relationship is essential to a Real Property Law > Deeds > mortgage. Construction & Interpretation Real Property Law > Financing > Mortgages & Other Security Instruments Contracts Law > Contract > Definitions & Interpretation Interpretation > General Overview [HN7] An agreement to reconvey is a Real Property Law > Deeds > significant factor in distinguishing Enforceability mortgages from absolute sales. Real Property Law > Financing > Agreements made in writing at the same Mortgages & Other Security Instruments time as the conveyance resolve any > Definitions & Interpretation doubt as to the character of the [HN4] The inadequacy of consideration conveyance in favor of a mortgage. is a potent or strong circumstance However, the agreement need not be in tending to show that a deed is writing. intended to operate as a mortgage and not a sale; and where consideration is COUNSEL: grossly inadequate, a mortgage is Timothy C. Evans, of Chicago, for strongly indicated. appellant. Mark R. Steffen, of Kankakee, for Contracts Law > Contract appellee. Interpretation > General Overview JUDGES: with which his half-uncle, the defendant, was familiar, and plaintiff Justice Scott delivered the opinion requested defendant's assistance in of the court. Barry, P.J., and Alloy, raising the funds necessary which J., concur. approximated $ 1,500. OPINION BY: Plaintiff asked defendant to accompany him while he attempted to SCOTT borrow the money at banks in Momence, Kankakee and Chicago. Defendant OPINION: accompanied plaintiff in his efforts [*706] [**772] Plaintiff's to borrow the necessary funds for his mother, Ivory Anderson, died on mother's funeral but they were October 7, 1977, leaving him as the unsuccessful. surviving [**773] joint tenant of Plaintiff and defendant then certain real estate located in entered into an agreement whereby in Kankakee County, commonly known as return for defendant's paying the Route 3, Box 446, Momence, Illinois. funeral [***2] bill for plaintiff's Plaintiff desired to provide her with mother (who a funeral at the Wesley Funeral Home [*707] was also the defendant's go to the house after his half-sister half-sister) plaintiff would deed the died. Plaintiff continued to keep the premises to defendant. property in good repair and to pay the 1978 and 1979 taxes on the property Plaintiff was vague as to the and defendant made no attempt to pay nature of the transaction, but any taxes on the property until testified that defendant told him he October of 1980, when his check was would need a quitclaim deed as returned, indicating that the taxes "collateral." Plaintiff did not know had already been paid. In January of what a quitclaim deed was but he 1980, plaintiff had offered to pay understood the meaning of defendant the balance of the debt but "collateral." Plaintiff testified that defendant refused payment. In June of he didn't intend to permanently 1980, defendant recorded the deed. transfer the title to the property to the defendant. Plaintiff testified Defendant never used the property that he valued the property at or interfered with plaintiff's use approximately $ 15,000, while until June 1980, when plaintiff defendant testified he didn't know the discovered that defendant was value of the property. Defendant attempting to list the property for admitted that he knew plaintiff was rent with a real estate broker. upset and distressed when the Plaintiff contacted an attorney, transaction took place. discovered the warranty deed and filed the instant suit to quiet title, the Plaintiff and defendant went to issue being whether the deed was defendant's attorney's office where absolute with a contract back to plaintiff signed a paper he thought repurchase, or whether it was intended was a contract to pay defendant $ 115 as a mortgage to secure [***4] a month for 15 months ($ 1,725). A repayment of the funeral bill. warranty deed was prepared by defendant's attorney and signed by From the trial court's ruling in plaintiff when he went to the lawyer's plaintiff's favor (plaintiff was office on October 9, 1977, two days ordered to pay the balance due on the after his mother's death. The next loan of $ 1,610 plus 5% per annum on $ day, defendant paid the funeral bill 1,473.75 from January 10, 1980) that a in the sum of $ 1,473.75. debt relationship existed between the parties and that the warranty deed was Plaintiff made one payment to in fact a mortgage, defendant has defendant before losing his [***3] appealed. job and generally falling on hard times by drinking heavily. No further We note initially that it is payments were made to defendant. provided by statute that: Plaintiff and his family made temporary use of the premises on several occasions after delivery of [HN1] "Every deed conveying the deed to defendant at his lawyer's real estate, which shall office. Defendant conceded he did not appear to have [*708] been intended only as a 335 N.E.2d 506; Warner v. Gosnell security in the nature of a mortgage, (1956), 8 Ill. 2d 24, 132 N.E.2d 526; though it be an absolute conveyance in Illinois Trust Co. v. Bibo (1927), 328 terms, shall be considered as a Ill. 252, 159 N.E. 254; Miller v. mortgage." Ill. Rev. Stat. 1977, ch. Thomas (1853), 14 Ill. 428; Wilkinson 95, par. 55. v. Johnson (1963), 29 Ill. 2d 392, 194 N.E.2d 328. [HN2] In order to convert a deed absolute on its face into a mortgage, The defendant contends the trial the proof must be clear, satisfactory, judge erred in finding a debt and convincing ( Burroughs v. relationship when neither party Burroughs (1973), 11 Ill. App. 3d 176, directly testified that plaintiff owed 296 N.E.2d 350), and can come from a debt to defendant, or that defendant almost every conceivable fact that [***6] would reconvey to plaintiff could legitimately aid that upon payment of such debt. [HN3] determination. [**774] Each case However, direct evidence is not will depend upon its own special required. In fact, no particular kind circumstances. Warner v. Gosnell of evidence is required. ( Burroughs (1956), 8 Ill. 2d 24, 132 N.E.2d 526. v. Burroughs (1971), 1 Ill. App. 3d 697, 274 N.E.2d 376.) However, a debt Many circumstances have been relationship is essential to a recognized or considered by Illinois mortgage. courts, including the existence of an indebtedness, [***5] the close In the case at bar, there are a relationship of the parties, prior number of circumstances which prove unsuccessful attempts for loans, the the existence of a debt relationship. circumstances surrounding the Plaintiff signed the warranty deed transaction, the disparity of the after defendant told him that the only situations of the parties, the lack of way to get money for the funeral would legal assistance, the unusual type of be to sign a quitclaim deed for sale, the inadequacy of consideration, collateral. Although plaintiff thought the way the consideration was paid, he was signing a contract to pay off the retention of the written evidence the funeral bill, defendant testified of the debt, the belief that the debt that they discussed collateral to get remains unpaid, an agreement to money for the funeral expenses, and repurchase, and the continued exercise came to the agreement that plaintiff of ownership privileges and would sell his property to the responsibilities by the seller. defendant for the amount of the Burroughs v. Burroughs (1971), 1 Ill. funeral bill and then pay defendant $ App. 3d 697, 274 N.E.2d 376; Burroughs 115 per month for 15 months to get it v. Burroughs (1973), 11 Ill. App. 3d back. The plaintiff, however, did not 176, 296 N.E.2d 350; Robison v. intend to sell his property. Moorefield (1952), 347 Ill. App. 508, The bulk of evidence in this case 107 N.E.2d 278; Havana National Bank is the testimony of the plaintiff and v. Wiemer (1975), 32 Ill. App. 3d 578, [*709] defendant. The trial judge In determining the issue presented believed they were both honest. Their in this appeal, we direct our testimony differs, but not attention to what we deem to be substantially. They both had pertinent factors. [HN4] The difficulty making responsive [***7] inadequacy of consideration has been answers, but the answers they gave regarded as a potent or strong often shed light on the nature of the circumstance tending to [**775] transaction. show that a deed was intended to operate as a mortgage and not a sale; A debt relationship was indicated and where consideration is grossly by defendant's attempt at collection. inadequate, a mortgage is strongly Defendant confronted and questioned indicated. Burroughs v. Burroughs plaintiff about plaintiff's failure to (1971), 1 Ill. App. 3d 697, 705. make the monthly payments as he had promised. This is a reasonable action Here, the consideration was less for defendant, who was concerned about than 10% of the value of the property. plaintiff falling behind in his debt Several factors regarding the payments. It is not reasonable to transaction in this case are similar expect a person obligated to reconvey to the circumstances in Burroughs. to be encouraging the other party to The property was not advertised or exert their "rights." offered for sale. The consideration Further support of a debt was not paid to the plaintiff, but was relationship comes from defendant's paid to the Wesley Funeral Home for own characterization of the agreement the funeral bill of plaintiff's to reconvey. Defendant consistently mother. In addition, defendant did referred to the payments plaintiff not even consider the value of the could make as "my money." He spoke in property when he purchased it, or the terms of expectation of payment, as if amount of consideration. the money to be paid by plaintiff was Plaintiff tried to borrow money for his already which was owed to him for his mother's funeral in three payment of the funeral bill. This is different cities, with no mention of supported further by defendant's collateral. Defendant offered to go to testimony that upon payment by his friends for help, [***9] and plaintiff, defendant would "redeem" plaintiff ended up with defendant in his property back to him. the office of his attorney signing a Another circumstance to consider is warranty deed instead of a loan the value of the consideration as agreement. This situation is similar, compared to the payback amount. The but even more significant than the one consideration was approximately $ noted in Burroughs, and should be 1,500 and the total payback amount weighed accordingly. after 16 months [***8] would be $ In Totten v. Totten (1920), 294 1,725. These figures would be in line Ill. 70, 80, 128 N.E. 295, 299, the with a typical installment loan court stated: [HN5] "The fact that the agreement. grantor in a deed absolute in form has remained [*710] in possession of the others, indicating a lack of intention property so conveyed and controlled by defendant to claim immediate the property after the conveyance is ownership. evidence tending to show that the [HN7] An agreement to reconvey has transaction, in fact, was a mortgage, long been considered a significant as is also the payment of taxes by the factor in distinguishing mortgages grantor after the conveyance." The from absolute sales. Agreements made reason for this rule is obvious, since in writing at the same time as the the grantee in an unqualified deed is conveyance resolve any doubt as to the entitled to immediate possession and character of the conveyance in favor becomes liable for payment of taxes. of a mortgage. ( Illinois Trust Co. v. In the instant case the uncontradicted Bibo (1927), 328 Ill. 252,159 N.E. testimony was that plaintiff and his 254.) However, the agreement need not family made use of the premises on be in writing. Miller v. Thomas several occasions after the delivery (1853), 14 Ill. 428. of the deed, and that he kept a lock on the door. Defendant conceded he In the case at bar, the agreement had not been in the house since his to reconvey was [***11] admitted by half-sister died. Plaintiff paid the the defendant to be a part of the deed 1978 and 1979 taxes and defendant made transaction. If there is doubt as to no attempt to pay taxes until October the intent of the conveyance, it 1980, when his check for [***10] the should be resolved in favor of a 1979 taxes was returned because they mortgage. were already paid. It is clear he attempted to exercise none of the Any one of these preceding factors prerogatives of an owner until over should be enough to find the trial two years after the time he claims to court did not commit manifest error. have become the owner and at a time The mass of relevant circumstances when plaintiff was in default on all clearly and convincingly prove that of the payments on the alleged the intention of the parties was to contract except the first. It is of create a debt arrangement with a further significance that defendant security. Based upon these failed to take another step usually circumstances, the trial judge was associated with ownership. [HN6] He correct in finding a debt relationship did not record his deed at the time of existed, and that plaintiff's warranty delivery or until well beyond the time deed to defendant was a mortgage. that the 15 months had expired. This For the foregoing reasons, the delay, while not of great significance judgment of the circuit court of standing alone, is a further Kankakee County is affirmed. circumstance, when considered with Affirmed.
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