Haweis v. Baddour

is an appeal from a judgment in favor of respondent for $63,000. Plaintiff’s claim is predicated on a charge of usury. The facts, as appear from the complaint and from the transcript of the evidence in the case, are as follows:

Respondent and appellant were, and for a number of years had been, friends. Respondent lost his wife in December, 1925, and was in financial straits. This was known to appellant. Respondent’s deceased wife had left an estate worth $408,000, which was her separate property at the time of her marriage to respondent. Subsequent to their marriage, and on January 12, 1925, respondent and his wife entered into an agreement by the terms of which she agreed to bequeath to him one-half of her property, he agreeing “to be faithful to his wife and to perform his marital duties in providing for and caring for his wife’’. The record fails to show any evidence indicating that respondent in any respect failed to perform his part of such agreement. Mrs. Haweis left a last will by which she devised one-half of her said property in the following word^: “While, by antenuptial agreement between myself and my husband, Emil Haweis, it was among other things provided, that on the death of either the survivor should have only one thousand dollars ($1000) from the estate of the deceased, and should not because of said marriage inherit or in anywise receive any of the property of the other, and while all my property is my own separate property, nevertheless, having made an agreement dated January 12, 1925, with my husband, that in case of my death prior to his I would bequeath to him a half interest in certain property in said agreement described, upon certain conditions, therefore in compliance with and in satisfaction of said agreement, providing he survives me, and providing that he is faithful to me and performs his marital duties in caring for and abiding with me, I give, devise, and bequeath to my said

After the death of his wife, respondent remained in possession of the home and the furniture therein. In the latter part of March, 1926, the sheriff of the county of Los Angeles, presumably by virtue of some process, the nature of which the record fails to show, took possession of the household goods and furniture and placed a keeper in respondent’s home. The sheriff required a bond in the sum of $1,000 before he would release said household goods and furniture. Appellant was asked by respondent to furnish the bond upon the assurance of respondent’s attorney, who was a brother of appellant, that the bond would only be required for two or three weeks, and thereupon appellant, in order to secure the bond, deposited with a surety company securities aggregating $20,000. It later developed that the bond was required for a much longer time than was contemplated, it being nearly a year before appellant was able to withdraw his securities as a whole, although he was permitted by the surety company to withdraw some of the bonds so he could “play the market” with them, upon his substituting other securities with the surety company. After these securities had been on deposit with the surety company for three or four weeks, appellant made repeated objections to leaving them up as security and, apparently, made it so disagreeable for respondent that he promised appellant he would pay him $2,000 for the use of his securities during the time the bond was required. Shortly thereafter respondent sought a loan of $7,000 from the appellant, and together they visited an attorney to arrange for security. Prom the conversation that took place between appellant and the attorney, the avarieiousness and greed of appellant and his persistent purpose to disregard or to circumvent the Usury Law, are demonstrated. The testimony in that regard is, in part, as follows: “My name is G. T. Van Etten. . . . I am aii attorney-at-law. I am acquainted with Emil J. Haweis, the plaintiff in this action. I have met Mr. S. Baddour, the defendant, several times. I recall having had a conversation with these two parties about the month of June, 1926, with respect to a loan agreement be

It is significant that the-substance of appellant’s denials concerning the damaging testimony of C. T. Van Etten, hereinbefore set out., was practically confined to a denial that he was to get $30,000 as a bonus—he claiming that Mr. Van Etten made a mistake in calling it a “bonus”; that what he said was that the word he used was “profit”, not “bonus”. He likewise denies that he told the witness Shipley that he contemplated making a bonus of from two hundred to three hundred per cent with the money he proposed to loan respondent. He did not, however, deny that he told

It appears from the testimony of respondent that while the litigation was pending he sought to borrow $7,000, whereupon appellant demanded and received a deed to some property belonging to respondent at Cardiff, in San Diego County, California. A few weeks later appellant loaned respondent $10,000 more and demanded and received an agreement for the payment of a bonus of $20,000. Later appellant made a further loan of $10,000 to respondent, which, with the previous loans, aggregated $27,000, whereupon the agreement providing for a bonus of $20,000 was torn up and another, providing for $30,000, was made. By the terms of the foregoing agreement, which included a deed, appellant received as security for his loan the Cardiff property that was outside of the estate of Mrs. Haweis, and also an undivided one-half of respondent’s interest in the estate of Mrs. Haweis.

Subsequently a settlement of the litigation was effected and there still remaining outside of appellant’s control an undivided one-half interest in what respondent had by the terms of the settlement definitely recovered, a further contract was entered into between respondent and appellant on January 28, 1927, by the terms of which all of the remaining interest of respondent in the estate of his deceased wife was taken over as security for the payment of said indebtedness of $27,000.

The evidence does not expressly disclose, but it is a fair presumption that the latter contract was made at the behest of appellant inasmuch as it added greatly to his security, and, further, encumbered respondent’s interest in the estate of Mrs. Haweis.

The bonus of $30,000 was paid to appellant by respondent on or about August 13, 1927, out of the estate of Mrs. Haweis and in accordance with an assignment of that amount to be paid out of the proceeds of the probate sale.

Appellant claims that he purchased outright the one-half interest of respondent in the estate of Mrs. Haweis for $2,000, although a consideration of $10 is named in that deed, and that the instruments executed to him by respondent were not intended as security for a loan, while respondent insists that, regardless of the terms of the agreements,

The evidence does not sustain appellant’s contention that he purchased respondent’s interest in the estate of Mrs. Haweis, but the evidence does sustain the finding of the trial court to the effect that the instruments in question constituted a mortgage; hence it is unnecessary to notice in detail the cases appellant cites as supporting his contention in the event there was a Iona fide sale; they are not applicable here, where every contract, deed or assignment disclosed by the record appears, from the circumstances shown by the evidence, to have been executed and delivered for the sole purpose of securing to appellant the payment of the loan of $27,000 and the bonus of $30,000.

In Todd v. Todd, 164 Cal. 255 [ 128 Pac. 413 , 414], the court said:

“The appellant’s principal contention is that the evidence is insufficient to justify the finding that the instrument executed by plaintiff and defendant was a mortgage. That a deed absolute in form may, by parol testimony, be shown to have been intended to be a mortgage is not questioned as, of course, it could not be, in view of the many authorities so holding. A few citations will suffice. (Civ. Code, sec. 2924; Montgomery v. Spect, 55 Cal. 352 ; Malone v. Roy, 94 Cal. 341 [ 29 Pac. 712 ]; Woods v. Jensen, 130 Cal. 200 [ 62 Pac. 473 ] ; Holmes v. Warren, 145 Cal. 457 [ 78 Pac. 954 ]; Couts v. Winston, 153 Cal. 688 [ 96 Pac. 357 ].) If the deed was intended merely as a security for the payment of a debt, it is a mortgage, ‘no matter how strong the language of the deed or any instrument accompanying it might be’. (Woods v. Jensen, 130 Cal. 200 [ 62 Pac. 473 ].) Although it has often been said that the character of an absolute deed cannot be changed to that of a mortgage except ‘upon clear and convincing evidence’, the rule is well settled that, where there is a substantial conflict, it is primarily for the trial court to determine whether the evidence in favor of the claim of mortgage is clear and convincing’. (Co uts v. Winston, 153 Cal. 688 [ 96 Pac. 357 ], and cases cited.) ”

In the case of Couts v. Winston, supra, the court also said:

“The circumstances, of' the whole case, if we accept the testimony acted on by the trial court, are entirely consistent with the view that the parties, while in fact agreeing on a loan to be secured by mortgage, were desirous, for reasons of their own, of giving the transaction a different appearance.” (Hodgkins v. Wright, 127 Cal. 688 [ 60 Pac. 431 ]; Rosemead Co. v. Shipley Co., 207 Cal. 414 [ 278 Pac. 1038 ].)

In the case before us, it is not difficult to divine the motives that prompted appellant to attempt to cause the transaction to have an appearance of a purchase and sale. The testimony shows that he declared it was a peculiar law that would not allow friends to do as they wished; that there must be some way to get around such a law; that he could not think of purchasing outright the interest of respondent, and take the chance of losing all he put into the proposition in the event the litigation should be unsuccessful—that he must have notes to show for what he loaned.

As is stated in California Jurisprudence, volume 17, page 789:

“A man is not presumed to sell his property for very much less than it would be valued in the market; and if the consideration is grossly inadequate a court will not readily believe that the grantor intended to sell.”

We cannot agree with appellant’s contention that the deed here involved was executed and delivered partly in consideration of the satisfaction of a former indebtedness of $2,000. The deed was merely a mortgage and hence the authorities cited in support of that contention by appellant are not in point. The $2,000 indebtedness referred to was the amount which respondent agreed to pay appellant for the use of his securities in obtaining a bond to release his furniture: Appellant contends that this $2,000 was a part of the consideration for the execution of the deed, but the testimony of respondent is clear and unequivocal to the effect that he had definitely agreed with appellant to pay him a thirty thousand dollar bonus for the loans due him,

The court, in Chapman v. Hicks, 41 Cal. App. 158 [ 182 Pac. 336 , 338], said:

“ ‘The presumption arising from the execution and delivery of a deed absolute in form is, undoubtedly, that it is made in pursuance of an agreement to sell, and vests an absolute title in the grantee. ... At the same time the court has been watchful against all schemes of moneylenders to deprive unfortunate debtors of their lands at less than their value, under the claim that the transaction was a purchase, and not a loan.’ (Locke v. Moulton, 96 Cal. 22 , 29 [ 30 Pac. 957 , 959].)”

While it is primarily a question for the trial court to determine what the intention of the parties was, there is clear and convincing evidence in the record before us that appellant never at any time considered that he was not loaning money to respondent, or that he did not demand and take the various deeds and assignments as security for the sums he claimed were due him, although it is apparent that he sought to conceal the fact, but it is most improbable

Appellant argues that there seems no good reason why he should undertake to expend the money in the litigation to determine respondent’s rights, when his sole return in the event of success was to be the repayment of the amount of money expended with interest, and receive nothing for the “hazard” he incurred. This argument is based upon a false premise and begs the question under consideration. We think the most that can be claimed for the so-called “hazard” appellant claims he took in the agreement dated June 22, 1926, was that he agreed, in effect, to advance the costs of the litigation, if that should become necessary— which it never did—such costs consisting of “court costs, stenographic or phonographic reporter’s fees, typewriting and printing, process-serving”, etc., none of which appellant ever paid.

The main hazard emphasized by appellant is the payment of the attorney’s fee respondent had agreed to pay. That fee was expressly made a contingent fee—a percentage of the recovery, dependent upon a recovery. Yet appellant reiterates throughout 145 pages of his briefs, the great “hazard” appellant accepted. This “hazard” he claims became a reality in this, that he, being the owner of one-half of the property recovered, one-half of the attorney’s fee came out of his share of the estate, and, hence, that he was saddled with the one-half of such attorney’s fee. But, as we have said, he was not the owner of what he claims, nor was he the owner of any part thereof, and never paid any part of the contingent attorney’s fee. Besides appellant never was under any obligation to pay or to advance any sum whatever on account of attorney’s fees. Whatever trifling sum he might have been obligated to advance as costs, he never paid in whole nor in part—the same being paid by respondent and, hence, that portion of the great “hazard” incurred by appellant as costs, like the contingent attorney’s fee, has no substantial basis upon which to rest. The sum loaned never was put in hazard, nor was any part thereof put in hazard. Appellant always held respondent’s unconditional promise to pay, and at all times

The finding of the trial court is to the effect that the bonus of $30,000 was a bonus for the loans aggregating $27,000 and the evidence is ample to support the finding.

Complaint is made by appellant of the order of the trial court permitting the filing of an amended complaint at the conclusion of plaintiff’s case. The question as to whether or not an amended complaint should be filed is a matter very largely in the discretion of the trial court, and, so long as there is no abuse of discretion, the ruling of the court below should not be disturbed. We cannot see wherein appellant has. been in any manner prejudiced by the fact that the amended complaint was filed. The trial court did not, therefore, err in making the order complained of, neither did the court err in denying appellant’s motion for a new trial.

In view of what we have above said, it is not necessary to mention in detail the four main points upon which appellant relies for a reversal. Bach point has been definitely decided against appellant’s contention.

The judgment is affirmed.

Thompson, J., and Plummer, Acting P. J., concurred.

A petition for a rehearing of this cause was denied by the District Court of Appeal on April 4, 1932, and an application by appellant to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on May 2, 1932.