Opinion ID: 853228
Heading Depth: 2
Heading Rank: 2

Heading: The House Sale to John was in Substance a Loan from John

Text: One way to view this arrangement is a sale subject to a repurchase agreement for $37,000. If so, the value of the equity in the home above the sum of the repurchase price of $37,000 plus the mortgage of $87,000 is a marital asset, just as any option to buy at below market price has value. I think this arrangement may also be properly viewed as, in effect, a loan secured by an equitable mortgage from John. As such, the debt to John of $37,000 is a marital liability, and the couple's interest in the house is a marital asset. [A] court may find an equitable mortgage where a deed, absolute on its face, is executed simultaneously with an agreement under which the grantor is entitled to a reconveyance upon performance of conditions. Moore v. Linville, 170 Ind. App. 429, 433, 352 N.E.2d 846, 849 (1976). [3] In these cases, the law `will give effect to the real and dominent [sic] intention of the parties' rather than be controlled by the form and names of the instrument. Id. (quoting Kerfoot v. Kessener, 227 Ind. 58, 79, 84 N.E.2d 190, 199 (1949)). Here, John and James executed the deed with an oral agreement that the house would be reconveyed to James when James was ready. John paid James $37,000 [4] for real estate valued at $128,000, and James assumed his father's mortgage. The intent of the parties is clear: James would continue to pay the house's expenses and live in the house, and as soon as James was ready, his father would transfer title of the house back to James in exchange for the $37,000. [5] When asked what he expected when he consummated the expected re-transfer to James, John replied that he wanted only to get my money out of it. [6] It seems clear to me that this reflected his understanding that the transaction was, in substance if not in form, a loan of $37,000 to James. As a result, I would include the $37,000 debt to John as a liability of the marital estate. The trial court valued the house at $165,000, subject to a mortgage of $87,000, leaving an equity of $78,000. The trial court divided this in half and gave $39,000 to each spouse. It seems clear to me that we need to take the calculation one step further and deduct the father's interest, whether viewed as a loan secured by an equitable mortgage or as a cap on the value of his equity created by the option to repurchase. Either way, the couple's interest limits John's interest to $37,000, and the value of any equity above that amount is a marital asset, regardless of whether James' and Rita's interest is viewed as ownership or a right to repurchase. After subtracting the father's $37,000 interest from the $78,000 equity the trial court awarded, Rita and James' interest in the house is $41,000. Following the trial court's ruling, which split the couple's equity in the house equally, Rita should be compensated by $20,500. John was not properly made a party to this dissolution proceeding for the reasons explained in Part IV of this dissent. However, the nature of John's interest is irrelevant. It seems to me that its value, however viewed, is $37,000 on this record.