Summary of Johnson v. Cherry, S. Ct. Texas 1987
Facts: Mr. Johnson the Pl, purchased 348 acres with a vendors lien (homestead)in place by the grantor. 7 years later he divorced and bought the community interests from his wife. Shortly afterward he secured a loan from Cherry, a feed store owner and director of Bank. Cherry gave Johnson $120,000 in exchange for the deed, and Cherry assumed the $38,000 note to his exwife. Johnson defaulted on the second balloon payment and Cherry started eviction proceedings.
Issue: Whether the money given by Cherry to the PL was a sale of deed or a mortgage for 148 acres, and if so can ?
Holding: 1) evidence established that gen wr deed was intended by parties to be a mortgage; and (2) purported transferees could recover money lent to landowner as represented in mortgage.
Procedure: Based on jury findings, the trial court rendered judgment for Johnson canceling the deed and awarding damages. The D Ct rendered judgment for landowner, and transferees appealed. The Court of Appeals, reversed and rendered. The landowner appealed. Reversed and remanded.
Rule: Restoration or an offer to restore consideration received by one seeking to cancel a deed is a condition precedent to maintaining a suit for cancellation of an instrument.
Ct. Rationale: Johnson’s testimony and the testimony of the other witnesses constitute some evidence upon which the jury could base its finding that the mortgage was disguised as a deed.
When there is a finding supported by some probative evidence that a disputed transaction, although written as a deed, is actually a mortgage, the law will impute the existence of an enforceable debt, thereby creating the debtor/creditor relationship necessary to every mortgage.
PL A: Johnson and Cherry agreed the transaction was a mortgage. Thus creating a debtor/creditor relationship necessary to every mortgage.
Def A: Johnson sold the warranty deed minus the homestead portion for $158,000 plus interest which is the fair market value.