No. 86-170
I N THE SUPREME COURT OF THE STATE OF MONTANA
1986
LARRY L E E D I L L R E E and BARBARA
ANN D I L L R E E ,
P l a i n t i f f s and A p p e l l a n t s ,
CLAYTON E . DEVOE,
D e f e n d a n t and R e s p o n d e n t .
APPEAL FROM: D i s t r i c t C o u r t of t h e F o u r t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of M i s s o u l a ,
T h e H o n o r a b l e D o u g l a s H a r k i n , Judge p r e s i d i n g .
COUNSEL OF RECORD:
For A p p e l l a n t :
B y r o n W. Boggs, Missoula, Montana
For R e s p o n d e n t :
David R o d l i , Missoula, Montana
S u b m i t t e d on B r i e f s : May 3 0 , 1986
Decided: August 21, 1 9 8 6
F i l e d:
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
The Dillrees appeal the decision of the District Court
for Missoula County declaring certain transactions between
the parties to be sales rather than loans and awarding Mr.
Devoe property and attorney fees. We affirm.
The issues are:
1. Did the trial court err in concluding that the
transactions were sales rather than secured loans, and in
doing so did it fail to apply the principles of Murray v.
Butte-Monitor Tunnel Mining Co. (1910), 41 Mont. 449, 110 P.
497?
2. Did the trial court err in holding that the transac-
tions at issue were not usurious secured loans of money?
3. Did the trial court err in holding that the Montana
Consumer Loan Act does not apply to the transactions?
4. Did the trial court err in awarding attorney fees to
Mr. Devoe?
In this case, the parties presented directly contradic-
tory evidence in a trial to the District Court, sitting
without a jury. The court entered extensive findings and
conclusions. It found that the Dillrees had been self-em-
ployed in the logging business since 1969. They had owned a
number of skidders, tractors, trucks, loaders and vehicles
and had obtained financing from six banks and three credit
and acceptance corporations. In many of these, equipment or
vehicles had served as collateral. As a businessman for 16
years Larry Dillree knew that titled property is not held in
the name of a lender during the repayment period, that bills
of sale on untitled equipment are not provided to a lender,
and that a borrower need not obtain reconveyance. He was
aware that the function of a bill of sale is to convey owner-
ship and that one executes a Montana certificate of title
only when selling or transferring ownership of motor vehi-
cles. Barbara Dillree demonstrated knowledge of the same
facts.
In the fall of 1984 the Dillrees were in financial
distress and attempted to secure loans from several banks,
but were turned down. Larry Dillree approached Mr. Devoe, to
whom the Dillrees had several years before sold a contract
for deed on some real estate. Mr. Devoe purchases contracts
in seven western states, but was not in the business of
loaning money.
The court found that Larry Dillree initially requested a
loan. Mr. Devoe refused the loan, stating he was not in the
business of loaning money. After being told that Mr. Devoe
was in the business of buying property, Mr. Dillree suggested
he would sell certain property if he could be assured of the
opportunity of buying it back. It was agreed that two items
of property, a 1979 double-wide mobile home and a 30-foot
boat, would be purchased for $5,000. It was also agreed that
the Dillrees would retain possession of the property.
After Larry Dillree had taken the titles and a written
"Lease-Rental Agreement" home overnight, he and Barbara
Dillree executed the lease-rental agreement. Prior to
receiving the $5,000, Mr. Dillree provided Mr. Devoe the
necessary lien releases and accompanied Mr. Devoe to the
county courthouse to transfer the titles to the mobile home
and boat. The parties intended that in six months the
Dillrees could pay Mr. Devoe $6,000 and receive back title to
the mobile home and the boat.
In December 1984 Larry Dillree requested another $2,000
from Mr. Devoe. A second agreement was reached in which Mr.
Devoe took title to a 1968 White truck tractor with log
loader and a 1978 Trapper travel trailer. The agreement
called for a payment of $2,200 in one month's time. It was
also memorialized in a written "Lease-Rental Agreement."
Neither of the obligations were paid in a timely fash-
ion. The Dillrees were unable to make any payments except
for $1,500. In May 1985, Mr. Devoe demanded they surrender
all four pieces of property. None of the property, with the
exception of the mobile home, had been kept in Ovando as
required in the written agreements. At the time of trial,
Mr. Devoe did not know the whereabouts of the travel trailer
or the truck tractor. The Dillrees filed a complaint and
petition for temporary restraining order alleging fraud,
usury, breach of good faith and fair dealing, and outrageous
conduct. A hearing was held, and the District Court conclud-
ed that the parties entered into valid contracts by which
property was sold to Clayton DeVoe subject to an intended
repurchase provision not actually reduced to writing. The
court concluded that the subject transactions were not fraud-
ulently arranged, were not loans of money by Clayton Devoe,
and were not usurious transactions.
The District Court entered judgment in favor of Mr.
Devoe and awarded him the immediate right to possession of
the mobile home, the boat, the travel trailer and the White
truck tractor.
I
Did the trial court err in concluding that the transac-
tions were sales rather than secured loans, and in doing so
did it fail to properly apply the principles of Murray v.
Butte-Monitor Tunnel Mining Co. (1910), 41 Mont. 449, 110 P.
497?
The Dillrees argue that these transactions were not
sales. They point out that this Court has listed four fac-
tors which, if present, tend to confirm the view that a
transaction is a security arrangement or a mortgage and not a
sale. The four factors are: 1) the transaction in its
inception had for its purpose a loan, not a sale; 2) the
grantor was in financial distress at the time of the transac-
tion; 3) the price appears to have been grossly inadequate;
and 4) according to the grantee's own theory, the transaction
did not amount to an absolute sale, but to a conditional
sale, that is, a sale with an option to repurchase. Bermes
v. Sylling (1978), 179 Mont. 448, 458, 587 P. 2d 377, 383,
citing Murray v. Butte-Monitor Tunnel Mining Co. (1910), 41
Mont. 449, 110 P. 497. The Dillrees' position is that these
four factors are present in this case, and that the District
Court's judgment should be reversed.
We initially point out that in both the Murray and the
Bermes cases, this Court upheld the trial court's findings of
fact that the questioned transactions were loans and that the
four factors were present. Here, the fact-finder did not
conclude that the transactions were loans. The parties agree
that factors (2) and (4) were present. It is undisputed that
the Dillrees were in financial distress, and Mr. Devoe char-
acterized the transactions as sales with options to repur-
chase. However, it is not agreed that factors (1) and (3)
were present, and the District Court did not find that all
four factors were present. Our standard of review of find-
ings of fact is whether the District Court's findings are
clearly erroneous. Lacey v. Herndon (Mont. 1983), 668 P.2d
The District Court's finding which goes to factor (1),
the purpose of the transaction, was:
Just prior to October 15, 1984, Larry Dillree
contacted Clayton Devoels business, initially
speaking on the telephone to Mr. Devoe's son,
Charles, to request a loan for the purpose of
preparing his business equipment for sale in the
Spring. Mr. Devoe refused to loan Mr. Dillree the
money, stating that Mr. Devoe was not in the busi-
ness of loaning money. The refusal was in keeping
with Mr Devoe's normal business practice, though he
regularly is asked for loans of money. After being
told by Mr. Devoe that he was in the business of
buying property, Mr. Dillree suggested that he
would sell certain property to Mr. Devoe if he
could be assured of the opportunity of buying it
back at the expiration of six months. Mr. Devoe
agreed ...
Mr. Devoels testimony supported the above finding of fact.
He testified that he conveyed to Mr. Dillree that he "did not
loan money ever," and that it was Mr. Dillree who brought up
the idea of a sale of some of the Dillrees' property with a
right of repurchase. We conclude there is substantial evi-
dence that the transactions did not in their inception have
for their purposes loans.
The values of the mobile home, boat, truck tractor, and
travel trailer were disputed, and the Dillrees claim factor
(3) was present because their values far exceeded the amount
of money received from Mr. Devoe. The adequacy of consider-
ation is tested by the conditions existing at the time of the
transaction. Boysun v. Boysun (1962), 140 Mont. 85, 89, 368
P.2d 439, 441. A Missoula mobile home dealer testified that
the value of the mobile home, which would have to be moved
from Ovando on a repossessed, cash basis sale, would not
significantly exceed $5,000. The boat had its flooring out
and, according to Mr. Devoe, had little if any value. We
conclude that there was substantial evidence to support the
District Court's finding that $5,000 would not significantly
exceed the actual value of the mobile home and that "the boat
in its present condition would be difficult to sell at any
price. "
Mr. Devoe testified at the time of trial that he had not
located either the truck tractor or the travel trailer. He
testified that based on his knowledge of automobiles in
general, he was suspicious of placing any value on the unseen
truck tractor. He estimated the value of the travel trailer
at $2,000. It is true that the Dillrees presented testimony
of higher values for both the truck tractor and the travel
trailer. However, we conclude that there was substantial
evidence to support the finding that Clayton Devoe reasonably
assumed "that any sale price that might be had if he took
possession of [the truck tractor and travel trailer] would
not significantly exceed $2,200."
We conclude that the District Court did not err in
failing to find that the four factors listed in Murray were
present.
I1
Did the trial court err in holding that the transactions
at issue were not usurious secured loans of money?
The trial court concluded that " [tlhe subject transac-
tions were not loans of money by Clayton Devoe and were not
usurious transactions." The Dillrees cite the principle from
Bermes, 587 P.2d at 383, that a transaction which resolves
itself into a secured transaction will be treated as a mort-
gage, whatever name is given it by the parties. The instant
case differs from Bermes in that it involves personal, not
real, property. In Bermes, the Court went on to discuss
tests which indicate whether a deed should be treated as a
secured transaction. The first test cited in Bermes is the
four-factor test discussed under issue one. We have held
that the District Court properly concluded that test was not
met. We conclude that the District Court did not clearly
err, because under the four-factor test, these transactions
do not resolve themselves into secured transactions.
The Dillrees next argue that these transactions meet the
definition of loans under § 31-1-101, MCA:
Loan of money--what constitutes. A loan of money
is a contract by which one delivers a sum of money
to another and the latter agrees to return at a
future time a sum equivalent to that which he
borrowed. A loan for mere use is governed by the
law on loan for use.
The contracts as described in Mr. Devoe's testimony, which
was relied upon by the District Court, were sales of property
with the opportunity for the Dillrees to repurchase it. They
do not fit the above definition.
The Dillrees also contend that these transactions
amounted to secured transactions under 5 30-1-201(37), MCA:
" [aln agreement that upon compliance with the terms of the
lease the lessee shall become or has the option to become the
owner of the property for no additional consideration or for
a nominal consideration does make the lease one intended for
security." That statement describes the title of the written
agreement combined with the oral understanding that the
Dillrees would regain title to the property upon payment of
the "lease" amounts. But the parties agree that the written
agreement does not accurately reflect their contract. The
identification of the agreement as a "lease agreement" is
clearly inaccurate. It is more accurately described as a
sale with right of repurchase.
Since we have concluded the District Court properly
found that the transactions were not loans, we need not
consider the contention that the transactions were usurious
loans.
I11
Did the trial court err in holding that the Montana
Consumer Loan Act does not apply to the transactions?
We have upheld the trial court's conclusion that no
loans were made. The Montana Consumer Loan Act, Title 32,
Chapter 5, MCA, applies to persons engaged in the business of
making loans of money. We need not address this issue fur-
ther. We affirm the trial court.
IV
Did the trial court err in awarding attorney fees to Mr.
Devoe?
The Dillrees' complaint alleged violations of the Mon-
tana Unfair Trade Practices and Consumer Protection Act,
S 30-14-101, et seq., MCA. Section 30-14-133(3), MCA states
that, "In any action brought under this section, the court
may award the prevailing party reasonable attorney fees
incurred in prosecuting or defending the action." The Dis-
trict Court concluded that I' [tlhe provisions of the Montana
Unfair Trade Practices and Consumer Protection Act do not
apply to the subject matter of this action" and that
"[plursuant to the provisions of the Montana Unfair Trade
Practices and Consumer Protection Act, Defendant is entitled
to his reasonable attorney's fees for defending the
action . . ." The Dillrees argue that attorney fees should
not be awarded to Mr. Devoe because he did not prevail on the
main issue in controversy and because the court concluded the
Act did not apply. Mr. Devoe prevailed on the counts of
fraud, usury, breach of good faith and fair dealing, and
outrageous conduct. His title in the property was affirmed.
We conclude that Mr. Devoe is the prevailing party in this
action which was brought under the Unfair Trade Practices and
Consumer Protection Act, and that the District Court properly
awarded him reasonable attorney fees.
A £ firmed .
We Concur: