279 N.W.2d 590 (Mich. App. 1979)
In 1970, plaintiff Helen Koenig owned a home in Oakland County with a market value of $60,000 that was encumbered by three mortgages totaling $25,933.26.1 The real estate taxes on the home had become delinquent and foreclosure proceedings had begun on one of the mortgages.2 Defendant Stanley Van Reken approached the plaintiff and proposed that for a fee of 10% he would service the mortgages and pay the delinquent taxes.3
On June 16, 1970, plaintiff and defendant Stanley Van Reken executed three documents that form the basis of this action.4 The first document, entitled AGREEMENT, stated that plaintiff desired to prevent the loss of her home and provided that defendant Stanley Van Reken purchase the property, redeem it from tax sale and mortgage foreclosure, and give plaintiff an exclusive right to repurchase according to the terms of a lease-option agreement that was also executed between the parties.5
The second document was a warranty deed which conveyed the property from plaintiff to defendants for a stated consideration of $28,600.6 Plaintiff alleges that the deed was silent as to consideration when she signed it, that the figure of $28,600 was added subsequently, and that she never received any such consideration.7 The third document provided that Stanley Van Reken was to lease the premises to plaintiff for a 3-year period at a fixed monthly rent of $300, and plaintiff was also to receive an exclusive option to repurchase the premises during the term of the lease for a price of $32,318.79 with a downpayment of $3,500 and monthly payments of $300 which were to include taxes, insurance, principal and interest.8
At no time during the negotiations that led to the execution of these documents was plaintiff represented by an attorney, and all three documents were prepared by Stanley Van Reken.9 The parties operated under the lease from June 16, 1970, to February, 1972, and during this time plaintiff made total payments of $5,800.10 In February, 1972, plaintiff defaulted in a monthly rental payment and was thereupon evicted from the home.11
In October of 1974, plaintiff Helen Koenig brought suit in Oakland County Circuit Court to have the warranty deed executed by her to defendants Van Reken declared an equitable mortgage.12 The original complaint was later supplemented to add a count against the defendants for unjust enrichment.13 The defendants moved for a summary judgment under GCR 1963, 117.2(1) claiming that the plaintiff failed to state a claim upon which relief could be granted.14 The plaintiff appeals by right the lower court’s granting of the defendants’ motion, but contests only the dismissal of the equitable mortgage count.15
Whether the trial court properly dismissed the equitable mortgage count under GCR 1963, 117.2(1)?16
A motion based on GCR 1963, 117.2(1) challenges the legal sufficiency of a plaintiff's complaint and is to be considered by an examination of the pleadings alone.17 It is the duty of the reviewing court to accept as true the well-pleaded facts in the plaintiff's complaint.18 The reviewing court must determine whether those claims are so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recovery.19 The court of equity protects the necessitous by looking through form to the substance of the transaction.20 The controlling factor in determining whether a deed absolute on its face should be deemed a mortgage is the intention of the parties.21 The adverse financial condition of the grantor, coupled with the inadequacy of the purchase price for the property, is sufficient to establish a deed absolute on its face to be a mortgage.22
No. The well-pleaded facts establish that plaintiff Helen Koenig faced foreclosure and delinquent taxes on her $60,000 home encumbered by $25,933.26 in mortgages when defendant Stanley Van Reken proposed servicing the mortgages for a 10% fee.23 Plaintiff conveyed the property via warranty deed for stated consideration of $28,600 that she alleges was never received and that was inserted after she signed, while receiving only a lease-option to repurchase for $32,318.79 after making $5,800 in payments before eviction.24 These circumstances of financial distress and gross inadequacy of consideration parallel the facts that led the court in Ellis to hold a similar deed-and-land-contract arrangement constituted an equitable mortgage securing a loan.25 Because the pleaded facts could support a finding that the transaction was an equitable mortgage, the claims are not so clearly unenforceable as a matter of law that no factual development could justify recovery.26
The trial court did not properly dismiss the equitable mortgage count under GCR 1963, 117.2(1) because the facts alleged could support imposition of an equitable mortgage.27