## Facts

- In 1982, Fred E. Duvall was charged with theft connected to buying and selling oil-and-gas leases and asked Russellville attorney Ike Allen Laws, Jr. to represent him.
- Laws quoted a $5,000 fee. Duvall paid $2,498 but could not raise the remaining amount.
- Duvall and his wife then executed a mineral deed dated September 27, 1982, purporting to convey mineral rights in 160 acres in Pope County to Laws’s firm, Laws, Swain & Murdoch, P.A.
- The deed recited $5,000 consideration, and revenue stamps were purchased in an amount consistent with that figure.
- On the same day, Laws sent Duvall a letter acknowledging the mineral transfer “representing” the $5,000 attorney fee and stating Duvall could repurchase the minerals within one year by paying the fee in full.
- On October 5, 1982, the firm sent Duvall an invoice showing a $2,502 balance; no further billing was sent.
- Evidence showed Duvall never attempted to pay the balance within the one-year period and that the mineral rights were essentially without market value at the time of the 1982 conveyance.
- In the summer of 1983, Duvall found a prospective buyer reportedly willing to pay more than $30,000 for the mineral rights, but the sale failed because of title problems; testimony conflicted about whether Laws cooperated with the attempted sale.
- In 1987, Laws leased the mineral rights and received $12,740.
- In 1988, Duvall sued, alleging the 1982 deed was intended as an equitable mortgage rather than an outright conveyance.
- The chancellor ruled the transaction was a deed with an option to repurchase, not an equitable mortgage, but still awarded Duvall $2,498. Duvall appealed the mortgage ruling, and Laws cross-appealed the $2,498 award.

## Issues

1. Whether Duvall proved by clear, cogent, and convincing evidence that the mineral deed—absolute on its face but accompanied by a repurchase letter—was intended as security for a debt (an equitable mortgage) rather than a conveyance with an option to repurchase.
2. Whether the chancellor could award Duvall $2,498 after finding the transaction was not an equitable mortgage.

## Decision

- The Court of Appeals affirmed on direct appeal, holding the chancellor did not clearly err in finding Duvall failed to prove the deed was intended only as security for a debt.
- The court applied the rule that a deed absolute on its face is presumed to be what it purports to be, and a party seeking to treat it as a mortgage must prove contrary intent by clear, cogent, and convincing evidence.
- The contemporaneous deed and letter supported the chancellor’s view that the minerals were conveyed as payment of the fee, coupled with a limited right to repurchase, rather than pledged as collateral for an ongoing obligation.
- The court reversed on cross-appeal, holding the $2,498 judgment could not stand once the transaction was treated as a true conveyance with an option to repurchase.
- Disposition: affirmed on direct appeal; reversed on cross-appeal.

## Legal Principles

- A deed that is absolute on its face is presumed to be an outright conveyance, and the party claiming it was intended as security must rebut that presumption with clear, cogent, and convincing evidence.
- Courts determine whether an instrument is an equitable mortgage by examining the parties’ intent, including contemporaneous writings (such as a repurchase agreement) and the circumstances at the time of the transaction.
- In equity cases, appellate review is deferential to the chancellor’s fact findings, especially where credibility disputes exist; reversal occurs only when findings are clearly erroneous.
- Later changes in the value or profitability of the conveyed property do not, by themselves, prove the original deed was meant as security.
- When a court finds a deed with an option to repurchase (not a mortgage), an award refunding money paid toward the underlying obligation is inconsistent absent a separate legal basis.

## Conclusion

The Arkansas Court of Appeals held that Duvall did not meet the clear-and-convincing burden to recharacterize an absolute mineral deed and one-year repurchase right as an equitable mortgage, affirmed the ruling that the transaction was a deed with an option to repurchase, and reversed the chancellor’s separate award of $2,498 to Duvall.


Duvall v. Laws, Swain, & Murdoch, P.A., 32 Ark.App. 99 (1990)