## Facts

- Reinhold Wehle owned real property subject to a $2,600 mortgage held by the Bank of Italy.
- Wehle needed additional money to pay a fine and sought funds using the property as security.
- Wehle approached Walter F. Price seeking a loan secured by a second mortgage.
- Price refused to make a second-mortgage loan and instead proposed a transaction structured as a sale: Wehle would convey the property to Price (subject to the existing mortgage) for $700.
- The parties executed documents drafted by an attorney consisting of (1) a deed absolute in form from Wehle to Price and (2) a separate agreement granting Wehle an option to repurchase for $900 within six months.
- The arrangement permitted Wehle to remain in possession during the option period.
- No promissory note or written loan terms appeared in the transaction documents.
- Wehle did not exercise the repurchase option within six months and later sued to have the deed declared a mortgage and to quiet title in himself.

## Issues

1. Whether an absolute deed accompanied by a repurchase option and continued possession by the grantor was intended as a mortgage securing a debt rather than an outright sale.
2. What level of proof is required to overcome the facial character of an absolute deed and recharacterize it as a mortgage.
3. Whether an appellate court may disturb a trial court’s finding on the parties’ intent when the evidence is conflicting but substantial evidence supports the finding.

## Decision

- The California Supreme Court affirmed the judgment for Price.
- The Court held that the evidence did not clearly and satisfactorily establish that the deed was intended as security for a debt.
- Because intent to create a mortgage was treated as a factual question, and substantial evidence supported the trial court’s finding that the transaction was a sale with an option to repurchase, the finding was not disturbed.
- Title remained in Price, subject to the prior bank mortgage.

## Legal Principles

- A deed absolute in form may be treated in equity as a mortgage if it was intended to secure payment of a debt.
- Recharacterization of an absolute deed as a mortgage requires clear and satisfactory (clear and convincing) proof of a security intent.
- Whether a transaction was intended as a mortgage is primarily a question of fact; appellate review is deferential, and findings supported by substantial evidence will be upheld despite conflicting testimony.
- Courts may scrutinize transactions that may function as disguised secured loans, but absent the required proof they will enforce the written form and the trial court’s supported findings.

## Conclusion

The court upheld the trial court’s determination that the parties intended an outright conveyance with a repurchase option, not a mortgage, because the record lacked clear and satisfactory proof of a security transaction and substantial evidence supported the finding of sale.


Wehle v. Price, 202 Cal. 394 (Cal. 1927)