Koenig v. Van Reken

Helen Koenig had over $30,000 on her home; however, she still owed $26,000 on 3 mortgages on her home in Michigan. She fell behind on her mortgages & property taxes.

Stanley Van Reken offered to pay Koenig's mortgages & back property taxes ($4,000). In exchange, Koenig agreed to convey a warranty deed to Van Reken.

Van Reken executed a lease-option agreement for Koenig. Later, Koenig missed one rent payment on her home. In turn, Van Reken moved to evict Koenig.

Koenig demanded that the Oakland County Circuit Court declare the warranty deed an equitable mortgage. Koenig loses.

May a facially absolute deed be deemed an equitable mortgage if circumstances indicate that the parties intended the transfer as a loan?

Yes. A deed may be declared an equitable mortgage if it appears that the parties intended a loan rather than an absolute transfer.

In the state of Michigan, the ruling court declared that

(1) a financially troubled grantor (Koenig), + (2) an inadequate purchase price

were sufficient to for the court to declare the deed to Van Reken an equitable mortgage.

Under equitable mortgage financing, the courts or any other 3rd party refrains from involvement.

Equitable mortgage is based on the mutual agreement of the lender and borrowers to their own T&C (terms & conditions).