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In 1974, Johnson (P) purchased 348 acres of land for $125,000 with his grantor reserving a vendor's lien on the property. P moved onto the property and made improvements. P and his wife divorced in 1981 and P purchased her community interest but began to experience financial difficulties. P fell behind all of his payments and the grantor posted the land for foreclosure. At all times, P claimed 200 acres of the 348 as his homestead. Because of the homestead status, P was unable to obtain loans. P then meet Cherry (D) and obtained a loan from D. Documents were executed by P and D; a general warranty deed from P and D covering all 348 acres; a two-year lease agreement; and an option for P to repurchase the land. P got $120,000 from D and D assumed the $38,000 note P's wife held. The lease provided for semiannual payments of $12,510 each. P could exercise his option for $132,000 and reassumption of the note to his ex-wife. The option was open for six months following the conclusion of the leasehold and was conditioned upon P making two lease payments. P failed to make the second lease payment. D initiated eviction and P sued D claiming that the transaction was simply a loan in disguise. D claimed that it was a sale. P got judgment, and the deed was canceled. The court of appeals reversed; there was no debt owned by P on the executed documents nor was P under any obligation or debt to repurchase the property.

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