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Harms v. Chase Home Finance, LLC

Court of Appeals of Kentucky

May 11, 2018

LARRY HARMS AND PAMELA HARMS APPELLANTS
v.
CHASE HOME FINANCE, LLC; ETHEL GRACE SMITH; RICHARD CHEEK; KAREN CHEEK; NATIONAL CITY BANK; JAMOS FUND I, LP; DOT CAPITAL INVESTMENTS, LLC; AND MID SOUTH CAPITAL PARTNERS, LP APPELLEES

          APPEAL FROM CLAY CIRCUIT COURT HONORABLE OSCAR G. HOUSE, JUDGE ACTION NO. 09-CI-00159

          BRIEFS AND ORAL ARGUMENT FOR APPELLANT: Ralph Hoskins Corbin, Kentucky

          BRIEF FOR APPELLEE, CHASE HOME FINANCE, LLC: Griffin Terry Sumner Louisville, Kentucky Miles R. Harrison Louisville, Kentucky Peter Matthew Cummins Louisville, Kentucky ORAL ARGUMENT FOR APPELLEE, CHASE HOME FINANCE, LLC: Peter Matthew Cummins Louisville, Kentucky

          BEFORE: ACREE, D. LAMBERT, AND THOMPSON, JUDGES.

          OPINION AFFIRMING

          LAMBERT, D., JUDGE

         Larry Harms and his wife, Pamela Harms, appeal from a judgment entered by the Clay Circuit Court which reformed a mortgage and deed based on the equitable principle of mutual mistake. In this appeal, the Harmses argue that the unjust enrichment claim asserted by Chase Home Finance, Inc. ("Chase"), was time-barred, and, even if not so precluded, the trial court exceeded its authority in reforming the deed in addition to the mortgage. Having reviewed the record, we conclude that the trial court did not err in ordering the reformation of the deed and mortgage, or in entering judgment against the Harmses for unjust enrichment. Therefore, we affirm.

         I. FACTUAL AND PROCEDURAL HISTORY

         In 1998, the Harmses entered into a contract whereby they would purchase the 4.92-acre subject property from subdivision developer, Triple S Development, Inc. ("Triple S"), on an installment plan. Upon receipt of the initial down payment of $6, 250, Triple S would convey a landlocked one-acre portion of the property, on which a residence stands, [1] to the Harmses. This conveyance was duly recorded in the Clay County Clerk's Office. Upon payment of the remaining purchase price ($24, 500), Triple S was to convey the remaining 3.92 acres to the Harmses. The Harmses made the initial payment in April of 1999, and Triple S conveyed the house lot to them, with an easement across the remainder for access. The Harmses remitted $24, 500 by April of 2001, and at that time, Triple S conveyed the remaining acreage to the Harmses per the contract.

         The dispute at the core of this appeal originated in the second deed from Triple S to the Harmses. The second deed included an acknowledgment of the first conveyance, and explicitly stated that the property subject to the prior conveyance was not part of the second conveyance: "There is excepted from this conveyance that tract of land previously conveyed to Larry and Pam Harms of record in Deed Book 249 at Page 160[.]" This second deed was also duly recorded in the Clay County Clerk's Office.

         In 2002, the Harmses sold their property-ostensibly both lots-to Richard and Karen Cheek for $250, 000. In discovery, the parties to this conveyance indicated they had intended the transaction to include the entirety of the real property the Harmses had purchased from Triple S. Larry Harms himself testified in deposition that the intent of the transaction was "selling the house" and all of his property located "up there on the hill and house included." The sales contract between the parties included not only both the residence and the surrounding acreage as the subject matter of the transaction, but also included a refrigerator and stove located within the residence.

         The Cheeks obtained financing for the transaction through Century 21 Mortgage ("Century 21"). Century 21 retained the services of a law firm to perform a title examination, which failed to notice that the conveyance only included 3.92 of the total 4.92 acres. Century 21 assigned its mortgage to JPMorgan Chase Bank, N.A., which assigned it to Chase in December of 2008. The mortgage and the subsequent assignments thereof were also duly recorded.

         Eventually, the Cheeks encountered financial difficulties and defaulted on their loan. Chase initiated this foreclosure action. The trial court granted judgment in favor of Chase, and ordered the property sold. Ethel Smith purchased the property at the judicial sale for $206, 000 on June 4, 2010. Smith discovered the discrepancy in the deed soon after, and successfully moved the trial court to postpone distribution of the sale proceeds. The sale was not confirmed at that time, and following motions by both the Master Commissioner and Smith herself, the trial court ordered the proceeds returned to Smith on August 30, 2010.

         Chase contacted the Harmses about correcting the mistake to allow Smith to take clear title to the house lot. The Harmses refused to do so, insisted they still owned the property, and demanded payment for their interest. With leave of the trial court, Chase amended its complaint in 2011 to seek reformation of the mortgage and deed, and to assert a claim of unjust enrichment against the Harmses. Smith intervened in the action in 2012.

         Chase and the Harmses filed competing motions for summary judgment, and the trial court granted Chase's motion. The trial court concluded that Chase's unjust enrichment claim was not time-barred. The trial court also found the mortgage to have contained a mutual mistake. It ordered the mortgage and deed be reformed to match the clear intent of the Harmses and the Cheeks in their 2002 transaction. The trial court also confirmed the sale, ordering Smith to remit the bid ...


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