Spartan Equities High Yield Fund I LLC v. Brian Owens ( 2017 )


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  •                             STATE OF MICHIGAN
    COURT OF APPEALS
    SPARTAN EQUITIES HIGH YIELD FUND I,                                 UNPUBLISHED
    LLC,                                                                January 17, 2017
    Plaintiff-Appellee,
    v                                                                   No. 328942
    Monroe Circuit Court
    BRIAN OWENS,                                                        LC No. 14-137042-CH
    Defendant-Appellant,
    and
    KRISTI R. HAMMACK, also known as KRISTI
    R. OWENS,
    Defendant.
    Before: RIORDAN, P.J., and FORT HOOD and SERVITTO, JJ.
    PER CURIAM.
    In this action seeking reformation of a mortgage and foreclosure on the reformed
    mortgage, defendant Brian Owens1 appeals as of right the trial court order granting summary
    disposition in favor of plaintiff and reforming the mortgage. We affirm.
    I. FACTUAL BACKGROUND
    Before September 1996, defendant individually owned property in Monroe County with
    the common address of 126 Virginia Court, Ash Township, Michigan, and the following legal
    description: “Lots 19, 20, 21, 29, 30, and 31, Shirrmacher Subdivision, according to the plat
    thereof as recorded in Liber 6, Page 31 of Plats, Monroe County Records.” A survey of the
    1
    For the sake of simplicity, we will refer to Brian Owens as “defendant” in this opinion because
    defendant Kristi R. Hammack, also known as Kristi R. Owens, was dismissed without prejudice
    from this case pursuant to a stipulated order between herself and plaintiff, and she is not a party
    to this appeal.
    -1-
    property indicated that the parcel included two structures: a house that extended across lots 20
    and 21 and a garage that primarily sat on lot 21 but extended approximately 10 feet into the
    northernmost part of lot 29. In September 1996, defendant quit claimed the entire parcel to
    himself and Kristi Hammack “as joint tenants with full rights of survivorship.”
    Subsequently, defendant and Hammack, as joint tenants, conveyed the vacant portion of
    the property to a third party.2 When the sale failed, the third party conveyed the vacant portion
    back to defendant and Hammack through a quit claim deed that included the following legal
    description: “Lot 29 except for the Northerly 12 feet, Lot 30 and 31, Schirrmacher Subdivision,
    according to the plat thereof as recorded in Liber 6, Page 31, of Plats, Monroe County Records.”
    Notably, that legal description only encompassed the lots of the property that were vacant.
    Defendant and Hammack eventually married, but later divorced. In the judgment of
    divorce, defendant was awarded sole ownership of the property at 126 Virginia Court.
    Approximately three years after the divorce, defendant sought to refinance his interest in the
    subject property. Defendant obtained a $75,000 loan from Washington Mortgage Company in
    2004, which was secured by a mortgage. The mortgage indicated that it was to encumber
    property with the common address of 126 Virginia Court, but it only listed the legal description
    covering the vacant lots, not the entire parcel. The mortgage was later assigned to plaintiff.
    Defendant defaulted on the mortgage, and plaintiff brought the instant action seeking foreclosure
    and reformation, as plaintiff had discovered that the legal description contained in the mortgage
    did not encumber the entire parcel, leaving out the lots on which the house and garage were
    erected.
    Plaintiff filed a motion for summary disposition under MCR 2.116(C)(10), arguing that
    there was clear and convincing evidence of a mutual mistake that permitted reformation of the
    mortgage. In response, defendant asserted that plaintiff’s position was without merit because he
    only intended to encumber the vacant portion of the property, as specifically described in the
    mortgage. The trial court agreed with plaintiff and entered an order granting summary
    disposition in favor of plaintiff, requiring the mortgage to be reformed to reflect an encumbrance
    of the entire parcel and ordering a judicial foreclosure in accordance with the reformed
    mortgage.
    Defendant now challenges the trial court’s grant of summary disposition.
    II. STANDARD OF REVIEW
    We review de novo a trial court’s decision on a motion for summary disposition under
    MCR 2.116(C)(10). Pace v Edel-Harrelson, 
    499 Mich. 1
    , 5; 878 NW2d 784 (2016). A motion
    under MCR 2.116(C)(10) “requires the adverse party to set forth specific facts at the time of the
    2
    Apart from defendant’s unsupported statements in his brief in response to plaintiff’s motion for
    summary disposition, there is no evidence of this attempted sale or completed transfer in the
    lower court record. A deed conveying the property to the third party was not recorded with the
    Register of Deeds.
    -2-
    motion showing a genuine issue for trial.” Bernardoni v City of Saginaw, 
    499 Mich. 470
    , 473;
    886 NW2d 109 (2016). Thus, “[b]ecause a motion under MCR 2.116(C)(10) tests the factual
    sufficiency of the complaint, the circuit court must consider the affidavits, pleadings,
    depositions, admissions, and other evidence submitted by the parties, MCR 2.116(G)(5), in the
    light most favorable to the party opposing the motion.” Joseph v Auto Club Ins Ass’n, 
    491 Mich. 200
    , 206; 815 NW2d 412 (2012). However, a reviewing court only may consider substantively
    admissible evidence. 
    Bernardoni, 499 Mich. at 473
    . “When the proffered evidence fails to
    establish a genuine issue regarding any material fact, the moving party is entitled to judgment as
    a matter of law.” 
    Id. “A genuine
    issue of material fact exists when the record, giving the
    benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable
    minds might differ.” Pioneer State Mut Ins Co v Dells, 
    301 Mich. App. 368
    , 377; 836 NW2d 257
    (2013) (quotation marks and citation omitted). “The trial court is not permitted to assess
    credibility, weigh the evidence, or resolve factual disputes, and if material evidence conflicts, it
    is not appropriate to grant a motion for summary disposition under MCR 2.116(C)(10).” 
    Id. In addition,
    “[w]e review equity cases de novo, but we will not reverse or modify the
    judgment unless convinced that we would have reached a different result had we occupied the
    position of the trial court.” Casey v Auto-Owners Ins Co, 
    273 Mich. App. 388
    , 394; 729 NW2d
    277 (2006). See also McDonald v Farm Bureau Ins Co, 
    480 Mich. 191
    , 197; 747 NW2d 811
    (2008) (“[W]hether equitable relief is proper under those facts is a question of law that an
    appellate court reviews de novo.”).
    III. ANALYSIS
    Defendant challenges the trial court’s grant of summary disposition in favor of plaintiff
    and reformation of the mortgage on two grounds: (1) summary disposition was improper because
    defendant denied that there was a mutual mistake and confirmed that he only intended for the
    three lots listed in the mortgage to be encumbered by the mortgage, and (2) plaintiff failed to
    meet its burden of proving a mutual mistake by clear and convincing evidence, such that the trial
    court improperly rewrote the contact between the parties. We disagree.
    “Michigan courts sitting in equity have long had the power to reform an instrument that
    does not express the true intent of the parties as a result of fraud, mistake, accident, or surprise.”
    Johnson Family Ltd Partnership v White Pine Wireless, LLC, 
    281 Mich. App. 364
    , 371-372; 761
    NW2d 353 (2008). In that vein, Michigan courts will not “hesitate . . . to reform contracts . . .
    where there has been a mutual mistake of fact.” Goldman v Century Ins Co, 
    354 Mich. 528
    , 532;
    93 NW2d 240 (1958). See also Etherington v Bailiff, 
    334 Mich. 543
    , 552; 55 NW2d 86 (1952)
    (“There is abundant authority for reforming a deed or mortgage which, through error, fails to
    express the result of the meeting of the minds of the parties, particularly when it is clear that the
    description fails to embody the clear, undisputed visual standard of the parties.”). However,
    “[i]n considering whether the trial court properly ordered reformation under the circumstances,
    we are mindful that courts are required to proceed with the utmost caution in exercising
    jurisdiction to reform written instruments.” Olsen v Porter, 
    213 Mich. App. 25
    , 28; 539 NW2d
    -3-
    523 (1995). Therefore, given this requisite caution, “a plaintiff must prove a mutual mistake[3] . .
    . , or mistake on one side and fraud on the other, by clear and convincing evidence” in order to
    obtain reformation. 
    Casey, 273 Mich. App. at 398
    . See also Ross v Damm, 
    271 Mich. 474
    , 480-
    481; 
    260 N.W. 750
    (1935); Johnson Family Ltd 
    Partnership, 281 Mich. App. at 379-380
    , 381-383
    (explaining the different types of mistakes of law and the likelihood of each type being
    reformed); 
    Olsen, 213 Mich. App. at 29
    . Likewise, because the primary concern in determining
    whether to reform an instrument is whether it expressed “the true intent of the parties,” 
    Olsen, 213 Mich. App. at 29
    , “[t]he burden of proof is upon the plaintiff to make out a case for
    reformation and the evidence should be clear and convincing that the contract should be
    reformed in order to carry out the true agreement of the parties,” E R Brenner Co v Brooker
    Engineering Co, 
    301 Mich. 719
    , 724; 4 NW2d 71 (1942). Evidence fulfills the “clear and
    convincing” standard if it “produce[s] in the mind of the trier of fact a firm belief or conviction
    as to the truth of the allegations sought to be established, evidence so clear, direct and weighty
    and convincing as to enable [the factfinder] to come to a clear conviction, without hesitancy, of
    the truth of the precise facts in issue.” In re Martin, 
    450 Mich. 204
    , 227; 538 NW2d 399 (1995)
    (quotation marks and citation omitted; alterations in original).
    Defendant contends that the trial court’s grant of summary disposition and reformation of
    the mortgage was improper because the record did not include clear and convincing evidence
    that he and Washington Mortgage intended the mortgage to encumber the entire parcel of
    property. We disagree. The record clearly reveals that defendant and Washington Mortgage
    intended to encumber all six lots.
    The legal description in the mortgage only described the vacant lots, omitting the lots that
    contain the house and garage, while still referencing the common street address. Nevertheless,
    the appraisal commissioned by Washington Mortgage before it provided the loan specifically
    considered the house and garage and expressly discussed the flooring, walls, and trim found in
    the house. Likewise, in considering comparable properties in order to fully appraise defendant’s
    property, the appraiser only noted other properties that had houses; the appraiser did not consider
    vacant lots. Accordingly, the documentation related to the appraisal provides clear and
    convincing evidence that Washington Mortgage intended that the mortgage would be secured by
    property that included the house. If Washington Mortgage only intended to encumber the
    vacant, undeveloped lots, it would have been pointless to appraise the lots that encompassed the
    house.
    Furthermore, despite defendant’s arguments to the contrary, his intent prior to signing the
    mortgage also is clear from the documentary evidence. Before receiving the loan and mortgage,
    defendant was required to read, review, and sign numerous documents provided to him by
    Washington Mortgage. During that process, defendant signed several documents that indicated
    his intent to live on the mortgaged property and occupy the house as his primary residence. One
    document warned defendant that if he obtained the loan, the lender would have a mortgage on
    3
    “A mutual mistake may be one of fact or one of law.” Johnson Family Ltd 
    Partnership, 281 Mich. App. at 379
    .
    -4-
    his “home” and that default on that mortgage could cause him to lose his home. Defendant also
    signed a “Borrower’s Certification” form, which certified that he “intends to occupy the property
    stated as the property address referenced above.” The form referenced the 126 Virginia Court
    address, but it did not include a legal description. In addition, defendant was required to
    purchase hazard insurance in order to cover the replacement costs of the improvements on the
    property, even though the vacant lots undisputedly contained no improvements. Defendant also
    signed a form—indicating that he was doing so under oath and subject to perjury charges—
    which stated that he would occupy the mortgaged property as his “home.” Defendant also filled
    out a Universal Residential Loan Application, in which he indicated that (1) he was seeking a
    $75,000 loan and lived at 126 Virginia Court; (2) he already had $45,529 in debt secured by the
    property, and that he was seeking to refinance the property in order to “cash out” that debt; (3) he
    “intend[ed] to occupy the property as [his] primary residence”; and (4) under the “ASSETS AND
    LIABILITIES” section of the application, that the subject property was valued at $160,000,
    constituting the value of the entire, six-lot parcel. In other words, defendant did not list the
    vacant lots and the developed lots as separate parcels.
    Defendant argues that this Court should not rely on these documents because they only
    indicate the common address (i.e., 126 Virginia Court) where defendant did, in fact, reside.
    However, again, several of those documents used the word “home” to describe where defendant
    would live, and it is undisputed that there was no house—or any residential structure at all, for
    that matter—on the property that was covered by the legal description in the mortgage.
    Therefore, defendant’s argument, which is unsupported with any admissible evidence, see
    
    Bernardoni, 499 Mich. at 473
    , that he understood the forms to mean that he was only mortgaging
    the vacant lots, but still would live in the house on the unmortgaged portion of the property, is
    belied by the fact that he repeatedly indicated in writing—at the time that he applied for and
    received the mortgage—that he would be living in a “home” on the mortgaged property.
    As previously mentioned, the most telling document indicated that defendant had been
    sworn and he understood that was signing the document under the threat of federal perjury
    charges. With that understanding, defendant expressly agreed that he would be using the
    mortgaged property as his “home.” It is only reasonable to assume that defendant read that
    document closely to ensure that he had not perjured himself. Further, although language solely
    referencing the common address of the property had the potential of causing some confusion
    regarding the specific property to which the documents referred, the same cannot be said with
    regard to defendant’s repeated confirmations that he would be living in the “home” on the
    mortgage property. In signing those documents, defendant revealed his intent to encumber the
    entire property because, again, there is no dispute that defendant was aware that the residential
    structure was not on the vacant lots.
    In addition, the vacant lots did not have a separate address. Rather, every legal
    description—whether only describing the vacant lots or the entire parcel—used the common
    address of 126 Virginia Court. Property taxes also were assessed on the full, six-lot parcel as a
    whole, not as two separate parcels—one developed, one vacant—for tax purposes.
    Contrary to his characterization of the record, defendant failed to proffer any evidence in
    the trial court that clearly or explicitly confirmed that his intent was to encumber the three vacant
    lots. He did not present an affidavit or identify any other evidence that unambiguously
    -5-
    confirmed his now-claimed intent when the mortgage was executed, which might have
    established a genuine issue of material fact for trial. See 
    Bernardoni, 499 Mich. at 473
    ; 
    Joseph, 491 Mich. at 206
    ; Pioneer State Mut Ins 
    Co, 301 Mich. App. at 377
    .
    Therefore, although it is apparent that defendant seeks to have the benefit of only having
    the vacant portion of his property encumbered now that he is in default, the record plainly
    reveals his intent to encumber the entire parcel. The documentary evidence submitted by the
    parties provided clear and convincing evidence that both defendant and Washington Mortgage
    intended to encumber the entire parcel of land owned by defendant at 126 Virginia Court under
    the mortgage. See E R Brenner 
    Co, 301 Mich. at 724
    ; 
    Casey, 273 Mich. App. at 398
    . Given this
    clear and convincing evidence of a mutual mistake, and the absence of any genuine issue of
    material fact, the trial court properly granted summary disposition in favor of plaintiff and
    ordered reformation of the mortgage. See 
    Bernardoni, 499 Mich. at 473
    ; Johnson Family Ltd
    
    Partnership, 281 Mich. App. at 371-372
    .
    IV. CONCLUSION
    Defendant has failed to establish that his claims warrant relief.
    Affirmed.
    /s/ Michael J. Riordan
    /s/ Karen M. Fort Hood
    /s/ Deborah A. Servitto
    -6-