Brown v. Butts, 2140962.

• Decision Date: 12 February 2016
• Docket Number: 2140962.
• Citation: 214 So.3d 1181
• Parties: Kenith BROWN and Laqunda Brown v. Ronnie BUTTS and Tammy Butts.
• Court: Alabama Court of Civil Appeals

214 So.3d 1181

Kenith BROWN and Laqunda Brown

v.Ronnie BUTTS and Tammy Butts.

2140962.

Court of Civil Appeals of Alabama.

Feb. 12, 2016.

Certiorari Denied July 8, 2016

Alabama Supreme Court 1150561. W. Allen Sheehan of Capell & Howard, P.C., Montgomery, for appellants.

Faye A. Schofield of Schofield Legal Solutions, LLC, Lapine, for appellees.

MOORE, Judge.

Kenith Brown and his wife, Laqunda Brown,¹ appeal from a judgment of the Crenshaw Circuit Court ("the trial court") reforming a "residential lease" ("the contract") that they had entered into with Ronnie Butts and his wife, Tammy Butts, regarding the lease and purchase of real property and a mobile home located in Luverne. We reverse the trial court's judgment.

Procedural History

On May 23, 2013, the Buttses filed a complaint against the Browns, seeking, pursuant to Ala.Code 1975, § 8–1–2, to reform the contract that they had entered into with the Browns. The Buttses attached a copy of the contract to their complaint as an exhibit; that contract identified the Buttses as "Lessor" and the Browns as "Lessee." Pursuant to the contract, the Buttses agreed to lease to the Browns a mobile home and real property located in Luverne for a lease term of 30 years—June 1, 2004, to June 30, 2034—for $728 per month. The contract also provided, among other things:

"12. Lessee agrees that Lessor shall have the right to attach ‘For Sale’ or ‘For Rent’ signs or placards on the premises during the last thirty days of the lease term and to show the premises to any person desiring to rent or purchase the premises.

"a) The Lessee hereby and herewith shall have an Option to buy the premises at anytime during the Lease period. Said purchase price shall be $85,000.00. Lessor agrees to apply the entire amount of all lease payments made by Lessee excluding late charges or fees toward a down payment for said purchase at the time of purchase."

In their complaint, the Buttses asserted that the contract contained an error that was the result of either a mutual mistake of the parties or a mistake of the Buttses that, the Buttses asserted, the Browns knew of or should have suspected at the time the contract was drafted and executed. The Buttses also asserted that the contract had omitted certain necessary clauses and that, as a result, it further failed to properly express the intent of the parties. The Browns answered and counterclaimed, asserting claims of "fraud, misrepresentation, and deceit" and breach of contract against the Buttses. The Buttses filed a reply to the Browns' counterclaims. Following a hearing on January 6, 2015, the trial court entered a judgment on March 13, 2015, providing, in pertinent part:

"The Court finds that the lease agreement by and between the parties dated May, 2004, is an ambiguous agreement in that it purports to be a thirty (30) year lease agreement but provides for an option price to be paid in full by applying the entire lease payments which would have provided for payment in full of the sales price after the 117th monthly payment. The Court further finds the contract to be ambiguous in allowing for the full amount of the purchase price to be paid after payment of less than one-third (1/3) of the number of lease payments which would have been made in the thirty (30) year life of the lease agreement; allowed for the [Buttses] to erect signs for sale or rent during the last thirty (30) days of the thirty (30) year term; failed to provide any method for the [Browns] to exercise their option rights; failed to provide any method of conveyance of the leased premises; failed to require the [Buttses] to convey a free and clear title to the [Browns] in the event the [Browns] exercised their option to purchase. The Court is further concerned about the validity of [the] lease agreement in that it was not recorded and would be void pursuant to Section 35–4–6, Code of Alabama, after a period of twenty (20) years.

"....

"Therefore, the Court finds that the contract between the [Buttses] and [the Browns] dated May, 2004, does not express the true intent of the parties and reforms the same to the extent that the [Browns] shall only be allowed to exercise their option to purchase the lease property by paying to the [Buttses] the balance due on their financing to Land Investment Group, LLC, on the real estate contract and the balance due CIT Group, or its assigns, at the time they elect to exercise their option to purchase."

The Browns filed a postjudgment motion on April 10, 2015; that motion was denied by the trial court on June 16, 2015. The Browns filed their notice of appeal to the Alabama Supreme Court on July 28, 2015; that court subsequently transferred the appeal to this court, pursuant to § 12–2–7(6), Ala.Code 1975.

Facts

Ronnie testified that he and Tammy had purchased 13 acres of real property ("the real property") in July 2000 for $21,000 from Land Investment Group, LLC. The sales contract indicated that the Buttses made a $2,000 down payment and agreed to make 180 monthly payments of $203.55, which included interest calculated at a rate of 10% per annum. The Buttses thereafter purchased a double-wide mobile home ("the mobile home") in November 2000, which they placed on the real property in December 2000. The Buttses financed the purchase of the mobile home through CIT Group/Sales Financing, Inc. The terms of the security agreement from that purchase indicate that the Buttses made a down payment of $5,561.85 and agreed to pay a balance of $50,168 through 360 monthly payments of $426.25, which included interest at a rate of 9.62% per annum.

Ronnie stated that, at some point before September 2003, he and Tammy had decided to sell the real property and the mobile home and that the Browns had subsequently contacted him and expressed an interest in purchasing both the real property and the mobile home. Ronnie testified that he and Tammy offered to sell the real property and the mobile home together for a total price of $85,000. According to Ronnie, at that time, he and Tammy had owed a total of approximately $75,000 on the notes that were secured by the real property and the mobile home. The Buttses set the sales price at $85,000 because they had hoped to recover additional amounts that they had paid for improvements to the property and to make a small profit. On September 25, 2003, the parties executed a document entitled "Offer to Purchase Real Estate" in which the Browns agreed to purchase the real property and the mobile home for $85,000, subject to their ability to obtain a mortgage in an amount of not less than $85,000 with an interest rate not to exceed 7.5%.

The parties all testified that the Browns were unable to obtain third-party financing to cover the $85,000. Ronnie subsequently presented the Browns with a lease agreement, pursuant to which they could lease the mobile home for one year for $500 per month; the Browns, however, declined to sign that agreement. Ronnie testified that he had subsequently "come to terms" with the Browns to sell the real property and the mobile home to them for $728 per month to be paid over the course of 30 years. Ronnie testified that he had determined the monthly payment amount to be included in the contract by adding together $430, which was the approximate amount of his and Tammy's monthly payment on the mobile home, plus $203, which was the approximate amount of his and Tammy's monthly payment on the real property, plus monthly amounts for taxes and insurance costs. Ronnie testified that he had made the contract term 30 years because his and Tammy's note on the mobile home was a 30–year note.

Ronnie testified that he did not want the purchase to go on for 30 years, but, rather, he wanted the Browns to acquire financing and to pay the purchase price sooner so he had agreed "to having the $85,000 put into the contract so that they could acquire financing on it at a later date." Ronnie testified as follows on direct examination by counsel for the Buttses:

"Q: And did you agree for them to be able to apply any of the lease payments toward the purchase price should they be able to buy it?

"[Ronnie]: That's right.

"Q: How was that to work? What was the agreement you had with Mr. Brown on that?

"A: I told him, Mr. Brown, you know, anything that they had paid up to it, that it would come off that amount, but we never really talked about any interest.

"Q: Okay. Was it your understanding with Mr. Brown that any—that he be able to buy at any time during the lease if he paid off the debts that you have?

"A: That's correct.

"Q: Was that your understanding what Mr. Brown—

"A: Yes.

"Q: If he paid off whatever you owed on it, both to Land Investment Group and to the mobile home, then you would deed over to him and convey the mobile home?

"A: That's right.

"Q: Did you ever agree to finance this property for him without any interest payments?

"A: No."

Ronnie also testified:

"Q: And you were willing at any time from the contract to convey the property to the Browns once they paid off what you owed on it?

"A: Yes.

"Q: Was that your understanding from Mr. and Mrs. Brown from the beginning?

"A: Yes."

Ronnie testified that, when they were negotiating the sale, the Browns were aware of the encumbrances on the real property and the mobile home. However, Kenith testified that he did not know of the encumbrances. Although one portion of Laqunda's testimony indicates that she was aware that the Buttses had a mortgage, in that she testified that the purpose of the contract had been for the Browns to finance the transaction through the Buttses' mortgage company, Laqunda also testified that she did not know about any loan the Buttses had on either the real property or the mobile home or the amount of any loan. Kenith testified that he had understood that the Browns would pay the Buttses $728 per month until the $85,000 was paid in full, at which point the Browns would own the real property and the mobile home, with no interest due. Kenith testified that he did not recall having...