Cent. Mortgage Co. v. Humphrey, A14A0346

• Decision Date: 09 July 2014
• Docket Number: DO-020,A14A0346
• Court: Georgia Court of Appeals
• Parties: CENTRAL MORTGAGE CO. v. HUMPHREY et al.

CENTRAL MORTGAGE CO. v. HUMPHREY et al.

A14A0346

DO-020

Court of Appeals of Georgia

July 9, 2014

FOURTH DIVISION

DOYLE, P. J.,

MILLER and DILLARD, JJ.

NOTICE: Motions for reconsideration must be physically received in our clerk's office within ten days of the date of decision to be deemed timely filed.

Doyle, Presiding Judge.

This case arises from an action filed by Central Mortgage Company ("Central") against, inter alia, Susan Humphrey a/k/a Susan D. Humphrey and David Elder,¹ asking the trial court for reformation of a deed, a declaratory judgment, or equitable reformation, relating to the conveyance of 1961 Luke Edwards Road, Dacula, Georgia, ("the property") from Humphrey to Elder. Of the $1.4 million purchase price, Central loaned $980,000 to Elder in exchange for a deed to secure debt. The trial court entered judgment in favor of Humphrey, finding that there was no meeting of the minds between Humphrey and Elder as to the portion of land being conveyed, and therefore, the court declined to reform the property description. The trial court also refused to rescind the contract or direct Humphrey to repay the purchase price to Central or Elder or to grant them an equitable lien against the property.

Central appeals, arguing that the trial court erred by failing to (1) reform the property description in the deed; (2) order complete rescission of the sales contract after finding that no agreement existed; (3) award Central and Elder equitable liens equal to the consideration received by Humphrey from those parties as part of the 2003 sales transaction; or (4) pursuant to OCGA § 9-4-2, declare a new legal description of the property conveyed to Central and Elder. For the reasons that follow, we affirm.

On an appeal from an entry of judgment following a bench trial, we apply a de novo standard of review to any questions of law decided by the trial court, but will defer to any factual findings made by that court if there is any evidence to sustain them. [Nevertheless], if the trial court makes a finding of fact which is unsupported by the record, that finding cannot be upheld and any judgment based upon such a finding must be reversed.²

The record shows that beginning in 1992, Humphrey obtained title to various parcels of adjoining property. One parcel, which was quitclaimed to Humphrey in 1992, included 9.118 acres described as Lot 8, Block B. Another parcel was deeded to Humphrey in 1996 by Star Custom Homes (the building company of her husband Ray) and included 3.644 acres described as Lot 7, Block B, which bounded Lot 8 to the north. In addition to those lots, Ray obtained title to Lot 6, which bounded Lot 7 to the north, and Ray later conveyed title to a home and one acre from the front of that lot to another individual, but Ray kept an easement along the north side of the subdivided lot for access to Luke Edwards Road, which ran north and south along the east side of all three parcels. In May 1998, Humphrey conveyed the road frontage of Lot 7, consisting of 2 acres and a home, to her son, Thomas.³ The legal description of that two acre parcel would later become the subject of another lawsuit after Thomas failed to pay the note on the property and the lien holder was forced to file suit to reform the legal description.⁴

In 2003, Elder, Humphrey, and Ray entered into negotiations for Elder, who is married to Humphrey's sister, to purchase Humphrey's property, which at that time consisted of Lot 8 and the westerly portion of Lot 7 that had not been conveyed to Thomas. At the time of the conveyance, the Humphreys had constructed improvements on the property, including a large main residence, a pool with an adjoining pool house and surrounding decks, a two-story garage or barn with upstairs living space, an uncompleted greenhouse, a gazebo overlooking a pond, a driveway with a roundabout in front of the residence containing a large fountain, a substantial wrought iron fence with brick columns along the road and driveway, and a sidewalk connecting the residence to the gazebo and other features. The parties agree that the transaction arose because Ray planned to develop a large condominium complex, and Elder, who worked installing various internal mechanical systems, planned to move to the Humphreys' former home and assist with the development; additionally, proceeds from the property sale would be used in the development opportunity and for the Humphreys' retirement.

In preparation for the sale, an appraisal was prepared, which assigned value to the property based on all the existing structures on the property and "10 acres +/- per seller."⁵ One copy of the purported sales contract, which was signed by Elder and the Humphreys,⁶ stating that Elder was purchasing the existing home and +/- 10 acres for $1.4 million. Another copy of the sales contract submitted to the court by Humphrey, however, stated that Elder was purchasing the existing home and +/- 17 acres for $1.4 million. Neither of these contracts incorporated the referenced legal description of the specific property being conveyed. The parties agreed that no one surveyed the property at that time of the sale. Elder secured a loan for $980,000 from Central's predecessor in interest, and he provided the balance of the $1.4 million purchase price; it is undisputed that Humphrey took $847,133.43 at the closing.⁷ The Humphreys did not attempt to divide the property or obtain an additional street address from the county subsequent to the closing.

Approximately a month after the closing, however, the business opportunity driving the transaction evaporated, and Elder did not move to the property. Instead of returning the purchase money, the parties agreed that the Humphreys would remain on the property and pay a monthly rent sufficient to cover Elder's payments on the $980,000 mortgage. This arrangement continued for approximately four years and eight months, until the Humphreys stopped paying rent, and as a result, Elder defaulted on the promissory note.

Thereafter, Central attempted to foreclose on the property, but was prevented from doing so when the Humphreys challenged the legal description in the security

deed.⁸ Among other things, the legal description in the deed to secure debt from Elder to Central and the warranty deed from Humphrey to Elder failed to describe a closed boundary and included some property from lots to which Elder had never held title. The description stated that the property included "[a]ll that tract or parcel of land laying [sic] . . . in Land Lot 781 . . . and being the easterly portion of lot 8, block b and a portion of lot 7." After discovering the defective legal description, the attorney who prepared the description issued a scriveners's affidavit purporting to correct the mistakes. The amended description, however, still failed to describe a closed loop of property. In the corrected description, the property was described as "[a]ll the tract or parcel of land laying [sic] and being Land Lot 281 . . . and being a portion of Lot 7 and all of Lot 8, Block B."

Thereafter, Central filed the instant "Complaint for Reformation, Declaratory Judgment and Equitable Relief" against Humphrey and Elder. In individual counts, Central asked that (1) the trial court reform the legal description of the property; (2) the trial court enter a declaratory judgment replacing the property description as stated in the warranty deed issued by Humphrey to Elder and the security deed given by Elder to Central with the legal description provided by Central's surveyor; or (3) the trial court use its other equitable powers to replace the prior description with Central's description or "grant such other and further relief as this Court deems just, equitable[,] and proper."

At the bench trial, Central presented the testimony of Daniel F. Conroy, a land surveyor, who testified that he performed a survey of the land to determine the correct legal description of the property included in both lots, the total area of which was 10.97 acres. Conroy testified that the Humphreys had violated zoning requirements by building the main residence and portions of the pool house and decking for Lot 8 onto the required setbacks on Lot 8 and encroached onto Lot 7. Although Ray testified he had made an agreement with the original owner of Lot 7 to do so by providing them with a "jog" of land in another area of the lots, this agreement and variance was not recorded with the county. Conroy testified that although there were different landscaping areas between the improvements, the various improvements were not obviously separate and appeared to be intended to remain together. Conroy prepared multiple legal descriptions regarding the lots that the court could use to declare a new legal description of the property that would resolve many of the zoning issues with the encroachments by the Lot 8 buildings onto the set-backs and Lot 7.

Additionally, the Humphreys and Elder testified about the transaction. Elder had assumed at the time of the transaction that he was buying the main house, all the improvements, and approximately ten acres of land, and he did not realize that the improvements were built on multiple lots. The Humphreys, however, believed that they were only selling the main residence and five acres and were retaining all of Lot 7 and the westerly portion of Lot 8, including the garage/barn, greenhouse, gazebo, and pool house. Humphrey explained that her understanding was that she and Ray would move into the pool house when Elder and his family moved in, and she and Ray eventually would build another house on the remainder of Lots 7 and 8. All the parties conceded that they never discussed the specifics of what was being sold but that the conversations occurred over several months.

The trial court issued an order denying the petition. In its order, the trial court found credible the Humphreys' and Elder's testimony that the parties never discussed the exact amount or...