City Nat'l Bank Of West Va. v. Smith
| Decision Date | 13 December 2010 |
| Docket Number | Civil Action No. 2: 09-1148 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | CITY NATIONAL BANK OF WEST VIRGINIA, a national banking association, Plaintiff, v. MARK K. SMITH; LISA D. SMITH; UNITED STATES DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE; UNITED STATES DEPARTMENT OF JUSTICE; WEST VIRGINIA DEPARTMENT OF TAX AND REVENUE; FOUR S DEVELOPMENT LIMITED PARTNERSHIP; LOUANN HEDRICK; JENNIFER DILLON; and POPLAR HILLS HOMEOWNERS ASSOCIATION, Defendants. |
AT CHARLESTON
Pending is the motion for summary judgment of plaintiff City National Bank of West Virginia ("City National"), filed September 20, 2010.
In this action, City National requests reformation of a deed of trust to correct what it asserts is a "simple scrivener'serror. " (Pl. 's Mem. Supp. Mot. Summ. J. 1). City National is a national banking association with its principal place of business in Kanawha County, West Virginia. (Compl. ¶ 1). Defendant Lisa D. Smith ("Ms. Smith") is a resident of Putnam County. (Id. ¶ 2). Defendant Mark K. Smith ("Mr. Smith") is a former resident of Putnam County and the husband of Lisa Smith (collectively "the Smiths"). (Id. ¶ 3). Defendants United States Department of Treasury, Internal Revenue Service and United States Department of Justice (collectively "United States") are federal agencies with liens filed against the Smiths. (Id. ¶ 4-5). Defendant West Virginia Department of Tax and Revenue ("WV Tax Department") is a state governmental department with tax liens filed against the Smiths. (Id. ¶ 6). Defendant Four S Development Limited Partnership ("Four S Development") is a West Virginia Limited Partnership with a judgment lien filed against Ms. Smith. (Id. ¶ 7). Defendants Louann Hedrick and Jennifer Dillon are Kanawha County residents with judgment liens filed against Ms. Smith. (Id. ¶ 8-9). Defendant Poplar Hills Homeowners Association, doing business as Poplar Estates Owners Association, Inc., ("Poplar Hills") is a West Virginia business with its principal office in Putnam County. (Id. ¶ 10).
In 1999, City National agreed to loan the Smithsapproximately $400,000 in exchange for repayment, with interest, over a fixed period of time. (Pl. 's Mem. Supp. Mot. Summ. J. 2). It was further agreed to secure the loan by a deed of trust, with certain property owned by the Smiths to serve as collateral. (Id.). According to City National, both the Smiths and the bank understood that the property to be used as collateral included Lots 2, 3, and 4 of Poplar Estates, located in Putnam County, West Virginia. (Id.; see also Pl. 's Mot. Summ. J., Ex. 2, Grafton Dep. 18).
A closing was held on July 6, 1999, wherein City National entered into a loan with the Smiths for $422,100. . Cynthia Miller, holding a valid power of attorney, signed the loan documents on behalf of the Smiths.
(Compl. ¶¶ 16-17). The loan was secured by a deed of trust, which was similarly signed by Cynthia Miller on July 6, 1999.
(Pl. 's Mot. Summ. J., Ex. 1, Ex. J, Deed of Trust). John A. Grafton, an attorney retained by City National, conducted the closing. (Id., Ex. 1, Grafton Aff. ¶ 3).
Attached to the deed of trust as Exhibit A was a description of the real estate securing the loan. (Id.). Exhibit A only includes a legal description of Lot 4, not Lots 2 and 3. (Pl. 's Mot. Summ. J., Ex. 1, Ex. J, Deed of Trust). City National maintains that the legal description of Lots 2 and 3 was inadvertently omitted from Exhibit A. (Pl. 's Mem. Supp. Mot. Summ. J. 5). Lots 2 and 3--the property on which the Smiths' house is located--had a total value of $158,410, whereas Lot 4 was only valued at $1,450. . The deed of trust was filed and recorded with the Office of the Clerk of the County Commission of Putnam County, West Virginia in July 1999 and has not been released. (Pl. 's Mem. Supp. Mot. Summ. J. 5).
After the loan was closed, the Smiths fell delinquent on a number of financial obligations. (Compl. ¶ 27). As a result, Poplar Hills obtained a judgment lien against Ms. Smith on September 28, 1999, Louann Hedrick and Jennifer Dillon each obtained judgment liens against Ms. Smith on August 31, 2004, and Four S Development obtained a judgment lien against Ms. Smith on January 28, 2005. (Compl. ¶¶ 8-9; Pl. 's Mot. to Strike, Ex. C, Lien Index; Four S Development Resp. 3, Ex. B, Abstract of J.). Although the amounts of the liens held by Poplar Hills, Hedrick, and Dillon have not been disclosed to the court, Four S Development's lien is in the amount of $128,304. 06. (Four S Development Resp. 3, Ex. B, Abstract of J.). Subsequently filedstate tax liens and federal tax and judgment liens aggregate over $12. 5 million. 1 It is undisputed that none of these liens have been satisfied and that all were filed after the deed of trust was recorded. (Compl. ¶ 29).
In 2008, following their federal convictions, the Smiths stopped making loan payments to City National. (Pl. 's Mem. Supp. Mot. Summ. J. 6). Mr. Smith has abandoned the house located on Lots 2 and 3. (Id.). Ms. Smith, however, continues to live in the house. (Id.).
City National initiated this action on October 20, 2009. Inasmuch as two of the defendants with liens on the subject property are federal government departments, jurisdiction is conferred on this court by 28 U. S. C. § 1346(f), which gives federal courts exclusive jurisdiction over actions brought under 28 U. S. C. § 2409(a), the Quiet Title Act. The single count of the complaint is entitled, "Count One--Reformation of Deed of Trust, " and it asserts (1) that the intent of the parties to the loan was that the loan would be secured by Lots 2, 3 and 4, (2) that Lots 2 and 3 were erroneously omitted from the deed of trust, and (3) that City National and the Smiths are entitled to correct the deed of trust to accurately reflect their intentions. (See Compl. ¶¶ 30-36). City National accordingly asks the court to enter an order reforming the deed of trust to include Lots 2 and 3. (Id. 6).
On May 21, 2010, City National moved for judgment on the pleadings or, in the alternative, for summary judgment. On June 3, 2010, Four S Development moved to seek additional discovery pursuant to Rule 56(f). In denying City National's motion and granting Four S Development's motion, the court concluded as follows:
In light of Four S Development's 56(f) affidavit [seeking additional time for discovery] and Lisa Smith's denial [that the Smiths intended to include Lots 2 and 3 as collateral], and inasmuch as the non-moving parties did not have the opportunity to conduct discovery before plaintiff moved for judgment on the pleadings or in the alternative for summary judgment, the court, while recognizing that City National presents a formidable case for relief, finds it inappropriate to attempt a ruling on the merits without affording the non-moving parties the opportunity to conduct discovery and present all of the relevant material facts.
City National v. Smith, No. 2: 09-1148, slip op. at 13 (S. D. W. Va. Aug. 31, 2010).
On September 20, 2010, City National moved for summary judgment. City National contends that reformation of the deed of trust is appropriate to correct a scrivener's error, asserting that the undisputed evidence shows that the parties intended Lots 2 and 3 to serve as collateral for the loan. (See Pl. 's Mem. Supp. Mot. Summ. J. 9-12). Further, City National maintains that the doctrine of laches does not bar its request for reformation because the undisputed evidence shows that (1) City National's delay in asserting its rights was excusable because Grafton, its attorney at the closing, affirmatively represented to City National that he would resolve any problem with the deed of trust, and (2) City National did nothing to cause any prejudice to defendants. (Id. 12).
On October 4, 2010, the United States filed a response to City National's summary judgment motion. The United States says that it does not oppose City National's motion. (United States Resp. 1). It states that the "circumstances surrounding the loan and the documentary evidence produced by City establish conclusively that City and the Smiths intended to include Lot Nos. 2 and 3 as collateral for the loan and the omission of those Lots from the deed of trust was the result of mistake orinadvertence. " (Id. 1-2). The United States concludes that it "has no equitable grounds for opposing City's request for relief. " (Id. 2).
Also on October 4, 2010, Four S Development filed its response in opposition to City National's motion for summary judgment. Four S Development contends that City National's request for reformation is barred by the doctrine of laches because (1) City National unreasonably delayed asserting its rights, inasmuch as it filed this action ten years after learning of the alleged scrivener's error, and (2) Four S Development has been prejudiced by City National's "dilatory conduct. " (Four S Development Resp. 4-6).
On November 1, 2010, Ms. Smith filed a verified response to City National's summary judgment motion. In her verified response, Ms. Smith contends that (1) City National has not met the requisite standard of proof for reformation, and (2) City National's request for equitable relief is barred by the doctrine of laches. .
No other defendant has responded to City National's motion for summary judgment.
A party is entitled to summary judgment "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. " Fed. R. Civ. P. 56(c). Material facts are those necessary to establish the elements of a party's cause of action....
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