Cornerstone Homes LLC v. Skinner

• Decision Date: 25 June 2010
• Docket Number: 058.,No. 101,101
• Parties: CORNERSTONE HOMES, LLC, Appellee,v.Shawn D. SKINNER, Gary W. Skinner, and Alberta E. Skinner, Appellants,andFHL Bank, Topeka, and Ford Motor Credit Company, Defendants.
• Court: Kansas Court of Appeals

235 P.3d 494

CORNERSTONE HOMES, LLC, Appellee,v.Shawn D. SKINNER, Gary W. Skinner, and Alberta E. Skinner, Appellants,andFHL Bank, Topeka, and Ford Motor Credit Company, Defendants.

No. 101,058.

Court of Appeals of Kansas.

June 25, 2010.

Syllabus by the Court

1. Appellate review of a grant of summary judgment is de novo.

2. An appellate court has unlimited review of a district court's interpretation of a statute and the first task of the reviewing court is to determine the legislature's intent through the language it uses.

3. The seller of a new mobile home must provide the purchaser with the manufacturer's statement of origin for the mobile home under K.S.A. 58-4204(e). Failure to do so, however, does not constitute a fraudulent act or void the sale.

4. K.S.A. 58-4204(h), which provides that a seller of a preowned mobile home for which a certificate of title has previously been issued that fails to timely deliver an assignment of the certificate of title to the buyer commits a fraudulent act that voids the transaction, does not apply to the sale of a new mobile home for which there has never been issued a certificate of title.

5. Under the facts, where the purchasers of a new mobile home did not dispute they purchased the home, signed a note and mortgage as a part of the purchase, and then defaulted on their payments, the district court did not err in granting judgment prior to trial to the seller on its foreclosure claim once the court determined that the seller's failure to deliver the manufacturer's statement of origin did not void the sale.

6. An appellate court has de novo review over a district court's entry of judgment following the presentation of evidence at trial when the relevant facts are not disputed.

7. The failure of a supplier of a new mobile home to provide the purchaser with the manufacturer's statement of origin does not alone constitute a deceptive act under subsections (b)(1)(A) or (b)(8) of K.S.A. 50-626, nor does it constitute an unconscionable act under K.S.A. 50-627.

Barry L. Arbuckle, of Wichita, for appellants.

Jeff Griffith, of Derby, for appellee.

Before HILL, P.J., PIERRON, J., and BUKATY, S.J.

BUKATY, J.

Cornerstone Homes, LLC (Cornerstone), is a seller of mobile homes, sometimes referred to as manufactured homes. It sold such a home to Gary, Alberta, and Shawn Skinner, who made a cash down payment. They signed a note and gave a mortgage on certain real estate they owned in favor of Cornerstone for the remainder of the purchase price. The Skinners later defaulted in their payments, and Cornerstone filed suit to foreclose its mortgage. The Skinners never denied signing the mortgage or defaulting on their payment obligations. In their defense, they argued that Cornerstone was guilty of fraud for failing to deliver to them the manufacturer's statement of origin (MSO) for the mobile home and this precluded Cornerstone from obtaining judgment for the amount due and for foreclosure of its mortgage. The Skinners also counterclaimed for damages on various theories all based essentially on Cornerstone's failure to deliver the MSO. They also sued Jack Hunt, a principal in Cornerstone on these same claims. That suit was consolidated with Cornerstone's foreclosure action. The district court granted Cornerstone the judgment it requested and denied all of the Skinners' claims.

All the arguments of the Skinners in this appeal raise as their core issue the question of whether the failure of a seller of a new mobile home to deliver the MSO to the buyer as required by statute is fraudulent as a matter of law and voids the sale. We answer the question, “No.” This finding, in essence, defeats the Skinners' defense to Cornerstone's foreclosure petition and all of their claims against Cornerstone and Hunt. We affirm.

After negotiations with Cornerstone's principals, Jack and Vicki Hunt, the Skinners agreed to purchase the home. According to the bill of sale, the total sales price including tax was $48,258. The Skinners made a down payment of $4,700, and Cornerstone agreed to finance the remainder of the purchase price at 12% interest. As collateral, Cornerstone took a 30-year mortgage on the Skinners' real property where the home would be placed.

The parties closed on the purchase on May 10, 2004. Hunt represented Cornerstone at the closing. At that time, Hunt did not have in his possession the MSO for the mobile home. The MSO is required for the Kansas Department of Revenue to issue an initial certificate of title. See K.S.A. 58-4204(e). According to notes taken by the closing representative of the title insurer, First American Title/Columbian Title (First American), Hunt stated: “ ‘He should have [it] in a couple of weeks.’ ” The home was delivered to the Skinners' property within 3 days of closing. Cornerstone recorded its mortgage on the Skinners' real property on May 13.

The Skinners made full, timely payments to Cornerstone for the next year. However, they were unable to make their full July 2005 payment after Gary Skinner suffered a heart attack. The Skinners contacted Cornerstone and made a partial payment for that month. Hunt reacted negatively to this, and the Skinners sought to refinance the property with another lender as a result.

The Skinners never obtained any alternate financing. First American became involved, apparently, at the Skinners' request. It was soon discovered that Cornerstone had never provided the MSO for the mobile home, and, consequently, no certificate of title had ever been issued. On July 28, 2005, First American sent Cornerstone a letter requesting information on the status of the mobile home's title. Cornerstone did not respond to the letter. The Skinners never obtained alternative financing and did not make any payments to Cornerstone after August 2005. They apparently continued to live in the home, at least up to the time of the trial.

Cornerstone filed suit to foreclose on the mortgage on March 7, 2006. On April 12, 2006, the Skinners filed a one-page, handwritten response in which they summarily denied the petition's allegations and stated they were refinancing the property and would be able to pay in full. On May 1, the district court granted Cornerstone default judgment and ordered a Sheriff's sale of the mortgaged property to satisfy the judgment.

In October 2006, the district court set aside the default judgment on the Skinners' motion and allowed them to file an answer. The Skinners filed an answer and argued that the transaction with Cornerstone was fraudulent and void under K.S.A. 58-4204 because Cornerstone never provided them with the MSO or a certificate of title. They claimed the sale was void and demanded return of their monthly payments, the down payment, and closing costs plus cancellation of the mortgage.

The Skinners also filed a number of counterclaims against Cornerstone relating to Cornerstone's failure to provide the MSO. The first claim alleged statutory fraud under K.S.A. 58-4204. The second alleged that Cornerstone violated the Kansas Consumer Protection Act (KCPA), K.S.A. 50-623 et seq. , by failing to provide them with the MSO, by filing a false lawsuit, and by acting in an unconscionable manner.

Prior to trial, the district court disposed of the Skinners' claims for statutory fraud in its ruling on a summary judgment motion filed by Cornerstone. It found that Cornerstone did not provide the Skinners with the MSO within 30 days of closing. However, the court agreed with Cornerstone that the Skinners were relying on the wrong section of K.S.A. 58-4204 as the basis for their fraud claim. Specifically, the court concluded that K.S.A. 58-4204(e) applied, rather than the section relied upon by the Skinners-K.S.A. 58-4204(h)-and that the applicable subsection did not provide that failure to deliver the MSO amounted to a fraudulent act or would it void the transaction between Cornerstone and the Skinners. The court declined to grant Cornerstone summary judgment on the Skinners' KCPA claims.

At the time it ruled on the summary judgment motion, the district court also orally announced a number of factual findings relevant to the foreclosure claim of Cornerstone. The court found the Skinners had agreed to purchase and Cornerstone had agreed to sell the manufactured home, Cornerstone did not have possession of the MSO at the time the purchase was closed, the purchase was financed with a note and mortgage on real estate the Skinners owned, and the Skinners were in default for nonpayment of amounts due Cornerstone. The Skinners did not object to these findings.

The parties then proceeded to trial in June 2008 on the remaining claims. Prior to hearing evidence on the Skinners' KCPA claims, the district court indicated that based upon the prior record in the case including the pretrial order and previous findings entered by the court, it appeared there was no dispute the Skinners had signed the note and mortgage and they had defaulted on their payment obligations contained in them. The court further indicated that since there had been a determination that Cornerstone's failure to deliver the MSO was not a fraudulent act that voided the transaction, Cornerstone was then entitled to judgment on its foreclosure claim.

Then, as to the Skinners' KCPA claims, the court heard the testimony of Vicki Hunt. She described the procedures normally taken relative to the procurement of the MSO for a new mobile home. She testified that the MSO was typically sent directly from the supplier to the title company after Cornerstone paid the supplier for the unit. She stated that Cornerstone paid the supplier and had no reason to believe that it would not issue the MSO for the mobile home. She admitted that no one at Cornerstone followed up to confirm whether the MSO had in fact been sent. She stated that she had not read First American's July 28, 2005, letter and was not aware the Skinners had never been provided with the MSO until October 2006, after Cornerstone...