Nelson v. 15 White Barn Drive LLC

• Decision Date: 25 August 2022
• Docket Number: 20210248-CA
• Parties: Lori Kathryn NELSON, Appellant, v. 15 WHITE BARN DRIVE LLC and James Houghtalen, Appellees.
• Court: Utah Court of Appeals

517 P.3d 1062

Lori Kathryn NELSON, Appellant,

v.15 WHITE BARN DRIVE LLC and James Houghtalen, Appellees.

No. 20210248-CA

Court of Appeals of Utah.

Filed August 25, 2022

Brad C. Smith, Ogden, Attorney for Appellant

Howard Burt Ringwood and Spencer Wyatt Young, Salt Lake City, Attorneys for Appellees

Judge Michele M. Christiansen Forster authored this Opinion, in which Justice Jill M. Pohlman and Judge Ryan M. Harris concurred.¹

Opinion

CHRISTIANSEN FORSTER, Judge:

¶1 Lori Kathryn Nelson appeals the district court's grant of summary judgment in favor of 15 White Barn Drive LLC (White Barn) and James Houghtalen (collectively, the Defendants) on Nelson's claims of equitable mortgage and fraud.² We affirm.

BACKGROUND³

¶2 Nelson owned certain real property (the Property) as trustee of her mother's trust. After her mother passed away, Nelson "was fearful of defaulting on the mortgage that existed at that time on the [P]roperty." The mortgage was approximately $36,000, and the Property was worth approximately $200,000. Nelson discussed her financial worries with her friend, James Houghtalen. He told her that although he did not have any money of his own to lend her, he "might know some private lenders."

¶3 According to Houghtalen, he tried to help Nelson find a lender but was unsuccessful because she was not employed. Houghtalen's wife (Wife) had the means to provide a loan, but when Houghtalen approached her about lending money to Nelson, she declined "because of [Nelson's] financial situation." However, Wife offered to purchase the Property for $55,000 so Nelson could pay off the mortgage and meet her other obligations. Wife formed White Barn to purchase the Property and gave Houghtalen a 1% interest in White Barn to facilitate the transaction.

¶4 Nelson believed that she had agreed to take a loan from White Barn and that she was obligated to pay off the $55,000 loan plus an additional "$10,000 as a good deed for [giving her] the loan," minus a credit for all rent payments White Barn received from leasing the Property. On the other hand, Houghtalen and Wife's understanding of the agreement was that White Barn would purchase the Property and then give Nelson the opportunity "to repurchase the home in two years at a predetermined price" of $65,000, less a partial rent credit of approximately $70 per month—the amount of equity Wife believed Nelson would have gained had she been paying on a loan. Wife explained that the parties initially anticipated that Nelson would live at the Property and pay rent, so they intended to put the option-to-purchase terms in a lease agreement separate from the sale agreement. According to Houghtalen and Wife, their goal was to allow Nelson to take "two years to get her act together and get a job and fix her credit" so that she could rebuy the Property.

¶5 Houghtalen did not tell Nelson that Wife was the person providing the funding for the transaction because Wife "wanted it to strictly be a business transaction" so that Nelson would take seriously the opportunity to buy back the Property and not see it as assistance from a friend. Houghtalen assured Nelson that White Barn would not attempt to sell the Property for two years.

¶6 Ultimately, Nelson decided not to reside at the Property, so the parties did not prepare a lease agreement. When Wife learned Nelson would not be living at the Property, she instructed Houghtalen to inform Nelson of changes she wanted to make to the agreement regarding the option to purchase, namely that Nelson would not be able to repurchase the Property sooner than two years after the transaction because Wife "wanted to make sure [she] could get a long-term [renter] in there" during that period. Nelson would then have from July 6, 2019, to September 1, 2019, "to purchase the Property from White Barn." Although the rent credit the parties had discussed was initially based on Nelson paying rent, Wife told Houghtalen that she would agree to give Nelson the promised $70 rent credit even if White Barn rented the Property to someone else.

¶7 In July 2017, Nelson and White Barn, through Houghtalen, executed a real estate purchase contract (the REPC). The REPC stated, "Seller represents that Seller has fee title to the Property and will convey marketable title to the Property to Buyer at Closing by general warranty deed." The REPC further contained an integration clause, which stated that "the entire contract between the parties" consisted of "[t]he REPC together with its addenda, any attached exhibits, and Seller Disclosures" and that the contract "supersedes and replaces any and all prior negotiations, representations, warranties, understandings or contracts between the parties whether verbal or otherwise." Nelson also signed a warranty deed (the Warranty Deed) conveying title to the Property to White Barn. Neither the REPC nor the Warranty Deed contained any terms regarding an option for Nelson to purchase the Property or the amount of any rent credits she would receive, and the parties never executed a separate agreement memorializing any such terms.

¶8 According to Nelson, she "didn't know" the parties’ agreement was to be "a purchase contract." Nelson recounted the following conversation that occurred right after she signed the REPC:

[Houghtalen] says, "Well, you know you don't own the house anymore, ... but look at the bright side, the new owner's going to have to pay for everything that happens to the house."

I says, "What do you mean by that?"

He says, "Well, if the washer and dryer go bad, they're going to replace them. If the plumbing floods, they're going to have to fix it."

I said, "Well, I guess that's a plus, but it doesn't make me happy."

According to Nelson, that was the first time she realized she had sold the Property. Up until that point, she "thought it was a loan." She signed the REPC and the Warranty Deed without reading them because she "trusted" Houghtalen.

¶9 Nelson later sued the Defendants, raising claims of quiet title, equitable mortgage, constructive trust, and fraud. Nelson, Wife, and Houghtalen were all deposed, and the following exchange took place at Nelson's deposition:

Q. Okay. In your complaint, you have alleged that White Barn and Mr. Houghtalen have committed fraud. Do you recall making that complaint?

A. I don't recall using the word "fraud."

Q. Would you consider—as you sit here today, do you believe that the word—that the use of the word "fraud" is inappropriate?

A. I think it's a giant misunderstanding.

Q. Okay. You don't think anything was intentionally done?

A. No. I don't think he meant to hurt me.

Q. Okay. So you genuinely believe that they were trying to help you and that it was just a misunderstanding as to whether it was a purchase or whether it was a loan?

A. Yes. I mean I knew nothing about his wife. It was just [Houghtalen] that I dealt with. And I don't think he meant to hurt me.

¶10 Nelson filed a motion for summary judgment, which the district court denied. The Defendants subsequently filed a motion for summary judgment, which the district court granted. With respect to Nelson's equitable mortgage claim, the district court determined that the written terms of the parties’ REPC governed their agreement and that there was no basis to consider extrinsic evidence of the parties’ intent. It accordingly granted the Defendants’ motion for summary judgment on that claim. The court also granted summary judgment in favor of the Defendants on Nelson's fraud claim because it determined that Nelson "failed to provide any evidence to support her fraud claim."

¶11 The Defendants requested their attorney fees and costs on the ground that the REPC provided for such an award to the prevailing party. Nelson failed to respond to this motion, and the district court granted the request.

¶12 Nelson now appeals.

ISSUES AND STANDARD OF REVIEW

¶13 Nelson argues that the district court erred in granting the Defendants’ motion for summary judgment on her equitable mortgage and fraud claims.⁴ Summary judgment is appropriate where "the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Utah R. Civ. P. 56(a). Thus, in reviewing a motion for summary judgment, we must "review the district court's decision to ensure its legal conclusions were correct, and we must review the record to ensure no genuine and material factual disputes exist." Shree Ganesh, LLC v. Weston Logan, Inc. , 2021 UT 21, ¶ 13, 491 P.3d 885.

ANALYSIS

I. Equitable Mortgage

¶14 Nelson first challenges the district court's grant of summary judgment in favor of the Defendants on Nelson's equitable mortgage claim. She argues that the court should have considered extrinsic evidence of the parties’ intent with respect to the terms of the agreement between them and that, considering that evidence in the light most favorable to Nelson, an issue of fact existed regarding whether the REPC and the Warranty Deed should be construed as an equitable mortgage on the Property rather than an agreement to transfer title to the Property.

¶15 "[A] deed, absolute in form, may be construed as a mortgage if it is intended as security under a parol agreement rather than an outright conveyance." Bown v. Loveland , 678 P.2d 292, 297 (Utah 1984). But "when the transaction features not only a deed but also a contemporaneous written agreement stating the terms of the transaction ... , the deed will be read in light of the written agreement and will be subject to the established rules of construction concerning such agreements." Glauser Storage, LLC v. Smedley , 2001 UT App 141, ¶ 20, 27 P.3d 565. "Thus, if a party claims a deed was intended as a mortgage, and no written agreement regarding the transaction exists, courts have no choice but to consider parol evidence to determine the parties’ intent." Id. "On the other hand, if the parties entered into a written agreement at about the same time the deed was given, the court will look first to that...