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Issue  210  Article  344
Published:  12/1/2013

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Two Cases on Proof of Facts
Chris Burti, Vice President and Senior Legal Counsel

We discuss two recent cases in this issue that turned, fundamentally, on evidentiary issues. The first deals with the elements necessary to show a right to equitable relief when a lien is released as against the owner of the land formerly encumbered. The second deals with easements by implication and what must be proved to establish an easement by necessity or an easement by prior use.

No Equitable Relief for "self inflicted" Loss of Lien

JPMorgan Chase Bank, N.A., v. Browning

No. COA13-358, Filed: November 19, 2013

This case reinforces the doctrine in North Carolina that the courts will not grant equitable relief to a lender that did not obtain the signatures of a necessary party on a deed of trust absent a showing of acts or representations by the non-signing party justifying such relief.

Plaintiff, JPMorgan Chase Bank appealed from the trial court's order granting summary judgment in favor of the defendant. The plaintiff filed a civil summons, notice of lis pendens, its complaint subsequently filed a motion for summary judgment and later, filed a motion for leave to amend its complaint. The summary judgment motion and motion to amend the pleadings were heard simultaneously by the trial court which granted the defendants' motion for summary judgment and denied the plaintiff's motion for leave to amend. The Court of Appeals stated that the record and exhibits presented on appeal tended to show the following facts.

This action concerns title to real property located at 179 Peachtree Street in Murphy, North Carolina ("Peachtree"). A brief history of the chain of title shows Defendants' grandparents Evan Alonzo Browning ("Evan") and Fleta Browning ("Fleta") previously owned Peachtree. Fleta passed away, leaving Evan as the sole owner as a surviving tenant by the entirety. Evan then conveyed Peachtree to Defendants on 26 August 1986 by a properly recorded deed, reserving a life estate for himself. Evan passed away on 27 October 1989. Defendants later conveyed a one-third interest to their father William Evan Browning ("Father") by general warranty deed on 31 March 1989. Father deeded his one-third interest in Peachtree to himself and his wife Mildred Browning on 13 January 1992, creating a tenancy by the entirety. Mildred Browning predeceased her husband in 1999.

On 24 April 2001, Father individually executed a promissory note payable to First-Citizens Bank and Trust Company in the amount of $162,000 ("First Note"). On the same date, to secure the First Note, Defendants and Father executed a deed of trust ("First Deed of Trust") to secure repayment of the First Note. The uniform settlement statement shows a title examination fee of $275.00 paid to Hyde, Hoover, & Lindsay, a Murphy, North Carolina law firm. As part of the closing, Attorney Charles W. McHan, Jr. notified Defendants that they needed to sign the First Deed of Trust in order for Father to complete the transaction. Defendants signed the First Deed of Trust, but not the First Note.

On or near 16 August 2005, Father executed a second promissory note in the amount of $236,300.00, payable to Gordon Lending Corporation, Plaintiff's predecessor in interest ("Second Note"). Father simultaneously executed a deed of trust ("Second Deed of Trust"), which was later recorded on 29 August 2005 in the Cherokee County Registry. Advantage Equity Services of Pittsburgh, Pennsylvania completed a "Title Commitment" for Father and his then-deceased wife, Mildred Browning. On the "Title Commitment," Schedule B, Item 3 required as a condition of closing that a "loan termination authorization must be signed by the borrowers for each mortgage appearing on the title." In the mortgages section of this document, the First Deed of Trust is listed, along with mortgagees "William E. Browning, Unmarried, Linda D. Browning, Unmarried, and Leslie D. Browning Davis, Unmarried." There is also a title insurance fee of $405.50 and a title exam fee of $185.00 listed on the "Title Commitment" document.

Defendants did not execute either the Second Note or the Second Deed of Trust. The 29 August 2005 Second Deed of Trust listed the borrowers as Father and his then-deceased wife, Mildred Browning, but not Defendants. Despite the title commitment requirement, then-deceased Mildred Browning did not sign the Second Deed of Trust. The record does not show Defendants signed a "loan termination authorization."

At closing, Gordon Lending Corporation disbursed $153,711.09 from the proceeds of the Second Note to satisfy the First Note and First Deed of Trust. The Second Deed of Trust was drafted by Gordon Lending Corporation. Additionally, the closing statement from Gordon Lending Corporation did not include any charges for checking the chain of title or for attorney's fees, although a $475 fee was paid to Advantage Equity Services. The record lacks any indication of involvement by a licensed North Carolina attorney in the second transaction.

Father died intestate on 13 September 2006 with Defendants being his only heirs. By letter dated 15 December 2006, the administrator of Father's estate notified the then-holder of the Second Deed of Trust, Plaintiff's predecessor in interest, Washington Mutual Bank, that (i) Father never owned more than a one-third interest in Peachtree; (ii) each of Defendants owned a one-third interest; and (iii) the Second Deed of Trust constituted a lien on only a one-third tenancy in common interest in Peachtree. The administrator also notified Washington Mutual that "it does not appear that a local attorney did any title examination and [does appear] that the whole transaction was handled by an out-of-state closing company, which may violate North Carolina statutes dealing with the authorized practice of law." The administrator also forwarded copies of the closing documents to the North Carolina State Bar for any appropriate action. Washington Mutual acknowledged receipt of this letter by its own letter dated 25 January 2007. Washington Mutual replied that it had "initiated an investigation of the allegations you raise and will advise you of our determination when concluded."

On 25 September 2008, the Federal Deposit Insurance Company labeled Washington Mutual Bank a "Failed Bank." Plaintiff, JPMorgan Chase, assumed the liabilities and purchased the assets of Washington Mutual Bank. Plaintiff is now the holder in due course of the Second Note and the beneficiary of the Second Deed of Trust.

The plaintiff's complaint asked the court to declare the junior Deed of Trust a valid lien, to equitably establish a trust in the property or reform the Second Deed of Trust, to quiet title; or in the alternative, to find that Defendants were unjustly enriched. While seeking relief at trial on all four grounds, the plaintiff's appeal only argued the trial court's treatment of its unjust enrichment claim and contended that the trial court abused its discretion in denying Plaintiff's request for leave to amend its complaint, abandoning the remaining three grounds raised in the trial court.

The relief requested was based in equity and such relief is only granted based upon a balancing test where the plaintiff must establish that fairness requires that relief requested outweigh the harm caused the defendants by granting such relief. The Court of Appeals disagreed with the plaintiff's contention that the trial court erred in granting summary judgment in favor of the defendants on its unjust enrichment claim. The benefit for which unjust enrichment is claimed is the benefit obtained by paying off the hypothecated deed of trust securing the father's loan and releasing the property from its lien.

A prima facie claim for unjust enrichment has five elements. First, one party must confer a benefit upon the other party...Second, the benefit "must not have been conferred officiously, that is it must not be conferred by an interference in the affairs of the other party in a manner that is not justified in the circumstances." ... Third, the benefit must not be gratuitous. ... Fourth, the benefit must be measurable.... Last, "the defendant must have consciously accepted the benefit." ... (citations omitted) For purposes of this appeal, we hold that the Plaintiff could show at trial three of these elements: (i) that the discharge of the First Deed of Trust was a benefit; (ii) that the benefit was non-gratuitous; and (iii) that the benefit was measurable. However, because the Plaintiff did not forecast evidence showing that the benefit was not officiously conferred, we affirm the trial court's granting of summary judgment.

"More must be shown than that one party voluntarily benefited another or his property." Collins v. Davis, 68 N.C. App. 588, 591, 315 S.E.2d 759, 761 (1984)... "Not every enrichment of one by the voluntary act of another is unjust. 'Where a person has officiously conferred a benefit upon another, the other is enriched but is not considered to be unjustly enriched. The recipient of a benefit voluntarily bestowed without solicitation or inducement is not liable for their value.'" Wright v. Wright, 305 N.C. 345, 350, 289 S.E.2d 347, 351 (1982) (emphasis added) (quoting Rhyne v. Sheppard, 224 N.C. 734, 737, 32 S.E.2d 316, 318 (1944)).

The opinion cites Homeq v. Watkins, 154 N.C. App. 731, (2002), holding that the unsolicited payment of a deed of trust without more does not support an unjust enrichment claim. 154 N.C. App. at 733. In Homeq, the high bid second mortgagee canceled its first mortgage lien during the raised bid period and the defendant filed a successful upset bid. The Court of Appeals found that there was "no legal or equitable obligation" for the defendant to pay plaintiff for satisfying the first deed of trust, noting that the defendant "did not solicit or induce plaintiff's discharge of the first deed of trust," and that plaintiff even had an opportunity to place its own upset bid within the ten-day period. Id. (emphasis added by the Court in this opinion). "This Court ultimately found that '[w]here defendant did not induce plaintiff's action, he is not responsible for plaintiff's error. Though defendant is enriched, "[t]he mere fact that one party was enriched, even at the expense of the other, does not bring the doctrine of unjust enrichment into play."'...quoting Williams v. Williams, 72 N.C. App. 184, 187, 323 S.E.2d 463, 465 (1984))." The opinion notes the similarity of the nature of the two cases in applying the cited doctrine to the facts of this case and notes that the attorneys handling the first deed of trust required the signatures of the defendants before funds were distributed by First-Citizens Bank and Trust Company, concluding that "This error or omission by the bank and the title company is self-inflicted."

The Opinion found it determinative that the trial court further found that Defendants never knew of the fathers latter loan, that they never agreed to encumber their individual interests to secure that loan and that the record reflected that there was no forecast of evidence that they had taken any action to induce Gordon Lending Corporation to fully satisfy the First Deed of Trust. The Court of Appeals stated that the defendants "may have gained financially by the actions of Plaintiff's predecessor, but under Wright, they were not unjustly enriched. 'The recipient of a benefit voluntarily bestowed without solicitation or inducement is not liable for [its] value.'" (citation and quotation marks omitted).

The plaintiff also contended that the trial court's denial of its motion to amend was a manifest abuse of discretion. The Court of Appeals disagreed and affirmed the trial court on this issue as well finding that while new documents were supplied, they did not constitute "new evidence" of the kind that would suggest that the plaintiff might be able to show solicitation or inducement by the defendants necessary withstand summary judgment or to support possible additional claims for equitable subrogation or equitable assignment. The documents merely corroborated what was already on the public record. Most problematic for the plaintiff in seeking equitable relief is that the harm to the plaintiff by the benefit obtained by the defendants was purely "self-inflicted".

Implied Easement Limitations

Barbour v. Pate

COA 13-227 August 20, 2013.

This case addresses the plaintiffs' claims to the right to use a long existing farm path on the defendants' property. The trial court entered judgment concluding that the plaintiffs were entitled to an implied easement by prior use and to an easement by necessity, but restricted the use of these easements to the farming and timber harvesting and management uses that were put into evidence to support the easement by prior use and necessity claims. However, the trial court denied the plaintiffs' requests for an easement by prescription and an easement by estoppel, concluding they had failed to prove either one by a preponderance of the evidence.

The Court of Appeals states: "'Contrary to the trial court's conclusion, the appropriate standard for determining the scope of an implied easement, as set out above, is not the "primary historical purposes" of the prior use of the easement, but rather "the probable expectations of the grantor and grantee that an existing use of part of the land would continue after the transfer.' Knott, 70 N.C. App. At 97-98, 318 S.E.2d at 863 (internal quotation and citation omitted).'"

At this point, the opinion should be considered properly analyzed; however the Court goes on to say:

It is unclear from the trial court's findings which uses of the Watson-Parker path the parties intended to continue after the division. The trial court's findings reflect that, at the time the land was subdivided, plaintiffs' predecessors in interest were using the path for hunting, fishing, and other recreational uses in addition to farming and timber harvesting, and that all of the listed uses have continued "since the 1820's." If the parties expected all of these uses to continue after the property was divided, they necessarily must be included as part of the easement implied by prior use.
See id.

Thus, we must vacate the portion of the trial court's judgment limiting plaintiffs' easement implied by prior use and remand for findings and conclusions regarding "the use of the land involved which gave rise to the quasi-easement," Webster's, § 15.22, at 15-56, (sic) at the time the land was divided in 1853, rather than the "primary historical purposes" of the easement... In making these findings and conclusions, the trial court should be guided by "the probable expectations of the grantor and grantee that an existing use of part of the land would continue after the transfer." Knott, 70 N.C. App. at 97-98, 318 S.E.2d at 863.

What the court apparently misconstrued is that use and the extent to which the (burdened) land comprising the easement was so used was what is controlling, not the use of the benefited lands. The Court cites Webster's, however, Webster's in footnote numbered 187 cites Powell v. Lash, 64 N.C. 456 (N.C., 1870). The use of the land here was for an access easement, the use to which the benefited land itself was used is irrelevant. See also; Blevins v. Welch, 137 N.C. App. 98, 527 S.E.2d 667 (N.C. App., 2000)

The Court made the same error in analyzing the applicability of the doctrine of easement implied by necessity. It should have been more obvious because they cited Woodring v. Swieter, 637 S.E.2d 269, 180 N.C. App. 362 (N.C. App., 2006) which dealt with the issue of the expansion of the use of the easement itself. That opinion in turn cites as follows; "Easements implied by prior use are designed to protect the expectations of the grantor and grantee that an existing use will continue after the transfer. Id. As a result, the grantee must show the disputed "use of the purported easement (emphasis added ed.) existed prior to the severance of title ... and that at the time of the severance, [the grantor] intended that the use would continue." CDC Pineville, LLC v. UDRT of N.C., LLC., 174 N.C.App. 644, ___, 622 S.E.2d 512, 519 (2005), disc. review denied, 360 N.C. 478, 630 S.E.2d 925 (2006).

The Court makes the same analytical error in its analysis of the limitation issue when addressing the implied easement by necessity arguments. The Court's analysis of prescriptive easement doctrine followed clear precedent and the result was that the judgment was vacated and remanded to the trial court. The issue remaining for parties claiming such easements is that the court should have foreclosed an artificial, irrelevant and erroneous limitation argument. Now it will be unnecessarily litigated until the Supreme Court remedies the problem.

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