MARK SMITH AND DEBRA SMITH v. LAVONDA J. HENRY AND WASHINGTON MUTUAL BANK, FA
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RENDERED:
December 30, 2004; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-000311-MR
MARK SMITH AND
DEBRA SMITH
v.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE TOM MCDONALD, JUDGE
ACTION NO. 03-CI-008456
LAVONDA J. HENRY AND
WASHINGTON MUTUAL BANK, FA
APPELLEES
OPINION
AND ORDER DISMISSING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; GUIDUGLI AND SCHRODER, JUDGES.
SCHRODER, JUDGE:
The buyers in a contract to purchase real
estate sued the seller for specific performance or a return of
the down payment, etc., after the buyers initially defaulted by
not closing within one year.
were in default and dismissed.
The trial court found the buyers
Even though the order was made
final and appealable, we believe it was interlocutory.
Therefore, we dismiss the appeal as having been taken from a
nonfinal order.
On June 22, 2001, Mark and Debra Smith (buyers)
entered into a “Sale and Purchase Contract” (purchase contract)
with Lavonda Henry (seller) for the property described as 3005
Talisman Road, Louisville, Kentucky, for a total purchase price
of $113,000.00.
According to the purchase contract, the buyers
were to pay $3,000.00 cash, with a balance of $108,000.00 [sic]
to be financed by “Contract for Deed for a period of one (1)
year from the date of this contract, at that time buyers will
obtain permanent financing and close in approximately one (1)
year or sooner at the buyer’s [sic] discretion. [sic] loan to be
amortized over a term of 30 years with interest at fixed rate of
7.25% per annum, with monthly payments of $__--_____. . . .” and
“Seller is responsible for all taxes and insurance on the
structure for the term of the Contract for Deed.”
The only
other check on this form contract was for prorating the taxes
between buyers and seller to date of deed.
The date for
possession is blank and there are no monthly payments specified.
Sometime after signing the purchase contract, the
buyers, with the seller’s consent, took possession of the
property and began making a monthly payment to the seller.
The
year (set in the purchase contract) for closing came and went
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without anything happening towards the purchase.
Meanwhile, the
buyers continued to retain possession and continued to make a
monthly payment.
When the buyers failed to make the August
2003, payment, the seller/landlord brought a forcible detainer
action against the buyers/tenants, and received a “guilty”
verdict which meant the buyers/tenants were to be evicted.
On September 26, 2003, after being evicted, the
purchasers filed suit against the vendor seeking specific
performance, damages for loss of equity, wrongful eviction, and
punitive damages.
The complaint also joined two mortgagees,
Washington Mutual Home Loans, Inc. and Fleet National Bank.
The
vendor’s answer alleges that the purchaser’s default rendered
the contract null and void but does not address the rights to
the $3,000.00 down payment.
The counterclaim was for unpaid
rents from the landlord/tenant relationship, and claims setoffs
for the $3,000.00 due to damage caused by the purchasers.
Washington Mutual Bank, successor to Washington Mutual Home
Loans, Inc., filed an answer acknowledging its mortgage and also
that it is successor to Fleet Mortgage Corporation and its
mortgage.
In a counterclaim, Washington Mutual requested
foreclosure because according to the terms of the mortgages, a
transfer of the property calls for payment in full of the
mortgages.
A separate foreclosure action (02-CI-04904) was
dismissed.
-3-
Both the vendor and the purchasers moved for summary
judgment.
The trial court granted summary judgment in favor of
the vendor, holding that under the purchase contract, the
purchasers had one year to perform, that this was not a contract
for a deed or land installment contract, and that the buyers
were actually tenants at will that could be evicted upon
nonpayment of rent.
The court then dismissed in a final order
entered February 9, 2004, without addressing the counterclaims,
including the mortgagees’ claims.
The notice of appeal filed
February 12, 2004, does not include the mortgagee.
An amended
notice of appeal filed March 2, 2004, does list Washington
Mutual Bank as successor mortgagee.
On appeal, the appellants contend they were buyers
under a land installment contract or a contract for a deed which
requires a foreclosure action rather than a forcible detainer
action.
Appellants are partially correct.
We see two
contracts, a written contract to purchase land, and a subsequent
oral lease to take possession.
As the appellee correctly points
out, the purchase contract does not provide for the buyers to
take possession before closing, and there are no provisions for
monthly payments before closing.
The purchase contract is
simply that, a contract to purchase for $113,000.00, closing to
be at the buyers’ convenience up to one year, with taxes and
insurance to be prorated at time of the closing.
-4-
The purchase
contract does not allow the buyers to take possession before
closing nor does the purchase contract require a monthly finance
charge pending closing.
The buyers taking possession prior to
closing, for a monthly fee, has to be pursuant to an
understanding with the seller which is separate from the
purchase contract, and in the nature of rent for a
landlord/tenant relationship.
Credit, if any, out of the
monthly payment toward the purchase price, was governed by the
unwritten landlord/tenant relationship, not the written purchase
contract.
That being said, actions involving interest in realty
belong in circuit court.
KRS 23A.010; KRS 24A.120(1)(a).
Actions for forcible entry and detainers belong in district
court.
KRS 383.210.
The question to be resolved in this case is what
happens when the parties to the purchase contract do not close?
The purchase contract does not set forth either party’s remedies
so we have to consult vendor/purchaser law which “is the body of
equitable doctrines, principles, standards and rules which
govern contracts for the sale of land.”1
Contracts involving the
sale of land are a little different from contracts involving the
sale of goods, and other contract principles because each parcel
of land is considered “unique”2 by law.
Generally, there are
three remedies to consider if one or the other of the parties
1
2
III American Law of Property, § 11.1 (A.J. Casner ed 1952)
III American Law of Property, § 11.68 (A.J. Casner ed 1952)
-5-
was not able to close:
damages, specific performance, and
rescission.3
The problem we have in this case is half a judgment.
The trial court’s ruling finds the buyers in default and then
dismisses the complaint.
If we accept the judgment as denying
specific performance, we still need to deal with the $3,000.00
down payment.
See CR 42.01.
The down payment is so intertwined
with the purchase contract that it has to be dealt with if
specific performance is denied.
the claim.
Who defaulted is just part of
CR 54.02 does allow a judgment on multiple claims be
entered and made final as to a single claim, with the right
language being added.
This would allow the mortgagee’s
interest, the wrongful eviction claim, etc., to be decided
later.
However, the specific performance claim is one claim.
The court either grants and applies the $3,000.00 toward the
purchase price, or denies and returns or credits the $3,000.00
down payment for something.
The $3,000.00 down payment is such
an integral part of the specific performance claim that the
failure to dispose of it renders the judgment interlocutory
because there is no final adjudication of the single claim.
Including the “magic words” does not make it final and
appealable.
See Francis v. Crounse Corp., Ky. App., 98 S.W.3d
62 (2002).
3
III American Law of Property, § 11.66 (A.J. Casner ed 1952)
-6-
For the foregoing reasons, the summary judgment order
by the trial court was interlocutory and will not become final
until the trial court decides what remedy it will apply upon
denying specific performance.
Therefore, the final judgment is
vacated and this appeal is dismissed as being from a nonfinal
order.
ALL CONCUR.
ENTERED: December 30, 2004__
_\s\ Wil Schroder_________
JUDGE, COURT OF APPEALS
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Edward L. Lasley
Kenneth A. Bohnert
Louisville, Kentucky
J. Key Schoen
Louisville, Kentucky
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