Opinion
2016 CA 0089
09-16-2016
VANESSA MOTTA v. JEFF BROCKTON, SHARON ZAREMBA AND LEIGH ZAREMBA
Christina T. Huguet Albert J. Campani, II Covington, Louisiana Counsel for Plaintiff-Defendant-in- Reconvention-Appellant Vanessa Motta Ernest S. Anderson Slidell, Louisiana Counsel for Defendant-Appellee Jeff Brockton Counsel for Defendants-Plaintiffs-in- Reconvention-Appellees Sharon Zaremba and Leigh Zaremba
NOT DESIGNATED FOR PUBLICATION ON APPEAL FROM THE TWENTY-SECOND JUDICIAL DISTRICT COURT
NUMBER 2014-13716, DIVISION A, PARISH OF ST. TAMMANY
STATE OF LOUISIANA HONORABLE RAYMOND S. CHILDRESS, JUDGE Christina T. Huguet
Albert J. Campani, II
Covington, Louisiana Counsel for Plaintiff-Defendant-in-
Reconvention-Appellant
Vanessa Motta Ernest S. Anderson
Slidell, Louisiana Counsel for Defendant-Appellee
Jeff Brockton Counsel for Defendants-Plaintiffs-in-
Reconvention-Appellees
Sharon Zaremba and Leigh Zaremba BEFORE: HIGGINBOTHAM, THERIOT, AND CHUTZ, JJ. Disposition: AMENDED AND, AS AMENDED, AFFIRMED. CHUTZ, J.
Plaintiff-defendant-in-reconvention-appellant, Vanessa Motta, appeals the trial court's judgment that (1) dismissed her claims for reformation or, in the alternative, rescission of a promissory note and a multiple indebtedness mortgage executed in favor of defendants-plaintiffs-in-reconvention-appellees, Sharon and Leigh Zaremba, and the Zarembas' son, defendant-appellee, Jeff Brockton; and (2) granted relief to the Zarembas on their reconventional demand enforcing the provisions of the promissory note and the multiple indebtedness mortgage agreement. We amend the judgment and, as amended, affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are undisputed. Motta was living in California when she met Brockton. After the birth of their child, Motta and Brockton began looking at houses in Louisiana online and soon moved to Slidell. The Zarembas loaned them $80,000.00 for the acquisition of a house in Slidell. Because Brockton had poor credit, the parties agreed that the transactions to acquire the house would be executed solely by Motta.
At the August 11, 2011 closing of the sale of the Slidell house, in addition to execution of a first mortgage in favor of St. Tammany Homestead Savings & Loan Association (the first mortgagee) on the Slidell house to secure a loan in the amount of $371,250.00, payable over 30 years, Motta executed a promissory note in the amount of $520,000.00 and a second mortgage in favor of the Zarembas. The second mortgage was a multiple indebtedness mortgage, which expressly limited Motta's total indebtedness to a maximum of $520,000.00, and was also secured by the Slidell house. The Zarembas pledged an $18,000.00 certificate of deposit into a savings account with the first mortgagee and also advanced to Motta closing costs of $23,750.00, which were remitted to Delta Title Corporation. Additionally, at the closing, Motta donated one-half of the Slidell house to Brockton.
Although the act of donation is not contained in the record, defendants admitted that contemporaneously with the execution of the promissory note, Motta executed the act of donation, which was duly recorded in the mortgage and conveyances records.
Approximately twenty-one months after they moved into their Slidell house, Motta and Brockton ended their relationship. In June 2014, the Zarembas sent Motta a letter through their attorney, making demand for the principal amount of $103,750.00 plus interest and advising her that she was in default of the terms of the multiple indebtedness mortgage agreement.
Motta subsequently filed this lawsuit. In addition to the Zarembas, Motta named Brockton as a defendant. She sought as relief either reformation or rescission of the promissory note and multiple indebtedness mortgage agreement to reflect the true intent of the parties. All defendants, Brockton and the Zarembas, jointly answered Motta's allegations. Additionally, the Zarembas asserted a reconventional demand, seeking enforcement of the promissory note and the multiple indebtedness mortgage agreement in the amount of $103,750.00 plus interest and attorney fees.
Motta voluntarily dismissed a claim against Brockton for revocation of the donation of one-half the Slidell house.
A trial on the merits was commenced. After Motta concluded her case-in-chief, Brockton and the Zarembas moved for and were granted an involuntary judgment of dismissal on her claims for reformation or rescission of the terms of the promissory note and the multiple indebtedness mortgage agreement. After the presentation of evidence by the Zarembas on their reconventional demand, the trial court rendered judgment in favor of the Zarembas and against Motta. A judgment dismissing Motta's claims with prejudice and awarding to the Zarembas the total sum of $103,750.00 with interest as well as $10,000.00 in attorney fees was subsequently signed on June 22, 2015. Motta lodged this devolutive appeal.
The judgment specifies that 6% annual interest on the sum of $80,000.00 commences from June 30, 2011 and on the sum of $23,750.00 from August 10, 2011. Motta has not complained of any error by the trial court in its determinations of the dates interest commenced on each respective sum or in the amount of the attorney fees award.
DISCUSSION
Motta contends the trial court erred in granting the involuntary judgment of dismissal of her claim for reformation or rescission. She maintains that error existed as to the causes of her execution of the promissory note. Specifically, she maintains that the amount stated in the promissory note, the term directing that she alone was liable for repayment, and the terms requiring her to pay the full amount due rather than to make installment payments are all factual errors expressed in the executed promissory note that do not reflect the parties' true intent. Each of these factual errors, Motta asserts, concerned a cause that motivated her to execute the promissory note, each of which the Zarembas knew or should have known.
Initially we note La. C.C.P. art. 1672(B) provides the basis for an involuntary dismissal at the close of a plaintiff's case in a bench trial when a plaintiff has shown no right to relief upon the facts and law. In determining whether an involuntary dismissal should be granted, the appropriate standard is whether the plaintiff has presented sufficient evidence in her case-in-chief to establish a claim by a preponderance of the evidence, which means taking the evidence as a whole, the fact or cause sought to be proved is more probable than not. Jackson v. Capitol City Family Health Ctr., 2004-2671 (La. App. 1st Cir. 12/22/05), 928 So.2d 129, 131. When considering a motion for involuntary dismissal, a plaintiff is entitled to no special inferences in her favor. However, absent circumstances in the record casting suspicion on the reliability of the testimony and sound reasons for its rejection, uncontroverted evidence should be taken as true to establish a fact for which it is offered. Id.
The trial court's grant of an involuntary dismissal is subject to the manifest error standard of review. Broussard v. Voorhies , 2006-2306 (La. App. 1st Cir. 9/19/07), 970 So.2d 1038, 1041, writ denied, 2007-2052 (La. 12/14/07), 970 So.2d 535. Accordingly, in order to reverse the trial court's grant of an involuntary dismissal, we must find that there is no factual basis for the trial court's finding or that the finding is clearly wrong or manifestly erroneous. Id., 970 So.2d at 1042; see also Stobart v. State , Dep't of Transp. and Dev., 617 So.2d 880, 882 (La. 1993).
Because an involuntary dismissal of an action pursuant to Article 1672(B) is based on the "facts and law," a review of the substantive law applicable to the plaintiff's case is necessary. The primary issue to be decided in this case is whether Motta is entitled to a reformation or rescission of the promissory note she signed.
Under our Civil Code, a contract is defined as an agreement by two or more parties whereby obligations are created, modified, or extinguished. La. C.C. art. 1906. A contract is formed by the consent of the parties established through offer and acceptance. La. C.C. art. 1927. It has the effect of law for the parties and may be dissolved only through the consent of the parties or on grounds provided by law. La. C.C. art. 1983.
Consent may be vitiated by, among other things, error. La. C.C. art. 1948. Error vitiates consent only when it concerns a cause without which the obligation would not have been incurred and that cause was known or should have been known to the other party. La. C.C. art. 1949; Peironnet v. Matador Resources Co., 2012-2292 (La. 6/28/13), 144 So.3d 791, 807. Cause is the reason why a party obligates herself, and without a lawful cause, an obligation cannot exist. La. C.C. arts. 1966 and 1967; Peironnet , 144 So.3d at 807.
Error, which vitiates consent, can manifest itself in two ways: mutually, i.e., both parties are mistaken, or unilaterally, i.e., only one party is mistaken. The granting of relief differs depending upon whether the error is bilateral or unilateral. When both parties are in error, that is, when the error is bilateral, the contract can be rescinded or reformed to reflect the true intent of the parties. Peironnet , 144 So.3d at 807.
When only one party is in error, that is, when the error is unilateral, there is theoretically no meeting of the minds, but granting relief to the party in error will unjustly injure the interest of the other party if he is innocent of the error. Louisiana courts have often refused relief for unilateral error for this reason unless the unilateral error was known or should have been known to the other party as the reason or principal cause why the party in error made the contract. Peironnet , 144 So.3d at 807-08.
Relief is provided through either reformation or rescission. Peironnet , 144 So.3d at 808. In granting such relief, we are guided by the understanding that it is not the province of the court to alter by construction or to make new contracts for the parties. The duty of the court is confined to the interpretation of the agreements the parties have made for themselves and, in the absence of any ground for denying enforcement, to give effect to the agreements as made. Peironnet , 144 So.3d at 808 (citing Texas Co. v. State Mineral Bd., 216 La. 742, 751, 44 So.2d 841, 844-45 (La. 1950)). An action to reform a written instrument is a personal action and the burden of establishing the mutual error by clear and convincing proof rests on the party seeking reformation. Peironnet , 144 So.3d at 809 (citing Litvinoff, Vices of Consent , Error , Fraud , Duress and Epilogue on Lesion , 50 La. L. Rev. 1, 45-46 (1989)).
Unlike reformation, which is only available upon mutual error for the explicit purpose of reforming an instrument to reflect the true intent of both parties, rescission is a remedy available for both forms of error, and our code specifically allows for rescission for unilateral error, providing the "party who obtains rescission on grounds of his own error is liable for the loss thereby sustained by the other party unless the latter knew or should have known of the error." La. C.C. art. 1952. Article 1952 then provides a court with the discretion to refuse rescission when the effective protection of the other party's interest requires that the contract be upheld. Peironnet , 144 So.3d at 809. In determining whether to grant rescission, our courts have considered whether the error was excusable or inexcusable, granting relief when error has been found excusable. Peironnet , 144 So.3d at 810.
Contractual negligence is a defense to a claim for unilateral error. See Peironnet , 144 So.3d at 811. A prominent factor of the contractual negligence defense is that solemn agreements between contracting parties should not be upset when the error at issue is unilateral, easily detectable, and could have been rectified by a minimal amount of care. See Peironnet , 144 So.3d at 811. Claim of Reformation or Rescission Based on Mutual Error:
Motta avers that the promissory note contains several errors of fact that vitiated her consent. Specifically, she maintains the first error is in the stated amount of the promissory note because she did not borrow $520,000.00. Next she claims that the parties intended that both she and Brockton would repay the Zarembas and, therefore, seeks to have equal liability imposed against Brockton on the promissory note. And Motta contends that the parties agreed that the loan of $80,000.00 would be repaid in installments rather than in a lump sum.
The trial court did not err in refusing to reform the terms of the promissory note based on findings of mutual errors by the parties. Besides her testimony, Motta did not offer any evidence to show that the Zarembas disagreed with any of the terms she contends were errors vitiating her consent to the promissory note. And while Brockton testified that he understood his parents would accept installment payments, Brockton was not a party to the written agreement such that his testimony could be imputed to the Zarembas to establish mutual error. Thus, having failed to establish by clear and convincing evidence that a mutual error existed, the trial court correctly granted an involuntary judgment of dismissal of Motta's claim for reformation or rescission of the promissory note on this basis. Claim of Rescission Based on Unilateral Error:
A review of the record shows that the trial court implicitly applied the defense of contractual negligence. Thus, it implicitly found that the alleged errors in the stated amount, the allocation of liability to Motta individually and without imposition on Brockton, and the repayment on demand were easily detectable by Motta and could have been rectified by a minimal amount of care on her part, i.e., by simply reading the document she signed and/or by requesting changes. Motta did not overcome the presumption that parties were aware of the contents of writings to which they affixed their signatures and/or bear her burden of proving with reasonable certainty that she was deceived. See Tweedel v. Brasseaux , 433 So.2d 133, 137 (La. 1983) (if a party can read, it behooves her to examine an instrument before signing it). Thus, the trial court did not err in rejecting Motta's claim for rescission of the promissory note based on unilateral errors and correctly granted an involuntary judgment of dismissal of Motta's claim for rescission of the promissory note. Claim for Enforcement of Contractual Agreements:
Motta has pointed out that the terms of the promissory note stated she promised to pay the sum of $520,000.00 although it is undisputed she did not receive that amount. But the promissory note was signed in conjunction with the multiple indebtedness mortgage agreement, which was paraphed. According to La. C.C. art. 3298:
A. A mortgage may secure obligations that may arise in the future.
B. As to all obligations, present and future, secured by the mortgage, notwithstanding the nature of such obligations or the date they arise, the mortgage has effect between the parties from the time the mortgage is established and as to third persons from the time the contract of mortgage is filed for registry.
C. A promissory note or other evidence of indebtedness secured by a mortgage need not be paraphed for identification with the mortgage and need not recite that it is secured by the mortgage.
A mortgage is defined as a "nonpossessory right created over property to secure the performance of an obligation." La. C.C. art. 3278. The right created is accessory to the underlying obligation and is only enforceable to the extent the obligation is enforceable. See La. C.C. art. 3282. A conventional mortgage, such as the one at issue, is established by contract. See La. C.C. arts. 3284 and 3287. Since it must be in writing, the principles of contract interpretation found in the Louisiana Civil Code apply. See La. C.C. arts. 2045-2057.
La. C.C. art. 3298 permits multiple indebtedness mortgages to secure the mortgagor's future advances and other cross-collateralized debt with retroactive ranking priority vis-à-vis competing third persons back to the time the mortgage was originally recorded in the parish mortgage records. David S. Willenzik, Louisiana Future Advance Mortgages: A 20-Year Retrospective , 75 La. L. Rev. 613, 656-57 (2015). La. C.C. art. 3298 is intended to permit a person to mortgage her property to secure a line of credit or even to secure obligations that may not then be contemplated by her except in the broadest sense of an expectation that she may someday incur an obligation to the mortgagee. A mortgage may secure existing obligations; obligations contemporaneously incurred with the execution of the mortgage or specific identifiable or particular and limited future obligations; or general and indefinite future obligations; or any combination of them. The matter is one of contract, not law. 75 La. L. Rev. at 657 (quoting 1991 Revision Comments (a) and (b) of La. C.C. art. 3298). Thus, when the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. La. C.C. art. 2046.
The multiple indebtedness mortgage agreement designates Motta as the mortgagor and the Zarembas as the mortgagees. Indebtedness is defined as follows:
The word "indebtedness" means any and all present and future loans, extensions of credit, liabilities and obligations of every nature and kind that I may now and/or in the future owe to or incur in favor of Mortgagee, whether such loans, extensions of credit, liabilities and obligations are direct or indirect, or by way of assignment or purchase of a participation interest, absolute or contingent, voluntary or involuntary, determined or undetermined, liquidated or unliquidated, due or to become due, and whether related or unrelated, or whether committed or purely discretionary, and whether secured or unsecured, in principal, interest, costs, expenses, attorneys' fees and other fees and charges, whether any such Indebtedness may be barred under any statute of limitations or prescriptive period or may be otherwise unenforceable or voidable for any reason. Notwithstanding any other provision of this Mortgage the maximum amount of indebtedness secured shall hereby be limited to $520 ,000.00 .Under the plain language of the multiple indebtedness mortgage agreement for which Motta agreed to be bound to the Zarembas and which was paraphed to the promissory note, Motta agreed to assume liability for all obligations, present and future, secured by the mortgage on the Slidell house, notwithstanding the nature of such obligations or the date they arose, in a maximum amount of $520,000.00.
By awarding a total sum of $103,750.00 to the Zarembas, the trial court implicitly concluded that Motta had breached the terms of the multiple indebtedness mortgage agreement. The evidence established that despite her explanation of having been defrauded by a contractor after the Slidell house had been repaired due to hurricane damage, an outstanding private works act lien encumbered the property and continued to do so as of trial in derogation of the provisions of the multiple indebtedness mortgage agreement. Also in violation of express provisions of the multiple indebtedness mortgage agreement, Motta acknowledged that she did not name the Zarembas as named insureds on either the homeowners or flood insurance policies; did not advise them of, or pay them when she received, settlements from both insurers (the proceeds of which exceeded the cost of repairs undertaken); and failed to perform all necessary repairs to the Slidell house. Accordingly, the trial court's implicit findings that Motta breached the terms of the multiple indebtedness mortgage agreement are not manifestly erroneous.
The Zarembas also averred that Motta was in default because she had leased the premises to a third party in breach of an express prohibition contained in the multiple indebtedness mortgage agreement. Motta conceded in testimony that she had given a short, 10-day lease of the premises to her mother -- for safety concerns while Motta was in Europe -- to stay in the Slidell house with her and Brockton's child. Documentary evidence established that the lease had been recorded and remained in the mortgage and conveyance records. But because the record supports breaches of other terms of the multiple indebtedness mortgage agreement, we pretermit a discussion on whether the elapsed lease constituted an additional breach. --------
While Motta admits that the Zarembas loaned $80,000.00 toward the acquisition of the Slidell house, she contends that they made a $20,000.00 gift to Brockton and her for which they failed to account in making demand for payment. Motta suggests that the $20,000.00 gift represented the amount the Zarembas had paid to Delta Title Corporation as closing costs. Thus, she asserts she only owes $80,000.00 under the terms of her agreements with the Zarembas and that the award of $23,750.00 for the closing costs paid to Delta Title Corporation was manifestly erroneous.
The trial court rejected her contention and its conclusion is supported by the testimonial and documentary evidence. Specifically, the testimony of the Zarembas and Brockton established that $20,000.00 had been given to Brockton and Motta prior to the acquisition of the Slidell house for use in acquiring the house in two separate transactions of $10,000.00 each, and that the Zarembas had gifted that amount to Brockton and Motta after they had successfully paid the first mortgage for two years. The Zarembas have not sought repayment of the $20,000.00 gift under the terms of the multiple indebtedness mortgage agreement. Motta raises no other contentions challenging the award of $23,750.00 to the Zarembas and, because a reasonable factual basis exists to support enforcement of the multiple indebtedness mortgage agreement in this amount, we find no manifest error.
Motta's suggestion on appeal that language in the promissory note precluded a finding that it was a negotiable or non-negotiable promissory note is of no moment because the Zarembas have neither obtained their rights through negotiation nor attempted to negotiate it. Motta admitted that the Zarembas had loaned $80,000.00 for acquisition of the Slidell house. She also admitted that the signatures on the promissory note and multiple indebtedness mortgage agreement were hers. We have already found no basis to reform or rescind the promissory note, and on appeal, Motta has not challenged the viability of her consent to the multiple indebtedness mortgage agreement. Therefore, under the broad language of indebtedness to which Motta agreed to be bound in the multiple indebtedness mortgage agreement and in light of the testimony and documentation establishing that the Zarembas provided $23,750.00 in closing costs on behalf of Motta with her knowledge and approval, we find no error in the trial court's judgment, awarding $23,750.00 (in addition to $80,000.00) to the Zarembas against Motta. See La. C.C. art. 3298; see also La. C.C. arts. 1906, 1927, and 1983. Answer to Appeal:
The Zarembas answered the appeal, asking for an additional award for attorney fees for the work their attorney expended in defending Motta's appeal. Generally, an increase in attorney fees should be awarded when a party who was awarded attorney fees in the trial court is forced to and successfully defends an appeal. Aswell v. Div. of Admin., State , 2015-1851 (La. App. 1st Cir. 6/3/16), 196 So.3d 90, ---. Since counsel for the Zarembas successfully defended the appeal, we amend the judgment to award an additional $1,500.00 in attorney fees.
DECREE
For these reasons, we amend the trial court's judgment to award additional attorney fees in the amount of $1,500.00 to the Zarembas. As amended, we affirm the trial court's judgment, which dismissed Motta's claims against the Zarembas and Brockton. Appeal costs are assessed against plaintiff-defendant-in-reconvention-appellant, Vanessa Motta.
AMENDED AND, AS AMENDED, AFFIRMED.