Opinion
2023-CA-1284-MR 2023-CA-0116-MR
07-19-2024
ANDREW W. WADE AND LISA D. WADE APPELLANTS v. PAUL B. WILLIS AND ALLISON H. WILLIS APPELLEES AND ANDREW D. WADE AND LISA D. WADE APPELLANTS v. PAUL B. WILLIS AND ALLISON H. WILLIS APPELLEES
BRIEFS FOR APPELLANTS: Jessica Katherine Winters Lexington, Kentucky BRIEF FOR APPELLEES: Stephen L. Marshall Lexington, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM FAYETTE CIRCUIT COURT HONORABLE THOMAS L. TRAVIS, JUDGE ACTION NO. 22-CI-01957
BRIEFS FOR APPELLANTS: Jessica Katherine Winters Lexington, Kentucky
BRIEF FOR APPELLEES: Stephen L. Marshall Lexington, Kentucky
BEFORE: ACREE, EASTON, AND MCNEILL, JUDGES.
OPINION
EASTON, JUDGE
Initially pursuant to a written lease agreement, Appellants Andrew and Lisa Wade (the "Wades") were tenants of Appellees Paul and Allison Willis (the "Willises"). The Wades filed an action in Fayette Circuit Court asserting that they continued to have an option to purchase the leased property. The Willises filed a counterclaim asserting that the tenancy had been terminated, and they were entitled to a writ of possession.
The Wades filed two appeals in this matter. In the first appeal (No. 2023-CA-0116-MR), the Wades seek reversal of the circuit court's granting of summary judgment on the Willises' counterclaim. The Wades then retained a new attorney who filed a "Motion to Reconsider," and, when that motion was denied, filed a second appeal (No. 2023-CA-1284-MR). The appeals are consolidated, and we will address both in this Opinion. Having reviewed the record, we affirm.
FACTUAL AND PROCEDURAL HISTORY
The Willises own a single-family house located at 321 Valley Brook Drive in Lexington ("the Premises"). In 2003, the Willises planned to move and looked into selling or renting the Premises. Allison Willis knew Lisa Wade from work. The Wades had been looking to purchase a home but did not have the present financial credit to do so. According to the Willises, the Wades thought they would have the ability to purchase the Premises by February 2004.
The parties entered into a one-year Residential Lease (the "Lease") on July 12, 2003. The Lease has no indication in it that it was prepared by an attorney, and the Wades believe it was drafted by Allison Willis. The term of the Lease was from August 1, 2003, to July 31, 2004. The Wades were to pay $1,264.00 per month in rent for the one-year term of the Lease. The parties simultaneously signed a Lease Addendum, which states:
Landlord agrees that the property as listed above will not be listed for sale or available to be sold at any time to anyone other [than] the Tenants listed in the lease agreement, Andrew and Lisa Wade.
As of the date February 1st of 2004, the property, 321 Valley Brook Drive, will be open for purchase per Contract with the Tenants listed above from Landlords, Paul and Allison Willis. If Tenants make the required monthly payments, as will be listed below, the purchase price of the property of $200,000 will be reduced accordingly.
6 payments with a purchase price of $198,900 (credit of $1,100)[.](Emphasis added.)
The Wades could not purchase the property in February 2004 due to their continued lack of financing options. The Wades also could not afford to purchase the property by the end of the original Lease on July 31, 2004. There were other offers to sell to the Wades over the years. The attorneys reported to the circuit court continuing negotiations for a purchase. No purchase contract was ever signed. No new lease was ever signed. The Wades continued to pay a monthly amount, although there were times when payments were substantially in arrears.
Years after the expiration of the Lease, the Willises decided to refinance the Premises. They then again offered to sell the Premises to the Wades for the appraised amount minus realtor costs. The Wades reportedly agreed, but, once again, they could not obtain financing for such a transaction. The Willises refinanced the Premises, and the Wades continued to pay a monthly amount which increased because of the cost of the refinancing.
The Willises divorced in 2021. While they were dividing their marital estate in the divorce proceedings, they offered to obtain an appraisal and sell the Premises to the Wades at market value. The Wades did not want to move out, but again no contract followed.
In June 2022, the Wades filed a Petition to Enforce Option to Purchase Real Property in Fayette Circuit Court seeking to exercise the Lease Addendum option to purchase the Premises. The Willises filed an Answer denying any present right for the Wades to buy the property. The Willises filed a Counterclaim, asserting the tenancy had been terminated, and they asked for a writ of possession for the property. The pendency of this case continued the pause of any vacating of the Premises, although the Willises gave required notice to the Wades to vacate, which had been sent to the Wades after the suit was filed.
The Wades then filed a "Motion for Declaratory Judgment" asking the circuit court to "declare the rights of the parties under the option contract." The Willises filed a Response and attached the Affidavit of Allison Willis. The circuit court conducted a hearing on the Wades' Motion in October 2022. At the conclusion of that hearing, the judge stated the option to buy had passed when the original Lease term ended in 2004, as there was no clear and convincing evidence the parties intended the option to extend past this date. The judge "overruled" the Wades' Motion for Declaratory Judgment. In November 2022, the circuit court issued an Order summarily memorializing this decision.
While dispositive terms are often used interchangeably, for clarity we note that motions are granted or denied; objections are sustained or overruled.
On October 31, 2022, counsel for the Willises sent a second notice letter to the Wades advising them that the continuing tenancy would not be allowed after November 30. The Willises' deadline of November 30 passed, and the Wades did not move out of the Premises. The Willises then filed a Motion for Summary Judgment and Writ of Possession. The Willises argued the option to purchase in the Lease Addendum was not exercised, the Lease had expired, the Wades were month-to-month tenants, and the Willises gave timely notice to the Wades to vacate the Premises.
The Wades filed a Response, asserting they were not month-to-month tenants. Without verification by way of a sworn affidavit, the Wades attached an email dated August 9, 2007, ostensibly from the Willises to Mrs. Wade, although it is not clear from the address what the email connection is with Mrs. Wade. If the email was sent to Mrs. Wade, the wording is curious, because it is clearly addressed for the benefit of some third party: "We, Paul and Allison Willis, are the primary mortgage holders for the property at 321 Valley Brook Drive in Lexington Kentucky. Andy and Lisa Wade have been our 'rent to own' tenants for the past 4 years. They pay a mortgage payment of $1650 a month." We gather from comments during the hearings before the circuit court that the purpose of this email may have been for a potential purchase creditor of the Wades or for bankruptcy purposes.
The Wades argued the 2007 email showed they were considered by the Willises to be "rent-to-own" tenants still with an open option to purchase the Premises. But the email is demonstrably inaccurate. There was no written purchase contract and no mortgage held by the Willises. The only mortgage was one held by a bank against the Willises. The email also does not purport to rewrite the Lease or the Lease Addendum. Consistent with the termination of the Lease and the connected option, the Willises maintained owner's (not mortgage) insurance for the property, and the Willises paid the property taxes. The Lease addressed the types of insurance to be maintained, the Wades were to buy renters' insurance.
The circuit court held a hearing on the Willises' Motion for Summary Judgment. The circuit court then issued an Order in January 2023 granting summary judgment and the issuance of a writ of possession to the Willises. In this later order, the circuit court commented on its November 2022 Order noting that any option to buy had expired. As to the 2007 email where the Willises ostensibly called the Wades "rent-to-own" tenants, the court found the email did not create a genuine issue of material fact.
The circuit court overall ruled that the term of the Lease had ended and that the parties had not entered into a new agreement. The court concluded that the Wades were month-to-month tenants. The Willises gave the Wades proper notice of the Lease being terminated and were entitled to possession of the Premises. This Order granting summary judgment did not have language stating it was final and appealable.
On January 29, 2023, the Wades appealed the circuit court's Order granting summary judgment. This appeal was designated No. 2023-CA-0116-MR (eventually consolidated with No. 2023-CA-1284-MR). The original attorney for the Wades improperly filed a Prehearing Statement in the circuit court instead of this Court. In February 2023, the Wades' original attorney was convicted on federal fraud charges and was sentenced to prison. The Wades apparently learned about the conviction from the original attorney's secretary.
After a failure to properly file the Prehearing Statement for the first appeal, this Court entered an Order dated March 24, 2023, holding the first appeal in abeyance for 30 days to permit the Wades to retain new counsel. The Wades then retained a new attorney.
In August 2023, the Wades and their new attorney filed a Motion to Reconsider citing CR 60.02(f) and asking the circuit court to reconsider the November 2022 Order overruling the Wades' Motion for Declaratory Judgment and the January 2023 Order granting summary judgment to the Willises, which had already been appealed. The Motion also asked for a determination as to whether all matters before the court have been adjudicated.
Kentucky Rules of Civil Procedure.
The Wades' Motion to Reconsider included contentions that the Wades repeatedly informed the Willises of their intention to eventually purchase the Premises. The Motion attached what purports to be the Affidavit of Lisa Wade, although the affidavit in the record is not sworn. In this offered affidavit, Lisa Wade stated all parties understood that the Lease was really in the nature of an installment purchase contract from the beginning. The Wades also asserted that their original attorney failed to present facts to the court regarding the parties' twenty-year relationship which would have established that they were considered rent-to-own tenants. The Wades attached to the unsworn affidavit over ninety pages of approximately 900 emails between Lisa Wade and Allison Willis.
In October 2023, the circuit court issued its Order overruling the Wades' Motion to Reconsider. The court also stated all claims and causes of action have been fully adjudicated, and thus the matter is final and appealable. The second appeal followed.
STANDARD OF REVIEW
"The standard of review of a trial court's granting of summary judgment is whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law. Summary judgment is proper when it appears that it would be impossible for the adverse party to produce evidence at trial warranting a judgment in its favor." Andrew v. Begley, 203 S.W.3d 165, 169 (Ky. App. 2006) (internal quotation marks and citations omitted). "Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo." Jenkins v. Best, 250 S.W.3d 680, 688 (Ky. App. 2007). In our review of summary judgment, we must affirm the circuit court if its decision was proper for reasons we discover rather than those relied upon by the circuit court. Gwaltney v. Board of Social Work, 644 S.W.3d 270, 274 (Ky. App. 2022).
A trial court's decision on a CR 60.02 motion should not be disturbed unless the court abused its discretion. Kurtsinger v. Bd. of Trustees of Kentucky Ret. Sys., 90 S.W.3d 454, 456 (Ky. 2002). "The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Goodyear Tire &Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000).
ANALYSIS
As the Wades' new attorney said (with some understatement) about this case at the final hearing in the circuit court, "[t]he procedural posture is a bit interesting." This case requires careful application of the Kentucky Rules of Civil Procedure to assess the pleadings in this case and the effect of the circuit court's decisions with respect to further review by this Court or the circuit court. We must also apply basic contract principles under Kentucky law. As we will explain, the ultimate resolution in this case is based on undisputed contract terms and events which led to the correct overall result reached by the circuit court.
CR 57 recognizes that declaratory judgment actions may be sought when authorized by statute. KRS Chapter 418 and specifically KRS 418.040 gave the Wades an option to seek a declaratory judgment. Arguably, Paragraph No. 1 of the prayer for relief in the Wades' Petition asks for a declaration, but the Wades actually sought specific performance of the option to purchase, which would naturally flow from a determination of a continuing nature of the option to purchase.
Kentucky Revised Statutes.
While the law does not exalt form over substance, compliance with pleading and procedural rules is important. See Brown v. Commonwealth, 551 S.W.2d 557, 559 (Ky. 1977). While the Wades' Petition sought specific performance, they would later suggest reformation as a remedy, although there is no such claim in the Petition; the word reformation does not even appear. Both of these remedies are equitable in nature and are subject to the requirement that the Wades did not sleep on their rights for twenty years before asserting them. See Williams Coal &Coke Co. v. Spears, 125 S.W.2d 745, 748 (Ky. 1938).
When the Wades filed the declaratory judgment motion, they were in effect seeking summary judgment as to their position in the case. They wanted a ruling that the Lease Addendum gave them a purchase option that they could still exercise. The later summary judgment motion by the Willises would simply reassert their contrary position that the option to purchase had expired and that the Willises were entitled to possession.
The Lease ran for a definite term between August 1, 2003, to July 31, 2004. The Wades rely upon the use of the phrase "down payment" of the first month's rent as an indication of the true nature of the Lease. The reading of the entire Lease makes it clear that the document is just that - a lease with a term of only one year. The requirement of a first rent payment when the Lease was signed (over two weeks before the term began) does not transform the Lease into something else.
The Lease Addendum is clearly tied to the Lease itself. The Lease Addendum gave the Wades an option to purchase and to apply only a small percentage of six (not an indefinite number) rent payments toward a set price of $200,000. It is not accidental that the six payments to which this could apply were those covering from February until the end of the Lease in July.
Nothing suggests that this formula survived the Lease. The only logical reading of the Lease and Lease Addendum together is that the Wades could enter a contract with the Willises after February 1, 2004, but no later than the end of the Lease term. Otherwise, there is no written legal relationship (lease or contract to purchase) between the parties after July 31, 2004. The Lease Addendum required a contract within the term of the Lease which never came into existence even after the Lease term ended.
The structure of the Lease Addendum did not give the Wades some never-ending option. They had to decide as of February of 2004 and no later than the end of the Lease term, now twenty years ago, if they wished to enter into a contract for the purchase of the Premises. If they made that choice, they still had to complete the Lease term of one full year but would be given some credit toward an agreed upon purchase price. The price and option expired with the Lease.
The Lease Addendum is not ambiguous. The interpretation offered by the Wades is not logical in the context of the Lease. As the Wades did not communicate an exercise of the option in February of 2004 nor before or at the termination of the Lease, the option expired. Even so, the Wades were given the opportunity to enter into a contract many times over the next twenty years but never did so. The Wades and Willises discussed the possible sale of the home many times over the two decades of tenancy, and only when the Willises divorced in 2021 did the Wades insist on a purchase price of $200,000. The admitted circumstances as a whole did not support the equitable right of specific performance or reformation which the Wades were far too late in asserting.
The circuit court correctly denied judgment in favor of the Wades on their motion. That decision did not resolve the whole case and so was not a final decision. CR 54.02. The Willises then filed their motion for summary judgment, which the circuit court granted. We next must evaluate the correctness of that ruling and its effect for an appeal.
The Wades offered only one piece of evidence to defeat the Willises' summary judgment motion. This was the 2007 email we have previously discussed. We have already commented on the circumstances of this email. We must further comment on its presentation to the circuit court. The authenticity of the email was not established. See Kays v. Commonwealth, 505 S.W.3d 260, 26970 (Ky. 2016). No affidavit was offered to support its validity.
Summary judgment rules contemplate affidavits to support items of potential evidence offered. CR 53.03; CR 53.05. Because of this issue alone, the circuit court would not have erred in granting the summary judgment. But, as we will explain later in our analysis, the email did not suffice to defeat summary judgment, even if it had been authenticated.
When the circuit court granted the summary judgment to the Willises, there were no remaining issues to be decided by the circuit court. The Wades were not entitled to the specific performance they had sought. The option to purchase had expired. The Wades had become month-to-month tenants years ago when the definite one-year term ended. Caudill v. Acton, 175 S.W.3d 617, 620 (Ky. App. 2004).
The Lexington-Fayette Urban County Government has adopted the Uniform Residential Landlord and Tenant Act ("URLTA"). As required by that law, the Willises had given the required notice to end that tenancy and were then entitled to possession of the property. KRS 383.695(2), (4). The Willises gave the required notice.
Cara L. Stewart & Ryan C. Smither, Breaking Down Barriers to Justice: Surveying the Practical Application of Kentucky's Landlord-Tenant Laws and Calling for Basic Reform, 39 N. KY. L. REV. 23, 43 (2012).
The parties both referred to forcible detainer, but we find no indication of such an action filed with the Fayette District Court, which would have exclusive jurisdiction of such an action. Although speaking in terms of a writ of possession, the circuit court simply declared or determined that the Willises were entitled to possession having prevailed on their counterclaim. Writs of possession in the circuit courts are usually related to proceedings such as mortgage foreclosures, not landlord/tenant disputes. See, e.g., Burgess v. Austin, 658 S.W.3d 487 (Ky. App. 2022). We need not address whether the Willises will now be required to proceed in the district court if the Wades continue in their occupancy. See Young v. House, 648 S.W.3d 706 (Ky. App. 2022) (applying URLTA provisions in the context of forcible detainer proceedings in district court).
The Order granting summary judgment to the Willises was a final and appealable judgment and was properly appealed. Even so, the first appeal did not deprive the Wades of the right to seek relief in the circuit court under CR 60.02. CR 60.04. "CR 60.02 is designed to provide relief where the reasons for the relief are of an extraordinary nature." Ray v. Commonwealth, 633 S.W.2d 71, 73 (Ky. App. 1982). The law favors finality in judgments, so the rule "requires a very substantial showing to merit relief under its provisions." Ringo v. Commonwealth, 455 S.W.2d 49, 50 (Ky. 1970). "[R]elief may be granted under CR 60.02 only where a clear showing of extraordinary and compelling equities is made." Carroll v. Carroll, 569 S.W.3d 415, 417 (Ky. App. 2019) (citing Webb v. Compton, 98 S.W.3d 513, 517 (Ky. App. 2002)).
The Wades asked for relief pursuant to CR 60.02(f) claiming the circumstances with their prior attorney prevented a proper presentation of evidence which would have defeated the summary judgment motion and supported their claims. "Negligence of an attorney is imputable to the client and is not a ground for relief under . . . CR 60.02(a) or (f)." Vanhook v. Stanford-Lincoln Cnty. Rescue Squad, Inc., 678 S.W.2d 797, 799 (Ky. App. 1984).
The Wades already knew about the evidence their original attorney did not introduce. They could have ensured this evidence was properly presented, but they did not. The first offer of the 2007 email was not supported by any sworn testimony. When this and other evidence was offered later, the affidavit offered in support again was not sworn. An unsworn affidavit presents no evidence at all. See Taylor v. Kentucky Unemployment Ins. Comm 'n, 382 S.W.3d 826 (Ky. 2012). The circuit court did not abuse its discretion in denying the Wades' Motion to Reconsider under CR 60.02.
Finally, the Wades argue that, in the circuit court's October 3, 2023, Order, the court erred in finding that all claims and issues before the court were fully resolved. The Wades specifically complain the court did not address their breach of contract claim in its various rulings. Again, the claim actually pled was for specific performance of a contract. Even so, the circuit court did rule on the contract claim as part of the Motion for Declaratory Judgment. The circuit judge held that the option to buy had passed when the original Lease term ended in 2004. With that ruling, the Willises did not breach the contract by refusing to contract with the Wades later. The court did not err in this respect.
We express no opinion on the actions or inactions of attorneys in this case. Regardless of what was or was nor presented, we note that the Wades could not have succeeded on the claim of a continuing right to purchase for important but basically overlooked reasons.
To the extent the Wades wanted to prove that the Lease was a ruse for an installment contract, the statements offered to prove this contention were barred by the parol evidence rule. See Cantrell, supra, at 620. The Lease states emphatically that its written terms are the sole agreement among the parties.
The law requiring a written contract for the sale of real estate also bars the Wades' claims. The Lease Addendum clearly required a contract to purchase that never came into existence. The Willises' Sixth Defense in their Answer states: [t]he Complaint is barred, in whole or in part, by statute." The law mandates a written contract for this purchase of the property. KRS 371.010(6) (statute of frauds). The evidence offered of discussions of a sale over the twenty years since the Lease expired and how some of the parties may have viewed continuing payments do not constitute the necessary written contract and are not sufficient to sustain any equitable exception, which the law limits, to the statute of frauds and which the Wades would have been far too late in asserting in these circumstances. See generally Farmers Bank and Trust Co of Georgetown Kentucky v. Willmott Hardwoods, Inc., 171 S.W.3d 4 (Ky. 2005).
CONCLUSION
The circuit court did not err in granting the Willises' Motion for Summary Judgment which was a final judgment. The court also did not abuse its discretion in denying relief under CR 60.02. The Orders of the Fayette Circuit Court dated November 7, 2022; January 3, 2023; and October 3, 2023, are AFFIRMED.