JPMorgan Chase Bank, N.A. v. Jackson

[Cite as JPMorgan Chase Bank, N.A. v. Jackson, 2014-Ohio-320.]

COURT OF APPEALS
LICKING COUNTY, OHIO
FIFTH APPELLATE DISTRICT

JUDGES:
JPMORGAN CHASE BANK, N.A. : Hon. W. Scott Gwin, P.J.
: Hon. William B. Hoffman, J.
Plaintiff-Appellee : Hon. Patricia A. Delaney, J.
:
-vs- :
: Case No. 13-CA-41
BRIDGETTE CRAWMER JACKSON, :
ET AL :
: OPINION
Defendant-Appellant

CHARACTER OF PROCEEDING: Civil appeal from the Licking County Court
of Common Pleas, Case No. 12CV00345

JUDGMENT: Affirmed

DATE OF JUDGMENT ENTRY: January 29, 2014

APPEARANCES:

For Plaintiff-Appellee For Defendant-Appellant

ANDREW GEORGE JETTA MENCER
STEVEN E. ELDER One South Park Place
STEVEN E. ELDER CO., LPA Newark, OH 43055
731 Fifth Avenue
Wilmington, OH 45177
[Cite as JPMorgan Chase Bank, N.A. v. Jackson, 2014-Ohio-320.]

Gwin, P.J.

{¶1} Appellant appeals from the following judgments entries of the Licking

County Common Pleas Court: the January 25, 2013 judgment entry denying summary

judgment and the April 30, 2013 judgment entry incorporating a March 18, 2013

memorandum of decision finding that appellant’s interest in the property is subject to a

constructive trust, that appellant is entitled to an equitable lien, and that appellant is

entitled to equitable subrogation.

Facts and Procedural History

{¶2} On January 5, 2008, Bridgette Crawmer nka Jackson (“Crawmer”)

contracted to purchase the property located at 3085 Cypress Bend in Newark, Ohio.

Crawmer’s signature was the only buyer’s signature on the purchase contract.

Crawmer was the sole applicant for a loan of approximately $128,000 to fund the

purchase of the property and the loan was originated by 1st Metropolitan Mortgage,

acting as a mortgage broker. Appellee JPMorgan Chase Bank, N.A., successor by

merger to Chase Home Finance, LLC, financed the purchase and Crawmer utilized the

funds to pay the costs of the transaction, broker fees, taxes, a prior first mortgage held

by Huntington Bank in the amount of $90,058.50, and the balance of the purchase price

to the seller. At a closing held on January 24, 2008, Crawmer signed a note to appellee

and executed a mortgage in favor of appellee. Also at the closing on January 24, 2008,

a deed was executed from the sellers to Crawmer and appellant Aaron Jackson

(“Jackson”), Crawmer’s then-fiancée, and now husband. Jackson attended the closing,

but did not sign the mortgage or execute any documents. The loan application,
Licking County, Case No. 13-CA-41 3

purchase contract, settlement statement, promissory note, mortgage, and commitment

for title insurance were executed by Crawmer only.

{¶3} In June of 2010, Crawmer and Jackson filed a Chapter 7 bankruptcy

petition and were discharged by the bankruptcy court on October 12, 2010. During the

pendency of the bankruptcy proceedings, Sara Daneman, the Chapter 7 trustee,

instituted an adversary proceeding against appellee to have appellee’s mortgage

declared invalid as to the ½ interest of Jackson based upon the fact that he did not

execute the mortgage. On August 5, 2011, the bankruptcy court entered an order on a

motion to approve compromise of claims against appellee. The order provides that the

trustee was authorized to settle the adversary proceeding against appellee for a

$20,000 payment from appellee to the trustee. The bankruptcy court found that the

proof of claim filed by appellee in the amount of $127,347.85 “will be treated as fully

secured.”

{¶4} On March 13, 2012, appellee filed a complaint in foreclosure against

Crawmer, the State of Ohio Department of Taxation, the Treasurer of Licking County,

and Jackson. Appellee amended its complaint on March 23, 2012 to add claims for

equitable relief. After Crawmer and Jackson filed answers to the complaint, appellee

filed a motion for partial summary judgment against Jackson and Crawmer and Jackson

filed his own motion for summary judgment. The trial court denied both motions for

summary judgment on January 25, 2013 and subsequently conducted a bench trial on

appellee’s amended complaint in foreclosure on February 27, 2012.

{¶5} Frank Dean, Jr., a home loan research officer and prior loan originator for

appellee, testified at the bench trial. Dean testified that Exhibit K is a record kept in
Licking County, Case No. 13-CA-41 4

appellee’s ordinary course of business and consists of loan closing instructions from

appellee to Title First of Columbus. Exhibit K instructs Title First to ensure appellee had

a first mortgage lien on the subject property by having all necessary parties execute the

mortgage. Dean testified it is customary for the buyer to select a title agent rather than

the lender making this selection and that appellee did not select Title First as the title

agent for this transaction. Dean testified Crawmer was the only applicant for the loan.

Dean further stated the title insurance company prepared the deed and, despite the

commitment for title insurance and loan closing instructions stating the deed should be

in the name of Crawmer only, the title company mistakenly placed Jackson’s name on

the deed. Dean testified there was nothing in the system to indicate that appellee was

aware of the problem or attempted to correct the mistake and that, at the closing, First

Title should have notified appellee of First Title’s error.

{¶6} At the trial, Jackson testified that he notified one of the agents at the

closing that he needed to sign something, but Jackson could not remember who he

spoke to or whether the person represented appellee or First Title. Crawmer confirmed

that Jackson inquired as to why he did not have to sign any documents at the closing.

Jackson stated he was aware appellee was financing the purchase of the property and

that “we had a mortgage with Chase,” but that he did not contribute towards the

purchase price or closing costs for the property. Jackson stated he was not on the loan

application because he had credit issues, but that he intended to be an owner of the

property with Crawmer. Crawmer testified she intended to purchase the property with

Jackson. Jackson stated he made mortgage payments with Crawmer to appellee, as

they married subsequent to the closing date in 2008.
Licking County, Case No. 13-CA-41 5

{¶7} The trial court issued a memorandum of decision on March 18, 2013,

ruling in favor of appellee and finding that appellee is entitled to a first lien on the entire

property. The trial court found Jackson’s interest in the property was subject to a

constructive trust, that appellee was entitled to an equitable lien, and that appellee was

entitled to equitable subrogation. The trial court based its ruling on the fact that

appellee advanced the purchase price for the property and paid the bankruptcy trustee

to purchase Jackson’s ½ interest from the bankruptcy estate in an adversary

proceeding. The trial court incorporated this memorandum of decision into a final

judgment entry issued on April 30, 2013.

{¶8} Appellants appeals from the January 25, 2013 and April 30, 2013

judgment entries and assigns the following as error:

{¶9} “I. THE TRIAL COURT ERRED IN DENYING APPELLANT’S MOTION

FOR SUMMARY JUDGMENT.

{¶10} “II. THE TRIAL COURT ERRED IN FINDING THAT APPELLEE WAS

ENTITLED TO AN EQUITABLE LIEN ON THE PREMISES.

{¶11} “III. THE TRIAL COURT ERRED IN FINDING THAT APPELLANT’S

INTEREST IN THE PROPERTY IS SUBJECT TO A CONSTRUCTIVE TRUST.

{¶12} “IV. THE TRIAL COURT ERRED IN FINDING THAT APPELLEE IS

ENTITLED TO EQUITABLE SUBROGATION.

{¶13} “V. THE TRIAL COURT ERRED IN FAILING TO FIND THAT

APPELLEE’S EQUITABLE CLAIMS DID NOT SURVIVE BANKRUPTCY.

{¶14} “VI. THE TRIAL COURT’S FINDING THAT THE EQUITIES FAVOR

APPELLEE IS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.”
Licking County, Case No. 13-CA-41 6

{¶15} For ease and efficiency of discussion, we shall address appellant’s

assignments of errors out-of-order.

VI.

{¶16} Appellant argues the trial court’s finding that the equities favor appellee is

against the manifest weight of the evidence. We disagree.

{¶17} As an appellate court, we neither weigh the evidence nor judge the

credibility of the witnesses. Our role is to determine whether there is relevant,

competent, and credible evidence upon which the fact finder could base its judgment.

Cross Truck Equip. Co. v. The Joseph A. Jeffries Co., 5th Dist. No. CA5758, 1982 WL

2911 (Feb. 10, 1982). Accordingly, judgments supported by some competent, credible

evidence going to all the essential elements of the case will not be reversed as being

against the manifest weight of the evidence. C.E. Morris Co. v. Foley Constr., 54 Ohio

St.2d 279, 376 N.E.2d 578 (1978).

{¶18} In this case, we find the trial court’s determination that the equities favor

appellee is supported by some competent, credible evidence. Though First Title listed

Jackson as a grantee on the deed for the property, both the commitment for title

insurance and loan closing instructions provided by appellee indicated the deed was to

be in Crawmer’s name only. Jackson testified he was aware appellee was financing the

property and that the property would be subject to a mortgage. Jackson did not

contribute any payment toward the purchase price or closing costs, though he did make

mortgage payments after he and Crawmer married. In addition, the funds from

appellee’s loan were used to satisfy a prior first mortgage.
Licking County, Case No. 13-CA-41 7

{¶19} Also key in weighing the equities in this case is the Chapter 7 bankruptcy

petition filing by Crawmer and Jackson in 2010. The Chapter 7 trustee instituted an

adversary proceeding against appellee to have appellee’s mortgage declared invalid as

to the ½ interest of Jackson based upon the fact that he did not execute the mortgage.

This adversary proceeding was instituted because Jackson, as the chapter 7 debtor,

held a cause of action against appellee and when a debtor files for chapter 7 relief, they

“surrender to the trustee control over their prepetition legal interests.” In re Smithey,

Bankr. N.D. Ohio No. 10-30310, 2011 WL 3102308. In August of 2011, the bankruptcy

court granted an order on trustee’s motion to compromise claim with appellee for a

$20,000 payment from appellee. Thus, appellee paid the $20,000 amount to settle

Jackson’s claim regarding his lack of mortgage execution. Jackson clearly benefited

from this payment as the funds were utilized to pay Jackson’s creditors from which

Jackson incurred debt and allowed Jackson to obtain a bankruptcy discharge with no

personal liability on the mortgage of the property. Accordingly, we find the trial court’s

determination that the weighing of the equities favors appellee is not against the

manifest weight of the evidence. Appellant’s sixth assignment of error is overruled.

II.

{¶20} Appellant argues the trial court erred in finding appellee was entitled to an

equitable lien on the property. We disagree. In order for an equitable lien to arise,

there are three elements required: (1) a duty, debt, or obligation; (2) a res; and (3) an

intent, either express or implied, that the specific property will serve as security for the

payment of the debt or obligation. Morley v. First Federal Savings and Loan Assn. of

Warren, 11th Dist. No. 97-T-0142, 1998 WL 553619 (June 12, 1998). An equitable lien
Licking County, Case No. 13-CA-41 8

may “arise either from an express written contract which shows an intention to charge

some particular property with a debt or obligation, or may be implied and declared by a

court of equity on the general considerations of right and justice as applied to relations

of the parties and the circumstances of their dealings.” Koon v. Clapp, 11th Dist. No.

89-P-2101, 1990 WL 170684 (Nov. 2, 1990).

{¶21} The trial court found that due to general consideration of justice as applied

to the relations of the parties and the circumstances of their dealings, an equitable lien

arose because all the parties understood and intended that appellee was providing the

purchase money and would have a first lien on the property. Based upon a review of

the evidence, we find there was competent and credible evidence to support the trial

court’s decision. As indicated above, Jackson testified he was aware appellee was

financing the property and that the property would be subject to a mortgage. Further,

the funds from appellee’s loan were used to satisfy a prior first mortgage. Accordingly,

appellant’s second assignment of error is overruled.

III.

{¶22} Appellant contends the trial court erred in finding that appellant’s interest

in the property is subject to a constructive trust. We disagree. The Ohio Supreme

Court defined a constructive trust as a:

trust by operation of law which arises contrary to intention and in

invitum, against one who, by fraud, actual or constructive, by

duress or abuse of confidence, by commission of wrong, or by any

form of unconscionable conduct, artifice, concealment, or

questionable means, or who in any way against equity and good
Licking County, Case No. 13-CA-41 9

conscience, either has obtained or holds the legal right to property

which he ought not, in equity and good conscience, hold and enjoy.

It is raised by equity to satisfy the demands of justice.

Estate of Cowling v. Estate of Cowling, 109 Ohio St.3d 276, 280-81, 2006-Ohio-2418.

{¶23} “A trial court’s decision regarding the existence of a constructive trust will

not be reversed where it is supported by some competent, credible evidence going to all

the essential elements of the case.” In the Matter of Estate of John C. Brunswick, 12th

Dist. No. CA2006-08-096, 2007-Ohio-5396. “The basis of the constructive trust is the

unjust enrichment which would result if the person having the property were permitted to

retain it. Ordinarily a constructive trust arises without regard to the intention of the

person who transferred the property.” Glick v. Dolin, 80 Ohio App.3d 592, 609 N.E.2d

1338 (8th Dist. 1992). Thus, a constructive trust should be imposed if the failure to do

so would result in unjust enrichment. Id. The elements appellee must prove to

establish unjust enrichment are: (1) the existence of a benefit conferred by appellee

upon Jackson; (2) knowledge by Jackson of the benefit; and (3) retention of the benefit

by Jackson under circumstances where it would be unjust to do so without payment. Id.

{¶24} In this case, we agree with the trial court that equity favors the imposition

of a constructive trust. Jackson received two benefits that he retained and had

knowledge of: (1) the payment by appellee of the purchase of the property that Jackson

acquired an interest in by virtue of a mistake in adding him to the deed and (2) the

$20,000 payment to the creditors to which he was indebted as a result of appellee’s

payment to the bankruptcy trustee in Jackson’s bankruptcy case. Jackson acquired an
Licking County, Case No. 13-CA-41 10

interest in the property by mistake and would be unjustly enriched if his interest in the

property were not subject to appellee’s lien.

{¶25} Based upon all the evidence, we find that there was competent and

credible evidence to support the trial court’s imposition of a constructive trust for the

benefit of appellee and that Jackson holds the property in constructive trust for appellee.

IV.

{¶26} Appellant argues the trial court erred in finding appellee is entitled to

equitable subrogation. We disagree.

{¶27} In Ohio, “[w]hen the rights of parties are clearly defined and established by

law, the courts usually apply the maxim ‘equity follows the law’; however, where the

rights of the parties are not so clearly delineated, the courts will apply board equitable

principles of fairness.” Aurora Loan Services, LLC v. Molter, 5th Dist. Delaware No. 09

CAE 0086, 2010-Ohio-3704. The definition of equitable subrogation is that which “ * * *

arises by operation of law when one having a liability or right or a fiduciary relation in the

premises pays a debt due by another under such circumstances that he is in equity

entitled to the security or obligation held by the creditor whom he has paid.” State Dept.

of Taxation v. Jones, 61 Ohio St.2d 99, 399 N.E.2d 1215 (1980).

{¶28} The doctrine of equitable subrogation depends upon the facts and

circumstances in each case and “grants relief to a party in order to prevent fraud, or to

grant relief from mistake.” Id. To claim the benefits of equitable subrogation, a “party’s

equity must be strong and clear” and the basis for the claim of equitable subrogation

must be readily apparent. Aurora Loan Services, LLC v. Molter, 5th Dist. Delaware No.

09 CAE 0086, 2010-Ohio-3704. Equitable subrogation has been described as a theory
Licking County, Case No. 13-CA-41 11

of unjust enrichment, preventing parties from receiving that to which they are not

entitled. Sky Bank Mid Am Region v. Mar-Metal Mfg., Inc., 3rd Dist. Wyandot No. 16-

09-02, 2009-Ohio-2193. Equitable subrogation may not be utilized to benefit parties

who are negligent in their business transaction or failed to act with ordinary and

reasonable practices. Aurora Loan Services, LLC v. Molter, 5th Dist. Delaware No. 09

CAE 0086, 2010-Ohio-3704.

{¶29} We find there is competent and credible evidence to support the trial

court’s determination that the equities weigh in favor of appellee. Appellee failed to

review the deed before closing and failed to correct the mistake in the deed after

closing. However, Dean’s testimony establishes that appellee did not negligently

prepare the documents, select the title agent, or have a representative at the closing

who could have prevented the error. In appellee’s closing instructions and commitment

for title insurance, appellee instructed the title agent to prepare the deed in Crawmer’s

name. It was the parties’ intention that appellee would have the first lien on the

property. Jackson testified he was aware appellee was financing the purchase of the

property. Appellee paid the purchase price that satisfied the existing lien on the

property at issue and it was only through a mistake that plaintiff did not have a lien on

the entire property. Jackson directly benefited from the funds provided by appellee as

the prior first mortgage on the property where Jackson is on the deed would not have

been paid off and released except for the loan of appellee and Jackson would have no

interest in the property but for appellee’s payment. Jackson also benefited from the

funds paid by appellee to the trustee in Jackson’s bankruptcy case because the funds

were used to pay his creditors and debts he incurred.
Licking County, Case No. 13-CA-41 12

{¶30} Jackson cites ABN AMRO Mtge. Group, Inc. v. Henson for the proposition

that equitable subrogation is not appropriate when the appellant had no knowledge of

the debt or participate in the debt that encumbered the real estate. 5th Dist. No. 04CA8,

2005-Ohio-2725. However, the Henson case is distinguishable upon the facts. In this

case, Jackson knew about the debt encumbering the property, participated in the

closing of the property, and testified that he was aware appellee was financing the

purchase of the property.

{¶31} Further, Jackson would be unjustly enriched if he were given a ½

unencumbered interest in the property where a mistake caused Jackson’s name to be

placed on the deed to the property. Jackson would also be unjustly enriched due to the

payment appellee made in his bankruptcy case. Appellee paid $20,000 in an adversary

proceeding Jackson’s bankruptcy case to settle the trustee’s claim regarding Jackson’s

½ interest in the property. These funds were utilized by the trustee to pay Jackson’s

creditors to whom he was indebted.

{¶32} Accordingly, we find there is competent and credible evidence to support

the trial court’s decision that the equities favor appellee in an equitable subrogation

analysis. Appellant’s fourth assignment of error is overruled.

V.

{¶33} Appellant argues the trial court erred in failing to find that appellee’s

equitable claim did not survive bankruptcy. We disagree. The enforcement of an

equitable lien is an in rem action and, though a debtor’s personal liability with respect to

the debt is extinguished by a bankruptcy discharge, an equitable lien as applied to these

facts as described infra, is not extinguished by a bankruptcy discharge. In re Pecora,
Licking County, Case No. 13-CA-41 13

297 B.R. 1, 4 (Bankr. W.D.N.Y. 2003); In re Stratton, 106 B.R. 188, 193 (Bankr. E.D.

Cal. 1989). Accordingly, appellant’s fifth assignment of error is overruled.

I.

{¶34} Appellant argues the trial court erred in denying his motion for summary

judgment requesting a finding that he owns the ½ interest in the property free and clear

of appellee’s lien. Based upon our disposition of appellant’s assignments of error II –

VI, supra, we find the trial court did not err in denying appellant’s motion for summary

judgment. Appellant’s first assignment of error is overruled.
Licking County, Case No. 13-CA-41 14

{¶35} Based on the foregoing, we overrule appellant’s assignments of errors I, II,

III, IV, V, and VI are overruled. The January 25, 2013 judgment entry of the Licking

County Court of Common Pleas and the April 30, 2013 judgment entry incorporating a

March 18, 2013 memorandum of decision of the Licking County Court of Common

Pleas are affirmed.

By Gwin, P.J.,

Hoffman, J., and

Delaney, J., concur