CoreFirst Bank & Trust v. JHawker Capital, LLC

282 P.3d 618, 47 Kan. App. 2d 755
CourtCourt of Appeals of Kansas
DecidedJune 15, 2012
DocketNo. 106,201
StatusPublished
Cited by1 cases

This text of 282 P.3d 618 (CoreFirst Bank & Trust v. JHawker Capital, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CoreFirst Bank & Trust v. JHawker Capital, LLC, 282 P.3d 618, 47 Kan. App. 2d 755 (kanctapp 2012).

Opinion

Marquardt, J.:

A mortgage foreclosure action was filed by CoreFirst Bank & Trust against JHawker Capital, LLC (JHawker) on property in a Junction City subdivision development commonly referred to as Mann’s Ranch. CoreFirst named Linda and James David Alexander (the Alexanders) as defendants in the foreclosure action because of their interests claimed in the Affidavit of Equitable Interest (affidavit) in the real estate recorded with the register of deeds in Geary County on April 2,2007. The journal entry granting the mortgage foreclosure was entered on November 4, 2009. That judgment is not at issue here, except to the extent that CoreFirst was granted a first priority lien against the real estate.

While the foreclosure action was pending, on August 13, 2009, the Alexanders .and Outwest Investments, LLC (Outwest) filed a third-party petition against Junction City Abstract & Title Co., Inc. (JCAT). In the third-party petition, the Alexanders and Outwest alleged that JCAT was liable for failing to include a restriction on the warranty deeds. The warranty deeds had the Affidavit of Equitable Interest attached. We note that David signed the deed on behalf of Outwest on March 13, 2007. Both Alexanders signed the Affidavit of Equitable Interest on March 28, 2007; the signatures on both of these documents were notarized. The deed and affidavit were filed with the register of deeds in Geary County on April 2, 2007. There was no restriction listed on the warranty deeds.

The Alexanders and Outwest filed their third-party petition, alleging that JCAT had a duty to include their restrictive covenant on the deeds it prepared. David signed the warranty deed JCAT prepared on behalf of Outwest. The Affidavit of Equitable Interest attached to the warranty deed was signed by David and Linda Alexander. It is obvious from these transactions that all the parties involved were sophisticated business people. Did the Alexanders read the deed and affidavit before signing them? It is obvious that there was no restriction recited on the deed. At'the time, did the [758]*758Alexanders deem the Affidavit of Equitable Interest was sufficient to protect their interests? If the Alexanders and Outwest wanted a restriction on the deed to protect their interests, why did David sign the deed without the restriction?

On March 21, 2011 the Geary County District Court filed a journal entry granting summary judgment to JCAT and denying the claims of the Alexanders and Outwest. The court held that the retained interests the third-party plaintiffs claim were transfer fee covenants, and our legislature has statutorily deemed that these covenants are void, unenforceable, and against public policy under K.S.A. 2011 Supp. 58-3821 and K.S.A. 2011 Supp. 58-3822. The court also rejected arguments that the transfer fees fit within the exceptions to the rule for real estate commissions or additional consideration. Thus, JCAT could not be liable for failing to adequately protect an unenforceable interest. Second, the court denied the claims for damages for future lost profits, finding them too speculative and remote. David Alexander and Outwest challenge both decisions on appeal.

This appeal involves the claims of tire Alexanders and Outwest, a real estate business in which David is the managing member. The Alexanders’ and Outwest’s second amended third-party petition against JCAT claimed: (1) professional malpractice and breach of fiduciary duty; (2) breach of contract; and (3) negligence in preparing real estate documents. The Alexanders and Outwest claim that JCAT failed to adequately protect the Alexanders’ and Out-west’s retained interests in the property as reflected in the contracts between Outwest (and other sellers) and the buyers, JHawker and Southboro, LLC.

The Alexanders and Outwest claimed that their contracts provided that when each of the 174 lots in Mann’s Ranch was fully developed with a home and was sold, the buyers would either (1) ensure that the Alexanders were the exclusive listing agents with a 5.5% commission or (2) pay Outwest a commission or fee of $2,500 regardless of whether the buyers still owned the lots at such time. The Alexanders and Outwest claim that JCAT, who prepared tire deed for the transfer of the real property, is responsible for the district court’s finding that their security interests were inferior to [759]*759CoreFirst’s mortgage lien and that their interests were extinguished in the foreclosure action.

Contract Terms

There were two contracts for the sale of the 174 lots that were essentially identical in their terms except for the names of the buyers, legal descriptions, number of lots to be platted, and calculation of the sale price. Each included the following provisions that are key to arguments raised in this appeal:

• The parties were identified as:

“Seller” (of both tracts): Alexander Land Investments, LLC; Thomas-Locke Development, LLC; Outwest Investments, LLC; and SBSL, LLC;
“Buyer” of Tract 1 (Phase I): Southboro, LLC;
“Buyer” of Tract 2 (Phase II): JHawker Capital, LLC.
• “1.0 RECITALS. . . . Seller acquired for development purposes a tract of land in Geary County, Kansas, commonly known as the ‘Mann’s Ranch’ with the intent of subdividing and developing it into a total of [92 and 82] residential lots to be sold at a wholesale price of $15,000 per lot and give David Alexander and Linda Alexander an exclusive listing agreement respecting the sale of completed structures for a commission o£5Vz% of the gross sale price.”
• “3.0 PURCHASE PRICE. . . .
“3.2 The purchase price for Tract One is $1,380,000 [and for Tract Two is $1,230,000] at $15,000 per lot based upon the final plat on file at the time of closing.”
• “6.0 RETAINED INTEREST TO REAL ESTATE PROTECTED BY AFFIDAVIT OF EQUITABLE INTEREST.
“If Buyer should elect not to use David Alexander or Linda Alexander as a real estate agent as described above, then the Buyer shall pay to Outwest Investments, LLC, a commission/fee of $2,500.00 at the time of the closing of each First Conveyance of each lot. For the purpose of this Agreement, ‘First Conveyance’ shall be defined as the first sale and conveyance of the lot or lots on which an improved house/residence has been constructed, regardless of who may own the lot or who might have constructed the dwelling at the time of such closing. The mere transfer of a vacant lot shall not obligate Buyer to pay the commission of $2,500.00, but such obligation to pay Outwest Investments, LLC, $2,500.00 shall arise upon the sale of a constructed dwell[760]*760ing or when a mortgage is filed securing the permanent financing of a dwelling, whichever first shall occur.
“6.1 Real Estate Commission Fees. It is disclosed by the Seller that David Alexander is a duly licensed real estate agent in the State of Kansas. As part of the consideration for this transaction, Buyer agrees that he/it will list all properties for sale through David Alexander and Linda Alexander as listing agents for tire real estate brokerage firm for which they are associated.

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Cite This Page — Counsel Stack

Bluebook (online)
282 P.3d 618, 47 Kan. App. 2d 755, Counsel Stack Legal Research, https://law.counselstack.com/opinion/corefirst-bank-trust-v-jhawker-capital-llc-kanctapp-2012.