Keywords: personal loan, reformation, mortgage, mutual mistake
Issue: Whether the court should reform a mortgage to change the grantor from an individual to the individual as trustee / owner of the real property where the trustee never intended to grant a mortgage to the property.
Holding: The court would not reform the mortgage as the trustee intended only to obtain a personal loan and the lender gave him a personal loan.
Reasoning: “The plain words of the Note and Mortgage are consistent with Niakaros’ description of the loanthat it was a loan to him individually and was not intended to be secured by a mortgage on the Property owned by the Trust. This suggests that the Note was only meant as evidence of a loan to Niakaros individually and not Niakaros as a trustee. WaMu may have ultimately intended to obtain a mortgage on the Property in connection with this loan. But that is only speculation. What the evidence shows is that Niakaros asked for a personal loan, WaMu agreed to give him a personal loan, and WaMu prepared closing documents showing a personal loan. There is no “full, clear, and decisive proof” that both parties intended the loan to encumber the Property and that the Mortgage given by Niakaros individually was meant to have been given by the Trust. To the contrary, the evidence tends to show that Niakaros meant to encumber himself individually, and if the granting of a personal loan instead of a loan secured by the Property was a mistake, it was a unilateral mistake on the part of WaMu that I cannot and will not correct.”
Notes: The lender also argued that the mortgage should be reformed on the theory of unjust enrichment. “Unjust enrichment is defined as retention of money or property of another against the fundamental principles of justice or equity and good conscience.'” Santagate v. Tower, 64 Mass. App. Ct. 324 , 328 (2005), quoting Taylor Woodrow Blitman Constr. Corp. v. Southfield Gardens Co., 534 F.Supp. 340, 347 (D. Mass. 1982). “Where the reasonable expectation of the parties was to give and receive a personal loan unrelated to the Property, reforming the Mortgage to encumber the Property would instead unjustly enrich JPMorgan. Moreover, Niakaros does not dispute he owes JPMorgan money in the form a loan. Therefore, he is not unjustly enriched as he is still bound by the debt obligation he sought.”