First National of North America, LLC (FNNA) sued Michael Marks for unjust enrichment after a refinancing transaction involving Marks' home mortgage. Marks refinanced his mortgage through Morgan International, owned by Jerry Levine, to pay off an existing mortgage and to obtain approximately $44,000 in net proceeds. Unknown to Marks, FNNA had provided the funds for this loan to Levine under a separate agreement. Although Marks received the net proceeds at closing, the existing mortgage with First American National Bank was not paid off as intended, as Levine continued to secretly make payments for a time before ceasing, leading to foreclosure proceedings initiated by First American against Marks. Marks paid the arrears and continued his mortgage with First American, subsequently suing Levine and Morgan International. FNNA intervened, obtaining a judgment against Levine, who later declared bankruptcy. FNNA then secured a $38,000 judgment against Marks based on unjust enrichment, which included pre-judgment interest. Marks appealed, arguing he had a contractual relationship with FNNA that barred unjust enrichment claims. The court affirmed the lower court's judgment, with a dissent from one judge. Marks had refinanced with a loan of $123,750, receiving net cash proceeds while the existing mortgage lien was not satisfied, along with unpaid back taxes.
The loan closing statement revealed that Morgan International was responsible for paying a pre-existing mortgage and back taxes. Marks remained unaware of issues with the loan closing for seven months until he received a foreclosure notice from First American in June 1999, due to non-payment of the mortgage. Marks had not made payments since December 1998, mistakenly believing the mortgage was satisfied. Upon receipt of the foreclosure notice, Marks made the necessary payments to First American and sought legal assistance. His attorney filed a notice of claims and defenses and contacted FNNA regarding deficiencies in the loan, with the first correspondence dated July 19, 1999, to which FNNA did not respond, citing doubts about its accuracy.
FNNA was investigating another loan involving Levine and a Mr. Pruett at the time. FNNA later claimed ignorance of the Marks loan issues until December 1999. Marks initiated a civil action against Levine and Morgan Financial, with subsequent correspondence to FNNA inquiring about Marks' obligations and informing them of the lawsuit. FNNA continued to remain unresponsive until December 6, 1999, when they informed Marks' attorney they held only a security interest in the loan. FNNA then intervened in Marks' lawsuit, ultimately winning a summary judgment against Levine for $201,499.81, which was uncollectible due to Levine's bankruptcy. FNNA also sought summary judgment against Marks, which was denied, leading to a jury trial in July 2002 where FNNA won a verdict against Marks for $38,000, with pre-judgment interest assessed later.
Marks is appealing on three grounds: 1) the trial court's finding of no contract between Marks and FNNA, allowing FNNA to pursue unjust enrichment; 2) the legality of FNNA's recovery under unjust enrichment for payments made by third parties; and 3) the assertion that Marks was not unjustly enriched.
The appellant presents two issues regarding the trial court’s denial of a motion for a directed verdict, which are treated as legal challenges rather than challenges to the jury's verdict regarding a third issue. The court reviews questions of law de novo, without presuming the trial court's correctness. The first issue involves whether a contract existed between FNNA and Marks, which FNNA disputes, claiming no enforceable contract was ever established, allowing it to seek recovery under unjust enrichment. Marks argues that FNNA had a contractual relationship and, alternatively, that FNNA had the authority to assign a contract based on its agreement with Levine. FNNA contends that the potential for a contract does not suffice for an enforceable agreement, emphasizing that unjust enrichment claims require the absence of an existing contract. The trial court's ruling on this matter is also subject to de novo review. Marks points to the Commercial Loan and Servicing Agreement with Levine, asserting it grants FNNA the authority to address the unsigned Assignment issue, citing specific paragraphs that outline the obligations and documentation requirements related to the loan.
Marks contends that FNNA has the authority to compel Levine to execute a "missing" assignment based on Paragraph 18 of their agreement, which allows the lender to endorse notes if the borrower fails to do so. Marks argues that this gives FNNA the right to endorse the Note to itself without Levine's involvement, suggesting a contract existed or could have existed if FNNA had acted on its rights. FNNA counters that its agreement was solely with Levine and that it had no contractual relationship with Morgan International, which never assigned the Note to Levine. FNNA asserts that it could not compel Morgan International to assign the Note to Levine and emphasizes that the condition precedent for such an assignment was not met.
Regarding unjust enrichment, the doctrine requires proof of several elements, including the absence of an enforceable contract covering the same subject matter. Marks claims a contractual relationship with FNNA exists, which would negate a claim for unjust enrichment. However, the Chancellor concluded that no contract was present between Marks and FNNA, a finding with which the court agrees, affirming the trial court's decision. Additionally, the Commercial Loan and Servicing Agreement states that FNNA retains the discretion to reject any Note, further undermining Marks’ argument that FNNA had a duty to enforce the assignment of the Marks Note.
Marks contends that the trial court incorrectly permitted FNNA to seek damages based on unjust enrichment, asserting that restitution laws do not allow for recovery when payments are made by third parties to the benefited party. He references Section 110 of the Restatement First, Restitution (1937), which asserts that a person who benefits from a contract with a third party is not entitled to restitution solely due to the third party's failure to perform. Additionally, Marks cites 66 Am. Jur. 2d, Section 32, which indicates that a third party benefiting from a contract between others does not incur liability under quasi contract or unjust enrichment principles.
However, the court found no Tennessee authority directly supporting Marks’ claim that FNNA’s unjust enrichment recovery is barred by restitution theory. The court interprets the restitution theory as not conflicting with established Tennessee case law on unjust enrichment, which requires several criteria: no enforceable contract between the parties on the same subject, provision of valuable goods or services by the recovering party, receipt of those goods or services by the charged party, reasonable expectation of compensation for the goods or services, and circumstances showing it would be unjust for the charged party to retain the benefits without payment. Consequently, the court upheld the trial court's decision to deny Marks’ motion for a directed verdict on this point.
Marks further argues against the claim of unjust enrichment, asserting he was not unjustly enriched despite receiving net proceeds of $44,394.00, as he incurred over $35,000 in legal fees. He challenges the jury's damage award, questioning the sufficiency of evidence to support it. The appellate court's review is limited to whether material evidence supports the jury's verdict, as established in Tenn. R. App. P. 13(d) and reiterated in Hodges v. S.C. Toof. Co. The court will not reassess the evidence or its weight but will view it in the most favorable light to uphold the verdict while disregarding conflicting evidence.
Material evidence must support a jury's verdict for it to be affirmed, ensuring parties retain their constitutional right to a jury trial. In this case, Morgan International loaned Marks $123,750, of which $44,394 was paid directly to him. Marks acknowledged receiving this amount. The remainder was intended to satisfy existing debts but was not paid, and Marks did not benefit from that portion. Levine made several mortgage payments on behalf of Marks, which relieved him of financial obligation and benefited him. The jury determined that Marks was unjustly enriched by $38,000 from the loan. This was a question for the jury, and there is material evidence backing their verdict. Therefore, the jury's decision is upheld. Marks claimed the transaction has negatively impacted his life and made his house a liability, but the trial court's ruling is affirmed, and the matter is remanded for further proceedings. Costs are imposed on Marks and his surety.
