Hamud v. Hawthorne

The Hamuds (plaintiffs) took out a loan from E. T. Hawthorne (defendant). To secure the loan, the Hamuds executed a quitclaim deed, which they deposited into escrow. The deed, when recorded, would convey three pieces of real property owned by the Hamuds to Hawthorne. The escrow agreement required the escrow company to record the deed if the Hamuds failed to repay the loan in full when it was due. The real property was also encumbered by other, senior liens. During the term of the loan, Hawthorne made approximately $350 in payments to the senior lienholders to keep the Hamuds out of default with respect to those senior lienholders. The Hamuds failed to repay the loan to Hawthorne, and the escrow company recorded the quitclaim deed conveying the property to Hawthorne. Hawthorne then conveyed the property, through an intermediary, to the Shaffers (defendants), who managed it and paid all expenses with respect to it. More than four years later, a third party, as part of an unrelated transaction, requested the creation of a new deed memorializing the conveyance of the property from the Hamuds to the Shaffers. The request caused the Hamuds to inspect the original quitclaim deed, in which they noticed a typo. The Hamuds, relying on the typo, sued Hawthorne and the Shaffers, seeking a declaration that the quitclaim deed was actually a mortgage and seeking a judgment allowing the Hamuds to redeem the property. The trial court ruled in favor of the Hamuds, and Hawthorne and the Shaffers appealed.