Am. Bank of Okla. v. Wagoner

• Court: United States State Court of Appeals of Oklahoma. Court of Civil Appeals of Oklahoma
• Writing for the Court: KENNETH L. BUETTNER, Presiding Judge.
• Citation: Am. Bank of Okla. v. Wagoner, 259 P.3d 841, 2011 OK CIV APP 76 (Okla. Civ. App. 2011)
• Decision Date: 25 April 2011
• Docket Number: No. 107,988.,107,988.
• Parties: AMERICAN BANK OF OKLAHOMA, an Oklahoma banking corporation, Plaintiff/Appellee,v.Drue WAGONER, a/k/a Douglas Drue Wagoner, Jr., and Tammy Wagoner, a/k/a Tammy Sue Wagoner, husband and wife, Defendants/Cross–Plaintiffs/Appellants,andDanny Lawrence and Shanna Lawrence, husband and wife; Hillcrest Medical Center, a corporation; Rogers County Treasurer; and Lakeside State Bank, an Oklahoma corporation, Defendants/Cross–Defendants.

259 P.3d 841

2011 OK CIV APP 76

AMERICAN BANK OF OKLAHOMA, an Oklahoma banking corporation, Plaintiff/Appellee,

v.Drue WAGONER, a/k/a Douglas Drue Wagoner, Jr., and Tammy Wagoner, a/k/a Tammy Sue Wagoner, husband and wife, Defendants/Cross–Plaintiffs/Appellants,andDanny Lawrence and Shanna Lawrence, husband and wife; Hillcrest Medical Center, a corporation; Rogers County Treasurer; and Lakeside State Bank, an Oklahoma corporation, Defendants/Cross–Defendants.

No. 107,988.

Court of Civil Appeals of Oklahoma, Division No. 1.

Nov. 5, 2010..Rehearing Denied Feb. 18, 2011.Certiorari Denied April 25, 2011.

Released for Publication by Order of the Court

of Civil Appeals of Oklahoma, Division No. 1.

Appeal from the District Court of Rogers County, Oklahoma; Honorable Sheila A. Condren, Judge.REVERSED AND REMANDED WITH DIRECTIONS.Sean Burrage, Mark Antinoro, Lindsey M. Jackson, Taylor, Burrage, Foster, Mallett, Downs & Ramsey, P.C., Claremore, Oklahoma, for Plaintiff/Appellee.Kris Ted Ledford, Kernan & Ledford, Tulsa, Oklahoma, for Defendants/Appellants.KENNETH L. BUETTNER, Presiding Judge.

¶ 1 Defendants/Cross–Plaintiffs/Appellants Drue and Tammy Wagoner appeal from the trial court's summary judgment order which found that the Wagoners' mortgage lien was inferior to the mortgage lien held by Plaintiff/Appellee American Bank of Oklahoma (Bank). Defendants/Cross–Defendants Danny and Shanna Lawrence (Borrowers) gave mortgages to Bank and the Wagoners to secure loans for the purchase of the Wagoners' property. After Borrowers defaulted, the Wagoners and Bank litigated the priority of their mortgages. The Wagoners contend that their vendor's purchase money mortgage is superior to Bank's third-party purchase money mortgage. The material facts are not in dispute. As a matter of first impression, we adopt the Restatement view that a vendor's purchase money mortgage is superior to a third-party's purchase money mortgage. Accordingly, the Wagoners were entitled to judgment as a matter of law and we reverse and remand.

¶ 2 In its April 3, 2009 Petition, Bank alleged that on August 3, 2007, Borrowers executed a note to Bank for $92,709.26 with 12% interest, secured by a mortgage on property in Talala, Oklahoma. Bank asserted the mortgage was recorded in Rogers County the same day. Bank further alleged that the Wagoners held an interest in the same property based on a mortgage recorded August 22, 2007. Bank next asserted that Defendant Hillcrest Medical Center held an interest in the same property under a judgment lien recorded in Rogers County September 24, 2008. Bank alleged that the Wagoners' and Hillcrest's claims were inferior and subordinate to Bank's interest.¹ Bank contended that Borrowers had defaulted on the note and Bank sought judgment of $91,882.47, plus interest and other expenses, and foreclosure on its mortgage.

¶ 3 The Wagoners filed an Answer and Cross–Claim May 12, 2009. They denied Bank's mortgage was superior to theirs and asked the court to deny Bank's claims to the extent those claims prejudiced the Wagoners' claims. For their cross-claim, the Wagoners asserted Borrowers executed a note to the Wagoners for $30,000 with 9% interest, secured by a mortgage on the same property in Talala, Oklahoma. The Wagoners asserted they recorded their mortgage August 22, 2007. The Wagoners alleged Borrowers were in default and the Wagoners asked for judgment of $28,023.46 plus interest and other expenses, as well as foreclosure on the mortgage.

¶ 4 Bank filed its Motion for Summary Judgment July 2, 2009. Bank included eleven statements of undisputed facts: 1) on August 3, 2007, Borrowers gave Bank a note for $92,709.26 in principal at 12% interest, which included a statement that the purpose of the loan was “purchase subject property;” 2) at the same time, Borrowers gave Bank a mortgage covering certain described property in Talala, which mortgage was recorded August 3, 2007; 3) the Wagoners claim an interest in the same property by virtue of a mortgage recorded August 22, 2007, which is inferior to Bank's mortgage; 4) Hillcrest claims an interest in the property based on a judgment lien recorded September 24, 2008; 5) the Rogers County Treasurer also claimed an interest in the property for unpaid taxes, but Bank had paid the taxes due by the time of its summary judgment motion; 6) Borrowers had defaulted on the note to Bank as of December 2008; 7) on May 20, 2009, a default judgment was entered against the Borrowers for failing to answer in this case; 8) Lakeside Bank filed a Corrected Release of Mortgage, and on June 4, 2009, filed a Disclaimer of any interest in the subject property; 9) the Wagoners filed their Answer and Cross–Claim May 12, 2009; 10) the Wagoners' counsel indicated they intended “to litigate over who has the first mortgage [and] assert the affirmative defense of estoppel;” and 11) “(a)t this point in time there are no material facts in dispute regarding the claims made in (Bank's Petition).”

¶ 5 In their Response filed September 22, 2009, the Wagoners admitted all of Bank's statements of fact, except that Bank's mortgage was superior to theirs. The Wagoners asserted theirs was a vendor's purchase money mortgage, which they claimed had priority over the Bank's mortgage as a matter of law. The Wagoners asserted 7 additional statements of material facts which they contended precluded granting summary judgment to Bank: 1) the Wagoners were the owners and sellers of the property; 2) as part of the sales transaction, the Wagoners agreed to loan the Borrowers $30,000 of the purchase price in exchange for a purchase money mortgage; 3) Borrowers executed a promissory note and mortgage in favor of the Wagoners August 3, 2007; 4) Bank knew the Wagoners were the owners and sellers of the property; 5) Bank was aware of the Wagoners' mortgage at the time Bank made its loan to Borrowers; 6) there was no subordination agreement or other document in which the Wagoners agreed that their mortgage would be inferior to the Bank's mortgage; and 7) the Wagoners filed their cross-claim against Borrowers to collect on their note and foreclose on the mortgage; the court granted default judgment in favor of the Wagoners after Borrowers failed to respond to the cross-claim.

¶ 6 Bank filed a Reply to the Wagoners' response October 5, 2009. Bank did not expressly dispute the Wagoners' statements of additional facts, but asserted Bank “does not believe the facts support statement number five” (that Bank was aware of the Wagoners' mortgage at the time Bank made its loan to Borrowers).² Bank also claimed the Wagoners had not presented proof that theirs was a purchase money mortgage, but Bank treated that fact as having been proved in making its reply.

¶ 7 The trial court heard arguments on the Motion for Summary Judgment October 8, 2009 and entered its Journal Entry of Judgment January 6, 2010. The trial court found the material facts were not in dispute and that Bank was entitled to judgment finding its mortgage lien superior to the Wagoners pursuant to Johnson v. Fugate, 1956 OK 35, 293 P.2d 559 and Estate of Skvorak v. Security Union Title Insurance Co., 140 Idaho 16, 89 P.3d 856. The Wagoners appeal.

¶ 8 Summary judgment proceedings are governed by Rule 13, Rules for District Courts, 12 O.S.2001, Ch. 2, App.1. Summary judgment is appropriate where the record establishes no substantial controversy of material fact and the prevailing party is entitled to judgment as a matter of law. Brown v. Alliance Real Estate Group, 1999 OK 7, 976 P.2d 1043, 1045. Summary judgment is not proper where reasonable minds could draw different inferences or conclusions from the undisputed facts. Id. Further, we must review the evidence in the light most favorable to the party opposing summary judgment. Vance v. Fed. Natl. Mortg. Assn., 1999 OK 73, 988 P.2d 1275.

¶ 9 The parties do not dispute the material facts that Borrowers purchased property from the Wagoners; on August 3, 2007, Borrowers gave a mortgage to Bank as security for a loan of about 75% of the purchase price and Borrowers gave a mortgage to the Wagoners to secure a loan of the balance of the purchase price; Bank and the Wagoners had knowledge of the other's mortgage but they did not execute a subordination agreement and neither mortgage indicated it was a second or inferior mortgage; Bank recorded its mortgage August 3, 2007 and the Wagoners recorded theirs August 22, 2007; and Borrowers defaulted on both notes. The issue presented is one of law: whether under these facts Bank's or the Wagoners' mortgage has priority.

¶ 10 Bank argued, and the trial court agreed, that the Oklahoma Supreme Court's decision in Johnson v. Fugate, 1956 OK 35, ¶ 12, 293 P.2d 559 was controlling. The court there found that when “a purchaser receives a deed and simultaneously executes a mortgage as security for a third person's advance of the purchase money, which is paid to the vendor, the mortgagee has a prior lien for the full amount of the money paid to the vendor over any lien of the vendor for the balance of the purchase price.”

¶ 11 The Wagoners responded that Johnson was not controlling because its facts are distinguishable. In Johnson, the vendor did not take a mortgage on the property; instead, the vendor had a statutory vendor's lien.³ The Wagoners asserted that because they and Bank both had purchase money mortgages, the facts of this case were governed by the Restatement (Third) of Property: Mortgages, § 7.2, Purchase Money Mortgage Priority, which directs that a vendor's purchase money mortgage has priority over a third-party's purchase money mortgage.

¶ 12 Bank responded by insisting that the facts in Johnson were identical to those in this case. Bank also contended that this provision of the Restatement has not been adopted in Oklahoma and is therefore not controlling. ⁴

¶ 13 Essential to the outcome of this case is the undisputed fact that both Bank and the Wagoners...