Countrywide Home Loans v. First Nat. Bank
| Decision Date | 17 October 2006 |
| Docket Number | No. 06-3.,No. 06-4.,06-3.,06-4. |
| Citation | 2006 WY 132,144 P.3d 1224 |
| Parties | COUNTRYWIDE HOME LOANS, INC., a Wyoming Corporation; and America's Wholesale Lender, a corporation, Appellants (Defendants), v. FIRST NATIONAL BANK OF STEAMBOAT SPRINGS, N.A., Appellee (Plaintiff). The Bank of New York Trustee Under the Pooling and Servicing Agreement Series 1997; and Mortgage Electronic Systems, Inc., a corporation, Appellants (Defendants), v. First National Bank of Steamboat Springs, N.A., Appellee (Plaintiff). |
| Court | Wyoming Supreme Court |
Representing Appellants: James R. Salisbury and Sean C. Chambers of Riske, Salisbury & Kelly, P.C., Cheyenne, Wyoming. Argument by Mr. Salisbury.
Representing Appellees: Thomas A. Thompson and Brandon W. Snyder of MacPherson, Kelly & Thompson, LLC, Rawlins, Wyoming. Argument by Mr. Thompson.
Before VOIGT, C.J., and GOLDEN, HILL*, KITE, and BURKE, JJ.
[¶ 1] In this mortgage foreclosure action, the district court declined to apply the doctrine of equitable subrogation and instead strictly applied Wyoming's "first in time is first in right" recording statute. The result was an order granting summary judgment in favor of First National Bank of Steamboat Springs, N.A. (First National Bank), holding its mortgage had priority over all other recorded liens and allowing it to proceed with foreclosure. In their appeal from the order, Countrywide Home Loans, Inc., (Countrywide) and America's Wholesale Lender (AWL) ask this Court to reverse the district court and adopt the doctrine of equitable subrogation so as to place Countrywide in the primary lien position formerly occupied by AWL. In a consolidated appeal from the same action, Mortgage Electronic Systems, Inc. (MES) and the Bank of New York Trustee Under the Pooling and Servicing Agreement Series 1997 (Bank of New York) ask this Court to reverse the district court's order denying a motion to set aside default judgments entered against them. We affirm both of the district court's orders.
[¶ 2] Countrywide and AWL present the following issue:
Whether the District Court, Second Judicial District, Carbon County, Wyoming, correctly applied the doctrine of equitable subrogation to determine the relative priorities of the mortgages encumbering the subject property.
First National Bank restates the issue as follows:
I. Whether the District Court erred as a matter of law in declaring Appellee First National Bank's mortgage a valid, enforceable and superior lien to that of Appellant Countrywide's mortgage and that Countrywide was not entitled to be equitably subrogated to First National's priority?
II. Whether the District Court abused its discretion in denying a motion under W.R.C.P. 60(b) seeking to set aside the default judgments entered against Appellants Mortgage Electronic Systems and Bank of New York and denying to dismiss the complaint?
[¶ 3] The Bank of New York and MES present the following issue:
ISSUE I:
Whether the District Court, Second Judicial District, Carbon County, Wyoming, erred in Denying the Motion to Set Aside Default and Entry of Default of The Bank of New York Trustee under the Pooling and Servicing Agreement Series of 1997 and Mortgage Electronic Registration Systems and a companion Motion to Dismiss Complaint for Foreclosure of the Bank of New York Trustee under the Pooling and Servicing Agreement Series of 1997.
(a) Whether the District Court erred in denying the motion of The Bank of New York Trustee under the Pooling and Servicing Agreement Series of 1997 to set aside the entry of default and default judgment, and to dismiss the Complaint for Foreclosure.
(b) Whether the District Court erred in denying the motion of Mortgage Electronic Registration Systems to set aside the entry of default and default judgment.
[¶ 4] Elmer Lee Ketcham, Jr. and Anita Ketcham owned real property located in Carbon County, Wyoming. On November 12, 1997, they obtained a loan of $100,000 from AWL, which they secured by executing a mortgage on the Carbon County property. The AWL mortgage was recorded in the Carbon County clerk's office on November 13, 1997. AWL assigned the mortgage to the Bank of New York and the assignment was recorded in the clerk's office on May 26, 1998.
[¶ 5] On June 4, 2002, the Ketchams pledged the Carbon County property as collateral for a business loan made by First National Bank to Blue Gate West, a Colorado corporation in which the Ketchams were principles. This mortgage was recorded in the Carbon County clerk's office on July 22, 2002.
[¶ 6] On April 2, 2003, the Ketchams executed a third mortgage on the property in favor of Countrywide and MES in exchange for a loan of $97,500. The purpose of this loan was to pay off the 1997 AWL mortgage. Countrywide obtained a title insurance commitment, which listed the 1997 AWL mortgage and the 2002 First National Bank mortgage as prior liens on the property. The 2003 Countrywide mortgage was recorded in the Carbon County clerk's office on April 15, 2003. The Ketchams used the funds borrowed from Countrywide to pay off the 1997 AWL mortgage, making the final payment in August of 2004.
[¶ 7] Meanwhile, in June of 2003, the Ketchams failed to make their monthly payment to First National Bank on the 2002 mortgage. Under the terms of the loan agreement, the failure to make the payment constituted a default entitling First National Bank to foreclose on the property. First National Bank filed a complaint for foreclosure naming the Ketchams, Countrywide, the Bank of New York, MES and AWL as defendants and claiming the First National Bank lien was the first and senior lien on the Carbon County property.
[¶ 8] MES and the Bank of New York did not answer the complaint in the time prescribed so First National Bank moved for entry of default against them. The clerk of the district court entered defaults against both non-responding defendants. First National Bank then moved the district court to enter a default judgment against the Bank of New York and MES, which motions the district court granted. The Bank of New York and MES filed motions to set aside the default judgments, which the district court denied.
[¶ 9] In the meantime, First National Bank filed a motion for summary judgment requesting the district court to declare as a matter of law that its lien on the Ketchams' Carbon County property was superior to the interests of all others; the Ketchams were in default; and First National Bank was entitled to foreclose. Countrywide and AWL also moved for summary judgment. They asked the district court to apply the doctrine of equitable subrogation and hold as a matter of law that the 2003 Countrywide mortgage was subrogated to the 1997 AWL mortgage, making the Countrywide mortgage superior in priority to all encumbrances recorded after 1997.
[¶ 10] The district court issued a decision letter in which it declined to apply the doctrine of equitable subrogation. Instead, the court applied Wyo. Stat. Ann. § 34-1-121 (LexisNexis 2005) to hold that First National Bank's 2002 mortgage had priority over all other encumbrances on the Ketchams' property, including the 2003 Countrywide mortgage. The district court denied Countrywide's summary judgment motion and granted summary judgment in favor of First National Bank.
[¶ 11] Our standards for reviewing summary judgment orders are well established.
Summary judgment is appropriate when no genuine issue as to any material fact exists and the prevailing party is entitled to judgment as a matter of law. A genuine issue of material fact exists when a disputed fact, if it were proven, would have the effect of establishing or refuting an essential element of the cause of action or defense which the parties have asserted. We examine the record from the vantage point most favorable to the party who opposed the motion, and we give that party the benefit of all favorable inferences which may fairly be drawn from the record. We evaluate the propriety of a summary judgment using the same standards and materials as the lower court used. We do not accord deference to the district court's decisions on issues of law.
Budd-Falen Law Offices, P.C. v. Rocky Mt. Recovery, Inc., 2005 WY 77, ¶ 13, 114 P.3d 1284, 1288 (Wyo.2005). We review the district court's decisions on issues of law de novo. Reed v. Cloninger, 2006 WY 37, ¶ 10, 131 P.3d 359, 364-65 (Wyo.2006). Because the question of whether equitable subrogation should be applied is one of law, we review the district court's decision in that regard de novo.
[¶ 12] The decision whether to set aside a default judgment under W.R.C.P. 60(b) rests in the sound discretion of the court and an order denying such a motion will be reversed only upon a showing that the district court abused its discretion. Chamberlain v. Ruby Drilling Co., Inc., 986 P.2d 846, 847 (Wyo.1999). An abuse of discretion occurs when a court:
[a]cts in a manner which exceeds the bounds of reason under the circumstances. In determining whether there has been an abuse of discretion, the ultimate issue is whether or not the court could reasonably conclude as it did. An abuse of discretion has been said to mean an error of law committed by the court under the circumstances.
Hodges v. Lewis & Lewis, Inc., 2005 WY 134, ¶ 11, 121 P.3d 138, 143 (Wyo.2005).
[¶ 13] Countrywide and AWL ask this Court to reverse the district court's ruling, adopt the doctrine of equitable subrogation and apply it in the instant case so that Countrywide's 2003 lien would be subrogated to the priority position of the 1997 AWL lien. They urge this Court to adopt the doctrine as set out in Restatement (Third) of Property (Mortgages) § 7.6 (1997):
(a) One who fully performs an obligation of another, secured by a mortgage, becomes by subrogation the owner of the obligation and the mortgage to the extent necessary to prevent unjust enrichment. Even though the performance...
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