Erickson v. Nationstar Mortg.

• Decision Date: 25 May 2021
• Docket Number: No. 4:20 CV 34 JMB,4:20 CV 34 JMB
• Court: U.S. District Court — Eastern District of Missouri
• Parties: ARNOLD LEE ERICKSON, et al., Plaintiffs, v. NATIONSTAR MORTGAGE, LLC, Defendant/Counterclaim Plaintiff/Third-Party Plaintiff, v. ERICKSON CABIN, LLC, Third-Party Defendant/Third-Party Plaintiff,, v. BUSEY BANK, et al., Third-Party Defendants.

ARNOLD LEE ERICKSON, et al., Plaintiffs, v. NATIONSTAR MORTGAGE, LLC, Defendant/Counterclaim Plaintiff/Third-Party Plaintiff, v. ERICKSON CABIN, LLC, Third-Party Defendant/Third-Party Plaintiff,, v. BUSEY BANK, et al., Third-Party Defendants.

No. 4:20 CV 34 JMB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

May 25, 2021

MEMORANDUM AND ORDER

This matter is before the Court on the Busey parties'¹ motion for summary judgment, pursuant to Rule 56, Fed.R.Civ.P., on the claim of Erickson Cabin, LLC, for slander of title. Erickson Cabin has filed a response in opposition and the issues are fully briefed. The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c).

I. Background

The claims in this matter concern title to real property located in Putnam County, Missouri. Arnold Erickson and Michael Erickson (father and son, respectively) purchased the property at issue in April 2006. Busey Statement of Uncontroverted Material Facts (Busey SUMF) at ¶ 6 [Doc. # 71]. In January 2007, Arnold and Michael executed a promissory note in the amount of $88,000 and a deed of trust giving Pulaski Bank (now known as Busey Bank)² a security interest in the property. Id. at ¶¶ 18-19, 22. The deed of trust was recorded on January 11, 2007. Id. at 21. Pulaski Bank subsequently assigned the note to Countrywide Bank. 2007 Note at 3 [Doc. # 71-4]; Michael Erickson Affidavit at ¶¶ 6-7 [Doc. # 86-1]. In 2013, servicing of the loan was transferred to Nationstar. Bank of America Notice [Doc. # 86-2].

In February 2018, attorney Ed Cox emailed Busey Bank seeking information regarding the deed of trust on behalf of a client who was attempting to execute a levy on the Erickson property.³ Id. at ¶¶ 25-27; Brian Schulte Affidavit at ¶¶ 8-10 [Doc. # 73]; Cox email [Doc. # 73-1]. Included with the email was a lien search Mr. Cox obtained that listed the January 2007 deed of trust to Pulaski Bank as the sole lien on the property. Busey SUMF at ¶ 28; Schulte Affidavit at ¶ 11; Lien Search [Doc. # 73-1]. Mr. Cox wrote, "Prior to having the sheriff sell the property, I am requesting confirmation of this Deed of Trust and contact information for providing notice of any sale." Cox email.

The Cox email was forwarded to defendant Brian Schulte. He testified that he reviewed Busey Bank's "internal imaging" and completed a lien search but found no information regardingthe Ericksons or the loan.⁴ Brian Schulte Deposition at 22 [Doc. # 86-6]; Schulte Affidavit at ¶ 12. Based on the lack of records, he assumed that the 2006 loan had been paid off before Busey Bank acquired Pulaski Bank. Schulte Dep. at 22 ("I did not find any loan. And that's a good indication that the loan was paid off many years ago is what my experience was at the time in 2018.").⁵ Accordingly, Schulte called Mr. Cox and told him that Busey Bank did not have an active loan on the Erickson property. Schulte Aff. at ¶ 16. He also told Cox that Busey Bank did not require notice of any sheriff's sale of the property because it had no interests in the property. Id. at ¶ 18. Schulte offered Cox a deed of release as a substitute for service on Busey Bank, and Cox accepted. Id. at ¶ 19. Schulte then prepared a document entitled "Full Deed of Release," using a fill-in form. Deed of Release [Doc. # 71-6]; Schulte Dep. at 23.

The completed deed of release identified the property and stated that the Ericksons "by Deed of Trust dated January 6, 2007 . . . conveyed to the trustee therein named, certain real estate, to secure payment of a certain note or notes" as described in the deed of trust. The deed of release then stated:

NOW, THEREFORE, the undersigned present holder and legal owner of said Deed of Trust and note or notes, does hereby REMISE, RELEASE AND QUIT-CLAIM unto its present owner(s), ALL of the real estate in said Deed of Trust . . .

TO HAVE AND TO HOLD the same, with all appurtenances thereto belonging, free, clear and discharged from the encumbrance of said Deed of Trust.

Full Deed of Release [Doc. # 71-6] (emphasis added). It is undisputed that the underlined language was false, because Busey Bank was not the "present holder and legal owner" of the deed of trust and note. Schulte gave the deed of release to his supervisor, defendant Garrett Bradley, who signed it on February 21, 2018.⁶ Id. The deed of release was recorded in Putnam County on March 15, 2018. Busey SUMF at ¶ 38.

Michael Erickson learned about the deed of release after it was recorded and, in April 2018, exchanged emails and phone calls with Schulte and Bradley.⁷ Michael Erickson Aff. at ¶ 15. According to Schulte, Michael Erickson told him that Nationstar held a valid lien by virtue of the assignment of the note and deed of trust.⁸ Schulte Aff. at 22-24; Schulte Dep. at 42. In response to this information, Schulte asked associates in Busey Bank's post-closing department if they could find any information regarding the Erickson loan. Schulte Dep. at 12-13. A search of the Mortgage Electronic Registration Systems (MERS) database confirmed that the Erickson loan had been sold.⁹ Schulte Aff. at ¶¶ 25-26; Schulte Dep. at 13-14. Neither Schulte nor Bradley had muchfamiliarity with MERS and, before this matter arose, it was not the bank's practice to check the MERS database before signing a deed of release. Schulte Dep. at 10-11, 15-16; Bradley Dep. at 16-18. Schulte acknowledges that he would not have prepared the deed of release if he had known that Pulaski Bank sold the original promissory note. Schulte Dep. at 22.

On April 30, 2018, Schulte emailed Michael Erickson, confirming that a MERS inquiry disclosed that Nationstar was the current servicer of the mortgage. He continued, "We are not affiliated with Nationstar mortgage, so I assume that the deed of trust was not mine to release and that it is invalid. However, I will take whatever corrective action is necessary to maintain the integrity of Nationstar's lien." Apr. 30, 2018 email [Doc. # 73-3].

In June 2018, the Ericksons formed Erickson Cabin, LLC, for the purposes of holding title to the property. According to Michael Erickson, although he and his father Arnold purchased the property, the bulk of the costs were paid by a family business largely owned by their wives, Julie and Marilyn. Michael Erickson Aff. at ¶ 18. On July 18, 2018, Arnold and Michael conveyed the property to Erickson Cabin, LLC.¹⁰ Id. at ¶ 20. Nationstar received payments on the loan through August 2018. Transaction History [Doc. # 18-7].

On March 15, 2019, Jody Martin, a title resolution specialist with the Martin Leigh law firm, contacted Brian Schulte regarding the release of deed. See Mar. 15, 2019, email string at 5 [Doc. # 86-8]. In response, Schulte prepared an Affidavit of Erroneous Deed of Release, based on a sample provided by Jody Martin. On March 20, 2019, Bradley executed the affidavit which was then recorded in Putnam County. Putnam County Record with Affidavit of Erroneous Release [Doc. # 71-7]. The document stated in relevant part:

This Affidavit of Erroneous Release . . . is made for the pu[r]pose of rescinding and declaring null and void a Deed of Release executed . . . and recorded March 5, 2018. . . . Said Deed of Release was accidentally and erroneously filed to release a Deed of Trust . . . on Property legally described as [the subject property].

It was not the intent of the undersigned to release the Deed of Trust on said property, since the Deed of Trust Note and loan released to said Deed of Trust has not been paid and the release of said Deed of Trust was not authorized and was ineffective. The error made consists of:

The loan secured by aforementioned Deed of Trust was sold by Pulaski Bank, now known as Busey Bank, to Nationstar Mortgage in the year 2007. Busey Bank held no ownership interest in the aforementioned Deed of Trust at the time the erroneous Full Deed of Release was recorded.

The purpose of this document is to correct on the record the mistaken filing of the Full Deed of Release filed in . . . Putnam County, Missouri on March 5, 2018.

On May 1, 2019, Martin Leigh, acting as the successor trustee, provided notice of a trustee's sale, scheduled for May 30, 2019.¹¹ [Doc. # 86-4]. On May 1, 2019, Nationstar notified the Ericksons that the property would be sold at a trustee's sale on May 30, 2019. Amended Counterclaim and Crossclaim at ¶ 24. Thereafter, Nationstar listed the property on auction.com, a website advertising foreclosure auctions. Id. at ¶ 25.

On May 14, 2019, Erickson Cabin entered into a contract for sale of the property to prospective third-party purchasers, Charles and Jodee Sapper, for a purchase price of $125,000. Busey SUMF at ¶ 67. On July 30, 2019, the Sappers cancelled the purchase, stating that they "simply do not have any choice." July 30, 2019, email [Doc. # 86-5]. Their email explained:

We understand your position that there was a release of the deed of trust on your property back in March 2018. But, the filings by Pulaski Bank, Busey Bank and/or NationStar in March and April of this year are deemed to be clouds in the title by the insurance carrier and closing agent and hence our lender. It's impossible for us to proceed.

Id.

On May 23, 2019, the Ericksons filed a petition for injunctive relief against defendant Nationstar in the Circuit Court of Putnam County to enjoin the May 30, 2019, trustee's sale.¹² Busey SUMF at ¶ 1. Nationstar filed a counterclaim against the Ericksons and a third-party petition against Erickson Cabin for declaratory judgment, to quiet title, and for suit on a promissory note.¹³ [Doc. # 18]. Erickson Cabin, in turn, brought in the Busey parties, asserting the claim for slander of title that is the subject of the present summary judgment motion. [Doc. # 52]. Thereafter, the Busey Bank parties removed the matter to the Western District of Missouri, invoking jurisdiction based on diversity of citizenship. Notice of Removal [Doc. #...