Ethridge v. Tierone Bank

Citation226 S.W.3d 127
Decision Date26 June 2007
Docket NumberNo. SC 87734.,SC 87734.
PartiesMary ETHRIDGE, Respondent, v. TIERONE BANK, f/k/a First Federal Lincoln Bank, Appellant.
CourtUnited States State Supreme Court of Missouri

Robert J.E. Edwards, Brett D. Anders, Christian J. Kelly, Kansas City, James R. Fossard, Springfield, for Appellant.

Kerry D. Douglas, Bolivar, for Respondent.

MICHAEL A. WOLFF, Chief Justice.

Introduction

When David Ethridge refinanced the home that he and his wife, Mary, held as tenants by the entirety, the lender prepared loan documents that slighted the wife. As the wife later said, her husband was "head of the household." That legally quaint assumption appears embodied in the lender-drafted refinancing papers that list David Ethridge, a married man, as the sole owner and the sole borrower. The law, as set forth in precedent cases dating to 1887, is harsh and unforgiving of such slights.

TierOne Bank, successor to the refinancing lender, seeks to impose the obligations of borrower on Mary Ethridge now that her husband is dead. To allow Mary Ethridge to retain the home free of the refinancing lien, the bank says, is unjust. The law, however, is unforgiving of the injustice of slighting the wife's interests at the time of refinancing—that injustice produces an enrichment of the wife who has no obligation to pay her late husband's loan. Equitable doctrines will not help. The bank loses.

Facts

Mary and David Ethridge purchased a home in Dallas County in 1999. They took title as tenants by the entirety and financed the purchase by borrowing money from Countrywide Home Loans. This loan was secured by a deed of trust. In 2001, David Ethridge, who made all the financial decisions for the couple, decided to refinance the home. At that time, the Ethridges owed approximately $74,000 on their loan to Countrywide. David Ethridge wanted to borrow $100,000 to pay off the existing loan and use the remaining proceeds to complete a remodeling project. First Fidelity Residential Lending, Inc., agreed to make the loan to David Ethridge.

On August 6, 2001, First Fidelity made a loan in the amount of $100,000. The promissory note evidencing the loan was signed only by David Ethridge. Mary Ethridge attended the refinancing because she knew that the house was going to be refinanced and she said she understood that she would need to sign something in order for that to occur. She felt obligated to sign the necessary documents because, she said, David Ethridge was the "head of household" and made all the couple's financial decisions.

The deed of trust prepared by First Fidelity contained only one signature line with David Ethridge's name typed beneath it. David Ethridge signed on the signature line and his wife signed below the line. They both also initialed each page of the document. The deed of trust defined the term, "Borrower," as "DAVID ETHRIDGE, A MARRIED MAN, AS HIS SOLE AND SEPARATE PROPERTY." This document contained a section entitled "TRANSFER OF RIGHTS IN THE PROPERTY" which stated:

This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower irrevocably grants, bargains, sells, conveys and confirms to Trustee, in trust, with power of sale, the following described property...."

The deed of trust identified the property as the Dallas County real estate owned by the Ethridges. The document also provided that "BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Property and ... Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record."

The last paragraph above the signature line on the Deed of Trust stated: "BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this Security Instrument and in any Rider executed by Borrower and recorded with it." As noted above, David Ethridge signed the deed of trust on the line provided for his signature and Mary signed the deed of trust below the signature line. Both signatures were notarized. The Ethridges also signed a settlement statement.

The Ethridges received $15,754.17 of the $100,000 loan proceeds. The remainder of the money was used to pay off the existing loan to Countrywide in the amount of $74,204.44 and to pay other fees associated with the refinancing. In October 2001, First Fidelity assigned the Note and Deed of Trust to TierOne Bank, appellant here. The Ethridges made payments on the loan until December 11, 2002, when David Ethridge was killed in an automobile accident. Thereafter, Mary Ethridge made no further payments.

In August 2003, Mary Ethridge filed a petition for declaratory judgment in the Circuit Court of Dallas County. She sought a cancellation of the deed of trust on the ground that it was void ab initio because she was not named as a grantor in the deed of trust, did not make any covenants of title and did not otherwise convey, via the instrument, her fee simple title as a tenant by the entirety in the property.

TierOne denied that the deed of trust was invalid and asserted the following affirmative defenses: (1) TierOne was entitled to have the deed of trust reformed to create a valid lien on the property; (2) Mary Ethridge should be estopped from denying the validity of the deed of trust; (3) TierOne should be granted an equitable lien on the property because the proceeds of the loan were used for her benefit; and (4) the doctrine of equitable subrogation was applicable because the proceeds of the loan were used to extinguish the prior lien on the Ethridges' property.

The trial court granted Mary Ethridge's motion for summary judgment and denied TierOne's motion for summary judgment concluding:

... that the real estate described in the deed of trust at issue was owned by Plaintiff and her now deceased husband as tenants by the entirety and that in order to convey a lien to the Defendant's predecessor, it was necessary that the deed of trust use appropriate words to convey the estate. In so determining, the Court finds that it is bound by the controlling precedent, as set forth by the Supreme Court of the State of Missouri, in Bradley et al. v. The Missouri Pacific Railway Company, 91 Mo. 493, 4 S.W. 427 (Mo.1887), which held that the party in whom the title is vested must use appropriate words to convey the estate, and that signing, sealing or acknowledging a deed by a wife, in which her husband is the only grantor, will not convey her estate. The Court finds that in this case the party in whom the title is vested did not use appropriate words to convey the estate, even though the Plaintiff signed the Deed of Trust in question before a notary public. Therefore, the case is analogous to Bradley, and the Court is bound by the Bradley decision.

TierOne appeals. After an opinion by the Court of Appeals, Southern District, this Court granted transfer. Mo. Const. art. V, sec. 10. The judgment is affirmed.

DISCUSSION
Standard of Review

There are no facts in dispute. The standard of review of summary judgment on appeal is essentially de novo. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993).

The deed of trust unambiguously designates only David Ethridge as "Borrower"

The main question in this case is whether the deed of trust conveyed a valid lien to the lender on Mary Ethridge's interest in the land. To answer this, the Court must ascertain the intent of the parties by looking at the words of the contract and giving those words their plain, ordinary, and usual meaning. State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 859-860 (Mo. banc 2006). The "intent of the parties . . . is determined based on the contract alone unless the contract is ambiguous." Trimble v. Pracna, 167 S.W.3d 706, 714 (Mo. banc 2005) (citing J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973)).

"[A] contract is only ambiguous, and in need of a court's interpretation, if its terms are susceptible to honest and fair differences." Schneider, 194 S.W.3d at 860. "A contract is not ambiguous merely because the parties disagree as to its construction." Id. "An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy. Language is ambiguous if it is reasonably open to different constructions." Seeck v. Geico General Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007) (quoting Gulf Ins. Co. v. Noble Broadcast, 936 S.W.2d 810, 814 (Mo. banc 1997)).

The deed of trust defines "Borrower" as David Ethridge, notes that he is married, but indicates—albeit incorrectly—that title is vested solely in him. This is the only definition of borrower in the document and the only description of the property's ownership. The deed of trust does not reference Mary Ethridge or otherwise indicate that another individual is also a borrower or grantor. This definition is not open to different constructions and cannot reasonably be construed to mean that Mary Ethridge also is a borrower under the deed of trust. Mary's initials on the document or her signature underneath the signature line on the final page of the document do not change the unambiguous nature of the deed's plain description of David Ethridge as the sole borrower and sole owner of the property. The separate "settlement statement" listing Mary Ethridge as borrower has no effect on the deed of trust.

This Court's reading of the deed of trust is controlled by Bradley v. Missouri Pac. Ry. Co., 91 Mo. 493, 4 S.W. 427, 428 (Mo. 1887). In Bradley, the husband deeded a piece of property owned by the wife to a third party. The deed, however, was signed and acknowledged by the wife. Despite the wife's signature, which was attested to, this Court...

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