Faust Corp. v. Harris

• Citation: 467 P.3d 710
• Decision Date: 17 December 2019
• Docket Number: Case No. 117,037
• Parties: FAUST CORPORATION, Plaintiff/Appellee/Counter-Appellant, v. Mykal Royetta HARRIS a/k/a Royetta M. Harris, Defendant/Appellant/Counter-Appellee, and John Lowe and Eliza Lowe, Midland Credit Management, Inc., and State of Oklahoma ex rel. Oklahoma Tax Commission, Defendants, and Linda Holtzclaw, as Special Administrator of the Estate of Mary E. Wensauer, Intervenor/Appellant/Counter-Appellee.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

467 P.3d 710

FAUST CORPORATION, Plaintiff/Appellee/Counter-Appellant,

v.Mykal Royetta HARRIS a/k/a Royetta M. Harris, Defendant/Appellant/Counter-Appellee,andJohn Lowe and Eliza Lowe, Midland Credit Management, Inc., and State of Oklahoma ex rel. Oklahoma Tax Commission, Defendants,

and

Linda Holtzclaw, as Special Administrator of the Estate of Mary E. Wensauer, Intervenor/Appellant/Counter-Appellee.

Case No. 117,037

Court of Civil Appeals of Oklahoma, Division No. 4.

FILED DECEMBER 17, 2019

Mandate Issued: June 17, 2020

Stephen L. Bruce, Everette C. Altdoerffer, Edmond, Oklahoma, and Sharon T. Thomas, Kristin D. Meloni, THE RUDNICKI FIRM, Oklahoma City, Oklahoma, For Plaintiff/Appellee

Gerard F. Pignato, RYAN WHALEY COLDIRON JANTZEN PETERS & WEBBER, PLLC, Oklahoma City, Oklahoma, For Defendant/Appellant Mykal Royetta Harris and Intervenor/Appellant Linda Holtzclaw as Special Administrator of the Estate of Mary E. Wensauer

OPINION BY JANE P. WISEMAN, VICE-CHIEF JUDGE:

¶1 Mykal Royetta Harris and Linda Holtzclaw, Special Administrator of the Estate of Mary E. Wensauer,¹ appeal a trial court order finding that each owned a one-half interest in the property at issue. Faust Corporation counter-appeals asserting its judgment lien against Harris attached to the whole property, not just an undivided one-half interest. After review, we conclude Harris had no remaining interest in the property when Faust's judgment lien was filed in Oklahoma County and Harris therefore had no interest to which the lien could attach. We affirm the trial court's judgment in part and reverse in part and remand with directions.

FACTS AND PROCEDURAL BACKGROUND

¶2 Faust Corporation filed its petition on September 25, 2008, to foreclose a judgment lien on property it alleged was owned by Harris. Faust described the property as Lots 17, 18, 19, and 20, of Block A in the Crestwood Addition, Oklahoma City, Oklahoma (the Property). On October 31, 2008, Mary E. Wensauer filed a motion to intervene stating she owned the Property on which Faust claimed a lien.

¶3 Faust filed a motion for summary judgment asserting the following: It was granted judgment in Pottawatomie County for $11,712.62 and obtained a lien on the Property. It alleged Harris filed a bankruptcy petition and received a discharge in 2003, but "[t]he bankruptcy court did not order [Faust's] judgment lien avoided." Faust renewed its judgment in 2007 and filed a certified copy in Oklahoma County. Faust claimed that although served with summons and petition, Harris failed to appear and was in default and that Mary Wensauer claimed some right, title, or interest in the Property through two unfiled deeds which Harris allegedly executed in 1988.

¶4 In her response to the summary judgment motion, Mary asserted she owned the Property, not Harris, and further that Harris had not included it in her bankruptcy estate because she did not own the Property.

¶5 On September 28, 2010, a judgment in favor of Faust was filed. Mary, the trial court found, "has no right, title, interest, estate, lien or equity of redemption in and to the real property and premises or any part thereof." The court held that Faust was entitled to foreclose its judgment lien, ordered the lien foreclosed, and authorized the issuance of a special execution and order of sale of the Property to satisfy the lien.

¶6 After the trial court denied Mary's motion for new trial, she filed a petition in error with the Supreme Court. When a sheriff's sale was held, the purchaser at the sale asked the trial court to set aside the sale and refund the amount he paid for the Property due to clouds on the title that had not been foreclosed. Because the purchaser asked to cancel his bid, the bid of the next highest bidder (Faust) was accepted. The order confirming sheriff's sale was filed on June 24, 2011.

¶7 In a previous appeal, Case No. 109,056, the Court of Civil Appeals reversed the trial court's summary judgment in Faust's favor. The Court concluded:

[A] question of material fact exists regarding what interest, if any, Wensauer and/or PMSI holds in the Property and when they acquired it. Any interest of Wensauer and/or PMSI acquired prior to the 2002 filing of Faust's Statement of Judgment cannot be disturbed by Faust's judgment lien. Pursuant to 12 O.S. § 706, the lien only affects property of the judgment debtor Harris.

The Court remanded the case for further proceedings.

¶8 The Court found that Harris owned the property, but in 1988, she "granted Wensauer a one-half undivided interest in ... Property." Mary, however, did not record the deeds from Harris. The Court stated:

In 1992, Harris entered into an agreement with Wensauer and Property Management Services, Inc. (PMSI) to sell PMSI all of Harris' right, title and interest in the Property. The Agreement was never filed of record nor were any deeds transferring title from Harris to PMSI. The only documents produced by Wensauer to show PMSI fulfilled its end of the Agreement were two handwritten notes from Harris to PMSI in 2006 requesting the deeds from Harris be filed. From 2002 through 2010, the Oklahoma County Assessor's website listed the owners of the property as "Mykal R. Harris c/o Property Mgmt Services." In May 2003, Harris filed a petition for bankruptcy. On Schedule A of her bankruptcy petition, Harris indicated she held no interest in any real property. In September 2003, Harris' debts were discharged.

(Footnote omitted.)

¶9 Faust claimed its judgment lien was superior to both Harris' and Mary's interests in the Property. The Court explained:

Faust contends 16 O.S. § 15 as amended in 1993, modified the definition of "third persons" to include holders of unrecorded interests which would allow judgment liens priority over unfiled deeds. In support of such argument, Faust relied upon a 1997 article from the Oklahoma Bar Journal which cited a 1996 unreported decision from Division 4 of the Oklahoma Court of Civil Appeals.

(Footnote omitted.) Mary, on the other hand, asserted that § 15 "contained nothing suggesting it was intended to overrule ‘almost 100 years of jurisprudence’ holding that a judgment creditor's lien only attaches to the actual interest of the judgment debtor in the real property." Mary argued the Property's title "was transferred to PMSI and her in 1992 when the terms of the Agreement were fulfilled." She presented "two handwritten letters from Harris dated in 2006 wherein Harris requested the deeds between the parties be recorded." Mary pointed out that the Property was not listed on Harris' bankruptcy petition, and she claimed Faust had notice of PMSI's interest in the Property before it filed its Statement of Judgment.

¶10 The Court in the first appeal offered the following analysis:

The Oklahoma Supreme Court has long recognized that "the grantee in a valid unrecorded conveyance of real estate has a superior claim to that of a judgment creditor claiming under a judgment subsequent to the effective date of the conveyance." Harty [Harry ] v. Hertzler , 1939 OK 211, ¶ 9 , 90 P.2d 656, 657. "[T]he reason for the rule is in the fact that the judgment creditor is not a bona fide purchaser as he parts with nothing to acquire his lien." Herndon v. Shawnee Nat'l Bank , 1924 OK 1167, ¶ 2, 232 P. 432, 433 [105 Okla. 207, 232 P. 432].

Title 16 O.S. Supp. 1993 § 15 provides a deed does not have to be acknowledged and recorded in order to be valid as between the parties to the conveyance, but that it is not valid as against third persons unless it has been acknowledged and recorded. The language added to § 15 in 1992 provides:

"No judgment lien shall be binding against third persons unless the judgment lienholder has filed his judgment in the office of the county clerk as provided by and in accordance with Section 706 of Title 12 [12-706] of the Oklahoma Statutes."

Contrary to Faust's assertion, nothing in § 15 suggests Wensauer/PMSI as the holder of a prior unrecorded deed would be considered a "third person" over whom Faust, the judgment lienholder, would have priority. Section 15 instead protects judgment lienholders who file a statement of judgment as required by 12 O.S. Supp. 1997 § 706 against subsequent bona fide purchasers for value. The Oklahoma Supreme Court reiterated the definition of "third persons" in Breeding v. NJH Enter., L.L.C. , 1997 OK 65, ¶14, 940 P.2d 502, 505 :

We have previously construed a statute that uses the term "third persons." Title 16 [O.S.] 1991 § 15 provides that deeds and mortgages "shall not be valid as against third persons unless acknowledged and recorded." We held in Whitehead v. Garrett , 199 Okla. 278, 280, 185 P.2d 686, 688 (1947), "The ‘third persons’ defined by § 15, supra, refer to innocent purchasers for value."

Further, nothing in § 15 alters the nearly 100 years-old Supreme Court precedent in Lunn v. Kellison , 1915 OK 1100 , 153 P. 1136 : "The judgment lien contemplated by section 5941, Comp. Laws 1909 (Rev. Laws 1910, § 5148)[now 12 O.S. § 706 ], is a lien only on the actual interest of the judgment debtor, whatever that may be; therefore, though he appear to have an interest, if he has none in fact, no lien can attach." Id . ¶¶ 5-6, 153 P. at 1136 (citations omitted). Neither Wensauer nor PMSI was Faust's judgment debtor. Accordingly, Faust's judgment lien cannot affect their interest in the property if that interest was acquired prior to the filing of Faust's Statement of Judgment.

(Footnote omitted.)

¶11 On remand, Harris testified at trial she first met Brent Wensauer 35 or 40 years ago. She sold over 20 properties to Property Management Services, Inc. (PMSI). When asked about Brent Wensauer's relationship to PMSI, she stated, "As far as I knew he was the company." She testified Mary Wensauer was Brent's mother. PMSI managed properties it owned as well as properties it did not own. Harris contacted Brent in the 1980s to ask if he wanted to invest in a property with her. Brent identified properties in which they could invest. When asked if sh...