Fed. Nat'l Mortg. Ass'n v. Bostwick

Decision Date24 December 2013
Docket NumberNo. WD 75768.,WD 75768.
PartiesFEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae), Assignee of LaSalle Bank National Association and Trans Lending Corporation, Respondent, v. Barbara J. BOSTWICK, et al., Appellants.
CourtMissouri Court of Appeals

414 S.W.3d 521

FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae), Assignee of LaSalle Bank National Association and Trans Lending Corporation, Respondent,
v.
Barbara J. BOSTWICK, et al., Appellants.

No. WD 75768.

Missouri Court of Appeals,
Western District.

Sept. 10, 2013.
Motion for Rehearing and/or Transfer to the Supreme Court Denied Oct. 29, 2013.

Application for Transfer Denied Dec. 24, 2013.


[414 S.W.3d 523]


Paul Hasty, Jr., Overland Park, KS, for appellants.

Paul Hasty, Jr., Overland Park, KS, Robert Pitkin, Kansas City, MO, for appellants.


Before Division Two: THOMAS H. NEWTON, P.J., MARK D. PFEIFFER and KAREN KING MITCHELL, JJ.

THOMAS H. NEWTON, Presiding Judge.

Ms. Barbara Bostwick and A & B Properties, LLC (collectively A & B) appeal the trial court's judgment in favor of Federal National Mortgage Association (Fannie Mae). A & B contends, inter alia, that the trial court erroneously admitted documents purporting to show the chain of assignment of a multifamily mortgage, note, and personal guaranty, and argues that absent the erroneously admitted documents, Fannie Mae failed to prove its case.

We conclude that the trial court properly found that Fannie Mae demonstrated assignment of the loan. However, the trial court erred in finding in Fannie Mae's favor because Fannie Mae failed to establish that A & B was in default and failed to show, to a reasonable certainty, the amount due on the loan. Therefore, we reverse and remand for further proceedings.

Factual and Procedural Background

Fannie Mae filed a petition against A & B for breach of contract and judicial foreclosure. Its petition alleged that A & B was the owner of certain property and that in 2007, Trans Lending Corporation (Trans Lending) loaned A & B $322,080. The loan was secured by a “Multifamily Note” (Note), a “Multifamily Mortgage Assignment of Rents and Security Agreement and Fixture Filing” (Mortgage), and a personal guaranty signed by Ms. Bostwick (Guaranty). Fannie Mae asserted that Trans Lending assigned the loan to LaSalle Bank National Association (LaSalle) and that in 2008, LaSalle assigned the loan to Fannie Mae. The petition further alleged

[414 S.W.3d 524]

that A & B failed to pay off the loan when due, and that the loan was in default.

Fannie Mae subsequently moved for summary judgment, which A & B opposed. In its order denying Fannie Mae's motion, the trial court determined that Fannie Mae was not entitled to summary judgment because the motion “rest[ed] upon affidavits of witnesses not competent, upon proper objection, to testify as to the existence of such facts which, under the law, entitle[d] Fannie Mae to relief.”

At trial, Fannie Mae offered the testimony of Ms. Tara Horn, an escrow closer and notary who witnessed Ms. Bostwick sign the Guaranty in 2007. Mr. Joey Davenport, III, an asset manager at Fannie Mae, also testified in Fannie Mae's behalf. Fannie Mae offered a number of documents to evidence the debt and the assignment. The Note, the Mortgage, and the Guaranty were admitted without objection. Fannie Mae further offered business record affidavits from representatives of Trans Lending, Bank of America as successor to LaSalle, Fannie Mae's attorney, and Fannie Mae. A & B made a number of hearsay objections to these affidavits and their attachments, some of which the trial court overruled and some of which the trial court sustained. At the close of evidence, A & B argued that Fannie Mae had failed to offer admissible evidence to prove its case, and the court took the issue under advisement.

Subsequent to trial, the trial court issued a memorandum of findings. In its memorandum, the trial court determined that its trial ruling sustaining A & B's objections to, “[particularly exhibits 107, 113, 114, and 115], was mistaken.” It declared that the records should have been admitted as complying with section 490.692,1 which provides a hearsay exception for the admission of business records, and that Fannie Mae was entitled to the relief sought in its petition. After requesting a proposed judgment from Fannie Mae, the trial court entered final judgment in Fannie Mae's favor. It determined that: (1) Fannie Mae was the lawful holder of the Note and entitled to enforce it in the amount sought by Fannie Mae; (2) Fannie Mae was entitled to judgment on the Guaranty in the amount sought by Fannie Mae; and (3) Fannie Mae had a legal and protectable interest in the property because of the Mortgage and was entitled to a judgment of foreclosure. It awarded Fannie Mae $435,178.43 against A & B and Ms. Bostwick jointly and severally with interest accruing from May 15, 2012 and ordered that the Mortgage on the property be foreclosed.

A & B filed a post-trial motion requesting that the court alter or amend its judgment based on the inadmissibility of the documents allegedly supporting Fannie Mae's claim. The trial court did not rule on A & B's motion, and A & B timely filed its notice of appeal.

Standard of Review

In a court-tried case, we will affirm the trial court's judgment unless it lacks substantial evidence, is against the weight of the evidence, or relies on an erroneous application or declaration of law. Discover Bank v. Smith, 326 S.W.3d 120, 122 (Mo.App.S.D.2010). We view the evidence and its reasonable inferences in the light most favorable to the trial court's judgment and we disregard contrary evidence and inferences. Id. The trial court's decisions on the admission of evidence are reviewed for abuse of discretion. Asset Acceptance v. Lodge, 325 S.W.3d 525, 528 (Mo.App.E.D.2010). Questions of law, however, we review de novo. See

[414 S.W.3d 525]

Thomas v. Festival Foods, 202 S.W.3d 625, 627 (Mo.App.W.D.2006).

Legal Analysis

A & B raises five points. The first four points argue that the trial court erred in finding in Fannie Mae's favor because it relied on inadmissible evidence and the admissible evidence was insufficient to support Fannie Mae's claims; the final point argues the trial court erred in awarding Fannie Mae attorney's fees. For ease of discussion, we discuss A & B's points out of order.

Fannie Mae proved it was entitled to enforce the Note, and the Mortgage and Guaranty follow the Note.

In its second point, A & B argues that Fannie Mae failed to show the Note was assigned to it, and because it did not show the Note was assigned to it, Fannie Mae did not show it lawfully possessed the Note or was entitled to enforce it. Fannie Mae, however, contends that the trial court correctly found that it was entitled to enforce the Note pursuant to section 400.3–301(i) because it was the holder of the Note in that the Note was endorsed payable to it and it was in possession of the original Note.

In order to recover an amount owed to some other party, the plaintiff is required to prove the assignment of the account to show that is the rightful owner of the debt. CACH, LLC v. Askew, 358 S.W.3d 58, 61–62 (Mo. banc 2012). When there are multiple assignments, each assignment must be proven valid. Id. “In other words, every link in the chain between the party to which the debt was originally owed and the party trying to collect the debt must be proven by competent evidence....” Id. Thus, in order to make its case, Fannie Mae was required to present evidence of each step in the chain transferring the Note from Trans Lending to LaSalle to Fannie Mae.

In Exhibits 101/101 a, Fannie Mae admitted without objection a copy of the Note and two allonges.2 One allonge endorsed the Note from Trans Lending to LaSalle, and the other endorsed the Note from LaSalle to Fannie Mae. The endorsement in the first allonge stated, “Pay to the order of LaSalle Bank National Association, a national banking association, without recourse, representation or warranty.” The endorsement in the second allonge stated, “Pay to the order of FANNIE MAE, its successors and/or assigns.”

Section 400.3–301 provides that a “Person entitled to enforce” includes “the holder of the instrument.” As relevant here, a “holder” is “the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession.” § 400.1–201(20). Exhibits 101/101a showed that Fannie Mae possessed the Note and that the allonges made the Note payable to it specifically, as an identified person. The endorsements were admitted without objection and directly transferred the Note from Trans Lending to La Salle and from La Salle to Fannie Mae. Consequently, Fannie Mae was a holder and therefore was a person entitled to enforce the Note.

In Missouri, “unless the mortgage has been in some way separately extinguished, as by release for instance, the transfer of the note carries the mortgage with it as an incident.” Logan v. Smith, 1876 WL 9349, *3 (Mo.1876); see also55 am. Jur.2d Mortgages § 927 (2009). “The debt is the principal thing; the mortgage, which is but the security, is the mere

[414 S.W.3d 526]

incident of the debt; and on the maxim, omne principale, trahet ad se accessorium, where the debt goes the mortgage follows.” Kingsland & Ferguson Mfg. Co. v. Chrisman, 1887 WL 1732, *2 (Mo.App.1887). Our supreme court recently reaffirmed the applicability of this rule: “It is well established that the assignee of a secured promissory note becomes, by that fact alone, the beneficiary of the deed of trust.” 3Wells Fargo Bank, N.A. v. Smith, 392 S.W.3d 446, 463 n. 12 (Mo. banc 2013); see also Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo.App.E.D.2009). Further, a...

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