Fed. Nat'l Mortg. Ass'n & Nationstar Mortg., LLC v. Conover

• Decision Date: 27 May 2014
• Docket Number: Nos. WD 76276,WD 76347.,s. WD 76276
• Citation: 428 S.W.3d 661
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION and Nationstar Mortgage, LLC, Appellants, v. Jeffrey A. CONOVER, et al., Respondents.
• Court: Missouri Court of Appeals

428 S.W.3d 661

FEDERAL NATIONAL MORTGAGE ASSOCIATION and Nationstar Mortgage, LLC, Appellants,
v.
Jeffrey A. CONOVER, et al., Respondents.

Nos. WD 76276, WD 76347.

Missouri Court of Appeals,
Western District.

Jan. 14, 2014.
Motion for Rehearing and/or Transfer to Supreme Court Denied March 4, 2014.
Application for Transfer Denied May 27, 2014.

[428 S.W.3d 663]

Benjamin F. Mann and Christopher C. Miles, Kansas City, MO, Thomas C. Walsh and John J. Schoemehl, St. Louis, MO, for Appellants.

Gregory Leyh, Gladstone, MO, for Respondents.

Before Division II: MARK D. PFEIFFER, Presiding Judge, and JOSEPH M. ELLIS and VICTOR C. HOWARD, Judges.

MARK D. PFEIFFER, Presiding Judge.

The Federal National Mortgage Association (“Fannie Mae”) and Nationstar Mortgage, LLC (“Nationstar”), appeal the “final judgment” ¹ of the Circuit Court of Clay County, Missouri (“trial court”), dated February 11, 2013, (1) granting summary judgment to Jeffrey and Angela Conover (“the Conovers”) in their wrongful foreclosure/quiet title claim against Fannie Mae and Nationstar and (2) dismissing Fannie Mae's unlawful detainer petition and Fannie Mae and Nationstar's wrongful foreclosure/quiet title counterclaim. We reverse and remand.

Factual and Procedural History ²

The Conovers executed a Promissory Note (“the Note”) in the sum of $213,000 to their originating lender, Merrlin Mortgage Corporation (“Merrlin”). The Note was secured by a Deed of Trust (“Deed of Trust”) on certain real property commonly known and numbered as 10223 North Hedges Avenue, Kansas City, Missouri (“the Property”). The Deed of Trust was recorded in the office of the Clay County Recorder of Deeds. Merrlin executed

[428 S.W.3d 664]

an allonge ³ to the Note, specifically endorsing the Note to CitiMortgage, Inc. (“CitiMortgage”). The allonge to the Note also contains a blank endorsement executed by CitiMortgage. Nationstar claims to have subsequently acquired the Note and Deed of Trust from CitiMortgage (though the record is less than “undisputed” about its acquisition). At minimum, though, the record does contain documentation attached in support of the Conovers' Motion for Summary Judgment that purports to declare that Nationstar was the holder of all rights related to the Note and Deed of Trust prior to appointing a successor trustee under the Deed of Trust and initiating foreclosure on the Property. ⁴

Nationstar later instituted foreclosure proceedings against the Conovers, and, through its attorney-in-fact, Martin, Leigh, Laws & Fritzlen, P.C. (“MLLF”), signed an Appointment of Substitute Trustee (“the Appointment”), which identified MLLF as the Grantee and Substitute or Successor Trustee. The document was recorded in the office of the Clay County Recorder of Deeds. The Appointment states that “Nationstar Mortgage, LLC, (‘Grantor’) is the holder of the Deed of Trust.” The Appointment further states that:

WHEREAS, said Deed of Trust provides that the legal holder of the Deed of Trust, at its option, and for any reason, shall have the power successively to remove the Trustee and appoint a Successor Trustee to any Trustee appointment thereunder by any instrument, who shall succeed to all the title, power and duties conferred upon the Trustee therein and by applicable law.

MLLF conducted a foreclosure sale and sold the Property to Fannie Mae for $190,110.66.

Thereafter, Fannie Mae filed in the Associate Circuit Division of the Circuit Court of Clay County a verified petition for unlawful detainer following foreclosure against the Conovers. Subsequently, the Conovers filed in the Circuit Court of Clay County a verified petition for wrongful foreclosure, quiet title, breach of fiduciary duty, and violations of the Missouri Merchandising Practices Act against Fannie Mae, Nationstar, and MLLF. ⁵ Fannie Mae and Nationstar filed an Answer and a Counterclaim in the wrongful foreclosure/quiet title case, alleging breach of the Note. The cases were eventually consolidated ⁶ and the Clay County Presiding

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Judge assigned the associate court division to hear the consolidated cases on the record under the practices and procedures before circuit judges, as set forth in Local Rule 6.4.1 of the 7th Judicial Circuit.⁷

The Conovers filed a Motion for Summary Judgment regarding their wrongful foreclosure/quiet title claims. Contemporaneously, Fannie Mae and Nationstar filed a Cross–Motion for Summary Judgment in the wrongful foreclosure/quiet title case, asserting that Nationstar was the holder of the Note at the time of the foreclosure upon which the wrongful foreclosure/quiet title claims were based and, therefore, had the right to foreclose upon the Property and issue a Trustee's Deed to Fannie Mae. The trial court granted the Conovers' Motion for Summary Judgment and denied Fannie Mae and Nationstar's Cross–Motion for Summary Judgment, expressly stating in the judgment that the foreclosure sale was void “because the Appointment [of the successor trustee] was made in a manner contrary to the power of sale provision in the Deed of Trust, and that the foreclosure sale was conducted by a non-Trustee in violation of the Deed of Trust.” ⁸

Pursuant to motions to dismiss, the trial court dismissed Fannie Mae's unlawful detainer petition and Fannie Mae and Nationstar's counterclaim related to the Conovers' claims for wrongful foreclosure and quiet title.

The trial court then determined that all claims in the consolidated cases were resolved (via previous rulings on motions for summary judgment and motions to dismiss) and thus, on February 11, 2013, entered “final judgment”: (i) in favor of the Conovers and against Fannie Mae and Nationstar for wrongful foreclosure; (ii) in favor of the Conovers and against Fannie Mae and Nationstar to quiet title in the name of the Conovers; and (iii) in favor of the Conovers and against Fannie Mae on the petition for unlawful detainer.

Fannie Mae and Nationstar appeal from the trial court's “final judgment.” On appeal, Fannie Mae and Nationstar raise two points asserting trial court error in granting the Conovers' motion for summary judgment, and two points asserting trial court error in granting the Conovers' motion to dismiss Fannie Mae's petition for unlawful detainer with prejudice. Fannie

[428 S.W.3d 666]

Mae and Nationstar's first point is dispositive of this appeal. Accordingly, we need not and do not address appellants' other points on appeal.

Standard of Review

“The propriety of summary judgment is purely an issue of law.” ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Accordingly, when considering appeals from summary judgments, we do not defer to the trial court's order and, instead, review the matter de novo. Id. We review the record in the light most favorable to the party against whom judgment was entered and accord the non-movant the benefit of all reasonable inferences from the record. Id. “The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially.” Id. To show a right to judgment as a matter of law, “[a] ‘claimant’ must establish that there is no genuine dispute as to those material facts upon which the ‘claimant’ would have had the burden of persuasion at trial.” Id. at 381. Summary judgment is “an extreme and drastic remedy and great care should be exercised in utilizing the procedure” because it “borders on denial of due process in that it denies the opposing party his day in court.” Id. at 377 (internal quotation omitted).

Analysis Point I—Validity of Appointment of Successor Trustee

In their first point, Fannie Mae and Nationstar assert that the trial court erred in granting the Conovers' motion for summary judgment ⁹ in the wrongful foreclosure action because there was no genuine dispute of material fact regarding the legality of the appointment of the successor trustee.¹⁰ Fannie Mae and Nationstar contend that Nationstar held the negotiable Note, was the legal assignee of the Deed of Trust, and had the power to appoint the successor trustee. Fannie Mae and Nationstar further claim that the successor trustee conducted a valid foreclosure sale that conveyed good title to Fannie Mae in accordance with the provisions of the Note, Deed of Trust, and Article 3 of the Missouri Uniform Commercial Code.

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The Conovers contend that its summary judgment motion raised a narrow issue concerning the Deed of Trust's power of appointment of a successor trustee. They argue that because Nationstar was not the Conovers' “Lender,” but nonetheless appointed the successor trustee, the failure to comply with the terms of the Deed of Trust's power of sale provision voids the successor trustee's sale and deed transfer to Fannie Mae.

The Conovers rely upon the Deed of Trust securing the Note to argue that only the “Lender” may invoke the power of sale and appoint the successor trustee. They contend that only the “owner” of the Note meets this description. Their argument also rests, in part, on separating the Note from the Deed of Trust so that the holder of the Deed of Trust cannot foreclose unless it is also “owner” of the Note. The Conovers' contentions are inconsistent with the language in the Note and Deed of Trust and with applicable Missouri law.

The Conovers' Note and Deed of Trust must be considered together. “[W]here the parties to a note contemporaneously execute another written contract, such as a deed of trust, which is connected with the note by direct reference or by necessary implication, the two instruments should be...