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

• Citation: 415 S.W.3d 697
• Decision Date: 01 October 2013
• Docket Number: ED 99062.,Nos. ED 99061,s. ED 99061
• Parties: FEDERAL NATIONAL MORTGAGE ASSOCIATION, Respondent, v. Harvey L. PACE and Christine Pace, Appellants.
• Court: Court of Appeal of Missouri (US)

415 S.W.3d 697

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Respondent,

v.Harvey L. PACE and Christine Pace, Appellants.

Nos. ED 99061, ED 99062.

Missouri Court of Appeals,

Eastern District,

Division Four.

Oct. 1, 2013.

Jane C. Hogan, St. Louis, MO, for appellants.

Scott B. Mueller, Kristin J. Steinkamp, St. Louis, MO, for respondent.

LAWRENCE E. MOONEY, Presiding Judge.

The defendants, husband and wife Harvey and Christine Pace, appeal the grant of summary judgment entered by the Circuit Court of St. Louis County in favor of the plaintiff, Federal National Mortgage Association (“Fannie Mae”), quieting title to certain real property in Fannie Mae's name. We conclude that the trial court erred in deciding, as a matter of law, that the deed of trust identifying the husband as the only grantor and borrower, and signed only by the husband, constituted a valid, first-priority lien encumbering the full fee interest in certain property the husband and wife held as tenants by the entirety. We reverse the trial court's judgment and remand for further proceedings.

On June 20, 2002, the Paces took title to residential property located in Olivette, Missouri. The trustee of the Rosalynd Sarno Feldman Revocable Living Trust dated 9/20/99 executed a special warranty deed conveying the property to “Harvey L. Pace and Christine Pace, husband and wife.” About one week later, the husband executed a promissory note for $197,000 to purchase the property, secured by a deed of trust to First Horizon Home Loan Corporation, the original lender. The promissory note identified only the husband as borrower, and the deed of trust identified only the husband as the grantor and borrower. Only the husband signed and initialed the note and deed of trust, thereby covenanting that he was lawfully seised of the estate and had the right to grant and convey the property. The deed of trust secured to the lender repayment of the loan and performance of the borrower's covenants and agreements under the deed of trust and the note. For that purpose, the husband as borrower “irrevocably grant[ed], bargain[ed], [sold], convey[ed], and confirm[ed] to [the] Trustee, in trust, with power of sale” the subject property.

The wife signed neither the promissory note nor the deed of trust. She later testified at deposition that she had no input into buying the property, that her husband took care of everything, that she did not apply for a loan in connection with the property, that she did not intend to take an interest in the property, and that until the instant litigation, she did not know that she was an owner of the property. The wife was not instructed to attend the closing, but she testified that she did so simply to accompany her husband. At the closing, at which the husband signed the promissory note and deed of trust, the wife signed a document titled “Assent to Execution of Deed,” which provided as follows.

I, Christine Pace, of the County of St. Louis, State of Missouri, the spouse of Harvey L. Pace, do hereby expressly assent to the conveyance of real estate made by my said spouse at any time, and acknowledge and state that any such conveyances are not to be deemed to be in fraud of my marital rights. I further assent to execution of any documents including the execution of loan documents such as Promissory Notes and Deeds of trust by said spouse in connection with property located to-wit:

[legal description of the subject property]

Commonly referred to as: [street address], Olivette, Mo. 63132

This instrument is executed so that Harvey L. Pace, my spouse, may execute and deliver conveyance of this real estate without my joinder therein or without my express assent to this particular conveyance endorsed herein, as required by Section 474.150 of the laws of 1957.

In witness whereof, I have hereunto set my hand this 28th day of June, 2002. The assent bears the wife's signature and is notarized.

The original lender prepared the note, deed of trust, assent, and other closing documents as if the husband were the sole owner of the property although the special warranty deed conveying the property to the Paces conveyed the property to both of them as husband and wife. An affidavit executed by the husband and submitted in opposition to Fannie Mae's motion for summary judgment, however, stated that it had always been the husband's “legal position” that the property be titled in both his and his wife's name. The special warranty deed conveying the property to the Paces and the deed of trust were recorded with the St. Louis County Recorder of Deeds on July 10, 2002.

Fannie Mae contends that the husband defaulted on the promissory note, and the property went into foreclosure. The wife testified that she telephoned the lender at the time to try to learn what was happening, but the lender refused to speak with her. Fannie Mae obtained the property at a foreclosure sale on September 2, 2010. Fannie Mae filed an action for unlawful detainer in the Circuit Court of St. Louis County, and ostensibly obtained a consent judgment against both the husband and wife. The Paces were not represented by counsel when they appeared in court regarding the unlawful-detainer action.

After obtaining the consent judgment in the unlawful-detainer action, Fannie Mae then filed the instant action, alleging a mutual mistake and that all parties intended the deed of trust to fully encumber the property. Fannie Mae sought to quiet title to the property, requesting a judgment that the deed of trust constituted a valid first-priority lien encumbering the full fee interest held by both the husband and wife in the property. In the alternative, Fannie Mae sought an equitable lien. Fannie Mae did not expressly seek to reform the deed of trust based on mutual mistake or fraud. Nor did Fannie Mae assert a separate claim against the husband for breach of contract on the promissory note. Both Fannie Mae and the Paces moved for summary judgment.

The trial court granted Fannie Mae's motion and denied the Paces' motion, quieting title in Fannie Mae and holding that the deed of trust constituted “a valid, first-priority lien against the full fee interest held by Harvey L. Pace and Christine Pace in the [p]roperty” and that the foreclosure sale extinguished the interests of the Paces in the property.

The Paces appeal. They claim the trial court erred in granting summary judgment to Fannie Mae because the deed of trust from the husband to the original lender was void and conveyed no interest in the property to the lender. Fannie Mae counters that it holds a superior claim to title because the wife's actions demonstrate that the Paces intended to, and did, take all actions necessary to place a valid lien on the property based on the parties' mistaken understanding of how title to the property would vest. Fannie Mae argues that no genuine issue of material fact exists regarding the parties' intent to encumber the Paces' entire interest in the property, that the Paces are estopped from denying their intent because they ratified this intent when they consented to judgment against them in the unlawful-detainer action, and that the Paces failed to raise the issue of whether the deed of trust was void in the trial court.

Summary judgment allows a trial court to enter judgment for the moving party where the party demonstrates a right to judgment as a matter of law based on facts about which there is no genuine dispute. ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). “Our review is essentially de novo.” Id. When considering an appeal from summary judgment, we review the record in the light most favorable to the party against whom judgment was entered. Id. Thus, we afford the benefit of all reasonable inferences to the non-movant. Id.

We consider Fannie Mae's additional counterarguments before we consider the central question of whether the deed of trust is void, as the Paces allege, or whether it conveyed a valid lien against the husband's and the wife's entire interest in the property. First, we observe that the Paces did, indeed, raise in the trial court the issue that the deed of trust was void. The Paces argued in the summary-judgment proceedings that both the husband and wife held the property and that consequently the deed of trust and assent were of no force and effect.

Second, we reject Fannie Mae's argument that the Paces ratified their intent to encumber the entire property with the deed of trust when they signed the consent judgment in the unlawful-detainer action. “ ‘[R]atification’ is an express or implied adoption or confirmation, with knowledge of all material matters, by one person of an act performed in his behalf by another who at that time assumed to act as his agent but lacked authority to do so.” Am. Multi–Cinema, Inc. v. Talayna's N.W., Inc., 848 S.W.2d 557, 559 (Mo.App.E.D.1993)(quoting Wilks v. Stone, 339 S.W.2d 590, 595 (Mo.App.Spgfld.1960))(emphasis added). “Ratification can occur when a spouse confirms or adopts an agreement with knowledge of its contents.” Scharf v. Kogan, 285 S.W.3d 362, 370 (Mo.App.E.D.2009). It is essential for ratification that the principal have full knowledge of all the material facts at the time she is charged with accepting the transaction as her own. Murphy v. Jackson Nat. Life Ins. Co., 83 S.W.3d 663, 668 (Mo.App.S.D.2002).

Viewing the record in the light most favorable to the Paces as the non-movants, Fannie Mae filed an action for unlawful detainer in the Circuit Court of St. Louis County, and ostensibly obtained a consent judgment against both the husband and the wife before filing the instant action. The Paces were not represented by counsel when they appeared in court regarding the unlawful-detainer action. The wife testified that she and her husband signed the consent judgment because counsel for Fannie Mae told them that they had to do so.¹ The wife confirmed at deposition in the instant case ...