Hallquist v. United Home Loans, Inc.
| Decision Date | 01 June 2012 |
| Docket Number | Case No. 11-04265-CV-C-NKL |
| Parties | TODD HALLQUIST and TERESA HALLQUIST, Plaintiffs, v. UNITED HOME LOANS, INC., et. al. Defendants. |
| Court | U.S. District Court — Western District of Missouri |
This action stems from the non-judicial foreclosure sale on August 25, 2011, of real property belonging to Plaintiffs Todd Hallquist and Teresa Hallquist. Pending before the Court are two motions to dismiss for failure to state a claim, the first from Defendants SunTrust Mortgage, Inc. ("SunTrust"), and Federal National Mortgage Association (Fannie Mae) [Doc. # 60] and the second from Defendant Millsap & Singer ("Millsap") [Doc. # 62]. For the following reasons, both motions are GRANTED.
The facts in this section are taken from Plaintiffs' First Amended Complaint, from documentation both attached to the original Complaint and referenced in the First Amended Complaint, and from publicly recorded documents.
On October 2, 2008, the Hallquists executed and delivered a Deed of Trust against the real property located at 325 Kristy Krove Drive, # 5-58, Camdenton, Missouri 65020, to secure a note in the amount of $211,000. The Deed of Trust was given by Plaintiffs to their lender, Defendant United Home Loans, with the beneficial interest therein conveyed to MERS, Inc., as nominee for United Homes and its successors. A few years later, in May of 2011, MERS assigned and conveyed its beneficial interest in the Deed of Trust to SunTrust. In July of 2011, Defendant SunTrust appointed Millsap successor trustee of the Deed of Trust.
On August 25, 2011, the property was sold at a non-judicial foreclosure sale; and SunTrust was the successful bidder at the sale. SunTrust did not tender cash at the sale but instead allowed Millsap, in the name of SunTrust, to purchase the property through a credit bid. SunTrust then conveyed the property to Fannie Mae by Successor-Trustee's Deed Under Foreclosure, which was duly recorded in the Camden County Recorder's Office on August 30, 2011. The Successor-Trustee's Deed Under Foreclosure states that Defendant Fannie Mae was the buyer at the sale.
In their First Amended Complaint (Doc. # 49), the Hallquists bring five counts. They assert against all Defendants a claim for Quiet Title (Count III) and assert against Millsap and Fannie Mae a count for Tampering With A Public Record (Count IV). They claim breach of fiduciary duty against Millsap (Count II) and violation of the Real Estate Settlement Procedure Act (RESPA) against United Homes and Sun Trust (Count V). TheHallquists also seek to enjoin Defendants Fannie Mae and Millsap from actions to remove the Hallquists from the Subject Property (Count I).
The Hallquists in Count III seek to quiet title to the property in Camdenton, Missouri. A Plaintiff in an action to quiet title has the burden to prove title superior to the other party, not superior to the whole world, and must prevail on the strength of its own title and not on any weakness in the title of the other party." Ollison v. Vill. of Climax Springs, 916 S.W.2d 198, 203 (Mo. 1996); Empire Dist. Elec. Co. v. Coverdell, 344 S.W.3d 842, 852-53 (Mo. Ct. App. 2011). Thus, to succeed on their quiet title claim, the Hallquists must prove their own title and establish the invalidity of the record sought to be eliminated as a cloud. Mays v. Kirk, 414 F.2d 131, 133 (5th Cir. 1969) (cited Murray v. United States, 686 F.2d 1320, 1326 n. 12 (8th Cir. 1982)).
Under Missouri law, a trustee's foreclosure sale transfers all legal and equitable interests in the property to the purchaser at the sale. Tucker v. Ameriquest Mortgage Co., 290 B.R. 134, 136 (Bankr. E.D.Mo. 2003), citing Mo. Rev. Stat. § 443.290 (1939). When the sale is complete at the termination of the foreclosure auction, a grantor of a deed of trust no longer has any interest in the property. Id.; Schmidt v. City of Tipton, 89 S.W.2d 569, 572 (Mo. Ct. App. 1936).
The Hallquists allege that the foreclosure was conducted improperly and as a result, their interest in the property was never extinguished. Specifically, the pleadings allege that the foreclosure was improper because Millsap & Singer 1) improperly bid for SunTrust; 2) allowed a credit bid; 3) allowed Fannie Mae to falsely claim that it purchased the property at the foreclosure sale; and 4) failed to ascertain whether Fannie Mae had any interest in the loans. [Amended Complaint, Doc. # 49].
In support of these claims, Plaintiffs primarily rely on the text of the Deed of Trust, which states that the "highest bidder for cash" shall have its bid accepted. [Doc. # 49 at 3]. The Hallquists then argue that under Missouri law the only party who would be entitled to enter a credit bid in this situation is the creditor, and that SunTrust cannot be considered the creditor.
The Hallquists' argument fails for at least two reasons. First, the Note attached to Plaintiffs' original complaint identifies SunTrust as the Noteholder, and is specially endorsed to Sun Trust from United Home Loans. The Deed of Trust, also attached to Plaintiffs' original complaint, shows that the Deed was assigned to SunTrust by the named beneficiary, MERS, three months before the foreclosure sale. This documentation indicates that SunTrust was the holder of the Note at the time of the foreclosure sale, was entitled to enforce the Note, and had the power of sale and foreclosure conferred upon it by the Deed of Trust. Mo. Rev. Stat. §§ 400.1-201(20); 400.3-301; Hobson v. Wells Fargo Home Mortg., 2011 WL 3704815, * 2 (E.D. Mo. 2011) (). Thus, SunTrust at the time of the sale was a creditor.
Second, the Hallquists have misstated Missouri law when arguing that credit bids are not allowed. Missouri courts have ruled that even when a deed requires the foreclosure sale to be for "cash," a foreclosure sale is not voided when the winning bid amount is paid not as cash but instead as a credit on the outstanding note. Webb v. Salisbury, 39 S.W.2d 1045, 1047, 1052 (Mo. 1931); Martin v. Lorren, 890 S.W.2d 352, 357 (Mo. Ct. App. 1994). These legal requirements serve a practical purpose. SunTrust, as holder of the note, was legally required to give credit for the sale amount to Plaintiffs against their note. Prohibiting a credit bid in this situation would produce the absurd result of forcing SunTrust to pay itself in cash at the foreclosure sale. The Hallquists have not disputed that they received credit for the amount of the sale against their debt. For the foregoing reasons, the fact that SunTrust placed a credit bid instead of paying in cash does not render the foreclosure sale invalid under Missouri law.
Further, Plaintiffs attack the foreclosure because SunTrust was not present at the sale and relied upon Millsap Singer to announce the bid. However, this argument is also without merit. Missouri law allows a trustee to announce the bid of the foreclosing holder of the note and deed of trust. Boatmen's Bank of Jefferson County v. Community Interiors, Inc., 721 S.W.2d 72, 77 (Mo. Ct. App. 1986); Hobson v. Wells Fargo Home Mortgage, 2011 WL 3704815, at * 2 (E.D. Mo. 2011) () (internal citations omitted).
The Hallquests also contest the accuracy of the Successor-Trustee's Deed, which names Fannie Mae as the purchaser even though SunTrust placed the winning bid. However, as argued by Defendants, the Hallquests have no standing to raise this claim. This is because the title to the property was transferred at the moment the bid was accepted. See In re Tucker, 290 B.R. 134, 137 (Bankr. E.D. Mo. 2003) (). As the Hallquists allege in their Complaint, SunTrust's bid was accepted at the foreclosure sale on August 25, 2011; thus, after that bid was accepted, the Hallquests had no further interest in the property. Therefore, they have no standing to attack the Successor Trustee's Deed issued after they had already lost title to the property.
The Hallquists also argue that the SunTrust Defendants are "estopped" from asserting that SunTrust purchased the property at the foreclosure sale because the Successor Trustee's Deed lists Fannie Mae and not SunTrust as the purchaser. However, estoppel by deed is an affirmative defense, which allows one party to a deed to prevent the other party from claiming something different than what is stated in the deed. SeeWhite v. Wilks, 357 S.W.2d 908, 913 (Mo. 1962). The Hallquists are not parties to the deed and thus lack standing to assert this doctrine. See e.g. Cottle v. Sydnor, 10 Mo. 763 (Mo. 1847). Finally, the Hallquists argue that the sale lacked consideration. However, SunTrust's crediting of the sale amount to Plaintiffs against their note in exchange for the purchase constitutes sufficient consideration.
Given that the law requires the Hallquists to prevail based on the strength of their own title, rather than the weakness of the opposing party's title, their claim to quiet title must fail.
A trustee for a deed of trust acts in a fiduciary capacity and is required to act with "complete integrity, fairness, and impartiality toward both the debtor and the creditor." Spires v. Edgar, 513 S.W.2d 372, 378 (Mo. banc 1974). The Hallquists allege that Millsap & Singer:
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