In re Gresham

• Court: U.S. Bankruptcy Court — Western District of Missouri
• Writing for the Court: Dennis R. Dow
• Citation: In re Gresham, 373 B.R. 914 (Bankr. W.D. Mo. 2007)
• Decision Date: 17 August 2007
• Docket Number: Adversary No. 07-02004.,Bankruptcy No. 06-21107.
• Parties: In re Pauletta Ann GRESHAM, Debtor. Pauletta Ann Gresham, Plaintiff, v. America's Servicing Company (ASC), Assignee of Home123 Corporation and Pramco L.L.C., Defendants.

373 B.R. 914

In re Pauletta Ann GRESHAM, Debtor Pauletta Ann Gresham, Plaintiff, v. America's Servicing Company (ASC), Assignee of Home123 Corporation and Pramco L.L.C., Defendants.

Bankruptcy No. 06-21107.

Adversary No. 07-02004.

United States Bankruptcy Court, W.D. Missouri.

August 17, 2007.

COPYRIGHT MATERIAL OMITTED

Gwendolyn Froeschner Hart, Shurtleff, Froeschner & Bunn LLC, Columbia, MO, for Debtor/Plaintiffs.

Jennifer M. West, South & Associates, St. Louis, MO, Mark J. Schultz, Gallas & Schultz, Phyllis nmn Schauffler, Martin, Leigh, Laws & Fritzlen, P.C., Steven M. Leigh, Kansas City, MO, for Defendants.

MEMORANDUM OPINION

DENNIS R. DOW, Bankruptcy Judge.

This matter was commenced by the filing of a motion by Pauletta Ann Gresham ("Debtor") against America's Servicing Company ("ASC") and Pramco II, L.L.C. ("Pramco") for a determination of lien status. The Court treated the motion as if it were filed as a complaint initiating an adversary proceeding under Rule 7001(2). The Chapter 13 trustee (the "Trustee") was subsequently joined as a plaintiff, seeking to avoid ASC's deed of trust lien under § 544(a)(3). Before the Court is a Motion for Summary Judgment filed by ASC against the Debtor and Pramco for a determination of the validity and priority of its lien. This is a core proceeding under 28 U.S.C..§ 157(b)(2)(K) over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 157(a) and (b)(1). The following constitutes my Findings of Fact and Conclusions of Law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure. For the reasons set forth below, the Court finds that ASC has satisfied its burden of demonstrating that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law with respect to the validity and priority of its lien. Summary judgment is, therefore, granted.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The facts are undisputed.¹ The real property at issue is located at 20 N. Rainbow, Apartments A & B, Columbia, Missouri (the "Property"). In September of 2005, the Debtor executed a deed of trust in favor of Pramco, granting Pramco a security interest in the Property (the "Pramco Deed of Trust"). The Pramco Deed of Trust was recorded in the real property records of Boone County, Missouri. On or about November 30, 2005, the Debtor executed a second deed of trust in favor of Home 123 Corporation, granting Home 123 Corporation a security interest in the Property. That deed of trust was subsequently assigned to ASC (the "ASC Deed of Trust") and was recorded in Boone County.

The correct legal description of the Property is:

LOT THREE (3) OF SUNRISE ESTATES SUBDIVISION, BLOCK IXPRD. The ASC Deed of Trust contained the correct street address, but an incorrect legal description of the Property:

LOT THREE (3) OF SUNRISE ESTATES SUBDIVISION, BLOCK IVPARD. No real property exists at the location that is legally described in the ASC Deed of Trust.

Pramco executed a subordination agreement (the "Subordination Agreement") on November 30, 2005, whereby Pramco agreed to subordinate the Pramco Deed of Trust to the ASC Deed of Trust. The Subordination Agreement was recorded in Boone County; it contained the correct legal description of the Property.

On November 3, 2006, the Debtor filed a motion to sell the Property and disburse a portion of the proceeds to ASC to satisfy ASC's first lien. Pramco objected on the grounds that ASC's lien was not properly perfected due to the error in the ASC Deed of Trust, and asserted that Pramco was the first lienholder. On December 20, 2006, this Court approved the sale and ordered that the disposition of the proceeds be determined by a separate adversary action.

In February of 2007, the Debtor initiated an adversary proceeding by filing a motion to determine the priority and validity of the liens of ASC and Pramco. This summary judgment motion followed. The Debtor subsequently sought the Court's approval to join the Chapter 13 trustee (the "Trustee") as a plaintiff to enable the Trustee to avoid ASC's lien under § 544(a)(3). The Debtor's motion was granted.²

The Trustee contends that because the ASC Deed of Trust misidentified the block, the mortgage is unperfected and he can avoid it as a bona fide purchaser under § 544(a)(3). ASC makes two arguments: 1) that the ASC Deed of Trust is valid despite the incorrect legal description, and 2) that the Trustee lacks standing to avoid the ASC Deed of Trust.³ ASC is seeking a determination that it holds a valid, first lien on the Property, superior to Pramco's lien.

III. DISCUSSION AND LEGAL ANALYSIS

A. Standard for Summary Judgment

Federal Rule of Bankruptcy Procedure 7056(c), applying Federal Rule of Civil Procedure 56(c), provides that summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Fed. R. Bank. P. 7056; Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party moving for summary judgment has the initial burden of proving that there is no genuine issue as to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 161, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once the moving party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to raise a genuine issue for trial, and may not rest on its pleadings or mere assertions of disputed facts to defeat the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A genuine issue exists when the evidence is such that a reasonable fact finder could find for the non-movant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir.1994). When reviewing the record for summary judgment, the court is required to draw all reasonable inferences in favor of the non-movant; however, the court is "not required to draw every conceivable inference from the record — only those inferences that are reasonable." Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir.1991).

B. The Validity of the ASC Deed of Trust

Missouri courts are reluctant to hold a property description insufficient and void unless compelled to do so by its ambiguity and uncertainty. Pincher v. Miles Homes of Missouri, Inc., 549 S.W.2d 848, 853-54 (Mo.1977). McCune Gill, a noted expert on Missouri titles, put it best:

It seems to be beyond the capabilities of the writers of descriptions in deeds, wills and court proceedings to put down accurate descriptions of property, or having put them down to observe the obvious precaution of reading them after they have been put down to correct any errors therein.

But the courts, staffed as they are with sensible and understanding judges, have been most lenient in construing erroneous descriptions. They say that when a man tries to convey something that he owns and possesses he is really trying to convey it and not something that he does not own or possess, that when he tries to convey a building he intends to convey the building wherever it is, that when he makes mistakes or omissions they will be disregarded if there is enough other description to identify the property, that the parts of the description where he is least likely to make mistakes will govern, and finally that the title will be considered to comply even with the rather exacting requirements of marketability even though the description is mildly erroneous.

M. Gill, TREATISE ON REAL PROPERTY LAW IN MISSOURI, 1474 (1954).

Under Missouri's rules of construction, validity is favored over invalidity. Beauchamp v. Beauchamp, 381 S.W.2d 804, 805 (Mo.1964). As the Missouri Supreme Court stated, "If susceptible of two constructions, one of which will render the deed valid and operative, and the other render it wholly inoperative, that construction, if not unreasonable nor legally impossible, should be adopted which will render the deed operative." Hobbs v. Yeager, 263 S.W. 225, 229 (Mo.1924). See also Boxley v. Easter, 319 S.W.2d 628, 633 (Mo.1959) ("[I]f the land conveyed is sufficiently identified by certain parts of the description, an impossible or senseless course should be disregarded, and the deed sustained.") (citations omitted); Massachusetts Gen. Life Ins. Co. v. Sellers, 835 S.W.2d 475, 480-81 (Mo.App. S.D.1992)(an interpretation that conveys nothing is rejected in favor of one that conveys something); Jones v. Cox, 629 S.W,2d 511, 513 (Mo.App. S.D.1981)("[P]eople are presumed not to intend nullities by their solemn conveyances and if one construction will render a deed operative and a competing construction will render it wholly inoperative, the former is preferred if not unreasonable nor legally impossible.").

The intention of the parties is the linchpin of this rule of construction. When confronted with uncertainty in a deed, Missouri courts rely on the four corners of the instrument as well as the surrounding circumstances and conditions to ascertain the parties' intentions. Snadon v. Gayer, 566 S.W.2d 483, 489 (Mo. App.1978). See also Wolfe v. Dyer, 95 Mo. 545, 8 S.W. 551 (1888)(deed with ambiguous legal description construed in favor of conveyance in light of other parts of the deed and the parties' subsequent acts); Massachusetts Gen. Life Ins. Co. v. Sellers, 835 S.W.2d 475 (Mo.App. S.D.1992)(dispute over ambiguous boundary settled in favor of validity after court considered physical location and course of the roads involved); Baird v. Harris, 220 Mo.App. 1290, 290 S.W. 80 (1927)(misdescription in deed, stating, northwest quarter instead of southwest quarter, did not render deed void in light of parties' intentions). A deed will be declared void for uncertainty of description only where, after resorting to oral or other extrinsic...