Swift v. Fed. Home Loan Mortg. Corp.

• Decision Date: 23 December 2013
• Docket Number: No. SD 32762.,SD 32762.
• Citation: 417 S.W.3d 342
• Parties: Rick SWIFT, as Trustee of the Rick Swift Trust, Dated October 6, 2005, Plaintiff–Respondent, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendant–Appellant.
• Court: Missouri Court of Appeals

417 S.W.3d 342

Rick SWIFT, as Trustee of the Rick Swift Trust, Dated October 6, 2005, Plaintiff–Respondent,

v.FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendant–Appellant.

No. SD 32762.

Missouri Court of Appeals,

Southern District,

Division Two.

Dec. 23, 2013.

Thomas E. Nanney, Kansas City, MO, for Appellant.

Robert W. Evenson, Pineville, MO, for Respondent.

MARY W. SHEFFIELD, J.

Federal Home Loan Mortgage Corporation (“Federal Home”) appeals from the trial court's order confirming a partition sale of real estate. Federal Home's arguments are without merit, and the trial court's judgment is affirmed.

Factual and Procedural Background

The dispute in this case surrounds the ownership of a parcel of residential real estate (“the real estate”) in Neosho, Missouri. Rick Swift (“ex-husband”) was previously married to Connie Landreth Swift (“ex-wife”). On January 29, 2004, the Newton County Circuit Court entered a judgment (“the January judgment”) terminating the parties' marriage and awarding the real estate in fee simple to ex-wife. Ex-husband immediately filed a Motion for Reconsideration as soon as the January judgment was received.

Then on February 20, 2004, ex-wife refinanced the real estate and signed a deed of trust using the home as collateral in favor of Missouri Capital Finance (“Mo Cap”). The deed of trust secured a mortgage of $97,900. On that same day, Mo Cap assigned its rights to Chase Manhattan Mortgage Corporation (“Chase Manhattan”). A copy of the January divorce decree and deed of trust were recorded with the Recorder of Deeds on February 26, 2004.

On April 29, 2004, the Newton County Circuit Court held a hearing on the Motion for Reconsideration, set aside the January judgment, and entered an amended judgment (“the April judgment”) in the dissolution case. The April judgment awarded the real estate to ex-husband and ex-wife as tenants in common. Although ex-wife and her attorney participated in the hearing, neither advised the trial judge of the refinancing. On October 27, 2005, ex-husband quitclaimed his interest in the real estate to the Rick Swift Trust (“the Trust”) of which ex-husband was trustee.

Ex-wife subsequently defaulted on her mortgage with Chase Manhattan. Chase Manhattan foreclosed on its deed of trust. On December 3, 2010, Chase Home Finance, LLC (“Chase Home”), purchased the real estate at the foreclosure sale for $91,610.96. On December 14, 2010, Chase Home conveyed its interest in the real estate to Federal Home for one dollar and “other valuable consideration.”

On July 28, 2011, ex-husband, in his capacity as trustee of the Trust, sued Federal Home seeking partition of the real estate. In its answer and affirmative defenses, Federal Home argued (1) the Trust had no interest in the real estate and (2) Federal Home was entitled to the protections of a bona fide purchaser for value. A trial was held in which the evidence described above was introduced.

The trial court entered its interlocutory judgment in partition on December 8, 2011. The trial court found the Trust and Federal Home were tenants in common in the real estate. The trial court further ordered the real estate be sold at public sale and the proceeds of the sale be divided.

A sheriff's sale was conducted, and the real estate was sold to the Trust for $1,000. Federal Home had a representative at the partition sale, but offered no bid. On the date of sale, Federal Home sought Prohibition in our Court, Case No. SD31813, which was denied on January 19, 2012. The Sheriff's Report of Sale was filed with the trial court on January 19, 2012. On January 20, 2012, the Trust filed a motion to approve the Report of Sale. Federal Home filed a motion in opposition, alleging the sale price was inadequate. Federal Home also moved to have the interlocutory judgment in partition set aside on the grounds that (1) Chase Home was a bona fide purchaser for value, (2) the April dissolution decree had never been recorded, and (3) the partition and sale would unjustly enrich the Trust.

On April 26, 2013, the trial court approved the sheriff's sale, and issued a final judgment for allocation and distribution of the proceeds of the sale. This appeal followed.

Discussion

Federal Home raises four points on appeal: (1) the trial court erred in confirming the partition sale because the sale price was grossly inadequate; (2) the trial court erred in refusing to set aside the interlocutory judgment of partition because Federal Home was a bona fide purchaser; (3) the trial court erred in refusing to set aside the interlocutory judgment of partition because Federal Home had an equitable lien on the Trust's interest in the real estate; and (4) the trial court erred in refusing to set aside the interlocutory judgment of partition because Federal Home is entitled to restitution. Federal Home's arguments are without merit for the reasons described below.

Point I: Adequacy of Sale Price

In its first point, Federal Home argues “[t]he [c]ircuit [c]ourt erred in confirming the partition sale of [the real estate] because the sale price amounts to a sacrifice of [the real estate] and raises a presumption of fraud in that the sale price was less than one percent (1%) of [the real estate's] value.” This argument is without merit because Federal Home uses the wrong test to determine the value. Under the appropriate test it is impossible to say the trial court abused its discretion in confirming the partition sale.

“A confirmation or rejection of a sale in partition is within the sound discretion of the trial court.” Plant v. Plant, 825 S.W.2d 674, 682 (Mo.App.S.D.1992) (quoting Borchers v. Borchers, 352 Mo. 601, 179 S.W.2d 8, 12 (1944)). “The trial court abuses its discretion when its ruling is clearly against the logic of the circumstances before it and is so unreasonable and arbitrary that the ruling shocks the sense of justice and indicates a lack of careful deliberate consideration.” Whelan v. Missouri Public Service, Energy One, 163 S.W.3d 459, 461 (Mo.App.W.D.2005).

Generally speaking, “inadequacy of price is not a sufficient ground for refusing to confirm a sale in partition, unless the inadequacy is so gross as to raise the presumption of fraud.” Plant, 825 S.W.2d at 682 (quoting Borchers, 179 S.W.2d at 12). Moreover, “[m]arket value may be considered in determining the adequacy of the sale price but it is not the measure of adequacy.” Hollida v. Hollida, 131 S.W.3d 911, 917 (Mo.App.S.D.2004) (quoting Koester v. Koester, 543 S.W.2d 51, 55 (Mo.App.St.L.D.1976)).

Instead, “the test of adequacy in a judicial sale is the price received in comparison with what the property would bring in a fair sheriff's sale.” Id. (quoting Koester, 543 S.W.2d at 55). “Property sold at a sheriff's sale will not normally sell for a price approaching its fair market value.” Id. at 918 (quoting Yokley v. Wian, 877 S.W.2d 179, 183 (Mo.App.W.D.1994)). Factors to be considered in determining what price a property will bring at a fair sheriff's sale “include the fact that the buyer is taking the property subject to any encumbrances, as-is structurally, and with the risk of legal processes needed to secure title.” Pleasant Hollow Homeowners Ass'n v. Webster, 285 S.W.3d 421, 423 (Mo.App.E.D.2009).

In the present case, there is no evidence in the record of what price the real estate would have brought at a fair sheriff's sale. The original marital mortgage loan had an unpaid principle balance of approximately $78,313.81 remaining at the time of the dissolution in April 2004, but no value was placed on the real estate. Ex-wife used the real estate to secure a mortgage of $97,900 with Mo Cap who then assigned its rights to Chase Manhattan. The real estate then sold at the foreclosure sale for $91,610.96 to Chase Home. Chase Home sold the real estate to Federal Home for $1.00 and other valuable consideration. There was no evidence adduced as to the value of the property at the time of the sale to Trust. None of those figures are values that take into account the potential risks associated with a sheriff's sale. In this matter, there were clearly legal risks to any prospective buyer considering the purchase of this real estate. On this record, it cannot be said that the trial court's decision not to set aside the sale was an abuse of discretion.

Federal Home compares this case to Sangamon Associates, Ltd. v. The Carpenter 1985 Family Partnership, Ltd., 165 S.W.3d 141 (Mo. banc 2005). This reliance is misplaced because the procedural posture in Sangamon was different from the procedural posture in the present case. In Sangamon, the trial court did set aside the sale because the price was grossly inadequate. 165 S.W.3d at 143. Thus, the appellate court in that case had to determine if setting aside the sale was an abuse of discretion. Here, in contrast, we are presented with a situation where the trial court refused to set aside the sale. Thus, we are presented with the distinct question of whether the refusal to set aside the sale was an abuse of discretion. Given this difference, Sangamon is not applicable in the present case.

We cannot conclude the trial court abused its discretion in refusing to set aside the sale. Federal Home's first point is denied.

Points II, III, and IV

Federal Home's remaining points raise legal challenges to the trial court's refusal to set aside its interlocutory judgment in partition. In a partition action, “we will sustain the judgment of the trial court unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.” Clark v. Dady, 131 S.W.3d 382, 386 (Mo.App.W.D.2004).

Point II: Federal Home Is Not a Bona Fide Purchaser

In its second point, Federal Home argues the trial court erred in refusing to set aside its interlocutory judgment in partition because Federal Home is a bona fide purchaser as it had no notice of the changes that occurred between the January and the...