Us Bank Nat'l Ass'n As Tr. v. Cox
| Decision Date | 31 May 2011 |
| Docket Number | No. WD 71945.,WD 71945. |
| Citation | 341 S.W.3d 846 |
| Parties | US BANK NATIONAL ASSOCIATION as Trustee, c/o Homecomings Financial, LLC, Appellant,v.Katherine COX, et al., Respondents. |
| Court | Missouri Court of Appeals |
OPINION TEXT STARTS HERE
M. Catherine Hartnett and Sara N. Faubion, Kansas City, MO, for appellant.John H. Edmiston, Warrensburg, MO, for respondents.Before Division Two: JAMES M. SMART, JR., Presiding Judge, MARK D. PFEIFFER, Judge and CYNTHIA L. MARTIN, Judge.
This case arises out of the refinance of a residential loan by Homecomings Financial Network, Inc. (“Homecomings”). US Bank National Association, as Trustee, c/o Homecomings Financial, LLC (“US Bank”) became the holder of the loan documents. After the loan went into default, U.S. Bank learned that the deed of trust, which was intended to secure the loan, identified property that was not owned by the purported borrowers, Katherine Cox (“Katherine”) 1 and her husband Dennis Cox (“Dennis” or collectively the “Coxes”). US Bank sued the Coxes seeking to reform the deed of trust or, in the alternative, for unjust enrichment.
Following a bench trial, the trial court entered its judgment (“Judgment”) in favor of the Coxes on U.S. Bank's claims for reformation and unjust enrichment and on the Coxes' claim that the deed of trust should be declared void and of no force or effect. US Bank filed this timely appeal.
We affirm.
On September 23, 1994, the Coxes became the owners, as tenants by the entirety, of residential real property located at 717 N.W. 1501 Road in Holden, Johnson County, Missouri (the “Cox Property”). On May 29, 1998, the Coxes acquired an adjacent tract of real property (the “Adjacent Tract”).
On September 20, 2004, the Coxes sold the Adjacent Tract to Robert E. Talley and Christine Y. Talley.
In late May 2005, the Coxes borrowed $246,000.00 from Homecomings and executed a deed of trust encumbering the Cox Property (the “First Homecomings Loan”).
A few months later, Katherine sought to refinance the First Homecomings Loan, again with Homecomings. At trial, Dennis testified that he was aware that Katherine was applying on her own to refinance the First Homecomings Loan, but that he did not participate in the application because his credit was bad. No evidence that Dennis participated with Katherine to jointly apply for credit to refinance the First Homecomings Loan was introduced at trial.3 Homecomings agreed to refinance the First Homecomings Loan (the “Second Homecomings Loan”). A closing was scheduled for December 27, 2005.
On December 27, 2005, Dennis drove Katherine to the closing. Katherine and Dennis testified that Katherine physically attended the closing, and that Dennis waited outside most of the time. Katherine testified Dennis was never in the room while she executed closing documents. At closing, Katherine signed a $261,000 promissory note (“Promissory Note”). The Promissory Note was not signed by Dennis, and did not include a signature line for Dennis. Katherine also signed a deed of trust (“Deed of Trust”) above a signature line where her name had been “typed.” A signature purporting to be Dennis's appears on the Deed of Trust above a signature line where Dennis's name was handwritten, not typed. The signatures on the Deed of Trust were notarized. However, the notary attests that “On this 28th day of December, 2005, before me personally appeared KATHERINE A. COX AND DENNIS R. COX, WIFE AND HUSBAND to me known to be the person(s) described in and who executed the foregoing instrument....” Thus, the notary public appears to have notarized the Deed of Trust a day after the physical loan closing. Katherine and Dennis each testified that the signature appearing above the signature line for “Dennis Cox” on the Deed of Trust was not Dennis's signature. A handwriting expert testified that the signature on the Deed of Trust was not Dennis's and was, in her opinion, a forgery.
Other routine closing documents were executed by Katherine at closing. Dennis acknowledged at trial that certain routine closing documents do bear his authentic signature including the HUD–1 settlement statement, an owner's affidavit, a name affidavit, several notices of right to cancel, and an authorization for release of his tax return.
The proceeds from the Second Homecomings Loan were used by Homecomings to pay off the First Homecomings Loan ($251,266.76) and to pay settlement charges ($4,664.24). The balance of the Second Homecomings Loan was paid out to the Coxes according to the HUD–1 settlement statement.
At some point following the closing of the Second Homecomings Loan, U.S. Bank become the holder of the Promissory Note and Deed of Trust.4
In 2007, the Promissory Note (which was signed by Katherine) went into default. US Bank learned that the Deed of Trust securing the Promissory Note mistakenly identified the Adjacent Tract and not the Cox Property. US Bank also learned that Dennis denied the authenticity of his signature on the Deed of Trust.
US Bank filed suit against the Coxes. On April 14, 2009, U.S. Bank filed a First Amended Petition (“Amended Petition”). The Amended Petition sought to reform the Deed of Trust to substitute the legal description for the Cox Property in place of the legal description for the Adjacent Tract. The Amended Petition also sought a judgment against the Coxes jointly and severally for unjust enrichment in the amount due on the Promissory Note. U.S. Bank did not assert a separate claim against Katherine for breach of contract on the Promissory Note. The Coxes filed an answer and counterclaim seeking a declaratory judgment that the Deed of Trust was void and a legal nullity.
A bench trial was conducted on May 14, 2009. At trial, a representative of GMAC, the company servicing the Second Homecomings Loan for U.S. Bank, testified for U.S. Bank. This representative did not attend the Second Homecoming Loan closing, did not prepare the closing documents, and offered no testimony about the closing other than to verify that certain documents generated out of the closing had been maintained as business records. US Bank did not call as a witness the person or persons who handled the Second Homecomings Loan closing, or the notary public who notarized the Deed of Trust.
At the conclusion of the trial, U.S. Bank made an oral motion to amend its petition to conform to the evidence to permit the assertion of an additional claim of equitable subrogation. US Bank argued that since the Second Homecomings Loan paid off the First Homecomings Loan, U.S. Bank, as the current holder of the Second Homecomings Loan documents, “stood in the shoes” of Homecomings in its status as the lender of the First Homecomings Loan. 5
On December 3, 2009, the trial court entered its Judgment denying U.S. Bank's requests to reform the Deed of Trust and for a judgment against the Coxes for unjust enrichment. The trial court found in favor of the Coxes on their counterclaim, and declared the Deed of Trust, and any lien purportedly created by the Deed of Trust, void and of no force and effect. The Judgment denied U.S. Bank's oral motion to amend its petition to assert an additional claim for equitable subrogation.
US Bank filed this timely appeal.
Before we explore the merits of the issues raised by U.S. Bank on appeal, we are required to dispose of a Motion to Dismiss this appeal filed by the Coxes, and taken with the case.
The Coxes have advised this Court that, following entry of the Judgment, U.S. Bank assigned the Promissory Note and Deed of Trust to its title insurance company in connection with the resolution of a claim made by U.S. Bank on a lender's policy of title insurance issued in connection with the Second Homecomings Loan. According to the Coxes, the assignment renders this case moot, because U.S. Bank no longer has an interest in the Deed of Trust it is seeking to reform. The Coxes have also advised this Court that a second lawsuit has been filed against them by the title company who took the assignment of the Promissory Note and Deed of Trust.
US Bank has confirmed that it did, in fact, assign its interest in the Promissory Note and Deed of Trust to a title company with whom it resolved a title insurance policy claim. US Bank has provided this Court with a copy of the assignment document which arguably conveys as well any interest U.S. Bank may have in continuing rights of recovery from the Coxes over and above the amount U.S. Bank was paid by the title company. US Bank correctly points out, however, that Rule 52.13(c) provides with respect to a pending action that:
In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party. Service of the motion shall be made as provided in subsection (a) of this Rule.
(Emphasis added.) The “motion” referred to in Rule 52.13(c) is described in Rule 52.13(a)(1). That Rule provides, in pertinent part:
A motion for substitution may be made by any party or by the successor.... Such motion, together with notice of hearing shall be served upon the parties as provided in Rule 43.01, and upon persons not parties in the manner provided for the service of summons.
These Rules combine to instruct that a transfer of interest after 6 an action has been commenced does not summarily divest the original parties of the right to continue pending litigation. See Metmor Fin., Inc. v. Leggett, 787 S.W.2d 733, 737 (Mo.App. E.D.1989). The remedy for a person who believes he or she has or will be affected by such a transfer is not, therefore, to seek dismissal of the action, but rather to seek substitution and/or joinder of the claimed successor in interest—relief which a court may (or may not) grant in its discretion.
Neither U.S. Bank nor the Coxes have filed a Rule 52.13(a) motion...
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