Wells Fargo Bank, N.A. v. Smith

• Decision Date: 19 March 2013
• Docket Number: No. SC 92649.,SC 92649.
• Parties: WELLS FARGO BANK, N.A., as trustee for the benefit of the certificate holders, Park Place Securities, Inc., asset-backed pass-through certificates Series 2005–WCW2, Respondent, v. William D. and Susan M. SMITH, Appellants.
• Court: Missouri Supreme Court

392 S.W.3d 446

WELLS FARGO BANK, N.A., as trustee for the benefit of the certificate holders, Park Place Securities, Inc., asset-backed pass-through certificates Series 2005–WCW2, Respondent,

v.William D. and Susan M. SMITH, Appellants.

No. SC 92649.

Supreme Court of Missouri,

En Banc.

Argued and Submitted Jan. 3, 2013.

Decided March 19, 2013.

John Campbell, Erich Vieth, Simon Law Firm, Alicia Campbell, Campbell Law LLC, St. Louis, MO, for Smiths.

Thomas C. Walsh, Louis F. Bonacorsi, John J. Schoemehl, Bryan Cave LLP, St. Louis, MO, Benjamin C. Struby, Millsap & Singer, St. Louis, MO, for Wells Fargo.

PAUL C. WILSON, Judge.

William and Susan Smith lost their home in a foreclosure sale. When they failed to vacate, the foreclosure purchaser, Wells Fargo, sued for unlawful detainer. The circuit court granted summary judgment to Wells Fargo, and the Smiths appeal. The Smiths argue that, because section 534.210, RSMo,¹ is unconstitutional, summary judgment was improper and the case should be remanded for consideration of their equitable defenses and counterclaims concerning the validity of Wells Fargo's title. Section 534.210 is not unconstitutional and, because the Smiths failed to raise a genuine issue of fact concerning Wells Fargo's right to possession, the judgment is affirmed.

I. Background

The Smiths purchased their home in 2005 using, in part, the proceeds of a $100,000 loan from Argent Mortgage Company. The Smiths executed a promissory note to Argent and a deed of trust containing a power of sale authorizing the trustee, after notice to the Smiths, to foreclose and sell the home in the event of an uncured default on the promissory note.

In 2010, a successor trustee published notice that the Smiths' home would be sold in foreclosure and sent the Smiths notice of the sale by registered mail. The sale occurred on February 23, 2010, at which Wells Fargo purchased the property. When the Smiths failed to vacate their home after receiving notice to do so, Wells Fargo sued the Smiths for unlawful detainer on March 29, 2010, in the associate circuit division of the circuit court of Jefferson County.

Wells Fargo alleged that it purchased the Smiths' home at a trustee's sale and that it was entitled to immediate possession of the same.² Wells Fargo also allegedthat the Smiths were the former owners of the property, that they had executed the deed of trust pursuant to which the foreclosure sale occurred, and that the Smiths remained in unlawful and wrongful possession of the premises despite written demand to vacate.

The Smiths filed an answer in which they denied Wells Fargo's allegations. In their answer, the Smiths also asserted 31 individual affirmative defenses. Rather than recite them verbatim, the following is the description of their self-styled “affirmative defenses” provided by the Smiths in this Court:

Plaintiff lacked standing; Plaintiff was not the real party in interest; Plaintiff lacked the original promissory note; Plaintiff could not establish chain of title; No proper chain of title existed; Plaintiff did not have the power to authorize the trustee's sale of the property; The trustee was not empowered to sell the property; The foreclosure was illegal; Plaintiff cannot show that the Smiths owed their bank money at the time of the foreclosure; The foreclosure was void because the note was split from the deed of trust; Plaintiff had unclean hands; Plaintiff is not a bona fide purchaser, and [the Smiths] were victims of fraud.

(App. Br. at 14 (citing L.F. 14–20).)

The Smiths also asserted four counterclaims. First, the Smiths sought actual and punitive damages because Wells Fargo had been negligent in purchasing foreclosure properties (including the Smiths' home) it knew, or should have known, had been improperly foreclosed upon, causing the Smiths “economic and emotional” injuries. Second, the Smiths sought actual and punitive damages because Wells Fargo acquired title to the Smiths' home “unjustly” and it would be “unjust for [Wells Fargo] to retain the subject property or to evict [the Smiths] from the property.” Third, the Smiths sought actual damages because erroneous charges had been added to their loan balance, their escrow fund was not accurate, and Wells Fargo (or its predecessors) had not given the Smiths “full credit” for all payments. Finally, the Smiths sought declaratory judgments that (a) Wells Fargo does not have valid title to the property, (b) the foreclosure and sale of their home was invalid, (c) Wells Fargo is not a bona fide purchaser for value, and (d) the Smiths have the right to “assert applicable affirmative defenses and counterclaims.” (L.F. 20–23.)

Wells Fargo moved to dismiss the Smiths' 31 “affirmative defenses” and four counterclaims on the ground that they exceeded the statutory scope of issues that may be litigated in an unlawful detainer action under section 534.210. The associate division granted this motion, citing Central Bank of Kansas City v. Mika, 36 S.W.3d 772, 774 (Mo.App.2001) (issues “relating to title or matters of equity, such as mistake, estoppel and waiver cannot be interposed as a defense” to an unlawful detainer action) (quotation marks omitted).³

Wells Fargo also moved for summary judgment on its unlawful detainer claim. The Smiths responded to Wells Fargo's statement of uncontroverted material facts, and filed their own “additional statement of uncontroverted material facts” that they contend proves Wells Fargo's title was invalid for the reasons set forth in their affirmative defenses and counterclaims. On September 15, 2011, the associate division entered judgment for Wells Fargo, awarding both immediate possession of the property and damages as provided in sections 534.310 and 534.330. The Smiths vacated the home, but sought a trial de novo pursuant to sections 534.380 and 512.180.

In the de novo proceedings on Wells Fargo's unlawful detainer claim, Wells Fargo again moved for summary judgment. The Smiths responded to Wells Fargo's statement of uncontroverted material facts and, again, filed their “additional statement of uncontroverted material facts” pertaining to the issues raised in their affirmative defenses and counterclaims. Wells Fargo responded to the Smiths' “additional statement” but also moved to strike that pleading, citing Central Bank of Kansas City v. Mika.

On May 12, 2012, more than two years after this “summary” unlawful detainer action began, the court granted summary judgment to Wells Fargo. The Smiths appeal, and, because they challenge the validity of section 534.210, this Court has exclusive appellate jurisdiction pursuant to article V, section 3 of the Missouri Constitution.

Also worthy of note are two related lawsuits brought by the Smiths and one lawsuit the Smiths failed to file. First, in April 2012, the Smiths sued Wells Fargo in the Jefferson County circuit court alleging wrongful foreclosure and various other claims.⁴ Their wrongful foreclosure suit raises the same issues—and seeks the same relief—that the Smiths tried to raise by way of affirmative defenses and counterclaims in Wells Fargo's unlawful detainer action. Despite the fact that they filed their wrongful foreclosure case before judgment was entered in Wells Fargo's unlawful detainer action, the Smiths never asked the wrongful foreclosure court to stay the unlawful detainer matter so that their wrongful foreclosure claims could be determined first.

Second, in August 2011, the Smiths filed a “Petition for Reformation of Judgment, Nunc Pro Tunc, Declaratory Judgment, Injunctive and Related Relief” against Wells Fargo in Jefferson County circuit court. That action sought to reform the judgment entered in a 2007 action between these same parties arising out of an earlier foreclosure and sale of the Smiths' home. Because Wells Fargo had determined that this foreclosure was improper, it filed the 2007 action to rescind the sale and restore the status quo ante. The 2007 action culminated in a judgment declaring that, after rescinding the sale, the Smiths owned the home in fee simple subject to the first lien interest held by Wells Fargo as the beneficiary of the Smiths' deed of trust. The Smiths agreed to the 2007 judgment before it was entered and did not appeal from it. Yet, in August 2011, the Smiths sued Wells Fargo to “reform” this 2007 judgment by removing the declarations concerning Wells Fargo's lien and its status as the current beneficiary of the Smiths' deed of trust. In their reformation case, unlike their wrongful foreclosure suit, the Smiths asked the circuit court to stay Wells Fargo's unlawful detainer action. This request was denied, however, and the Smiths sought no review of that decision. Following an evidentiary hearing on the Smiths' reformation claims, the court dismissed those claims with prejudice. Again, the Smiths did not appeal.

Finally, despite the bevy of actions between the Smiths and Wells Fargo, one action the Smiths did not file was an action to enjoin the 2010 foreclosure sale of their home. The Smiths admit that they received prior written notice of the sale, and do not identify any legal or practical impediment that they claim prevented them from raising their various claims and defenses before the sale occurred. Yet, the Smiths did not seek such protection and, instead, waited until the foreclosure purchaser sued them for unlawful detainer before raising these issues.

II. Issues of Preservation and Finality

Before addressing the merits of the Smiths' appeal, the Court must assure itself that it has appellate jurisdiction and that the Smiths' arguments were properly preserved for appellate review. During the trial de novo proceedings on Wells Fargo's unlawful detainer claim, the Smiths made no effort to re-assert the affirmative defenses and counterclaims that the associate division dismissed prior to its September 2011 judgment for Wells Fargo. Therefore, unless the Smiths' responsive pleadings were restored au...