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Metropolitan National Bank v. Commonwealth Land Title Ins. Co.

Court of Appeals of Missouri, Southern District, First Division

February 23, 2015

METROPOLITAN NATIONAL BANK, Plaintiff/Appellant,
v.
COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant/Respondent

APPEAL FROM THE CIRCUIT COURT OF GREENE COUNTY. Honorable Mark E. Fitzsimmons, Associate Circuit Judge.

Appellant's Attorneys: Charles B. Cowherd and Derek A. Ankrom, of Springfiled, MO.

Respondent's Attorney: Shawn T. Briner and Mary G. Walsh, of Chesterfield, MO.

WILLIAM W. FRANCIS, JR., C.J./P.J., OPINION AUTHOR. JEFFREY W. BATES, J., Concur. DANIEL E. SCOTT, J., Concur.

OPINION

Page 62

WILLIAM W. FRANCIS, JR., C.J./P.J.

Metropolitan National Bank (" Metropolitan" ) appeals summary judgment entered in favor of Commonwealth Land Title Insurance Company (" Commonwealth" ). We reverse and remand this matter to the trial court for further proceedings.

Factual and Procedural History

On February 2, 1999, Jo Belle Hopper (" Hopper" ) sold a parcel of real property (" Tract 3" ) to Red Rocket Fireworks, Inc. (" Red Rocket" ), in exchange for Red Rocket's promissory note and deed of trust. In June 2005, Red Rocket notified Hopper that it intended to apply for a loan with Metropolitan, to be secured by five tracts of land, including Tract 3. In order for Red Rocket to secure the loan, Red Rocket needed Hopper to subordinate her promissory note and deed of trust on Tract 3 to Metropolitan.

On June 22, 2005, Hopper executed a " Subordination Agreement." The Subordination Agreement recited that the Hopper deed of trust was subordinated to Metropolitan's note and deed of trust. Thereafter, Red Rocket received a loan from Metropolitan in the amount of $1,915,340, in exchange for a note and deed of trust. The Subordination Agreement

Page 63

was notarized by an employee of Guaranty Title Company (" Guaranty Title" ), an agent of Commonwealth. All the documents were recorded on June 24, 2005, with Metropolitan's note and deed of trust being first recorded.

On June 24, 2005, Commonwealth issued a " Loan Policy of Title Insurance," policy number H55-0121124 (" the Policy" ) to Metropolitan, insuring the validity and priority of Metropolitan's note and deed of trust. The coverage provision pertinent to this appeal states:

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, [Commonwealth], insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of:
. . . .
6. The priority of any lien or encumbrance over the lien of the Insured mortgage;

The " Exclusions From Coverage" reads in part:

The following matters are expressly excluded from the coverage of this policy, and [Commonwealth] will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
. . . .
3. Defects, liens, encumbrances, adverse claims or other matters
(a) created, suffered, assumed, or agreed to by the Insured claimant;
(b) not known to [Commonwealth], not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to [Commonwealth] by the Insured claimant prior to the date the insured claimant became an insured under this policy;

Red Rocket subsequently defaulted on its loan. On December 11, 2009, Red Rocket filed a Chapter 11 bankruptcy petition, listing the Metropolitan note and deed of trust as one of its debts. Thereafter, Metropolitan filed a creditor's motion to lift the automatic stay, requesting an order from the bankruptcy court to allow it to enforce its rights under its note and deed of trust on four of the five tracts of land, including Tract 3. On January 8, 2010, the bankruptcy court entered an order sustaining Metropolitan's motion.

Metropolitan then entered into an agreement to sell the four tracts of land to " Love's Travel Stop & Country Stores, Inc.," for $1,175,000. On February 15, 2010, Metropolitan published a " Notice of Trustee's Sale" on the four tracts of land--to be foreclosed on--on February 24, 2010.

On February 23, 2010, Hopper filed a petition for injunctive relief, declaratory judgment, and fraud, challenging Metropolitan's right to sell Tract 3, alleging, among other things, that Metropolitan had committed fraud, and that Metropolitan or Red Rocket failed to provide consideration for the Subordination Agreement. Metropolitan denied in its answer that it had committed fraud, and as an affirmative defense, Metropolitan alleged that Hopper had " executed a valid and enforceable subordination agreement . . . that governs the parties' ...


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