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Deutsche Bank National Trust Co. v. Pyle

Court of Appeals of Missouri, Southern District, First Division

March 28, 2017

ENOCH and KAREN PYLE, Defendants-Appellants, and HOMELAND CAPITAL GROUP, LLC, Defendant.


         Enoch and Karen Pyle ("Homeowners"), husband-and-wife defendants in the underlying case, appeal the September 2015 declaratory judgment that quieted title in Homeowners to certain property in Steeplechase Estates, an Ozark subdivision ("the Property"), but also declared the Property subject to a first-priority encumbrance for the deed of trust ("Deed of Trust") assigned to Deutsche Bank National Trust Company, as Trustee for Morgan Stanley Home Equity Loan Trust 2005-3 ("Bank"). The judgment also declared a recorded copy of the Deed of Trust to be "a true, accurate, and authentic copy of the original, " and it taxed the costs of the action against Homeowners.[1]

         Well after the litigation commenced, Homeowners were granted leave to file counterclaims against Bank. One of these "counterclaims" ("HCC 1") relied on section 514.205[2] in claiming that Bank had pursued its action frivolously and in bad faith. On the morning of trial, after the jury had been selected but before the presentation of evidence had commenced, the trial court dismissed HCC 1 and determined that the selected jury would stay on as "an advisory jury pursuant to Rule 73.01."[3]

         Homeowners present nine points on appeal. Point 1 contends the trial court erred in dismissing HCC 1 because Homeowners had a cause of action under section 514.205 for money damages resulting from their opposition to Bank's "frivolous" litigation. Point 2 contends that Homeowners "have a constitutional right to a trial by jury on all statutory actions for damages." Point 3 contends the trial court erred in denying Homeowners a jury trial on Bank's claim. Point 4 challenges the denial without a hearing of Homeowners' after-trial motion that also asserted claims under section 514.205 ("the frivolous-suit motion"). Points 5, 6, and 7 challenge the admission of certain photocopies of documents as Bank's exhibits 1, 3, and 5, and each alleges that "legally false impression[s]" resulted from their admission.[4] Point 8 claims the trial court erred in permitting Bank "to challenge a juror after [Homeowners] had announced their challenges" in violation of section 494.480, which directs that a plaintiff's challenges be made first. Point 9 claims the judgment was not supported by substantial evidence and was against the weight of the evidence because "there was no competent evidence in the record that the alleged photocopy of [the Deed of Trust] . . . was a true, accurate, and authentic copy of the original[.]" (Quotation omitted.) Finding no merit in any of Homeowners' points, we affirm.

         Applicable Principles of Review

         We "will affirm a trial court's judgment in a court-tried case 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." Hunter v. Moore, 486 S.W.3d 919, 925 (Mo. banc 2016). The same standard applies when a case is tried to an advisory jury. Rhodes v. Hunt, 913 S.W.2d 894, 898 (Mo. App. S.D. 1995). In cases tried with an advisory jury, "the trial court is the ultimate trier of fact and [it] may adopt or reject the verdict or findings of the advisory jury according to the court's view of the facts." Mason v. Wal-Mart Stores, Inc., 91 S.W.3d 738, 741 n.1 (Mo. App. W.D. 2002). Thus, an appellate court still defers "to the trial court's determinations of credibility, and views all evidence in the light most favorable to the trial court's judgment and disregards all contrary evidence." Pitman Place Dev., LLC v. Howard Inv., LLC, 330 S.W.3d 519, 526 (Mo. App. E.D. 2010); see also Rhodes, 913 S.W.2d at 902.

         "The determination of whether a sufficient foundation was laid for admission of the evidence is within the sound discretion of the trial court." Healthcare Serv. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 616 (Mo. banc 2006) (quotation omitted). The admission of evidence is reviewed for prejudice, not mere error. Teasdale & Assoc. v. Richmond Heights Church of God in Christ, 373 S.W.3d 17, 24 (Mo. App. E.D. 2012). "A trial court has broad discretion when ruling upon a complaint that proffered documentary evidence violates the best evidence rule, and the court's decision is subject to reversal only in cases of clear abuse." Christian Health Care of Springfield W. Park, Inc. v. Little, 145 S.W.3d 44, 53 (Mo. App. S.D. 2004). "We will not reverse unless the erroneous admission of evidence was so prejudicial that it deprived the defendant of a fair trial, and we find a reasonable probability that the evidence affected the outcome of the trial." Teasdale, 373 S.W.3d at 24.

         Relevant Evidence and Procedural Background[5]

         Homeowners purchased the Property and borrowed money in 2004 to construct a house on it. In March 2005, Homeowners obtained "permanent financing" for the Property. In May 2005, Homeowners refinanced the second loan with a third ("the Loan").

         Portions of the depositions of Homeowners were read into evidence. In those portions, Mr. Pyle recalled that he and Mrs. Pyle were present for the closing on the Loan, which was held at their house, but he could not recall the name of the man who handled the closing. Mr. Pyle thought he "had documentation" about the closing at the time it occurred, but he did not keep "a single copy[.]" Mr. Pyle did not recall looking at the documentation even though he knew that he should have, but he did not do so because he had borrowed money before. He commented, "'[It] seems like the more I do it, the faster it goes. Because I think, okay, I've done this before. Bang-bang and, you know, you're out of there.'" Mr. Pyle acknowledged at trial that he "sign[ed] papers" at the closing, and he and his wife received about $34, 000 in cash as a result of the Loan.

         In her deposition, Mrs. Pyle recalled that she signed documents at the closing, but she did not "review them prior to the closing[.]" In her testimony at trial, Mrs. Pyle said that before she signed the documents, she "briefly[, ]" but "not completely" reviewed them, and she acknowledged that she "could have reviewed them more thoroughly if [she had] wanted to[.]" Mrs. Pyle also testified that she and Mr. Pyle still "reside[d] together at the [P]roperty[.]"

         A vice-president of Bank's corporate trust department, Ronaldo Reyes, testified that he had the original adjustable rate note for the Loan dated May 17, 2005 ("the Adjustable Rate Note") with him at trial in a binder. He also testified that he had a copy that was a true and accurate photocopy of the Adjustable Rate Note ("the Note Copy"). The Note Copy identified Mr. Pyle as the borrower and Wilmington Finance as the lender, and the Note Copy was admitted into evidence as Bank's Exhibit 3 as follows:

THE COURT: Any objection to Exhibit 3?
[HOMEOWNERS' COUNSEL]: Uh, no. I object to 3. It hasn't been identified. That's the note.
THE COURT: It was identified by this witness.
[HOMEOWNERS' COUNSEL]: No. He hadn't -- he didn't -- he said what it looks like. He read the top of it. In order for a note to be admissible, he has to say who signed it. He didn't ask him that. He just said it's -- it's a note.
THE COURT: Well, I'm going to overrule the objection, and I'll admit Exhibit 3.

         The Note Copy included the hand-written initials "E.P." at the bottom of the first three pages, a hand-written signature above the typed-name "ENOCH PYLE" on the fourth page, and another hand-written signature above the typed-name "ENOCH PYLE" on a final page entitled "PREPAYMENT RIDER TO NOTE[.]"

         A photocopy of the U.S. Department of Housing and Urban Development settlement statement ("the HUD statement") dated May 17, 2005, which identified Homeowners as the borrowers, Wilmington Finance as the lender, and Advantage Equity Services ("Advantage") as the settlement agent, was admitted as Bank's Exhibit 17. The HUD statement included hand-written signatures above each of the typed-names "ENOCH PYLE" and "KAREN PYLE[.]"

         Portions of a deposition of the former general counsel for Advantage, Sean Bello, were read into evidence. Mr. Bello worked for Advantage in Pennsylvania between 2002 and 2007, and he understood that the company was no longer in business. Mr. Bello recalled that, for areas outside of Pittsburgh, Advantage would use a closing service that had "'people go to the borrowers [sic] residence.'"

         Records from Advantage's internal note-keeping system were admitted into evidence, [6] and the entries from May 19, 2005 stated that Advantage "did not get back the original mortgage or all our [sic] affidavits[, ]" and "[w]e got all of the originals with the exception of the mortgage." Additional entries indicated plans to "DOUBLE/TRIPLE CHECK FOR" the "MISSING MORTGAGE" and, if it could not be located, "GET IT RESIGNED."

         In June 2005, Bank became the custodian of the Loan as trustee "for the benefit of bond investors[.]" Bank was governed in the management of loans held for this purpose (a category that included the Adjustable Rate Note) by a pooling and servicing agreement. A copy of the pooling and servicing agreement ("Pooling Copy") was admitted as Exhibit 1 over Homeowners' objection that "[i]t's improper to admit a photocopy when the original is available."

         Mr. Reyes testified that Bank's file for this type of loan would "typically include the . . . deed of trust[, ]" and, upon receipt, Bank employees would review the physical files for the mortgages. Bank retained these files in a secure room. Mr. Reyes had reviewed the file for Homeowners' mortgage, and he could tell from Bank's records that the file was reviewed in June 2005 when it came into Bank's possession. Bank's file contained the Adjustable Rate Note, but it did not contain the Deed of Trust. Bank's records reflected that when the file was first delivered, Bank received "only . . . a photocopy of -- of the mortgage."

         Entries from Advantage's records dated July 2005 indicated that a representative from Advantage named "Gayla (abst [sic] from Sparks Searching)" was "to inquire about mtge [sic] recording info[, ]" and "Gayla said she thought she verbally gave the info to someone last month but she will check into this & fax back the info[.]" An entry in Advantage's records dated October 31, 2005 states: "This mortgage was never recorded because we never got the orig [sic] back. I called [Mr. Pyle] and left a message that they have to resign a new mortgage. Waiting to hear back from them." An entry dated November 16, 2005 includes: "left another message for [Mr. Pyle] that this is very urgent to get the mortgage signed. i [sic] have the 3rd reaqust [sic] for the mortgage and policy from [W]ilmington."

         An entry in Advantage's records from the following day reflects that a "LOST MORTGAGE AFFIDAVIT" ("the lost mortgage affidavit") was drafted for signature. Mr. Bello recalled that he executed the lost mortgage affidavit to be recorded "'if the original mortgage could not be located so as to get a copy of the instrument on the record.'" Two other subsequent entries in Advantage's records indicated that the lost mortgage affidavit and a "COPY OF MORTGAGE" were subsequently sent "FOR RECORDING[, ]" and the "COUNTY" requested an additional fee for "A NON-STANDARD DOC."

         On December 1, 2005, a set of documents consisting of the lost mortgage affidavit and a copy of a deed of trust were recorded. Copies of these two documents, with each page bearing the same "BOOK" number and consecutive "PAGE" numbers, together with a certified copy of a "RECORDER OF DEEDS CERTIFICATE[, ]" were admitted as Exhibit 5 over Homeowners' objections that Exhibit 5 constituted "hearsay thrice removed. It hasn't been properly authenticated. It hasn't been properly identified. It's -- it's in violation of the best evidence rule for the Court to allow this exhibit into evidence." We will refer to the copy of the lost mortgage affidavit in Exhibit 5 as the "Affidavit Copy, " and the copy of the deed of trust in Exhibit 5 as the "Deed Copy."

         Mr. Reyes identified the Deed Copy and the Affidavit Copy as pertaining to the Property based upon the address for the Property listed in the documents. He also testified that the Deed Copy had an execution date of May 17, 2005, it reflected purported signatures of Homeowners, some of its terms referenced information in the Adjustable Rate Note, and the documents all contained the same notary information.

         The Affidavit Copy, stated, inter alia, that "an employee of [Advantage] did review and prepare the final document . . . for recordation and forwarded it to: Gayla Sparks, " but that after "the document" was mailed to "Gayla Sparks, Abstractor, " it "subsequently become [sic] lost[.]" The Affidavit Copy stated "[t]hat a due diligent [sic] search of the offices of [Advantage] and the closing office has been made and that the whereabouts of the original Mortgage is unknown." The Affidavit Copy also stated that "[a] 'true certified' copy of the Mortgage from the closing file" was attached for recording.

         The Deed Copy reflects hand-written initials on the bottom of each page which vary as to whether periods are used in each instance but otherwise reflect "EP KP" and hand-written signatures above the type-written names "ENOCH PYLE" and "KAREN PYLE" on page 14. Page 15 of the Deed Copy reflects an executed notary acknowledgment that Homeowners appeared and "executed the foregoing instrument[.]" Referenced in the Deed Copy, and attached to it within Exhibit 5, is a photocopy of an "ADJUSTABLE RATE RIDER" ("Rider Copy") that also bears handwritten initials on each page and a set of hand-written signatures above Homeowners' individually-typed names on the next to last page, with the last page being an exhibit to the document that states the legal description for the Property.

         In March 2006, Bank received "the certified copy of the deed of trust . . . . [t]hat had been recorded in the county[.]" Payments on the Loan became delinquent, and in July 2008, Mr. Pyle executed a loan modification agreement with the company servicing the loan to set the interest rate at a specified level for a period of time so as to change the payment and bring "the [L]oan current." Copies of letters from the servicing company reflecting a determination that Mr. Pyle had failed to make required payments on the modified loan were admitted into evidence over an objection from Homeowners, but Mr. Pyle admitted at trial that he "quit paying" on the Loan because "[t]he payment was too high."

         A forensic document examiner, Linda James, testified on behalf of Bank. Part of her work relevant to this case involved examining the original signature of Mr. Pyle on a "verification page received in discovery from [Homeowner's] counsel in this case." The verification page was admitted as Bank's exhibit 14A, and the original signature of Mrs. Pyle from another verification page produced with discovery materials was admitted as Bank's exhibit 14B. Ms. James opined that the two signatures represented for Mr. Pyle on the loan modification agreement and two other signatures represented as Mr. Pyle's on the Adjustable Rate Note were genuine and authentic. Ms. James also opined that the signatures of Homeowners on the Deed Copy and the Rider Copy were genuine and authentic.

         Bank filed suit in August 2011, and the petition asserted one count for quiet title, citing sections 527.150 and 527.190.[7] The petition alleged that "[t]he fact that [the] Deed of Trust was, and is, lost or destroyed and never placed of record has prevented [Bank] from exercising its rights afforded under [the] Deed of Trust[, ]" and Bank "has no adequate remedy at law." As relief, Bank sought: (1) a decree of quiet title to the Property in Homeowners subject to Bank's Deed of Trust; (2) a decree that a copy of the Deed of Trust was a true and authentic copy establishing a "first priority encumbrance on the Property in favor of [Bank]"; (3) an award of Bank's costs and fees incurred in the action; and (4) "such other ...

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