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Deutsche Bank National Trust Co. v. Vaughn

Court of Appeals of Missouri, Western District, First Division

July 18, 2017

DEUTSCHE BANK NATIONAL TRUST COMPANY, Respondent,
v.
WALLACE W. VAUGHN, ET AL., Appellant.

         Appeal from the Circuit Court of Jackson County, Missouri The Honorable Jennifer M. Phillips, Judge

          Before: Gary D. Witt, Presiding Judge, Alok Ahuja, Judge and Edward R. Ardini, Jr., Judge

          Gary D. Witt, Judge

         Appellant, Wallace Vaughn ("Vaughn") appeals the judgment of the Circuit Court of Jackson County, Missouri finding for Deutsche Bank National Trust Company ("Deutsche Bank") on its petition to reform a Deed of Trust held by Deutsche Bank, to reflect that it is secured by a property owned by Vaughn located at 933 East 77th Terrace, and entering declaratory judgment that Deutsche Bank held a superior interest in the property over the named defendants in the petition. Vaughn raises six points on appeal. We affirm.

         Factual Background

         Vaughn and Jennifer Vaughn[1] ("Jennifer")[2] acquired title by Special Warranty Deed to two pieces of real property located in Jackson County, Missouri. One property is commonly described as 933 East 77th Terrace ("77th Terrace Property") and one property is commonly described as 6232 College ("College Property"). On October 19, 2005, Vaughn and Jennifer refinanced the properties and entered into a Deed of Trust ("Deed of Trust"). The Deed of Trust secures a Promissory Note dated October 19, 2005, in the amount of $87, 300.00 (the "Note"). The Deed of Trust describes the real estate it encumbers inconsistently, referring to the common address and tax identification number for the 77th Terrace Property but containing the legal description for the College Property.

         Deutsche Bank filed a petition seeking reformation of the Deed of Trust to substitute the legal description for the 77th Terrace Property for the legal description of the College Property ("Petition"). The Petition also sought a declaratory judgment that the Deed of Trust encumbered the 77th Terrace Property and had priority, despite intervening conveyances to Wallace Vaughn Investments, LLC, KC Quality Investments, LLC, and then back to Vaughn individually. Since the execution of the Note and Deed of Trust, the property was conveyed to Wallace Vaughn Investments, LLC for $1, then to KC Quality Investments, LLC for $10, and then back to Vaughn individually for $10. At the time of trial, Vaughn, individually, owned the 77th Terrace Property. Wallace Vaughn Investments, LLC, KC Quality Investments, LLC, Vaughn, and Jennifer were all named as defendants in the Petition. Wallace Vaughn Investments, LLC and KC Quality

         Investments, LLC did not appeal from the judgment and are not parties to this appeal.

         Following a trial held on December 15, 2015, the court entered judgment on February 1, 2016, in favor of Deutsche Bank, allowing it to reform the Deed of Trust to properly reflect the legal description of the 77th Terrace Property and declaring that the 77th Terrace Property was subject to the Deed of Trust and took priority despite the intervening transfers ("Judgment").

         Vaughn is the sole defendant to appeal the court's judgment.[3]

         Discussion

         I.

         Vaughn raises six points on appeal. His first Point Relied On alleges that the trial court erred in finding that Deutsche Bank had standing to proceed on its Petition.

         Standard of Review

         "Because standing is a question of law, review of the issue on appeal is de novo." CACH, LLC v. Askew, 358 S.W.3d 58, 61 (Mo. banc 2012). We, however, "defer to the factual findings of the trial court and apply those facts to the law." Mannering Condo. Ass'n v. Schulte, 462 S.W.3d 830, 834 (Mo. App. E.D. 2015).

         Generally, standing exists when a plaintiff has "a legally cognizable interest in the subject matter" and a "threatened or actual injury." U.S. Bank, N.A. v. Smith, 470 S.W.3d 17, 23 (Mo. App. W.D. 2015). In the case of a Deed of Trust, standing can be established by demonstrating that the party has the right to enforce the promissory note that the deed of trust secures. U.S. Bank Nat'l Ass'n v. Burns, 406 S.W.3d 495, 497 (Mo. App. E.D. 2013). Missouri has adopted the Uniform Commercial Code (UCC), which governs commercial transactions. See Section 400, et seq.[4] "Application of the UCC is straightforward regarding [the] question of who may enforce the Note." Burns, 406 S.W.3d at 497. Under Section 400.3-301, the holder of a negotiable instrument is entitled to enforce it. Id. "A holder is one (1) who possesses the instrument, and (2) to whom the instrument is made payable." Id.; Section 400.1-201(20). An instrument may be endorsed in blank and such instrument then becomes payable to its bearer. Sections 400.3-205(a) and (b). A party that possesses a negotiable instrument containing a blank endorsement that does not identify the person to whom it is payable has standing to enforce the note and, therefore, to bring an action to reform the deed of trust securing that instrument. Smith, 470 S.W.3d at 23-24. In this case, the trial court made factual findings that (1) Vaughn and Jennifer signed the Note and Deed of Trust, (2) the Note is assignable, (3) the Note has been endorsed in blank and is payable to the bearer, (4) possession of the Note was delivered to an agent of Deutsche Bank, and (5) Deutsche Bank is entitled to enforce the Note. These factual findings are supported by the record and are sufficient to establish that Deutsche Bank had legal standing to bring an action to reform the Deed of Trust.

         Vaughn's arguments on appeal are based upon his belief that the trial court relied on its own mistaken belief that Vaughn failed to raise standing in his answer to the Petition as well as the procedure by which the court ruled on the issue of standing. First, all parties are in agreement that the Judgment incorrectly states that Vaughn failed to raise the issue of standing in his answer. Any error was, however, cured by the court itself when the court chose to address the issue of standing in its judgment despite believing it was not properly raised by the pleadings. This error leaves nothing for this court to address or correct because the trial court fully considered and addressed the issue of standing based on the facts adduced at trial.

         Vaughn contends that he was prejudiced because he was given no opportunity to present testimony, witnesses, and evidence as to standing. First, Vaughn fails to identify any additional evidence that he would have presented to the trial court regarding standing. See, generally, City of Riverside v. Progressive Inv. Club of Kansas City, Inc., 45 S.W.3d 905, 910 (Mo. App. W.D. 2001) (noting trial court did not err in denying a request to reconsider its judgment because appellant failed to identify the additional evidence it wished to introduce but was prohibited from presenting). But, more importantly, Vaughn did have an opportunity to fully present his evidence and argue his position regarding standing to the trial court. Vaughn filed a motion to dismiss the Petition on October 25, 2013, arguing that Deutsche Bank lacked standing to enforce the Deed of Trust. An evidentiary hearing was held on the motion on December 20, 2013, and denied the same day. To the extent that Vaughn had evidence that Deutsche Bank lacked standing, the December 20th hearing gave him full opportunity to present such evidence and make any relevant arguments.

         Vaughn also seems to raise a procedural challenge to the speed with which the trial court ruled on the question of standing at the hearing because the court announced its decision immediately after the close of the evidence. Vaughn argues that the lack of delay shows that the ruling was inaccurate and prejudicial. We disagree. Vaughn presents no authority to support his proposition and the Court knows of ...


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