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McClain v. Landmark Equity Group, LLC

Court of Appeals of Missouri, Western District, Second Division

October 1, 2019

JOE McCLAIN, Appellant-Respondent,
v.
LANDMARK EQUITY GROUP, LLC, et al; Respondent-Appellant; FINANCE OF AMERICA REVERSE, LLC, COMPU-LINK CORPORATION, Respondents, SOUTHLAW, P.C., Respondent.

          APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY The Honorable Kenneth R. Garrett, III, Judge.

          Before: Lisa White Hardwick, Presiding Judge, Thomas H. Newton and Mark D. Pfeiffer, Judges.

          Lisa White Hardwick, Judge.

         Joe McClain ("McClain") appeals from the circuit court's entry of partial summary judgment in favor of Finance of America Reverse, LLC, ("FOA") and Compu-Link Corporation of MI d/b/a Celink ("Celink") on declaratory judgment and wrongful foreclosure claims that McClain and his wife, Billa McClain (collectively, "the McClains"), filed. McClain contends the court erred in granting summary judgment on these claims because the adjustable rate note was not a negotiable instrument as a reverse mortgage and, therefore, FOA and Celink, who were not the original lenders, were not holders and could not enforce the note. In a cross-appeal, Landmark Equity Group, LLC ("Landmark"), the company that purchased the McClains' property at the foreclosure sale and subsequently filed an unlawful detainer action, contends the court erred in denying its motion to join in FOA and Celink's motion for summary judgment and in denying its motion to lift a stay on its unlawful detainer action. Because the judgment is not final and this case is not eligible for interlocutory appeal under Rule 74.01(b), we dismiss the appeal and cross-appeal.

         Factual and Procedural History

         On October 11, 2013, the McClains signed an adjustable rate home equity conversion deed of trust, note, and loan agreement with lender Proficio Mortgage Ventures, LLC ("Proficio"). At closing, the McClains executed a settlement statement acknowledging the distribution of loan proceeds for the reverse mortgage in the total amount of $143, 290.00, which included a $95, 580.19 advance to the McClains.

         Shortly after the McClains executed the note, two allonges were affixed to the note. "An 'allonge' is a piece of paper annexed to a negotiable instrument or promissory note on which to write endorsements for which there is no room on the instrument itself." Fed. Nat'l Mortg. Ass'n v. Conover, 428 S.W.3d 661, 664 n.3 (Mo. App. 2014) (internal quotations and citations omitted). In the first allonge, Proficio endorsed the note to Urban Financial Group, Inc. ("Urban"). The second allonge was a blank endorsement by Urban. FOA previously operated as Urban.

         Celink serviced the McClains' loan on behalf of FOA. The McClains' deed of trust was assigned to FOA on August 10, 2016.

         On September 14, 2016, Celink, as attorney-in-fact for FOA, appointed SouthLaw, P.C., as the successor trustee under the deed of trust. On November 17, 2016, the McClains' property was sold at a trustee's sale to Landmark. Following the trustee's sale, SouthLaw distributed $21, 795.22 in excess proceeds from the sale to the McClains. The McClains spent the foreclosure sale proceeds "[t]o pay debt."

         In January 2017, Landmark filed an unlawful detainer action against the McClains alleging that, despite having received notice of the termination of their tenancy and a written demand for possession, the McClains continued to hold possession of the property. In February 2017, the McClains filed an eight-count petition against FOA, Celink, SouthLaw, and Landmark. Each count incorporated the facts and allegations contained in the other counts. In Count I, the McClains asserted a claim for declaratory judgment against FOA. They requested a judgment: (1) declaring that a reverse mortgage is a non-negotiable instrument, FOA was not a holder of the note, and FOA did not have the right to enforce the note or foreclose on it; (2) cancelling the successor's deed of trust as void ab initio because FOA lacked the right to foreclose; and (3) declaring the rights and legal obligations of the McClains and FOA regarding the original note.

         In Counts II and III, the McClains asserted claims of wrongful foreclosure against FOA and Celink. In Count II, the McClains alleged that the foreclosure sale was void because SouthLaw's alleged principals, FOA and Celink, lacked the authority to instruct SouthLaw to conduct the foreclosure sale in that FOA and Celink did not own the note and had no right to enforce it. For this claim, the McClains requested that the court set aside the foreclosure sale and the successor trustee's deed executed and filed by SouthLaw. In Count III, the McClains alleged that the foreclosure sale was void because they were not in default on their note and, therefore, SouthLaw's alleged principals, FOA and Celink, lacked the authority to instruct SouthLaw to conduct the foreclosure sale. For this claim, the McClains sought monetary damages in the form of compensatory and punitive damages.

         In Count IV, the McClains asserted a quiet title action against Landmark. The McClains alleged that, because FOA and Celink lacked the right to foreclose on the property, they did not have the right to sell the property to Landmark. For this claim, the McClains sought a judgment defining the title, estate, and interest of the parties severally in and to such real property; a determination of all rights, claims, interest, liens, and demands of the parties concerning or affecting the property; and an award of all legal and equitable relief available to them.

         In Count V, the McClains asserted a breach of contract claim against Celink. The McClains alleged that, in October 2016, Celink had offered them a repayment plan agreement and that they had accepted the repayment plan agreement and made the first payment pursuant to that agreement, but Celink failed to honor and perform that agreement by participating in the foreclosure sale in November 2016. For this claim, the McClains sought actual and nominal damages, pre-judgment interest, and specific performance of the repayment plan agreement.

         In Count VI, the McClains asserted a negligent misrepresentation claim against SouthLaw. The McClains alleged that, when SouthLaw recorded its appointment of successor trustee in September 2016, it failed to exercise reasonable care because the information contained therein was false. Specifically, the McClains alleged that the false information in the appointment of successor trustee was the representation that FOA was the "owner and/or holder" of the note and that FOA and Celink were acting under the authority of the deed of trust to appoint SouthLaw as successor trustee. The McClains further alleged that SouthLaw knew that they had accepted a repayment plan agreement ...


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