McKinley v. Lamar Bank
| Docket Number: | 2002-CT-02070-SCT Linked Case(s): 2002-CA-02070-COA ; 2002-CT-02070-SCT ; 2002-CT-02070-SCT ; 2002-CA-02070-COA |
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| Supreme Court: | Opinion Link Opinion Date: 12-01-2005 Opinion Author: Carlson, J. Holding: AS TO GEORGE GUNTER, THE JUDGMENT OF THE COURT OF APPEALS IS REVERSED, AND THE JUDGMENT OF THE LAMAR COUNTY CIRCUIT COURT IS REINSTATED AND AFFIRMED |
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| Additional Case Information: |
Topic: Contract - Satisfaction of indebtedness Judge(s) Concurring: Smith, C.J., Waller, P.J., Dickinson and Randolph, JJ. Non Participating Judge(s): Diaz, J. Dissenting Author : Easley and Graves, JJ. Concur in Part, Dissent in Part 1: Cobb, P.J., without separate written opinion Procedural History: Summary Judgment Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 10-29-2002 Appealed from: Lamar County Circuit Court Judge: Michael R. Eubanks Disposition: The trial court granted summary judgment in favor of the defendants and entered a final judgment dismissing McKinley’s case with prejudice. Case Number: 2001-166 |
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| Note: | The Motion for Rehearing filed by Jerald D. McKinley is granted. | |
| Party Name: | Attorney Name: | |||
| Appellant: | Jerald D. McKinley |
LAWRENCE E. ABERNATHY, III,
JOHN T. KERSH |
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| Appellee: | The Lamar Bank, James S. Welch, Jr., and George Gunter | C. STEPHEN SEALE, AMANDA CLEARMAN WADDELL, S. ROBERT HAMMOND, JR., MONICA R. MORRISON, RICHARD F. YARBOROUGH, JR. |
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| Topic: | Contract - Satisfaction of indebtedness |
| Summary of the Facts: | The motion for rehearing is granted and this opinion is substituted for the original opinion. Jerald and Minnie McKinley purchased a home from James Welch, Jr. The McKinleys executed a deed of trust and promissory note to Welch to secure financing of the home. The deed of trust secured a $50,000 indebtedness and provided for monthly payments in the amount of $482.40. Five years later, Welch recorded a photocopy of the original recorded deed of trust denoted as a “Corrected Deed of Trust,” in which a Bobbie Hudson replaced Welch as the beneficiary. Hudson reassigned all of her interest in the deed of trust back to Welch. Additionally, Welch assigned all of his interest in the deed of trust to Lamar Bank as collateral for a loan financed by the bank. The bank never notified the McKinleys of the assignment. Apparently, the McKinleys continued making payments to Welch, with no payments ever being made to Lamar Bank. Further, the bank did not send the notice of foreclosure to the McKinleys. Welch later canceled the recorded deed of trust in which he was listed as the beneficiary. He paid off the loan financed by Lamar Bank and, on the same day, assigned to the bank for a second time all of his interest in the McKinley deed of trust. This second assignment was security for a new loan. McKinley defaulted on his promissory note to Welch. As a result, Lamar Bank appointed George Gunter as substitute trustee of the deed of trust and authorized Gunter to initiate foreclosure proceedings on McKinley’s property. McKinley filed a Chapter 13 bankruptcy to interrupt the foreclosure proceedings. In response to the bankruptcy filing, Gunter terminated the foreclosure proceedings and took no further action in this regard. McKinley continued to live in the house without making any further payments until the house was destroyed by a fire. Claiming that the bank had wrongfully commenced foreclosure proceedings on his property pursuant to a deed of trust which allegedly had previously been satisfied and canceled of record, Jerald McKinley commenced a suit for damages against the bank, the original holder of the deed of trust, and George Gunter, the bank’s substituted trustee. The court granted summary judgment in favor of the defendants and entered a final judgment dismissing McKinley’s case with prejudice. McKinley appealed, and the Court of Appeals reversed the trial court’s judgment and remanded the case for a jury trial. The Supreme Court granted Gunter’s petition for writ of certiorari. |
| Summary of Opinion Analysis: | The Court of Appeals found that there existed a genuine issue of material fact as to whether the indebtedness which was secured by the deed of trust had been satisfied. The Court applied the “after-acquired title” doctrine in determining that the indebtedness had been paid off and satisfied. The Court of Appeals also found an issue of negligence on the part of the Bank and Gunter, which could only be resolved by a jury. The questionable negligence was the purported failure by the Bank and Gunter to exercise ordinary diligence to discover that there was a recorded cancellation of the deed of trust. Generally, the intention of the parties ascertained from the entire transaction, including conduct, determines whether the assignment is absolute or intended only as a collateral security. In today’s case, based on the unqualified language of the assignment, once Welch executed the assignment of the deed of trust to Lamar Bank on May 23, 1995, and once this assignment was filed of record, Welch had no further interest whatsoever in the promissory note and deed of trust executed by the McKinleys in his favor on May 25, 1990, and Welch’s cancellation of the deed of trust on July 5, 1996, was thus invalid and of no effect – Welch possessed nothing on which to act on July 5, 1996. Therefore, the trial court correctly found that McKinley had not paid off the deed of trust and that McKinley was in default on the note and deed of trust. Even though McKinley claimed that his wife, prior to her death, told McKinley that the house note was taken care of, the record is devoid of any evidence that the note had been satisfied. The record bears out the fact that Gunter and the Bank were aware of Welch’s purported cancellation of the deed of trust, and Gunter, as the attorney and substituted trustee, determined that the cancellation carried no adverse legal effect since Welch had previously assigned all his right, title, and interest in the note and deed of trust to the Lamar Bank. Thus, the Court of Appeals erred in finding that there existed genuine issues of material fact as to whether McKinley’s promissory note had been paid in full at the time the foreclosure proceedings were initiated, or alternatively, that if the note had not been paid in full, whether McKinley was in default at the time foreclosure proceedings were initiated. The Court of Appeals also erred in finding that there was a question of whether there was negligence on the part of Gunter since there was a recorded cancellation of the deed of trust by Welch. |
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