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Missouri Court of Appeals Rules for Home Borrower in a Quitclaim Deed Case

Posted By USFN, Tuesday, December 12, 2017
Updated: Tuesday, November 14, 2017

December 12, 2017

by William H. Meyer
Martin Leigh, P.C. – USFN Member (Kansas)

The Missouri Court of Appeals recently reversed a trial court’s summary judgment decision and ruled for a home borrower and against the home lender. That case, styled Gacki v. Jeff Kelly Homes, Inc., No. ED 104983 (Mo. Ct. App. Oct. 17, 2017), involved a residential home loan that was secured by a quitclaim deed. Under the terms of the loan, if the home borrower was more than thirty days delinquent, then the lender was entitled to record the quitclaim deed and obtain ownership and possession of the home. This case is different from the normal Missouri nonjudicial foreclosure situation in that the lender is able to skip Missouri’s statutory foreclosure procedure to obtain title to a home in an expedited fashion after a borrower’s default.

Appellate Review
Payment Default Issue — In ruling for the borrower, the Court of Appeals first focused on the rigorous evidentiary standard that the lender was required to satisfy to obtain a summary judgment. In this case, there was no doubt that the borrower was two weeks behind in making payments. Nonetheless, the Court of Appeals concentrated on the loan documents (which did not define when a loan payment was “late”), conflicting default notices given by the lender, and the fact that the lender withdrew funds from the borrower’s account prematurely. Given these evidentiary issues, the appellate court held that the lender failed to present uncontroverted evidence to establish that the borrower was more than thirty days late in making her payments and, accordingly, found for the borrower on the payment default issue.

Property Abandonment Issue — The court also addressed the lender’s claim that the borrower had abandoned the home and that such abandonment also constituted a default under the home loan. In ruling for the borrower on this issue, the Court of Appeals found that the evidence, which the trial court had relied on for finding that the borrower abandoned the house, was controverted and, therefore, summary judgment was not appropriate. The appellate court also emphasized that when personal property is still in the home, this fact rebuts a presumption of abandonment.

Policy Concern — The Court of Appeals also articulated concern over home loans that are secured by quitclaim deeds. Although the court did not have to decide this issue (because it overruled the summary judgment on other grounds), the court was skeptical about the fairness of home loans that are secured by quitclaim deeds. In this case, had the trial court decision not been overturned, the home lender would have been allowed to recover a judgment for ownership of the home and a monetary award for the entire amount of the home loan debt. As noted by the Court of Appeals, such a judgment is troubling because the home borrower’s debt would not have been offset by the value of the home.

Closing
Although not addressed by the Court of Appeals, there is at least one significant advantage to using a deed of trust versus a quitclaim deed to secure a home loan. That advantage is that Missouri’s nonjudicial foreclosure process associated with foreclosing a deed of trust extinguishes most liens against a property. Simply recording a quitclaim deed after a borrower’s default, however, does not have the same effect over liens — and a lender in this situation will find its title clouded by the unresolved lien claims.

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