Estate of Ripley v. Mortgage One Corp.

JAMES R. DOWD, Judge,

dissenting.

I respectfully dissent.

The applicable statute of limitations provides:

[A]ll claims against the estate of a deceased person... which are not filed in the probate division of the circuit court within six months after the date of the first published notice of letters testamentary or of administration... are forever barred against the estate, the personal representative, the heirs, devisees and legatees of the decedent.

Section 478.860.1. Dorothy Ripley, the last surviving mortgagor, died on December 26, 1996. The circuit court first published notice of the letters of administration on February 6, 1997. A timely claim against the estate should have been filed by August 6, 1997. Mortgage One filed its claim on November 10, 1997.

Statutes which limit the time in which claims can be filed against a probate estate play a primary role in the probate process. “The purpose of a statute of nonclaim is to expedite the settlement of estates in the interest of public welfare and for the benefit of those interested in the estate.” Estate of Thomas, 743 S.W.2d 74, 78 (Mo. banc 1988). These statutes are “rigidly enforced, and no one is entitled, either in law or equity, to file a claim after the expiration of the time fixed therein.” Harrison Machine Works v. Aufderheide, 222 Mo.App. 474, 280 S.W. 711, 712 (1926).

Missouri case law is rife with situations in which a statute of limitations bars meritorious claims against a probate estate. See, e.g., Hatfield v. McCluney, 893 S.W.2d 822 (Mo.banc 1995) and Beekman v. Richardson, 150 Mo. 430, 51 S.W. 689 (1899). In Hatfield, for instance, a creditor had a valid judgment against the decedent before the decedent’s death. Hatfield 893 S.W.2d at 824. The Missouri Supreme Court held that this claim was barred by the statute of limitations. Id at 825. Recently, the Missouri Supreme Court has held that statutes of limitations in the probate process are of such crucial importance as to preclude a minor’s right to establish the identity of his deceased father. Johnson v. Akers, 9 S.W.Sd 608 (Mo.banc 2000).

Mortgage One contends their claim falls within an exception to the statute of limitations. This exception provides that “[njothing in this section affects or prevents any action or proceeding to enforce any mortgage, pledge or other lien upon property of the estate.” Section 473.360.3 (emphasis added).

The contention that this is a proceeding to enforce the mortgage holds no merit. The deed of trust in this case provides only one process by which it can be enforced. Following a limited set of circumstances, the mortgagee may accelerate all of the unpaid debt to be immediately due, then hold a foreclosure sale of the property. There is no authorization whatsoever in the deed of trust allowing the mortgagee to file suit against the mortgagor or her estate. Neither is there any provision in the deed of trust extending its security *598interest to the proceeds from the sale of the property. A mortgage merely provides security for a debt. Eurengy v. Equitable Realty Corp., 341 Mo. 341, 107 S.W.2d 68, 71 (1937). The right to sue on the debt stems from the underlying note, not the deed of trust.

When Mortgage One failed to record this deed of trust, it became- invalid against anyone “except between the parties thereto, and such as have actual notice thereof.” Section 442.400. The effect of this recording statute is that “subsequent bona fide purchasers of realty with no actual notice of an unrecorded interest in that realty take free of that unrecorded interest.” Ortmeyer v. Bruemmer, 680 S.W.2d 384, 395 (Mo.App.1984). In effect, Mortgage One’s deed of trust terminated once the personal representative sold the property to a bona fide purchaser who had no notice of the deed of trust.

It is clear that Dorothy Ripley owed Mortgage One money and that this money was never paid. To counter this resulting unjust enrichment to her estate, the probate court granted Mortgage One an equitable lien on the proceeds from the sale of the real estate. An equitable lien is proper when the law fails to provide an adequate remedy and justice would suffer without equitable relief. Wilkinson, 393 S.W.2d at 542; Iota, 731 S.W.2d at 420. Under the majority’s holding, Mortgage One’s claim becomes a proceeding to enforce a lien, rather than a mortgage, and thereby fits within the exception to the claim period statute, which provides that “[n]othing in this section affects or prevents any action or proceeding to enforce any mortgage, pledge or other lien upon property of the estate.” Section 473.360.3 (emphasis added).

An equitable hen is an inappropriate vehicle for enforcing the mere failure to repay money as agreed. Hahn v. Hahn, 297 S.W.2d 559, 565 (Mo.1957); Wilkinson, 393 S.W.2d at 542. Equitable liens can be granted only where there is no remedy provided by law. Wilkinson, 393 S.W.2d at 542; Iota, 731 S.W.2d at 420. Here, the

law provided two legal remedies, and Mortgage One failed to take advantage of either.

The first legal remedy was provided by the recording process. The majority correctly points out that the right to foreclose never ripened because neither the note nor the deed of trust was violated before the property was sold to a bona fide purchaser who had no notice of the deed of trust. Consequently, Mortgage One never had the opportunity to foreclose on the property-

Conversely, if the deed of trust was recorded, a title search would have revealed its existence and Mortgage One would have been paid at the closing. Mortgage One’s failure to be paid at the closing stems solely from its failure to record. Mortgage One’s own negligence deprived it of the normal benefits afforded a holder of a deed of trust who acts with ordinary diligence.

Mortgage One’s second legal remedy was to file a claim against the estate on the unpaid note within the six month time period after publication of letters. Mortgage One filed its claim almost three months after the deadline fixed by the statute. Having failed to take advantage of its two legal remedies, Mortgage One should not gain the benefit of an equitable hen. That the personal representative knew of the deed of trust or that the proceeds from the sale of the property remain in the estate should not override the principle that equity will not intervene when the law provides a remedy. Here, the law provided two remedies.

Under the majority’s holding, the Probate Code is powerless to limit the time in which a claim stemming from an unrecorded deed of trust can be brought against an estate so long as the personal representative knows the deed of trust exists. This contravenes the purpose of the six month claim period statute. I would reverse.