Jp Morgan Chase Bank Na v. Stacey Bayle ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
JP MORGAN CHASE BANK, N.A., UNPUBLISHED
April 26, 2016
Plaintiff-Appellee,
v No. 325544
Muskegon Circuit Court
STACEY BAYLE, LC No. 13-049307-CH
Defendant,
and
BRENDA YONKMAN,
Defendant-Appellant.
Before: SAAD, P.J., and BORRELLO and GADOLA, JJ.
PER CURIAM.
In this action to quiet title, defendant Brenda Yonkman appeals the trial court’s order that
granted plaintiff JP Morgan’s motion for summary disposition and declared JP Morgan’s
mortgage interest in the subject property superior to the mortgage interest in the same property
held by Yonkman. For the reasons set forth below, we affirm in part and reverse in part.
The instant dispute concerns property commonly known as 2504 Crozier Street in
Muskegon, Michigan. The record reflects that on May 21, 2007, defendant Stacey Bayle
purchased the subject property from Homeland Developers, Inc., of which Yonkman was its
president. To facilitate the purchase of the property, Bayle received a loan from Chase Bank for
the sum of $99,200, the entirety of which she used toward the purchase price of the home. In
exchange, Bayle granted Chase a mortgage interest in the subject property to secure repayment
of the loan. The mortgage was executed on the date of closing, June 14, 2007, and was
ultimately recorded on June 19, 2007. The mortgage was subsequently assigned to JP Morgan.1
1
For simplicity, we will refer to this mortgage as the “bank mortgage.”
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Purportedly, Bayle also borrowed $27,027.01 from Yonkman, in her individual capacity,
which was evidenced by a mortgage that was recorded on June 19, 2007, approximately three
hours before the bank mortgage was recorded.
Eventually, Bayle defaulted on the bank loan, and JP Morgan initiated the instant lawsuit
seeking to have its interest in the property declared superior to that of Yonkman. JP Morgan
subsequently moved for summary disposition under MCR 2.116(C)(10). The trial court granted
that motion on the basis that although Yonkman’s interest was recorded first, she had knowledge
of JP Morgan’s interest at the time she acquired hers. Accordingly, she was not a good-faith
subsequent mortgagee and could not claim superiority under Michigan’s race-notice statute,
MCL 565.29.
We review a trial court’s decision on a motion for summary disposition de novo. BC Tile
& Marble Co, Inc v Multi Bldg Co, Inc, 288 Mich App 576, 583; 794 NW2d 76 (2010).
Summary disposition under MCR 2.116(C)(10) is appropriate if, “[e]xcept as to the amount of
damages, there is no genuine issue as to any material fact, and the moving party is entitled to
judgment or partial judgment as a matter of law.” A motion under MCR 2.116(C)(10) tests the
factual sufficiency of the complaint. Maiden v Rozwood, 461 Mich 109, 120; 597 NW2d 817
(1999). In deciding a motion under MCR 2.116(C)(10), the trial court considers affidavits,
pleadings, depositions, admissions, and any other documentary evidence submitted by the parties
in the light most favorable to the nonmoving party. Id.I. YONKMAN’S STATUS AS A VENDOR PURCHASE MONEY MORTGAGEE
Yonkman argues that the trial court erred in declaring JP Morgan’s interest superior to
hers because her mortgage was a vendor purchase mortgage, which purportedly is given a higher
priority than a third-party purchase mortgage. We need not determine if Michigan has adopted
the position relied on by Yonkman and put forth by Restatement Property, 3d, Mortgages,
§ 7.2(c), p 458, that a vendor purchase money mortgage is given a higher priority than a third-
party purchase money mortgage, because there is no question that Yonkman was not a “vendor”
in this case. The evidence is clear that the vendor, i.e., the seller of the property, was Homeland
Developers, Inc. Yonkman was simply its president and signed the deed that transferred title to
Bayer on behalf of the corporation. It is well established that “[a] corporation is an artificial
being separate and distinct from its agents, officers, and stockholders.” Washington Agency, Inc
v Forbes, 309 Mich 683, 690; 16 NW2d 121 (1944). Therefore, as the trial court correctly ruled,
any argument related to Yonkman’s supposed status as a vendor who also supplied funds to
purchase the property is misguided and necessarily fails. As a result, we affirm the trial court’s
grant of summary disposition based on this theory.
II. YONKMAN’S STATUS AS A THIRD-PARTY PURCHASE MONEY MORTGAGEE
Yonkman also argues that even if she is not considered a vendor purchase mortgagee,
there is a question of fact that she is a third-party purchase money mortgagee, which if true
would grant her priority over JP Morgan because she recorded her interest first. We agree.
A. APPLICATION OF MCL 565.29
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“ ‘Michigan is a race-notice state, and owners of interests in land can protect their interest
by properly recording those interests.’ ” Richards v Tibaldi, 272 Mich App 522, 539; 726 NW2d
770 (2006), quoting Lakeside Assoc v Toski Sands, 131 Mich App 292, 298; 346 NW2d 92
(1983). Indeed, “the holder of a real estate interest who first records his or her interest generally
has priority over subsequent purchasers.” Richards, 272 Mich App at 539. MCL 565.29 further
provides in pertinent part:
Every conveyance[2] of real estate within the state hereafter made, which shall not
be recorded as provided in this chapter, shall be void as against any subsequent
purchaser[3] in good faith and for a valuable consideration, of the same real estate
or any portion thereof, whose conveyance shall be first duly recorded.
Generally, the first conveyance that was executed has priority over any subsequent
conveyances. See Cheboygan Co Const Code Dep’t v Burke, 148 Mich App 56, 59; 384 NW2d
77 (1985) (stating that the general rule is “first in time, first in right”); 55 Am Jur 2d, Mortgages,
§ 278, pp 37-38. But under Michigan’s race-notice scheme, when the holder of a real estate
interest fails to record its interest (i.e., the prior or first-in-time interest), that interest is deemed
void but only against (1) any subsequent interest holder (2) who obtained its interest in good
faith and for valuable consideration and (3) recorded first.4 See Coventry Parkhomes Condo
Ass’n v Fed Nat’l Mtg Ass’n, 298 Mich App 252, 256; 827 NW2d 379 (2012).
JP Morgan’s reliance on this statute in support of its motion for summary disposition is
misplaced. Primarily, in order for MCL 565.29 to “void” the Yonkman mortgage, as JP Morgan
suggests, it would require the Yonkman mortgage to be considered the “prior” transaction and
the bank mortgage to be considered the “subsequent” transaction. Here, the facts, when viewed
in a light most favorable to Yonkman, the party opposing JP Morgan’s motion for summary
disposition, see Maiden, 461 Mich at 120, show that Yonkman’s mortgage conveyance was
simultaneous to the bank mortgage conveyance because both were purchase money mortgages.
A purchase money mortgage is “[a] mortgage or security device taken back to secure the
performance of an obligation incurred in the purchase of the property.” Graves v American
Acceptance Mtg Corp, 469 Mich 608, 613; 677 NW2d 829 (2004), quoting Black’s Law
Dictionary (6th ed). “[A] purchase money mortgage takes effect immediately, as part of the
‘same transaction by which seisin was acquired by the mortgagor.’ ” Graves, 469 Mich at 613,
quoting Fecteau v Fries, 253 Mich 51, 55; 234 NW 113 (1931). In other words, “the purchase of
the land and the mortgage are seen as simultaneous events, so that the mortgagor obtains the land
already encumbered by the mortgage.” Bednarowski & Michaels Dev, LLC v Wallace, 293 F
Supp 2d 728, 733 (ED Mich, 2003).
2
A “conveyance” is expressly defined to include the granting of a mortgage. MCL 565.35.
3
A “purchaser” is expressly defined to include a mortgagee. MCL 565.34.
4
Because the statutory condition requires that the initial conveyance not be recorded, it means
that the subsequent interest holder necessarily recorded its interests first.
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There is no genuine issue of material fact that the mortgage held by JP Morgan is a third-
party purchase money mortgage. Bayle obtained a loan from Chase in the amount of $99,200,
the totality of which was used toward the purchase of the subject property. To secure repayment
of that loan, Bayle in turn granted a mortgage to Chase on the subject property. The record
reflects that the bank mortgage was granted on the same day that the property was purchased.
Thus, the obligation incurred by Bayle under the bank mortgage “arose as part of the same
transaction” in which Bayle purchased the property securing the mortgage, and is a purchase
money mortgage. Graves, 469 Mich at 614.
Similarly, when the evidence is viewed in a light most favorable to Yonkman, there is a
question of fact that her mortgage also is a third-party purchase money mortgage. It is
undisputed that Bayle granted a mortgage to Yonkman. The mortgage itself is dated June 22,
2007, but it was recorded June 19, 2007, so it is clear that it was not executed on June 22, as the
document otherwise indicates. In an affidavit that was submitted to the trial court, Yonkman
averred that the mortgage was indeed executed at the closing on June 14 and that the reference to
June 22 was erroneous. Again, looking at the evidence in a light most favorable to Yonkman, a
natural conclusion is that the mortgage was executed on June 14 as a purchase money mortgage.5
The existence of a genuine issue as to whether Yonkman’s mortgage is a purchase money
mortgage precluded the trial court from granting summary disposition in JP Morgan’s favor. If
both JP Morgan and Yonkman hold purchase money mortgages, their interests arose at the exact
same time, i.e., at the time title to the property was acquired by Bayle. Bednarowski, 293 F Supp
2d at 733; see also Graves, 469 Mich at 613, citing Fecteau, 253 Mich at 55. In such a situation,
the “subsequent purchaser in good faith” provision of the race-notice statute would not decide
priority because neither party can be said to be “subsequent” to the other.
Moreover, while there is evidence that Chase qualified as a bona fide good-faith
purchaser for value, it is not disputed that Yonkman recorded her interest first, and not Chase.
Therefore, two of the three requirements needed to void an interest under MCL 565.29 are not
satisfied, and the trial court erred in granting summary disposition based on this statute.
B. PRIORITY BETWEEN COMPETING PURCHASE MONEY MORTGAGES
Assuming Yonkman has a purchase money mortgage, we must determine if JP Morgan
nonetheless is entitled to judgement as a matter of law. See Brown v Brown, 478 Mich 545, 552;
739 NW2d 313 (2007) (“Summary disposition is appropriate if there is no genuine issue
regarding any material fact and the moving party is entitled to judgment as a matter of law.”).
5
JP Morgan relies on the fact that the HUD Settlement Statement that was provided at closing
only referenced a purchase loan by Chase and did not mention any funds coming from Yonkman.
While this fact certainly would be relevant in a trial setting for a finder of fact, it is not
dispositive in a motion for summary disposition, where we must view all the evidence in a light
most favorable to the non-moving party. Yonkman has submitted evidence that the mortgage
was given on the day of the closing, and the natural inference is that the accompanying loan was
used for the purchase of the property. At a minimum, it establishes a genuine issue of fact.
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Establishing the priority between two competing purchase money mortgages appears to be an
issue of first impression in Michigan. In this instance, because both mortgages attached at
precisely the same instant, the general rule that “first in time, first in right” is not helpful. And
we have already determined that Michigan’s race-notice statute also is not particularly of
assistance because there are no “prior” and “subsequent” conveyances.6
We note that in addition to being an issue of first impression in this state, there is scant
case law from other jurisdictions that address competing third-party purchase money mortgages
as well. However, Minnesota, which also is a race-notice state, recently was confronted with this
very same issue and held that, irrespective of the notice either party had of the other’s purchase
money mortgage interest, priority is simply determined by who recorded its interests first.
Slattengren & Sons Props, LLC v RTS River Bluff, LLC, 805 NW2d 279, 283-284 (Minn App,
2011). We agree with this rule and hold that the priority between competing third-party purchase
money mortgages is to be resolved by which mortgage is recorded first. With the transactions
having taken place simultaneously, the only meaningful way to break this temporal tie is to see
which conveyance was recorded first. Cf. Richards, 272 Mich App at 539; see also 55 Am Jur
2d, Mortgages, § 290, p 50 (recognizing that priority can be determined for two
contemporaneous mortgages on the basis of which was recorded first). Accordingly, assuming
that both Yonkman and JP Morgan possess purchase money mortgages, JP Morgan cannot
establish priority and is not entitled to judgment because Yonkman recorded her interest first.
In light of the above analysis, because there is a question of fact regarding whether
Yonkman has a purchase money mortgage, the trial court erred when it granted summary
disposition in favor of JP Morgan. For purposes of the race-notice statute, Yonkman’s
knowledge of the existence of the bank mortgage is not dispositive because neither mortgage
6
We note that the Restatement suggests that when only one purchase money mortgagee has
notice of another purchase money mortgagee, then the mortgagee without notice should be
considered the subsequent taker “in fairness” and therefore eligible for the protection of the
recording acts. Restatement Property, 3d, Mortgages, § 7.2, comment d, p 465. The
Restatement thus concludes that “[i]n a race-notice type of jurisdiction, the lender who takes
without notice must also record first in order to prevail.” Id. (emphasis added). This principle
could be of benefit to JP Morgan, as there is no evidence that Chase was aware of the Yonkman
mortgage at the time of the closing and there was evidence that Yonkman was aware of the
Chase mortgage. However, we reject this principle because our rules of statutory construction do
not allow a “simultaneous” transaction to be considered “subsequent” based on principles of
fairness. See Koontz v Ameritech Servs, Inc, 466 Mich 304, 312; 645 NW2d 34 (2002) (“When
the Legislature has unambiguously conveyed its intent in a statute, the statute speaks for itself,
and judicial construction is not permitted. . . . Because the proper role of the judiciary is to
interpret and not write the law, courts simply lack authority to venture beyond the unambiguous
text of a statute.”). In any event, even if we did consider the bank mortgage as being subsequent
to the Yonkman mortgage, the bank mortgage was recorded after the Yonkman mortgage was
recorded. Thus, even under the Restatement’s fairness principles, the Yonkman mortgage still
would have priority.
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interest attached to the property “subsequent” to the other. Furthermore, when there are
competing purchase money mortgages, priority is determined by which was recorded first, and
here, Yonkman recorded her interest first. Of course, our opinion does not preclude the trial
court from finding, after a trial or other proceeding, that the Yonkman mortgage was not a
purchase money mortgage, and therefore junior to the bank mortgage, but on the specific motion
and record before us, we must reverse.
Affirmed in part and reversed in part. No costs, as neither party prevailed in full. MCR
7.219.
/s/ Henry William Saad
/s/ Stephen L. Borrello
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