In December 2016 the Missouri Court of Appeals, Western District considered a challenge to a lender’s deed of trust against real property. That case is styled Lester v. Nationstar Mortgage, LLC, ___ S.W.3d ___ (Mo.App. W.D. 2016). The basis of the challenge was the lender’s alleged failure to make a timely probate claim to protect the lender’s deed of trust lien.
In Lester, the property at issue was subject to a recorded deed of trust that secured a loan. The property was also subject to a recorded beneficiary deed which would result in the title to the property transferring to the beneficiary upon the owner’s death. The property owner subsequently died and the property was conveyed to the plaintiff by operation of the beneficiary deed. The lender did not make a probate claim within one year of the owner’s death.
The Lester plaintiff argued to the trial court that plaintiff was entitled to a declaration extinguishing the lender’s deed of trust because the lender did not make a probate claim within one year of the owner’s death.
The lender argued that Missouri law (specifically R.S.Mo. 473.360) does not require lien holders to make probate claims to protect their lien interest against property. The lender also argued that the beneficiary deed (pursuant to which plaintiff obtained ownership of the property) resulted in the property transferring to plaintiff outside of the Missouri statutory probate scheme and therefore the lender was not required to make a probate claim because the property was never subject to probate.
The Court of Appeals ruled for the lender. The Court’s decision focused on the lender’s second argument, i.e. that the property transferred outside of probate because of the beneficiary deed. The Court reasoned that if a probate estate would have been opened for the owner, the property would not have been subject to the probate estate because the beneficiary deed resulted in the property’s title being conveyed to plaintiff upon the owner’s death. Applying R.S.Mo. 461.039.1, the Court found that plaintiff took the property subject to the lender’s deed of trust.
Lester leaves open a question regarding if the holders of deeds of trust against real property must make a timely probate claim to preserve their lien right against property. R.S.Mo. 473.360 strongly suggests that lien holders are not required to make probate claims to preserve such liens. However, R.S.Mo. 473.020(1) can be read to require all creditors to file timely probate claims against an estate because that statute does not have an exception for creditors who hold mortgages or liens on estate property.
Lester is not the first time that the Court of Appeals has avoided making an affirmative ruling that R.S.Mo. 473.360 relieves lien holders from making probate claims to protect their lien position. In late 2015 the Court of Appeals had the opportunity to consider the R.S.Mo. 473.360 issue in a case styled Reverse Mortgage Solutions, Inc. v. Estate of Hunter, 479 S.W.3d 662, 663 (Mo.App. W.D. 2015). Instead of ruling on the R.S.Mo. 473.360 issue, the Court of Appeals focused on a procedural issue in ruling for the lender.
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