SYLLABUS BY THE COURT
1. “The entry of an order denying a motion for summary judgment made
at the close of the pleadings and before trial is merely interlocutory and not then appealable
to this Court.” Syllabus, Wilfong v. Wilfong, 156 W. Va. 754, 197 S.E.2d 96 (1973).
2. “As the purpose of the summary judgment proceeding is to expedite the
disposition of the case a summary judgment may be rendered against the party moving for
judgment and in favor of the opposing party even though such party has made no motion for
judgment.” Syllabus point 4, Employers' Liability Assurance Corp. v. Hartford Accident
& Indemnity Co., 151 W. Va. 1062, 158 S.E.2d 212 (1967).
3. “Upon a hearing on a motion of one of the parties for summary
judgment, after due notice, when it is found that there is no genuine issue as to any material
fact and that the adverse party is entitled to judgment as a matter of law, the failure of such
party to file a motion for summary judgment does not preclude the entry of such judgment
in his favor.” Syllabus point 5, Employers' Liability Assurance Corp. v. Hartford Accident
& Indemnity Co., 151 W. Va. 1062, 158 S.E.2d 212 (1967).
4. “A circuit court's entry of summary judgment is reviewed de novo.”
Syllabus point 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994).
5. “'“A motion for summary judgment should be granted only when it is
clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not
desirable to clarify the application of the law.” Syllabus Point 3, Aetna Casualty & Surety
Co. v. Federal Insurance Co. of New York, 148 W. Va. 160, 133 S.E.2d 770 (1963).'
Syllabus Point 1, Andrick v. Town of Buckhannon, 187 W. Va. 706, 421 S.E.2d 247 (1992).”
Syllabus point 2, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994).
6. “[A] promissory note, signed by the maker, containing an unconditional
promise to pay a sum certain in money and payable on demand or a fixed or determinable
future time, to order or bearer, is negotiable in its origin, and continues to be negotiable until
it has been restrictively indorsed or discharged by payment or otherwise.” Syllabus point 1,
in part, Maryland Trust Co. v. Gregory, 129 W. Va. 35, 38 S.E.2d 359 (1946).
7. A “deed of trust” is a deed that conveys title to real property in trust as
security until the grantor repays the loan. In the case of default of a debt secured by a deed
of trust, the property becomes liable to sale under the power of sale conferred upon the
trustee.
8. A lending institution may require the trustee of a valid deed of trust to
initiate foreclosure proceedings on the property subject to the deed of trust, even though one
of the signatories to the deed of trust did not sign the underlying promissory note.
9. “'A valid written instrument which expresses the intent of the parties in
plain and unambiguous language is not subject to judicial construction or interpretation but
will be applied and enforced according to such intent.' Syl. pt. 1, Cotiga Development
Company v. United Fuel Gas Company, 147 W. Va. 484, 128 S.E.2d 626 (1963).” Syllabus
point 1, Sally-Mike Properties v. Yokum, 175 W. Va. 296, 332 S.E.2d 597 (1985).
10. “'In construing a deed, will, or other written instrument, it is the duty
of the court to construe it as a whole, taking and considering all the parts together, and giving
effect to the intention of the parties wherever that is reasonably clear and free from doubt,
unless to do so will violate some principle of law inconsistent therewith.' Pt. 1, syllabus,
Maddy v. Maddy, 87 W. Va. 581[,105 S.E. 803 (1921)].” Syllabus point 5, Hall v. Hartley,
146 W. Va. 328, 119 S.E.2d 759 (1961).
Davis, Justice:
This is an appeal by the defendant/third-party plaintiff below and appellant
herein, Advantage Bank (hereinafter referred to as “Advantage”), from an August 18, 2008,
order of the Circuit Court of Wood County. By that order, the circuit court denied
Advantage's trustee from foreclosing on the home of the plaintiff below and appellee herein,
Lois Arnold, (hereinafter referred to as “Mrs. Arnold”), which order effectively prevented
Advantage from enforcing a deed of trust. In this appeal, Advantage asserts that it had a
proper right to foreclose on the subject property and that the circuit court erred in denying
it such right. Upon review of the parties' arguments,
(See footnote 1)
the pertinent authorities, and the record
designated for appellate consideration, we find that the circuit court erred by enjoining
Advantage's right to foreclose on the subject property under the deed of trust. Accordingly,
we reverse the decision of the circuit court.
I.
FACTUAL AND PROCEDURAL HISTORY
Factually, this is a straightforward case, which began with the filing of Mrs.
Arnold's action for injunctive relief against three defendants: Advantage, Advantage's
trustees,
(See footnote 2)
and the executor of her late husband's estate.
(See footnote 3)
In her claim for injunctive relief,
Mrs. Arnold sought an order restraining foreclosure on her residence and enjoining the
defendants below from enforcing any putative lien of the deed of trust. She further requested
that her husband's estate be compelled to satisfy any remaining obligations under the deed
of trust.
The record reveals that Mrs. Arnold and her late husband were married for
approximately twenty years prior to his death. Before Mr. Arnold's death, he and Mrs.
Arnold had owned the residence at issue before this Court, which was located in Wood
County, West Virginia, for approximately five years. By deed dated November, 3, 1998, Mr.
and Mrs. Arnold conveyed the subject property to themselves as joint tenants with rights of
survivorship.
Thereafter, on November 3, 2002, Mrs. Arnold's husband executed a
promissory note in the original principal sum of $128,000.00. It is undisputed that the note
was executed by only Mrs. Arnold's husband. Mrs. Arnold did not sign the promissory note.
Subsequently, on November 5, 2002, both Mrs. Arnold and her husband executed a deed of
trust in favor of Advantage's trustee. Both Mrs. Arnold and her husband signed the deed of
trust, which secured the real property at issue that was used as the collateral for the
repayment of the executed promissory note.
Mrs. Arnold's husband died testate on January 20, 2007, at which time, the
property title immediately vested in Mrs. Arnold based on her status as a joint tenant with
right of survivorship. Prior to his death, Mrs. Arnold's husband had executed a last will and
testament, wherein he directed the executor of his estate to pay his debts. In the course of
the administration of the estate, the estate was referred to a fiduciary commissioner. The
commissioner published notice to the estate's creditors, establishing June 9, 2007, as the last
date upon which any claims for payment of any debts could be filed against the estate.
Advantage did not file any claims for debt repayment against the estate.
(See footnote 4)
The loan came to be in default,
(See footnote 5)
and Advantage Bank directed the trustees to
foreclose on the subject deed of trust. Mrs. Arnold, on November 13, 2007, filed an action
for injunctive relief in the circuit court asking for Advantage to be enjoined from any
foreclosure activities because “[w]hen, as here, the creditor is estopped from enforcing the
obligation secured by a promissory note, it is likewise precluded by operation of law from
enforcing the lien of the deed of trust.” Advantage filed an answer and counterclaim to Mrs.
Arnold's complaint for injunctive relief, and also filed a third-party complaint against the
estate and its beneficiaries requesting a distribution from the proceeds of the estate or, if the
disbursements had been made to the beneficiaries, requesting a pro rata amount from the
distributees. Advantage then filed its motion for summary judgment seeking affirmation of
its right to foreclose.
(See footnote 6)
On August 18, 2008, the circuit court entered an order denying Advantage's
motion for summary judgment. In that order, the lower court found that “in this case[,] . . .
there is both a promissory note and a deed of trust. While both [Mrs. Arnold] and the
decedent, Jeffrey A. Arnold, were signatories to the Deed of Trust, only the decedent signed
the Note.” The lower court further found that “[Mrs. Arnold] is not liable on the Note, or the
underlying debt secured by the Deed of Trust.” It was further explained that “[i]t is clear that
[Mrs. Arnold] did not sign the Note (or instrument) in this case and, thus, is not liable on the
Note, meaning [Mrs. Arnold] is not personally obligated to pay the sums due thereunder.”
Relying on the language of the deed of trust, the lower court reasoned that Advantage could
not foreclose on the property because
“[i]n a suit to enforce a lien securing a negotiable note, the same
defenses are generally available as would be in a suit on the note
itself.” Syl. Pt. 3, Miller v. Diversified Loan Service Company,
382 S.E.2d 514 (1989). In this case, it appears that [Mrs.
Arnold] would have a defense to the Note in that she is not
liable for the debt of the Note . . . As such, it follows that [Mrs.
Arnold] has a defense to the Deed of Trust securing the Note.
The lower court concluded that
it appears that a creditor's rights against a joint tenant rise no
higher than the joint tenant's rights and interest, and that when
a joint tenant dies survived by a joint tenant, his/her rights in the
property cease to exist along with any claim a creditor has to the
property. . . . Therefore, the decedent's estate has no rights or
interests in the property at issue and, thereby, Advantage Bank
does not have any rights or interests in the property.
(internal citation omitted). It is from this order that Advantage appeals to this Court.
II.
STANDARD OF REVIEW
As stated by Advantage, the circuit court entered an order denying its motion
for summary judgment. It is from this order that Advantage seeks redress. It is generally
held that “[t]he entry of an order denying a motion for summary judgment made at the close
of the pleadings and before trial is merely interlocutory and not then appealable to this
Court.” Syllabus, Wilfong v. Wilfong, 156 W. Va. 754, 197 S.E.2d 96 (1973). However, the
effect of the August 18, 2008, order denying summary judgment to Advantage was that, in
actuality, it granted summary judgment to Mrs. Arnold. None of the parties dispute the fact
that the order implicitly granted summary judgment to the appellee. Further, we have
reviewed the order and concluded it does, in fact, grant summary judgment to Mrs. Arnold
based on its effect. See Syl. pt. 4, Employers' Liab. Assurance Corp. v. Hartford Accident
& Indem. Co., 151 W. Va. 1062, 158 S.E.2d 212 (1967) (“As the purpose of the summary
judgment proceeding is to expedite the disposition of the case a summary judgment may be
rendered against the party moving for judgment and in favor of the opposing party even
though such party has made no motion for judgment.”). Stated otherwise,
Upon a hearing on a motion of one of the parties for
summary judgment, after due notice, when it is found that there
is no genuine issue as to any material fact and that the adverse
party is entitled to judgment as a matter of law, the failure of
such party to file a motion for summary judgment does not
preclude the entry of such judgment in his favor.
Syl. pt. 5, id.
Therefore, the circuit court effectively granted summary judgment in favor of
Mrs. Arnold. In this regard, it has long been held that “[a] circuit court's entry of summary
judgment is reviewed de novo.” Syl. pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755
(1994). In undertaking our de novo review, we apply the same standard for granting
summary judgment that is applied by the circuit court:
“'A motion for summary judgment should be granted
only when it is clear that there is no genuine issue of fact to be
tried and inquiry concerning the facts is not desirable to clarify
the application of the law.' Syllabus Point 3, Aetna Casualty &
Surety Co. v. Federal Insurance Co. of New York, 148 W. Va.
160, 133 S.E.2d 770 (1963).” Syllabus Point 1, Andrick v. Town
of Buckhannon, 187 W. Va. 706, 421 S.E.2d 247 (1992).
Syl. pt. 2, Painter, 192 W. Va. 189, 451 S.E.2d 755. Moreover,
[s]ummary judgment is appropriate where the record
taken as a whole could not lead a rational trier of fact to find for
the nonmoving party, such as where the nonmoving party has
failed to make a sufficient showing on an essential element of
the case that it has the burden to prove.
Syl. pt. 4, Painter, id. We are also cognizant that “[t]he circuit court's function at the
summary judgment stage is not to weigh the evidence and determine the truth of the matter,
but is to determine whether there is a genuine issue for trial.” Syl. pt. 3, Painter, id. Mindful
of these applicable standards, we now consider the substantive issues raised herein.
III.
DISCUSSION
On appeal to this Court, Advantage Bank argues that the circuit court
erroneously denied its motion for summary judgment. Advantage sets forth that the order
wrongfully precluded foreclosure on the deed of trust. Advantage contends that the lower
court's rulings are in conflict with W. Va. Code § 44-2-28 (1957) (Repl. Vol. 2004),
(See footnote 7)
the
jurisprudence of real property law as it exists in West Virginia, and the plain language of the
deed of trust. Further, Advantage asserts that the effect of the circuit court's order would be
in contravention of federal banking regulations.
(See footnote 8)
Conversely, Mrs. Arnold argues that the circuit court was correct in issuing her
injunctive relief through the effective granting of summary judgment in her favor. She
contends that Advantage Bank's recourse was through the estate of her deceased husband.
However, Advantage failed to file a proof of claim against her deceased husband's estate,
and Mrs. Arnold argues that Advantage is, therefore, now barred from making any claims.
The estate also appears before this Court and posits that the lower court's rulings were
correct because Advantage failed to make a claim against the estate even after the estate put
the bank on notice of its deadline in which to make any claims.
The lower court correctly found that “in this case[,] . . . there is both a
promissory note and a deed of trust.” Both Mrs. Arnold and her husband signed the deed of
trust, while only Mrs. Arnold's husband signed the promissory note. The lower court found
that “[Mrs. Arnold] is not liable on the Note, or the underlying debt secured by the Deed of
Trust.” The circuit court erred in this regard when it combined the legal effects of the two
documents.
A “promissory note” is “[a]n unconditional written promise, signed by the
maker, to pay absolutely and in any event a certain sum of money either to, or to the order
of, the bearer or a designated person.” Black's Law Dictionary 1162 (9th ed.2004). As
previously found by this Court,
[A] promissory note, signed by the maker, containing an
unconditional promise to pay a sum certain in money and
payable on demand or a fixed or determinable future time, to
order or bearer, is negotiable in its origin, and continues to be
negotiable until it has been restrictively indorsed or discharged
by payment or otherwise.
Syl. pt. 1, in part, Maryland Trust Co. v. Gregory, 129 W. Va. 35, 38 S.E.2d 359 (1946). A
promissory note is known as a negotiable instrument,
(See footnote 9)
enforcement of which is governed by
the Uniform Commercial Code. Such enforcement is illustrated by W. Va. Code § 46-3-401
(1993) (Repl. Vol. 2007), which states in relevant part that “(a) A person is not liable on an
instrument unless (i) the person signed the instrument or (ii) the person is represented by an
agent or representative who signed the instrument and the signature is binding on the
represented person under section 3-402 [§ 46-3-402].” Mrs. Arnold did not sign the
promissory note, and there is no argument that an agent or representative of Mrs. Arnold
signed the promissory note. Thus, Mrs. Arnold is not liable on the promissory note.
However, a “deed of trust” is defined as “[a] deed conveying title to real
property to a trustee as security until the grantor repays the loan. This type of deed resembles
a mortgage.” Black's Law Dictionary 476 (9th ed.2004).
(See footnote 10)
Significantly, in Minor v.
Pursglove Coal Mining Co. , 118 W. Va. 170, 176, 189 S.E. 297, 299 (1936), this Court also
recognized that “[t]he trust creditor has no estate in, or right of possession to, the trust
property by virtue of the deed of trust. He has merely a chose in action secured by the trust,
which may be enforced only by sale of the property.” In Citizens' National Bank of
Connellsville v. Harrison-Doddridge Coal & Coke Co., 89 W. Va. 659, 665, 109 S.E. 892,
894 (1921), this Court stated that “[i]n case of default in payment of a debt secured by a deed
of trust, no change occurs in the title. The property merely becomes liable to sale under the
power of sale conferred upon the trustee.” Stated otherwise,
[a] deed of trust in the nature of a mortgage, is a conveyance in
trust by way of security, subject to a condition of defeasance, or
redeemable at any time before the sale of the property. A deed
conveying land to a trustee as mere collateral security for the
payment of a debt when due, and with power to the trustee to
sell the land and pay the debt, in case of default on the part of
the debtor, is a deed of trust in the nature of a mortgage.
Sandusky v. Faris, 49 W. Va. 150, 174, 38 S.E. 563, 573 (1901).
Accordingly, we now hold that a “deed of trust” is a deed that conveys title to
real property in trust as security until the grantor repays the loan. In the case of default of
a debt secured by a deed of trust, the property becomes liable to sale under the power of sale
conferred upon the trustee. Further, in view of the foregoing, we hold that a lending
institution may require the trustee of a valid deed of trust to initiate foreclosure proceedings
on the property subject to the deed of trust, even though one of the signatories to the deed of
trust did not sign the underlying promissory note.
The circuit court's decision that the deed of trust cannot be enforced against
Mrs. Arnold since she was not a signatory on the promissory note ignores the fact that these
are two separate legal documents, each with its own unique purpose. While it is true that
Advantage cannot enforce the terms of the promissory note against Mrs. Arnold as a non-
signatory, the same rationale does not apply to the deed of trust because Mrs. Arnold was,
in fact, a signatory of the deed of trust. Moreover, in the underlying proceedings, Advantage
was seeking enforcement of the deed of trust, not the promissory note; therefore, the terms
of the deed of trust must guide the analysis. No party argues that the deed of trust is invalid;
thus, this Court will look to the terms of the deed of trust to determine its effect on the case
sub judice.
At the outset, we note that “[d]eeds of trust are subject to the principles of
interpretation and construction that govern contracts generally.” Gilroy v. Ryberg, 266 Neb.
617, 667 N.W.2d 544, 552 (2003). Accord Cache Nat'l Bank v. Lusher, 882 P.2d 952
(Colo.1994); Starcrest Trust v. Berry, 926 S.W.2d 343 (Tex.App.1996). The general rule is
that “'[a] valid written instrument which expresses the intent of the parties in plain and
unambiguous language is not subject to judicial construction or interpretation but will be
applied and enforced according to such intent.' Syl. pt. 1, Cotiga Development Company v.
United Fuel Gas Company, 147 W. Va. 484, 128 S.E.2d 626 (1963).” Syl. pt. 1, Sally-Mike
Properties v. Yokum, 175 W. Va. 296, 332 S.E.2d 597 (1985). “In the construction of a deed
or other legal instrument, the function of a court is to ascertain the intent of the parties as
expressed in the language used by them.” Davis v. Hardman, 148 W. Va. 82, 89, 133 S.E.2d
77, 81 (1963) (internal citations omitted). Further guidance is provided in the principle that
“[i]n construing a deed, will, or other written instrument,
it is the duty of the court to construe it as a whole, taking and
considering all the parts together, and giving effect to the
intention of the parties wherever that is reasonably clear and free
from doubt, unless to do so will violate some principle of law
inconsistent therewith.” Pt. 1, syllabus, Maddy v. Maddy, 87
W. Va. 581[,105 S.E. 803 (1921)].
Syl. pt. 5, Hall v. Hartley, 146 W. Va. 328, 119 S.E.2d 759 (1961). But cf. Syl. pt. 9,
Paxton v. Benedum-Trees Oil Co., 80 W. Va. 187, 94 S.E. 472 (1917) (“Extrinsic evidence
will not be admitted to explain or alter the terms of a written contract which is clear and
unambiguous.”).
The relevant wording of the deed of trust sets forth that Mrs. Arnold signed the
document as a guarantor of the deed of trust and states, in relevant part, as follows:
13. Joint and Several Liability; Co-signers;
Successors and Assigns Bound. Borrower covenants and
agrees that Borrower's obligations and liability shall be joint and
several. However, any Borrower who co-signs this Security
Instrument but does not execute the Note (a “co-signer”): (a) is
co-signing this Security Instrument only to mortgage, grant and
convey the co-signer's interest in the Property under the terms
of this Security Instrument; (b) is not personally obligated to pay
the sums secured by this Security Instrument; and (c) agrees that
Lender and any other Borrower can agree to extend, modify,
forebear or make any accommodations with regard to the terms
of this Security Instrument or the Note without the co-signor's
consent.
The wording of the deed of trust is clear that under subsection (a) Mrs. Arnold is mortgaging
or conveying only her interest in the property that is in this agreement (i.e. the home) and is
not, under subsection (b) personally obligated to pay the sums owing under the promissory
note. By contrast, the promissory note would allow the bank to collect by way of any assets
of the signatories of the note up to the value of the promissory note. Mrs. Arnold is correct
that this promissory note cannot be enforced against her. However, the deed of trust was
signed by Mrs. Arnold, acknowledging that the residence owned by her and her husband was
used as collateral for the promissory note. Mrs. Arnold's signature on the same illustrated
her understanding that her home, which she held as a joint tenant with right of survivorship,
was used for collateral. Thus, the deed of trust allows the bank to foreclose on the home
under the deed of trust, without any need to resort to the promissory note. The fact Mrs.
Arnold did not sign the promissory note is irrelevant because it is not the document being
enforced in this case.
The circuit court, in rendering the underlying decision, relied on this Court's
case of Dobbins v. Cunningham, 217 W. Va. 580, 618 S.E.2d 589 (2005) (per curiam). In
its reliance, the circuit court reasoned that the Dobbins case was factually similar to the
current case because it involved two parties who owned land as joint tenants with the right
of survivorship. In that case, this Court held that the circuit court erred in finding the
appellant responsible for any of the debt owed on a promissory note that she had not signed.
In that regard, its application and holding are consistent with the current case before this
Court. However, that is where the similarities and application of the Dobbins case must
cease. The Dobbins case involved two people who owned land with rights of survivorship,
a deed of trust signed by two parties, and a promissory note signed by only one party. No
foreclosure had been instituted in the Dobbins case, and the bank holding the promissory note
was not involved in the case as no default had been declared. Rather, the issue in Dobbins
was one of two people involved in a separation and the proper distribution of property and
debts, one of which included a motion to partition the jointly-owned land and the payment
of a promissory note. In that regard, the case is not assistive in the decision of the current
case.
The circuit court further relied on this Court's recitation that “[i]n a suit to
enforce a lien securing a negotiable note, the same defenses are generally available as would
be in a suit on the note itself.” Syl. pt. 3, Miller v. Diversified Loan Service Co., 181 W. Va.
320, 382 S.E.2d 514 (1989). The lower court found that “[i]n this case, it appears that [Mrs.
Arnold] would have a defense to the Note in that she is not liable for the debt of the Note . . .
As such, it follows that [Mrs. Arnold] has a defense to the Deed of Trust securing the Note.”
However, an examination of the facts of the Miller case shows that it is
inapplicable to the present case. At issue in Miller were two deeds of trusts used by two
different homeowners to secure two different notes for home improvement work. The notes
were transferred by the contractors to a bank who eventually filed for bankruptcy. Prior to
the bankruptcy, the two homeowners became dissatisfied with the workmanship of the
contractors on their homes. One homeowner instituted a suit for damages, and the other
homeowner ceased payments on the note. During the pendency of the bankruptcy, the notes
were purchased by Diversified Loan Service Company, who then began to demand payments
on the notes. When payments were not received, Diversified then instructed its trustee to
initiate foreclosure. The two homeowners then filed suits to enjoin the foreclosure sales.
The case involved the issue of whether Diversified qualified as a holder in due course of the
notes in relation to the problems of which the bankrupt bank was aware with respect to the
workmanship on the homes. There were also allegations that some of the signatures were
forgeries and that others were obtained by fraud. In that vein, the Miller court recognized
that “[i]n a suit to enforce a lien securing a negotiable note, the same defenses are generally
available as would be in a suit on the note itself.” Syl. pt. 3, Miller, 181 W. Va. 320, 382
S.E.2d 514. Thus, it is clear that the Miller court was referring to defenses to the validity of
the note itself, not to the ability to enforce a deed of trust that secures the interest obtained
in a valid promissory note. In the present case, there are no such defenses to the validity of
the promissory note.
The distinction not appreciated by the court below is that the bank is not
seeking to enforce the promissory note. Rather, it is seeking to enforce the deed of trust, a
document to which Mrs. Arnold was a signatory. The bank is therefore allowed to foreclose
on this property, and Mrs. Arnold is liable to the bank for the fair market value of the home.
She is not liable for the amount of the promissory note as she was not a signatory on that
document. Moreover, because she did not sign the promissory note, all of her other assets
are protected from any attempts at collection. The only asset of Mrs. Arnold's that is at risk
under the deed of trust is the home; therefore, the bank can foreclose on this asset as needed
to redeem the deed of trust. Accordingly, the lower court's order is reversed because
Advantage has the right to foreclose on the home under the execution of the deed of trust, a
document to which Mrs. Arnold was a party.
IV.
CONCLUSION
For the foregoing reasons, the August 18, 2008, order by the Circuit Court of
Wood County, enjoining Advantage Bank from executing the deed of trust is hereby
reversed.