Opinion
No. CA12-612
02-20-2013
ARVEST BANK APPELLANT v. BANK OF AMERICA, N.A. APPELLEE
Daniels, Woods, Snively, Atwell Law Group, LLP, by: Wright, Lindsey & Jennings, LLP, by:
APPEAL FROM THE WASHINGTON COUNTY CIRCUIT COURT [NO. CV11-1479-7]
HONORABLE JOANNA TAYLOR, JUDGE
AFFIRMED
RITA W. GRUBER , Judge
Arvest Bank brings this appeal from the order of the Washington County Circuit Court that granted summary judgment in favor of appellee Bank of America that foreclosed Bank of America's mortgage. The circuit court also denied Arvest's motion for summary judgment seeking to foreclose its junior mortgages. For reversal, Arvest contends that Bank of America cannot enforce its note and foreclose its mortgage because it did not meet the requirements for enforcing a lost instrument. We affirm.
The underlying facts are straightforward and undisputed. In 2003, Gregory Moore and his wife, Kara, executed a promissory note and mortgage in favor of Bank of America. Thereafter, Bank of America endorsed the note in blank and transferred possession of the note to ReconTrust Company for indexing and storage. The note was lost sometime thereafter. In 2008, Arvest acquired two junior mortgages on the property by making home-equity loans to the Moores.
The Moores defaulted on all three loans and later filed for bankruptcy. The Moores obtained a discharge of their debts in the bankruptcy proceeding, extinguishing their personal liability on the debts secured by the various mortgages.
On May 15, 2011, Arvest filed suit to foreclose its mortgage, naming the Moores and Bank of America as defendants. Bank of America filed a counterclaim against Arvest, as well as a cross-claim against the Moores and a third-party complaint against American Express Centurion Bank, to foreclose its mortgage. To support its claim for foreclosure, Bank of America submitted an Affidavit of Lost Promissory Note, in which Alejandra Silva, a bank vice president, testified that ReconTrust indexes and stores some of Bank of America's original collateral files, including the Moore file, and that she expected to find the original note in the Moore file but was unable to locate it.
American Express was a judgment creditor of a Gregory Moore, but it is not clear whether this is the same Gregory Moore involved in this suit.
On January 23, 2012, Bank of America filed a motion for summary judgment. In support of its motion, Bank of America submitted the Silva affidavit again, as well as the affidavit of Brienne Siriwan, an assistant vice president of the bank, regarding the Moores' default and the balance due on the note.
Arvest filed a response to the motion for summary judgment, as well as a cross-motion for summary judgment. Arvest conceded there were no material facts in dispute, but asserted that Bank of America was not entitled to enforce the note and mortgage because the note had been endorsed in blank and was no longer in Bank of America's possession. Arvest did not submit any affidavits in support of its cross-motion. The Moores also responded to Bank of America's motion, filing a brief that had been drafted by Arvest's attorney and shared with their attorney.
The circuit court heard oral arguments on the cross-motions for summary judgment on March 8, 2012. Prior to the hearing, the court entered a consent decree of foreclosure wherein the Moores did not dispute that a judgment in rem should be entered in favor of Bank of America in an amount not less than $172,603.82, plus continuing interest, attorney's fees, and costs. Likewise, a similar consent decree of foreclosure was entered in Arvest's favor. Both consent decrees specifically reserved the issues between Arvest and Bank of America.
The circuit court ruled from the bench. First, the court granted Bank of America a default judgment against American Express Centurion Bank. The court found that Bank of America had submitted the affidavits of Alejandra Silva and Brienne Siriwan in support of its motion for summary judgment. The Siriwan affidavit established that the Moores were in default on their note and the balance due, together with interest, attorney's fees, and costs. The court found that the Silva affidavit asserted that the original note was placed with ReconTrust for indexing and storage. The court found that ReconTrust was the agent for Bank of America, and that the note was lost while in the possession of the bank's agent. The court concluded that Silva's affidavit satisfied the requirements for the enforcement of a lost instrument and that Bank of America was the proper party to enforce the note secured by the 2003 mortgage. The court found that Arvest failed to meet either affidavit with proof and that Bank of America was entitled to judgment as a matter of law on all issues set forth in its motion for summary judgment. The court denied Arvest's cross-motion for summary judgment. This appeal followed.
Ordinarily, upon reviewing a circuit court's decision on a summary-judgment motion, we would examine the record to determine if genuine issues of material fact exist. See Schultz v. Butterball, LLC, 2012 Ark. 163, ___ S.W.3d ___. However, in a case such as this one, which does not involve the question of whether factual issues exist but rather the application of legal rules, we simply determine whether Bank of America was entitled to judgment as a matter of law. See id.
For reversal, Arvest argues that, as a matter of law, Bank of America cannot enforce its mortgage. Specifically, Arvest relies on Article 3 of the Uniform Commercial Code. Ark. Code Ann. §§ 4-3-101 to -605 (Repl. 2001 & Supp. 2011). Arkansas Code Annotated section 4-3-301 provides that an instrument may be enforced by "(i) the holder of the instrument, . . . or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to § 4-3-309 or § 4-3-418(d)." According to Arvest, Bank of America cannot meet the requirements of section 4-3-309 because it cannot show that it was entitled to enforce the note at the time the note was lost due to the note having been endorsed in blank and given to ReconTrust for indexing and storage. Arvest then relies on sections 4-3201 and 4-3-203 defining negotiation and specifying the results from a transfer of a negotiable instrument to argue that, because the note was endorsed in blank before being given to ReconTrust, only ReconTrust is entitled to enforce the note. This, according to Arvest, results in the reversal of summary judgment in favor of Bank of America and entry of summary judgment in favor of Arvest.
Section 4-3-309(a) provides in pertinent part as follows:
(a) A person not in possession of an instrument is entitled to enforce the instrument if:
(1)(A) the person was entitled to enforce the instrument when loss of possession occurred, or
Resolution of this case does not require that we address the merits of Arvest's arguments because the real issue between Arvest and Bank of America is one of priority. A mortgage lien is perfected against subsequent encumbrances by recording the mortgage in the office of the circuit clerk of the county in which the mortgaged lands are situated. Ark. Code Ann. § 18-40-102 (Repl. 2003). The recording constitutes constructive notice of the prior encumbrances and perfects the lien against claims of bona fide purchasers or subsequent encumbrances. Id.; O'Neill v. Lyric Amusement Co., 119 Ark. 454, 459, 178 S.W. 406, 408 (1915). Priorities are determined from the date of recording. Carpenter v. Walker, 199 Ark. 829, 138 S.W.2d 68 (1940); Mitchell v. Badgett, 33 Ark. 387 (1878); Comment, Priority of Liens on Real Property in Arkansas: Mortgages, and Mechanics' and Materialmen's Liens, 12 Ark. L. Rev. 170 (1958). It is undisputed that Bank of America has the first mortgage on the property, recorded in 2003. Arvest's mortgages were recorded in 2008.
This leads us to the issue of whether, even if we agree with Arvest, there is prejudice to Arvest from the circuit court's ruling. In other words, even if we agree with Arvest that ReconTrust should have been the proper party to enforce the first mortgage, how does that change Arvest's position to a first priority. Our supreme court has, on many occasions, explained that an appellant must demonstrate prejudice or this court will not reverse. See, e.g. , Viravonga v. Samakitham, 372 Ark. 562, 279 S.W.3d 44 (2008); Commercial Energy Users Group v. Ark. Pub. Serv. Comm'n, 369 Ark. 13, 20, 250 S.W.3d 225, 231 (2007). Even if Bank of America is not the proper party, that first mortgage is still enforceable. Nowhere does Arvest explain how the fact that Bank of America is not the proper party to enforce the first mortgage somehow changes its position from a junior lien holder to a senior lien holder. It is not the duty of this court to research or develop arguments for an appellant on appeal. See Martin v. Pierce, 370 Ark. 53, 63-64, 257 S.W.3d 82, 90 (2007). Indeed, it is often said that failure to develop an argument precludes review by this court of the issue on appeal. See, e.g. , McNeil v. Weiss, 2011 Ark. 46, 378 S.W.3d 133; Davis v. State, 375 Ark. 368, 375, 291 S.W.3d 164, 169 (2009).
Because Arvest does not explain how it is entitled to advance its mortgages to first-priority status, we affirm the circuit court's grant of summary judgment in favor of Bank of America.
Affirmed.
PITTMAN and WHITEAKER, JJ., agree.
Daniels, Woods, Snively, Atwell Law Group, LLP, by: Nick Churchill, for appellant.
Wright, Lindsey & Jennings, LLP, by: Judy Simmons Henry and Adrienne L. Jung, for appellee.
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(2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.