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2005-UP-123 - Wells Fargo Bank v. Luther
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THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals


Wells Fargo Bank Minnesota, National Association, FKA, Norwest Bank Minnesota, National Association, as Trustee, for the registered Holders of Option One Mortgage Loan Trust 1999-C, Asset-Backed Certificate, Series 1999-C, without recourse,        Appellants,

v.

Peggy M. Luther and the South Carolina Department of Public Safety, and all unknown persons with any right, title or interest in the mobile   manufactured home described herein being a class designated as John Doe now known to be Denise Gardner,        Respondents.


Appeal From Kershaw County
Jeffrey M. Tzerman, Master-In-Equity


Unpublished Opinion No. 2005-UP-123
Heard January 11, 2005 – Filed February 17, 2005


AFFIRMED


Robert J. Thomas, of Columbia, for Appellant.

Rolland E. Greenburg, III and William L. Todd, both of Columbia, for Respondent.

PER CURIAM:  This appeal arises from an order allowing foreclosure on a piece of real property but not on a mobile home located on that property.  We affirm.

FACTS

In 1996, Denise Gardner acquired sole ownership of a mobile home that she placed on a piece of vacant real estate in Lugoff.  Both Denise and her mother, Peggy Luther, had an ownership interest in the real estate. [1]   Peggy moved into the mobile home with Denise after Denise was involved in an automobile accident. 

While Peggy was living with Denise, an agent of Approved Federal Savings Bank (“Bank”) contacted Peggy offering to consolidate her various debts by refinancing her real property.  Peggy agreed and understood the consolidation transaction was going to be a refinance on her property.  Pursuant to section 37-10-102(a) of the South Carolina Code (Supp. 2003), the Bank provided Peggy with a notice that explained she could choose her own closing attorney and insurance agent.  Because Peggy indicated she had no preference in legal counsel, Brett F. Kline was chosen by the Bank and served as Peggy’s counsel.  Kline met with Peggy twice in her home during this transaction. 

In order to effectuate the refinancing, Denise signed a limited warranty deed on September 3, 1999, conveying her interest in the real estate to Peggy, such that Peggy would become the sole owner of the real estate.   While the face of the deed did not purport to transfer the mobile home, the legal description of the deeded property which was contained on a separate paper and attached to the deed, included a statement that the transfer included all improvements on the real estate and “that it is the borrower’s intent that the mobile home loses its nature as personalty and becomes realty.” 

Peggy also executed a promissory note in favor of the Bank [2] for $65,500 on that same day.  The promissory note was secured by a mortgage on the real estate.   The legal description of the mortgaged property also stated that the transfer included all improvements and “that it is the borrower’s intent that the mobile home loses its nature as personalty and becomes realty.”  Peggy also executed an “Affixation Affidavit Regarding Manufactured Home,” and a manufactured housing rider to the mortgage, in which Peggy attested to the permanent affixation of the mobile home to the real estate. 

Peggy testified that she was seventy years old, did not necessarily understand what she was signing, did not finish the ninth grade, and was in poor health.  Peggy also testified that at the time she signed these papers, she believed that the land and the mobile home belonged to her daughter, Denise.  During Peggy’s deposition, Peggy represented that she knew she was signing the papers in order to have the “trailer refinanced,” but that she did not and never had owned the mobile home.  Peggy’s deposition testimony also revealed that she acknowledged signing the papers, but no one was there to witness her signature.  Peggy testified that her attorney, Kline, told her “not to worry about it, that he was going to take it back to the office, and get somebody to witness it there.”  The documents revealed Robert V. Harrelson to be the subscribing witness. 

Denise testified that it was never her intent to transfer the mobile home to her mother, and that she told Kline that she would not sign anything that could ever cause her to lose her mobile home.  Denise also testified that she thought her mother was borrowing money on the land and not the mobile home.  The loan proceeds were used to pay off Peggy’s medical bills and to pay off money Denise owed on the mobile home. 

On December 1, 2000, Peggy defaulted on the promissory note and mortgage.  The Bank brought a declaratory judgment action seeking a determination that the mobile home was subject to the mortgage and an action for foreclosure of the mortgage.  The case was transferred to the master-in-equity. 

The master issued an order on February 11, 2004, finding that each page of the mortgage was initialed by Peggy except the legal description, “which was prepared and attached to the document after the execution of the Mortgage and was never presented to or reviewed by Peggy.”   The master also found, in relevant part, that (1) the deed and mortgage were not properly witnessed, (2) the mortgage was invalid as a legal mortgage, (3) the deed failed to transfer title to the mobile home to Peggy, (4) the Bank failed to perfect a lien on the mobile home, (5) the failure to perfect was fatal to the Bank’s claim that it was entitled to foreclose on the mobile home as an improvement located on the real property, and (6) the Bank was entitled to foreclose pursuant to an equitable mortgage against the real estate only.  The Bank appeals the master’s failure to include the mobile home in the equitable mortgage.

STANDARD OF REVIEW

“Actions for foreclosure or the cancellation of instruments are actions in equity.”  Wilder Corp. v. Wilke, 324 S.C. 570, 576-77, 479 S.E.2d 510, 513 (1996).  Since the master-in-equity heard this equitable action without appeal to the circuit court, the appellate court may find the facts on appeal in accordance with its own view of the preponderance of the evidence.  Id.  However, the appellate court should not disregard the findings of the master who saw and heard the witnesses and was in a better position to judge their credibility.  Id.

LAW/ANALYSIS

The Bank’s sole argument on appeal is that the master erred in concluding that the mobile home was not a fixture and not subject to the equitable mortgage.  We disagree. 

The Bank argues that it was the intent of the parties to subject the mobile home to the equitable mortgage and permanently affix the mobile home to the real estate.  In making this argument, the Bank asserts the master erred in making certain findings of fact.  First, the Bank alleges the master erred in omitting from the order the fact that the legal description of the deeded property included the mobile home.  Second, the Bank alleges that the master erred in finding the legal description, which included the mobile home, was prepared and attached to the mortgage and deed after Peggy signed the papers.  Third, the Bank argues the master erred in finding that Denise testified “the mobile home at no time was to be transferred or included in the contemplated loan.”  We disagree and find that the facts, in accordance with our own view of the preponderance of the evidence, support the order of the master-in-equity.

Initially, we find the Bank’s equitable mortgage did not extend to the mobile home.  For an equitable lien to arise, there must be a debt owing from one person to another; specific property to which the debt attaches; and an intent, expressed or implied, that the property will serve as security for the payment of the debt.  First Federal Sav. and Loan Ass’n of Charleston v. Bailey,  316 S.C. 350, 356, 450 S.E.2d 77, 80-81 (Ct. App. 1994). If a mortgage is actually signed by the mortgagor and intended to secure the debt, it can be treated as an equitable mortgage. See Stelts v. Martin, 90 S.C. 14, 16-17, 72 S.E.2d 550, 551 (1911);  Bryce v. Massey, 35 S.C. 127, 142, 14 S.E. 768, 774 (1892).

In this case, there is no doubt that Peggy owes a debt to the Bank.  Moreover, it is uncontested that Peggy sought to secure the debt with her real estate.  However, we do not find that Denise or Peggy intended for the mobile home to serve as security.  The Bank does not appeal from the master’s finding that the deed purporting to transfer the mobile home from Denise to Peggy was invalid.  This unappealed ruling becomes the law of the case and precludes consideration of the validity of the deed on appeal.  See ML-Lee Acquisition Fund, L.P. v. Deloitte & Touche,  327 S.C. 238, 241, 489 S.E.2d 470, 472 (1997).  As a result, Peggy never had an ownership interest in the mobile home to subject to a mortgage.  Cf. McDavid v. McDavid, 187 S.C. 127, 139, 197 S.E. 204, 209 (1938) (“If one has a legal right to sell land, he would likewise have the right to mortgage it.”). 

Therefore, we must look to the intent of Denise, as sole and exclusive owner of the mobile home, to see if she entered into any transaction that would subject her mobile home to the Bank’s equitable mortgage.  Denise, however, owes no debt to the Bank.  The debt owed to the Bank is owed solely by Peggy.  While Denise signed a deed that purported to transfer her interest in the mobile home to her mother, this deed was found to be invalid.  See ML-Lee Acquisition Fund, L.P.,  327 S.C. at 241, 489 S.E.2d at 472.  Moreover, the legal description of the deeded property included improvements and a statement “that it is the borrower’s intent that the mobile home loses its nature as personalty and becomes realty.”  This legal description was never signed or initialed by Denise, nor does it evince Denise’s intent; rather, it merely expresses Peggy’s intent as “borrower.”  

Although the Bank asserts that the parties were represented by attorney Kline, implying that Denise knew the legal description on the deed included the mobile home and reflected her intent to transfer interest in the mobile home, the record does not reflect that attorney Kline represented Denise’s interests.    Rather, the record demonstrates that Kline was hired to represent Peggy’s interests and served as Peggy’s legal counsel. 

Denise expressed her intent to remain the owner of the mobile home to Kline and testified that she thought her mother was borrowing money on the land.  Thus, we find Denise did not intend to secure Peggy’s debt with her mobile home and as a result, the equitable mortgage was properly limited to the real estate. 

Additionally, we find the mobile home was not a fixture to the real estate and thus not subject to the equitable mortgage.  A mobile home is generally classified as personal property, such that a security interest may be perfected by listing the interest on the certificate of title.  Brockbank v. Best Capital Corp., 341 S.C. 372, 379, 534 S.E.2d 688, 692 (2000).  However, a mobile home may cease being personal property by annexation to real estate and may be sold with the real estate.  Id.   In such a case, the mobile home is considered a fixture and may be subject to any mortgage on the real estate.   See In re Rebel Mfg. And Mktg. Corp., 54 B.R. 674 (Bankr. D.S.C. 1985); Gilbert v. Easterling, 217 S.C. 267, ­­275, 60 S.E.2d 595, 597 (1950). 

A mobile home does not become a fixture by mere affixation to realty.  City of North Charleston v. Claxton, 315 S.C. 56, 62-63, 431 S.E.2d 610, 614 (Ct. App. 1993).  “Criteria for determining whether personalty becomes a fixture when affixed to realty includes: (1) the mode of attachment; (2) the character of the structure of the article; (3) the intent of parties making the annexation; and (4) the relationship of the parties.”  Id. 

In this case, the relationship of the parties is clear: Peggy and Denise are mother and daughter and the Bank is the lender.  With respect to the mode of attachment and the character of the structure, Denise testified that the mobile home is a rectangular doublewide, set up in two sections and fastened together.  She stated:  “The tires don’t come with it, but it’s all set up where they just put the tires back under it.  I mean, it’s movable.” Denise further explained:  “The tongue is laying right up under it.  All it takes is bolts to put it up.” 

At issue is the intent of the parties making the annexation.  There is evidence that Peggy and the Bank intended the mobile home to be a fixture.  Peggy signed a deed and mortgage containing a legal description stating that it was the borrower’s intent to treat the mobile home as a fixture and part of the real estate.  In addition, Peggy signed an affidavit stating that the mobile home was permanently affixed to the real estate and a rider in which she promised that the mobile home would be permanently affixed.  Furthermore, she purported to grant the Bank a security interest in the mobile home. 

At most, these documents evidence Peggy’s and the Bank’s intention to treat the mobile home as a fixture but do not suggest Denise, as rightful owner of the mobile home, had a similar intent.  Although Denise signed the deed, she did not initial the legal description, which stated that the transfer included all improvements and that the borrower intended to treat the mobile home as a fixture.  Nothing in the legal description suggests Denise intended to treat the mobile home as a fixture.  

Moreover, we decline to give substantial weight to the documents considering the circumstances under which they were signed. [3]   Peggy explained that the Bank contacted her and offered her a loan.  She stated that she was seventy years old, did not necessarily understand what she was signing, did not finish the ninth grade, and was in poor health.  Peggy’s attorney was chosen by the lender, did not leave copies of the documents with Peggy, failed to have the documents properly witnessed, and was hired to represent the interests of Peggy and not Denise.  Neither Peggy nor Denise signed or initialed the legal description, which purported to include the mobile home in the deed and mortgage and purported to state Peggy’s intent to treat the mobile home as a fixture.

Peggy testified that she believed that the land and the mobile home belonged to her daughter, Denise, but represented that she knew she was signing the papers in order to have the “trailer refinanced.”  Denise, on the other hand, never intended to for her mother to secure the loan with the mobile home or forfeit ownership of the home. 

Based on these facts, we find the mobile home did not become a fixture by its mere annexation to the real estate subject to the equitable mortgage.  Rather, the evidence suggests that the mobile home was readily movable and the parties did not intend to permanently annex the home to the real estate.  As a result, the master did not err in concluding that the mobile home was not a fixture and not subject to the equitable mortgage.

Finally, the Bank argues the master erred in finding it was estopped from including the mobile home in the mortgage because the deed failed to transfer title to the mobile home to Peggy.   The Bank asserts that the statutes setting forth the procedure for transferring a mobile home in addition to real estate were not in effect at the time the deed was executed and therefore not applicable to the transaction.  This argument was never raised to or ruled upon by the master-in-equity, and is not preserved for our review.  See Holy Loch Distrib., Inc. v. Hitchcock, 340 S.C. 20, 24, 531 S.E.2d 282, 284 (2000).  Furthermore, the master’s order did not find that the Bank was estopped from including the mobile home in the mortgage.  Rather, the order determined that the mobile home was not permanently affixed to the property, was not contemplated in the loan, was not transferred by deed to Peggy, and was not subject to the lien because the Bank failed to perfect by listing the interest on the certificate of title.  Therefore, we decline to address this issue on appeal.

CONCLUSION

Because we find the master correctly concluded that the mobile home was not a fixture and not subject to the equitable mortgage, the order of the master-in-equity is hereby

AFFIRMED.

HEARN, C.J., GOOLSBY and WILLIAMS, JJ., concur.       


[1] The parties’ briefs clarify that Denise and Peggy owned the real estate as tenants in common.  The description of the real estate attached to the mortgage and deed explains that it was conveyed to Peggy and Denise by deed in November of 1998.  Peggy testified that the property was her daughter’s property, but “[i]t ended up in my name somehow.”  The final order describes Denise’s interest as an “undivided one-half (1/2) interest.” 

[2] Approved Federal Savings Bank subsequently assigned the note and mortgage to Appellant, Wells Fargo Bank Minnesota. 

[3] The Bank seems to argue, pursuant to the parol evidence rule, that we are bound to consider only the documents as evidence of the parties’ intent.  However, the parol evidence rule only applies to the construction of written agreements.  See Redwend Ltd. Partnership v. Edwards,  354 S.C. 459, 471, 581 S.E.2d 496, 502 (Ct. App. 2003) (“The parol evidence rule prevents the introduction of extrinsic evidence of agreements or understandings contemporaneous with or prior to execution of a written instrument when the extrinsic evidence is to be used to contradict, vary, or explain the written instrument.”).  In this case, we are not construing a written agreement, but determining the extent of an equitable mortgage and fashioning a remedy in equity.  Thus, we are not bound by the parole evidence rule.