Kathleen A. Grant v. Nationstar Mortgage, LLC

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Kathleen A. Grant, Dylan T. Grant, Devin D. Grant, and
Andrea J. Grant, Appellants,

v.

Nationstar Mortgage, LLC, Respondent.

Appellate Case No. 2019-001732

Appeal From Charleston County
Bentley Price, Circuit Court Judge

Unpublished Opinion No. 2023-UP-264
Heard December 5, 2022 – Filed July 12, 2023

AFFIRMED

Daniel Scott Slotchiver and Stephen Michael Slotchiver,
both of Slotchiver & Slotchiver, LLP, of Mount Pleasant;
Jesse Sanchez, of The Law Office of Jesse Sanchez, of
Charleston; and Stephen A. Spitz, of A Business Law
Firm, of Charleston, all for Appellants.

Lawrence Michael Hershon, of The Hershon Law Firm,
P.A., of Charleston, for Respondent.
PER CURIAM: In this declaratory judgment action, Appellants Kathleen A. Grant,
Dylan T. Grant, Devin D. Grant, and Andrea J. Grant (collectively, Appellants) seek
review of an order of the circuit court finding that Respondent, Nationstar Mortgage,
LLC's (Nationstar) mortgage is a valid encumbrance on property owned by
Appellants. Appellants argue the court erred in finding that: (1) the current action is
an action at law; (2) Nationstar had no duty to benefit the remaindermen; and (3) the
life tenant had the authority to mortgage the property. We affirm as modified.

FACTS

On June 25, 1987, Roberta R. Grant (Roberta) purchased a property at 1 Wall
Street, Charleston, South Carolina (the Property). On December 28, 1988, Roberta
passed away and left her Last Will and Testament (the Will) granting her husband,
David E. Grant (David), a life estate interest in the property. Under the terms of the
Will, David was named as the executor of the estate and the trustee of the Will's
testamentary trust, and Appellants were named as remaindermen.

At the time of Roberta's death, there were two mortgages—in the amounts of
$50,000 and $110,000—on the Property. From May 2, 1990, to March 14, 2007,
David refinanced and consolidated the existing mortgages on the property and
executed new mortgages. The subject of this appeal is the March 14, 2007 mortgage
executed and delivered to Countrywide Home Loans (Countrywide) in the amount
of $625,000. On September 3, 2013, the mortgage was assigned to Nationstar. On
July 3, 2016, David passed away and Appellant Kathleen Grant was appointed as
the personal representative of his estate. As of July 16, 2019, the most recent
appraisal valued the property at $1,100,000, and the remaining balance of the
mortgage was $669,984.89.

On August 26, 2017, Appellants filed a declaratory judgment action asking
the circuit court to declare whether the mortgage on the property was proper noting
their position "that it was not proper or lawful to put permanent mortgages on the
property". On August 14, 2019, the circuit court denied the requested relief, finding
that "Nationstar's mortgage was a valid encumbrance on the Property both under the
express terms of the Will and the testamentary trust created under the Will." This
appeal followed.

STANDARD OF REVIEW
The parties disagree as to the proper standard of review in the present case.
Appellants contend that the trial court erred in characterizing this action as an action
at law. We agree.

The "[c]haracterization of an 'action as equitable or legal depends on the
appellant's "main purpose" in bringing the action.'" Verenes v. Alvanos, 387 S.C.
11, 16, 690 S.E.2d 771, 773 (2010) (quoting Ins. Fin. Servs., Inc. v. S.C. Ins. Co.,
271 S.C. 289, 293, 247 S.E.2d 315, 318 (1978)). "The main purpose of the action
should generally be ascertained from the body of the complaint." Id. The "main
purpose [is] reflected by the nature of the pleadings, evidence, and character of the
relief sought." Lollis v. Dutton, 421 S.C. 467, 478, 807 S.E.2d 723, 728 (Ct. App.
2017) (quoting Fesmire v. Digh, 385 S.C. 296, 303, 683 S.E.2d 803, 807 (Ct. App.
2009)). "[W]hen necessary, resort may also be had to the prayer for relief and any
other facts and circumstances which throw light upon the main purpose of the
action." Sloan v. Greenville Cnty., 380 S.C. 528, 534, 670 S.E.2d 663, 667 (Ct. App.
2009). "[W]here the complaint states facts which would support either a legal or an
equitable action, the relief demanded will ordinarily determine its character."
Bramlett v. Young, 229 S.C. 519, 531, 93 S.E.2d 873, 879 (1956) (quoting 1 C.J.S.
Actions, § 54).

"The construction of a will is an action at law. . . [but a]n action to construe
or interpret a testamentary trust is equitable in nature." Holcombe-Burdette v. Bank
of Am., 371 S.C. 648, 654-55, 640 S.E.2d 480, 483 (Ct. App. 2006). Further,
"[a]ctions to foreclose or cancel an instrument are [also] actions in equity." Cody
Disc., Inc. v. Merritt, 368 S.C. 570, 574, 629 S.E.2d 697, 699 (Ct. App. 2006).

The body of the complaint in the current action states in pertinent part:

This is a Declaratory Judgment Action filed pursuant to
S.C. Code [Ann. § 15-53-10 (2017)]. It asks the Court to
declare whether or not certain mortgages are valid vis-à-
vis four remaindermen / remainderwomen who only
recently came into possession of certain property in
Charleston, South Carolina and discovered that the
property they inherited is deeply encumbered by
mortgages that may well not be entirely proper.

This action is filed specifically under S.C. Code Sections
15-53-20 and 15-53-30 and asks the [c]ourt to interpret
various wills and to declare the meaning of those
documents in light of the law [in relation] to the mortgages
now on their property but placed there without their
knowledge or consent.

(emphasis added). The prayer for relief "request[s] that the [circuit c]ourt inquire
into this matter and determine whether or not the mortgages 1 are indeed valid and
lawful with regard to the [Appellants] in this case."

In Holcombe-Burdette, this court recognized that the differing standards of
review between the interpretation of wills and trusts presented an "obvious
conundrum" but declined to resolve the dilemma because it would not affect the
outcome of that case. Holcombe-Burdette 371 S.C. at 655, 640 S.E.2d at 483. In the
present case, the will and embedded testamentary trust present a similar conundrum.
However, unlike the situation in Holcombe-Burdette, the Appellants' prayer for
relief provides another consideration that we believe controls the analysis. See
Bramlett 229 S.C. at 531, 93 S.E.2d at 879 ("[W]here the complaint states facts
which would support either a legal or an equitable action, the relief demanded will
ordinarily determine its character.") (quoting 1 C.J.S., Actions § 54). Because the
prayer for relief asks the court to determine the validity of the mortgage, we find the
character of the action is one in equity. See Cody Disc., Inc., 368 S.C. at 574, 629
S.E.2d at 699 ("Actions to foreclose or cancel an instrument are actions in equity.").

"In an action in equity, while this [c]ourt is free to take its own view of the
preponderance of the evidence, this does not require us to disregard the findings of
the trial judge who saw and heard the witnesses and, accordingly, was in a better
position to judge their credibility." Id. at 574-75, 629 S.E.2d at 699.

LAW/ANALYSIS

I. David's Authority to Mortgage the Property

Appellants argue that the circuit court erred in finding that David had the
authority to mortgage the property "as he saw fit" because David was authorized to
mortgage the Property only to protect the interests of the remaindermen. We
disagree.

1
The Appellants' complaint asked the circuit court to inquire into "mortgages"
instead of the "mortgage." The only mortgage at issue on appeal is the March 14,
2007 mortgage in the amount of $625,000.
Long-established South Carolina precedent dictates that a life tenant may
execute a mortgage to the fullest extent of their life estate interest. See First Nat.
Bank v. Hutson, 142 S.C. 239, 244, 140 S.E. 596, 597 (1927) (finding that a life
tenant could mortgage her interest in a life estate even when her children had a
remainder interest); see also Bethea v. Bass, 240 S.C. 398, 412, 126 S.E.2d 354, 360
(1962) (clarifying that a mortgage executed by a life tenant covers only his life estate
interest and not a fee interest). This is particularly true when a will explicitly carves
out a life estate interest with the power of disposition. See Johnson v. Waldrop, 256
S.C. 372, 375, 182 S.E.2d 730, 731 (1971) (finding that "a life estate, with the
complete power to dispose and consume[,]" was a valid devise).

Article V, Section 1(d) of the Will defines the executor's rights and obligations
in pertinent part:

My husband, David E. Grant, shall be obligated to invest
and reinvest the properties from time to time constituting
the assets of such life estate, in order to protect the
remaindermen taking after him[,] and in furtherance of
said obligation he shall have and possess full power and
authority to mortgage or pledge all or any portion of such
property, either realty or personalty, or both[,] in fee
simple, absolutely, by warranty deed or otherwise, and
such conveyance may be public or by private sale, and at
such prices and upon such terms and conditions as he in
his absolute discretion may deem most advantageous,
taking into account the protection of remaindermen taking
after him. All resulting proceeds shall continue to be
properties of such life estate.

(emphases added). In David's capacity as trustee of the testamentary trust, the Will
reaffirms his authority "[t]o borrow money for any purpose, either from [himself] or
from others, and to mortgage or pledge any trust property[.]"

The above provisions reflect Roberta's unambiguous intent to grant David
absolute discretion to mortgage the Property. The circuit court, in stating that David
had the authority to mortgage the Property "as he saw fit," echoed this express
language in the Will.

Appellants argue that because David was subject to express limitations in the
Will, he could not mortgage the Property. Specifically, Appellants challenge the
circuit court's finding that David had the authority to mortgage the Property "as he
saw fit" because this finding is incongruent with the following limitation in Article
V, Section 1(b) of the Will:

[David] shall not in any event be entitled, directly or
indirectly, to consume or otherwise retain any principal of
this life estate absolutely as his own, or have or possess
any substantially equivalent powers or rights, and the
provisions of this article and of this [w]ill in general shall
be construed accordingly.

We find this provision restricts David from converting the mortgage proceeds
to fee simple. 2 However, we do not believe that this limitation conflicts with David's
wide latitude to mortgage the property as he deemed appropriate. Therefore, we find
that the circuit court did not err in finding David had the authority to mortgage the
property as he saw fit.

II. Countrywide's Duty to Remaindermen
Appellants next argue that if David lacked the authority to mortgage the
property, Countrywide—as a "sophisticated financial institution"—had a duty to
look after the remaindermen's interests. We disagree.

A. Roberta's Testamentary Intent
"The paramount rule of will construction is to determine and give effect to the
testator's intent." Holcombe-Burdette, 371 S.C. at 655, 640 S.E.2d at 483. "In
construing the provisions of a will, every effort must be made to determine and carry
out the intentions of the testator." Id. at 656, 640 S.E.2d at 483. "The rules of
construction that apply in this State to the interpretation of and disposition of
property by will also apply as appropriate to the interpretation of the terms of a trust
and the disposition of the trust property." S.C. Code Ann. § 62-7-112 (2022).

Here, the testamentary trust embedded within the Will lists powers which
apply to "[a]ny [t]rustee . . . and any others that may be granted by law[.]" This part
of the trust includes a provision that states "[n]o person paying money or delivering

2
There was no evidence presented at trial that David misused the proceeds of the
mortgage by conversion or retention. The circuit court found that David's
"utiliz[ation of] the proceeds is inconsequential as to the findings of this [c]ourt[.]"
any property to any [t]rustee need[s] to see to its application." In her Will, Roberta
states that "I appoint my husband, David E. Grant . . . as sole Trustee of this Will[.]"
Countrywide was delivering money to David as the appointed trustee in exchange
for a mortgage on the Property. Appellants suggest that Countrywide had a duty to
inquire into David's handling of the mortgage funds. However, according to the
Trust's explicit terms, Countrywide had no duty to oversee its administration on
behalf of the remaindermen.

Appellants argue that "the wide range of liberties afforded to possible
[t]rustees under the Will . . . specifically [do] not apply to David." This is in
reference to the provision in the will that states "[David] shall not in any event be
entitled, directly or indirectly, to consume or otherwise retain any of the principal of
this life estate absolutely as his own[.]" This limitation protects the nature of the
money or property in the life estate because "[David is] obligated to invest and
reinvest the properties from time to time[.]" However, we do not believe this
limiting provision may be translated into a duty owed by a mortgagee to the
remaindermen. Such a reading would contravene Roberta's intent in excluding third-
party obligations. See Holcombe-Burdette, 371 S.C. at 656, 640 S.E.2d at 483. ("In
construing the provisions of a will, every effort must be made to determine and carry
out the intentions of the testator."). Therefore, we find the circuit court did not err
in finding that Nationstar (and Countrywide) had no duty to benefit the
remaindermen.

B. Countrywide's Duty as a "Sophisticated Financial Institution"

Appellants also argue that as a "sophisticated financial institution,"
Countrywide had a duty to protect the remaindermen's interest. We disagree.

"The normal bank-depositor arrangement creates a creditor-debtor
relationship rather than a fiduciary one." Burwell v. S.C. Nat. Bank, 288 S.C. 34, 40,
340 S.E.2d 786, 790 (1986). "In limited circumstances, . . . a fiduciary relationship
may be created between a bank and a customer if the bank undertakes to advise the
customer as a part of the services the bank offers." Id. However, where there is no
evidence of a special relationship beyond that of a typical creditor-debtor
relationship, no fiduciary relationship is created. See Hotel & Motel Holdings, LLC
v. BJC Enterprises, LLC, 414 S.C. 635, 654, 780 S.E.2d 263, 273 (Ct. App. 2015)
(finding that because there was no evidence that a debtor reposed a special trust in a
creditor, a fiduciary relationship was not created).
Appellants hang their hat on a footnote in Wachovia Bank, N.A. v. Coffey
stating that "sophisticated financial institutions that prepare mortgages purporting to
encumber a customer's property must ensure that the customer in fact holds a legal
interest in that property so as to protect all pertinent interests." 404 S.C. 421, 426
n.1, 746 S.E.2d 35, 38 n.1 (2013). Appellants' reliance upon this statement, in
isolation, decontextualizes its meaning and misconstrues longstanding South
Carolina precedent.

The dispositive question in Wachovia was whether a bank may foreclose on
an invalid mortgage. Id. at 425, 746 S.E.2d at 38. In Wachovia, a husband "obtained
a $125,000 home equity line of credit from [the lender], and secured the loan with
the couple's residence, which was titled in [his w]ife's name only." Id. Our supreme
court found that the lender "never possessed a valid mortgage on the property and
cannot pursue an action against [the w]ife related to that mortgage." Id. at 425–26,
746 S.E.2d at 38. As a result of the lender's flagrant disregard of proper title, the
court cautioned against "allow[ing] lenders to ameliorate their complete failure to
exercise proper due diligence at the expense of third parties." Id. at 426 n.1, 746
S.E.2d at 38 n.1.

Here, David had the express authority to mortgage the property by virtue of
his status as the executor of Roberta's estate and trustee of her testamentary trust.
Unlike the situation in Wachovia, there was no reason for Countrywide to be
concerned that David did not have the authority to mortgage the property. We find
that Countrywide had neither a fiduciary responsibility to warn the remaindermen
that a mortgage had been levied upon the property nor the authority to overrule
David's decision to do so. Therefore, we find Countrywide—and Nationstar as its
successor in interest—had no duty to protect the remaindermen.

CONCLUSION

Accordingly, we affirm the circuit court's order as modified to reflect the
proper designation of the action as one in equity.

AFFIRMED.

GEATHERS and MCDONALD, JJ., and HILL, A.J., concur.