Court: Supreme Court of Alabama; February 8, 2018; Alabama; State Supreme Court
EvaBank appeals a summary judgment favoring Traditions Bank, TBX Title, Inc., and Terry Williams, with the court reversing and remanding the case. The undisputed facts reveal that on August 14, 2013, William and Connie Robertson entered into a purchase agreement with Terry Williams for their property, valued at $50,000, while EvaBank held two mortgages totaling approximately $41,000. Traditions Bank financed Williams' purchase, requesting a payoff statement for the EvaBank mortgages. On September 10, 2013, EvaBank erroneously faxed a payoff statement for Michael S. Roberson's loan instead of the Robertsons'. The transaction closed on September 13, 2013, with Traditions Bank paying EvaBank $22,123.25 based on the erroneous statement. EvaBank accepted and applied these funds to Roberson’s loan. When contacted by EvaBank about the Robertsons' past-due loan on September 18, EvaBank realized its mistake and subsequently applied the payment to the correct loan, demanding the remaining balance from the Robertsons. Traditions Bank then sued EvaBank for slander of title and to declare it the first lienholder, while EvaBank counterclaimed regarding mortgage priority and added claims against TBX Title for breach of contract, negligence, and slander of title. Williams also counterclaimed against EvaBank, seeking a declaration and damages for alleged fraud and negligence. All parties moved for summary judgment under Rule 56(c), Ala. R. Civ. P.
On February 7, 2017, the trial court granted summary judgment in favor of Traditions Bank and TBX Title, applying equitable estoppel to the claims against those parties and dismissing other claims. The court found that EvaBank had the opportunity to avert the injuries suffered and ordered it to release its mortgages on the property. EvaBank's postjudgment motion was denied, leading to this appeal. The appellate court reviews the case de novo due to undisputed facts. EvaBank argues that the trial court incorrectly applied equitable estoppel, asserting that the necessary elements for estoppel were absent.
Alabama law classifies the state as a "title" state regarding mortgages, where executing a mortgage transfers legal title to the mortgagee. EvaBank, holding legal title through mortgages for the Robertsons’ loan, contended that Traditions Bank and TBX Title needed to verify the accuracy of a payoff statement they received. Traditions Bank claimed reliance on a faulty payoff statement faxed by EvaBank, which had confused the Robertsons with another customer. To prove estoppel, Traditions Bank and TBX Title must show that EvaBank knowingly misled them, that they relied on this misleading communication, and that they would suffer harm if EvaBank later asserted a claim inconsistent with its previous conduct. It is undisputed that EvaBank faxed the incorrect payoff statement and did not realize the mistake until after the closing. Thus, EvaBank's lack of awareness negates any intent to induce reliance, undermining the basis for estoppel.
EvaBank did not intend for Traditions Bank or TBX Title to rely on the payoff statement for Michael S. Roberson regarding the real estate transaction involving the Robertsons and Williams. Testimony confirms that both Traditions Bank and TBX Title were aware of discrepancies in the payoff statement. The central legal question is whether their reliance on the statement was reasonable, given the established facts. For estoppel to apply, a party must show they acted in good faith and diligently sought the truth, as outlined in Ivey v. Dixon Inv. Co. and Webb v. Pioneer Ins. Co. Traditions Bank and TBX Title had access to various documents that included the full names of the Robertsons and the property details, while the payoff statement used the name Michael S. Roberson, which raised concerns. Tabitha White from Traditions Bank noted the name discrepancy but did not verify it against the closing documents, assuming its accuracy because it came from EvaBank at the customer's request. TBX Title's Debra Butler also recognized the name mismatch but believed it was unnecessary to question the validity since the statement originated from EvaBank. Both institutions shared the responsibility for obtaining an accurate payoff statement, yet neither followed up on the discrepancies, despite having multiple documents that confirmed the correct names and property details.
E-mails between White and Butler reveal that they were aware prior to the closing that the Robertsons had relocated to Texas and no longer resided in Hanceville. However, the payoff statement used by Traditions Bank and TBX Title indicated a property address in Moulton, a different county. When questioned about this inconsistency, Butler acknowledged that while it was common for addresses to differ in various documents, she would typically verify discrepancies if they arose. The evidence indicated that both banks were aware of inconsistencies that, with due diligence, would have disclosed that the payoff statement did not pertain to the EvaBank mortgages on the Robertsons' property. Consequently, the court determined that the reliance on the payoff statement without further investigation was unreasonable, negating any claim of estoppel for a priority interest in the property. The trial court's summary judgment favoring Traditions Bank and TBX Title was reversed and remanded for further proceedings. The court also noted that the Alabama Residential Mortgage Satisfaction Act's provision regarding erroneous payoff statements did not apply since the payoff statement was requested via telephone, which is excluded from the Act's provisions.
