Mississippi Appeals Court Holds Beneficiary of Deed of Trust Has Priority Over Prior Deed of Trust Because the Prior Deed of Trust Lacked a Named Beneficiary

In an action brought by plaintiff, a beneficiary under a subsequent deed of trust, seeking a declaration that it had first priority to property over that of the beneficiaries under a prior deed of trust that originally lacked a named beneficiary, the Court of Appeals of Mississippi recently affirmed the chancery court’s grant of summary judgment in favor of plaintiff, holding that while the prior deed of trust was not void for initially lacking a named beneficiary, plaintiff’s affidavit in support of its motion precluded a fact issue as to whether its predecessor-in-interest had actual notice of defendants’ prior deed of trust.  See Borries v. Goshen Mortgage, LLC, 219 So.3d 593 (Miss. Ct. App. 2017).  In the case, non-party purchasers bought a residence in June 2005 and executed a deed of trust.  In August 2005, the purchasers executed a deed of trust on a portion of the land, but failed to name a beneficiary.  In October 2005, the purchasers executed a third deed of trust.  In March 2007, the purchasers refinanced their loan and executed a deed of trust on the entire property to plaintiff’s predecessor-in-interest, which was recorded on April 30, 2007.  As a result of the refinance, the June 2005 deed of trust and October 2005 deed of trust were paid off.  However, the blank beneficiary deed of trust did not appear in the title search because there was no named beneficiary.  In April 2008, the blank beneficiary deed of trust was corrected to name defendants as the beneficiaries, and was re-recorded in the land records.  Plaintiff filed this suit in May 2014.  In April 2015, plaintiff moved for summary judgment against defendants.  The court granted the motion and defendants appealed.

The Court of Appeals affirmed the chancery court’s determination that Mississippi Code Annotated sections 89-5-5 and 89-5-37 govern.  These statutes provide that if there is no actual notice of prior encumbrances, the priority of instruments is based on a first-to-file rule (section 89-5-5); and if an instrument without a beneficiary is recorded, it “shall not impart notice to anyone” (section 89-5-37).  Therefore, plaintiff held the prior recorded deed of trust, and the corrected blank beneficiary deed of trust, which was re-recorded one year later, was subordinate to plaintiff’s.  The Court further rejected defendants’ argument that summary judgment was improper because fact issues remain on actual notice, the exception to first-to-file priority under section 89-5-5.  The Court reasoned that plaintiff submitted an affidavit of the settlement agent who swore, based on “personal knowledge,” that the lender had no knowledge of any other deed of trust aside from the two deeds of trust discovered during the title search and paid off at the refinance closing.  Defendants did not offer any evidence to contradict the affidavit.  Accordingly, plaintiff held priority interest over defendants’ prior deed of trust.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com or Clarissa Gomez at cgomez@riker.com.