KANSAS CITY – The Missouri Court of Appeals in December upheld a trial court’s decision that a lender does not have to make a probate claim to protect its lien against a property when transferred through a beneficiary deed.

William Meyer, a partner with Martin Leigh Attorneys who specializes in civil litigation, explained the case to the St. Louis Record.

“A real property owner obtained a loan from a lender which was secured by a mortgage lien against the property,” Meyer said. “Later, the property owner signed a beneficiary deed that, upon her death, would convey her property to her relative.”

When the owner died, property ownership transferred to her son, David Wayne Lester. The lender, Nationstar Mortgage, did not make a probate claim regarding its interest in the property within 12 months of the original owner's death. This was the basis for Lester's suit.

“The relative sued the lender for a ruling to declare that the lender’s mortgage was nullified by the lender’s failure to timely make a probate claim,” Meyer said.

The court ruled in favor of Nationstar Mortgage, and Lester appealed the decision to the Missouri Court of Appeals.

In its defense, Nationstar Mortgage argued that under Missouri law, lien holders do not need to make probate claims to protect their lien interest against a property. The company also argued that because the property transferred to the plaintiff through a beneficiary deed, the property was never subject to probate and therefore Nationstar Mortgage had not been required to make a probate claim.

The appeals court focused on Nationstar Mortgage’s second argument in its decision. 

“The crux of Lester’s points — that Nationstar Mortgage had to open an estate in order to enforce its lien — ignores the legal effect of the beneficiary deed,” the court said. When the initial property owner died, the property passed to the plaintiff as a nonprobate transfer.

The court’s decision said that under Missouri law, Lester’s ownership of the property did not come free and clear.

"The law specifically provides that a beneficiary of a nonprobate transfer takes the owner’s interest in the property at death subject to all conveyances, assignments, contracts, set offs, licenses, easements, liens and security interests made by the owner or to which the owner was subject during the owner’s lifetime,” the decision said.

According to Meyer, the Court of Appeals did not err by failing to address Nationstar Mortgage’s first argument.

“The Court of Appeals’ analysis was correct,” he said. “The property, because it transferred through a beneficiary deed, was never subject to the Missouri probate code. There was no reason for the Court of Appeals to address the lender’s argument that the Missouri probate code does not require real and personal property owners to make probate claims to protect their lien interest.”

It's not unusual for heirs to challenge a lien, Meyer said. However, despite the loss in Lester's appeal, Meyer said it's unlikely that he will request to have the decision reconsidered.

“There is no indication in the record that Mr. Lester has requested that the Court of Appeals’ decision be reconsidered or reviewed by the Missouri Supreme Court,” Meyer said.

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