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In re Francis

United States Court of Appeals, Eighth Circuit

April 25, 2014

In re: Charles Ray Francis; Rhonda Kay Francis, Debtors;
v.
Summit Bank, N.A., et al., Defendants - Appellees Ocwen Loan Servicing LLC, Plaintiff - Appellant

Submitted December 20, 2013

Appeal from United States District Court for the Western District of Arkansas - Hot Springs.

For Ocwen Loan Servicing, LLC, LLC, Plaintiff - Appellant: Charles Turner Coleman, Johnathan Dwaine Horton, Gary D. Marts Jr., Wright & Lindsey, Little Rock, AR; Don A. Eilbott, Jack & Nelson, Little Rock, AR.

For Summit Bank, N.A., Defendant - Appellee: Marian Major McMullan, McMullan Law Firm, Little Rock, AR.

For Rhonda Kay Francis, Charles Ray Francis, Defendants - Appellees: Christian W. Frank, North Little Rock, AR.

For Farmers Bank & Trust, formerly known as: Southern State Bank 211 N. Washington, Defendant - Appellee: Henry C. Kinslow, El Dorado, AR.

Before WOLLMAN, LOKEN, and KELLY, Circuit Judges.

OPINION

Page 755

LOKEN, Circuit Judge.

GMAC Mortgage Corporation, the predecessor in interest of appellant Ocwen Loan Servicing LLC, refinanced a first mortgage loan on a home and surrounding twenty two acres of land owned by Ray and Rhonda Francis. In preparing a mortgage securing GMAC's loan, its agents described an adjacent eleven acres as the mortgaged property and filed the flawed mortgage in the recorder's office. See Ark. Code Ann. § 18-40-102. Ray Francis brought this error to GMAC's attention, but GMAC failed to correct it. Some months later, appellees Summit Bank, N.A., and Southern State Bank (later renamed Farmers Bank & Trust) made additional loans to the Francises secured by recorded mortgages on portions of the twenty-two-acre parcel. The Francises filed for Chapter 7 bankruptcy protection in November 2007. GMAC filed this adversary proceeding, claiming it is entitled to a first-priority lien by operation of the

Page 756

Arkansas doctrine of equitable subrogation, or to reformation correcting the mutual mistake in its mortgage. The district court[1] denied both forms of relief. Ocwen appeals the denial of equitable subrogation. We affirm.

I.

Southern State made the first mortgage loan on the twenty-two-acre property in Hot Spring County, Arkansas. The Francises refinanced the loan in October 2005. GMAC agreed to pay off the Southern State loan in exchange for a note and a first-priority mortgage on the property. In preparing the mortgage documents, GMAC hired an independent company to prepare title reports, identifying the land by street address. The title reports mistakenly described by metes and bounds an adjacent eleven-acre plot previously sold by the Francises' company, Francis Construction Corporation. GMAC incorporated that description in the mortgage documents. Ray Francis, a former Hot Spring County tax assessor, noticed the smaller acreage when a notary brought him the mortgage documents to sign. The notary knew nothing ...


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