Wills & Trusts – Mortgages – Executor/Trustee’s Authority – Banks & Banking

Although a will and testamentary trust charged the executor/trustee – who also held a life estate in the trust’s property – with protecting the interests of the remaindermen, the will and trust also gave the executor/trustee full authority to mortgage the trust property, and the defendant-lender had no monitor the executor/trustee’s use of the mortgage proceeds.

We affirm judgment for the lender.

Roberta Grant died on December 28, 1988, leaving her husband, David Grant, a life estate in Charleston property burdened by two mortgages totaling $160,000. David died on July 3, 2016, leaving the property burdened by a mortgage debt of $669,984.89. The remaindermen challenge the propriety of the mortgage.

The construction of a will is an action at law, while an action to construe a testamentary trust is equitable in nature. Nevertheless, because the prayer for relief in this case asks the court to determine the validity of a mortgage, the character of this action is one in equity.

It is true that Roberta’s will required David to protect the remaindermen. However, the will granted David, both as executor and as trustee, the authority to borrow money for any purpose and to mortgage any trust property.

The will also said that 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 Will in general shall be construed accordingly.”

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

With respect to the remaindermen’s assertion that the lender had a duty to look after their interests, we note that a trust provision states, “No person paying money or delivering any property to any Trustee need[s] to see to its application.” The lender was delivering money to David as the appointed trustee in exchange for a mortgage on the trust property. According to the trust’s explicit terms, the lender had no duty to oversee the administration of the mortgage proceeds on behalf of the remaindermen.

The remaindermen point to another will provision: “[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. Therefore, the circuit court did not err in finding that the lender had no duty to benefit the remaindermen.

The remaindermen cite a footnote from Wachovia Bank, N.A. v. Coffey, 404 S.E. 421, 746 S.E.2d 35 (2013): “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.” However, Coffey involved a husband – who had no ownership interest in his wife’s property – mortgaging his wife’s property. Here, there was no reason for the lender to be concerned that David did not have the authority to mortgage the property.

Affirmed.

Grant v. Nationstar Mortgage, LLC (Lawyers Weekly No. 012-033-23, 8 pp.) (Per Curiam) Appealed from Charleston County Circuit Court (Bentley Price, J.) Daniel Scott Slotchiver, Stephen Michael Slotchiver, Jesse Sanchez and Stephen Spitz for appellants; Lawrence Michael Hershon for respondent. South Carolina Court of Appeals (unpublished)