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Sbs Financial Services, Inc v. the Plouf Family Trust

October 3, 2012

SBS FINANCIAL SERVICES, INC., PLAINTIFF AND APPELLEE,
v.
THE PLOUF FAMILY TRUST, MICHAEL PLOUF, SUCCESSOR TRUSTEE; DEFENDANTS AND APPELLANTS, AND LARRY G. ENGLUND, MARIANNE M. ENGLUND, HUSBAND AND WIFE; AND ITC SERVICE FIRST, INC., DEFENDANTS.



APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA THE HONORABLE DOUGLAS E. HOFFMAN Judge

The opinion of the court was delivered by: Wilbur, Justice

CONSIDERED ON BRIEFS ON APRIL 17, 2012

#26155

[¶1.] In this case, we interpret a trust instrument to decide whether the death of Betty Plouf triggered the offset provision of the Plouf Family Trust (Trust), and thus, instantaneously satisfied the mortgage lien the Trust held on the home of a beneficiary. We hold that it did and affirm the decision of the trial court.

FACTS AND PROCEDURAL BACKGROUND

[¶2.] Although this case turns on the interpretation of a trust instrument, it has its origins in a first and second mortgage on the home of Larry and Marianne Englund. In 1993, the Englunds, in exchange for a $52,000 loan, gave Marianne's parents, Richard and Betty Plouf, a mortgage on the Englunds' home. In 2002, the Ploufs assigned their mortgage interest in the home to the Trust for which they were settlors, lifetime beneficiaries, and co-trustees. Richard died in March 2007, and Betty, under the terms of the Trust, became the "surviving spouse" beneficiary. The Ploufs' five children, including Marianne, were the remainder beneficiaries of the Trust.*fn1

[¶3.] In 1997, the Englunds, in exchange for a $97,956.41 loan, gave the First Bank of South Dakota, N.A., a mortgage interest in their home. This mortgage was later assigned to appellee SBS Financial Services (SBS). In 2008, SBS filed this action against the Englunds, the Trust, and Michael Plouf, the Successor Trustee of the Trust (collectively, "Appellants"). SBS asked that the trial court determine that its mortgage was superior to the mortgage held by the Trust and allow SBS to foreclose on the Englunds' home.*fn2 According to SBS, although the Trust filed its mortgage prior to SBS's mortgage, the Trust obtained the mortgage in a fraudulent manner and thus its mortgage interest was void.

[¶4.] The Appellants defended against the fraud claim and filed a cross- claim asserting that their mortgage was superior and requested an order authorizing them to commence with foreclosure. After trial to the court, the court determined that the Trust mortgage was valid and superior to SBS's mortgage and the trial court issued an order to this effect on February 24, 2011. However, the order did not contain any language regarding whether either party could pursue foreclosure.

[¶5.] About a week later, on March 4, 2011, Betty died. On April 20, 2011, SBS filed a motion to vacate and set aside or, in the alternative, to modify the February 24 order. In addition, the Trust brought a motion to foreclose on April 29, 2011.

[¶6.] The court heard both motions on May 20, 2011. SBS, relying on language contained in the Trust, argued that Betty's death constituted new evidence which justified vacating the February 24 order. In its motion, SBS contended that Betty's death triggered an offset provision of the Trust. According to SBS, under the terms of the offset provision, immediately upon Betty's death, Marianne's mortgage debt to the Trust was offset against her share of the Trust proceeds; thus, satisfying the Trust's mortgage.

[¶7.] The trial court agreed and found that the trust document mandated that the trustee offset the outstanding mortgage debt to the Trust against Marianne's 25% interest in the approximate $3 million of Trust assets.

Subsequently, on August 24, 2011, the trial court entered a "Judgment Vacating Order of February 24, 2011" ordering that the Trust's mortgage was fully satisfied and SBS had a valid first-priority lien. The judgment also ordered that SBS "may proceed with its foreclosure proceedings."

[ΒΆ8.] On appeal, Appellants argue that the trial court did not have authority to revisit its initial order regarding priority and, in the alternative, that the trial court erred in ruling that the Trust mandated the ...


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