September 9, 2013
by Andrew Babitz
South & Associates, P.C. – USFN Member (Kansas, Missouri)
The Missouri Court of Appeals for the Eastern District recently handed down a decision that clarifies the notice required to bring an unlawful detainer matter following foreclosure. In Federal National Mortgage Association v. Wilson, 2013 WL 3943016 (Mo. Ct. App. 2013), the appellate court reversed and remanded the trial court’s decision in favor of the borrower.
The trial court had held, among other things, that the borrower did not default on the underlying note and, thus, never lost her right to possession of the property. The lower court reasoned that because the borrower’s right to possession predated Fannie Mae’s title to the property obtained after the foreclosure sale, the borrower’s right to possession was superior.
The trial court also determined that Fannie Mae failed to provide the former borrower with proper notice pursuant to Mo. Rev. Stat. § 534.030.1. The trial court’s order held that Fannie Mae did not provide proper notice because the GSE could not prove it sent a certified written letter demanding that the borrower vacate the property or that it had personally served the written demand letter upon the borrower. The trial court held that the written notice of foreclosure was not enough to satisfy Mo. Rev. Stat. § 534.030.1. Id. at *2.
The Court of Appeals reversed on all accounts and found that Fannie Mae successfully proved the three elements necessary to prevail in an unlawful detainer proceeding following foreclosure: (1) that the property was purchased at a foreclosure sale; (2) the defendant received notice of the foreclosure; and (3) the defendant refused to surrender possession of the property. Id. at *3; U.S. Bank v. Watson, 388 S.W. 233, 236 (Mo. Ct. App. 2012); JPMorgan Chase Bank v. Tate, 279 S.W.3d 236, 239 (Mo. Ct. App. 2009).
The court cited the longstanding statute, Mo. Rev. Stat. § 443.380, which states that recitals in a trustee’s deed after a foreclosure sale, “shall be received as prima facie evidence in all courts of the truth thereof.” The court held that the former borrower received notice of the foreclosure because the foreclosing law firm sent a certified written notice of the foreclosure sale to the former borrower pursuant to Mo. Rev. Stat. § 443.325.3. The court stated that the trustee’s deed contained the United States Post Office receipt showing that the certified notice of foreclosure was sent. Id. at *4.
Furthermore, the court held that the borrower, falling in the after-foreclosure class of unlawful detainer, was not entitled to written demand for the property described by the trial court in addition to the notice of the foreclosure. The court stated “since the nineteenth century, Missouri courts interpreting the unlawful detainer statute have unequivocally determined that written demand should apply only to the intruder class.” Id. at *6. This holding is extremely important to servicers because it clarifies the notice required in unlawful detainer cases post-foreclosure, and should reduce litigation on this point. The court has now clarified that the United States Post Office receipt proving that notice of the foreclosure was sent by certified mail satisfies the notice of the foreclosure requirement.
Wilson follows the recent Missouri Supreme Court decision, Wells Fargo Bank v. Smith, 392 S.W.3d 446 (Mo. 2013), which paved the way for Wilson by, among other things, providing an excellent summary of the legislative history regarding Missouri’s unlawful detainer statute. In Smith, the high court affirmed Missouri’s longstanding law that counterclaims and affirmative defenses may not be raised in unlawful detainer proceedings. Specifically, the court affirmed, Mo. Rev. Stat. § 534.210, which explicitly states that, “the merits of title shall in nowise be inquired into, on any complaint which shall be exhibited by virtue of the provisions of this chapter.” Id. at 460.
The court in Smith further held that homeowners who dispute a lender’s right or ability to foreclose upon their property have two options. They may either (1) sue to enjoin the foreclosure sale from occurring, or (2) if the sale has occurred and the buyer has sued for unlawful detainer, bring a separate action challenging the foreclosure purchaser’s title and seek a stay of the unlawful detainer action in that separate case. Id. at 461.
Author’s Note: The defendant Fiona Wilson filed a motion for rehearing/transfer to the Missouri Supreme Court on August 7, 2013. The motion was denied by the Court of Appeals on August 22, 2013. Defendant Wilson filed an Application for Transfer directly to the Missouri Supreme Court on September 6, 2013. The Application for Transfer had not been decided at press time of this article.
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