Article Library
Blog Home All Blogs
Search all posts for:   

 

A Cautionary Tale: Foreclosed Borrowers Sue Bank and Others Claiming Personal Injury and Unlawful Conversion

Posted By USFN, Tuesday, May 15, 2018
Updated: Thursday, May 10, 2018

May 15, 2018

by Brian Liebo
Usset, Weingarden & Liebo, PLLP – USFN Member (Minnesota)

In Schulz v. Power Movers of Minnesota, Inc. (Minn. Ct. App., unpub. Apr. 16, 2018), the plaintiff-former homeowners (a couple) had lived in the property where they operated a fertilizer business. The bank had foreclosed its mortgage and was the successful bidder at the sheriff’s sale; when the borrowers failed to redeem, the bank commenced an eviction action.

Eviction
After the district court issued a writ of recovery and ordered the borrowers to vacate, the bank hired a moving company to remove and store the borrowers’ personal property. The property was in a difficult condition for moving. There were cluttered business records “stacked helter-skelter on tables, chairs, desks, and floors,” complaints of “odors akin to animal feces,” and “a frozen cat in a freezer.” It was a “massive disarray of furnishings, records ….” To top it off, one of the movers suffered a puncture wound from a hypodermic needle in a pile of papers on the floor during the moving process. “It took the movers 687 boxes and six days to complete the move into 14 storage bays.”

The borrowers gained access to their business records and property after the move. Following many hours hunting through boxes, one of the borrowers said a wardrobe box (beside her) buckled under the weight of items stacked on top of it, knocking her to the floor and seriously injuring her shoulder.

Post-Eviction Claims, including Negligence and Conversion
The borrowers sued the bank and moving company, alleging violations of multiple statutes (including the Minnesota eviction statute, found under chapter 504B; and tort claims of negligence and conversion, among other claims). The applicable eviction statute under chapter 504B.365, subd. 3(f) provides the following: “The [eviction] plaintiff is responsible for the proper removal, storage, and care of the defendant’s personal property and is liable for damages for loss of or injury to it caused by the plaintiff’s failure to exercise the same care that a reasonably careful person would exercise under similar circumstances.” The borrowers settled with the bank.

The district court granted summary judgment to the moving company, concluding that the eviction statute applies only to rental-property disputes and not to matters arising out of mortgage foreclosures. However, the Minnesota Court of Appeals ultimately determined that even though the Minnesota eviction statutes are under a chapter titled “Landlord and Tenant” and the chapter focuses mostly on landlord-tenant disputes, it doesn’t state that it applies to those disputes exclusively. Instead, chapter 504B defines eviction not only as a landlord’s process for removing tenants but more broadly as a summary court proceeding to remove tenants “or occupants” from real property. The appellate court held that the eviction statute creates a private cause of action for persons injured in connection with evictions and, further, that the plaintiffs could proceed with their negligence cause of action (for an alleged breach of a duty of reasonable care by the stacking of heavy objects over lighter items at the storage facility).

The plaintiffs also alleged damaged and missing items in their conversion cause of action. One of the borrowers offered testimony that her neighbors witnessed the movers drinking beer, throwing items, and mishandling boxes; this was inadmissible hearsay. Accordingly, those claims were dismissed since they lacked admissible evidence.

Closing Words
As a practice pointer, it is important for foreclosing banks to hire agents, property preservation companies, movers, and storage companies that have significant experience and provide high quality services in the securing, moving, and storing of property. These agents and companies should also be fully versed in the laws that impact their work from their own legal counsel. Moreover, foreclosing banks should ensure that these agents and companies are fully insured and in a position to protect and fully indemnify the foreclosing bank from claims that may arise from their work.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Illinois: Appellate Court Continues to Clarify Requirements of a Purchaser at a Foreclosure Sale in Extinguishing Condominium Association Lien

Posted By USFN, Tuesday, May 15, 2018
Updated: Thursday, May 10, 2018

May 15, 2018

by Marcos Posada
McCalla Raymer Leibert Pierce, LLC – USFN Member (Connecticut, Florida, Georgia, Illinois)

Illinois continues to present challenges to purchasers of condominiums at foreclosure sales. Many associations make it difficult to pay the proportionate share of assessments following the foreclosure sale by refusing to provide ledgers, providing ledgers untimely, or by adding on unwarranted fees and costs to their ledgers. Because of the potential for litigation in this area, Illinois continues to present updates to existing case law that refine the process of lien extinguishment post-foreclosure sale. Recently, the First District Appellate Court of Illinois provided purchasers additional clarity on what can constitute extinguishment of an association’s lien.

In Quadrangle House Condo. Ass’n v. U.S. Bank, N.A., No. 1-17-1713 (2018 Ill. App. (1st) Apr. 20, 2018), the association appealed the trial court order granting summary judgment in favor of U.S. Bank, the purchaser of the condominium unit following the foreclosure sale that occurred on November 13, 2015. The only issue on appeal presented by the association was whether, “pursuant to section 9(g)(3) of the Act, the Bank’s $5,411.31 payment for post-purchase assessments on September 13, 2016, confirmed the extinguishment of any lien in its favor by reason of the prior unit owner’s failure to pay assessments accruing prior to the Bank’s purchase of the Subject Unit at the foreclosure sale.” Quadrangle, ¶ 9.

The association contended that section 9(g)(3) of the Illinois Condominium Property Act (Act) required a strict deadline for payment of assessments, and U.S. Bank was required to make its payment for assessments the month following the judicial foreclosure sale. Having issued payment approximately ten months after the sale, the association concluded that U.S. Bank failed to extinguish its lien for pre-sale assessments. In Quadrangle, the court rejected the association’s argument and held:


As this court noted in its decision in Country Club Estates Condominium Ass’n v. Bayview Loan Servicing LLC, 2017 IL App (1st) 162459, ¶ 14, “it is clear that a foreclosure buyer’s duty to pay monthly assessments begins on ‘the first day of the month after the date of the judicial foreclosure sale.’ [Citation.] But on the face of the statute, section 9(g)(3) does not contain any time limit for confirming the extinguishment of an association’s lien.” See also 5510 Sheridan Road Condominium Ass’n v. U.S. Bank, 2017 IL App (1st) 160279, ¶ 20. In its decision in 1010 Lake Shore, the supreme court did state that “[t]he first sentence of section 9(g)(3) plainly requires a foreclosure sale purchaser to pay common expense assessments beginning in the month following the foreclosure sale.” 1010 Lake Shore, 2015 IL 118372, ¶ 24. However, we do not interpret that phrase to mean that the purchaser of a condominium unit at a foreclosure sale must commence remitting payments for post-purchase assessments in the month following the sale. Quadrangle, ¶ 11.


Further, the court explained that prompt payment was not a condition precedent to the extinguishment of an association lien created under 9(g)(1) of the Act, expressly holding: “In Section 9(g)(3) of the Act, the legislature did not place any temporal requirement on the payment of post-purchase assessments in order for the payment to confirm the extinguishment of any lien created under subsection 9(g)(1) of the Act; nor do we believe that the supreme court in 1010 Lake Shore found promptness of payment to be an implicit requirement in the statute. To the extent that the decision in Bayview held to the contrary, we decline to follow it.” Quadrangle, ¶ 15.

In affirming the trial court’s order, the appellate court found that U.S. Bank’s payment of post-foreclosure sale assessments, ten months after the sale occurred, sufficiently extinguished the lien of the association.

Conclusion
Condominium units are frequently purchased at the foreclosure sale by the foreclosing plaintiff. A purchaser should act quickly to request a ledger from the appropriate association following sale so that prompt payment of post-sale assessments can be made and the association lien can be extinguished. The Quadrangle decision offers clarity in Illinois as to what actions the purchaser of a condominium unit at a judicial foreclosure sale must take to extinguish an association lien.


As associations often seek pre-sale assessments and charges, purchasers are now armed with authority stating that payment of the post-sale obligation confirms extinguishment of the lien from the prior owner’s unpaid obligation, which could save thousands of dollars per unit. Equally important is that legal counsel be obtained in the event an association seeks unwarranted fees or assessments following the foreclosure sale; a successful challenge to an association could save tens of thousands of dollars.


Editor’s Note: At both the trial and appellate levels, the author’s firm represented U.S. Bank in the case summarized in this article.

© Copyright 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Invitation for Comment to Restyle the Federal Rules of Bankruptcy Procedure

Posted By USFN, Tuesday, May 15, 2018
Updated: Tuesday, May 8, 2018

May 15, 2018

by Edward J. Boll III
Lerner, Sampson & Rothfuss – USFN Member (Kentucky, Ohio)

Over the last several years many of the federal rules have undergone a process known as restyling — designed to make them simpler, more understandable, and easier to read and use. With the exception of the rules in Part 8, which were recently revised, the Federal Rules of Bankruptcy Procedure (FRBP) have not been restyled, partially in deference to their close linkage to provisions of the Bankruptcy Code.

The Advisory Committee on Bankruptcy Rules is now considering whether to recommend that the FRBP undergo the restyling process and is soliciting input from the public. With the assistance of the Federal Judicial Center, the Advisory Committee’s Restyling Subcommittee has created a short survey seeking opinions and comments on the benefits and drawbacks of restyling.

If you, or your organization, would like to provide feedback, please complete the survey (note: link is external) by June 15, 2018. We encourage you to contribute your views. The survey results will be reviewed by the Restyling Subcommittee and given careful consideration as it decides on a recommendation to present to the Advisory Committee.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Connecticut: In Order to Properly Notice a Borrower of Default, Strictly Comply with the Requirements of the Note and Mortgage

Posted By Rachel Ramirez, Tuesday, May 15, 2018
Updated: Tuesday, May 8, 2018

May 15, 2018

by Sonja Bowser
Bendett & McHugh, P.C. – USFN Member (Connecticut, Maine, Vermont)

To date, the Connecticut legislature has not adopted a statutory requirement that a notice of default (also known as a breach letter, demand letter, or notice of acceleration) be given to borrowers before acceleration of the debt and foreclosure. Instead, longstanding case law relies on contract principles in defining notice requirements: if the note and/or mortgage require such notice, the notice of default must be given prior to the commencement of the foreclosure. Historically, substantial compliance with a loan’s notice requirements was sufficient to establish that the notice of default complied with the terms of the note and mortgage. However, the Connecticut Appellate Court took a more conservative approach in the recent decision of Aurora Loan Services, LLC v. Condron, No. AC 38934 (Conn. App. Ct. Apr. 24, 2018).

In Condron, the appellate court held that the contractual requirements set forth in the note and mortgage may require strict compliance, depending on the articulated requirements. The subject mortgage contained two provisions that memorialized the need for a notice of default and the details to be included in said notice. Section 22 provided “in relevant part: ‘Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument . . . .’” (emphasis added) and specified necessary information to be contained within the notice.

As the case cites, Section 15 dictated: ‘‘‘[a]ll notices given by Borrower or Lender in connection with this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means.’’’ (Emphasis added.)

It was undisputed at both the trial court and appellate court levels that the plaintiff mailed the requisite notice of default by certified mail, return receipt requested. The defendants alleged, however, that the notice of default was never received and, in the absence of any proof proffered by the plaintiff, the appellate court found that the plaintiff failed to meet its burden of establishing that the notice was actually received by the defendants as required by the plain language of Section 15, supra.

Appellate Court’s Analysis
In its analysis, the appellate court reiterated Connecticut precedent that the notice requirements of a note and mortgage create a condition precedent that must be satisfied prior to the commencement of a foreclosure action. Because Section 15 of the subject mortgage necessitated either the mailing of a notice of default by first class mail or actual delivery to the borrowers if sent by other means, the plaintiff was unable to establish that it strictly complied with the notice requirement of the mortgage.

The plaintiff testified at trial that it mailed the notice of default by certified mail in an effort to exercise thoroughness and to provide an extra layer of security, but it did not provide proof of delivery of the notice. While plaintiff’s efforts were well-intentioned, the appellate court found that the non-compliance with the strict terms of the mortgage justified overturning the trial court’s judgment of foreclosure. The appellate court was further unmoved by the plaintiff’s contention that it substantially complied with the requirements of the mortgage, specifically not “where there is a contractual provision requiring proof of actual delivery for a notice of default sent by certified mail, return receipt requested, and there is no evidence that the defendants actually received the notice of default.”

Importantly, the appellate court noted that the critical difference between first-class and certified mailing is that first-class mail is entitled to a presumption of actual delivery, whereas certified mailing requires proof of actual delivery. There is no presumption of delivery where proof of actual delivery is required.

Closing Words
The Condron decision is significant to Connecticut foreclosure practice because it reinforces the supposition that compliance with the terms of individual loan agreements can be more important than good intentions or best practices. This ruling confirms that lenders, servicers, and their counsel must be meticulously cognizant of the individual notice requirements contained in the note and mortgage documents to ascertain compliance with the contractual requirements created by the loan instruments before progressing a foreclosure. Failure to comply with a condition precedent to a foreclosure action undermines the validity of the action and will likely warrant judicial dismissal on jurisdictional grounds.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

South Carolina: Court of Appeals uses “Debt Method” to Determine whether Foreclosure Sale Price “Shocks the Conscience”

Posted By USFN, Tuesday, May 15, 2018
Updated: Tuesday, May 8, 2018

May 185 2018

by John S. Kay
Hutchens Law Firm – USFN Member (North Carolina, South Carolina)

Historically, South Carolina courts will not set aside a judicial sale — except under certain circumstances. One of these circumstances is when a judicial sale price is so gross as to “shock the conscience.” In a recent case, the appellate court found itself deciding the appropriate method to use in calculating a sales bid price when a senior encumbrance is involved.

In Winrose Homeowners’ Association, Inc. and Regime Solutions LLC v. Hale, Op. No. 5549 (Apr. 4, 2018), the Court of Appeals decided that the appropriate method to use was the “debt method” and, consequently, the bid entered at the homeowners association (HOA) foreclosure sale by a third-party bidder did not shock the conscience, and the court upheld the judicial foreclosure sale.

Background
In Winrose, the homeowners association pursued a foreclosure action against the owners (the Hales) for nonpayment of association dues. The HOA foreclosure was subject to a senior mortgage in the amount of $66,004 and the parties had previously agreed that the fair market value of the property was $128,000. Thus, the owners had an equity cushion in the property of approximately $62,000.

At the HOA foreclosure sale, a third party (Regime Solutions, LLC) purchased the property with a successful bid of $3,036. The appellants (the former owners of the property) asserted that the court should use the “equity method” and compare the successful bid at the foreclosure sale of $3,036 to the existing equity in the property of $62,000. Using this approach, the appellants contended that the sales price was so low in relation to the amount of equity in the property that the third-party’s sale bid did shock the conscience and requested that the sale be overturned.

The third-party bidder maintained that the outstanding mortgage balance owed to the senior mortgagee should be added to the successful bid in calculating the bid price to be considered by the court; this is known as the debt method. Under this reasoning, any senior encumbrance that the purchaser at a sale would need to pay in order to obtain clear title must be included in the bid determination. The third party purchased the property subject to the senior mortgage.

The trial court had determined that the correct calculation was to combine the successful bid of $3,036 with the senior mortgage balance of $66,004 to arrive at an “effective sale price.” This computation resulted in a bid of $69,040 for the property, which was 54 percent of the fair market value of $128,000. Based upon this debt method of computing the effective sale price, the trial court found that the bid price at the foreclosure sale did not shock the conscience.

Appellate Analysis & Conclusion
The Court of Appeals noted that there had been no previous South Carolina cases expressly weighing in on the debt method versus the equity method — and establishing a preferred method when the facts involved a senior mortgage encumbrance. The appellants argued that the equity method should be adopted by the court, with the sales bid then only 4.89 percent of the equity. The calculation using the debt method, espoused by the respondents, resulted in a sales bid that was 54 percent of the fair market value of $128,000.

The Court of Appeals adopted the debt method as the more reasonable because the bidder in the case at hand would still be required to satisfy the senior encumbrance prior to obtaining the property free and clear of liens. Accordingly, in determining a bid for a property subject to a senior encumbrance in South Carolina, counsel should be able to consider the debt owed on that senior encumbrance in deciding on a bid that will not result in an amount that may shock the conscience of the court, and subject the sale to being overturned.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Tennessee: Supreme Court Rules that Theft Statute Encompasses Theft of Real Property

Posted By USFN, Tuesday, May 15, 2018
Updated: Tuesday, May 8, 2018

May 15, 2018

by James Bergstrom
Wilson & Associates, PA – USFN Member (Arkansas, Mississippi, Tennessee)

In 1989 Tennessee enacted a consolidated theft statute based on the Model Penal Code, which eliminated the confusing and fine-line distinctions among different forms of theft. The enactment of the consolidated statute also broadened the application of the Tennessee theft statute to include theft of real property. Under express code provisions, theft is committed when a criminal actor “obtains or exercises control over [ ] property without the owner’s effective consent.” Tenn. Code Ann. § 39-14-103. Late last year, the Tennessee Supreme Court ruled on the issue of whether the theft statute applied to real property in State of Tennessee v. Tabitha Gentry (aka Abka Re Bay), No. W2015-01745-SC-R11-CD, 2017 Tenn. LEXIS 733 (Nov. 29, 2017). The court held that the theft of real property is a criminal offense in Tennessee.

Background
On August 26, 2011, Renasant Bank foreclosed on real property located in an upscale neighborhood in Memphis. The property included a 10,000-square foot home, a four-car garage, and a swimming pool. The bank sold the real property and a closing was scheduled for late March 2013. On February 25, 2013 the defendant, Tabitha Gentry (Gentry), filed three documents with the Shelby County Register of Deeds, including a quitclaim deed that purported to transfer ownership of the real property to “Abka Re Bay,” Gentry’s alias. By March 4, 2013, without the bank’s consent or knowledge, Gentry had entered the home; changed the locks; placed a chain across the driveway entrance to the property; and positioned signs about the property notifying the public to “Keep Out,” asserting “No Trespassing,” and announcing that the property was “Private Property.”

The bank discovered the illegal entry on March 4, 2013 and notified the police. On March 5, 2013 the bank posted a written notice to vacate on the gate of the home informing the occupants that they “must have vacated this property by March 6th, 2013 at 2:30 p.m.” Gentry failed to vacate by March 6, 2013 and she was arrested as she left the property on March 7, 2013. She was charged with, and convicted of, theft of property valued at over $250,000 and aggravated burglary. Gentry appealed to the Court of Criminal Appeals, which affirmed the lower court’s convictions. She then appealed to the Tennessee Supreme Court.

The issue on appeal was “whether Tennessee’s consolidated theft statute encompasses the offense of theft of real property, and if so, whether theft has been committed based on the facts of this case.” Id., 9-11.

Supreme Court’s Review & Conclusion
Gentry first contended that the theft statute should be limited to include only theft offenses recognized before the enactment of the 1989 theft statute. The Court, however, reviewed Tennessee’s consolidated theft statute and determined that a person commits theft when he or she “obtains or exercises control over [ ] property without the owner’s effective consent.” Tennessee Code Ann. § 39-14-103. The Court zeroed in on the General Assembly’s definition of “obtain” in the theft statute, and found that the General Assembly broadly defined the term, stating that theft “includes, but is not limited to, the taking or carrying away or the sale, conveyance or transfer of title to or interest in or possession of property ....” Tenn. Code Ann. § 39-11-106(a)(24)(B). Citing State v. Amanns, 2 S.W.3d 241, 243-44 (Tenn. Crim. App. 1999), the Court determined that theft under Tennessee law “is complete when a person takes property, without the owner’s consent with the intent to deprive the owner of the property.”

Gentry then argued that the Tennessee theft statute only applies to “tangible, movable property” and not to real property. The Court again turned to the theft statute and found the term “property” to be broadly defined as “anything of value, including, but not limited to . . . real estate.” Tenn. Code Ann. § 39-11-106(a)(28). The Court concluded that the General Assembly could have adopted statutory language that did not include real property in the definition of “property,” but did not do so. Therefore, the Court held that the theft statute applied to real property and the judgment of the Court of Criminal Appeals was affirmed.

It is worth noting that the Court made efforts to distinguish a cause of action for theft of real property from the more common causes of action against a squatter or a holdover tenant. The Court opined that, in a case against a squatter or a holdover tenant, the State would find it difficult to prove one of the elements of theft, namely, the defendant’s intent to deprive the owner of her ownership interest in the property. In contrast, in Gentry the Court concluded that the defendant was not a mere squatter or holdover tenant. Rather, the evidence supported her intent to deprive Renasant Bank of its interest in the real property when she “filed papers with the Register of Deeds Office by which she sought to obtain record ownership of the property,” entered the house, posted signs along the exterior of the property indicating that it belonged to her, padlocked the entrance to the property, and changed the door locks. As a result, the Court concluded that the facts under Gentry are distinguishable from the typical causes of action against squatters and holdover tenants.

The Tennessee Supreme Court affirmed the judgments of the trial court and the Court of Criminal Appeals, and remanded the case for re-sentencing.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

South Carolina: State Supreme Court Reinstates a Finding of an Implied Easement

Posted By USFN, Tuesday, May 15, 2018
Updated: Thursday, May 10, 2018
May 15, 2018

by Ronald Scott and Reginald Corley
Scott & Corley, P.A. – USFN Member (South Carolina)

In the recent South Carolina Supreme Court case, Gooldy v. The Center-Platt Springs, LLC1, the Court held that an implied easement encumbered property of the Respondent Storage Center-Platt Springs. Accordingly, the Supreme Court reversed the decision of the Court of Appeals and reinstated the trial court’s ruling. The Supreme Court relied on Blue Ridge Realty Co. v. Williamson,2 holding that the petitioner, Gooldy, was entitled to the rebuttable presumption of an implied easement.

Background
The facts in this case are that in 1986, Congaree Associates (the owner of the subdivision) conveyed the subject property to Loflin. The deed of conveyance contained, by reference, a plat (Loflin Plat) outlining the disputed easement. The easement referenced in the Loflin Plat included the inscription “50’ Road” along the southern boundary of the Petitioner Gooldy’s property. Petitioner’s property is surrounded on three sides by Respondent Storage Center’s property. Over the course of 16 years, the subject parcel was conveyed four more times, each by a deed incorporating the Loflin Plat. The final of the four conveyances was to Petitioner in January of 2002.

In 2007, Congaree conveyed the neighboring lot to Respondent by deed, referencing a different plat — one that did not include the road. There was no dispute that the Loflin Plat was within the Storage Center’s chain of title. Shortly thereafter, Respondent informed Petitioner that he was no longer permitted to use the road. Petitioner subsequently brought suit to determine if he was entitled to an easement by implication or estoppel, or by prescription.

Supreme Court’s Review
Petitioner advanced two arguments before the Supreme Court as to why the Court of Appeals erred and, therefore, why the trial court’s decision should be reinstated. First, Petitioner contended that it was an error to hold that the deed’s reference to the Loflin Plat did not raise the presumption of an implied easement. The Supreme Court, quoting Blue Ridge, stated that, “[A]ccording to the great weight of judicial opinion, the lot purchaser is entitled to the use of all the streets and ways, near or remote, as laid down on the plat by which he purchases.”3 Furthermore, Petitioner maintained that the general rule was “that where a deed describes land as is shown on a certain plat, such plat becomes a part of the deed.”4 The Supreme Court also relied on McAllister v. Smiley5 in which it concluded that an implied easement arose where the deed referred to a plat that contained a road, and no evidence existed that the parties intended to negate the grant of the easement. The Supreme Court concluded that under the Blue Ridge case, Petitioner was entitled to the rebuttable presumption of an implied easement.

Second, Petitioner asserted that evidence in the record supported the trial court’s decision that the 1986 conveyance was subject to an implied easement. The Supreme Court stated that the trial court correctly looked at the parties’ intent within a narrow scope, evaluating only the time of the 1986 conveyance to determine if an easement was intended to be created. The Supreme Court, quoting Boyd v. Bellsouth Tel. Tel. Co.,6 stated that “Whatever easements are created by implication must be determined as of the time of the severance of the ownership of the tracts involved.” The Court determined that the evidence suggested that Congaree, at the time of preparation of the Loflin Plat, intended to build the road, and there was no evidence as to when the plan was abandoned — thus finding that the record supported the trial court’s decision that Congaree intended to convey an easement in the 1986 conveyance.

1 See Gooldy v. The Storage Center-Platt Springs, Op. No. 27782 (S.C. Mar. 14, 2018).
2 See Blue Ridge Realty Co. v. Williamson, 247 S.C. 112, 120, 145 S.E. 2d 922, 925 (1965).
3 Id. at 247 S.C. 120, 145 S.E.2d at 925.
4 Id. at 247 S.C. 118, 145 S.E.2d at 924.
5 See McAllister v. Smiley, 301 S.C. 10, 12, 389 S.E.2d 857, 859 (1990).
6 See Boyd v. Bellsouth Tel. Tel. Co., 369 S.C. 410, 416, 633 S.E.2d 136, 139 (2006).

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Follow-up on the National Fraud Scheme Impacting Title: Receiver Appointed

Posted By USFN, Friday, May 11, 2018

May 15, 2018

by Abe Salen
The Wolf Firm – USFN Member (California)

A national fraud scheme involving what is believed to be thousands of properties/loans throughout the United States (previously described in the Winter 2018 USFN Report; view those articles here and here) has been temporarily halted by the wheels of justice. Earlier this month, a U.S. District Court judge ordered an injunction against the parties to this particular scheme and, importantly, appointed a permanent receiver over the business entities involved. See below for the particulars to this case, as well as a list of alleged perpetrators. In addition, the first criminal trial is scheduled against the so-called “ringleader” in a Northern California county, presently set to proceed in late summer 2018. Additional authorities, both federal and state, continue their investigations.

Case Name: Nationstar Mortgage v. Patrick Joseph Soria, West H&A, LLC, et al.

 

Venue: U.S. District Court, Central District of California (Western Division), Judge Dale S. Fischer

 

Case No.: 2:18-cv-03041-DSF-RAOx

 

Case Filed: April 11, 2018

 

Ex Parte Applications for TRO/Injunction and appointment of Receiver filed: April 12, 2018

 

TRO Granted: April 23, 2018

 

Injunction / Permanent Receiver Appointed: May 7, 2018

 

Receiver Information:
Robb Evans & Associates (Brick Kane, Receiver in charge)
11450 Sheldon Street
Sun Valley, California 91352-1121
Tel: (818) 768-8100
Fax: (818) 768-8802
bkane@robbevans.com

Counsel for Receiver:
Barnes & Thornburg, LLP
Gary O. Caris, Esq.
2029 Century Park East, Suite 300
Los Angeles, CA 90067
Tel: (310) 284-3880
Fax: (310) 284-3894
gcaris@btlaw.com

 

ORDER issued May 7, 2018: (also see www.robbevans.com and then “Find a Case” to view various court documents in the West H&A LLC matter).

Individual Defendants: Patrick Joseph Soria, Tamyra White aka Tammy White, George Wesley Jr. Pierce, Gricela Mendoza, Bernard Germani aka Bernie Germani, Rebekah Brown, Michael C. Jackson aka M.C. Jackson, Cynthia Lara, F. Martinez, Jenny De Leon, Elba Chavez, and Ryan Alexander Urquizu.


Receivership Defendants: West H&A, LLC, Warranted Effectuation of Substitute Transferee, Inc. aka W.E.S.T., Inc., Westwood Legal, Westward Legal, Brighton Legal Group, PC aka Brighton Legal Title Co. and BLG PC National, BLG PC National By Brighton Legal Group, Inc., Deutsche Mellon National Asset, LLC aka Integrititle, Christiana Wilmington Global Asset Corp., HBSC US In Its Capacity As Legal Title Holder Incorporated, Camden Legal Group PC, dba Homeowner Help Initiative, and any subsidiaries, affiliates, successors, and assigns of any of the foregoing, any entities owned or controlled by Defendant Soria, any fictitious business names created by or used by any of the foregoing, individually, collectively, or in any combination, and the Assets of Defendant Soria.

© Copyright 2018 USFN. All rights reserved.
May e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Navigating Property Preservation Post-Foreclosure: Highlighting North Carolina

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by Jeremy B. Wilkins,
Devin Chidester,
and Anthony Carreri
Brock & Scott, PLLC
USFN Member (North Carolina)

In North Carolina, purchasers of foreclosed homes traversing the post-foreclosure property preservation landscape are likely to encounter many legal constraints and pitfalls throughout the journey. If not anticipated and managed accordingly, certain actions may lead to delays in the eviction process, financial liability, and/or subsequent costly litigation. Therefore, it is essential to understand the applicable law so that a process that helps to ensure acting within one’s rights, while limiting exposure to liability, is followed.

What is property preservation?
Property preservation denotes a lender (or new owner if post-foreclosure sale) averting waste to the value of real property by repairing, securing, or maintaining the same, often times through third-party vendors. These steps could include (but are not limited to): changing locks, preventing squatters, winterizing to avoid damage, cutting grass to preempt a municipal lien, fixing damages such as broken windows, and other related precautionary measures.

What are the laws regarding property preservation?
During the pre-foreclosure sale period, property preservation is governed by contractual obligations in the deed of trust. Once a foreclosure is complete, determining how to proceed requires evaluation of the home for signs of occupancy, extent of any damage, and remnants of any personal property. If the property is vacant, the new owner may change the locks and start the REO process. However, if the home appears occupied or personal property is present, the scope of property preservation should follow the limitations for an eviction found under Chapters 42, 44A, and 45 of North Carolina’s General Statutes. See N.C.G.S. § 45-21.29(l). It is best practice to determine occupancy status during the pendency of the foreclosure.

Pursuant to N.C.G.S. § 45-21.29(k), an eviction post-foreclosure sale is a continuation of the foreclosure special proceeding, and possession is delivered to the new owner via a writ of possession and lockout by local authorities. N.C.G.S. § 45-21.29(k) requires that 10-day notice to vacate (including removal of personal property) be given to the parties that remain in possession of the property. If personal property remains pursuant to N.C.G.S. § 42-25.9(g), only after a 7-day waiting period from execution of the writ of possession may the purchaser dispose of the property. If the purchaser intends to sell the remaining personal property, notice (including time, date, and location) must be provided to the owner of the property. During this period, the purchaser may “move for storage purposes” but not dispose of (or sell) any items unless otherwise allowed by law. See N.C.G.S. § 42-25.9(g). Conversely, if the value of the personal property is deemed to be less than $500, the waiting period is reduced to five days from execution of the writ, at which point it is deemed abandoned. The purchaser must release any belongings upon request by the owner prior to expiration of the applicable waiting period. See N.C.G.S. § 42-25.9(h). Special note should be made that, although the federal Protecting Tenants at Foreclosure Act expired at the end of 2014, North Carolina enacted laws to protect bona fide tenants. See N.C.G.S. § 45-33A. The purchaser, and purchaser’s counsel, must be cognizant of any tenancy claims.

Oftentimes, remaining personal property is a strong indication of occupancy. If evidence of occupancy exists, best practice is to always seek a writ of possession after a foreclosure. Removal and/or storage of remaining personal effects may lead to legal consequences for the purchaser if done improperly. For instance, in the case of Heaton-Sides v. Snipes, 233 N.C. App. 1 (2014), a lender secured a foreclosed home and removed personal property not in accordance with North Carolina law. Ultimately, the appellate court found that the lender committed conversion of the prior owner’s personal property. Although purchasers have an interest to protect, they must do so in compliance with North Carolina law.

What should purchasers do while onsite to ensure that they are within the bounds of the law and limit property preservation pitfalls?
First, do not change locks unless certain that the property is vacant and no personal items remain. If there is a question as to whether someone is residing at the home, seek a writ of possession.

Second, document everything. All parties should document all communications (written or oral) with borrowers, tenants, occupants, or any party involved at any point of the post-foreclosure sale process. This alone may be the difference between whether or not property preservation was permissible in a specific set of facts. Similar to tracking communications, all work performed on the property should be recorded with specificity. From conducting a drive-by to check for occupants, to performing more in-depth preservation efforts, it is important to include date, time, and services performed. Preservation vendors should document every single piece of personal property remaining in the home. The use of photography with a date- and time-stamp juxtaposed with a log describing personal property, condition of property, etc. will help contribute to the valuation of personal property if subsequent litigation occurs.

Third, be aware of the totality of the property condition. That is, are people coming and going from the home? What is the condition of landscaping? Are there notices from a homeowners association? Is there damage to the exterior, to the interior? Are there active “cash for keys” negotiations? Do not assume a small detail is not worth documenting.

Lastly, paramount to the removal of people or property, is the general rule found in N.C.G.S. § 42-25.6: actions taken contrary to statutory guidelines are against public policy and therefore unlawful. Changing locks, preventing access to property, or the like may be a violation of public policy and North Carolina law.

With any property preservation matter, there is a risk of protracted litigation. Purchasers at foreclosure should protect their interests by seeking an experienced foreclosure and eviction law firm to guide on the pitfalls of property preservation. Simply put, knowing and following the rules are key to preservation of one’s interests.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Case Law Updates: Connecticut

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by Adrienne Roach
Bendett & McHugh, P.C.
USFN Member (Connecticut, Maine, Vermont)

Ejectment or Eviction?
For some time, there has been a lack of Connecticut case law concerning those individuals who are covered under a court-issued execution of ejectment. Recently, a judge in the Bridgeport Superior Court issued an unpublished opinion under docket number FBT-CV-17-6065783-S. It sheds some light on who can be removed from a foreclosed property without the requirement of filing a separate eviction action.

In the subject case, the father of the former mortgagor applied for a temporary injunction to prevent the foreclosing plaintiff (in whom title had vested) from effectuating a lockout against him. The father contended that he was not named in the foreclosure action and, thus, the court had no jurisdiction over him. In ruling in favor of the foreclosing plaintiff, the court noted that a close relative of the mortgagor has no claim of any independent right of possession and, therefore, may be dispossessed under the execution of ejectment naming the mortgagor.

C.G.S. § 49-31p provides that the plaintiff take title “subject to … the rights of any bona fide tenant as of the date absolute title vests ….” Nevertheless, the court noted that under C.G.S. § 49-31p(b) “a lease or tenancy shall be considered bona fide only if (1) the mortgagor or the child, spouse or parent of the mortgagor under the contract is not the tenant.”

Moreover, the court upheld the bank’s ancillary argument that “even if [the father] were a tenant at the property, he can be evicted as a person in privity with the mortgagor under C.G.S. § 49-22(a), which provides in relevant part: ‘the court may, if it renders judgment in [plaintiff’s] favor and finds that he is entitled to the possession of the land, issue execution of ejectment … provided no execution shall issue against any person in possession who is not a party to the action except a transferee or lienor who is bound by the judgment by virtue of a lis pendens.’”

The court referenced further precedent, citing to a case also involving a foreclosed mortgagor’s family member: “In Wachovia Bank v. Hennessey [Conn. Super. Ct., Jud. Dist. of Hartford, Docket No. CV-05-4016481 (Oct. 25, 2007, Satter, J.T.R.), 2007 WL 4105504] the court held, in accord with the common law of other states, that a family member of a mortgagor foreclosed upon does not have to be named in a foreclosure action to have an execution of ejectment issued. The Hennessey court cited Tappin v. Homecomings Financial Network, Inc., 265 Conn. 741 (2003), as applicable to the due process rights of tenants who do have an independent claim to possession in their own right. Judge Satter denied the injunction against ejectment sought by the 23-year-old son of the former mortgagors who had no claim of any independent right of possession.”


Although the moving party (the foreclosed mortgagor’s son) did not prevail in this recent case, it should be noted that the standard applied by the court was that of a temporary injunction, where the movant must show that: “(1) it is likely to succeed on the merits after trial; (2) it faces immediate and irreparable harm absent an injunction; and (3) the harm it faces without the injunction is greater than the injunction would do to the defendants,” referencing Griffin Hospital v. Commission on Hospitals and Health Care, 106 Conn. 451, 456-58 (1985).

In the case at hand, the moving party failed to meet his burden of showing that he had a legal right that would be violated by enforcement of the execution of ejectment, that enforcement of the ejectment would cause him immediate and irreparable harm for which he had no adequate remedy at law, nor the ultimate remedy sought by this lawsuit. The court noted that “[T]here is an often-used remedy in the form of a Motion for Stay of Execution of Ejectment addressed to the court’s inherent powers as a court of equity.” The moving party here failed to make use of such a motion. The court therefore found that the moving party: (1) failed to sustain his burden of proof for issuance of a temporary injunction; (2) failed to make use of an adequate remedy other than the extreme remedy of injunction; and that (3) “the balance of the equities under all the circumstances favors the [bank]’s rights as becoming owner of the property by strict foreclosure some eight months ago after five years of litigation.”

The court left the door open on motions for stay of execution of ejectment filed by relatives of the mortgagor, primarily by its suggestion that the moving party in this case could have elected to file that motion instead. It will be interesting to see whether Connecticut courts develop case law on that issue in the future.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Case Law Updates: Maine

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by Eva M. Massimino
Bendett & McHugh, PC
USFN Member (Connecticut, Maine, Vermont)

Last year came to a tumultuous close mortgage creditors in Maine. In a series of three cases from the Maine Supreme Court, it has become clear that: (1) mortgage creditors only have one chance to properly accelerate the loan; (2) a loan is still deemed accelerated even when the statutory demands required were noncompliant with local statute; (3) judgment will enter in favor of a borrower if a servicer fails to present a witness with knowledge of the record-keeping practices of a prior servicer; and (4) an adverse judgment for any reason will have res judicata effect and potentially result in discharge of the mortgage.

Federal National Mortgage Association v. Deschaine, 2017 Me. 190 — The first of the three notable cases was decided on September 7, 2017. In Deschaine, the Maine Supreme Court upheld a superior court’s judgment barring foreclosure because a prior foreclosure action on the mortgage was dismissed with prejudice as a sanction. The Court held that once a promissory note is accelerated, the payments required by the note become indivisible, and there can be no new default under the note and mortgage. As such, the Court held that where a foreclosure was dismissed with prejudice, the foreclosing plaintiff cannot thereafter assert a continuing default on the note to defeat a res judicata defense to foreclosure.

In the subject case, the plaintiff filed its first foreclosure against property owned by the defendant in 2011, alleging a default date of January 2011. The first foreclosure action was dismissed with prejudice. Thereafter, in 2013, the plaintiff commenced its second foreclosure, alleging a default beginning February 2011. The lower court accepted Deschaine’s defense, which claimed that the second foreclosure was barred by the principles of res judicata. An appeal ensued.

Relying on precedent, the Court upheld the lower court opinion, stating: “Fannie Mae ‘cannot avoid the consequences of [the prior dismissal]’ by alleging grounds for foreclosure that are different from those alleged in the 2011 action — in other words, by ‘attempting to divide a contract which became indivisible when [it] accelerated the debt in the first lawsuit.’”

Pushard v. Bank of America, N.A., 2017 Me. 230 — The Maine Supreme Court’s next opinion was released on December 12, 2017. In Pushard, the Court held that a judgment in favor of the borrowers, which denied the bank foreclosure due in part to a defective statutory demand, has res judicata effect.
In this case, the bank filed a foreclosure against the Pushards in 2011, wherein the bank alleged that a notice of default was provided in accordance with the law. The superior court found, however, that the bank’s notice of default was defective for failure to meet statutory requirements. Additionally, the superior court determined that the bank failed to prove a breach of condition of the mortgage as well as the amount due. As a result, judgment was entered for the Pushards in 2014, and neither party appealed. Rather, the Pushards filed a second action in the superior court to obtain discharge of the mortgage and an order prohibiting the bank from enforcing the note and mortgage. Judgment in the second action was entered for the bank, and the Pushards appealed.


The Court in Pushard necessarily considered the effect of the judgment in the bank’s foreclosure action, which had been entered in favor of the Pushards. The bank contended that the judgment in the foreclosure action should not have res judicata effect as the acceleration clauses of the note and mortgage were not appropriately triggered in compliance with Maine statute, which indicates that a mortgagee “may not accelerate maturity” until a demand pursuant to the section was sent and, hence, the bank could not have accelerated the loan. (See 14 M.R.S.A. § 6111.)


The bank’s argument did not prevail and the Court held, “We do not interpret section 6111 as a prohibition on a mortgagee’s choice to exercise an acceleration clause …. When the Bank chose to [accelerate], ‘the contract became indivisible’ and ‘[t]he obligations to pay each installment merged into one obligation to pay the entire balance due on the note.’” The Court’s opinion ends with a remand of the case to the trial court “to enter a judgment declaring that the note and mortgage are unenforceable and that the Pushards hold title to their property free and clear of the Bank’s mortgage encumbrance.” It is now clear that an adverse judgment in a foreclosure case may result in a free house for the borrower and a big loss for the creditor.


Key Bank National Association v. Estate of Eula W. Quint, 2017 Me. 237 — On December 21, 2017, the Supreme Court entered its last significant holding of the year. In Quint, the bank brought a foreclosure action against the Estate of Eula Quint (Estate) as well as Vickie L. Kilton (Kilton). Despite having failed to defend against the foreclosure action, Kilton, through counsel, appeared on the day of trial. Counsel for the bank called a witness from the current servicer to testify as to the business records kept in the regular course of that servicer’s business with regard to the loan subject to foreclosure. However, the outstanding principal balance on the loan could not be established without relying on records of a prior servicer, which had been incorporated into the business records of the current servicer. The witness was able to authenticate records created and maintained by the current servicer, but could not establish that he had any personal knowledge of the record-keeping practices of the prior servicer. Judgment was entered for Kilton and the Estate. The bank appealed.


The Supreme Court affirmed the decision of the lower court, holding that the bank did not properly establish the business records exception for integrated business records of the former servicer. Relying on precedent, the Supreme Court indicated that in order to admit integrated records, the current servicer must present witnesses who can demonstrate knowledge not only of the transmission, receipt, integration, and reliance on records from the former servicer but also knowledge of the regular business practices of that former servicer for the creation and maintenance of the records prior to transfer.


Since the current servicer’s witness was unable to present testimony to establish the past servicer’s business practices, a proper foundation was not laid for admitting that earlier servicer’s loan records, and they were therefore inadmissible. In order to ensure that integrated business records are admissible, testimony should be presented of one or more witnesses with knowledge of the business practices of each prior servicer whose records are necessary to establish the essential elements of foreclosure. As seen in Pushard, failing to prove any allegation in a foreclosure may result in the underlying note and mortgage becoming unenforceable.


Closing Words — Servicers and their counsel must proceed with caution to ensure that all foreclosure documentation and evidence are flawless, and that the proper qualified witnesses appear and be ready to testify at trial.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Legislative Updates: Wisconsin

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by William (Nick) Foshag
Gray & Associates, L.L.P.
USFN Member (Wisconsin)

Countering Abuses in the Process relating to Blighted Properties — Over the last two years Milwaukee’s major newspaper has been running an ongoing “watchdog” series dramatically entitled, Landlord Games. The series of articles, along with a recent bestselling book (Evicted) by University of Wisconsin alumnus Dr. Matthew Desmond, has turned a spotlight on landlord-tenant and related foreclosure issues, particularly in the inner city of Milwaukee. In response to this attention, the Wisconsin legislature has enacted several measures aimed at preventing bad actors from abusing the system.

In January 2016 a statutory change was made for Milwaukee County that targeted a handful of third-party purchasers at sheriff’s sales who intentionally delayed (or simply never recorded) a sheriff’s deed. If the deeds were not recorded, the City’s land records were not updated and, consequently, the City’s delinquent tax bills and building code violations were still being directed to the previous owners who had lost the property in foreclosure. In some instances, the property taxes were never paid, and after three to four years the City may ultimately take the property through the tax foreclosure process.

Prior to the tax foreclosure, the current owner might continue to collect rent and, in many cases, allow the property to deteriorate further — resulting in building code violations and City inspection fines, which (like the tax bills) were still being directed to the former owner. To stem this abuse, the 2016 change provided that immediately following a completed foreclosure, the sheriff’s deed would be transmitted directly from the clerk of courts to the register of deeds office for recording.

In December 2017, the legislature expanded the requirements for Milwaukee County to all 72 counties in Wisconsin. To encourage interested third-party buyers, the change also required that the notice of the sheriff’s sale include the street address of the subject property and the amount of the underlying foreclosure judgment.

In March 2018, two even more ambitious measures were passed (and expected to be signed into law by the end of the following month): 2017 Assembly Bill 690 allows a county to enact its own ordinance requiring the sheriff to conduct; or to engage a third party to conduct, mortgage foreclosure sheriff’s sales using an Internet-based auction, and 2017 Assembly Bill 691 imposes minimum qualifications for third-party bidders at a sheriff’s sale.

Following similar measures around the country, the Wisconsin legislature’s intent in allowing sheriff’s sales to be conducted online is to make the process more accessible to the public and more transparent for interested bidders who might otherwise be intimidated by the process as conducted at the courthouse. Sales in Milwaukee, for example, are conducted in a windowless room in the basement of the courthouse and are attended primarily by a regular crowd of seasoned bidders. Further changes will be that any priority liens on the property must be identified in the notice of sale and by the person conducting the online auction. Moreover, any deposit on a successful online bid will be allowed to be paid by credit or debit card, or another electronic payment method.

The intent of imposing minimum qualifications for third-party bidders at sheriff’s sales is to prevent the type of abuses seen particularly in Milwaukee County, where a handful of frequent purchasers were buying low-cost foreclosure properties to be used as rental units — and intentionally allowing property taxes and building code violations to go unpaid. Once this change is implemented, no third-party (or their related business) may bid if more than 120 days delinquent on any property taxes, or if they have any unsatisfied court judgments related to a violation of a state or local building code. With the specific exception made for Fannie Mae and Freddie Mac, no bid at a sheriff’s sale may later be assigned to any person who would not meet these qualifications.

Lastly, before a court may confirm the outcome of the sale, the third-party bidder must file an affidavit with the court affirming that these qualifications are met. If the affidavit is found to contain a false representation, made knowingly, the court can order a $1,000 penalty and prohibit the person from bidding at a future sheriff’s sale in that county for up to one year.

Passage of these provisions targeting manipulations of the sheriff’s sale process continues the efforts in Wisconsin over the past several years to streamline the foreclosure process and to address problems of blighted properties. In particular, 2015 Act 376 addressed vacant and abandoned properties in foreclosure and significantly reduced post-judgment redemption periods for loans executed before April 27, 2016.

Copyright © 2018 USFN. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

CFPB Issues Final Rule Amendment regarding Transition to Modified or Unmodified Periodic Statements

Posted By USFN, Tuesday, May 1, 2018
Updated: Tuesday, May 1, 2018

May 1, 2018

by John D. Schlotter
McCalla Raymer Leibert Pierce, LLC
USFN Member (Connecticut, Florida, Georgia, Illinois)

On March 8, 2018, the Consumer Financial Protection Bureau issued a rule amending certain aspects of the 2016 Mortgage Servicing Final Rule relating to periodic statements. These amendments revise the timing requirements for servicers transitioning between modified or unmodified periodic statements and coupon books when consumers enter or exit bankruptcy.

The 2016 Mortgage Servicing Final Rule addresses the periodic statement and coupon book requirements under Regulation Z when a person is a debtor in bankruptcy. That rule included a single-billing-cycle exemption from the requirement to provide a periodic statement, or coupon book, in certain circumstances after one of several specific triggering events occurs, resulting in a servicer needing to transition to or from providing bankruptcy-specific disclosures. The single-billing-cycle exemption applied only if the payment due date for that billing cycle was no more than 14 days after the triggering event. That rule also included specific timing requirements for servicers to provide the next modified or unmodified statement, or coupon book, after the single-billing-cycle exemption has ended.

This final rule amendment replaces the single-billing-cycle exemption for periodic statements and coupon books with a single-statement exemption when servicers transition to providing modified or unmodified periodic statements and coupon books to consumers entering or exiting bankruptcy. This final rule provides a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs.

As finalized, the rule provides that — as of the date on which one of the triggering events listed in § 1026.41(e)(5)(iv)(A) occurs — a servicer is exempt from the requirements of § 1026.41 with respect to the next periodic statement or coupon book that would otherwise be required, but thereafter must provide modified or unmodified periodic statements or coupon books that comply with the requirements of this section. Comments 41(e)(5)(iv)(B)-1 thru -3 describe how the single-statement exemption operates in specific circumstances.

Comment 41(e)(5)(iv)(B)-1 explains that the exemption applies with respect to a single periodic statement or coupon book following a triggering listed in § 1026.41(e)(5)(iv)(A) and presents examples illustrating the timing. The provided examples assume that a mortgage loan has a monthly billing cycle where each payment due date is on the first day of the month following its respective billing cycle, and each payment due date has a 15-day courtesy period.

The effective date for the rule is April 19, 2018, the same date that the other sections of the 2016 rule relating to bankruptcy-specific periodic statements and coupon books take effect.

The final rule amendment can be accessed at:
https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing_final-rule_2018-amendments.pdf.

Copyright © 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a"Feature."

 

This post has not been tagged.

Share |
Permalink
 

Illinois: Appellate Court Offers Guidance on the Diligence Requirement for Service by Publication

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Marcos Posada
McCalla Raymer Leibert Pierce, LLC – USFN Member (Connecticut, Florida, Georgia, Illinois)

An Illinois appellate court recently found that service of process via publication pursuant to 735 ILCS 5/2-206(a) was proper and upheld the trial court’s order denying the defendant’s motion to quash service. [Neighborhood Lending Services v. Griffin, 2018 IL App (1st) 162855 (Mar. 15, 2018)]. In Griffin, the process server made one attempt to serve the defendant — at the only address found for the defendant, where he was told by the defendant’s spouse that the defendant did not live at the property. Thereafter, the plaintiff served the defendant via publication pursuant to Illinois law.

The defendant argued that the plaintiff failed to exercise due inquiry into his whereabouts and, therefore, did not comply with Section 2-206. Contrary to the defendant’s contentions, the plaintiff submitted the requisite affidavits establishing the inquiry into the defendant’s whereabouts. Of note, the appellate court in Griffin cited to precedent regarding statutory prerequisites, specifically quoting Bank of New York v. Unknown Heirs & Legatees, 369 Ill. App. 3d 472, 476 (2006): “Our courts have determined that these statutory prerequisites [of due inquiry and due diligence] are not intended as pro forma or useless phrases requiring mere perfunctory performance but, on the contrary, require an honest and well-directed effort to ascertain the whereabouts of a defendant by inquiry as full as circumstances permit.”

The appellate court then affirmed that because the defendant could not be located at any address other than the property in which service was attempted and the process server was told by the defendant’s spouse that he did not live there and refused to provide additional information, the trial court did not err in permitting service by publication. Moreover, there was no showing as to any requirement for a process server to repeatedly engage in knowingly futile visits before serving via an alternate method of service.

As service via publication is a frequently challenged matter in Illinois with respect to defendants seeking to quash service, Griffin presents additional stability for parties serving via publication, especially when spouses seemingly go out of their way to conceal the whereabouts of the party one is trying to serve. With timelines in Illinois always a challenge, it is imperative to efficiently prosecute cases in compliance with statutory requirements, yet recognize instances (such as in the case described here) to minimize delays.

Editor’s Note: The author’s firm was counsel for the plaintiff at both the trial and appellate levels in the Neighborhood Lending Services v. Griffin case summarized in this article.

© Copyright 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

North Carolina: Appellate Reviews of Due Diligence Requisites for Service by Publication or Posting

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Devin Chidester
Brock & Scott, PLLC – USFN Member (North Carolina)

In North Carolina, if personal service on a defendant is unavailable, the plaintiff may satisfy service of process alternatively through publication or posting at the subject property. However, for these alternative measures, a plaintiff must complete the requisite due diligence required by the Rules of Civil Procedure.1 Recently, two North Carolina Court of Appeals decisions added further layers to the “due diligence” interpretation.

In re Ackah

First, In re Ackah2 dealt with lack of actual notice by a homeowners association (HOA). In Ackah, the homeowner moved out of the country (leasing her home during her absence) and had her mail forwarded to a relative’s home. The defendant fell behind in HOA dues and, accordingly, the HOA commenced foreclosure. Delinquency and foreclosure notices sent to the defendant were returned “unclaimed” and the HOA posted notice at the subject property.3 Defendant Ackah successfully set aside the sale for improper service.

Upon appeal by the third-party purchaser at the sale, the Court of Appeals held that the HOA failed to meet the due diligence standard required, prior to posting notice to the subject property. Specifically, the court pointed to the fact that the HOA chose not to attempt contact through a known email address. The court reasoned that the HOA should have known that Ackah did not reside at the property after sending letters to an out-of-state address, and since all other notices were returned as either unclaimed or undeliverable. According to the court, due diligence required the HOA to at least attempt notice through a known form of contact information, such as the defendant’s email address.

Watauga County v. Beal

Next, the Court of Appeals examined whether due diligence was satisfied in the context of a tax foreclosure. In Watauga County v. Beal,4 the county attempted to collect delinquent taxes from the defendant for two years. The defendant provided only a fax number and post office box address as contact information. The county sent delinquency and foreclosure notices to the fax number, post office box, and subject property. All notices were returned as “unclaimed” or “undeliverable,” resulting in the county publishing notice. Defendant Beal appealed the foreclosure, asserting improper service because the plaintiff allegedly did not satisfy due diligence prior to publishing notice. The Court of Appeals held that the county had, in fact, satisfied necessary due diligence, because — in addition to efforts undertaken by the county to effectuate service — the county also had an extensive prior history of non-contact by Beal.

Conclusion

The standard for due diligence, cited by both Ackah and Beal, requires a plaintiff to use “all resources reasonably available … in attempting to locate defendant.”5 Neither case diverges from this standard, but both may have further muddied the already unclear waters.


1 See N.C.G.S. § 1A-1, Rule 4(j1), (k); N.C.G.S. § 45-21.16; N.C.G.S. § 47F-3-116(c), (f).
2 In re Ackah, __ N.C. App. __, 803 S.E.2d 794 (2017).
3 Associations are allowed to post a notice of hearing to the subject property when service by publication would be allowed under Rule 4 of Rules of Civil Procedure. See N.C.G.S. § 47F-3-116(c), (f) and N.C.G.S. § 1A-1, Rule 4(j1), (k).
4 Watauga County v. Beal, 806 S.E.2d 338 (2017).
5 See Jones v. Wallis, 211 N.C. App. 353, 712 S.E.2d 180 (2011).

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

South Carolina: Email Constitutes Written Notice to Trigger Time to Appeal

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018
April 17, 2018

by Ronald Scott and Reginald Corley
Scott & Corley, PA – USFN Member (South Carolina)

In the South Carolina Supreme Court case of Wells Fargo Bank v. Fallon Properties,1 the issue was raised as to whether an email that provides an entry of an order or a judgment triggers the commencement of the time required to provide written notice for serving a notice of appeal for purposes of Rule 203(b)(1), South Carolina Appellate Court Rules (SCACR). The Supreme Court determined that an email sent from the court, an attorney of record, or a party triggers the time to serve a notice of appeal.

Briefly, the facts are that, on December 15, 2014, the master-in-equity judge filed an order denying Fallon Properties’ petition for an order of appraisal pursuant to the post-foreclosure sale, deficiency judgment statute. Later that same day, the master’s office emailed a signed and stamped copy of the order to both parties of record. The email stated that a copy of the documents had also been mailed. Fallon Properties (the petitioner) served its notice of appeal on January 15, 2015 — 31 days after receiving the email, and 28 days after receiving the documents by mail. The respondent filed a motion to dismiss, asserting that the notice of appeal was untimely.

The Supreme Court applied the pertinent rule from Rule 203(b)(1), SCACR which states, “A notice of appeal shall be served on all respondents within thirty (30) days after receipt of written notice of entry of the order or judgment” (emphasis added). The petitioner conceded that an email does constitute written notice of entry of an order or judgment, although it contended that the written notice that an email provides can only be triggered under the rule if it is received by mail or hand delivery. In support of this argument, the petitioner looked to Rule 5, South Carolina Rules of Civil Procedure (SCRCP). The Supreme Court found, however, that because the service of a notice of appeal is an appellate procedure, the SCRCP are inapplicable.2

The case law surrounding this issue has not been in agreement. The Supreme Court found that the Court of Appeals properly relied on Canal Insurance Company v. Caldwell3 where it was determined that a fax sent from one of the party’s counsel to another’s was sufficient to commence the notice period. On the other hand, the Supreme Court distinguished this case from White v. South Carolina Department of Health and Environmental Control4 where that court incorrectly determined that an email received from opposing counsel, containing a signed and filed copy of an order [of the Administrative Law Court], did not trigger the time to appeal under Rule 203(b)(6), SCACR.

Given that the case law was inconsistent in the application of Rule 203, SCACR, and the novelty of the question, the Supreme Court held that fairness required that the ruling on this issue be applied prospectively. Furthermore, the Supreme Court affirmed the Court of Appeals’ decision as modified and allowed the appeal to proceed on its merits. To reiterate, the prospective standard that this case establishes is that an email sent from the court, an attorney of record, or a party triggers the time to serve a notice of appeal.

1 Wells Fargo Bank v. Fallon Properties, Op. No. 27773 (S.C. Feb. 28, 2018).
2 See Rule 101(a), SCACR (mandating that the appellate court rules govern the practice and procedure in appeals before the Supreme Court or Court of Appeals); Rule 73, SCRCP (providing the procedure on appeal to the South Carolina Supreme Court or the South Carolina Court of Appeals must be in accordance with the appellate court rules).
3 Canal Insurance Company v. Caldwell, 338 S.C. 1, 524 S.E.2d 416 (S.C. Ct. App. 1999).
4 White v. South Carolina Department of Health and Environmental Control, 392 S.C. 247, 708 S.E.2d 812 (S. C. Ct. App. 2011).

 

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Fourth Circuit Permits Lien Stripping in Chapter 13 Cases Regardless of Whether a Proof of Claim is Filed

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Nathan Greyard
Rosenberg and Associates, LLC – USFN Member (District of Columbia)

In Burkhart v. Grigsby, 2018 U.S. App. LEXIS 7928 (4th Cir. Mar. 29, 2018), the Fourth Circuit held that the bankruptcy court can strip an unsecured claim from the debtor’s principal residence in a Chapter 13 case regardless of whether the claimant filed a proof of claim. This result may require secured creditors to be extra vigilant about filing proofs of claim (and, when necessary, objecting to plan confirmation in Chapter 13 bankruptcies) in order to protect their liens.

Background
In 2012, the Burkharts filed a Chapter 13 bankruptcy, at which time four liens encumbered their principal residence, which was worth $435,000. Chase Bank’s first-priority lien was over $600,000 — making it the only secured creditor. Tri-County Bank held unsecured second- and third-priority liens. PNC Bank was unsecured in fourth position. Only Chase and PNC filed proofs of claim with the bankruptcy court.

The debtors initiated an adversary proceeding to strip the unsecured liens, which the trustee opposed. The bankruptcy court stripped PNC’s lien but denied to strip the Tri-County liens, holding that Bankruptcy Code § 506(d)(2) prohibits lien avoidance where no proofs of claim are filed. On appeal, the district court agreed that § 506(d)(2) barred the Tri-County liens from being voided due, simply, to the failure to file a proof of claim.

Appellate Analysis
The Fourth Circuit Court of Appeals disagreed with the lower courts, noting that the trustee’s focus on claim allowance created a system where the secured creditor has no incentive to file a proof of claim if the property is underwater. PNC filed a proof of claim and had its lien stripped, but Tri-County did nothing and its liens survived. This made no sense.

The Fourth Circuit did not adopt a hardline view of § 506. It determined that authority for a Chapter 13 debtor to strip underwater liens actually stems from § 1322(b)(2), where a plan may modify the rights of holders’ secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence. A creditor’s rights thus turns on whether there is any value in the collateral. The junior liens had no value because Chase’s lien swallowed the value of the property. As a result, the junior lienholders are unsecured and their liens may be stripped under § 1322(b), regardless of whether or not they filed proofs of claim.

Conclusion
Moving forward, creditors must be cognizant concerning whether to file proofs of claim and ensure that they are filed timely. A debtor can now strip a lien on his or her principal residence through the plan without filing anything else. If the debtor fails to complete his or her plan, then the lien will remain. However, if a creditor does not file a proof of claim on an unsecured lien, and the debtor does receive a discharge, that creditor could walk away with nothing. Moreover, valuation of the property is important.

If a creditor is in a junior position and there may be any value left after the senior lien, that junior lien is secured and cannot be stripped in Chapter 13. Even if it just a dollar, the lien will survive the bankruptcy. In these close calls, a creditor will need to object to plan confirmation to protect its lien. Consult with local counsel as to how the Burkhart v. Grigsby opinion may affect specific liens on properties in bankruptcy.

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Handling RESPA Qualified Written Requests — Eighth Circuit Reverses Damages Award for Violation

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Paul Weingarden and Brian Liebo
Usset, Weingarden & Liebo, PLLP – USFN Member (Minnesota)

In a recent case decided by the Eighth Circuit Court of Appeal, a borrower sued his mortgage servicer claiming servicing violations on his Minnesota loan under the Real Estate Settlement Procedures Act (RESPA). Ultimately, the district court’s damages award to the borrower was reversed and remanded for further proceedings in the district court. Essentially, the appellate court found no harm, no foul. [Wirtz v. Specialized Loan Servicing, LLC, No. 16-4069 (8th Cir. Apr. 3, 2018].

Background
The facts of the case are fairly straightforward. Borrower Wirtz made a series of Qualified Written Request (QWR) demands to his current loan servicer, arising from an alleged misapplication of funds for their servicer-transferred loan after the servicer claimed that Wirtz was delinquent on his loan. Through one QWR, the borrower demanded a payment history from “origination to present.”

The current servicer may have received only a partial loan history from the prior servicer at the time of the service transfer. When the current servicer responded in a fashion deemed objectionable, Wirtz sued for damages under RESPA (and the piggyback provisions of the Minnesota Mortgage Originator and Servicer Licensing Act, which also proscribes lenders from violating federal laws regulating mortgage loan).

The district court found the responses to Wirtz were improper, concluding that the servicer did not conduct an adequate investigation into the QWRs submitted by Wirtz. The district court held (and later the appellate court also agreed) that the servicer violated RESPA when it did not “obtain, review, or provide the full payment history as Wirtz requested.” The district court awarded the borrower damages (and costs) in an amount less than $5,000 — plus attorneys’ fees in excess of $45,000.

Appellate Review
The servicer appealed to the Eighth Circuit Court of Appeals. There, the appellate judges carefully analyzed the wording of the statutes in question, and disagreed with the rationale for the ultimate damages award by the district court, noting that Wirtz had no actual damages to trigger the penalties in the statute. The court held that proof of actual damages is an essential element of a claim under RESPA, and that Wirtz had suffered no actual damages to trigger the statutory provisions. In coming to this conclusion, the appellate court stated the following:

“We agree with Specialized that Wirtz failed to prove actual damages, because Specialized’s failure to comply with RESPA did not cause Wirtz’s alleged harm. When a loan servicer fails to comply with § 2605(e), the borrower is entitled to ‘any actual damages to the borrower as a result of the failure.’. . . Congress’s use of the phrase ‘as a result of’ dictates that there must be a ‘causal link’ between the alleged violation and the damages.”

Once disposing of the actual damage issue, the appellate court then vacated the award for statutory damages on the basis that without actual damages, the trigger to impose additional statutory damages failed as a matter of law. The court reversed and remanded to the district court to enter judgment for Specialized on the RESPA claim. The appellate court, however, did mention the possibility for a further examination under the corresponding Minnesota statute, which remains unknown as of this writing.

Conclusion
An important lesson from this case is for servicers to adequately investigate and respond to borrowers’ qualified written requests. If a borrower submits a QWR that includes a demand for a complete loan history (or a loan history covering specific dates), then the servicer should provide the matching loan history to satisfy RESPA requirements.

Hopefully, the result of this case will deter all but the most determined borrowers from litigation if they suffer no actual damages under RESPA. The prospect of a substantial attorneys’ fees award in favor of a borrower remains an issue whenever litigating RESPA matters, so extreme caution is always prudent for servicers around this topic. Nonetheless, it is encouraging to see the reversal of a large damages award when there is no actual loss caused to a borrower.

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

The 2016 American Land Title Association Title Insurance Commitment

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Ellen Fornash
Anselmo Lindberg & Associates, LLC – USFN Member (Illinois)

In June 2016, in an effort to become more streamlined and comprehensive, the Board of Governors of the American Land Title Association (ALTA) approved revision recommendations to the 2016 ALTA Title Insurance Commitment. These took effect on August 1, 2016. The 2016 Commitment form combines two 2006 versions of the form and became generally put into use nationwide in 2017. Not only did the board seek to promote a better understanding and uniformity of the commitment provisions and formatting, it sought to define the scope and purpose of a title commitment itself. The most significant revisions to the commitment are five-fold:


1. Of greatest importance to mortgagees and lenders, the 2016 ALTA commitment now limits underwriter liability solely to contract claims. Previously, lenders often attempted to sue title companies under tort theories and, in some courts, were successful (U.S. Bank, N.A. v. Integrity Land Title Corp., 929 N.E.2d 742, 2010 Ind. LEXIS 396). Many lenders inferred a title commitment to be an abstract of title and/or legal opinion of the state of the title provided for the benefit of the lender. In actuality, any information concerning the state of the title included in a title commitment is for the benefit of the title company in making its determination of coverage. The 2016 ALTA forms clearly mirrors Illinois case law when stating in no uncertain terms that liability is therefore limited to matters of contract only (First Midwest Bank, N.A. v. Stewart Title Guar. Co., 218 Ill. 2d 326, 843 N.E.2d 327, 2006 Ill. LEXIS 14, 300 Ill. Dec. 69). This limitation is boldly stated in a “Notice” on the first page of the commitment form, and also in Condition 3(a). The notice states that the “commitment is not an abstract of title, report of the condition of title, legal opinion, opinion of title, or other representation of the status of title.”

2. Liability is further limited by the 2016 ALTA commitment to exclude claims against the insurer that arise from settlement or closing defects. It is common practice for an agent of the insurer to conduct the settlement or closing; however, the agent at the closing is not acting on behalf of the underwriter for purposes of the closing. Misperceptions of the agent’s scope of representation have also led to tort claims against the insurer. Therefore, the 2016 ATLA commitment sets forth that the closing agent is not the title company’s agent for purposes of the closing.

3. The 2016 ALTA commitment now requires that a specific length of time limiting the validity of the commitment be inserted into the commitment itself. This is commonly six months.

4. The 2016 ALTA commitment promotes uniformity amongst all underwriters by requiring the inclusion of specific sections:

a. NOTICE: Defines the scope and purpose of the commitment and limits liability;
b. Commitment to Issue Policy;
c. Commitment Conditions: Includes a definitions section and, again, limits liability;
d. Schedule A: Now requires the inclusion of a specific dollar amount of coverage;
e. Schedule B, Part 1: Sets forth the requirements that must be met to issue the policy;
f. Schedule B, Part 2: Includes both general and specific exceptions to coverage.


5. Finally, the new form requires a written or electronic signature by the company or its agent.


In addition to title commitments, title companies in Illinois offer two other relevant products. A Tract Search (also called a property report) is a collection of information obtained from the county records about a particular person and property. Much of the information accumulated may not actually attach to the property in question or be relevant to a foreclosure. Furthermore, this product does not offer any insurance to the lender. Minutes of Foreclosure, on the other hand, specify only title information and liens that do attach to a specific foreclosed property. Minutes of Foreclosure include “necessary and permissible parties” to a foreclosure action before the action is filed. This specialized search offers protection to a lender throughout the foreclosure process and in post-sale transactions as well.

The Tract Search or property report is equivalent in the states of Illinois, Ohio, and Kentucky. Again, this product searches for a large amount of data, including transfers of ownership, judgments, and liens against the property. These searches are taken from the public record, typically extend back 40 to 60 years, and offer a basic level of protection — but no insurance.

A Title Abstract is similar to the Tract Search but is not limited to a certain amount of time. It is more expensive and time-consuming, but covers the entire history of the property to its point of origin, or as far back as public record allows. Again, this is not insurance. Insurance will require a Title Commitment and Policy, which will indemnify against any loss due to a defect or encumbrance on property not specifically excepted in the policy.

The states of Ohio and Kentucky do not offer Minutes of Foreclosure; however, Ohio Revised Code § 2329.191 requires a Preliminary Judicial Report to be filed in every action demanding the judicial sale of real property. The Preliminary Judicial Report must include, among other items, the name and address of every recorded lienholder on the real property. The Preliminary Judicial Report is prepared by a title company and requires that a title search be conducted.

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Clarification on Alabama Redemption Law

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018 and May 1, 2018

by Andy Saag
Sirote & Permutt, P.C. – USFN Member (Alabama)

On April 23, 2015 Alabama changed its redemption law to allow for a shortened right of redemption period from one year to 180 days for certain residential properties on which a homestead exemption was claimed in the tax year during which the sale occurred. The new law also required the mortgagee to mail a notice of a mortgagor’s right to redeem residential property at least 30 days prior to the foreclosure date by certified mail with proof of mailing. However, many questions remained unanswered after that new law became effective, including:


• How long was the right of redemption if notice was not provided?
• Was production of the proof of mailing sufficient to satisfy the legal requirement that notice was provided?
• What was the statute of limitation for bringing an action related to sending the notice?


These questions were answered by the Alabama legislature when, in February 2018, it amended Alabama Code Section 6-5-248(h). The new law clarifies that a right of redemption cannot be exercised later than one year after the date of foreclosure even if the required notice was not sent. The new law also provides that possession or production of the proof of mailing of the notice would constitute an affirmative defense to any action related to the notice requirement. Finally, the law specifically limited the time frame in which actions related to the notice requirement can be brought to one year after the date of the foreclosure sale.

The Alabama legislature should be commended for passing this legislation as it will help to avoid piecemeal, and likely conflicting, rulings from courts across the state. Court filings and any judicial rulings from around the state regarding the right of redemption will continue to be monitored by this author’s firm.

© Copyright 2018 USFN. All rights reserved.
April e-Update and Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Florida: Borrower’s Property Surrender in Bankruptcy Creates a Rebuttable Presumption in Foreclosure Action

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018 and May 1, 2018

by Robyn Katz
McCalla Raymer Leibert Pierce, LLC – USFN Member (Connecticut, Florida, Georgia, Illinois)

Florida Senate Bill 220 passed both houses of the legislature unanimously and was signed by the governor on March 19, 2018. This act relates to bankruptcy matters in foreclosure proceedings. It authorizes lienholders to use certain documents filed under penalty of perjury in the defendant’s bankruptcy case as an admission in the mortgage foreclosure case. SB 220 applies to foreclosure cases filed on or after October 1, 2018.

The act creates a rebuttable presumption that the defendant has waived any defense to the foreclosure if a lienholder submits documents filed in the bankruptcy case evidencing the debtor’s intent to surrender the subject property — provided those documents have not been withdrawn by the defendant. Additionally, if a final order is entered in the defendant’s bankruptcy case which discharges the defendant’s debts or confirms the repayment plan that provides for the surrender of a property, that also creates the same rebuttable presumption. The defendant is not precluded, however, from raising a defense in the foreclosure action based on an action or inaction of the lienholder that is subsequent to the filing of the document in the bankruptcy case which evidenced the defendant’s intention to surrender the mortgaged property to the lienholder.

This law will allow the plaintiff’s counsel in foreclosure proceedings to swiftly rebut defenses filed by borrowers who have surrendered the subject property in their bankruptcy case, as those defenses will be deemed as waived. Pleadings and orders entered in the bankruptcy cases can be reviewed to provide the state court with appropriate documentation evidencing the defendant’s intent to surrender the subject property.

© Copyright 2018 USFN and McCalla Raymer Leibert Pierce, LLC. All rights reserved.
April e-Update and Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

New York: More on Enforcing Forbearance Agreements

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Bruce J. Bergman
Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. – USFN Member (New York)

Must a borrower scrupulously adhere to the requirements of a forbearance agreement to derive benefit from it? A concise appellate decision and order confirms that, indeed, punctilious performance is required. [Interaudi Bank v. Moorgate Investments Limited, 145 A.D.3d 549, 44 N.Y.S.3d 35 (1st Dept. 2016)].

Because it seems that courts tend to be liberal in finding breaches to be de minimis, lenders and their counsel may often be skeptical that settlement agreements or forbearance agreements will be strictly enforced. Interestingly, though, and certainly gratifyingly from the point of view of a lender or servicer, such agreements are enforced with regularity according to their very terms. Such is the lesson of the subject case, and the story is but a short one.

A defaulted mortgage elicited a mortgage foreclosure action, which in turn led to a forbearance agreement whereby an extension of the loan maturity date was granted — specifically conditioned, however, upon the plaintiff’s receipt of $1,000,000 towards reduction in the principal sum. The source of this $1,000,000 was to be from proceeds of certain art sales by the loan payment guarantor at two auctions (to be conducted on a denominated date in November 2015). Importantly, the agreement stated that time was of the essence for this compliance.

The borrower-defendants, however, failed to comply with the terms of this condition. The monies were not paid and, thus, the loan maturity date was not extended.

While the trial court under these circumstances declined to grant summary judgment to the foreclosing plaintiff, the Appellate Court (the First Department) reversed, concluding that the agreement was clear and the failure to perform by the borrower (guarantor, actually) meant that the loan maturity was not extended and the foreclosure could proceed.

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

South Carolina: Appellate Review of Quiet Title Action after Tax Sale

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Ronald Scott and Reginald Corley
Scott & Corley, P.A. – USFN Member (South Carolina)

In the recent 2018 South Carolina Court of Appeals case, Equivest Financial, LLC v. Ravenel, which involved a quiet title action on a property sold at tax sale, the appellant (Ravenel) raised multiple issues on appeal. Specifically, the appellant asserted that: (1) the trial court erred in failing to take testimony; (2) the tax sale was void because the property was not levied, advertised, and sold in the name of the true owner; (3) judicial estoppel does not apply because Ravenel was not a party to the previous action; and (4) the delinquent tax collector did not comply with statutory requirements in sending notice to Ravenel. The court addressed these arguments by finding that: (1) the attorney for the appellant did not preserve the first issue for appeal, and (2) the doctrine of res judicata applied, barring the appellant from raising the other issues.

Background
The facts, briefly, are that Ravenel (just prior to filing bankruptcy) conveyed the subject property to her children for five dollars in consideration. In the subsequent bankruptcy proceeding, Ravenel failed to indicate this perceived fraudulent conveyance in her schedules; likewise, Ravenel did not tell her children about the conveyance or physically deliver the deed to them. After Ravenel filed bankruptcy she failed to pay her annual property taxes. As required by statute, the Charleston County Delinquent Tax Collector (DTC) sent notices to the children based on their addresses listed on the most recent deed of record. After multiple attempts to notify the children of the delinquent taxes on the property (i.e., notice by publication, issuance of a final notice of property redemption, and a failure of Ravenel to pay the redemption amount of $27,849.06), the property was sold at tax sale to Equifunding, who conveyed the property to the respondent in this action, Equivest Financial LLC. After this conveyance, Ravenel’s children brought a quiet title action, seeking to have the tax deed set aside. This case deals with the appeal of that action.1 The main issues in the appeal related to the doctrines of judicial estoppel and res judicata.

Judicial Estoppel

First, the court considered whether Ravenel was judicially estopped from claiming a position inconsistent with the one that she held in a previous court action. The five elements of judicial estoppel are: (1) two inconsistent positions taken by the same party or parties in privity with one another; (2) the positions must be taken in the same or related proceedings involving the same party or parties in privity with each other; (3) the party taking the position must have been successful in maintaining that position and have received some benefit; (4) the inconsistency must be part of an intentional effort to mislead the court; and (5) the two positions must be totally inconsistent.2

In the present case, with respect to the third element, the court found that Ravenel was not successful in establishing that she was the true owner of the property. Here, Equivest Financial LLC was found to be the true owner of the property by the trial court; therefore, the court of appeals found that judicial estoppel did not apply.

Res Judicata

Second, the court considered whether the elements of res judicata were met and thereby barred all other claims. The court found the three-element test was met: (1) the action involves the same identity of the parties or their privies; (2) the subject matter is identical; and (3) the prior suit adjudicated the issue with a final, valid judgment on the merits.3

In this case, Ravenel’s interests were essentially the same interests as her children’s interests in the property. Accordingly, Ravenel was deemed to be the real individual in interest with regard to the subject property. Further, the court found that the subject matter element was met because the case presented to the court was the identical issue surrounding whether the tax sale was valid. Finally, the court found that the trial court heard the first case in full and made a ruling on the issue, which the court of appeals affirmed. Due to the fact that the three elements of res judicata were met, all claims were barred.


1 Equivest Fin., LLC v. Scarborough, 2013 WL 8541673, Op. No. 2013-UP-495 (S.C. Ct. App. filed Dec. 23, 2013).
2 Auto-Owners Ins. Co. v. Rhodes, 405 S.C. 584, 598, 748 S.E.2d 781, 788 (2013).
3 7 S.C. Jur. Estoppel and Waiver § 27 (1991).

© Copyright 2018 USFN. All rights reserved.
April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Attorney Fees and Costs Recoverable against Foreclosed Borrowers in Virginia Unlawful Detainer Actions (Effective 7/1/18)

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018 and May 1, 2018

by E. Edward Farnsworth, Jr.
Samuel I. White, P.C. – USFN Member (Virginia)

In the 2018 regular session, foreclosure purchasers realized a benefit by way of House Bill 311. Signed into law by the governor on March 9, 2018, and becoming effective July 1, 2018, this bill provides for additional remedies (including reasonable attorney fees and costs) against borrowers who fail to vacate after foreclosure. Virginia courts are adherent to the “American Rule,” which only permits a prevailing party to recover attorney fees and costs where contractually permitted or authorized by statute. For this reason, attorney fees and costs for post-foreclosure eviction actions have not been available in the Commonwealth. Most, if not all, common deed of trust forms fail to address recovery of post-foreclosure fees and costs associated with obtaining possession, and Virginia statute did not provide such a remedy.

Specifically, House Bill 311 amends Virginia Code § 8.01-126 (the Virginia unlawful detainer statute) and addresses the legal status of foreclosed borrowers who occupy the property on the date of foreclosure. The newly minted § 8.01-126(C)(4) states that foreclosed borrowers are “tenants-at-sufferance” and such tenancy is terminable by sending a written 3-day notice of termination. The new statute effectively negates Johnson v. Goldberg, 207 Va. 487 (1966), where the Virginia Supreme Court held that foreclosed borrowers, as tenants-at-sufferance, are not entitled to any notice to quit or vacate. After expiration of the notice, the foreclosure purchaser is permitted to file an unlawful detainer. Where notices to vacate mailed to foreclosed borrowers are currently more a requirement of court custom and preference, they will become a material condition to seeking possession as a matter of law.

The new section also enables claims for damages and fair rental value, in addition to attorney fees and court costs: “Such tenant shall be responsible for payment of fair market rental [sic] from the date of such foreclosure until the date the tenant vacates the dwelling unit, as well as damages, and for payment of reasonable attorney’s fees and court costs.” While these new remedies can be sought as part of the unlawful detainer, this new provision seems to also provide an avenue for a separate cause of action where the borrower vacates after the expiration of the termination notice, but prior to filing the unlawful detainer, and the property has been detained for a significant time thereafter and/or has been damaged by the borrower. Similarly, such remedies could be sought after a “lock out” pursuant to an order of possession, or through bifurcation of the unlawful detainer action into a ruling on possession and a later hearing, post-lock out, to determine “final rent and damages.” Bifurcation is commonly used in landlord/tenant cases.

Operationally, when the statute becomes effective, notices to vacate should be revised to recite this statue’s applicability to borrowers — and that failure to vacate may subject them to a claim for fair rental value, damages, and reasonable attorney fees and costs. This may give greater incentive to borrowers to timely vacate rather than exploit the administrative time required by the judicial eviction process. Perhaps it will also compel borrowers to evaluate the merits of contesting the eviction more prudently. It should be noted that this statute does not apply to occupancy by foreclosed tenants of the borrower, which is addressed by Virginia Code § 55-225.10(C).

 

While these remedies will be available come July 1, 2018, whether to pursue them should be carefully considered by servicers and outsourcers, as Virginia general district courts will likely require witnesses to establish these monetary claims (which are separate and apart from merely seeking possession). Seeking these new remedies may add additional time, cost, and effort to the standard eviction process where possession is the primary desired outcome. A monetary judgment, after all, may only be as good as its collectability.

© Copyright 2018 USFN. All rights reserved.
April e-Update and Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 

Virginia Legislature Adds New Sale Notice Requirements for Deceased Borrowers and Their Estates

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018 and May 1, 2018

by E. Edward Farnsworth, Jr.
Samuel I. White, P.C. – USFN Member (Virginia)

House Bill 755/Senate Bill 422 (relates to foreclosure after death of owner) — For those who practice in both judicial and nonjudicial foreclosure states, the different treatment of deceased borrowers and their estates is readily apparent. In Maryland (quasi-judicial) and the District of Columbia (judicial), for example, the personal representative of the estate must be served with the foreclosure pleadings. If such fiduciary has not yet been established, one must be appointed to proceed. Notices of sale and all other filings are mailed to the personal representative.

By contrast, Virginia, a nonjudicial state, does not require the appointment of a personal representative to foreclose — not even to receive notice of sale. Virginia Code § 55-59.1(A) only compels that sale notice be sent to the present owner at the “last known address as such owner and address appear in the records of the party secured” and does not specifically address heirs and personal representatives. Notices of sale must be mailed no more than 14 days prior to sale.

Although not requiring a personal representative to foreclose, the Virginia legislature’s passage of House Bill 755/Senate Bill 422 does amend Virginia Code § 55-59.1(A) to include additional deceased borrower notice requirements. The amendment expands the source from which entitled notice recipients are derived to also include recorded probate documents. Effective July 1, 2018, Virginia Code § 55-59.1(A) will read in part:


If the secured party has received notification that the owner of the property to be sold is deceased, the notice required by clause (a) shall be given to (1) the last known address of such owner as such address appears in the records of the party secured; (2) any personal representative of the deceased’s estate whose appointment is recorded among the records of the circuit court where the property is located, at the address of the personal representative that appears in such records; and (3) any heirs of the deceased who are listed on the list of heirs recorded among the records of the circuit court where the property is located, at the addresses of the heirs that appear in such records.


The amended statute will legally entitle personal representatives and heirs to notice of sale, if the probate documents have been recorded. The statute does limit the notice address for these individuals to what is specifically referenced in the probate documents.

This statute also presents new concerns and quagmires. In many cases the servicer may be aware of the deceased borrower at referral — but probate instruments have yet to be recorded. Unlike subordinate deeds of trust and association statements of lien, which must be recorded more than 30 days prior to sale to trigger the right to notice, the amended statute does not contain the same “safe harbor” language regarding the recording of the probate documents in relation to the sale date. Where an allegation of failure to notify is advanced, it is uncertain how Virginia courts will interpret this distinction where the probate documents are recorded prior to sale but after the last pre-sale title update and the mailing of notices. How title insurers will treat this scenario is equally uncertain. Another new issue is that not all “heirs” listed on a “List of Heirs” are legal heirs under Virginia law. On face value, the amended statute seems to confer standing to challenge the foreclosure on notice grounds to individuals with no cognizable legal interest in the property.

Virginia best practice has traditionally been to direct notice to heirs and personal representatives appearing on the referral, foreclosure correspondence, and the pre-foreclosure title searches and updates, regardless. To this end, the amendment should not change processing in the ordinary course. However, where a notice might have been missed, resort can no longer be made to the statute’s limiting language confining the entitled recipient to whoever appears in the servicer’s records. With this new statutory amendment and the current industry focus on successors-in-interest, it is more important than ever for Virginia trustee firms and servicers to timely communicate concerning deceased borrowers and any known heirs or personal representatives.

© Copyright 2018 USFN. All rights reserved.
April e-Update and Spring USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

This post has not been tagged.

Share |
Permalink
 
Page 1 of 29
1  |  2  |  3  |  4  |  5  |  6  >   >>   >| 
Membership Software Powered by YourMembership  ::  Legal