Alabama Court of Civil Appeals Rules in Bank’s Favor in Ejectment Action Based on Bank’s Substantial Compliance with Terms of Mortgage Contract and Promissory Note

In Turner v. Wells Fargo, N.A., No. 2150230, Wells Fargo foreclosed on a home after the homeowners tendered a bad check and attempted to send catch-up payments that did not include required penalty fees.  Wells Fargo, which purchased the home in foreclosure, obtained summary judgment in the trial court after initiating an ejectment action against the former owners. On appeal, the Alabama Court of Civil Appeals affirmed the summary judgment, holding that Wells Fargo had substantially complied with the terms of the mortgage and was therefore entitled to initiate the foreclosure.

In 2006, Donna Turner and Trenton Turner, Jr. executed a promissory note and mortgage for the purchase of a home. The note was eventually sold to Wells Fargo, and Carrington Mortgage Services serviced the loan.  In 2011, the Turners tendered checks to Carrington that were returned due to insufficient funds. The Turners ultimately satisfied the principal and interest payments, but Carrington assessed several penalty fees for the bad checks.  The Turners repeatedly sent checks that were sufficient to pay the principal and interest, but Carrington returned these checks because they were not sufficient to pay the mounting penalty fees.

In late 2011, Carrington notified the Turners of its intent to foreclose, and in early 2012, Wells Fargo accelerated the mortgage and sent the Turners a notice of foreclosure.  Wells Fargo ultimately purchased the home at a foreclosure sale. Because the Turners refused to vacate the home, Wells Fargo filed a complaint for ejectment. The trial court entered summary judgment in favor of Wells Fargo, and the Turners appealed to the Alabama Court of Civil Appeals.

Specifically, the Turners contended that Carrington caused the default by returning the checks that were tendered in 2011, that Wells Fargo failed to provide sufficient notice pursuant to the terms of the mortgage contract, and that Wells Fargo failed to show it was the holder of the note. The Court rejected all three arguments. First, the Turners admitted that they neglected to send Carrington checks that were sufficient to cover the penalty fees that accrued in 2011, and they did not dispute that the note allowed for such fees. Thus, the Court held that, under the terms of the note, Carrington was entitled to return the insufficient checks, and the Turners failed to cure their default.  Second, the Turners asserted that, because the notice of foreclosure sent by Wells Fargo did not contain the precise notice language included in the mortgage contract, the foreclosure was void.  The Court disagreed, holding that the notices substantially complied with the mortgage’s notice requirements. Therefore, the Court held that there was no genuine issue of fact supporting the Turner’s claim that they did not receive proper notice. Finally, the Turners contended that Wells Fargo did not produce substantial evidence that it was the holder of the note and mortgage. However, Wells Fargo presented to the trial court an executed assignment of the mortgage and note, which was recorded in the probate court prior to the foreclosure. Thus, the Court held that Wells Fargo did, in fact, present substantial evidence that it was the holder of the mortgage and was entitled to foreclose. Accordingly, the Court affirmed the trial court’s judgment.

No “Free House” in Florida

Last week, after much anticipation and speculation, the Florida Supreme Court decided Bartram v. U.S. Bank National Association, No. SC14-1265 (Fla. Nov. 3, 2016).  To the relief of lenders, the Court rejected the borrower’s attempt to use Florida’s five-year statute of limitations for mortgage foreclosures to avoid the mortgage on his home based on the bank’s earlier unsuccessful attempt to foreclose.  This decision means that Florida courts will be less likely to find that subsequent attempts to foreclosure are time-barred.

In early 2005, Bartram obtained a $650,000.00 loan secured by his Ponte Vedra home.  One day later, Bartram granted a $120,000.00 second mortgage on the home to his ex-wife.  Bartram stopped making payments on the first mortgage in January 2006 and never made payments on the second mortgage.

In May 2006, U.S. Bank N.A., as assignee (the “bank”), sued to foreclose the first mortgage based on Bartram’s failure to make installment payments.  In the complaint, the bank claimed it was accelerated the note and declared that all amounts under the note were due.  Almost five years later, the bank’s foreclosure action was involuntarily dismissed because the bank failed to appear at a case management conference.

About a year later, Bartram’s ex-wife sued to foreclosure her second mortgage.  Bartram filed a crossclaim against the bank to cancel the first mortgage based on the statute of limitations.  Bartram argued that any claim by the bank under the mortgage would be time-barred because over five years had passed since he defaulted, the bank accelerated the loan, and the bank attempted to foreclose the mortgage.  The trial court agreed with Bartram and entered an order that, in effect, released the bank’s lien on the property.  The bank appealed to the Fifth District Court of Appeal, and the Fifth District reversed.  The Florida Supreme Court later granted review of the Fifth District’s decision.

The Florida Supreme Court held that the dismissal of the previous foreclosure action returned the parties to their “prior contractual relationship,” meaning that (1) Bartram had the opportunity to restart making his installment payments and (2) the bank had the right to accelerate the loan through a foreclosure action if Bartram subsequently defaulted.  Because Bartram failed to make any installment payments after the prior case’s dismissal, the court determined that there were new defaults within the statute of limitations that entitled the bank to accelerate the loan and foreclose the mortgage.

Note that the court based its determination that the previous case’s dismissal returned the parties to their prior contractual relationship, at least in part, on the fact that the mortgage at issue was a standard residential form mortgage that grants the right to reinstate after acceleration to the borrower if the borrower meets certain conditions.  It is unclear whether a judge in the future will decide that a different result should occur where the mortgage at issue does not grant a right to reinstate to the borrower.

Alabama Supreme Court Enforces Arbitration Clause That Provides For Arbitration “At the Election of Either Party”

The Alabama Supreme Court recently held in Hanover Insurance Company v. Kiva Lodge Condominium Owners’ Association, Inc. (No. 1141331) that where a dispute is governed by a contract that requires arbitration the arbitrator must determine whether particular claims are time barred under the contract, not the courts.

Continue Reading

Citing Spokeo, Eleventh Circuit Rejects Class Action Over Late Mortgage Satisfaction Recordation, Holding Plaintiff Had Not Alleged Concrete Injury-In-Fact Due to Statutory Violation

The Eleventh Circuit recently held in Nicklaw v. CitiMortgage, Inc.(No. 15-14216) that a plaintiff lacks standing to sue a creditor where the plaintiff merely alleges that the creditor failed to timely record a mortgage satisfaction, as it is statutorily required to do, but does not allege any additional concrete injury.

Continue Reading

Eleventh Circuit Holds That Reg. X Does Not Require Mortgage Servicers to Evaluate Untimely Loan Modification Plans Even If the Foreclosure Is Rescheduled So That the Sale Actually Occurs Beyond Reg. X’s 37-day Window

In a recent decision, the Eleventh Circuit (Lage v. Ocwen Loan Servicing, LLC, No. 15-15558 (11th Cir. Oct. 7, 2016)) held that a loan servicer is not required to evaluate a completed loan modification application if that application is submitted less than 37 days before a foreclosure sale is originally scheduled to occur. The Court held that this applies even when the foreclosure sale on the property is rescheduled to a later date, making the loan modification application fall outside the 37-day window.

Continue Reading

Federal Rules Advisory Committee Proposes Amendments to Rule Governing Class Actions in Federal Court

Since 2011, a Subcommittee of the Federal Rules Advisory Committee has been mulling changes to Rule 23 of the Federal Rules of Civil Procedure. On April 14, 2016, the Advisory Committee forwarded proposed changes to the Standing Committee on Rules of Practice and Procedure, recommending that they be published for public comment. On August 12, the Standing Committee published a draft. Any approved changes will be made effective December 1, 2018.

The most significant changes involve measures to deter “bad faith” objectors. Under the new Rule 23(e)(5)(B), the Court must approve any side payment to an objector or objector’s counsel associated with withdrawing an objection or abandoning an appeal from a judgment approving a settlement.

Continue Reading

Alabama Court of Civil Appeals reverses summary judgment granted in favor of mortgage servicer based on res judicata defense.

In Sims v. JPMC Specialty Mortgage, LLC, No. 2150437, a borrower had been involved in two previous lawsuits arising out of a mortgage servicer’s foreclosure upon the borrower’s property. The servicer obtained summary judgment in the trial court based on the doctrine of res judicata.  The Alabama Court of Civil Appeals reversed, finding that genuine issues of material fact precluded summary judgment based on res judicata.

Continue Reading

Joint Tenancy Lienholders Should Timely Execute on Judgment Liens in Order to Avoid Losing Property Interest

The Alabama Supreme Court recently held in Ex parte Arvest Bank, that an unexecuted judgment lien against the property interest of one joint tenant does not sever a joint tenancy with the right of survivorship, thereby extinguishing the lienholder’s rights in the property when that joint tenant dies.

Continue Reading

Eleventh Circuit Holds Arbitration Clause Unenforceable Due to Unavailability of Arbitral Forum

The Eleventh Circuit recently held in Parm v. National Bank of California, that a payday lender’s arbitration clause was unenforceable because the forum selected was unavailable and no alternative forum was provided for.

Continue Reading

Eleventh Circuit: Failure to provide debtor with FDCPA-required disclosures constitutes injury-in-fact to confer standing

In an unpublished opinion, the Eleventh Circuit applied the Supreme Court’s recent opinion in Spokeo, Inc. v. Robins, 578 U.S. ___, 136 S. Ct. 1540 (2016) and held that a debtor who allegedly did not receive certain disclosures required by the Fair Debt Collections Practices Act (FDCPA) suffered an injury-in-fact to her statutorily created right to receive such information, and therefore had standing to pursue an FDCPA claim against the entity attempting to collect the debt.

Continue Reading

LexBlog