In BAC Home Loans Servicing, L.P. v. Wedereit, 328 Ga. App. 566 (2014), the Georgia Court of Appeals affirmed a trial court’s sua sponte granting of summary judgment for breach of contract based upon the lender’s failure to give proper notice prior to accelerating the loan at issue. The borrower filed suit for wrongful foreclosure, based upon allegations that the lender did not own the note and had failed to give proper notice of the foreclosure sale. The borrower also brought claims for breach of contract, based upon the lender’s failure to modify the terms of the mortgage. The borrower did not specifically allege that the lender breached the deed at issue by failing to give pre-acceleration notice to cure.
On appeal, the Court of Appeals first held that the trial court was permitted to make this sua sponte finding, as the lender was given the opportunity to respond to borrower’s allegation of lack of notice, generally, in its complaint. Since the construction of a deed presents a question of law which the Court of Appeals must review de novo, the Court of Appeals specifically examined the Deed at issue and found that it listed several very specific notice requirements, including a 30-day cure period during which the borrower may cure the default prior to acceleration of the amounts due and owing under the note. While BAC’s counsel had sent two default letters to the borrower, neither letter gave the borrower notice of the action required to cure the default, the date by which to cure, that failure to cure would result in acceleration, or that the borrower had a right to reinstate after acceleration, and accordingly, these letters did not comply with the Deed’s notice provisions.
The Court rejected the lender’s argument that a premature demand for accelerated payment can constitute sufficient notice if the debtor is given adequate time to cure the default and fails to do so, noting that here, the Deed required the lender to send out a very specific notice giving the borrower the opportunity to cure prior to acceleration. In upholding summary judgment on this claim, the Court noted that the borrower still has to show his damages resulting from the lender’s failure to give pre-acceleration notice in order to prevail on its claim for breach of contract. The Court also granted the borrower leave to amend the Complaint to state a claim for wrongful foreclosure based on the lack of pre-acceleration notice.
Lenders should always pay careful attention to the language of the operative Deed when foreclosing, particularly to any specific default or notice to cure provisions, as these can differ among loan documents. A lender’s failure to specifically comply with the default or notice provisions in a Deed may give rise to a wrongful foreclosure claim – whether the borrower specifically makes this allegation or not.