MINNESOTA CASE LAW UPDATE
Stuckey v. Gislason & Hunter LLP (D. Minn. 2021)
The US District Court in Minnesota issued a favorable order for creditors on January 12, 2021 in Stuckey v. Gislason & Hunter LLP. Facts of the case include, plaintiff’s as mortgagors and foreclosing Law Firm as a defendant. Law Firm sent out a letter with a Notice of Default and a pre-foreclosure notice to Plaintiff’s.
Plaintiff’s alleged that the Law Firm violated the FDCPA (15 U.S.C. § 1692 et seq.). Law Firm moved to dismiss for failure to state a claim under Rule 12(b)(6), arguing it is not a debt collector and therefore not subject to the FDCPA. Additional, Law Firm contends Plaintiff’s did not plead sufficient facts to establish it is a debt collector under the limited purpose definition in 15 U.S.C. § 1692(f)(6). The court threw out the argument that Law Firm was a debt collector, relying on the recent Obduskey precedent, “those who engage in only nonjudicial foreclosure proceedings are not debt collectors within the meaning of the Act”.
Plaintiff’s claims include, Law Firm attempted to collect more than the secured-claim amount owed, sent pre-foreclosure notices directly to plaintiffs represented by counsel, and notifying a foreclosure-prevention agency of the debt. The first claim was thrown out for failing to plead sufficient facts to state a claim, and plaintiff’s amended complaint listed the secured claim amount exactly as in the notice. The second claim was thrown out because Plaintiff failed to cite any post-Obduskey authority that Law Firm was acting as a primary-purpose debt collection, and that the notice was sent pursuant to state statutory requirements with counsel being copied. The final claim was also thrown out because Plaintiff’s failed to establish Law Firm was a primary purpose debt collector, and sent the homeowners name, address and phone number to foreclosure prevention agencies as required by state statute.
Ultimately, the court found that the Law Firm commencing non-judicial foreclosures was not a debt collector under the primary purpose of the FDCPA. Even if a debt collector for the limited purposes of 15 U.S.C. § 1692(f)(6), complying with state statutes do not amount to FDCPA violations.
KENTUCKY CASE LAW UPDATE
United States Bank Nat'l Ass'n v. Kinslow, 2020 Ky. App. Unpub. LEXIS 407, 2020 WL 3124443
Kinslow is an unpublished case in Kentucky, but it is significant because the ruling in the case served to strip a lender of its mortgage on the property. Bill Kinslow and his son Allen Kinslow held title to the property as joint tenants with rights of survivorship. Bill entered into a promissory note that was secured by a mortgage. Allen did not sign the promissory note or mortgage for reasons that were not explained in the case. Bill passed away and the loan went into default. The lender foreclosed on the mortgage that encumbered Bill’s ½ interest in the property. The trial court denied the foreclosure and the Court of Appeals upheld the decision. The Court of Appeals ruled that under Kentucky law regarding joint tenancy with right of survivorship, any rights the lender had in the property because of the mortgage signed by Bill were extinguished at the time of Bill's death. Therefore, the mortgagee was unenforceable – even as to Bill’s ½ interest.
OHIO CASE LAW UPDATE
Christiana Trust v. Berter, 2020-Ohio-727, (12th District 2020)
The borrowers raised a number of issues in this case. The most significant issue was their argument that they should be allowed to contest the signatures that appear on the promissory note indorsements. This could present significant problems, not least of which would involve tracking down the individuals that signed the indorsements. Courts in Ohio have not had the opportunity to address this issue in any detail. The borrowers’ argument was based on ORC 1303.35, which corresponds UCC 3-306 and 3-308. Most states have adopted UCC 3-306 and 3-308 in some version so this issue could arise across the country. The Court of Appeals ruled that ORC/UCC does not provide the borrowers with the right to contest signatures that appear on indorsements as that provision was intended to provide the maker of the promissory note with the opportunity to raise the issue of the maker’s signature being fraudulent or forged. The borrowers attempted to appeal this decision to the Ohio Supreme Court, but that court denied jurisdiction. Contrast this with the George decision below.
OHIO CASE LAW UPDATE
U.S. Bank Nat'l Ass'n v. George, 2020-Ohio-6758, (10th District 2020)
This is the second time the George case has been on appeal since 2015. The issue in George I and George II involved copies of a promissory note submitted to the court that contained different indorsements. It is important to note that Ohio is not an original promissory note state. If it were and the original promissory note was presented as evidence, the issue would not have been raised. In the George II trial the original promissory note was offered as evidence and the lender prevailed. However, in both George I and George II the Court of Appeals implied that ORC 1303.35, which corresponds UCC 3-306 and 3-308 could be used by the borrower to challenge signatures on an indorsement to a promissory note. The 10th District Court of Appeals decision in George II is inconsistent with the 12th District Court of Appeals decision in Christiana Trust v. Berter, 2020-Ohio-727, (12th District 2020), which means the Ohio Supreme Court may accept the issue in the future to resolve the conflict.
OHIO CASE LAW UPDATE
Wilmington Sav. Fund Soc'y FSB as Trust v. Woods, 2020-Ohio-4599, (2nd District 2020)
This case is of particular interest to lenders as it is the first decision in Ohio where a Court of Appeals acknowledged the right of a lender to pursue foreclosure of an equitable mortgage where the borrower is deceased, the mortgage was lost and never recorded and title to the property was transferred. The trial court judge granted a Motion for Summary Judgment filed by the heirs of the deceased borrower and held that under Ohio law, a mortgage becomes operative as to third parties only when it is recorded. Lender’s counsel argued on appeal argued that the case law relied upon by the trial court applied to bona fide purchasers for value and the heirs could not inherit an interest greater than what the decedent held. The Court of Appeals agreed and held that the heirs of a decedent do not inherit a greater interest in the estate's property than the interest held by the decedent. Therefore, the lender is entitled to pursue its foreclosure on the equitable mortgage theory.
INDIANA CASE LAW UPDATE
Blair v. EMC Mortgage, LLC, 139 N.E.3d 705, 2020 Ind. LEXIS 96, 101 U.C.C. Rep. Serv. 2d (Callaghan) 291, 2020 WL 762592
The Indiana Supreme Court addressed the statute of limitations in Blair v. EMC Mortg., LLC. The Superior Court granted the foreclosure but held that EMC was entitled to recover only payments and interest that accrued after July 3, 2006 due to the six-year statute of limitations in Indiana Code section 34-11-2-9. The Indiana Court of Appeals reversed the decision and held that by failing to make demand within a reasonable time, EMC was not entitled to recovery. The Indiana Supreme Court heard the case and rejected the reasonableness standard applied by the Court of Appeals. In addition, the Indiana Supreme Court held that Indiana has two statutes of limitations that would apply to a promissory note and mortgage, Indiana Code section 34-11-2-9 and Indiana Code section 26-1-3.1-118. The two statutes provide for three events that could trigger the statute of limitations. First, a lender can sue for a missed payment within six years of a borrower’s default. Second, a lender can exercise its option to accelerate the promissory note’s maturity date and call the full balance due. In that situation the lender must file their foreclosure case within six years of that acceleration date. Third, a lender can decide not to accelerate upon default and instead sue for the entire amount owed within six years of the note’s date of maturity.
The LOGS Executive team recently announced plans to simplify our legal structure. We have been inspired by the overwhelmingly positive feedback our valued clients have shared. Thank you for the trust you have placed in us.
An essential part of this organizational transformation is establishing a structure that provides increased growth and leadership opportunity for our valued and talented team members and supports the future direction of the industry. As we advance to the next phase of this initiative, these key individuals will join our leadership team as Regional Partners:
We are excited to announce Jason Purser, Esq., as Managing Attorney for the State of North Carolina. Mr. Purser joined the firm in 2003 as an Associate and has 17 years of end-to-end experience in the creditors’ rights industry.
In addition to the attorney leadership roles, we are announcing the following key operational leadership roles.
The strategic promotion of these key leaders entrusts their unique strengths to drive our ongoing commitment to excellence and innovation in providing outstanding client service and help lead us into the future in an ever-evolving marketplace.
As part of a client-focused strategic plan for their national network of law firms, LOGS Network is excited to announce that effective January 1, 2021, in addition to their common technology, operations and ownership, a majority of its members will have a common name: LOGS Legal Group LLP serving 23 jurisdictions of the 33 jurisdictions LOGS Network serves.
Member firm Korde & Associates will continue to serve the New England region including Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island, and member firm Janeway Law Firm will continue to serve Arizona, Colorado, Oregon, and Washington.
"Over the last two years, LOGS Network has been working incrementally toward this legal structure simplification on behalf of our valued clients, and our firms," says Jason Shapiro, President of LOGS Network, "with this name change, it's easier than ever for clients to see the difference more than 40-years of experience and innovation can make across our comprehensive national footprint."
LOGS Legal Group LLP, along with Korde & Associates and Janeway Law Firm, serves 32 states and the District of Columbia supported by an experienced and tenured executive team. State-level managing attorneys, along with Jason Shapiro (President), Christopher Phillips (Managing Partner), Kay Schinker (Chief Operating Officer), Mark Carey (Chief Finance Officer), Jaqueline Comeau (Chief Compliance Officer), and Jamie Zelvin (General Counsel) will continue to lead and govern the most reliable, far-reaching, and comprehensive creditors' rights practice in the nation.
The LOGS Network proudly announced the promotion of Christopher Phillips, Esq., to Managing Partner, effective immediately. In this newly created executive leadership role, Christopher will contribute to the strategic direction and governance of our law firms.
It is with great pleasure that I am announcing the addition of Christopher Phillips to the LOGS Network executive team. As our industry navigates this unprecedented pandemic disruption, we intend to emerge a stronger and more agile organization. Having talented team members with the right skills, motivation, professionalism, and commitment to lead is key to our long-term viability and success. Christopher is a respected leader and proven professional and this promotion reflects the strong confidence we have in his abilities.”
Prepared by Kristine Brown, Managing Attorney
The United States Bankruptcy Court for the Northern District of Mississippi found that for purposes of interpreting 11 USC 1322(c)(1), the debtor’s right to cure a default terminates at the conclusion of the foreclosure auction and not delivery or recordation of a trustee’s deed. The Court found that this is because the mortgagor is divested of legal title upon default and the equity of redemption upon the conclusion of the public auction. In the absence of a legal or equitable interest at the commencement of a bankruptcy case filed subsequent to the completion of the auction, the property is not property of the estate.
The firm received this positive ruling in a matter of first impression with respect to the finality of the foreclosure sale under Mississippi law. The Court found that a valid foreclosure auction constitutes a foreclosure sale and divests a debtor of both legal and equitable title to real property so that the automatic stay of 11 USC 362(a) will not come into effect to invalidate a foreclosure sale even though a deed has not been delivered or recorded. In a well reasoned memorandum, Judge Woodard affirmed the arguments put forth by Shapiro & Brown, LLC to find that the debtor’s interest terminates when the auction concludes and does not require a trustee’s deed to be delivered or recorded. In this case, the auction began at 11:05 A.M. concluded at 11:28 A.M. and the bankruptcy case was filed at 11:28 A.M. The trustee’s deed was signed and delivered on February 5th 2020 and subsequently recorded on February 12th 2020.