Wednesday, April 3, 2013

FYI: Missouri Sup Ct Rejects Borrower's Attempt to Challenge Foreclosure in Eviction Proceeding

The Missouri Supreme Court recently upheld summary judgment in favor of a purchaser of foreclosed property in an action for unlawful detainer and the dismissal of a borrower's "affirmative defenses" and counterclaims, ruling that, because actions for unlawful detainer are statutorily limited to issues of possession, the lower court properly dismissed the borrower's claims, as they related exclusively to issues of title and the validity of the foreclosure rather than to the purchaser's right to possession.


A copy of the opinion is available at:


Borrowers lost their home to foreclosure pursuant to a deed of trust.  In accordance with the terms of the trust deed, Borrowers were provided proper notices of default, foreclosure, and intent to sell the property.  The owner of the loan, the trustee of a pool of securitized mortgage loans ("Trustee"), purchased the property at the foreclosure sale and subsequently sent notice to the Borrowers demanding immediate possession of the property.    Borrowers failed to vacate and Trustee sued for wrongful possession and unlawful detainer. 


In their answer, Borrowers asserted a number of "affirmative defenses," including that Trustee lacked standing and could not establish chain of title, the foreclosure was illegal, the note was split from the deed of trust, and Trustee was not a bona fide purchaser.   Seeking damages, Borrowers asserted counterclaims for:  Trustee's alleged negligence in purchasing foreclosed properties that it knew or should have known had been improperly foreclosed upon; Trustee's "unjustly" acquiring title to Borrowers' property; and accounting irregularities in crediting Borrowers' loan payments.  


Borrowers also sought a declaratory judgment that: Trustee lacked valid title to the property, that the foreclosure was invalid; Trustee was not a bona fide purchaser for value; and Borrowers had a right to assert "applicable" affirmative defenses and counterclaims.


Trustee moved to dismiss the affirmative defenses and counterclaims on the ground that they exceeded the statutory scope of issues permitted to be litigated in an action for unlawful detainer.  Ruling that matters of equity may not be interposed as a defense in an unlawful detainer action, the trial court granted the motion to dismiss. 


Trustee also moved for summary judgment on its unlawful detainer claim, which the court granted following Borrowers' response in which they again raised issues related to the validity of Trustee's title.  The trial court awarded Trustee immediate possession and damages.   Borrowers vacated the property, but sought a new trial.  In the subsequent proceedings, Trustee again moved for summary judgment on its unlawful detainer claim, and Borrowers repeated their assertions related to their prior affirmative defenses and counterclaims.  The trial court granted summary judgment in favor of Trustee.


Borrowers appealed, arguing among other things that Missouri's unlawful detainer statute was unconstitutional, as it prevented them from asserting their various claims in the unlawful detainer action. 


The Missouri Supreme Court affirmed, ruling that issues regarding validity of title are precluded from being resolved in an action for unlawful detainer, but may be raised in a separate law suit.  


As you may recall, Missouri's unlawful detainer statute provides: "the complainant shall not be compelled to make further proof of the forcible entry or detainer than that he was lawfully possessed of the premises, and that the defendant unlawfully entered into and detained or unlawfully detained the same."  RSMo § 534.200.  


Additionally, the statute states:  "The merits of the title shall in nowise be inquired into, on any complaint which shall be exhibited by virtue of the provisions of this chapter."  RSMo 534.210 


Providing an historical overview of unlawful detainer actions in Missouri, the Court noted among other things that such actions, being summary proceedings, traditionally were limited to the question of possession and never addressed questions of ownership or validity of title.  In so doing, the Court stressed repeatedly that claims regarding validity of title or ownership had to be raised in a separate action, pointing out the statutory limitations on the substantive scope of unlawful detainer actions and that Missouri courts have thus prohibited equitable defenses and counterclaims to such actions.  See, e.g., Broken Heart Venture, L.P. v. A&F Rest. Corp., 859 S.W.2d  282, 286 (Mo. App. 1993); V.F.W. Post No. 7222 v. Summerville Saddle Club, 788 S.W.2d 796, 798 (Mo. App. 1990).  


Thus rejecting the notion that the limitations are procedural rather than substantive, the Missouri Supreme Court pointed out that the substantive limitations apply regardless of how the defendant raises such issues, whether by affirmative defense, counterclaim, or otherwise. 


Turning to Borrowers' argument that Missouri's statutory limitations on the scope of unlawful detainer actions were unconstitutional because they deprived Borrowers of substantive and procedural due process and equal protection, the Court stressed that Borrowers were never barred from litigating issues related to the validity of Trustee's title to the property generally, but that Borrowers were simply barred from doing so within the context of a limited action for possession under Chapter 534.  See Lindsay v. Normet, 405 U.S. 56 (1972)(ruling that Oregon's unlawful detainer statute did not violate due process even where tenant was not permitted to raise equitable or legal challenges).


In so ruling, the Missouri Supreme Court rejected Borrowers' various assertions, including the argument that Section 534.210 created an "irrebuttable presumption" that title is proven simply by filing an unlawful detainer action, observing that Section 534.210 merely provides that the validity of title is irrelevant in an action for unlawful detainer.


The Court similarly rejected Borrowers' contentions that Missouri rules of procedure trumped the substantive aspects of Section 534.210 and that Section 534.210 prevented them from challenging Trustee's standing to file an unlawful detainer action.  In doing so, the court noted that Borrowers' standing arguments were really "re-packaged" attacks on the validity of title, repeating its observation that such challenges are only prohibited by Section 534.210 to the extent they are, in substance, attacks on the validity of the plaintiff's title and must therefore be raised in a separate suit. 


Finally, pointing out that a "foreclosure purchaser's right to possession is based upon the fact of the foreclosure sale as demonstrated by the deed, not on the ultimate validity of the title that the deed reflects," the Court conceded that unlawful detainer actions, designed to be simple and quick, are difficult to contest.   Moreover, the Court concluded that Borrowers, having failed to appeal a judgment in earlier litigation granting Trustee a first lien interest in their property under the deed of trust, were precluded from challenging Trustee's ability to foreclose at this late date.


Accordingly, the Missouri Supreme Court affirmed the lower court's judgment, remarking that changes in the policies embodied in Missouri's unlawful detainer statute must be accomplished through legislative means.




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
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