Friday, September 13, 2013

FYI: 1st Cir Rejects Borrower's Statute of Frauds Challenge to Mortgage Lacking Legal Description

The U.S. Court of Appeals for the First Circuit recently rejected a borrower's claim that his mortgage -- which allegedly did not include a legal description at the time it was executed -- violated the New Hampshire statute of frauds.  



A borrower's mortgage allegedly failed to include the legal description of the related property, though it did include the common address.  After the borrower executed the mortgage, but before it was recorded, the lender allegedly inserted the correct legal description for the subject property. 


The borrower fell behind on his mortgage payments, and the lender's successor in interest (the "bank") initiated foreclosure proceedings.  The borrower challenged those proceedings, arguing that the original mortgage was invalid under New Hampshire's statute of frauds, and that the mortgage as recorded was fraudulent.  However, the borrower did not dispute that the legal description which appeared on his recorded mortgage was accurate.


The lower court granted the bank's motion for summary judgment, and the borrower appealed. 


As you may recall, New Hampshire law provides that "a memorandum is sufficiently definite to satisfy the statute of frauds if it is 'reasonably certain from the contract itself and the acts of the parties in performance of it what land was intended.'"  See Jesseman v. Aurelio, 106 N.H. 529, 532 (1965). 


On appeal, the First Circuit first considered the borrower's argument concerning the statute of frauds.  Based on the standard above, the First Circuit determined that any alleged imprecision related to the mortgage executed by the borrower was eliminated by the legal description recorded by the lender, which the Court found to be "unambiguous and undisputed parol evidence."


Accordingly, the First Circuit rejected the borrower's argument in connection with the statute of frauds. 


The borrower's arguments that the mortgage was fraudulent  -- in connection with his argument that the legal description was added to the mortgage unilaterally by the lender, and without his knowledge -- was similarly unpersuasive to the Court, which noted that the borrower "fails to explain how altering a writing in a way that indisputably causes it to better reflect the intentions of the parties constitutes fraud." 


Therefore, the First Circuit affirmed the lower court's ruling.  





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
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Admitted to practice law in Illinois


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