FYI: 9th Cir Holds FDCPA Does Not Apply to Judicial Foreclosures If No Deficiency Sought

The U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of a borrower's complaint under the federal Fair Debt Collection Practices Act (FDCPA) arising from a judicial foreclosure proceeding in Oregon, holding that the defendants were not attempting to collect a debt within the meaning of the FDCPA when only foreclosure was sought and not a deficiency judgment.

 

A copy of the opinion is available at:  Link to Opinion

 

The borrower defaulted on his mortgage loan and the loan owner, which had acquired the loan from the original lender, filed suit to foreclose the deed of trust on borrower's home. The state court dismissed the case because the borrower had a pending case against the original lender, which the court deemed "duplicative."

 

The borrower then filed a complaint in federal court alleging that the mortgage loan owner, its loan servicer and attorneys violated the FDCPA, the Oregon Unlawful Trade Practices Act and engaged in a civil conspiracy by filing an unlawful foreclosure action and failing make required disclosures.

 

The federal trial court dismissed the borrower's complaint for failure to state a claim because "none of the defendants had engaged in debt collection by initiating the judicial foreclosure proceeding." The state law claims were also dismissed because "Oregon law provides that compliance with the FDCPA constitutes compliance with the Unlawful Trade Practices Act … [a]nd under Oregon law, civil conspiracy is a theory of joint liability that depends on an underlying civil violation."

 

The borrower appealed.

 

On appeal, the Ninth Circuit affirmed the trial court's dismissal of the complaint, but the borrower petitioned for rehearing.  The Court requested "supplemental briefing to discuss the effect (if any) of the Supreme Court's intervening decision in Obduskey v. McCarthy & Holthus LLP."

 

The Court began by noting that "[t]he crux of the parties dispute is whether the defendants' pursuit of judicial foreclosure was a form of debt collection." It then explained that the FDCPA's definition of "debt" boiled down to "a consumer's obligation to 'pay money.'"

 

The Ninth Circuit then explained that since the FDCPA defines "debt collector" as someone "who regularly collects or attempts to collect … debts owed or due or asserted to be owed or due another[,] … an entity that collects a debt owed itself—even a debt acquired after default—does not qualify under this definition."

 

The Court reasoned that [t]he key takeaway from these statutory definitions is that the FDCPA regulates people or entities whose principal business is collecting, or who regularly collect, money  owed by a consumer to a third party." The loan owner, however, "could have — but did not — take this approach."

 

The Ninth Circuit then concluded that "[i]n contrast to an action on the note, the enforcement of a security interest does not entail an attempt to collect money from the debtor." "Courts have long recognized the 'very palpable distinction' between security interests and the debts they secure."

 

"While the deed of trust creates a lien on the property to secure the creditor's right to repayment, the note makes the debtor personally liable for the loan." The Court likened this to the repossession of a car, where "the repo man who tows a car subject to a security agreement thereby exercise[s] the creditor's right to retake the property, without attempting to collect on the defaulted loan. … As we have explained, the remedy of foreclosure authorizes a creditor 'to retake and resell the security, not to collect money from the borrower.'"

 

The Ninth Circuit rejected the borrower's argument that "[r]ather than focusing on the distinction between security-interest enforcement and collecting money, … the crucial distinction is between judicial and non-judicial foreclosure."

 

The Court reasoned that "[w]e do not agree that, as a categorical matter, a person who initiates a judicial foreclosure proceeding is attempting to collect a debt. Our cases make clear that a plaintiff must identify something beyond the mere enforcement of a security interest to establish that the defendants are acting as debt collectors subject to the FDCPA's broad code of conduct. That additional debt-collection ingredient can be present for judicial foreclosure, provided that state law permits a creditor to recover money from the debtor after foreclosure if the property sells for less than the debt. … That remedy, called a deficiency judgment, is often available in judicial foreclosure proceedings (but typically not in non-judicial proceedings). Because Arizona authorizes deficiency judgments as part of judicial foreclosure, we accordingly held … that the filing of a foreclosure writ in Arizona can qualify as debt collection. … But unless a deficiency judgment is on the table in the proceeding, a person judicially enforcing a deed of trust is seeking only the return or sale of the security, not to collect a debt."

 

Having concluded that the FDCPA "kicks in only once a person does 'something in addition to the actions required to enforce a security interest[,]'" the Court turned to Oregon law, noting that "[s]tate law provides that 'a judgment to foreclose residential trust deed … may not include a money award for the amount of the debt against the grantor." Because this provision prohibits deficiency judgments, "[j]udicial foreclosure in Oregon 'extinguishes the entire debt even if it results in a recovery of less than the amount of the debt.'"

 

The Court also rejected the borrower's argument that the loan owner "crossed the line into debt collection by including in its foreclosure complaint a request for a money award…[,]" reasoning that that request "served simply to identify the amount of the debt secured by the property, which authorized a sheriff's sale to discharge that liability in the same manner as for a typical judgment debtor."

 

The Ninth Circuit concluded that "[a] judicial foreclosure proceeding is not a form of debt collection when the proceeding does not include a request for a deficiency judgment or some other effort to recover the remaining debt."

 

Because the borrower did not plead any conduct by the defendants other than filing the foreclosure action and "actions to effectuate that proceeding[,] … the trial court property granted the motion to dismiss."

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments 

 

FYI: Ill App Ct (2nd Dist) Rejects Post-Sale Challenge to Foreclosure Service of Process

The Appellate Court of Illinois, Second District, recently held that jurisdictional defects in service of process that did not affirmatively appear on the face of the foreclosure court record protected the rights of an innocent third-party foreclosure against the claims of the borrower.

 

A copy of the opinion is available at:  Link to Opinion

 

In July 2010, a mortgagee filed a foreclosure complaint against a borrower in relation to a property located in Roselle, IL, County of DuPage. The summons issued was on a form provided by DuPage County and the caption listed "the mortgagee v. the borrower, et al."  The borrower was eventually served via substitute service on his son at an address in Schaumburg, Illinois.

 

In November 2010, the trial court entered a default judgment and in March 2011 a judgment of foreclosure was entered against the borrower. The property was sold at a sheriff's sale to the mortgagee who shortly thereafter issued a new buyer a special warranty deed in September 2011.

 

Seven years later in September 2018, the borrower filed a petition to vacate the judgment of foreclosure and sale arguing the Court did not acquire personal jurisdiction over him because he was served in Cook County, Illinois and the foreclosure court did not appoint a special process server to serve process in Cook County as was required by statute. Additionally, the borrower argued, the summons did not identify him as a defendant and was not directed to anyone.

 

In December 2018, the foreclosure buyer filed a motion to dismiss arguing that the borrower's petition was barred by the bona fide-purchaser protections of Illinois law and by the doctrine of laches, among other claims.

 

As you may recall, Illinois law regarding petitions to vacate judgments provides generally, that where the rights of innocent third-party purchasers have attached, a judgment can be collaterally attacked only where an alleged personal jurisdictional defect affirmatively appears in the record.

 

The trial court granted the foreclosure buyer's motion to dismiss holding the protections afforded under Illinois law to bona fide purchasers bar original owner's petition "because the lack of jurisdiction is not on the face of the record."

 

The borrower appealed.

 

On appeal the borrower argued that the foreclosure court lacked personal jurisdiction over him because (1) the summons issued against him was "facially noncompliant" because the summons did not identify defendant as "Defendant;" and (2) he was served by an unauthorized person under the Illinois statute of substitute service of process.

 

The Appellate Court began its analysis by examining the bona fide-purchaser protections under Illinois law, noting that "[i]n determining whether a lack of jurisdiction is apparent from the record, we must look to the whole record, which includes the pleadings, the return on the process, and the judgment of the court," and that "[a] lack of jurisdiction is apparent from the record if it does not require inquiry beyond the face of the record." Id. at

 

The borrower argued that the lack of personal jurisdiction was apparent on the face of the record due to the invalid summons. He contended that the summons issued against him was "facially noncompliant" with Illinois law regarding the contents of summons because the summons did not identify defendant as "Defendant" and it was not directed to him. In addition, the borrower argued, the summons was invalid because the caption did not identify the parties and he was not named following the line "To each Defendant:". The borrower argued that, because the words "Plaintiff" and "Defendants" did not appear below the names of the parties, the summons did not identify who the parties are in the caption and thus this violated Illinois law.

 

The Appellate Court acknowledge a summons issued in violation of the statute and the rules is void and results in a lack of personal jurisdiction over the defendant. Arch Bay Holdings, 2015 IL App (2d) 141117, ¶ 14. For example, the Illinois Supreme Court has ruled that "a summons which does not name a person on its face and notify him to appear, is no summons at all, so far as the unnamed person is concerned." Ohio Millers Mutual Insurance Co. v. Inter-Insurance Exchange of the Illinois Automobile Club, 367 Ill. 44, 56 (1937); see also Arch Bay Holdings, 2015 IL App (2d) 141117, ¶ 14.

 

In addition, the Appellate Court noted, the purpose of a summons is to "notify a party that an action has been commenced against him." In re Application of the County Treasurer & ex officio County Collector, 307 Ill. App. 3d 350, 355 (1999). In determining whether a summons was sufficient to provide the opposing party with notice of the action, courts "adhere to the principle that a court should not elevate form over substance, but should construe a summons liberally." Id. The rule does not require exact compliance with the form provided. Rather, the rule requires a plaintiff to "substantially" adopt the form provided by rule.

 

The Appellate Court observed there were only two names listed on the summons, that of the mortgagee and the borrower. The borrower would have known if he were the plaintiff, thus it logically followed that he would be the defendant. In addition, page five of the summons names the borrower as a defendant to be served. Thus, the Appellate Court held the alleged defects in the summons did not deprive the trial court of personal jurisdiction over the borrower as the summons "substantially" adopted the form and no defect regarding the summons was apparent from the face of the record.

 

Next, the borrower contended that a lack of personal jurisdiction is apparent on the face of the record because he was served in Cook County by a special process server who was not appointed by the court, in violation of Illinois rules regarding service by special process server. When the borrower was served, the relevant Illinois law provided that service in a county with a population of one million or more required a court-appointed special process server if service was not provided by a sheriff.

 

Here, the mortgagee served the borrower via a special process server, but the record contains no order appointing a special process server. The borrower argued that such an order was required  because service occurred in Cook County, which had a population of one million or more. Therefore, the borrower argued, personal jurisdiction was never established.

 

The Appellate Court noted the mortgagee served the borrower in Schaumburg, which has portions in both DuPage and Cook counties. However, the affidavit did not indicate whether the borrower was served in Cook or DuPage County. Therefore, to determine in which county the mortgagee served the borrower, outside materials are required.

 

Thus, the affidavit did not establish a jurisdictional defect on its face and the alleged defect is beyond the face of the record. See Thill, 113 Ill. 2d at 314 (a lack of jurisdiction apparent from the record may not be established by going beyond the face of the record); see also Rahman, 2016 IL App (2d) 150040, ¶39.

 

The Appellate Court further noted that the borrower's citation to a map defeated his argument because it led the court beyond the face of the record. See Thill, 113 Ill. 2d at 314; see also Rahman, 2016 IL App (2d) 150040, ¶ 39 ("[I]t was impossible to determine in which county service occurred from the face of the affidavits—outside materials were necessary.").

 

Accordingly, the Appellate Court held that because the jurisdictional defect does not affirmatively appear on the face of the record, Illinois law protects the foreclosure buyers' rights in the property.

 

Finally, although the Appellate Court did not need to determine if laches applies to this case, it noted that laches can preclude relief in an appropriate case where prejudice is demonstrated.

 

Accordingly, the judgment of the trial court was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments 

 

FYI: 4th Cir Holds Each FDCPA Violation Subject to New Statute of Limitations

Joining similar rulings by the Eighth and Tenth Circuits, the U.S. Court of Appeals for the Fourth Circuit recently held that each violation of the FDCPA gives rise to a separate claim governed by its own statute of limitations period.

 

A copy of the opinion is available at:  Link to Opinion

 

On April 16, 2016, the homeowner plaintiffs received a notice from a law firm retained by their home owners association (HOA) stating the homeowners failed to pay $77.09 in HOA assessments and a demand for $1,000 to satisfy both the HOA assessments and the costs and attorneys' fees.

 

The homeowners disputed the debt and mailed a letter to the law firm with copies of cancelled checks. The law firm acknowledged that the disputed payments had been received, but asserted that the homeowners still owed the costs and attorneys' fees.

 

The homeowners and law firm exchanged several letters with the homeowners denying making any late payments and the law firm insisting that late fees, costs, interest, and attorneys' fees were owed.

 

On May 18, 2016, following another demand for payment, the homeowners delivered a letter to the law firm "requesting that [it] stop contacting us about this claim" and stating that the [homeowners] would consider "any further attempt to collect a debt against us or record a lien on our property [as] harassment[.]"

 

In January 2017, the homeowner hand-delivered a payment at the annual HOA meeting and was told to leave. The homeowner later received a notice that he had been banned from the HOA's premises for one year.

 

In February 2017, the homeowners received another letter from the law firm acknowledging receipt of the January 2017 payment, but noted as outstanding the accumulated fees and costs associated with the original disputed payment from 2016.

 

On March 10, 2017, the homeowners responded to the February letter, writing that "in our correspondence to you on this matter, we had requested that you stop contacting us about that claim . . . As both my wife and I dispute the debt referenced in your most recent letter, I am now requesting once again that you stop all communications with my wife and myself concerning this debt." The homeowners received additional correspondence from the law firm on March 14, 2017, including an updated ledger of the homeowners' account showing that a fee had been added for preparation of the February letter.

 

In January 2018, the homeowners requested to attend the annual meeting and was told by the law firm that the homeowner would not be allowed to attend, and that "this whole thing would not have happened if you would just pay your bills."

 

On February 6, 2018, the homeowners received an updated ledger from the law firm and although this correspondence purported to provide the homeowners with "verification of your account as you requested," the homeowners deny having made any such request for verification.

 

On April 5, 2018, the homeowners filed a complaint against the law firm brought under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (FDCPA, or the Act).  In their complaint, the homeowners alleged that the law firm violated various provisions of the FDCPA by engaging in unfair debt collection practices and by improperly communicating with the homeowners after they had disputed the debt and had made a written request that the law firm cease further communications. The law firm responded by seeking dismissal of the complaint as untimely or, in the alternative, for summary judgment.

 

The trial court granted the law firm's motion to dismiss the complaint based on the statute of limitations holding that the entire complaint was time-barred because the more recent violations that the homeowners alleged were of the "same type" as other violations that occurred outside the one-year limitations period.

 

The homeowners appealed.

 

The sole question on appeal was whether the trial court erred in concluding that all the homeowners' claims were barred by the FDCPA's statute of limitations.

 

The homeowners argued that the trial court erred in dismissing all their claims as time-barred because two of the alleged violations occurred less than one year from the date they filed suit. According to the homeowners, under the language of 15 U.S.C. § 1692k(d), a new statute of limitations arose with each "violation" of the FDCPA.

 

In response, the law firm argued that because the first alleged violation of the FDCPA occurred outside the limitations period and all later communications by the law firm arose from its attempt to collect the same debt.

 

The Fourth Circuit first acknowledged that under the FDCPA, claims must be brought "within one year from the date on which the violation occurs." 15 U.S.C. § 1692k(d). Moreover, the Court noted, nothing in the FDCPA suggests that "similar" violations should be grouped together and treated as a single claim for purposes of the FDCPA's statute of limitations. To the contrary, the Court has long held that a "separate violation" of the FDCPA occurs "every time" an improper communication, threat, or misrepresentation is made. United States v. Nat'l Fin. Servs., Inc., 98 F.3d 131, 141 (4th Cir. 1996). Accordingly, the Court concluded that Section 1692k(d) establishes a separate one-year limitations period for each violation of the FDCPA.

 

In coming to its ruling, the Fourth Circuit noted this interpretation avoids creating a safe harbor for unlawful debt collection activity where no matter how frequent or abusive such collection efforts became, the debtor would be left entirely without a remedy simply because the debtor did not timely pursue the first violation.

 

Finally, the Court observed that two other federal appellate courts have also concluded that the FDCPA's limitations period runs anew from the date of each violation. See Demarais v. Gurstel Chargo, P.A., 869 F.3d 685, 694 (8th Cir. 2017); Llewellyn v. Allstate Home Loans, Inc., 711 F.3d 1173, 1188 (10th Cir. 2013). As these courts have recognized, it simply "does not matter that the debt collector's violation restates earlier assertions — if the plaintiff sues within one year of the violation, [the suit] is not barred by § 1692k(d)." Demarais, 869 F.3d at 694; see also Llewellyn, 711 F.3d at 1188.

 

Accordingly, the Fourth Circuit vacated the trial court's judgment and remanded the case for further proceedings.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments 

 

FYI: 9th Cir Holds Conditional Offer Not Sufficient to Satisfy Nevada Superpriority HOA Lien

The U.S. Court of Appeals for the Ninth Circuit recently held that a conditional offer from a lender was not a valid tender to satisfy the superpriority portion of an HOA lien.

 

A copy of the opinion is available at:  Link to Opinion

 

A condominium owner ("Owner") fell behind on the assessments she owed her Homeowners Association ("HOA") and filed a Chapter 7 bankruptcy on February 29, 2012. On July 2, 2013, the HOA's Collection Agency ("Collection Agency") recorded a notice of delinquent assessment lien on behalf of the HOA.

 

The lender ("Lender") responded to the notice of default by sending a letter to the HOA requesting that HOA identify the superpriority amount of its HOA lien, with a breakdown of nine months' assessments so Lender could calculate and tender that portion of the lien. HOA acknowledged receipt of Lender's letter but responded by demanding that all payoff requests to be submitted through its online request form.  The Lender did not comply with the HOA's demand.

 

As you may recall, Nev. Rev. Stat. § 116.3116(1) allows HOAs to pursue liens on members' homes for unpaid assessments and charges. HOA liens are split into superpriority and subpriority components. The superpriority component is prior to all other liens, including first deeds of trust; and it comprises nine months' worth of common assessments and any nuisance-abatement or maintenance charges.

 

An HOA may foreclose on its superpriority lien through a non-judicial foreclosure sale. Additionally, to initiate a non-judicial foreclosure proceeding, an HOA must give notice of delinquency and wait 90 days to allow the homeowner to pay off the lien. See Nev. Rev. Stat. § 116.31162. Notice of default and notice of sale must be provided to the homeowner and to any holders of security interests in the property. Id. The holder of the first deed of trust may protect its collateral by tendering the amount of the superpriority portion of the lien to the HOA. Before 2015, these notices were not required to state the amount of the superpriority portion.

 

The HOA recorded a notice of trustee sale in April 2014, and an induvial buyer ("Buyer") purchased the property for $11,100 at the non-judicial foreclosure sale and later executed a quitclaim of her interest to a separate company (the "LLC").

 

In February 2016, the new holder of the deed of trust ("Mortgagee") filed a complaint against the HOA, Collection Agency, Buyer and LLC for quiet title.

 

The Mortgagee argued the Lender's offer to pay the superpriority portion of the lien, conditioned on receipt of "adequate proof" of the amount of the lien, was a valid tender. The trial court disagreed, and this appeal followed.

 

The Ninth Circuit considered two issues on appeal:  (1) whether there was a valid tender which would defeat the superpriority lien; and (2) whether the property was property of the debtor or of the bankruptcy estate, to determine whether the notices violated the bankruptcy stay.

 

The Ninth Circuit noted that the Nevada Supreme Court has cited with approval the commonly recognized definition of tender as "an offer to perform a condition or obligation, coupled with the present ability of immediate performance." 7510 Perla Del Mar Ave Tr. v. Bank of Am., N.A., 458 P.3d 348, 350 (Nev. 2020), thus endorsing "the generally accepted rule that a promise to make a payment at a later date or once a certain condition has been satisfied cannot constitute a valid tender." Id.

 

The Mortgagee argued that Lenders letter to the HOA constituted a valid tender because the letter insisted on a permissible condition: that HOA present "adequate proof" of the amount due for nine months' assessments. Lender's letter recounted the relevant provisions of section 116.3116 and requested a copy of the "HOA payoff ledger detailing the super-priority amount by providing a breakdown of nine (9) months of common HOA assessments in order for us to calculate the super priority [sic] amount."

 

The Appellate Court agreed that valid tender of the superpriority portion would discharge an HOA lien, but held that the tender either must be unconditional or include only those "conditions on which the tendering party has a right to insist," such as a request for satisfaction of judgment or a statement that the acceptance of tender satisfies the superpriority portion of the lien, Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 117–18 (Nev. 2018).

 

The Ninth Circuit relied on the recent Nevada Supreme Court ruling in Perla Del Mar, which held that a mere offer to pay at a later time, after the superpriority amount is determined, does not constitute a valid tender. Id. at 350–51. It also held that formal tender is excused when it is known that the party entitled to payment will reject it. Id. at 351.

 

Here, Lender's letter to the HOA and Mortgagee's summary judgment briefing, asserted that the superpriority portion was limited to nine months' worth of common assessments. However, the Court noted the superpriority portion includes nine months' worth of assessments and any unpaid maintenance and nuisance-abatement charges. Although Mortgagee argued that no nuisance-abatement or maintenance charges were owed in this case, the Appellate Court held that Mortgagee failed to offer any persuasive response to the trial court's ruling that Lender's tender was impermissibly conditional.

 

The Ninth Circuit rejected the Mortgagee's additional argument that it had no way to calculate the superpriority amount of HOA's lien because that overlooks the Nevada Supreme Court's ruling that the operative version of section 116.3116 allowed lenders to satisfy the superpriority portion of an HOA lien by paying the entire amount in the notice of default and seeking reimbursement.

Finally, Bank alternatively argued that its obligation to tender should be excused because the Collection Agency had a known policy of rejecting any payment for less than the full lien amount. The Appellate Court rejected this argument as it was not preserved for appeal.

 

Accordingly, the Appellate Court held that the trial court did not err when it ruled that Lender's inquiry letter was impermissibly conditional, and Mortgagee did not preserve its argument that its tender was excused.

 

The Ninth Circuit then examined Mortgagee's argument that the notices themselves violated the automatic stay, that the notices must be deemed void as a result, and that the subsequent foreclosure sale must be set aside for lack of adequate notice.

 

The Appellate Court acknowledged that "[g]enerally, the filing of bankruptcy will stay all proceedings relating to a foreclosure sale." Mann v. Alexander Dawson, Inc. (In re Mann), 907 F.2d 923, 926–27 (9th Cir. 1990) and the trial court misperceived the contention in the Mortgagee's complaint and mistakenly focused on the foreclosure sale rather than on the notices of delinquent assessment and default.

 

Accordingly, the Ninth Circuit remanded the matter to consider whether the property was property of the debtor or of the estate, to determine whether the notices violated the bankruptcy stay, and to address whether Mortgagee has standing to challenge the alleged violation.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments