FYI: Oregon Sup Court Holds HOA Lien Primes First Mortgage/DOT If No Foreclosure Within 90 Days of Notice

The Oregon Supreme Court recently held that a lien for delinquent condominium assessments has priority over a first mortgage or deed of trust, where the mortgagee fails to initiate a foreclosure action within the 90-day notice period prescribed by ORS § 100.450(7).

 

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

 

On July 25, 2013, a condominium association recorded its lien for delinquent assessments against a condominium that was subject to a first deed of trust held by a mortgagee.

 

Shortly thereafter, on July 30, 2013, the mortgagee filed a judicial foreclosure action against the borrower, without naming the condominium association as a party.   The mortgagee later amended the foreclosure complaint to add the association as a party.  However, on May 16, 2014, the condominium association was dismissed, without prejudice, due to the mortgagee's failure to prosecute the action.

 

On October 14, 2014, the condominium association sent the mortgagee written notice of the delinquent assessment, pursuant to ORS § 100.450(7).  It was undisputed the mortgagee failed to reinstate the dismissed foreclosure action or to file a new one, within the 90-day period following the notice.

 

On May 4, 2015, seven months after receipt of the condominium association's statutory notice, the mortgagee obtained an order reinstating the previously dismissed judicial foreclosure action.   The condominium association filed an answer to the complaint, alleging the priority of its lien over that of the mortgagee, because either (a) the mortgagee had filed its foreclosure action before the condominium association had given notice, or (b) the mortgagee had failed to reinstate the dismissed action or file a new action within the 90-day period prescribed by ORS § 100.450(7).

 

The mortgagee subsequently filed a motion for summary judgment, and the trial court ruled in favor of the mortgagee sustaining its lien priority claim.  The mortgagee asserted that the statute did not require it to initiate a foreclosure action within the 90-day notice period, rather it merely required the mortgagee to initiate a foreclosure action at any time prior to the expiration of the 90-day notice period.  The condominium association appealed the ruling.

 

The Oregon Supreme Court, upon reviewing the statutory text, the legislative intent, and the actions of the parties, ruled in favor of the condominium association, reversing the appellate court's ruling and the trial court judgment, and remanding the case to the trial court for further proceedings.

 

The Court reasoned that the purpose of the notice under ORS § 100.450(7) is to prompt a first lien holder to transfer the condominium to a new owner who could pay the condominium assessments.  In the Court's view, a dismissed foreclosure action does not serve that purpose. 

 

Accordingly, the Oregon Supreme Court held that, as the mortgagee had failed to take appropriate action before the expiration of the 90-day notice period, the condominium association's lien had priority over the mortgagee's interest in the property.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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

 

 

 

FYI: NY Court of Appeals (State Supreme Court) Clarifies State Law on Mortgage Loan Acceleration and Foreclosure Statute of Limitation

The New York Court of Appeals, the state's highest court, recently held that:

 

(1) a notice of default sent before a foreclosure did not accelerate the mortgage debt for statute of limitation purposes; and

 

(2) in most circumstances, a lender decelerates mortgage debt when it voluntarily dismisses a foreclosure complaint.

 

The opinion resolves a conflict among New York appellate divisions on these issues, and it reverses case law that consumer attorneys have frequently used to defend mortgage foreclosures throughout the country.

 

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

 

The decision resolves multiple consolidated appeals that each turned on the timeliness of a mortgage foreclosure claim. Each appeal involved notes and mortgages with standard language providing lenders the option to accelerate the debt and declare the full outstanding balance immediately due if the borrower defaults. The language did not automatically accelerate the debt upon default or otherwise obligate the lender to accelerate.

 

Before ruling on each individual appeal, the court confirmed the existing law governing acceleration for statute of limitation purposes. In New York, as in many judicial foreclosure states, the statute of limitation to enforce a mortgage note begins to run when the lender accelerates the loan. The Court reiterated the importance of requiring lenders to perform "an unequivocal overt act" to accelerate mortgage debt, explaining that acceleration typically replaces the borrower's right to make manageable monthly payments with a demand for full immediate payment and courts should not presume or infer such a significant alteration of the borrower's obligations.

 

Applying these principles, the Court reaffirmed that filing a foreclosure complaint can qualify as an unequivocal overt act to accelerate, but it reversed a lower court ruling that deemed the debt accelerated when the lender incorrectly filed two prior complaints seeking to enforce the loan as originally extended without acknowledging a subsequent modification.

 

It also reversed lower court rulings interpreting pre-filing notices of default to have accelerated the debt, resolving lower court disagreement on the issue and finding that the "will accelerate" language in the notices at issue did not constitute the required unequivocal overt act.

 

More specifically, the Court considered notices stating that the lender "will accelerate" the debt if the borrower does not cure the default in the appropriate timeframe under the note and mortgage, which reflected common language used in such notices.

 

The Court found that the language did not qualify as an unequivocal overt act to accelerate primarily because the letter referred to acceleration as a future event, did not seek immediate payment of the entire outstanding loan balance, and did not pledge that acceleration would occur immediately or automatically when the borrower's time to cure expired.

 

The Court next considered whether and under what circumstances a lender can revoke acceleration. Although a concurring opinion suggested that the Court was not deciding whether the standard language in most mortgages and notes allowed the lender to revoke acceleration, the majority opinion favorably discussed appellate division opinions holding that lenders can revoke acceleration with an affirmative act made within six years of the lender's election to accelerate as long as the long documents do not precisely set forth alternative procedures, and as long as the borrower did not materially alter its position in detrimental reliance on the acceleration.

 

Relying on these prior rulings, the Court held that when a lender accelerates the debt by commencing a foreclosure action, it revokes that acceleration by withdrawing the complaint and voluntarily discontinuing the action, unless the lender makes an express contemporaneous statement to the contrary.

 

The Court criticized lower court decisions that created uncertainty by examining the parties' post-dismissal activities, and it expressed its desire to create a clear rule that voluntary discontinuance revokes acceleration unless the lender contemporaneously advises the borrower otherwise so attorneys could properly counsel their clients on statute of limitation issues.

 

Finally, the Court discussed its single caveat to the rule that voluntarily discontinuing a prior foreclosure generally revokes acceleration, holding that courts may equitably estop lenders from revoking acceleration where the borrower materially changes its position in detrimental reliance on the acceleration.

 

Nevertheless, the Court declined to equitably estop the lender in the appeal at issue, even though the lender specifically admitted that it revoked acceleration primarily to avoid the statute of limitation bar.

 

Noting that the motivation for exercising a contractual right is generally irrelevant, the Court reiterated that the borrower must allege a material change of position in detrimental reliance of acceleration for equitable estoppel to apply.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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