Summary
finding plaintiff to be the proper party in interest after an assignment of a mortgage from MERS to plaintiff
Summary of this case from Bank of N.Y. Mellon v. ShrewsburyOpinion
C.A. No. 09L-06-082 WLW.
Submitted: February 16, 2011.
Decided: May 13, 2011.
Upon Defendant's Motion to Set Aside Sheriff's Sale and For Relief from Judgment. Denied.
Lisa R. Hatfield, Esquire of Morris, Hardwick, Schneider, LLC, Newark, Delaware; attorneys for the Plaintiff.
Douglas A. Shachtman, Esquire, The Shachtman Law Firm, Wilmington, Delaware; attorneys for the Defendant.
ORDER
FACTS
Wayne Trader ("Defendant") entered into a mortgage with Mortgage Electronic Registration Systems ("MERS") On April 10, 2008. The agreement provides for a $290,797.00 mortgage on Defendant's property identified as 431 Brenford Station Road, Smyrna, Delaware 19977. Defendant had a duty to pay monthly installments on the mortgage. The agreement provided that any failure to make timely payments would be grounds for declaring default. MERS assigned its interest in the mortgage to Citimortgage ("Plaintiff") on May 27, 2008-although the assignment was not recorded in the Office of the Recorder of Deeds until August 18, 2009.
Defendant failed to make his monthly payments as required by the terms of his agreement, and Plaintiff filed an action on the default. It obtained a judgment against Defendant on August 15, 2009-three days before Plaintiff recorded its assignment. Thereafter, the parties entered two separate "forbearance" agreements by which Defendant was given an opportunity to make a series of payments in order to return his mortgage to good standing. Both agreements provided that Plaintiff reserved its rights to seek collection and foreclosure and would do so if Defendant failed to comply with the terms of the forbearance agreements. Defendant made some payments but failed to strictly comply with the terms of either forbearance agreement. Plaintiff filed a writ of levari facias on September 28, 2010. Defendant avers that Plaintiff's "loss mitigation department" continued to communicate with him up to-and even after-the sheriff's sale in an attempt to come to another accommodation or forbearance agreement. No agreement was reached, and the mortgaged property was sold at a sheriff's sale on December 2, 2010.
Defendant alleges that Plaintiff's "loss allocation department" frequently corresponded with him in order to attempt to work out a new forbearance agreement. Defendant proffered text messages from that department showing that it was still conducting a "30 business day review" on December 17, 2010-weeks after the property had been sold at a sheriff's sale. Def's Ex. F.
Standard of Review
The Court has broad discretion to set aside a sheriff's sale when there has been an irregularity that has prejudiced the party challenging the sale.
Option One Mortgage Corp. v. Diamicis, 2007 WL 441943 at *2 (Del. Super. Feb. 9, 2007).
DISCUSSION
Defendant presents two arguments to support his motion. First, Defendant argues that the foreclosure action was void because Plaintiff was not a proper party at the time that it obtained judgment. Second, Defendant argues that the Court should apply the doctrine of equitable estoppel to set aside the foreclosure sale because the parties continued to attempt to work out a settlement or accommodation until the date of the sale. The arguments will be reviewed in the order they were presented.A. Real Party in Interest
Defendant argues that Plaintiff was not a proper party to bring the foreclosure action because it had not recorded its assignment of the mortgage interest before it initiated legal action on the mortgage and obtained a default judgment. Superior Court Civil Rule 17 provides that every action shall be prosecuted in the name of the real party in interest. A real party in interest is defined as someone who has the right sought to be enforced by the action.
Supr. Ct. Civ. R. 17(a).
Cammile v. Sanderson, 101 A.2d 316, 318 (Del. Super. 1953).
In this case, Plaintiff brought suit on a mortgage obtained through assignment. Delaware law specifically provides that an assignee of a mortgagee's interest has standing to bring a foreclosure action. Thus, Plaintiff's standing to bring the lawsuit depends on whether the assignment was valid and effective. The statute governing the assignment of a mortgagee's interest provides that "[a]n assignment of a mortgage or any sealed instrument attested by 1 creditable witness shall be valid and effectual to convey all the right and interests of the assignor."
Here, Plaintiff received the assignment, witnessed as required by law, on May 27, 2008. Plaintiff had a valid interest in the mortgage as of that date. Thus, Plaintiff had standing as a "real party in interest" to sue on a mortgage default when it initiated the action in June of 2009. The late recording of the assignment is irrelevant to Plaintiff's standing to initiate the foreclosure proceedings.
Pl.'s Ex. A. Defendant has not attacked the credibility of an attesting witness.
Defendant cites to a recent Delaware Supreme Court case, Gunn v. Bank Nat. Ass'n, for the proposition that failure to record the assignment of a mortgage interest prior to the entry of default judgment is grounds for setting aside the judgment and subsequent sheriff's sale. Unfortunately, the fact-pattern of Gunn is quite convoluted. The salient facts are as follows. The plaintiff in that case was a trustee that had not received a conveyance of the mortgagee's interest before it began a foreclosure action against the mortgagor. Nonetheless, a default judgment was entered in the plaintiff's favor, and a sheriff's sale was scheduled. The sale was stayed when the mortgagor filed for bankruptcy, and during the stay the property was sold to a third party investor who claimed to be unaware of the defaulted mortgage. Thereafter, the investor learned of the action and filed a motion to intervene, vacate the default judgment, and stay the impending sheriff's sale. His motion was denied. The investor filed another motion to intervene after the sheriff's sale had been held. The court permitted the intervention but denied his motion to set aside the sale on the grounds that the plaintiff was not a real party in interest.
Gunn v. U.S. Bank Nat. Ass'n, No. 102, 2009 (Del. Dec. 1, 2009).
The mortgagee's interest was conveyed to the Gunn plaintiff two months after the initiation of the foreclosure action. Id.
The Delaware Supreme Court reversed the trial court on appeal. It found that the investor had been denied the opportunity to conduct discovery and properly present his challenge to the plaintiff's standing. The case was remanded for further proceedings.
Id. at *8.
This case is distinguishable from Gunn because the mortgagee's interest was conveyed to Plaintiff before the initiation of the action. Thus, as explained in the preceding discussion, Plaintiff was a real party in interest from the outset of the litigation. Moreover, unlike the investor in Gunn, Defendant has been a party to the action from its initiation and has had an opportunity to challenge Plaintiff's standing. Therefore, Gunn does not support Defendant's motion.
B. Equitable Estoppel
Defendant contends that Plaintiff should be estopped from asserting its right to foreclose on the mortgage because it gave "conflicting messages" by continuing to negotiate in an attempt to save the mortgage until-and even after-the sheriff's sale. Delaware courts invoke the doctrine of equitable estoppel to prevent a party from unjustly asserting an otherwise valid legal claim or defense when his words or conduct have induced the other party to reasonably believe that the claim or defense would not be asserted.
First Fed. Sav. Loan Ass'n of New Castle County v. Nationwide Mut. Fire Ins. Co., 460 A.2d 543, 545 (Del. 1983).
Defendant's contention is unavailing for two reasons. First, there is no evidence that Plaintiff ever suggested that it would not assert its right to sell the property. Rather, it appears that Plaintiff communicated its openness to saving the mortgage if possible-despite the fact that Defendant had defaulted on the original agreement and two subsequent "forbearance agreements." The mortgage company's openness to saving the mortgage if Defendant were able to cure his default should not be interpreted as a waiver of the right to proceed to sale. A person should reasonably understand the loss mitigation department's efforts as an indication that the company was open to Defendant curing his default and thus rendering the foreclosure sale unnecessary. There is no indication that Plaintiff ever suggested that it would not proceed to a sheriff's sale if it decided that was necessary to protect its interest.
Second, Defendant has not indicated what "action or inaction" he took in reliance on his assumption that Plaintiff would not proceed to sell the property. Equitable estoppel does not apply in the absence of detrimental reliance. Defendant's failure to proffer some evidence of detrimental reliance undermines his claim.
CONCLUSION
For the foregoing reasons, the Court finds that Defendant was not prejudiced by an irregularity in the foreclosure proceedings. Therefore, Defendant's motion to set aside the sheriff's sale is DENIED.
IT IS SO ORDERED.