Title: Jackson v. Wells Fargo Bank, N.A.

State: alabama

Issuer: Alabama Supreme Court

Document:

Rel: 02/17/2012
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2011-2012
_________________________
1100594
_________________________
Emmett Jackson and Debra Jackson
v.
Wells Fargo Bank, N.A., and U.S. Bank, National Association,
as trustee for Structured Asset Securities Corporation Trust
2005-WF-3 
Appeal from Mobile Circuit Court
(CV-08-001894)
WOODALL, Justice.
Emmett Jackson and Debra Jackson, husband and wife,
appeal from a summary judgment in favor of Wells Fargo Bank,
N.A. ("the bank"), and U.S. Bank, National Association, as
1100594
2
trustee for Structured Asset Securities Corporation Trust
2005-WF-3 ("the trustee"), in the Jacksons' action against the
bank and the trustee challenging a foreclosure sale involving
the Jacksons' property.  We affirm in part, reverse in part,
and remand.
I. Factual and Procedural Background
On February 11, 2005, the Jacksons refinanced an existing
loan on their home in Mobile.  In so doing, they gave a
mortgage on the property, which was subsequently assigned to
the bank.  Although the mortgage was, in turn, assigned to the
trustee, the bank continued to function as the "servicer" of
the loan.
The mortgage form was an "ALABAMA -- Single Family --
Fannie 
Mae/Freddie 
Mac 
UNIFORM 
INSTRUMENT." 
(Capitalization 
in
original.)  Paragraph 22 provided, in pertinent part:
"22. Acceleration; Remedies.  Lender shall give
notice to Borrower prior to acceleration following
Borrower's breach of any covenant or agreement in
this Security Instrument .... The notice shall
specify: (a) the default; (b) the action required to
cure the default; (c) a date, not less than 30 days
from the date the notice is given to Borrower, by
which the default must be cured; and (d) that
failure to cure the default on or before the date
specified in the notice may result in acceleration
of the sums secured by this Security Instrument and
sale of the Property.  The notice shall further
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3
inform Borrower of the right to reinstate after
acceleration and the right to bring a court action
to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale.
If the default is not cured on or before the date
specified in the notice, Lender at its option may
require immediate payment in full of all sums
secured by this Security Instrument without further
demand and may invoke the power of sale and any
other remedies permitted by Applicable Law...."
(Emphasis added.)
By October 2007, the Jacksons were in arrears on their
mortgage payments.  In that month, the Jacksons and the bank
entered into a "special forebearance agreement" ("the first
forebearance"), whereby the Jacksons were to make three
monthly payments of $389.32, beginning on November 29, 2007,
and a fourth payment of $1,597 on February 29, 2008.  A
dispute arose over the Jacksons' compliance with the first
forebearance, and, on January 25, 2008, the bank offered the
Jacksons another "special forebearance agreement," whereby
they were to make three monthly payments of $370.95, beginning
on February 22, 2008, and a fourth payment of $2,405.86 on May
22, 2008.  While the Jacksons and the bank were engaged in
negotiations for further forebearance, the Jacksons did not
make the payment of $2,405.86 that was due in May.
1100594
4
On July 21, 2008, while the negotiations for further
forebearance 
were 
ongoing, 
a 
debt-collection 
representative 
of
the trustee sent the Jacksons a "NOTICE OF ACCELERATION OF
PROMISSORY NOTE AND MORTGAGE" (hereinafter referred to as "the
acceleration letter"). (Capitalization in original.)  The
acceleration letter stated, in pertinent part:
"YOU ARE HEREBY NOTIFIED that, pursuant to the terms
of the Promissory Note and Mortgage dated the 11th
day of February, 2005, to Mortgage Electronic
Registration Systems, Inc. acting solely as nominee
for The Mortgage Outlet, Inc., said mortgage having
subsequently been transferred and assigned to [the
trustee] and by virtue of default in the terms of
said Note and Mortgage, [the trustee] hereby
accelerates to maturity the entire remaining unpaid
balance of the debt, including attorney's fees,
accrued interest, and other lawful charges, and the
amount 
due 
and 
payable 
as 
of 
this 
date 
is
$37,040.27.  This payoff amount may change on a
daily basis.  If you wish to pay off your mortgage,
please call our office to obtain the updated figure.
"We are at this time commencing foreclosure under
the terms of the Mortgage, and enclosed is a copy of
the foreclosure notice to be published in the Mobile
Press-Register.  Please note that the foreclosure
sale is scheduled for August 15, 2008.  If you wish
to avoid losing the subject property, you must
contact us immediately; otherwise, the foreclosure
sale will take place as set forth in the publication
notice, and we will take legal action to obtain
possession of the subject property. ..."
(Capitalization in original; emphasis added.)  The foreclosure
sale 
occurred 
on 
August 
15, 
2008, 
as 
advertised.
1100594
Throughout this litigation, the Jacksons have continued
1
to reside on the property.
5
Subsequently, a foreclosure deed to the property was issued to
K-Quad, LLC.  
On September 30, 2008, the Jacksons sued the bank, the
trustee, and K-Quad, alleging essentially (1) negligent or
wanton foreclosure and (2) breach of contract.  The complaint
sought damages, as well as declaratory and injunctive relief
quieting title to the property in the Jacksons.  K-Quad filed
an answer, which included counterclaims against the Jacksons
and 
cross-claims 
against 
the 
bank 
and 
the 
trustee.
Subsequently, K-Quad settled with all parties and was
dismissed from the action.  Also, K-Quad allegedly executed a
quitclaim deed in favor of the bank.1
The bank and the trustee jointly moved for a summary
judgment, contending that the Jacksons "lack any valid basis
to contest the foreclosure sale."  In response to that motion,
the Jacksons argued that they were not in default as of the
date of the sale and that, in any case, the bank had not given
notice of its intent to accelerate as required by paragraph 22
of the mortgage.  Subsequently, the bank and the trustee filed
an amended summary-judgment motion, contending that the
1100594
6
Jacksons had "failed to establish that they are entitled to an
award of compensatory damages."  Regarding the notice issue
raised by the Jacksons, the bank and the trustee merely
stated: "An acceleration letter dated July 21, 2008, notified
[the Jacksons] of the total amount of their outstanding debt
to [the bank] and the scheduled date of the foreclosure sale."
(Emphasis added.)  The bank and trustee supplemented their
original summary-judgment filings with a copy of the
acceleration letter.  The trial court entered a summary
judgment in favor of the bank and the trustee, and the
Jacksons appealed. 
II. Discussion
On appeal, the Jacksons contend that the summary judgment
in favor of the bank and the trustee is due to be reversed on
any 
one 
of 
a 
number 
of 
alternative 
grounds. 
 
More
specifically, they insist that "[t]here are at least three
independent grounds upon which a jury could find that the
foreclosure in this case was wrongful," the first of which is
the alleged ground that the bank "failed to provide the notice
of default and intent to accelerate as required under the
mortgage."  The Jacksons' brief, at 30-31 (emphasis added).
1100594
7
The bank and the trustee reiterate their position that the
acceleration letter afforded all the notice required under the
mortgage.  Although the bank and the trustee also argue that
the Jacksons' claims fail to support an award of damages, the
overriding issue on appeal is the legal effect of the
acceleration letter.
It is well settled that "[t]o defeat a properly supported
summary judgment motion, the nonmoving party must present
'substantial evidence' creating a genuine issue of material
fact."  Capital Alliance Ins. Co. v. Thorough–Clean, Inc., 639
So. 2d 1349, 1350 (Ala. 1994).  Questions regarding the legal
effect of unambiguous contractual provisions are questions of
law, which are reviewed de novo.  Bon Harbor, LLC v. United
Bank, 53 So. 3d 82, 91 (Ala. 2010).
A. Negligent Foreclosure
Alabama has long recognized a cause of action for
"wrongful foreclosure" arising out of the exercise of a power-
of-sale provision in a mortgage.  However, it has defined such
a claim as one where "a mortgagee uses the power of sale given
under a mortgage for a purpose other than to secure the debt
owed by the mortgagor."  Reeves Cedarhurst Dev. Corp. v. First
1100594
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American Fed. Sav. & Loan Ass'n, 607 So. 2d 180, 182 (Ala.
1992).  Elsewhere, a wrongful-foreclosure claim is explained
as follows:
"'Generally the purpose for which the power of
sale is given being to afford an additional and more
speedy remedy for the recovery of the debt, the
mortgagor is by the contract bound to exercise
necessary promptness in fulfilling it and cannot
complain of a legitimate exercise of the power.  If
in any case it is attempted to pervert the power
from its legitimate purpose and to use it for the
purpose of oppressing the debtor or of enabling the
creditor to acquire the property himself, a court of
equity will enjoin a sale or will set it aside if
made.  Wittmeier v. Tidwell, 147 Ala. 354, 40 So.
963 [(1906)], and authorities there cited.  Or, as
was said in the case of Castleman v. Knight, 215
Ala. 429, 110 So. 911 [(1927)]: "If he uses the
power to sell, which he gets for that purpose, for
another purpose, from any ill motive, to effect
means and purposes of his own, or to serve the
purposes of other individuals, the court considers
that to be what it calls a fraud in the exercise of
the power, because it is using the power for a
purpose foreign to the legitimate purposes for which
it was intended."'"
Paint Rock Props. v. Shewmake, 393 So. 2d 982, 983-84 (Ala.
1981).
The Jacksons have not argued or alleged that the power of
sale was exercised for any purpose "other than to secure the
debt owed by [them]."  Nor have they invited this Court to
revisit or to modify existing law.  "It is not the function of
1100594
9
this Court to construct and address arguments for the parties
on [a nonjurisdictional] point."  Custom Performance, Inc. v.
Dawson, 57 So. 3d 90, 99 (Ala. 2010).  Consequently, the
Jacksons present no basis on which to reverse the summary
judgment as to their claim of negligent or wanton foreclosure.
B. Breach of Contract 
The Jacksons' breach-of-contract claim stands on better
ground.  At this stage in the litigation, there remains a
fundamental failure of communication between the parties as to
the function and effect of the acceleration letter.  Although
the Jacksons maintain that the acceleration letter was not the
notice of intent to accelerate the debt required by the
mortgage, the bank and the trustee tout it as evidence that
they satisfied their duty under the contract.  We agree with
the Jacksons.
The parties' confusion centers on the difference between
notice of actual acceleration and notice merely of intent to
accelerate.  Similar confusion infected the litigation in
Ogden v. Gibraltar Savings Ass'n, 640 S.W.2d 232 (Tex. 1982),
in which the Supreme Court of Texas explained:
"The term 'notice of acceleration' is used by
the parties to express different concepts. [The
1100594
10
debtor] refers to notice of intent to accelerate;
Gibraltar refers to notice that the debt has been
accelerated. Although the cases do not always
clearly distinguish between the two, both types of
notices are required. Notice of intent to accelerate
is necessary in order to provide the debtor an
opportunity to cure his default prior to harsh
consequences 
of 
acceleration 
and 
foreclosure.
Proper notice that the debt has been accelerated, in
the absence of a contrary agreement or waiver, cuts
off the debtor's right to cure his default and gives
notice that the entire debt is due and payable.  See
Faulk v. Futch, 147 Tex. 253, 214 S.W.2d 614 (1948).
Notice that the debt has been accelerated, however,
is ineffective unless preceded by proper notice of
intent to accelerate.  Allen Sales & Servicenter,
Inc. v. Ryan, 525 S.W.2d 863 (Tex. 1975)."
640 S.W.2d at 233-34 (emphasis added).  In that connection,
commentators have stated:
"[I]t should be emphasized that the Federal National
Mortgage Association (Fannie Mae) -- Federal Home
Loan Mortgage Corporation 
(FNMA-FHLMC) 
mortgage-deed
of trust form contains substantial limitations on
the acceleration process.  Not only does it require
detailed mailed notice and a thirty-day grace period
as a condition precedent to acceleration, it also
affords 
the 
mortgagor 
the 
right 
to 
defeat
acceleration until five days prior to foreclosure by
the payment of arrearages and mortgagee's reasonable
costs and attorney's fees.  These provisions may be
omitted from the FNMA-FHLMC form only when state law
is more protective of the mortgagor with respect to
pre-acceleration requirements and the ability to
defeat acceleration once it has occurred.  Because
most institutional lenders wish to retain the option
of selling their home mortgages to these two
secondary market entities, they will be likely to
use the FNMA-FHLMC form.  Thus vast numbers of
mortgagors 
in 
states 
that 
have 
not 
enacted
1100594
11
legislation 
regulating 
acceleration, 
or 
whose
legislation or case law is less restrictive than the
requirements of the form, will nevertheless have
substantial 
protection 
against 
abuse 
of 
the
acceleration process."    
Grant S. Nelson & Dale A. Whitman, Real Estate Finance Law §
7.7, at 551 (Hornbook Series 4th ed. 2001) (emphasis added;
footnotes omitted).  See 1 Jesse P. Evans III, Alabama
Property Rights and Remedies § 34.5[a] (4th ed. 2010) ("A
party may contractually undertake or obligate him or herself
to provide pre-foreclosure notice.  Nothing prevents a party
from freely engaging in a contract that would require some
form of notice to the mortgagor ... as a condition precedent
to the exercise of the power of sale in the mortgage.  Failure
to give notice where there is such a contractual obligation
amounts to a failure of a condition precedent or an estoppel,
thereby forming a basis for barring exercise of the power
...." (footnote omitted)).  See also Dewberry v. Bank of
Standing Rock, 227 Ala. 484, 492, 150 So. 463, 469 (1933)
("[A] sale under the power [of sale] in a mortgage or trust
deed must be conducted in strict compliance with the terms of
the power."); Bank of New Brockton v. Dunnavant, 204 Ala. 636,
638, 87 So. 105, 107 (1920) ("'In a court of law a power of
1100594
12
sale is merely part of a legal contract to be executed
according to its terms.'"(quoting Harmon v. Dothan Nat'l Bank,
186 Ala. 360, 369, 4 So. 621, 624 (1914))); Fairfax Cnty.
Redev. & Hous. Auth. v. Riekse, 281 Va. 441, 446, 707 S.E.2d
826, 829 (2011) ("[T]he powers of the person foreclosing under
a mortgage ... are limited and defined by the instrument under
which he acts, and he has only such authority as is thus
expressly conferred upon him, together with incidental and
implied powers that are necessarily included therein. ...
Accordingly, the ... mortgagee must see that in all material
matters he keeps within his powers, and must execute the trust
in strict compliance therewith.").
The "Fannie Mae/Freddie Mac Uniform Instrument" mortgage
form in this case contained the species of provisions
referenced in the excerpt from Real Estate Finance Law quoted
above.  Specifically, paragraph 22 of the form required the
bank to give the Jacksons a notice -- before acceleration --
that it was considering an acceleration, upon the failure of
certain conditions, in "not less than 30 days" following the
date of the notice.  In other words, the debt could not be
accelerated until at least 30 days had passed and the Jacksons
1100594
13
were still in default.  Under the language of this mortgage,
without proper notice of intent to accelerate, acceleration
fails and, consequently, so does the foreclosure sale.  See
Sharpe v. Wells Fargo Home Mortg. (In re Sharpe), 425 B.R.
620, 643 (N.D. Ala. 2010).
The acceleration letter is just that -- a notice that the
debt had been accelerated, not a notice of intent to
accelerate.  The only option it contemplates is payment of the
entire debt, an approach in direct contravention of paragraph
22.  Thus, the Jacksons have provided substantial evidence
that essential notice under the mortgage was not given,
resulting in failure of the acceleration, and, consequently,
failure of the foreclosure sale conducted on August 15, 2008.
The trial court's judgment, to the extent it summarily
disposed of the breach-of-contract claim, was improper.
III. Conclusion
In conclusion, the Jacksons have presented no error in
regard to the trial court's judgment insofar as it disposed of
the claim alleging negligent or wanton foreclosure.  To that
extent, the judgment is affirmed.  However, insofar as it
1100594
Because the Jacksons have maintained that the judgment
2
could be reversed on this ground alone and have not explained
how a reversal on any other ground would materially alter the
case, we decline to address other grounds for reversal
asserted in their briefs.
14
disposed of the breach-of-contract claim,  the judgment is
2
reversed, and the cause is remanded for further proceedings.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
Malone, C.J., and Bolin, Murdock, and Main, JJ., concur.