Title: Bayview Loan Servicing v. Simmons

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT:  All the Justices 
 
BAYVIEW LOAN SERVICING, LLC 
 
 
 
 
 
 
 
 
 
OPINION BY 
v. Record No. 062715 
 
 
 
JUSTICE G. STEVEN AGEE 
 
 
 
 
 
 
 
 
    January 11, 2008 
JANET SIMMONS 
 
FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY 
James V. Lane, Judge 
 
Bayview Loan Servicing, LLC appeals from the judgment of 
the Circuit Court of Rockingham County, awarding Janet M. 
Simmons $156,809.46 in damages resulting from the foreclosure 
sale of Simmons’ property.  The circuit court determined Bayview 
breached a notice obligation under a deed of trust securing her 
property.  On appeal, Bayview argues that the circuit court 
erred in holding that Bayview breached any obligation to Simmons 
because, under Code § 55-59.1(A), a properly executed notice of 
a foreclosure sale subsumed any contractual notice obligation in 
the deed of trust. 
For the reasons set forth below, we will affirm the 
judgment of the circuit court. 
I. 
RELEVANT FACTS AND PROCEEDINGS BELOW 
Donald and Janet Simmons owned a 3.08-acre parcel of land 
situated in Rockingham County (“the Parcel”),1 which they 
conveyed by deed of trust on May 8, 1998, (“the Deed of Trust”) 
                     
1 On June 7, 2001, the Simmonses conveyed the Parcel to 
Janet Simmons as the sole owner, and Donald Simmons is not a 
 
 
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to Arthur Friedman, trustee, for the benefit of CommonPoint 
Mortgage Co. to secure a note in the principal amount of 
$134,532.00, plus interest (“the Note”).2  On September 18, 2002, 
after several intervening assignments, Wachovia Bank, N.A. 
(“Wachovia”), apparently became the assignee and beneficiary of 
the Deed of Trust and Bayview became the holder of the Note.  
Bayview acted as Wachovia’s servicing agent for the Deed of 
Trust.3 
By April 2004, Simmons was substantially in arrears on the 
monthly payments due under the Note.  On February 23, 2005, 
Bayview purportedly sent Simmons a letter by first-class mail 
notifying her that her account was past due in the amount of 
$31,942.23 and that the Note would be accelerated, the full 
balance would be due and payable, and foreclosure proceedings 
would begin if the past due amount was not paid within thirty 
days.  Simmons denied ever receiving the letter. 
On May 19, 2005, pursuant to Code § 55-59(9), Bayview 
substituted Specialized, Inc. of Virginia (“Specialized”) as 
                                                                  
party to the case at bar.  Unless otherwise indicated, “Simmons” 
refers to Janet Simmons. 
2 A pre-existing deed of trust on the Parcel secured a 
separate indebtedness of Simmons but is not the subject of the 
case at bar.  The Deed of Trust was a second lien on the Parcel. 
3 Although the circuit court’s findings of fact recite 
Bayview as the Noteholder, Wachovia as the assignee of the Deed 
of Trust, and Bayview as the servicer of the Deed of Trust, the 
parties raise no issue as to any difference that would make as 
to Bayview’s liability under the Deed of Trust in this case. 
 
 
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trustee under the Deed of Trust.  On June 28, 2005, Specialized 
notified Simmons by letter that her account was in default, that 
payment had been accelerated due to that default, and that the 
Parcel would be sold at foreclosure on July 13, 2005.  Although 
the June 28 letter was sent by certified mail, it was not 
claimed and was returned to Specialized by the United States 
Postal Service. 
On July 13, 2005, the Parcel was sold at foreclosure 
auction to a third-party bidder for $172,000.00.  Simmons did 
not learn of the foreclosure sale until two days later, on July 
15, 2005.  On the date of the foreclosure sale, the Parcel had a 
fair market value of $358,000.00. 
Simmons timely filed an amended Complaint in the Circuit 
Court for Rockingham County alleging breach of contract by 
Bayview under the Deed of Trust.  Simmons alleged that Paragraph 
17 of the Deed of Trust required a pre-acceleration notice of 
breach and the action required to cure the breach prior to 
acceleration of any indebtedness secured by the Deed of Trust 
and that Paragraph 12 of the Deed of Trust required that notice 
be delivered or sent by certified mail.  Simmons then alleged 
neither personal nor certified mail delivery of the pre-
acceleration notice was made and therefore no right to 
accelerate the indebtedness secured by the Deed of Trust had 
 
 
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accrued.  Consequently, Simmons claimed no right to foreclose 
had matured.4 
Bayview responded that its letter of February 23, 2005, 
constituted substantial compliance with the requirements of the 
Deed of Trust; that Simmons had not provided credible evidence 
to overcome the presumption that she had received the February 
23 notice; that Simmons had actual knowledge of delinquency and 
had evaded receipt of notice; and that the notice of foreclosure 
sale under Code § 55-59.1(A), which was sent by certified mail, 
satisfied the pre-acceleration notice required by the Deed of 
Trust.  Bayview did not contest that the February 23, 2005, 
letter was not sent by certified mail. 
After a hearing, the circuit court made the specific 
factual finding that Simmons presented credible evidence that 
she had not received the February 23 letter.5  Bayview was thus 
“required to prove that Plaintiff had actual knowledge of the 
pre-acceleration notice of the foreclosure sale.”  The circuit 
court determined that Bayview failed in its proof that Simmons 
had actual knowledge of the pre-acceleration notice.  The 
                     
4 Paragraph 12 provides, in relevant part, that: 
Except for any notice required under applicable law to 
be given in another manner, (a) any notice to Borrower 
provided for in this Deed of Trust shall be given by 
delivering it or by mailing such notice by certified 
mail addressed to Borrower at the Property Address. 
5 Bayview did not assign error to this finding of fact by 
the circuit court. 
 
 
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circuit court then held that Bayview breached its obligations 
under the Deed of Trust as the right to accelerate the 
indebtedness and sell the Parcel at foreclosure had never 
matured due to Bayview’s failure to give the pre-acceleration 
notice required under Paragraph 17 of the Deed of Trust in the 
manner required by Paragraph 12 of that instrument.  The circuit 
court also concluded that Simmons had not waived her right to 
notice and opportunity to cure default; that Code § 55-59.1(A) 
did not protect Bayview from liability by merging the pre-
acceleration notice with the notice of foreclosure sale 
Specialized sent Simmons by certified mail; and that Bayview’s 
breach was the proximate cause of Simmons’s loss of $156,809.46 
equity in the Parcel.6  The circuit court then entered judgment 
for Simmons against Bayview in the amount of $156,809.46.7  We 
awarded Bayview this appeal. 
 
 
                     
6 To determine the measure of damages, the circuit court 
began with the Parcel’s appraised fair market value of 
$358,000.00 and then subtracted all liens and encumbrances, 
including $32,405.80 secured by the first deed of trust, 
$168,743.79 secured by the Deed of Trust, and $40.95 in pro 
rated real property taxes, to arrive at the $156,809.46 amount. 
7 The amended Complaint also named as parties defendant the 
purchaser of the property at the foreclosure sale, his lender, 
and the trustee of his deed of trust, and sought to set aside 
the foreclosure sale.  Simmons subsequently settled with the 
foreclosure purchaser and non-suited the related claims, which 
are not within the scope of this appeal. 
 
 
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II.  ANALYSIS 
Bayview argues in its sole assignment of error that the 
circuit court erred in failing to hold that, under Code § 55-
59.1(A), the notice of proposed foreclosure sale from 
Specialized “effectively exercise[d] the right of acceleration 
expressly contained in the deed of trust.”  This assignment of 
error raises a question of law, which we review de novo.  
Boynton v. Kilgore, 271 Va. 220, 227, 623 S.E.2d 922, 925 (2006) 
(citing Ainslie v. Inman, 265 Va. 347, 352, 577 S.E.2d 246, 248 
(2003)). 
Bayview relies on Code § 55-59.1(A), which provides, in 
pertinent part, that: 
The written notice of proposed sale when given as 
provided herein shall be deemed an effective exercise 
of any right of acceleration contained in such deed of 
trust or otherwise possessed by the party secured 
relative to the indebtedness secured. The inadvertent 
failure to give notice as required by this subsection 
shall not impose liability on either the trustee or 
the secured party. 
 
Bayview argues that Specialized’s notice “exercise[d] the right 
of acceleration” in the Deed of Trust by virtue of the specific 
language in that statute, thus obviating any requirement to meet 
the certified mail provision in Paragraph 12 of the Deed of 
Trust.  Neither Bayview nor Simmons disputes that the notice of 
foreclosure sale that Specialized sent on June 28, 2005, to 
Simmons by certified mail satisfied the requirements of Code 
 
 
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§ 55-59.1(A), but Simmons contends the statute does not apply in 
this case. 
Simmons argues that Bayview’s right of acceleration under 
the Deed of Trust had not accrued on June 28, 2005, when 
Specialized sent the foreclosure notice.  Therefore 
Specialized’s notice of foreclosure sale was effectively a 
nullity, because it could not exercise a right of acceleration 
that had not matured as a result of Bayview’s failure to provide 
the pre-acceleration notice required by the Deed of Trust.  In 
other words, Simmons contends that the pre-acceleration notice 
under the Deed of Trust is a condition precedent to the accrual 
or maturing of a right to accelerate the indebtedness secured by 
the Deed of Trust and that this condition precedent was not 
fulfilled.  Simmons relies on the language of Paragraph 17 that:  
“Lender prior to acceleration shall give notice to Borrower as 
provided in paragraph 12 hereof.”  Paragraph 17 further provides 
that only “[i]f the breach is not cured on or before the date 
specified in the [pre-acceleration] notice, Lender, at Lender’s 
option, may declare all of the sums secured by this Deed of 
Trust to be immediately due and payable.” 
Bayview concedes that the pre-acceleration notice is “a 
contractual condition on the acceleration of defaulted debt.”  
However, Bayview contends that such a contractual condition is 
superseded by Code § 55-59.1(A).  Bayview contends the pertinent 
 
 
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language in that statute, “[t]he written notice of proposed sale 
. . . shall be deemed an effective exercise of any right of 
acceleration contained in such deed of trust,” was added by the 
General Assembly in 1976 to derogate the decision of this Court 
in Sharpe v. Talley, 215 Va. 615, 212 S.E.2d 273 (1975). 
Sharpe, Bayview argues, is closely analogous to the case at 
bar.  There, this Court held that notice of acceleration must be 
complete and effective prior to a foreclosure sale, found the 
notice provided to the debtor ineffective, and remanded the case 
for an award of monetary damages to the debtor against the 
beneficiary of the deed of trust. Sharpe, 215 Va. at 622-23, 212 
S.E.2d at 277-78.  Bayview asserts the General Assembly modified 
former Code § 55-59(6), subsequently recodified as Code § 55-
59.1(A), to include the current statutory language cited above 
and allow notice of acceleration to be merged with the notice of 
foreclosure sale, notwithstanding any contrary provision in the 
Deed of Trust. 
Bayview misreads the scope of Code § 55-59.1(A) and any 
analogy to the Sharpe case.  While Bayview is correct that a 
notice of foreclosure sale, as represented by Specialized’s June 
28, 2005, letter to Simmons, could act as the exercise of the 
“right of acceleration” under the Deed of Trust, Code § 55-
59.1(A) does not establish a statutory mandate as to whether 
such “right of acceleration” is in existence and capable of 
 
 
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being exercised by the foreclosure notice.  Such a determination 
remains a matter of contract between the parties, as represented 
by Paragraph 17 of the Deed of Trust. 
In Paragraph 17 of the Deed of Trust, the parties agreed no 
right of acceleration would be in existence to exercise (in 
other words, that no such right would have accrued to Bayview) 
until the condition precedent of providing the pre-acceleration 
notice had been satisfied.  That condition precedent required a 
notice by personal delivery or certified mail specifying: 
(1) the breach; (2) the action required to cure such 
breach; (3) a date, not less than 10 days from the 
date the notice is mailed to Borrower by which such 
breach must be cured; and (4) that failure to cure 
such breach on or before the date specified in the 
notice may result in acceleration of the sums secured 
by this Deed of Trust and sale of the Property. 
 
As noted above, this required notice was not given and thus 
the condition precedent to Bayview’s right of acceleration was 
never met.  Because Bayview did not comply with the specific 
condition precedent under the Deed of Trust, prior to the notice 
of foreclosure sale by Specialized, Bayview had not acquired the 
right to accelerate payment under the terms of the Deed of 
Trust.  Thus, Specialized’s June 28, 2005, letter could exercise 
no right of acceleration because no such right had then accrued 
to Bayview. 
The statutory cure of Code § 55-59.1(A) is of no benefit to 
Bayview because it had not acquired the right to accelerate the 
 
 
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indebtedness secured by the Deed of Trust when the foreclosure 
notice was issued.  While Code § 55-59.1(A) does allow a proper 
notice of foreclosure sale to exercise an accrued right of 
acceleration, Bayview failed to fulfill the contractual 
condition precedent that would have given it such a right. 
Bayview’s citation to Sharpe is without merit and has no 
application to this case.  In Sharpe, we determined that the 
language used in the deed of trust in that case created a 
condition subsequent, requiring notification to a borrower that 
his loan had been accelerated in order to complete the exercise 
of the right of acceleration prior to foreclosure.  215 Va. at 
620, 212 S.E.2d at 276.  We said “[i]t is essential for a valid 
exercise of an option to accelerate the maturity of a note that 
the noteholder do some positive act to indicate that the option 
has been exercised. . . .  While such notice is not a condition 
precedent to an effective exercise of the option . . . it must 
reach the maker.”  Id. (quoting Florance v. Friedlander, 209 Va. 
520, 523, 165 S.E.2d 388, 391 (1969)) (internal marks omitted) 
(emphasis added). 
Thus, the notice in Sharpe was required after the 
noteholder had accelerated the indebtedness and there was no 
issue that a right of acceleration had accrued to the 
noteholder, only a question of how that existing right was 
exercised.  Even if the General Assembly created Code § 55-
 
 
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59.1(A) to overturn that result, it has no application when the 
right to accelerate has not accrued. 
Bayview had no right of acceleration at the time that the 
notice of foreclosure sale was sent.  Accordingly, Code § 55-
59.1(A) does not cure Bayview’s contractual breach under the 
Deed of Trust or immunize Bayview from its liability to Simmons 
for her lost equity in the Parcel sold in foreclosure.  
Therefore, the circuit court did not err by entering judgment in 
favor of Simmons. 
CONCLUSION 
For the foregoing reasons, we will affirm the judgment of 
the circuit court. 
Affirmed.