Bayview Loan Servicing, LLC v. Simmons, Record No. 062715.

• Decision Date: 11 January 2008
• Docket Number: Record No. 062715.
• Citation: 275 Va. 114,654 S.E.2d 898
• Parties: BAYVIEW LOAN SERVICING, LLC v. Janet SIMMONS.
• Court: Virginia Supreme Court

654 S.E.2d 898

275 Va. 114

BAYVIEW LOAN SERVICING, LLC v. Janet SIMMONS.

Record No. 062715.

Supreme Court of Virginia.

January 11, 2008.

W. Scott Street, III, Richmond, (Michael A. Glasser, Norfolk, Samuel T. Towell, Richmond, Williams Mullen, Richmond, Glasser & Glasser, on briefs), for appellant.

Kevin M. Rose (BotkinRose, on brief), Harrisonburg, for appellee.

Present: All the Justices.

OPINION BY Justice G. STEVEN AGEE.

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") 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 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 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 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.

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 § 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...