Charter Bank v. Francoeur

• Decision Date: 03 August 2012
• Docket Number: No. 30,551.,30,551.
• Citation: 287 P.3d 333
• Parties: CHARTER BANK, Plaintiff–Appellee, v. Margret FRANCOEUR, Defendant–Appellant, and Darr Angel, Trustee of the Darr Angel Living Trust, Intervenor–Appellee.
• Court: Court of Appeals of New Mexico

287 P.3d 333

CHARTER BANK, Plaintiff–Appellee,

v.Margret FRANCOEUR, Defendant–Appellant, and Darr Angel, Trustee of the Darr Angel Living Trust, Intervenor–Appellee.

No. 30,551.

Court of Appeals of New Mexico.

May 15, 2012.

Certiorari Granted, Aug. 3, 2012, No. 33,709.

Little & Dranttel, P.C., Peggy Whitmore, Albuquerque, NM, for Appellee.

United South Broadway Corp., Angelica Anaya Allen, Albuquerque, NM, for Appellant.

Heidel, Samberson, Newel, Cox & McMahon, Michael T. Newell, Lovington, NM, for Intervenor–Appellee.

OPINION

WECHSLER, Judge.

{1} In this foreclosure case, Plaintiff Charter Bank obtained a default judgment after Defendant Margret Francoeur failed to answer its complaint. After a special master sold Defendant's property at a public auction, Defendant moved to set aside the default judgment and to vacate the foreclosure sale. Defendant appeals two orders of the district court: (1) an order denying Defendant's motion to set aside the default judgment and to vacate the foreclosure sale and (2) an order setting supersedeas bond at $150,000 during the pendency of the appeal. We hold that the district court did not err in (1) denying Defendant's motion to set aside the default judgment because Defendant did not have a meritorious defense, (2) denying Defendant's motion to vacate the foreclosure sale because the sale's price-value ratio did not shock the conscience of the court and there were no additional circumstances impeaching the fairness of the sale, and (3) setting the supersedeas bond at $150,000. Accordingly, we affirm.

BACKGROUND

{2} Defendant and Plaintiff entered into a loan agreement (the loan) on March 26, 2007, secured by a mortgage on her residential property (the property) in Hobbs, New Mexico. On April 9, 2009, Defendant received a letter from Plaintiff that she was in default of the loan. Defendant contacted the Law Offices of T.W. Dvorak (the firm), a Florida-based law firm specializing in foreclosure defense that Defendant found on the internet. Defendant retained the firm to representher and paid a $1500 retainer on June 23, 2009.

{3} On July 27, 2009, Plaintiff filed a complaint in foreclosure seeking an in rem judgment against the property and in personam judgment against Defendant. Plaintiff sought a judgment for the unpaid principal balance, interest, late charges, and reasonable attorney fees and costs associated with the unpaid loan secured by the mortgage on Defendant's property. After Plaintiff filed its complaint and served Defendant, Defendant provided the firm with the complaint. The firm failed to file an answer on Defendant's behalf, and the district court entered a default judgment in favor of Plaintiff on September 30, 2009. The district court awarded Plaintiff $90,467.68 as a judgment for the unpaid loan and ordered the property sold at a public auction.

{4} Following the default judgment, Defendant learned that the firm's principal attorney, Thomas Dvorak, was arrested for driving under the influence and driving with a suspended license in June 2009 after his involvement in a fatal car accident. Sometime during the summer or fall of 2009, a Florida court sentenced Dvorak to eight weeks imprisonment, and Dvorak served his sentence from November 5, 2009 to December 27, 2009. Defendant ultimately learned about Dvorak's incarceration on February 23, 2010 after the Florida State Bar sent her a letter informing her that Dvorak was in alcohol abuse rehabilitation and counseling and that he was withdrawing from the practice of law.

{5} On January 8, 2010, Plaintiff informed Defendant that it transferred the servicing of the loan to U.S. Bank Home Mortgage (U.S. Bank). U.S. Bank is a participant in the federal Making Homes Affordable Program (HAMP). HAMP is a program established by the United States Department of Treasury (the treasury), pursuant to the Emergency Economic Stabilization Act of 2008, 12 U.S.C. §§ 5201 to –5261 (2008, as amended through 2009). HAMP allows the treasury to work with loan service providers to “use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.” 12 U.S.C. § 5219(a)(1). In order to participate in HAMP, service providers must execute a servicer participation agreement with Fannie Mae. Treasury Supplemental Directive 09–01. U.S. Bank entered into a servicer participation agreement with Fannie Mae on August 20, 2009. In the servicer participation agreement, U.S. Bank agreed to comply with the guidelines and procedures issued by the treasury.

{6} Meanwhile, on October 7, 2009, the special master filed the first notice of sale on the property and scheduled the sale for November 24, 2009. Plaintiff advertised the property for sale in the Hobbs News–Sun from October 13, 2009 through November 3, 2009. The special master postponed the sale until January 12, 2010, although Plaintiff did not file notice of the postponement with the district court until April 21, 2010. The special master postponed the re-scheduled January 12, 2010 sale until February 16, 2010, and Plaintiff again filed notice of the postponement on April 21, 2010. The special master again postponed the re-scheduled February 16, 2010 sale and rescheduled the sale for April 20, 2010. On April 20, 2010, the special master sold the property at auction for $100,000 to Darr Angell, trustee of Darr Angell Living Trust (Angell). The special master filed the report of sale with the district court on May 6, 2010. On the same day, the district court issued an order approving the sale and the special master's report. The order provided Defendant a one-month redemption period, expiring on June 7, 2010.

{7} On May 27, 2010, Defendant filed a motion pursuant to Rule 1–060(B) NMRA to set aside the September 30, 2009 default judgment and to vacate the judicial sale of the property. Defendant argued that the representation by the firm, which included the failure to answer Plaintiff's complaint, was negligent and therefore excusable neglect. Further, Defendant argued that she had meritorious defenses to set aside the default judgment because (1) Plaintiff engaged in fraud, misrepresentation, estoppel, or other misconduct during the foreclosure sale by assuring Defendant that a loan modification was “imminent,” Defendant never received notice of the judicial sale, and Defendanttherefore did not explore other avenues to avoid foreclosure of the property; and (2) Plaintiff did not comply with treasury directives required by HAMP and the service agreements because Defendant's application for a loan modification was not evaluated within thirty days, she was not notified whether the application was accepted or rejected, and Plaintiff proceeded with the foreclosure sale despite Defendant's pending application for a loan modification. Further, Defendant argued that the $100,000 sales price was “grossly disproportionate to the value of the home” and therefore was another ground for vacating the sale.

{8} Angell, as an intervenor, filed a response on June 10, 2010, and Plaintiff filed its response on June 14, 2010. The district court issued an order on July 9, 2010, denying the motion to set aside the default judgment and to vacate the sale. The district court determined that the default judgment resulted from excusable neglect based on the negligent representation of the firm but that Defendant did not have a meritorious defense. Regarding Defendant's defenses alleging fraud, other misconduct, or estoppel, the district court determined that Plaintiff and Defendant did not reach an agreement that foreclosure would be halted while various loan modification alternatives were being evaluated. Further, the district court determined that the $100,000 sales price was inadequate, but it did not “shock the [conscience] of the court” to justify setting the sale aside because there were no additional circumstances impeaching the fairness of the sale. Defendant filed a timely notice of appeal.

{9} On appeal, Defendant argues that the district court erred by (1) denying the motion to set aside the default judgment because Defendant had meritorious defenses because Plaintiff (a) failed to fulfill its contractual obligations under HAMP, (b) misrepresented to Defendant that she would receive a loan modification and was therefore estopped from proceeding with the foreclosure sale, and (c) engaged in bad faith by proceeding with the foreclosure sale even though Defendant's loan modification application was pending; (2) determining that the sale should not be vacated because the sales price did not “shock the court's conscience;” and (3) setting the supersedeas bond at $150,000 instead of the property's fair rental value.

MOTION TO SET ASIDE DEFAULT JUDGMENT

{10} In order to set aside a default judgment under Rule 1–060(B)(1), a court must determine that (1) the default judgment resulted from mistake, inadvertence, surprise or excusable neglect, and (2) the party seeking to set the default judgment aside had a meritorious defense. N.M. Educators Fed. Credit Union v. Woods, 102 N.M. 16, 17, 690 P.2d 1010, 1011 (1984). “If these two elements are found and there are no intervening equities in favor of the other party, a court should set aside the judgment.” Id. Generally, “default judgments are not favored and a case should be heard on its merits whenever possible[.]” Id.

Standard of Review

{11} A grant or denial of a motion to set aside a default judgment rests within the sound discretion of the district court. Gandara v. Gandara, 2003–NMCA–036, ¶ 9, 133 N.M. 329, 62 P.3d 1211. We will only reverse the district court's grant or denial of a motion to set aside a default judgment for an abuse of that discretion. N.M. Educators Fed. Credit Union, 102 N.M. at 17, 690 P.2d at 1011. “An abuse of discretion occurs when a ruling is clearly contrary to the logical conclusions demanded by the facts and circumstances of the case.” Sims v. Sims, 1996–NMSC–078, ¶ 65, 122...