Jackson v. Wells Fargo Bank, N.A.

• Decision Date: 17 February 2012
• Docket Number: 1100594.
• Citation: 90 So.3d 168
• Court: Alabama Supreme Court
• Parties: 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.

90 So.3d 168

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.

1100594.

Supreme Court of Alabama.

Feb. 17, 2012.

Kenneth J. Riemer and Earl P. Underwood, Jr., of Underwood & Riemer PC, Mobile, for appellants.

W. Austin Mulherin III and Mary Margaret Bailey of Frazer, Green, Upchurch & Baker, LLC, Mobile; and D. Keith Andress of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Birmingham, for appellees.

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 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 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.

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. 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 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). 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 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...