By Sally Garrison, Esq.

The Mortgage Law Firm *

USFN Member (AZ, CA, HI, OK, OR, WA)

A recent Supreme Court of the State of Oklahoma ruling in McBee v. Shanahan Home Design, 2021 OK 60 may be indicative of the potential impacts of COVID-19 administrative orders and the resulting delays in timelines.

The Supreme Court of the State of Oklahoma issued three successive emergency administrative orders impacting the availability of court services in response to the COVID-19 pandemic. These orders limited district court procedures and suspended certain deadlines in judicial matters.

The first emergency administrative order stated, “Subject to constitutional limitations, all deadlines and procedures whether prescribed by statute, rule or order in any civil, juvenile or criminal case shall be suspended by 30 days from the date of this order. This suspension also applies to appellate rules and procedures for the Supreme Court, the Court of Criminal Appeals, and the Court of Civil Appeals.” First Emergency Joint Order Regarding the COVID-19 State of Disaster, 2020 OK 25, ¶ 3, 462 P.3d 704, 704-05.

The second emergency administrative order continued the suspension described in the first emergency administrative order through May 15, 2020. Second Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 24, ¶3, 462 P.3d 262, 262. It further directed that “[a]ll courthouses shall be closed to the public with exceptions for emergencies as permitted by local order,” and that “[c]ourt clerks and judges should be using email, fax, and drop boxes for acceptance of written materials.” Second Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 24, ¶¶ 6-7, 462 P.3d 262, 262.

            The third emergency administrative order continued the suspension further, and clarified as follows:

5. Paragraphs 4 and 5 of the Second Emergency Joint Order remain in effect to May 15, 2020. In all cases, the period from March 16, 2020 to May 15, 2020, during which all rules and procedures, and deadlines, whether prescribed by statute, rule or order in any civil, juvenile or criminal case were suspended, will be treated as a tolling period. May 16th shall be the first day counted in determining the remaining time to act. The entire time permitted by statute, rule or procedure is not renewed.

6. Beginning on May 16, 2020, all rules and procedures, and all deadlines whether prescribed by statute, rule or order in any civil, juvenile or criminal case, shall be enforced, including all appellate rules and procedures for the Supreme Court, the Court of Criminal Appeals, and the Court of Civil Appeals.

7. For all cases pending before March 16, 2020, the deadlines are extended for only the amount of days remaining to complete the action. For example, if the rule required the filing of an appellate brief within 20 days, and as of March 16, ten (10) days remained to file the brief, then the party has 10 days with May 16, 2020 being the first day.

Third Emergency Joint Order Regarding the Covid-19 State of Disaster, 2020 OK 23, ¶¶ 5-7, 462 P.3d 703, 703.

            On November 19, 2019, Vickie McBee filed suit against Shanahan Home Design, LLC, and Biggs Backhoe, Inc., related to the design and construction of her residence. McBee’s counsel did not issue summons prior to the issuance of the Oklahoma Supreme Court’s emergency administrative orders. On May 18, 2020, after the expiration of those orders, McBee’s counsel caused summons to be issued. Biggs Backhoe was served on July 8, 2020. Shanahan Home Design was served on July 16, 2020. McBee v. Shanahan Home Design. LLC, et al., 2021 OK 60, ¶¶ 4-5.

            In Oklahoma, the plaintiff has 180 days after filing its petition to serve the defendant. Okla. Stat. tit. 12, §2004(I). Both defendants argued that service was untimely and that the action should be dismissed. In response, McBee argued that the emergency administrative orders suspended the time for service even though summons had not been issued before the emergency administrative orders were effective. The trial court agreed with the defendants and concluded that the suspension did not apply because the summons had not been issued before the orders took effect. Id., at ¶¶ 6-7.

            The Oklahoma Supreme Court retained the matter on appeal, reversing and remanding the trial court’s decision. The Court found that “general administrative authority over all courts in this State, including the temporary assignment of any judge to a court other than that for which he was selected, is hereby vested in the Supreme Court and shall be exercised by the Chief Justice in accordance with its rules.” Id. at ¶12 (citing Okla. Const. art. VII, § 6). The McBee Court went on to say, “[u]nder the State Constitution and Rule 2, it is unquestionable that the Supreme Court, acting through the Chief Justice, had authority to take proper measures and issue such orders as were deemed necessary for the safe operation of state courthouses and its employees.” Id. at ¶13. The McBee Court noted, “[t]he tolling of time limitations was just one in a litany of safety measures implemented by the emergency orders to better protect courthouse employees and the public from further spread of Covid-19.” Id. at ¶15.

            The Court defined “tolling” as “the temporary suspension of statutory time bar for bringing a suit because of either some ‘disability’ on the part of the plaintiff which prevents that person from commencing the action or some activity on the part of the defendant forestalling prosecution of the claim against the defendant." Id. at ¶18 (quoting Thompson v. Anchor Glass Container Corp., 2003 OK 39, ¶ 9 n. 13, 73 P.3d 836, 838). The McBee Court further reasoned, “[i]n the present case, there are a number of factors that constitute disability on the part of the plaintiff, including, but not limited to, the fact that society was in the midst of a global pandemic. Most courthouses were closed to the public because of Covid-19. Additionally, the third SCAD order expressly stated that the statute of limitations in any civil case would be extended. Consequently, McBee's potential reliance on this Court's orders clearly stating that the statute of limitations on all civil cases pending would toll further establishes a disability for purposes of tolling.” Id. at ¶18.

The Court provided the following application for guidance: “For all cases pending before March 16, 2020, the deadlines are extended for only the amount of days remaining to complete the action. For example, if the rule required the filing of an appellate brief within 20 days, and as of March 16, ten (10) days remained to file the brief, then the party has 10 days with May 16, 2020, being the first day.”  Id. at ¶18. As applied to the case at bar, from the date the petition was filed, to the date the first order took effect, 117 days elapsed. Consequently, McBee had 63 days remaining, beginning on May 16, 2020, to complete service. Therefore, McBee completed service on both defendants in the time allowed because of the available tolling.

As our industry returns to its usual processes, it appears that the interruptions caused by the pandemic and the emergency executive orders of the Oklahoma Supreme Court will be applied to all operative timelines in existence. While this particular opportunity for timeline enlargement is likely already behind us, it is important to consider its effect as applied to issues that have a long life, like jurisdiction and service. Further, the Court’s finding in McBee may be an indication of how it will treat delays caused by moratoria impacting various timelines for the industry at large.

Copyright @2022

USFN Report - Winter 2022

by Eva Massimino, Esq.

Bendett & McHugh, P.C.*

USFN Member (CT, ME, MA, NH, RI, VT)

On September 7, 2017, in Federal National Mortgage Association v. Deschaine, 2017 ME 190, the Maine Supreme Court held that once a promissory note is accelerated, the payments required by the note become indivisible, and there can be no new default under the note and mortgage. Due to the indivisibility of the payments, if there is a dismissal of a foreclosure action with prejudice, the lender is precluded from filing another foreclosure at a future date based on a continuing default. The practical impact of Deschaine was that a loan became unenforceable if a foreclosure action was dismissed with prejudice, resulting in a house free from an enforceable mortgage obligation.

Defenses sounding in insufficiencies in pre-foreclosure demand notices have become more frequent and particular, creating significant concern over initiating foreclosure with even the slightest error in the demand notice. Servicers and foreclosure counsel in the area have worked together to help stop and hopefully reverse the trend of minor deficiencies resulting in a windfall for the borrower. The efforts have been slow and frustrating and have resulted in increasingly conservative practice throughout the state.

Recently, we have had some signal that the tide may be turning. The composition of the Maine Supreme Judicial Court has changed. With this change has seemingly come a willingness to temper the need for strict statutory compliance with the state’s demand notice requirements against the severity of a notice’s defect.

On October 12, 2021, the Maine Supreme Judicial Court decided 1900 Capital Trust II v. Moynihan. The Plaintiff in Moynihan provided a demand notice in support of its foreclosure that had a minor discrepancy in the itemization provided which resulted in a $6 difference in the amount due on the loan to reinstate. The court affirmed that given the minor nature of the discrepancy in the notice, the Plaintiff nevertheless met its burden to foreclose the subject mortgage. The holding suggests that there is a reasonableness standard that will also be applied when reviewing demand notices under the strict compliance requirements previously established in Maine.

In addition, there may be some hope in adopting strategies which have been successful in other states. Namely, there may be a circumstance or a process that can be established to revoke acceleration prior to judgment entry by forgiving past due payments and inviting the borrower to resume payments under the existing mortgage terms. The process would effectively revive the note obligations and permit foreclosure if the default were to recur.

Only time will tell if we are truly witnessing a reversal of the “free house” trend, but for now there is at least some indication of a shift in the right direction.

Copyright © 2021 USFN. All rights reserved.

December 2021 USFN Report

by Camille R. Hawk, Esq.
Walentine O’Toole, LLP

USFN Member (IA, NE)

The various moratoria since March 2020 impacted residential evictions across the country, and Nebraska was not left out of that equation.  Earlier this year, Nebraska made some changes to certain provisions of the Uniform Residential Landlord-Tenant Act (Neb. Rev. Stat. §§ 76-1401 to 76-1449) (the “Act”) and the Forcible Entry and Detainer (FED) statutes (Neb. Rev. Stat. §§25-21,219 to 25-21,235). 

While we as attorneys for our clients may not deal with landlord-tenant law in a post-foreclosure world, Nebraska does not have specific post-foreclosure restitution statutes per se.  It does have FED statutes, and they provide cross-references to the Act.  Applying an often-used common law standard, judges practically review what is “customary and reasonable” in light of the Act and the FED statutes.

In 2019, prior to the moratoria, the notice to vacate (Legislative Bill 433) under various circumstances was updated from three days to seven days; however, Neb. Rev. Stat. §25-21,221 under the FED statutes still only requires a three-day notice to vacate.  The former owner arguably has been stripped of their title and the shorter timeline would apply. To be safe, however, you may want to consider adding the additional four days. 

LB 320 was signed into law and became effective August 28, 2021.  In that Bill, Neb. Rev. Stat. §76-1441 provides some additional requirements when a Complaint is filed.  It must identify the specific statutory authority under which possession is sought.  Additionally, Neb. Rev. Stat.  §76-1442.01 requires that the Affidavit filed requesting alternative/constructive service include with specificity the diligent efforts made to serve the summons, why those efforts were not successful, and that the summons was posted on the front door and mailed.  Note:  the person mailing the Summons and Complaint and the person posting the same must each file an Affidavit. See also Neb. Rev. Stat. §25-21,223 of the FED statutes, which is similar to the new law.

Previously, continuances under the Act were allowed for extraordinary cause.  Now, the first continuance is allowed by either party for good cause and does not require extraordinary cause. Neb. Rev. Stat.  §76-1443.

Again, these specific revisions are to the Act; the FED statutes do not require that the statutory authority to file the Complaint be cited.  That being said, the same or similar provisions of the Affidavit for alternative/constructive service apply to the FED statutes (Neb. Rev. Stat. §25-21,223).  The extraordinary cause requirement for continuances remains in the FED statutes (Neb. Rev. Stat. §25-21,225). 

It remains to be seen whether the judges will lean toward the greater consumer protection in light of Covid.  It is encouraged that you speak with your local counsel as to the pros and cons and best practices after a Nebraska foreclosure sale.

Copyright © 2021 USFN. All rights reserved.

December 2021 e-Update

by Kevin Galin, Esq.
Bendett & McHugh, P.C.
USFN Member (CT, MA, ME, NH, RI, VT)

The Connecticut Supreme Court recently visited the question of whether state courts have jurisdiction to extend the automatic stay provisions of 11 U.S.C. § 362 (a) (1) to motions by those court appointed attorneys that administer foreclosure sales (called “committees for sale” or “committees” in Connecticut foreclosure practice. The committees perform duties similar to auctioneers) to recover fees and expenses from non-debtor foreclosure plaintiffs.  In a decision stemming from a writ of error filed by the committee for sale, the Court held that an award of a committee’s fees and costs during a bankruptcy stay does not violate the applicable provisions of the Bankruptcy Code.

In U.S. Bank, N.A. as Trustee v. Jacquelyn N. Crawford et.al, 333 Conn. 183 (2019), the trial court entered a judgment of foreclosure by sale, and pursuant to Connecticut practice, appointed a committee to conduct the sale. After the sale had been conducted but prior to the sale approval, the defendant-mortgagor filed for Chapter 13 bankruptcy protection, automatically staying the proceedings. The committee nonetheless filed a motion pursuant to Connecticut General Statute § 49-25,^[1] which sought to recover fees and expenses incurred prior to the filing of the bankruptcy petition in preparing and conducting the sale.

The trial court considered itself bound by Equity One, Inc. v. Shivers, 150 Conn. App. 745 (2014), a prior Connecticut Appellate Court decision which held that such motions for award of committee’s fees were prohibited from being awarded as violative of the automatic bankruptcy stay provisions of 11 U.S.C. § 362 .  In doing so, the Appellate Court in Shivers held that even though the committee’s motion did not directly affect the defendant, since these fees and costs would be able to be sought by plaintiff at the conclusion of the case, such a motion was subject to the stay.  Relying upon Shivers, the trial court here denied the committee’s motion. The committee’s writ of error followed.

In Crawford, the Connecticut Supreme Court overrules Shivers to the extent that Shivers held that state courts have jurisdiction to extend the automatic stay provisions to proceedings against non-debtors, in particular, the committee for sale appointed in a foreclosure action. The Court first visits the issue of whether or not the denial of the committee’s motion for an award of attorney’s fees is a reviewable issue, which the Court finds that it is.^[2] The Court then acknowledges that while the writ of error was rendered moot during the pendency of the writ of error, in that the automatic stay was terminated by virtue of the defendant-mortgagor’s bankruptcy case being dismissed, the claim is reviewable under the capable of repetition, yet evading review exception to the mootness doctrine. 

In doing so, the Court describes this issue to be one that is “of some public importance” as a committee for sale functions as an arm of the court in a judicial sale and that under the Shivers holding, attorneys may be more reluctant to serve as sale committees if they run the risk of being rendered unable to recover their fees and expenses promptly, and without having to seek a judgment from the bankruptcy court, if the debtor declares bankruptcy.

Crawford reinforces the significance of the public policy served by resolving foreclosures expeditiously and further emphasizes the importance of the sale committee’s role in doing so.   It also highlights the relationship between federal bankruptcy proceedings and state court foreclosure actions, clarifies the responsibility of a mortgage servicer to pay committee of sale fees and expenses, notwithstanding a pending bankruptcy of a defendant, and now puts Connecticut state law with respect to this issue in line with most of the holdings of the Bankruptcy Courts for the District of Connecticut. Although there is a split of authority amongst Connecticut’s Bankruptcy courts on the payment of fees and costs during a bankruptcy, further challenges on this issue in Bankruptcy Courts are expected.