Sturdivant v. BAC Home Loan Servicing, LP

Citations: 159 So. 3d 47; 2013 Ala. Civ. App. LEXIS 263; 2013 WL 6511669Docket: 2100245

Court: Court of Civil Appeals of Alabama; December 12, 2013; Alabama; State Appellate Court

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On December 31, 2009, BAC Home Loans Servicing, LP filed a complaint in ejectment against Bessie T. Sturdivant, alleging that it had foreclosed on her property secured by a mortgage and purchased it at the foreclosure sale, with Sturdivant failing to surrender possession. Sturdivant denied the allegations and opposed BAC's motion for summary judgment. On October 29, 2010, the trial court granted summary judgment to BAC and issued a writ of possession. Sturdivant's post-judgment motion was denied, and she appealed to the Alabama Supreme Court, which transferred the case to this court.

In December 2007, Sturdivant obtained a loan from Security Atlantic Mortgage Co., Inc., secured by a mortgage executed in favor of Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Security Atlantic. The loan was FHA-insured. Sturdivant’s affidavit revealed personal hardships in March 2009, prompting her to seek a loan modification from BAC after failing to make payments in April and May 2009. BAC notified her of the default and potential loan acceleration in a June 8, 2009 letter. The foreclosure process began in September 2009, with BAC referring the matter to an attorney and sending Sturdivant two letters on September 20, 2009, confirming BAC as the mortgage holder, detailing the amount due, and notifying her of the scheduled foreclosure sale for October 28, 2009. Additionally, BAC provided communication logs from Neighborhood Housing Services of Birmingham, Inc., which Sturdivant had authorized to negotiate on her behalf.

In late April or early May 2009, Sturdivant initiated a request for a mortgage workout, seeking assistance for a loan modification. By mid-September 2009, she was informed that BAC intended to foreclose on her property, despite her ongoing modification efforts. The foreclosure sale originally set for October 28, 2009, was postponed to December 1, 2009, while BAC reviewed her modification request. On November 13, 2009, records indicated that Sturdivant did not qualify for a loan modification as of November 7, 2009, according to NHSB communication logs. BAC’s assistant vice president, Ken Satsky, stated in an affidavit that Sturdivant failed to meet guidelines for loan modification, and confirmed their initiation of foreclosure proceedings.

Satsky's affidavit indicated Sturdivant defaulted on her mortgage note and claimed BAC provided her a Notice of Default on January 6, 2009. However, this notice was not included in the record on appeal, nor did Satsky reference BAC's September 20, 2009, letters supporting its summary judgment motion. BAC submitted evidence of a foreclosure notice published on November 7, 2009, which stated BAC was the holder of Sturdivant’s mortgage and scheduled a public auction for December 1, 2009.

On the day of the auction, BAC purchased the property, and MERS assigned Sturdivant's mortgage to BAC. The auctioneer's foreclosure deed noted that the mortgage had been recorded in the probate court and specifically detailed the assignment from MERS to BAC, referencing the original mortgage executed on December 18, 2007. The deed confirmed that all necessary steps for acquiring the property at the foreclosure sale were completed by BAC.

The 'book' and 'page' numbers in the December 1, 2009, auctioneer's foreclosure deed were handwritten rather than printed. Evidence shows that both the assignment of Sturdivant’s mortgage from MERS to BAC and the auctioneer’s foreclosure deed were recorded in the Jefferson Probate Court on December 23, 2009, with the foreclosure deed recorded one second after the assignment. On December 4, 2009, BAC notified Sturdivant of its property purchase at the December 1 foreclosure sale and demanded possession under Alabama Code § 6-5-251. In the case of Sturdivant v. BAC Home Loans Servicing, LP, the court ruled that BAC lacked standing to conduct the foreclosure sale since the mortgage had not been assigned to it at that time, precluding discussion of other appeal issues. However, upon BAC's petition for certiorari, the Alabama Supreme Court concluded that the appellate court erred in denying BAC standing to prosecute its ejectment action. The Supreme Court clarified that the issue of whether the foreclosing entity had valid title did not affect the trial court's subject-matter jurisdiction but rather related to BAC's ability to prove its cause of action in ejectment. BAC, having successfully bid and received a foreclosure deed, has the right to claim title and seek ejectment under Alabama law. The court affirmed that the trial court can address issues of proof without lacking subject-matter jurisdiction, overruling previous case law to the contrary regarding standing in ejectment actions.

Bessie T. Sturdivant contests the summary judgment granted to BAC concerning its ejectment claim. The court reviews summary judgments under the standard that requires no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. The burden shifts to the nonmovant to provide 'substantial evidence' to create a genuine issue of material fact. In this case, BAC's ejectment claim stems from Alabama Code § 6-6-280(b), which allows for recovery of land possession without needing to state a lease or ouster, provided the plaintiff claims possession or legal title and that the defendant unlawfully detains the property. BAC asserted it held legal title due to a foreclosure purchase. However, Sturdivant argues BAC's deed is void, claiming BAC lacked the legal authority to foreclose, as it was neither the mortgage assignee nor the holder of the promissory note during foreclosure proceedings. The court must consider whether BAC met the necessary legal standards to maintain its ejectment action.

In an ejectment action, the plaintiff bears the burden of proving superior title to the property. Under Ala. Code 1975 § 35-10-12, a mortgage's power to sell is part of the security and can be executed by any party entitled to the secured money. Sturdivant contends that the foreclosure sale by BAC was invalid as BAC was not an assignee of the mortgage at the time of the foreclosure proceedings in September 2009. The Alabama Supreme Court in Ex parte GMAC Mortgage, LLC ruled that the validity of a foreclosure hinges on whether the foreclosing party held the mortgage at the time the power of sale was executed, not at the initiation of the foreclosure process. The court confirmed that GMAC was validly able to foreclose since it held the mortgage when executing the sale.

In Sturdivant's case, BAC claimed to have received the assignment of the mortgage on December 1, 2009, the same day it conducted the foreclosure sale. However, there was no evidence presented regarding the timing of the assignment relative to the sale, leading to the conclusion that BAC did not establish a prima facie case for summary judgment based on its assignment of the mortgage. Nevertheless, under § 35-10-2, BAC could still potentially qualify to foreclose if it was a holder of the promissory note secured by Sturdivant’s mortgage at the time of foreclosure, a point that was not addressed in the parties' briefs. The appellate court may affirm a judgment for any correct reason, prompting consideration of whether BAC could show it was the note holder when it initiated foreclosure.

In Alabama, a mortgage-secured note is considered a negotiable instrument, allowing the holder to enforce its terms. It is not necessary for a mortgage deed to be assigned for the debt owner to foreclose using a power of sale, which can be executed by an assignee or anyone entitled to the mortgage debt. A transfer of the debt, whether written or verbal, equates to an assignment of the mortgage in equity. In Coleman v. BAC Servicing, the court ruled that possession of the promissory note, which is a bearer instrument, allows for foreclosure even without an assigned mortgage. The court emphasized that physical possession of the note outweighs other ownership indicators.

In Nelson v. Federal National Mortgage Association, Flagstar Bank, as the servicing entity, was represented by MERS in a foreclosure that resulted in a deed transferred to Fannie Mae. The Nelsons contested the ejectment action, claiming the foreclosure deed was invalid because the mortgage had not been assigned to MERS or Flagstar before foreclosure proceedings began. The court found that Fannie Mae failed to show Flagstar was the holder of the note prior to the foreclosure initiation, rendering MERS without authority to foreclose, and therefore, the foreclosure deed was void. This led to the conclusion that Fannie Mae lacked standing to pursue ejectment against the Nelsons.

The Alabama Supreme Court later reversed the Sturdivant ruling, asserting that a foreclosing entity with a seemingly valid deed can initiate ejectment actions. However, having a valid deed when starting the ejectment process is essential, as is proving the validity of plaintiffs’ title to the property. The Supreme Court also clarified that a foreclosing entity need not possess the note or title at the time of foreclosure, countering the earlier requirements established in Nelson.

BAC was tasked with demonstrating that it was the holder of the promissory note at the time of foreclosure on Sturdivant's mortgage. The evidence presented included a letter dated June 8, 2009, in which BAC identified itself as the servicer of the loan for an unnamed Noteholder. In two subsequent letters from BAC's counsel on September 20, 2009, and another on October 28, 2009, BAC referred to itself as the holder of the mortgage. However, these statements were unsworn and insufficient to establish BAC's status as the holder of the note during the foreclosure. The record lacked evidence showing when or if BAC became the note holder, as BAC submitted only documentary evidence and affidavits that did not clarify its ownership status. Consequently, BAC failed to establish a prima facie case for its authority to foreclose, leading to a reversal of the summary judgment and a remand for further proceedings. The court acknowledged a genuine issue of material fact regarding BAC's authority to foreclose, rendering Sturdivant's additional arguments unnecessary for consideration. The foreclosure deed indicated the sale occurred on December 1, 2009, during legal hours. Furthermore, while Sturdivant argued the note and mortgage had been separated, the court noted that such separation does not invalidate the note's enforceability. Lastly, the letters from BAC's counsel did not originate from its appellate counsel.