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| Who knows what we're thinking with this one? |
By Elizabeth Kruska
This case is a lot to wade through, which is why it’s gone un-summarized for three years. But I’m willing to take one for the collective SCOV Law Team and do this.
There’s apparently a piece of property in Clarendon owned by the Campneys. They have nearly nothing to do with this case, except that they fell into arrears on their mortgage(s). The mischief is with the Big Corporation Mortgagee who decided to follow its own rules of civil procedure.
In 2007, back when it was a-okay for lenders to write all sorts of mortgages, the Campneys executed a note to E-Loans, Inc. (It’s worth it to click on the link. I think they wrote their own Wikipedia page.) The Campneys got a $310,000 loan, secured by a mortgage on the Clarendon land. As they do, the lender sold the loan to Provident Funding (I assume it was sold because that’s how this works). There is also a junior mortgage on this land held by Joan Campney. Joan’s mortgage was recorded in 2004. However, Joan signed a subordination agreement in 2007. This is important because even though her mortgage was first in time, she now agreed the Provident mortgage would take priority.
The problem in this case, as I mentioned, is not with the Campneys, but more between Provident and Joan. The opinion refers to them as senior mortgagee and junior mortgagee, respectively, but I find that sort of confusing, so I’m going with Joan and Provident instead. This is why I’m a cheeky blogger and not a SCOV justice. Although maybe I should be a SCOV justice. I’ll put that on my ever-growing list of things to do.
The Campneys failed to make payments, so Provident filed a foreclosure action in October 2008, and also named Joan as a defendant. By January 2009, Provident moved to dismiss this case, so it was dismissed. We’ll call this Foreclosure Action Number One.
In August 2009, Provident filed Foreclosure Action Number Two action against the Campneys and Joan. It moved for a default judgment but didn’t provide proof that it was the holder of the note. The court ordered it to provide the proof, but it never did, so in January 2010 that foreclosure action got dismissed.
Foreclosure Action Number Three got filed by Provident in December 2010. Unclear about this, but it appears the defendants didn’t get served. In June 2011 the court sent notice to Provident about the service issue, but Provident didn’t respond so that one got dismissed in August 2011. Provident filed a motion to reopen, saying it did provide proof of service. But there were other problems, so the court denied the motion to reopen in November 2011.
The present case—Foreclosure Number Four—or the Fourclosure, as I have unfortunately decided to call it, was filed in January 2012 against the Campneys and Joan. Joan moved to dismiss, arguing that the prior dismissals acted as an adjudication on the merits, and that Provident didn’t get to re-litigate on something that had already been decided.
While that’s true, there had been additional defaults since the time of the dismissal of Foreclosure Action Number Three, so those new defaults can serve as the basis of new actions. However—and here’s the twist—the court granted Joan’s motion to dismiss on an equitable basis. The court’s reasoning was that Joan had, at that point, had to hire an attorney four different times and defend a foreclosure claim four times. Three of those times the cases went away, and twice it was because Provident didn’t have its act together to prosecute its claim. Maybe I’m being unfair in my assessment, but this opinion sort of makes it sound like Provident is the Kruger Industrial Smoothing of mortgage lending.
The effect of the court’s ruling was that Provident was now precluded from foreclosing against Joan’s interest in the property. Provident wanted to appeal this but the court said no. Then the Campneys filed for bankruptcy protection, which put the whole matter on hold until September 2013.
Then Provident moved for summary judgment against the Campneys. The Campneys moved to dismiss for lack of jurisdiction or, in the alternative, to set lien priorities. Remember from above, Provident was the senior lien, and Joan became the junior lien subject to the subordination agreement signed in 2007. Provident’s response was to ask the court to reconsider the order dismissing the matter against Joan and also that there was insufficient evidence to prove that Joan had been inconvenienced by the prior several years of litigation.
The court said no because there was a good historical record to prove that Joan had been brought into the matter on multiple occasions, had to defend it, and on two of the four occasions, Provident didn’t follow through on what it needed to do. In baseball (remember baseball?) batting .500 is unheard of, but in a good way. That’s not okay here, though. Joan is an individual person who has a mortgage interest, and every time she gets sued she’s got to defend. At some point the repeated filings and dismissals feel abusive on a systemic level, and there ought to be a remedy. The court also denied the Campneys’ motion to dismiss, and in October 2015 (goodness this is taking a long time), issued a judgment and decree of judicial sale. The Campneys could redeem the property or else it would be sold within 6 months of the redemption date or conclusion of any appeal in the case.
Provident moved to appeal, and SCOV reverses.
Because this was an equity argument, SCOV reviews for an abuse of discretion. The long and short is SCOV found that the court did abuse its discretion by going so far as to dismissing Joan. SCOV felt the dismissal was a bit too far.
Dismissal as a sanction is something that can be done, but it’s meant to be done sparingly. It’s kind of a nuclear option because it’s saved for situations only where anything less than dismissal would prejudice a party. It’s clear here the trial court was irritated by Provident, and sympathized with Joan’s need to defend her mortgage repeatedly. Abuse of the legal process, including acting in bad faith, ignoring court orders, and causing scheduling delays all causes prejudice to the party not engaging in that behavior. But there are other sanctions the court could consider instead.
Dismissing Joan also caused another problem. It re-ordered the priority of the mortgages, making Provident the junior mortgagee and Joan the senior mortgagee. She had voluntarily given up that position back in 2007, and reversing their positions was a disproportionate step in sanctioning Provident.
To be sure, SCOV is decidedly not impressed with Provident’s behavior. So SCOV reverses, but also very heavily hints to the trial court that maybe some sort of monetary sanction would be a better idea. *nudge nudge*
Well, more than a nudge. The order says “reversed and remanded for the trial court to consider monetary sanctions.”
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