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California Appellate Court Reverses Lower Court’s Decision and Holds Insured Was Collaterally Estopped from Lawsuit Against Title Insurance Company Banner Image

California Appellate Court Reverses Lower Court’s Decision and Holds Insured Was Collaterally Estopped from Lawsuit Against Title Insurance Company

Month: March 2017

California Appellate Court Reverses Lower Court’s Decision and Holds Insured Was Collaterally Estopped from Lawsuit Against Title Insurance Company

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The California Court of Appeals recently reversed a trial court’s order and held that an insured property owner was collaterally estopped from suing a title insurance company for coverage regarding a forged deed to the insured property.  See Gillard v. Fid. Nat’l Title Ins. Co., 2017 WL 345086 (Cal. Ct. App. 2017), reh’g denied (Feb. 14, 2017), review filed (Mar. 7, 2017).  In the case, the insured purchased the property in 2004.  The prior owner had represented that he was the sole owner of the property and that his wife had conveyed any of her community property interest in the property to him via prior deeds.  In 2008, as part of a construction defect lawsuit the insured instituted against the prior owner, it was revealed that the prior owner had forged his wife’s name to the prior deeds, albeit with his wife’s knowledge.  The insured then filed a claim with the title insurance company, but the title insurance company denied it because neither the prior owner’s wife nor anyone else was challenging the insured’s title to the property.  Indeed, the prior owner’s wife had offered to quitclaim her interest in the property to the insured, but the insured rejected the offer, allegedly because she was concerned about the wife’s judgment creditors’ liens attaching.  Although the court in the construction defect lawsuit entered judgment for the insured on her breach of contract and negligence claims against the prior owner, it denied the insured’s request to declare her 2004 deed void because it found that the prior owner’s wife had authorized the conveyance.

The insured then initiated an action against the title insurance company, among others.  She sought a judgment that, inter alia, the prior deeds to the property, including her 2004 deed, were void and that the title insurance policy covered the defect.  After a trial, the court entered judgment that the deeds were void, that the policy covered the defect, and that the title insurance company had breached its contract by not defending the insured in the underlying lawsuit.  On appeal, the appellate court reversed the lower court’s decision.  It held that the court in the construction defect lawsuit had determined that the insured had title to the property and that the insured was collaterally estopped from bringing a lawsuit on that issue again.  Accordingly, because there was no adverse claim as to the insured’s title, the title insurance company had no duty to defend and did not breach the policy.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

NJDEP to Expand Site Remediation Municipal Ticketing Initiative

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The New Jersey Department of Environmental Protection (“NJDEP” or the “Department”) Site Remediation Program (“SRP”) has been experimenting in recent years with expedited enforcement proceedings utilizing its “Municipal Ticketing Initiative.”  Through the Municipal Ticketing Initiative, NJDEP issues “tickets” for certain obvious violations of the Site Remediation Reform Act, primarily including the failure to retain a Licensed Site Remediation Professional.  Upon issuance of a ticket, the applicable municipal court will set a hearing date, and a state attorney will send a letter to the offender proposing to settle the violation upon compliance with the applicable requirements.  If the offender and the state attorney cannot reach a settlement, the matter will go to trial in municipal court.  From start to finish, this process takes between three to six months.

Traditionally, NJDEP has enforced the requirements of the SRP through the administrative order and civil penalty process.  The Department still relies on administrative proceedings to prosecute complicated enforcement matters, but this process can take several years to complete.  As a result, NJDEP is looking to expand its use of the Municipal Ticketing Initiative wherever possible.  In fact, NJDEP is working to automate the ticketing process and to expand the ticketed violations so that responsible parties will receive tickets for other types of violations, including failure to conduct a receptor evaluation, failure to establish a classification exception area, failure to obtain a remedial action permit, or failure to comply with other mandatory aspects of the SRP.

As of February 2017, the Department reported that, through its Municipal Ticketing Initiative, it had issued 55 tickets at 37 contaminated sites, and had collected over $160,000 in penalties.  As noted above, legal counsel may assist with negotiating settlement and reducing penalties sought by NJDEP in connection with tickets.  Negotiated penalties often are significantly lower than the applicable penalty, and have ranged from $1,500 to $12,500.  In contrast, the Department may seek to impose penalties of up to $50,000 per day for continuing violations, and may request a bench warrant if an offender fails to appear for a scheduled hearing.  As a result, it is beneficial to address tickets in a timely manner, but it is important to note that NJDEP may still seek a penalty even if the offender comes into compliance after receiving the ticket.  New Jersey Department of Environmental Protection v. Hood, Docket No. A-3955-14 (App. Div. Nov. 3, 2016).

For more information, please contact any attorney in our Environmental Practice Group.

Maine’s Supreme Court Holds That the Mere Possibility of Future Claim for Public Easement Does Not Trigger Coverage Under Title Insurance Policy

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The Supreme Judicial Court of Maine recently affirmed a lower court’s judgment in favor of defendant title insurance company and the denial of plaintiff’s cross-motion for summary judgment in an action for coverage and indemnification under a title insurance policy on the ground that plaintiff failed to identify any cloud on its title or any other title defect that would implicate defendant’s duty to defend.  See Osprey Landing, LLC v. First Am. Title Ins. Co., 2017 WL 931383 (Me. March 9, 2017).  In the case, plaintiff acquired a parcel of oceanfront property and purchased a title insurance policy from defendant.  After the transfer of the parcel, plaintiff sued the owners of a lot abutting the property, claiming that a deeded easement over the neighboring lot permitted passage of motor vehicles.  The neighbors counterclaimed, asserting the existence of a private prescriptive easement over plaintiff’s property.  Although plaintiff filed a claim with defendant at that time, the neighbors subsequently dismissed their claim with prejudice.  In connection with that litigation, however, the prior owner of the insured property was deposed, and he expressed his knowledge of a history of public use of a path over the insured property.  He also executed an affidavit with the same claim.  Plaintiff then filed a claim with defendant, alleging a prescriptive easement over the insured property.  Defendant declined, and procured a second affidavit from the prior owner, in which the prior owner stated that he asserted no claim to a prescriptive easement over the property himself and knew of no one who could do so.  Plaintiff filed the instant action to enforce defendant’s purported duty to defend and indemnify plaintiff.  The trial court granted defendant’s motion for summary judgment as to all counts and denied plaintiff’s cross-motion for summary judgment.

On appeal, the Court noted that each of plaintiff’s three arguments were an iteration of a single issue: plaintiff believes that the prior owner’s deposition and affidavit create the risk of a future public prescriptive easement claim adverse to plaintiff’s title and, therefore, the policy requires defendant to take some action to either clear plaintiff’s title or compensate plaintiff for this perceived title defect.  The Court affirmed the lower court’s judgment and rejected plaintiff’s argument that the prior owner’s statements created a “triggering event” requiring defendant to take any action.  The Court further determined that the language of the policy is unambiguous, and the policy only imposes an obligation on defendant to “provide for the defense” of plaintiff’s title upon plaintiff’s request when a third party makes a claim adverse to plaintiff’s title.  The Court noted that the neighbors’ counterclaim was dismissed with prejudice, and therefore there is currently no known claim against plaintiff’s title.  Further, plaintiff could not identify any specific “loss or damage” within the meaning of the policy caused by the alleged easement.  Accordingly, the Court held that “[n]o obligation is imposed on [defendant] under these circumstances to preemptively indemnify [plaintiff] despite the lack of proof of the existence of an easement or litigation claiming one. We have never before held that the mere possibility of future claims for public easements renders title unmarketable, and will not do so here.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

Special Considerations for a Second Divorce

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I recently read an article in The Huffington Post outlining the reasons why second marriages are more likely to end in divorce. It’s a troubling thought for those once-divorced individuals who are optimistic about remarriage and hope never to undergo the experience of divorcing again. For those who do fall into this unfortunate situation, there are several ways to protect yourself while entering the second marriage, and several unique characteristics of a second divorce to keep in mind if and when the second marriage ends.

1. Go into the marriage with eyes wide open

Most people do not realize the mistakes they made when getting married until they’re faced with divorce. At the outset of a second marriage, most people are optimistic that they won’t be getting divorced again. However, it’s important to take the lessons you learned in your first divorce and apply them when getting remarried. Most critical is open communication with your partner about your circumstances, expectations and goals.

Many second marriages occur later in life when people are more financially stable and/or have higher earning potential. For some, a prenuptial agreement is a necessary safeguard that serves two ends: (1) it facilitates an honest dialogue about your respective financial positions and expectations of your roles in the marriage; and (2) it outlines your mutual understanding of what will happen if the relationship should fail and reduces the unpredictability of the dissolution process.

Where finances are less complex, some second marriages may not warrant a prenuptial agreement. At a minimum, there should still be full disclosure of all income, assets and liabilities and a meaningful discussion about how marital responsibilities will be allocated. Entering the marriage with a full understanding of the circumstances and expectations of both yourself and your spouse reduces the risk of surprises down the road which could lead to marital discord and, ultimately, divorce.

2. Capitalize on your knowledge of the process

It is no secret that divorce is not pleasant. While some divorcing couples have an easier experience than others, it is rare to find anyone who enjoyed the process. Those unfortunate enough to go through the experience a second time should utilize their understanding of the legal process to their advantage to mitigate the financial and emotional strain that divorce can cause. For example, in the first divorce you may have found that time and money were wasted litigating or fighting about issues that, ultimately, were not that important. You may have felt rushed or delayed by the deadlines and timing of the judicial system and regret not pursuing your divorce through alternative means like mediation.  At the outset of a second divorce, think about what you would have done differently in your first divorce and apply those lessons to the circumstances before you. Every divorce is different because it involves different players, but knowledge of the process can be used to your advantage to avoid repeating mistakes.

3. Consider how your first divorce impacts your current divorce

Not everyone is able to sever all ties with his or her first spouse before entering a second marriage. If you are paying alimony to your first spouse, for example, getting remarried does not automatically change that obligation. Where children are involved, you are likely co-parenting and/or sharing financial responsibility for many years after the divorce: again, getting remarried doesn’t change that. For those who find themselves dissolving a second marriage, components of your first divorce may actually impact how the second divorce gets resolved.

Payments of alimony to a former spouse, for example, factor in to reduce your income if and when alimony is determined at the end of your second marriage. Child support payments, whether made to a former spouse or not, also reduce your income for purposes of determining alimony in a second divorce.

Where a person has children from both marriages, custodial obligations related to the children from your first marriage may affect custody of the children from your second marriage. For example, if you have parenting time with children from your first marriage during the week, you may desire scheduling parenting time with your other children at the same time (so they can spend time together as a family) or separately (so each child receives one-on-one time with you). You may need to coordinate holiday and vacation time with two former spouses having very different schedules. You may have preexisting obligations to pay college costs that have to be considered in your second divorce. The interplay between the two divorces is a highly fact-sensitive inquiry, but requires careful consideration so that you are aware of how all the pieces fit together when you are ultimately divorced from your second spouse.        

4. Remember your allies and enemies

It is natural to resent or dread the divorce process, knowing from experience what it can be like. However, you can use your prior experience to your advantage to make the divorce looming ahead as painless as possible. If you had a great relationship with your first divorce attorney, utilizing his or her services again can make the process as streamlined as possible, knowing the dynamics of the attorney-client relationship. If you were not satisfied with your representation but feel that your first spouse’s attorney did a fantastic job, ask him or her for a recommendation. The same approach applies to any retained experts used in the first divorce, like child psychologists or forensic accountants. You can arm yourself with a great team and resources by utilizing the lessons learned from your first divorce experience. 

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Third Circuit Affirms Foreclosure Judgment Finding Lender Had No Duty To Borrower To Monitor Property Inspections On Residential Construction Loan

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In a case successfully litigated by Riker Danzig partner Jonathan Vuotto, the Third Circuit Court of Appeals recently affirmed the District Court of New Jersey’s grant of foreclosure judgment in favor of plaintiff, Bank of America, N.A., successor in interest to Merrill Lynch Credit Corporation, by and through its servicer and attorney-in-fact, PHH Mortgage Corporation (collectively, “lender”), finding that borrower failed to assert any meritorious defense or counterclaim and did not otherwise contest the core New Jersey elements of a prima facie mortgage foreclosure case.  See Bank of America v. Westheimer, 2017 WL 1048054 (3d Cir. March 20, 2017).  In the case, defendant mortgaged his New Jersey home and entered into a construction loan agreement (the “Agreement”) with lender in September 2008.  The Agreement contemplated a construction period ending in March 2010, and any extensions of this deadline were subject to lender’s approval.  The Agreement also contained sections that pertained to lender’s right to conduct inspections of the property during the pendency of the construction, as well as an integration clause and subsection entitled “Borrower-Lender Relationship,” which provided that lender “will not be considered . . . a partner, agent or joint venturer.”  In 2012, lender filed for foreclosure, alleging that defendant had defaulted on the Agreement by failing to complete the improvements to his home by the agreed-upon date and subsequently failed to correct his defaults.  Defendant filed an answer containing affirmative defenses and various state-law counterclaims, all of which “ar[ose] out of the [allegedly] negligent and otherwise improper manner and means by which [plaintiff] inspected and/or failed to inspect the [construction project] as a precondition of its disbursement of the Loan proceeds.”  Defendant alleged that lender essentially conducted “sham” inspections and did not adequately monitor the project.

Lender filed a combined motion to dismiss defendant’s counterclaims and motion for summary judgment on its foreclosure claim.  The district court granted lender’s motion in its entirety.  Defendant appealed the district court’s decision and obtained a stay of foreclosure pending the outcome of his appeal.

On appeal, the Third Circuit noted that defendant did not “contest the core New Jersey elements of a prima facie mortgage foreclosure case, [] such as the underlying existence of a mortgage debt, the validity of the mortgage, or default under the note.”  Instead, defendant’s argument primarily focused on the existence of the alleged duty owed by lender to him under state law.  However, the Third Circuit held that under New Jersey law, absent an egregious breach of good faith, there is “no duty on the part of lenders to disclose information they may have concerning the financial viability of the transactions the borrowers were about to enter.”  Further, the Agreement specifically disclaimed any quality assurances arising from the inspections and defendant could not meaningfully show that lender owed a duty to conduct the inspections for his benefit, or that he reasonably relied on them for that purpose.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Jonathan Vuotto at jvuotto@riker.com or Clarissa Gomez at cgomez@riker.com.

Changing Your Name Post Divorce

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In my opinion, most people (typically women) decide whether or not to change their name to a maiden name at the actual time of the divorce proceeding, if not sooner.  The decision is a largely personal one and in my years of practice I’ve heard the gamut of reasons as to why to or not to change from the married name.  N.J.S.A. 2A:34-21 is the statute that governs legal name changes in New Jersey.

Rarely do we see the courts chime in on this issue, because generally it is quite mundane.  However, there is a published trial court opinion stemming out of Passaic County which gives guidance on when is the appropriate time to make a request for a name change and suggests timing may be everything when it comes to this issue.

In the matter of Leggio v. Leggio, Mrs. Leggio filed an application with the family court seeking to change her name.  She provided the court with a copy of her dual judgment of divorce from bed and board entered in 2004.  Ten years later, she sought to change her name.

A critical point in this matter that cannot be overlooked is the distinction between a divorce from bed and board and a divorce.  New Jersey does not recognize legal separation for married people.  However, a divorce from bed and board has been considered by many to be the closest available option to a legal separation.  Those who enter into a divorce from bed and board are not legally divorced and their marital bond is not dissolved. As an example, they can still remain on their spouse’s health and/or car insurance.  In order to become ‘divorced,’ in the true sense of the word, following a divorce from bed and board, one party must file an application with the court seeking to convert their judgment into a final judgment of divorce.

The Leggios never did that.  So, when Mrs. Leggio came to the court seeking to change her name, the court looked to the statute which explicitly states, “The court, upon or after granting a divorce from the bonds of matrimony to either spouse…may allow either spouse…to resume any name used by the spouse…before the marriage…, or to assume any surname.”  This very language gives our courts authority to grant a name change incident to or after a “divorce from the bonds of matrimony.” Because a divorce from bed and board does not dissolve the bonds of matrimony, the court held that a name change could not be granted unless and until a final judgment of divorce is entered.  The mere passage of time is insufficient.

Bad Tanks Make Bad Neighbors: Appellate Division Approves Equitable Sharing of Costs to Investigate Underground Storage Tank Leak at Condominium

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In a recent decision, the Appellate Division upheld a Chancery Division injunction ordering five neighboring condominium owners to share the costs of investigating a discharge before the plaintiff condominium owner could demonstrate which, if any, of its neighbors contributed to the contamination.  Matejek v. Watson, Docket No. A-4683-14 (App. Div. Mar. 3, 2017).  The Appellate Division ratified the trial court’s “inventive solution” to the common dilemma of assigning responsibility to investigate pollution where it is not known which party caused it.  Although the Matejek courts invoked their equitable powers to require all parties to share in the cost of an investigation and remediation, this decision does not relieve parties seeking contribution under the Spill Compensation and Control Act (“Spill Act”) of their burden to ultimately prove the defendant’s nexus to the contamination.

In this case, the New Jersey Department of Environmental Protection (“NJDEP”) found oil in a stream behind the condominium in 2006.  NJDEP responded by removing each of the underground storage tanks from five adjacent condominium units.  However, NJDEP did not determine which tank or tanks had leaked and contaminated the stream.  To dispel the cloud on their title from NJDEP’s open file on the matter, the Matejeks, owners of one unit, sought an injunction compelling their four neighboring owners to share the cost of investigating and remediating the discharge.  The Chancery Division agreed with the Matejeks and ordered the parties to hire a Licensed Site Remediation Professional (“LSRP”) to investigate and, if necessary, remediate, with the costs shared equally among the five neighbors.

Affirming the injunction, the Appellate Division rejected the objecting neighbors’ argument that they could not be compelled to contribute without proof that the underground storage tank attached to their particular unit had leaked.  Despite implicitly agreeing with the defendants’ argument that recovery under the Spill Act required proof of a nexus between the discharge and the alleged discharger, see N.J. Dep’t of Envtl. Prot. v. Dimant, 212 N.J. 153 (2012), the court nevertheless “found the circumstances did not preclude imposition of an equitable remedy by which that evidence [of a nexus] might be revealed.”  The court determined that an injunction compelling all the neighbors to contribute equally to the investigation was appropriate because, without that injunction, the Matejeks would “solely bear the expense of investigation and remediation” before they could seek contribution from their neighbors under the Spill Act.  Furthermore, as the trial court noted, the fact that DEP removed each of the neighbors’ underground storage tanks sufficiently connected the neighbors to the contamination such that they could be compelled to participate in the investigation.

Despite the court’s refusal to require that the Matejeks prove their neighbors' tanks leaked, Matejek does not necessarily deviate from the New Jersey Supreme Court’s holding in Dimant, which requires that the plaintiff prove the defendant’s nexus to the discharge to recover cleanup costs under the Spill Act.  The Matejek court acknowledged the possibility of future litigation depending on the outcome of the investigation.  If the investigation exonerates a unit owner, that unit owner would not be liable for remediation and might even recoup its share of the investigation costs.

Matejek continues a trend of courts looking for remedies outside the Spill Act to assist parties beginning the remediation process.   For example, in Bradley v. Kovelesky, the Appellate Division permitted a current property owner to seek an Environmental Rights Act injunction ordering a prior owner to begin remediation.  Under the relevant Spill Act precedents, a party beginning remediation must spend its own money before it can obtain contribution from other potentially responsible parties, which can impose significant burdens on parties who take the lead on cleanups.  Matejek may mitigate this hardship in certain cases by permitting contribution claims earlier in the cleanup process while reserving a final allocation of liability for a later proceeding after the cleanup reveals the relevant facts about who caused or contributed to the contamination.

For more information, please contact the author Michael Kettler at mkettler@riker.com or any attorney in our Environmental Practice Group. 

Florida Federal Court Dismisses Complaint Alleging Violations of RESPA and FDCPA Due to Plaintiff’s Failure to Provide Notice and Opportunity to Cure, as Required Under the Mortgage

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The United States District Court for the Southern District of Florida recently granted defendant mortgage company’s motion to dismiss plaintiff’s complaint alleging, inter alia, violations of the Real Estate Settlement Procedures Act, 12 U.S.C. §2605(k) (“RESPA”) and the Fair Debt Collection Practices Act, 15 U.S.C. §§1692e, 1692f (“FDCPA”), because she failed to provide defendants with notice of the alleged issues and an opportunity to cure, as required under the mortgage.  See Sandoval v. Ronald R. Wolfe & Assocs., P.L., 2017 WL 244111 (S.D. Fla. 2017).  In the case, plaintiff purchased a home in Florida through a loan from the defendant mortgage company, secured by a mortgage on the property.  Plaintiff allegedly defaulted and defendant law firm initiated a foreclosure lawsuit against plaintiff.  Plaintiff hired counsel to defend her in the foreclosure lawsuit, and plaintiff’s counsel mailed the mortgage company a request for information.  The mortgage company, through the law firm, responded to plaintiff’s request and sent a reinstatement letter advising plaintiff that if she wished to avoid foreclosure, she must comply with the requirements for reinstatement of her loan.  Included in these requirements were charges for estimated amounts to reinstate her mortgage and avoid foreclosure, which included over $1,000 in service of process costs and $250 for a future filing.  Plaintiff alleges that defendants sought and collected unlawful estimated attorneys’ fees and service of process fees from plaintiff, in violation of RESPA and the FDCPA, as well as Florida state law.  The mortgage company moved to dismiss.

The Court granted the mortgage company’s motion to dismiss for several reasons.  Primarily, the Court agreed with defendant’s argument that plaintiff failed to allege compliance with a contractual condition precedent prior to filing the lawsuit.  Specifically, the mortgage required plaintiff to give the mortgage company notice and an opportunity to cure prior to initiating any action.  Therefore, all of plaintiff’s claims were fundamentally deficient due to plaintiff’s failure to comply with the necessary contractual condition precedent.  The Court also found that the reinstatement letter timely provided plaintiff, in writing and in a clear and conspicuous manner, with the requested information and contact information for further inquiry, and therefore was in compliance with RESPA.  Finally, the Court found that the mortgage company is not a debt collector for purposes of FDCPA liability because it is the original creditor.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

Third Circuit Holds Mortgage Servicer May Not Recalculate Mortgage Insurance Termination Date Based on Updated Home Value After Loan Modification

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In a homeowner class action, the United States Court of Appeals for the Third Circuit recently held that a lender that modifies a mortgage cannot rely on an updated property value to recalculate the length of the homeowner’s mortgage insurance obligation under the Homeowners Protection Act (the “HPA”) unless same is expressly set forth in the loan modification agreement. See Fried v. JP Morgan Chase & Co, 2017 WL 929752 (3d Cir. Mar. 9, 2017). Plaintiff purchased a home in 2007 with a loan for $497,950 that was serviced by defendant.  Because the loan-to-purchase-price ratio was more than 80%, defendant required that plaintiff obtain private mortgage insurance. Under the HPA, the insurance would terminate when the ratio reached 78%, which was scheduled to occur in 2016. 12 U.S.C. 4901 et seq. In 2011, plaintiff modified her mortgage under the Home Affordable Mortgage Program (“HAMP”). Per the modification, the outstanding principal was reduced to $431,597 and, based on this reduced amount, the principal balance would reach 78% of the original value of the home in 2014. However, when plaintiff inquired about this termination date, defendant informed her that the insurance obligation would not terminate until 2026, ten years after the original termination date. After a series of letters and inquiries, defendant informed plaintiff that it recalculated the value of the property at the time of the modification and reduced the value by about 25%. Using these reduced numbers, the new outstanding principal exceeded the new property value, increasing both the duration and the amount of the mortgage insurance payments. Plaintiff then initiated this action on behalf of herself and similarly-situated individuals, alleging defendant violated the HPA by using this new property value to calculate the termination date. Defendant filed a motion to dismiss, arguing that it was allowed to substitute this new value under the HPA. The District Court denied the motion but certified its appeal to the Third Circuit, “recognizing that whether Chase violated the [HPA] is a controlling question of law with substantial grounds for difference of opinion that is likely to advance this case’s resolution.”

On appeal, the Third Circuit affirmed the District Court’s denial of the motion to dismiss, holding that defendant must continue to use the original value of the property in calculating the termination date. First, the Court addressed the plain language of the HPA and HAMP regulations. Under Section 4902(d) of the HPA, if the mortgagor and mortgagee “agree to a modification,” the termination date “shall be recalculated to reflect the modified terms and conditions of such loan.” The defendant argued that it was required to obtain a new property value assessment under HAMP guidelines and that this “condition precedent” necessarily was incorporated as a condition of the loan. The Court rejected this argument, holding that the new valuation was not a term or condition of the loan, even if it was a condition precedent to defendant’s decision to modify. More importantly, plaintiff and defendant did not “agree” on this new value as part of the modification, so it could not be a term or condition of the agreed-upon loan. The Court also noted that defendant had at least twice successfully argued in other courts that the borrowers there could not use HAMP’s rules to modify their loan documents, and defendant cannot argue that “HAMP’s provisions do not bind the parties to a mortgage modification only when they benefit” defendant.

Second, the Court held that the HPA expressly states that the termination date should be adjusted based on the new property value after a refinancing. This language is not included in the section of the HPA discussing modifications. Based on this different language, the Court found that Congress did not intend for servicers to automatically incorporate new valuations into termination calculations after modifications without the borrowers’ agreement thereto. Third, the Court rejected defendant’s argument that the interpretation of the HPA is controlled by Fannie Mae’s Servicing Guidelines, which state that the home’s value at the time of the modification should be used to calculate the termination date. The Court held that Section 4908(b) of the HPA explicitly provides that the HPA takes precedence over any conflicting Guidelines, and the HPA therefore controlled. Fourth, the Court found that allowing changes to termination dates based on fluctuating property values would undermine the predictability of consumers’ mortgage insurance obligations, which was one of the priorities of the HPA.

Finally, the Court affirmed the District Court’s decision to deny the motion to dismiss based on defendant’s statute of limitations argument. Defendant had argued that plaintiff knew of the new termination date in 2012 but did not bring the action until 2015, which was outside the HPA’s two-year statute of limitations. The Court found that plaintiff’s argument that the limitations period did not begin running until 2013, when she discovered the reasoning for the new termination date, was plausible and enough to defeat the motion to dismiss.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.

Pitfalls of Representing Yourself in a Divorce

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It is common and often unfortunate that I meet with clients who decided, for whatever reason, that they would represent themselves during a divorce proceeding.  There are cases where that decision may be perfectly acceptable.  More often than not, the people I have met are coming to me because they are totally unsatisfied and/or unhappy with the deal they’ve made for themselves and are looking to an attorney to get them a better deal.  Sometimes this is a possibility.  However, when the ink is dry on that formal agreement, it makes things more complicated. 

Our courts have weighed in regarding the enforceability and conscionability of an Agreement negotiated and reached by self-represented parties.  The case in mind was formalized by husband’s attorney.  Wife chose to remain self-represented during the negotiations and execution of the Agreement.

After husband made a post-divorce application in the trial court to enforce the Agreement, wife challenged its validity, claiming unconscionability, inequity, unfairness and that it was obtained through fraud.  The trial court conducted a two-day hearing during which both parties and husband’s attorney testified.  Thereafter, the trial court rejected wife’s arguments that the Agreement was invalid, unfair, inequitable and procured through fraud.

By now you may be asking, how can that be? If wife was self-represented, she may not have known the law and didn’t understand what she was signing.  While a possibility, the testimony in this case revealed otherwise, opined the trial court judge.  As an aside, if you’re going to represent yourself in court, on some level, it is incumbent upon you to learn the law and understand what it is you are negotiating and ultimately agreeing to.

The trial judge in this case found that while the Agreement waived formal discovery, that alone was not dispositive of wife’s claims.  Also, while wife was self-represented, the judge found that she voluntarily agreed to waive her discovery rights and to bind herself to the terms of the Agreement.  To that end, the judge found wife had been previously married and had drafted an Agreement in connection with the break-up of that marriage, and therefore she understood the significance of such Agreements.  Also, the judge found that the parties had discussed the terms of the Agreement before it was executed in August 2005 – demonstrated by the prototype prepared by the parties and given to the husband’s attorney to formalize. The parties’ participated in a mediation session with regard to the division of marital assets.  Wife also acknowledged and was aware of the Agreement’s terms when she received a check to her from husband marked "Separation Agreement." In addition, wife negotiated an increase of husband’s support obligation to the tune of $2,000 more per month.

The trial judge also found that the Agreement was not grossly unfair, that the parties did not have grossly disproportionate bargaining power, and that the wife had sufficient time to reflect upon the terms of the Agreement.

The Appellate Court upheld the findings of the trial court and affirmed its decision.  Lesson to be learned from this – be careful what you bargain for, especially without the advice of counsel.

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