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Colorado Court Decides Matter of First Impression Regarding Lis Pendens Bond Requirements Banner Image

Colorado Court Decides Matter of First Impression Regarding Lis Pendens Bond Requirements

Month: August 2023

Colorado Court Decides Matter of First Impression Regarding Lis Pendens Bond Requirements

Posted on by Christie Bowness

In the August 24, 2023 decision issued by the Colorado Court of Appeals, Division Two (“the Court”), in the matter of Bertoia v. Denver Gateway LLC, 2023 LEXIS 1285 (2023 COA), the Court decided a matter of first impression regarding the propriety of conditioning the continuation of a notice of lis pendens pending appeal on the posting of a supersedeas bond.

Background

Plaintiff Wanda Bertoia (“Plaintiff”) was the sole owner of WPB Hospitality (“WPB”), an entity that, in 2015, obtained financing from American Lending Center (“ALC”) to construct a hotel on a four-acre parcel of land in the Gateway Park business district near the Denver International Airport (“the Property”).  After obtaining financing WPB commenced construction of the hotel, placing mechanics’ liens on the Property as part of the construction process.  In late 2018, WPB filed for bankruptcy without having completed construction, during bankruptcy proceedings contracting with Frisco Acquisition (“Frisco”) for Frisco’s purchase of WPB and assumption of all liabilities it owed to ALC and any other creditors.

During WPB’s bankruptcy proceedings, the Property was sold at a foreclosure sale with ALC submitting the winning bid.  Frisco subsequently filed a notice of intent to redeem the Property based on the mechanics’ liens it had acquired from WPB, with ALC ultimately agreeing to convey to Frisco the Property via a Purchase and Sale Agreement (“PSA”).  Frisco then assigned the PSA to Defendant Denver Gateway (“Denver”), an assetless company owned by the wife of Frisco’s sole owner, receiving nothing in exchange for the assignment.  Post-assignment, Frisco filed for a “no-asset” bankruptcy.

At a creditors’ meeting held during Frisco’s bankruptcy proceedings, Plaintiff learned about the PSA and assignment to Denver for the first time, leading her to file suit under the Colorado Uniform Fraudulent Transfers Act (“CUFTA”) seeking to void the assignment.  Simultaneous with Plaintiff’s filing of her Complaint she also recorded a notice of lis pendens on the Property.  Denver later moved before the trial court to expunge the lis pendens on the basis that Plaintiff’s CUFTA claim could not impact title to the Property, with the trial court agreeing with this reasoning and expunging the filing as requested.

In response, Plaintiff initiated an appeal before the Court, contesting the order expunging her lis pendens.  Despite the controlling Colorado statute providing that an expunged lis pendens is to remain in effect for the duration of an appeal, the trial court, upon being notified of Plaintiff’s challenge, entered an order requiring Plaintiff to post a $25 million dollar bond within ten days.  If Plaintiff failed to comply with this requirement, the order held that her lis pendens would be expunged regardless of her pending appellate action.  Plaintiff thereafter failed to post the bond and the lis pendens was expunged as threatened, with Plaintiff subsequently adding a challenge to this bond requirement to her appellate action.

The Appeal

In addressing Plaintiff’s appeal, the Court began by observing the basic principles of Colorado’s lis pendens statute, which provides that wherever a suit is initiated requesting relief that would potentially affect title to real property, any party to the action is entitled to record a notice of lis pendens against the involved property.  Recording a lis pendens in this manner serves the dual purposes of providing notice of the litigation and rendering title to the property unmarketable until the lawsuit is resolved or the notice is expunged.  If a notice is believed to be false or premised on invalid reasoning, any party can move for expungement of that notice.  However, even where expungement is warranted, if a timely appeal is filed challenging the expungement, the expunged notice will nevertheless remain in effect for the duration of the appeal.

The Court then addressed Plaintiff’s contention that the trial court lacked authority to condition the continuation of her lis pendens pending appeal on the posting of a bond – a Colorado issue of first impression.  The Court held that the trial court had acted appropriately and within the scope of its powers, reasoning that because the controlling Colorado statute empowers courts with the ability to “enter an order determining that [a] notice of lis pendens is no longer in effect,” a court can thus “surely [] stop short of doing so by conditioning its decision not to enter such an order on the posting” of a bond.

The Court then turned to Denver’s opposition to Plaintiff’s appeal, which contended that because Plaintiff had failed to post the bond as required, such non-compliance should render the subject appeal moot.  The Court disagreed, holding that while the posting of a bond was required to stay the lower court’s release of the lis pendens, the bond was “not a prerequisite for filing and pursuing an appeal of the underlying order striking the notice.”

As Plaintiff’s appeal was therefore valid, the Court then addressed the merits of her challenge to the basis for expunging the lis pendens, which was the trial court’s determination that her CUFTA claims could not have impacted title to the Property.  The Court ultimately ruled in Plaintiff’s favor, holding that Frisco’s transfer of the Property to Denver fell within the purview of the controlling statute which applied to any transfer involving “the interest of a seller or purchaser under a contract [of] sale,” with the Court concluding “that the assignment of the PSA was an indirect transfer of title in real property.”  The Court further explained that as the execution of a PSA serves to vest equitable title in a prospective purchaser, in the instant matter, upon entering into the PSA, Frisco held title which it then transferred to Denver.  Accordingly, if the trial court had ruled favorably on Plaintiff’s claim, it could have “return[ed] title to Frisco,” and thus Plaintiff’s CUFTA claim had indeed been capable of “affecting the title to real property” contrary to the trial court’s conclusions.

Based on the above, the Court therefore reversed the trial court, holding that Plaintiff’s notice of lis pendens was valid and properly recorded.

Takeaways

This matter demonstrates that where the expungement of a lis pendens is contested on appeal, the lower court being challenged is justified in requiring that the appealing party post a bond of seemingly uncapped value, as no clear parameters have yet been set delineating whether a bonding requirement can be deemed excessive.  The case also illustrates the important distinction that where a bond is required, said bond will have no bearing on a party’s right or ability to seek an appeal, but will relate only to the continuation of the lis pendens itself.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.

New Jersey Regulatory Update, Part IV

Posted on by Christie Bowness

Part IV continues to address various regulations in New Jersey that impact healthcare.

Board of Applied Behavior Analyst Examiners Rules

On May 15, 2023, the Division of Consumer Affairs (“DCA”) published 55 N.J.R. 989(a), which proposes new rules N.J.A.C. 13:42B, to implement P.L. 2019, c. 337 (“Act”). The Act created the Board of Applied Behavior Analyst Examiners and allows for the licensure and regulation of licensed applied behavior analysts and licensed assistant applied behavior analysts. The proposed new rules include, but are not limited to, licensing standards and requirements for initial licensure, renewal, suspension, reactivation, and abandonment of licenses, and many other requirements and standards for practice.

The full text of the proposed rule may be accessed here.

Licensed Clinical Social Worker Scope of Practice

On May 15, 2023, the DCA published 55 N.J.R. 1001(a), which proposed amendments to N.J.A.C. 13:44G-3.1, the rule which sets forth the scope of practice for licensed clinical social workers. The Board of Social Work Examiners proposed to amend N.J.A.C. 13:44G-3.1 to recognize that determining whether a terminally ill patient is capable and notifying a physician of this determination is within the scope of practice for licensed clinical social workers.

The full text of the proposed rule may be accessed here.

State Board of Medical Examiners: Licensing and Examination Requirements for Hearing Aid Dispensers Rules

On May 15, 2023, the DCA published 55 N.J.R. 988(a), which proposes amendments to N.J.A.C. 13:35-8.17, the rule that establishes examination requirements for licensure as a hearing aid dispenser. The Hearing Aid Dispensers Examining Committee (“Committee”) proposed to amend N.J.A.C. 13:35-8.17 to: recognize that written examination applicants are required to pass the International Licensing Examination ("ILE") given by the International Hearing Society; recognize that the name of the examination on laws and rules governing the practice of hearing aid dispensing is the "jurisprudence examination"; and to delete the provision requiring a candidate to retake the written examination if he or she fails a section of the ILE. Lastly, the Committee proposed two new amendments to address passing the examinations: requiring that a candidate pass the ILE prior to taking the jurisprudence or practical examinations and requiring that an applicant pass the jurisprudence and practical examinations within two years of passing the ILE, otherwise retake the examination.

The full text of the proposed rule may be accessed here.

Office of Health Care Financing: Adjusted Admission Assessment for Hospitals

On June 5, 2023, the New Jersey Department of Health (“DOH”) published 55 N.J.R. 1127(a), which proposed amendments to N.J.A.C. 8:31B-3.66, the rules requiring the DOH to assess general acute care and specialty heart hospitals a charge per adjusted admission and establishes an annual payment schedule and reporting requirements. The amendments are to implement the 2018 amendments to P.L. 2018, c. 116. The DOH proposes in the amendments, among other things, to make the assessment apply to rehabilitation and long-term acute care hospitals, in addition to its existing application to general acute care and specialty heart hospitals.

The full text of the proposed rule may be accessed here.

Provision of Fee-for-Service Psychological Services to Eligible Medicaid/NJ FamilyCare Beneficiaries

On June 5, 2023, the New Jersey Department of Human Services (“DHS”) published 55 N.J.R. 1128(a), which proposed amendments to N.J.A.C. 10:67-1.2, 1.3, and 3, as well as proposed the repeal of N.J.A.C. 10:67-2.3. The DHS is proposing amendments to N.J.A.C. 10:67, Psychological Services, including codifying the requirement that the providers obtain a federally required National Provider Identifier ("NPI") and valid taxonomy code for their provider type and updating the list of Healthcare Common Procedure Code System ("HCPCS") procedure codes, their descriptions, and maximum fee amounts. The DHS is proposing the repeal of N.J.A.C. 10:67-2.3, which addresses prior authorization requirements for psychological services since prior authorization for psychological services is no longer required.

The full text of the proposed rule may be accessed here.

Mandatory Direct Care Staff-to-Resident Ratios

On June 19, 2023, the DOH published 55 N.J.R. 1249(a), which proposed amendments to N.J.A.C. 8:39-1.2 and 43.1 and 8:43E-3.4, and proposed new rule N.J.A.C. 8:39-25.3. The rules provide the standards for licensure of long-term care facilities. The DOH proposes to amend existing N.J.A.C. 8:39-1.2, Definitions, to add a definition of the term "direct care staff member." Proposed new N.J.A.C. 8:39-25.3, mandatory direct care staff-to-resident ratios, would implement the minimum staffing requirements of P.L. 2020, c. 112 (approved October 23, 2020, and effective February 1, 2021).

The full text of the proposed rule may be accessed here.

Rehabilitative Services for Children Rules

On June 19, 2023, the DOH published 55 N.J.R. 1292(a), which was readopted with amendments N.J.A.C. 10:77, Rehabilitative Services for Children. Part of the amendments will require providers to obtain a federally required National Provider Identifier ("NPI") number and valid taxonomy code for their provider type. Another amendment will require employees of agencies to provide proof of applicable current clinical licensure and driver's licenses and that all agencies shall adopt a policy requiring that any changes to an employee's driving or clinical license status be reported by the employee to the provider immediately.

The full text of the final rule may be accessed here.

New Jersey Regulatory Update, Part III

Posted on by Christie Bowness

Part III of our Regulatory Update continues to address various regulations in New Jersey that impact healthcare.

Division of Developmental Disabilities Organizational Rules: Notice of Readoption

On March 6, 2023, the Commissioner of the Department of Human Services published 55 N.J.R. 391(a), which readopted N.J.A.C. 10:40, the rules which set forth the goals and basic method of operations of the Division of Developmental Disabilities ("Division"). The rules describe the mission, method of operations, and public information regarding the Division’s website. The rules were re-adopted for another seven-year period, expiring January 31, 2030.

The full text of the final rule may be accessed here.

Uniform Rules on Discrimination in Licensed Professions

On March 20, 2023, the Division of Consumer Affairs (“DCA”) published 55 N.J.R. 550(a), which adopted new rules N.J.A.C. 13:45C-4.1, 4.2, and 4.3. The new rules establish activities that may result in disciplinary action for licensed professionals governed by the DCA. Any licensee who has been found to have engaged in a reprisal against any person, or engaged in prohibited discrimination against any current or prospective client, patient, student, supervisee, colleague, or employee shall be deemed to have engaged in professional or occupational misconduct and may be subject to discipline.

The full text of the final rule and adopted regulations may be accessed here.

Background Checks

On April 3, 2023, the Department of Human Services published 55 N.J.R. 583(a), which proposed to readopt N.J.A.C. 10:48A, Background Checks, with amendments. Chapter 48A establishes the guidelines for obtaining criminal history background checks for employees of agencies under contract with the Division of Developmental Disabilities. The amendments include, among other things, the addition of community care residences, applicants, alternates, and household members to the background check requirements. The proposed amendments to the rule are meant to address the statutory changes reflected in the amendments to P.L. 2017, c. 328.

The full text of the proposal may be accessed here.

New Jersey Board of Nursing: English Proficiency Examination

On April 17, 2023, the Division of Consumer Affairs published 55 N.J.R. 647(a), which proposed amendments to N.J.A.C. 13:37-2.3, which establishes application requirements for graduates of foreign nursing programs. The proposed amendments will recognize the Occupational English Test ("OET") organization examination as a valid examination of English proficiency.

The full text of the proposed rule may be accessed here.

Executive Order No. 325: An Order Lifting COVID-19 Requirements in Congregate Care and Healthcare Settings

On May 1, 2023, the Governor published 55 N.J.R. 773(b), Executive Order No. 325, an order lifting COVID-19 requirements in congregate care and healthcare settings. The EO was effective April 3, 2023. The EO rescinds the COVID-19 vaccination and testing requirements for high-risk congregate settings, as required or extended by Executive Order No. 252 (2021) and Nos. 283, 290, and 294 (2022), and Paragraph 2 of Executive Order No. 281 (2022). Healthcare settings are no longer required to maintain a policy that requires covered workers to submit to weekly or twice weekly COVID-19 testing under the circumstances outlined in such Executive Orders. Healthcare settings, however, shall continue to be required to maintain a policy that requires covered workers to provide adequate proof that they are up to date with their COVID-19 vaccinations pursuant to such EOs.

The full text of the executive order may be accessed here.

Patient Supervision at State Psychiatric Hospitals Rules

On May 1, 2023, the Department of Health (“DOH”) published 55 N.J.R. 812(a), which proposes a readoption with amendments and recodification to N.J.A.C. 10:36 as 8:135, and proposes a new rule, N.J.A.C. 8:135-2.5. The amendments and new rule establish patient supervision at state psychiatric hospitals. The changes are meant to reflect the transfer of authority from the Department of Human Services (“DHS”) to the DOH. The DOH proposed substantive and non-substantive amendments throughout the chapter to delete references to the DHS and its divisions and add in place thereof, references to the DOH, use gender-neutral language, reorganize sections, improve readability, improve grammar, eliminate the passive voice, remove unnecessary capitalization, and update terminology that tends to stigmatize or objectify patients who have psychiatric illnesses. Also, the amendment adds new supervision requirements for patients.

The full text of the proposed rule may be accessed here.

State Board of Pharmacy: Remote Processing of Prescriptions

On May 1, 2023, the Department of Health published 55 N.J.R. 954(b), which adopts new rules N.J.A.C. 13:39-4A. The new rules set forth the requirements to allow a pharmacy to have licensed pharmacists and registered pharmacy technicians perform limited pharmaceutical functions at a location other than on the premises of a pharmacy. The remote pharmaceutical functions include but are not limited to: data entry of prescription medication information, prospective drug utilization review, refill authorizations, interventions, patient counseling, and receipt, interpretation, and clarification of prescription orders received from a prescriber. Remote functions explicitly exclude the storing or dispensing of any medication and do not involve more than one licensed pharmacy.

The full text of the final rule may be accessed here.

Expiration of Redemption Period Eliminates Standing to Challenge Foreclosure but for Fraud

Posted on by Christie Bowness

In a recent opinion issued by the Michigan Court of Appeals (“the Court”) in the matter of Logan v. Grann, No. 358022, LEXIS 3927 (Ct. App. June 1, 2023), the Court addressed the ramifications caused by the expiration of a foreclosed mortgagor’s statutory redemption period and potential exceptions to these ensuing consequences.

Background

In 1999, Plaintiff Rodney Logan (“Plaintiff”) purchased real property (“the Property”), executing a mortgage in favor of Countrywide Home Loans, Inc., in connection with his purchase.  This mortgage was subsequently assigned to Wells Fargo Bank, National Association (“Wells Fargo”) and its servicer Nationstar Mortgage LLC (“Nationstar”).  In July 2019, Nationstar informed Plaintiff that it intended to foreclose on the Property due to Plaintiff having become delinquent on his payments owed under the Mortgage.  On August 20, 2019, Nationstar informed Plaintiff that to avoid foreclosure, he owed $8,699.52 due by September 1, 2019, as this was the amount needed “to bring [his] loan current.”

Plaintiff failed to remit any payments by the September 1, 2019 date, and a sheriff’s sale of the Property was scheduled for September 12, 2019.  On the date of the sale, but prior to the sale proceedings actually commencing, Plaintiff paid Nationstar $9,583.07 via wire transfer.  However, despite this payment, the sale proceeded as scheduled and Wells Fargo purchased the Property for $145,387.35, later conveying the Property to Defendant Dewayne Grann.

Plaintiff later filed suit challenging the foreclosure, alleging various causes of action including one count of fraud.  While Plaintiff’s suit was filed within the statutory redemption period, and while the trial court also entered an order extending the redemption period by an additional 90 days, Plaintiff ultimately failed to redeem the Property.  Accordingly, upon the expiration of the extended redemption period, the trial court dismissed Plaintiff’s Complaint, holding that Plaintiff no longer had standing to maintain his action due to the expiration of the redemption period.  Plaintiff subsequently appealed the dismissal.

Plaintiff’s Appeal

On appeal before the Court, Plaintiff contended that the trial court had erred by concluding he lacked standing to continue his action following the expiration of the redemption period.  In addressing Plaintiff’s claims, the Court first observed that pursuant to the controlling Michigan sheriff’s sale statute, after a sale is completed, a mortgagor may redeem the sold property by paying the requisite amount owed within a six-month redemption period.  The Court noted that here, the trial court had extended this six-month period by an additional 90 days, and yet even with this additional time Plaintiff had still failed to effectuate redemption.

Citing to controlling Michigan case law, the Court held that where a mortgagor “does not exercise their redemption rights,” all of that “mortgagor’s rights in and to the property are extinguished.”  On this basis, the Court thus affirmed the trial court’s dismissal of Plaintiff’s Complaint, holding that the expiration of Plaintiff’s redemption period had extinguished any and all of Plaintiff’s interests in the Property, leaving him without standing to challenge the foreclosure.

Despite this, the Court proceeded to focus on Plaintiff’s count seeking to set aside the foreclosure due to alleged fraud.  The Court held that this fraud claim could potentially survive Plaintiff’s lack of standing as an exception to the rule, as were this claim to be proven valid, it would nullify the extinguishment of his rights because the sale of the Property – the event setting in motion the redemption period – would be found to have improperly occurred.  Thus, the “pivotal question” regarding this fraud claim was whether Plaintiff’s Complaint had pled the requisite elements of a fraud cause of action, which – in the foreclosure context – required that he demonstrate: (1) fraud in the foreclosure procedure; (2) prejudice to the mortgagor; and (3) a causal relationship between the fraud and prejudice.

Plaintiff contended that his Complaint satisfied these elements on the basis that he had alleged Nationstar engaged in prohibited so-called “dual tracking,” a practice where a lender institutes foreclosure proceedings while a borrower in default is actively seeking a loan modification.  However, the Court rejected these claims, holding that even were they true, they “did not allege fraud in the foreclosure procedure” itself, and that, without his doing so, his fraud claim failed.

Accordingly, the Court affirmed the lower court’s dismissal for lack of standing.

Takeaways

This decision demonstrates three important concepts.  First, that upon the expiration of the applicable statutory redemption period, a foreclosed mortgagor will be divested of all their rights in a given property.  Second, that an exception to this rule exists in the case of alleged fraud, but that, third, the alleged fraud must relate to the actual foreclosure procedure itself and not the surrounding events.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.

Washington Court Addresses Loan Servicer RESPA Response Obligations

Posted on by Christie Bowness

In a recent opinion issued by the United States District Court for the Western District of Washington (“the Court”) in Storms v. Flagstar Bank, No. 2:22-cv-00650, LEXIS 93862 (W.D. Wash. May 30, 2023), the Court addressed the responsive obligations owed by a loan servicer under the federal Real Estate Settlement Procedures Act (“RESPA”) and the types of damages a plaintiff is justified in pursuing for alleged RESPA violations.

Background

In 2005, Plaintiff Shawna Storms (“Plaintiff”) and her then-husband Jon Storms (“Storms”) purchased a home in Snohomish County, Washington (“the Property”).  As part of their purchase, Plaintiff and Storms obtained a mortgage from Defendant Flagstar Bank (“Flagstar”).  Plaintiff and Storms subsequently divorced in 2014, with Plaintiff retaining possession of the Property and assuming all mortgage payments.

In 2015, Plaintiff fell behind on the mortgage and applied for a loan modification with Flagstar, which was approved in January 2016.  Plaintiff later entered into a second loan modification in December 2016.  In early 2019, Plaintiff defaulted on the mortgage and sought a third loan modification in an attempt to save the Property from foreclosure.  In August 2019, Flagstar granted Plaintiff’s request for the third modification.  Importantly, the paperwork accompanying this third modification contained a chart comparing the current terms of Plaintiff’s loan and the modified terms, which provided as follows:

Plaintiff thereafter made timely payments from September 2019 through September 2020,  and in October 2020, sought to obtain new financing through a different lender.  While completing the financing application, Plaintiff – for the first time – reviewed her statements and discovered that they listed a deferred principal balance of $71,073.41 (“the Deferred Balance”).  Plaintiff then contacted Flagstar, claiming that the Deferred Balance was not listed in the 2019 loan modification paperwork and requesting that it be removed, thereafter filing two “notice of error” letters with Flagstar regarding the issue.  Flagstar responded by informing Plaintiff that it had found no errors in its loan modification paperwork, stating that its records indicated that the modification paperwork contained the above excerpted chart which Plaintiff had affixed her signature directly underneath.

In March 2022, Plaintiff brought suit against Flagstar, alleging that it had violated RESPA.  A year later, in March 2023, Flagstar moved before the Court for summary judgment.

Summary Judgment

In ruling on summary judgment, the Court first observed that Plaintiff had alleged Flagstar violated RESPA by failing to properly investigate and respond to her allegations regarding the loan modification paperwork and her “notice of error” letters.  In addressing this claim, the Court first explained that RESPA imposes an obligation upon loan servicers to investigate and reply to all borrower “qualified written requests” (“QWR”) with a written explanation addressing the specific concerns raised therein within 30 days of receipt, with these servicer responses containing a statement of reasons indicating why the servicer agrees or disagrees with the borrower’s contention.

As to Plaintiff’s claims, the Court noted that Plaintiff had sent October 30, 2020 and January 7, 2021 letters which constituted QWRs necessitating Flagstar responses.  The Court found no timeliness violations had occurred, as Flagstar had responded to both within 30 days – on November 19, 2020 and February 3, 2021, respectively.  As to the substance of Flagstar’s responses, Plaintiff contended that Flagstar had failed to adequately investigate and address her claims, as in response to her QWRs Flagstar had stated that the plain language of the 2019 loan modification required her to make the payments she now disputed.  Specifically, Flagstar’s response advised that it had “researched the error you reported and can confirm that there was no error in the processing of the Loan Modification.  Our records indicate [an] Agreement was mailed . . . in which it outlines the $73,749.81.”

Although Plaintiff disagreed that these were sufficiently detailed responses, the Court held otherwise, holding that “Plaintiff’s disagreement with the servicer’s determination does not create a claim under RESPA” and that Plaintiff could not manufacture a claim from what was her “simply fail[ing] to review her monthly itemized billing statements for a year.”  Indeed, Plaintiff ultimately could not overcome the fact that she had signed “directly below the chart explaining the terms of the loan modification and the amount of the deferred principal,” as doing so “show[ed] that Plaintiff was aware, or should have been aware, of the existence of the deferred principal balance.”

Finally, while Plaintiff’s claim had failed for the above reasons, the Court also observed that Plaintiff had failed to satisfy the requirement of demonstrating she had suffered actual damages as a result of the alleged RESPA violations.  Interestingly, the Court noted that while Plaintiff had claimed she suffered from “stress” due to the situation, she had never produced evidence that she had “sought medical care or incurred any costs associated with dealing with that stress,” thereby indicating that although insufficiently established, she may have been capable of pursuing these types of damages.

The Court thereafter granted summary judgment in Flagstar’s favor dismissing Plaintiff’s claims.

Takeaways

This decision reaffirms that loan servicers are obligated to respond to QWRs in a timely manner, but demonstrates that a borrower’s belief regarding the adequacy of the response provided has no bearing on the ultimate determination of the sufficiency or insufficiency of the response.  It also demonstrates that a borrower may be capable of pursuing damages that are non-economic in nature under RESPA, contingent upon the provision of adequate proofs.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.

New Jersey Regulatory Update, Part II

Posted on by Jessica Civetta

Part II of our Update continues to address various regulations in New Jersey that impact healthcare.

Standards for Community Residences for Persons with Head Injuries

On January 3, 2023, the New Jersey Department of Health ("DOH") published 55 N.J.R. 58(a), which sets forth amendments to the rules for minimum requirements for community residences for persons with head injuries that are licensed by the DOH. The final rule adopts amendments to N.J.A.C. 10:44C. The amendments remove the terms “supported living programs” and replace them with “community care residences,” since these are what will be offered in the future in a licensed setting. The other amendments include, among other things, changes regarding criminal background checks, individual requirements included in an application for licensure, time frame for application completion, requirements for initial licensure and renewal of a license, staff qualifications, orientation and training, advocacy and rights, rehabilitation procedures, health and safety, and general home requirements.

The full text of the final rule may be accessed here.

Radiologist Assistant Performing Procedures

On January 3, 2023, the State Board of Medical Examiners published 55 N.J.R. 67(a), which adopted a new rule N.J.A.C. 13:35-6.20A. The rule sets forth the procedures for licensed radiologist assistants, and the level of supervision licensed radiologists must provide, when radiologist assistants are performing certain procedures and other related tasks. The rule requires, among other things, that prior to a licensed radiologist directing a radiologist assistant to perform a task, a licensed radiologist or other licensed physician in the practice must certify and document the radiologist assistant's training and ability to perform the task. The rule also requires that the supervising licensed radiologist: 1) be responsible for choosing and ordering pharmaceuticals and contrast materials; 2) be certified in Advanced Cardiovascular Life Support (along with the radiologist assistant); and 3) if a patient is a minor, have experience performing the procedures on such patients. The rule lists specific procedures and post-imaging activities which a radiologist assistant may perform under general supervision and direct supervision of a licensed radiologist.

The full text of the final rule may be accessed here.

Expedited Partner Therapy

On January 17, 2023, the New Jersey DOH, in consultation with the Public Health Council, published 55 N.J.R. 108(a), which adopted a new rule, N.J.A.C. 8:67. The new rule, proposed by the Division of HIV, STD, and TB Services, implements expedited partner therapy ("EPT") in New Jersey, in accordance with P.L. 2019, c. 336, an act concerning treatment of sexually transmitted diseases and supplementing Title 26 of the Revised Statutes (Act), codified at N.J.S.A. 26:4-48.2 through 48.4.

The rule applies to health care professionals in the New Jersey who elect to provide EPT. EPT is a harm reduction practice by which a health care professional provides treatment to recent sexual partners of a patient the professional diagnosed with a sexually transmitted infection ("STI"), without first conducting an examination of those recent partners. A health care professional provides EPT by issuing a prescription for appropriate antibiotic drugs in each of the patient's partners' names, if known, or, if the patient does not know or declines to provide the partners' names, then in the name of "expedited partner therapy." N.J.S.A. 26:4-48.2. In the alternative, the health care professional can dispense medication to the patient to give to the patient's partners for their use. N.J.S.A. 26:4-48.2. EPT enables the partners to immediately begin treatment by having the prescriptions filled, without having to wait for appointments with the partners' own healthcare professionals. The new rule establishes informational materials and guidelines for the safe and effective provision of EPT by health care professionals, which includes incorporation of CDC STI Treatment Guidelines. Additionally the rule specifies which STIs EPT is indicated for.

The full text of the final rule may be accessed here.

Limitations on Prescribing, Administering, or Dispensing of Controlled Dangerous Substances

On January 17, 2023, the State Board of Medical Examiners published 55 N.J.R. 110(b), which adopted amendments to N.J.A.C. 13:35-7.6. The amendments set forth limitations on prescribing, administering, or dispensing of controlled dangerous substances, and special requirements for management of acute and chronic pain by physicians, podiatrists, physician assistants, and certified nurse midwives. The amendments aim to ensure that practitioners identify in advance psychological co-morbidities that affect prescribing and overall treatment decisions and assess whether continued opioid therapy is working to address the patient's treatment needs. The changes are also meant to ensure that practitioners have a clear understanding of the patient's history from the outset, assess a patient's predilection for addiction and develop treatment objectives accordingly, and continually evaluate whether opioid therapy is providing clinically meaningful improvement in pain and function. The amendments, among other things, add requirements for practitioners when evaluating the patients and obtaining and reviewing patient medical records, as well as discussing the treatment plan with the patient and prescribing an opioid antidote with a controlled dangerous substance if certain conditions are present.

The full text of the final rule may be accessed here.

Community Residences for Individuals with Developmental Disabilities

On February 6, 2023, the New Jersey Department of Human Services ("DHS") published 55 N.J.R. 171(a), which adopted amendments and repealed and added new rules to N.J.A.C. 10:44A. The adopted rules set minimum requirements for licensed community residences for individuals with developmental disabilities in the areas of general provisions and licensing procedures, organization and administration, advocacy and rights, service delivery/habitation, health and safety, and fire safety and physical environment. The adoptions are meant to comply with the DHS’ Fee-for-Service initiative, the Centers for Medicare and Medicaid Services' guidelines for funding, Danielle's Law, P.L. 2003, c. 191 (N.J.S.A. 30:6D-5.1--5.6), and Stephen Komninos' Law, P.L. 2017, c. 238 (N.J.S.A. 30:6D-9.1 et seq., 30:6D-5.4, and 30:6D-74 et seq.).

The full text of the final rule may be accessed here.

Curriculum for 300-Hour Course for Persons Holding a New Jersey State Barbering License Issued After 1985 Who Wish to Obtain a Cosmetology and Hairstyling License

On February 6, 2023, the State Board of Cosmetology and Hairstyling published 55 N.J.R. 200(a), which adopted amendments to N.J.A.C. 13:28-6.28A. The rule now requires that a makeup application be included in the 300-hour course for barbers who were licensed by the Board after 1985, since makeup application is within the scope of practice for that license. Thus, the time distribution table for instructional units and clinical practice for a barbering license now shows that a total of 60 hours of makeup application is required.

The full text of the final rule may be accessed here.

Online Examination for Psychologists

On February 6, 2023, the State Board of Psychological Examiners published 55 N.J.R. 200(b), which adopted amendments to N.J.A.C. 13:42. The amendments focus on an online jurisprudent examination and continuing education requirements. To obtain a license as a psychologist in New Jersey, the jurisprudence examination, which an applicant must pass, may be completed online, at any time. Thus, applicants do not need to wait for an in-person examination. Additionally, the amendments amend N.J.A.C. 13:42-10.21 to require licensees to complete the jurisprudence online examination as part of continuing education requirements. Note that the written examination for Professional Practice in Psychology must be passed before an applicant may take the online jurisprudence examination, pursuant to N.J.A.C. 13:42-5.1(b).

The full text of the final rule may be accessed here.

Standards for Licensure of Adult Family Care Caregivers and Sponsor Agencies

On March 6, 2023, the New Jersey DOH published 55 N.J.R. 377(a), which adopted new rules at N.J.A.C. 8:43B, Standards for Licensure of Adult Family Care Caregivers and Sponsor Agencies. The rules were promulgated to effectuate the purposes of the New Jersey Adult Family Care Act. The rules establish licensing procedures for adult family care caregivers (“AFC”) and sponsor agencies including actions required for initial licensure, renewal, and surrender of licenses, as well as criminal background checks and fingerprinting procedures. The rules apply to applicants for licensure as AFC caregivers and AFC sponsor agencies, licensed AFC caregivers who operate AFC homes, and licensed AFC sponsor agencies.

The full text of the final rule may be accessed here.

New Jersey Regulatory Update, Part I

Posted on by Christie Bowness

As we wind down the summer, we reflect on the past year regarding various regulations in New Jersey that impact healthcare and have become final. In this Part I, we identify eight such regulations.

Home Care Services Rules

On September 6, 2022, the New Jersey Department of Health and Human Services ("HHS") published 54 N.J.R. 1721(a), which adopted new rules with amendments to N.J.A.C. 10:60. The published regulation includes changes regarding the inclusion of Practitioner Orders for Life-Sustaining Treatment ("POLST") forms in N.J.A.C. 10:60-1.6, adding “practitioner” to Section 10:60-2.1(d)5i since other providers besides physicians can prescribe home health services, and requiring only the most recent nursing assessment to be retained in clinical records under N.J.A.C. 10:60-3.6(a)2i.

The full text of the final rule with comments and responses may be accessed here.

Abandonment of Application for Licensure or Certification of Social Workers

On September 19, 2022, the State Board of Social Work Examiners (“Board”) published 54 N.J.R. 1818(a), which adopted a new regulation, N.J.A.C. 13:44G-4.7. There were no comments received, thus the regulation was adopted without change. The regulation sets forth the circumstances where an application for a license or certification submitted to the Board will be deemed abandoned. Under N.J.A.C. 13:44G-4.7(c), an individual whose application is closed pursuant to N.J.A.C. 13:44G-4.7(a) may reapply for licensure.

The full text of the final rule may be accessed here.

Continuous Quality Improvement Program for Pharmacies

On October 3, 2022, the State Board of Pharmacy adopted 54 N.J.R. 1916(a), which adds requirements for a pharmacy’s continuous quality improvement ("CQI") program. Specifically, a pharmacy’s CQI program must require the pharmacy permit holder to document that pharmacy personnel who did not attend a CQI meeting received the CQI meeting minutes and that the pharmacy permit holder has communicated any changes to policies and procedures resulting from a CQI meeting with those personnel affected by such changes.

The full text of the final rule may be accessed here.

Board of Respiratory Care Rules

Under 54 N.J.R. 1917(a), the Board of Respiratory Care readopted N.J.A.C. 13:44F with amendments. No comments were received and the regulation was readopted without change. The amendments to 13:44F-3.3 removed restrictions in subsection (c), which prohibited a licensee from authorizing an assistant to engage in patient care. The amendments under 13:44F-8.1 lowered the duplicate license fee from $50.00 to $25.00. Additionally, 54 N.J.R. 1917(a) added the requirement to 13:44F-8.5 that licensees provide the State Board of Respiratory Care with their business address, as opposed to the former general change in “address” requirement. Lastly, 54 N.J.R. 1917(a) amended 13:44F-10.2 to explicitly list each examination for which 10 continuing education credits are required to be completed by covered licensees.

The full text of the final rule may be accessed here.

License and Continuing Education Requirements for Psychologists

On November 7, 2022, the State Board of Psychological Examiners published 54 N.J.R. 2091(a), a final rule that adopted amendments to N.J.A.C. 13:42-4.1. There were no comments and the final rule was adopted without change. The amendments are meant to effectuate the provisions of P.L. 2020, c. 134. The amendments removed the provision which required that an applicant complete at least one year of professional experience subsequent to receiving a doctoral degree. The amendments also recognize that applicants may complete the required two years of professional experience under section (a) prior to receiving a doctoral degree.

The full text of the final rule may be accessed here.

Home and Community-Based Services Provided in Assisted Living Residences, Comprehensive Personal Care Homes, and Assisted Living Programs

On December 19, 2022, the New Jersey Department of Human Services published 54 N.J.R. 2389(a), a final rule which adopted new rules, N.J.A.C. 10:53. Chapter 53 is titled “Home and Community-Based Services Provided in Assisted Living Residences, Comprehensive Personal Care Homes, and Assisted Living Programs.” As stated in N.J.A.C. 10:53-1.2, the purpose of the chapter is to implement waiver provisions for services provided in assisted living residences, comprehensive personal care homes, and assisted living programs to Medicaid/NJ FamilyCare beneficiaries, which supplement the licensing requirements included at N.J.A.C. 8:36. The new rules were adopted with non-substantial changes from the proposed rule. The rules set forth residential setting requirements and required notices.

The full text of the final rule may be accessed here.

Programs of Assertive Community Treatment Rules

On December 19, 2022, the New Jersey Department of Health ("DOH") published 54 N.J.R. 2391(a), which provided notice of the readoption of the rules at N.J.A.C. 10:37J, Programs of Assertive Community Treatment ("PACT"), which were scheduled to expire on January 25, 2023. The final rule readopts the regulation in addition to making technical changes which reflect the recodification and readoption of N.J.A.C. 10:190, Licensure of Mental Health Programs, as N.J.A.C. 8:121, licensing of such programs by the DOH pursuant to Reorganization Plans Nos. 001-2017 and 001-2018, and updates references to the Division of Mental Health and Addiction Services from the Division of Mental Health Services.

Subchapter 2 of N.J.A.C. 10:37J, Program Operation, specifies requirements regarding written policies and procedures, licensing, eligibility, program intensity, services to be provided and service coordination, assessment, recovery planning, progress notes, terminations and discharges, staff requirements and training, PACT team office space, records, and continuous quality improvement activities. The DOH noted that further rulemaking may be necessary to update these rules to reflect current practices.

The full text of the final rule may be accessed here.

Manual of Standards for Community Care Residences

On January 3, 2023, the New Jersey DOH published 55 N.J.R. 52(b), which set forth the rules to establish minimum requirements for the provision of residential services to individuals with developmental disabilities residing in community care residences. The final rule adopts amendments to subchapters of N.J.A.C. 10:44B. The amendments, among other things, redefine "abuse" and "neglect" to reflect the definitions in the Central Registry Statute (N.J.S.A. 30:4D-77), and redefines other terms as well. Under subsection 10:44B-1.4, any references to regional offices, the Division, and development agencies are replaced with the “placing agency,” which is now the entity that handles the pre-inspection process. The other amendments include, among other things, changes to requirements for first aid and cardiopulmonary resuscitation training, drug testing, correction plans, lease agreements, and individuals’ personal rights and funds.

The full text of the final rule may be accessed here.

Non-Borrower Fraud Allegations Insufficient to Waive Debt Tender Requirement in Quiet Title Action

Posted on by Jessica Civetta

In its recent opinion issued in Ha v. Bank of N.Y. Mellon, No. H050054, 2023 Cal. App. Unpub. LEXIS 3145 (May 31, 2023), the California Court of Appeal, Sixth Appellate District (“the Court”) held that in a quiet title action brought against a secured lender, it was necessary for the plaintiff to allege tender of any outstanding debt on the loan, regardless of whether they were a party to that loan, and also reaffirmed that non-parties to a loan have no standing to attack its validity absent a demonstration of assignment or assumption.

Background

On January 3, 2006, Plaintiff Minhtam Ha (“Plaintiff”) and her husband sold their San Jose residence (“the Property”) to Dzung Pham (“Pham”), who obtained an $840,000 mortgage loan from Mylor Financial Group, Inc. (“Mylor”) to fund the purchase.  Pham’s loan was secured by a deed of trust on the Property which contained a power of sale if Pham were to default.  Unbeknownst to Pham at the time, Pham’s mortgage broker had made misrepresentations about the loan documents, which contained material changes to the terms and conditions of Pham’s financing.

In October 2009, Pham sold the Property back to Plaintiff for $505,000, with their purchase agreement requiring that Pham clear the Property of all liens.  After Pham’s execution of a grant deed transferring the Property, Plaintiff discovered that the Mylor lien still existed.  Pham stated that he had no knowledge of this lien and that he would immediately resolve it, but was unable to do so and subsequently defaulted on the Mylor loan.  On March 17, 2010, a substitution of trustee and assignment of the deed of trust to Defendant Bank of New York Mellon (“Defendant”) was recorded, followed by a December 22, 2015 notice of default, a property sale, and Defendant’s eventual March 2, 2018 purchase of the property at the trustee’s sale for $949,450.  Post-purchase, Defendant moved to evict Plaintiff from the property.

While these events were ongoing, Plaintiff brought a quiet title action seeking to establish her ownership and possession of the Property, contending that the original Mylor loan had improperly involved fraud committed by both the lender and its broker.  However, the trial court dismissed Plaintiff’s action – even after multiple amendment attempts – holding that Plaintiff was unable to satisfy the requirement of demonstrating tender.  Specifically, the trial court found that if the underlying Mylor loan was void for fraud, then Pham could have no interest in the subject property, as his interest was only created via Mylor’s loan tender.

Appeal

Plaintiff appealed before the Court, arguing that the tender rule was inapplicable.  The Court ultimately affirmed the dismissal, first explaining that the tender rule requires a borrower to allege tender of the outstanding debt on a mortgage or deed of trust before seeking to quiet title against a secured lender.

Plaintiff argued that this rule was inapplicable because Plaintiff and her husband did not have a loan with Defendant and were thus not borrowers.  However, the Court rejected this contention, citing Burns v. Hiatt, 87 P. 196, 197 (Cal. 1906) and holding that the tender requirement applies even if the party bringing suit was not a party to the original loan.  In Plaintiff’s case, the Court observed that Pham had failed to clear the lien on the property when Plaintiff and her husband had purchased it back from him.  Defendant’s subsequent proceeding to enforce the lien, regardless of whether Plaintiff was a party to it, did not extinguish the lien, as Defendant – as assignee of the loan – was entitled to enforce the debt owed on the title after acquiring it at the trustee’s sale. Thus, the only way for Plaintiff to quiet the title was to tender the loan.

Plaintiff also argued that she was not required to allege tender because her action attacked the validity of the underlying debt. However, this claim was dismissed for a lack of standing to assert fraud or attack the validity of the loan, as she was not a party to it, and had failed to allege any facts showing an assignment or assumption of the loan to her.

Finally, the Court also determined that Plaintiff was unable to establish that it would be inequitable to require tender in this case. The Court reasoned that if Pham’s loan from Mylor was void due to fraud, “then either Pham did not have an interest in the subject property, or Pham would only have an interest through the tender of the amount received” by Mylor. “As Plaintiff’s interest is dependent on Pham’s interest, it is not inequitable to require tender” when Plaintiff acknowledged the possibility of liens and required Pham to remove those liens in the purchase agreement.

Takeaways

This decision underscores the significance of the requirement to allege tender of debt in an action to quiet title. In addition, it highlights the importance of understanding one’s responsibility regarding the tender of debt prior to purchasing property. By failing to do so, Plaintiff and her husband were unsuccessful in establishing that they were the rightful owners of the property and should remain in possession of their residence.

This article was prepared by Riker Danzig summer associate Samantha Fitzgerald, a 2024 J.D. Candidate at the University of Maryland Francis King Carey School of Land and Staff Editor of the Maryland Law Review.  For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, James Mazewski at jmazewski@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.

Washington District Court Decides Issues of First Impression Regarding Fiduciary Duties

Posted on by Jessica Civetta

On June 23, 2023, the United States District Court for the Western District of Washington (“the Court”) issued its opinion in the matter of First American Title Insurance Company v. Northwest Title Company, LLC, No. 2:21-cv-01057-JHC, 2023 U.S. Dist. LEXIS 108947 (W.D. Wash. June 23, 2023), deciding issues of first impression concerning the general application of fiduciary duties in Washington State, the accrual of breach of fiduciary duty claims, and the interplay of these claims and Washington’s three-year statute of limitations.

Background

Between 2009 and 2016, Plaintiff First American Title Insurance Company (“First American”) and Defendant Northwest Title Company LLC (“Northwest Title”) entered into various agency agreements under which Northwest Title was to act as First American’s agent in multiple states, in which capacity it would issue policies and collect premiums on First American’s behalf.  At all times, Northwest Title used computer software to track the premiums it owed to First American; however, sometime in 2012, it transitioned to new software which inadvertently created a backlog of premiums collected but never remitted.

In 2019, First American audited Northwest Title, as permitted by the parties’ agency agreements.  While Northwest Title initially complied with First American’s audit and generated spreadsheets of all outstanding premiums owed from 2010 to 2019, it later refused to comply with follow-up requests for additional records, and in April 2020, the parties agreed to terminate their agency relationship via the execution of mutual termination agreements.  Subsequently, Northwest Title ceased complying with the audit entirely, informing First American that it “no longer planned to audit and remit unpaid premiums on policies more than six years old.”

In August 2021, First American filed suit for, among other causes of action, breach of fiduciary duty and conversion, seeking to recover all unpaid premiums owed by Northwest Title.  Following discovery First American later moved for summary judgment, seeking a “ruling that [Northwest Title] breached its fiduciary duty by refusing to remit all unpaid premiums,” while Northwest Title contended in defense that First American’s claim ran afoul of Washington’s statute of limitations.

Summary Judgment Ruling and Adoption of Fiduciary Duty Standard

In ruling on the motion, the Court began by confirming that the agency agreements did impose a fiduciary duty upon Northwest Title, as they required it to “safely maintain and preserve all property” including premiums “ entrusted to [it].”  However, the Court next observed that Washington’s statutory scheme imposed a three-year statute of limitations on all breach of fiduciary duty claims.  In reliance on this statute, Northwest Title contended that “individual claims for breach of fiduciary duty would have accrued after each failure to remit” and that all of First American’s claims “arising out of premiums more than three years old [should] be barred.”  Conversely, First American argued that Northwest Title’s fiduciary duty was ongoing, continuous, and persistent, and accordingly, that breach of this duty did not occur until Northwest Title informed First American it would not remit unpaid premiums on policies older than six years, thereby repudiating its duty.  Under First American’s interpretation all of its claims were viable and none would be barred by Washington’s statute of limitations.

The Court ultimately agreed with First American’s proposed interpretation, observing that this was an issue of first impression as Washington courts had never “addressed whether a fiduciary has an ongoing duty in this context.”  In adopting the ongoing duty interpretation, the Court opined that it was “persuaded by the logic of various other state and federal district courts” – including Massachusetts, Texas, Delaware, California, and others – which had each interpreted and applied their respective fiduciary duties in the same manner.  Thus, holding in lockstep with these outside courts, the Court held that Washington fiduciaries owe a continuous and ongoing duty and – importantly – that claims for breach of this duty do not accrue until the party to whom the duty is owed learns that a repudiation of the duty has occurred.

In accordance with this newly adopted standard, the Court held that because Northwest Title owed an ongoing fiduciary duty, First American’s claims did not accrue until it became aware that Northwest Title intended to repudiate its duty, which occurred upon Northwest Title advising First American that it would no longer pay backlogged premiums older than six years.  As to actual breach of this duty, the Court concluded that the elements of breach were met, as there was “no dispute” that Northwest Title had “stopped cooperating [with] the audit and failed to remit older unpaid premiums,” thereby breaching its fiduciary duty to remit premiums and injuring First American in the amount left unpaid.

Takeaways

This matter determined an issue of first impression and made clear that, going forward, Washington will treat fiduciary duties as a continuous ongoing duty.  Perhaps most importantly, this opinion also demonstrates that breaches of this duty will not occur on a piecemeal basis generating multiple individual claims, but will instead be treated as a single claim accruing only upon the plaintiff gaining knowledge that an express repudiation has occurred, thereby allowing for an expanded scope of potential recovery.

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