Virginia Lawyers Weekly VA Lawyers Weekly
Even though the circuit court misconstrued a notice of default provision in a deed of trust as being optional rather than mandatory, there was no reversible error because the lender, in fact, provided the borrower with a notice of default.
Background
Anchor Loans loaned Entrepreneur $104,500 to buy residential property. Alex Battle, Entrepreneur’s president, signed the promissory note and a deed of trust, using the property as security. Sherry Battle-Edmonds is the registered agent, CEO, and CFO of Entrepreneur.
“Paragraph 18 [in the deed of trust] … addressed Anchor Assets’ option, in the event of default, to accelerate the loan and instruct the trustee to foreclose on the property:
“‘Upon the occurrence of any default under this Deed of Trust, Lender may, at its option, declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and of written Notice of Default and of election to cause to be sold said property, which notice Trustee shall cause to be filed for record.’”
Entrepreneur defaulted on the loan. Anchor Loan provided Entrepreneur with notice of default and provided several opportunities to cure. Entrepreneur provided several partial payments and eventually stopped making any payments.
Anchor directed CAS, the trustee, to send a foreclosure notice to Entrepreneur. Entrepreneur admitted that it received the notice. CAS conducted a foreclosure sale. Entrepreneur sued. The circuit court granted Anchor Loan summary judgment.
Notice
“Entrepreneur first challenges the court’s conclusion that the deed of trust did not require Anchor Assets to provide a written notice of default, but merely allowed Anchor Assets to give this notice ‘at its option.’ Entrepreneur contends that although Anchor Assets had the option to accelerate the loan and foreclose, ‘exercise of [that] option required such notice.’ …
“Anchor Assets’ obligation to send a notice of default to Entrepreneur may be reasonably inferred from Paragraph 18. Although Paragraph 18 provided that Anchor Assets ‘at its option’ could accelerate the loan in the event of Entrepreneur’s default, once Anchor Assets in fact exercised this option, it had to perform specific actions to authorize the trustee’s foreclosure sale.
“These actions included ‘delivery to trustee … of written Notice of Default.” Delivering this document to the trustee implies first sending it to Entrepreneur. To construe these actions as optional, simply because Anchor Assets’ decision to accelerate the loan was itself optional, treats the disputed language in Paragraph 18 as meaningless. …
“Additionally, although the promissory note included language purporting to waive Entrepreneur’s right to notice of default and amounts due, the notice requirement in Paragraph 18 remained effective because all loan instruments ‘will be construed together to determine the intent of the parties.’ …
“In fact, it is undisputed that Anchor Assets did send Entrepreneur a written ‘NOTICE OF DEFAULT AND INTENT TO ACCELERATE’ on May 11, 2018. Entrepreneur admitted that both Battle and Battle-Edmonds received it.
“The notice advised that Entrepreneur could cure the default and reinstate the loan by paying a certain amount within ten days. Having received that notice, Entrepreneur knew Anchor Assets would accelerate the balance due if Entrepreneur failed to cure its default.
“Anchor Assets sent several follow-up emails, often in response to Entrepreneur’s partial payments that were never enough to reinstate the loan. Anchor Assets kept the partial payments in a trust account and consistently advised Entrepreneur that the foreclosure process would proceed.
“Paragraph 18 required Anchor Assets to send the notice of default. Although the court misconstrued this provision as optional, we find no reversible error because Anchor Assets in fact complied with the deed of trust by sending the notice as required.
Recording
“Despite Anchor Assets foreclosing without CAS’s compliance with the recordation requirement, Entrepreneur failed to show that it suffered any harm from that breach of the deed of trust. …
“Instead, Entrepreneur only argued that, if it had received notice that the foreclosure sale was intended for August 14, 2018, it would have taken steps to cure the default. There are at least three problems with that argument.
“First, recordation of the notice of default would not have informed Entrepreneur of the date of the foreclosure sale. The May 11, 2018 notice of default that should have been recorded said nothing about the time, date, or location of the foreclosure sale. That information came from CAS in its July 25, 2018 foreclosure notice to Entrepreneur.
“Second, Entrepreneur is charged with knowledge of the contents of the July 25 foreclosure notice because CAS sent it in compliance with Code § 55-59.1(A), the statute in effect at the time. That statute required the trustee to ‘give written notice of the time, date[,] and place of any proposed sale in execution of a deed of trust’ by mail to the property owner’s ‘last known address as such owner and address appear in the records of the party secured.’ …
“Third, the undisputed facts establish that, despite receiving the notice of default and the notice of foreclosure sale, Entrepreneur did not cure the default. Entrepreneur failed to show that recordation of the notice of default would have made any difference.
“It only represented that Battle-Edmonds would have refinanced her personal home or obtained some other loan if Entrepreneur knew the foreclosure date.
“But Entrepreneur admitted that it received the notice of the foreclosure date, not to mention ample notice of the default and opportunity to cure, yet it never came into compliance. …
“[W]e find that the court did not err in granting summary judgment for Anchor Assets and affirm the judgment below.”
Entrepreneur Dream Team v. Anchor Assets, LLC, et al., Record No. 0546-22-1, March 7, 2023. CAV (unpublished opinion) (O’Brien). From the Circuit Court of the City of Norfolk (Hall). Henry W. McLaughlin for appellant. David M. Zobel for appellee. VLW 023-7-101, 20 pp.
