St. Louis Record

Monday, July 15, 2019

Clinton County homeowners survive mortgage-foreclosure appeal, case returning to trial jury

By Sam Knef | Mar 5, 2017

JEFFERSON CITY, Mo. — A Clinton County couple has prevailed at the Missouri Supreme Court in a mortgage foreclosure, but their case will return to a jury at the trial court level on the question of damages.

In an opinion issued Feb. 28, the high court found that a Clinton County judge was correct in sanctioning Wells Fargo and Freddie Mac for discovery violations and that they wrongfully foreclosed on the home belonging to David and Crystal Holm.

But, because Wells Fargo had a constitutional right to jury which had been denied at the Clinton County court, the Supreme Court reversed awards of $2,959,123 in punitive damages, $200,000 for emotional distress, and $95,912.30 in compensatory damages and remanded the case for a new trial on the Holms' damages for wrongful foreclosure.

According to court documents, the case arises out of a 2008 wrongful-foreclosure case against Wells Fargo and a quiet title action against Federal Home Loan Mortgage Corp. — Freddie Mac — which had taken title to the Holms' house following a foreclosure sale.

According to information in the opinion, discovery disputes between the parties arose during pretrial proceedings that required the trial court to compel the mortgage companies to produce documents and witnesses for deposition.

Because of their "obstructive discovery tactics," the mortgage companies had their pleadings struck by the trial-court judge and and were prevented from the following: giving evidence at trial, objecting to the Holms' evidence and cross-examining any of the Holms' witnesses, the order stated.

After the sanctions order was entered, the plaintiffs waived their right to a jury trial. The mortgage companies on the day of the trial wanted the case be tried by a jury, but that request was denied by Circuit Judge R. Brent Elliott, who then held a bench trial.

Elliott had concluded that the mortgage companies had waived their right to a jury trial by failing to request a jury prior to the date of trial and by failing to submit jury instructions.

Following the bench trial, Elliott entered judgment in favor of the Holms on wrongful foreclosure, and he awarded damages and quieted title to the house in the Holms.

The order stated that the Holms had bought their home in 2001, and in 2008 it sustained storm damage. They were issued an insurance check for $4,467.74 made payable to them and Wells Fargo.

Wells Fargo, which would have had to co-sign the check, did not return it to the Holms. Instead, the company notified the Holms that it had accelerated their note and they would need to pay $6,608.93 to reinstate the note.

In a letter to Wells Fargo attorneys, the Holms acknowledged they had been behind on payments but stated they had a payment plan in place. They also contended that their loan was erroneously accelerated because a Wells Fargo agent saw them removing items from a storm-damaged barn and "mistakenly believed they were abandoning their home."

The order states that the Holms believed the insurance check was retained by Wells Fargo and their note would be brought current.

Wells Fargo did not release the insurance check to the plaintiffs or apply it toward their debt.

Leading up to a foreclosure sale, the Holms believed that if they paid a reinstatement amount of $10,306.94, the sale would not take place, according to the order.

However, it took place as scheduled with Freddie Mac purchasing the house at the foreclosure sale, which ultimately lead the Holms to file suit.

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Missouri Supreme Court