Denial of Mortgagee's Right to Foreclose; Erroneous Filings; Lost Instruments

Paul H. Cherry v. Chase Manhattan Mortgage Group

190 F.Supp.2d 1330 (Fed. Dist. Ct. FL 2002)

Facts:Chase held a mortgage on Cherry's house on which Cherry made timely payments until he received a letter from Chase acknowledging his satisfaction of the mortgage. Cherry notified Chase of the error, but nevertheless received a check (dated August 15, 2000) as an escrow refund on the mortgage, and it recorded a Satisfaction of Mortgage into the county public records (October 19, 2000). In November Chase sent Cherry a "Loan Reactivation" letter with a new loan number upon which to make the payments; meanwhile, Cherry placed his mortgage payments into a bank account, which was put into an escrow account maintained by his attorney; the payments were not tendered to Chase. Consequently, Chase sent Cherry an acceleration warning on November 17, 2000, and again on March 16, 2001. Chase notified the credit bureaus as to Cherry's default status and moved for foreclosure. In a letter addressed to Cherry's attorney, dated April 24, 2001, Chase's attorney advised Cherry to make the mortgage payments to Chase. Chase recorded a "cancellation of satisfaction of mortgage" ("vacatur") in with the ounty public records on May 3, 2001. Chase was unable to locate the original note, dated October 15, 1997, and deemed it lost.

Procedure:Paul Cherry filed a complaint suing Chase for Fair Debt Collection Practices Act violations and slander of credit; Chase counter-claimed for foreclosure and reestablishment of the lost note.

Issue:Is Case allowed to foreclose on the mortgage?Should the acceleration of payments be confirmed as Chase requests?

Held:No, Chase cannot foreclose; request to reestablish the note and mortgage is granted.Cherry will tender all previously escrowed mortgage payments to the Court, unless the parties agree otherwise, within ten days of this order and shall henceforth, tender future monthly payments to Chase as set out in the reestablished note and mortgage.

No, Chase's acceleration of payments is not allowed: mortgage re-instated.

Reason:Equity will grant relief to one who, because of a mistake, released a mortgage, unless such a vacatur prejudices the rights of third parties. No such parties appear here. A mortgage foreclosure may be denied where the mortgagor (Cherry) attempted to make payments but was thwarted by misunderstanding, excusable neglect, and the action of the mortgagee. Cherry did attempt to make payments, and Chase's own conduct contributed to the confusion.

Case Questions

1. When Chase figured out that it had issued a Satisfaction of Mortgage erroneously, what did it file to rectify the error?

2. Cherry had not made any mortgage payments between the time Chase sent the erroneous Satisfaction of Mortgage notice to him and the time of the court's decision in this case. The court listed five circumstances in which a mortgagee (Chase here) might be denied the right to foreclose on a delinquent account: which one applied here? The court said Chase had engaged in "an apparent obfuscation of the case law before the court"? What obfuscation did it engage in?

3. What did Cherry do with the mortgage payments after Chase erroneously told him the mortgage was satisfied? What did the court say he should have done with the payments?