Claims About A Flawed Title Accrue Once There Is Reasonable Notice Of An Injury, Not When Title Was Recorded

After the snafu CitiMortgage created in White v. CitiMortgage, Inc., No. 16-2599 (8th Cir. June 16, 2017), the Eighth Circuit (Opinion by Judge Riley, joined by Loken, J. and Benton, J.) wasn't much in the mood to find the plaintiff's claims barred by Missouri’s statute of limitations. In 2008, White fell into default on his home mortgage, which was held by Freddie Mac and serviced by CitiMortgage. After the foreclosure sale, and after Freddie Mac recorded title in its name, White reached a deal with CitiMortgage to modify the mortgage and to reclaim title to his house. Apparently both Freddie Mac and White believed CitiMortgage would take whatever steps were necessary to ensure title was actually in White's name. Unbeknownst to them, though, that never happened.

So White was stunned when his real estate agent (he was putting the house up for sale) found out in the fall of 2013 that he didn't have a valid title to his house even though by that point he'd paid CitiMortgage some $90,000. In early 2014, White sued CitiMortgage claiming the lender had violated Missouri's Merchandising Practices Act (“MMPA”) and made fraudulent and tortious misrepresentations.

After Freddie Mac intervened and removed the case to federal court, CitiMortgage moved for summary judgment arguing that White’s claims were barred by Missouri's five-year statute of limitations. The District Court agreed, finding that White’s claims accrued in 2008 when he could have learned that CitiMortgage had failed to ensure title was recorded in his name.

The Eighth Circuit reversed. Judge Riley’s opinion concedes that it was possible for White to have discovered his injury in late 2008. But that is not what the statute of limitations (R.S.Mo. Sec. 516.100) means by “capable of ascertainment” in Missouri. Rather, under Missouri's more "practical approach," a claim doesn’t accrue until “a reasonable person would have been put on notice that an injury and substantial damages may have occurred.” Nothing in the record, according to the Court, should have put White on notice that there was an issue with his title until he decided to sell his home.

Judge Riley’s opinion also touches on the scope of the MMPA. There has been some debate in Missouri about whether a lender’s alleged deception related to a loan modification is “in connection with a sale,” which is an element in all MMPA’s claims. See Watson v. Wells Fargo Home Mortg., Inc., 438 S.W.3d 404, 408 (Mo. 2014) (finding that conduct related to loan modification as opposed to the original sale, servicing, or collection of the loan falls outside the MMPA). See also Conway v. CitiMortgage, Inc., 438 S.W.3d 410, 416 (Mo. 2014); Wivell v. Wells Fargo Bank, N.A., 773 F.3d 887, 889 (8th Cir. 2014). In White, the claims were that CitiMortgage mislead the borrower about the affect of the lump-sum payment he made to retain possession of the house after the foreclosure sale. These claims, wrote Judge Riley, dealt with collection of the original loan, not modification, and were thus cognizable under the MMPA.

Practice Tip If possible, the complaint or petition should link the MMPA-offending conduct to the original loan, its servicing, or efforts to collect under it. Claims that are simply couched as arising out of the lender's conduct during or after a loan modification risk dismissal.