Nev. SC rules short-sale agreement is enforceable
CARSON CITY, Nev. (Legal Newsline) - The Nevada Supreme Court ruled last week in favor of a mortgage company in a foreclosure mediation matter.
The Court, in its April 26 decision, affirmed a Washoe County District Court order denying a petition for judicial review by homeowners Michael W. Jones and Analisa A. Jones.
In 2006, the Joneses bought a home in Sparks, outside of Reno, with a loan from Home Mortgage Direct Lenders.
Home Mortgage Direct Lenders assigned the note and deed of trust to SunTrust Mortgage Inc.
The Joneses later defaulted on their mortgage.
After receiving a notice of default and election to sell, they elected to participate in the state's Foreclosure Mediation Program, or FMP.
SunTrust's attorney, the Joneses' attorney and Michael Jones attended the mediation in person, and a representative for SunTrust participated by telephone.
At the mediation, SunTrust produced uncertified copies of the original deed of trust, the original note and the endorsement of the note to SunTrust. It also produced an automated valuation of the Joneses' home, which an online company generated without an in-person inspection of the home. SunTrust did not submit copies of any assignments.
Despite SunTrust's failure to produce any assignments or certified copies of the other documents, the parties resolved the pending foreclosure by agreeing to a short sale of the home, if accomplished within a specified time period.
SunTrust's attorney, the Joneses' attorney and Michael Jones all signed the mediator's statement agreeing to execute the terms of the short sale.
Following the mediation, SunTrust twice mailed a short-sale package to the Joneses, but they never returned the documents and, instead, filed a petition for judicial review in the district court.
They requested that the court impose sanctions against SunTrust because the company allegedly violated a section of state code and foreclosure mediation rules by failing to provide the required documents, and mediating in bad faith.
After conducting a hearing, the court denied the petition, finding that the Joneses entered into an enforceable short-sale agreement and therefore waived any claims under state code and the mediation rules.
The court's order allowed SunTrust to seek a certificate from the FMP to proceed with the foreclosure against the Joneses based on the terms of the short-sale agreement.
The Joneses appealed.
The state's high court sided with SunTrust, concluding that when an agreement is reached as a result of an FMP mediation, the parties sign the agreement and it otherwise comports with contract law principles, the agreement is enforceable.
The Court said "substantial evidence" supports the lower court's finding that the mediator's statement containing the written short-sale terms, signed by all parties, constitutes an enforceable settlement agreement.
"First, the short-sale agreement was supported by consideration. In exchange for the Joneses' agreement to a short sale, SunTrust agreed to suspend the foreclosure proceedings against the Joneses for two months. If the short sale was not accomplished within the two-month period, SunTrust could proceed with the foreclosure, but the Joneses maintained the right to conduct a short sale until the time of the foreclosure sale," Justice Mark Gibbons explained.
Gibbons said the terms of the agreement allowed SunTrust to seek a certificate and pursue foreclosure if the short sale was not accomplished within the specified time.
"The parties expressly agreed to the foreclosure in the event that the short sale did not take place. Therefore, the district court did not abuse its discretion by refusing to impose sanctions against SunTrust," the justice wrote.
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