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In a recent case, the Mississippi Supreme Court was called upon to determine whether a mortgagor effectively reinstated a delinquent mortgage loan before a foreclosure sale. That is not a particularly unusual issue to be litigated. The unusual fact about the case was who was arguing against reinstatement. In a typical reinstatement case, a mortgagor claims to have reinstated a mortgage loan, and a mortgagee disputes that claim. In this case, Hobson v. Chase Home Finance, LLC, 2015 Miss. LEXIS 584 (Miss. December 10, 2015), both the mortgagor and the mortgagee were in agreement that the loan had been reinstated. It was the presumptive purchaser of the foreclosed property that argued otherwise.

In Hobson, Deborah Quimby received a mortgage loan to buy a house. Chase Home Finance, LLC, eventually took assignment of the deed of trust. After Quimby defaulted, the substitute trustee, Priority Services of Mississippi, held a foreclosure sale, and James Hobson, Jr. was the high bidder. Hobson paid the purchase price, and received a receipt containing a disclaimer that the sale could be withdrawn based on a timely reinstatement. Several days later, Hobson's check was returned to him, presumably by the trustee, and Hobson was informed that Quimby had reinstated her loan shortly before the sale.

Hobson sued Chase and Priority for breach of contract, arguing that he was entitled to the difference between the appraisal price of the property and his foreclosure bid. The trial court granted judgment to Hobson, and the defendants appealed. The Mississippi Supreme Court, in Chase Home Fin., LLC, v. Hobson, 81 So. 3d 1097 (Miss. 2012), ruled that if Quimby did reinstate the loan prior to the sale, the foreclosure sale was void. The high court then remanded the case for the trial court to determine if Quimby actually reinstated prior to the sale.

On remand, the parties agreed that Quimby paid the past due amounts, but she did not pay a $912.76 foreclosure fee because Chase agreed to "reverse" that fee. The foreclosure fee consisted of accrued costs, attorneys' fees, and trustees' fees. The trial court granted judgment to Chase and Priority, finding that Quimby had reinstated the loan, so the sale of the property was a nullity. Hobson appealed, arguing that Quimby did not effectively reinstate the loan under Mississippi's reinstatement statute, Miss. Code Ann. § 89-1-59, because she did not pay the foreclosure fee. Section 89-1-59 provides that a debtor may stop a foreclosure sale at any time before the sale "by paying the amount of the note or installment then due or past due by its terms, with all accrued costs, attorneys' fees and trustees' fees on the amount actually past due by the terms of such instrument or lien …" Miss. Code. Ann. § 89-1-59.

The Mississippi Supreme Court ruled in favor of Chase and Priority. As an initial matter, the high court found that Hobson had standing to challenge Quimby's alleged failure to reinstate under Section 89-1-59. However, the high court then found that reinstatement did occur. The high court noted that in order to reinstate, the borrower must pay all sums due, including accrued costs, attorneys' fees, and trustees' fees. The statute refers to the "terms of [the] instrument" in order to determine those fees. Quimby's deed of trust provided that the "lender shall be entitled to collect" costs and fees. The high court found that Section 89-1-59 requires nothing more than compliance with the terms of the security instrument, and the parties to a security instrument may waive a right that they are entitled to. While Chase could have demanded the foreclosure fee, it instead waived the provision of the deed of trust authorizing the fee. As a result, summary judgment was proper because Quimby complied with the statutory requirements for reinstating the loan before foreclosure. The high court also noted that Hobson had clear notice that reinstatement was a possibility.

The high court's interpretation of the reinstatement statute was reasonable, and the holding in the case was a good result for Chase.

Clayton C. Swears is a partner in the Hanover, Maryland office of Hudson Cook, LLP. Clay can be reached at 410-865-5419 or by email at cswears@hudco.com.