Filed: February 3, 2015
Opinion by: Paul W. Grimm
Holding: A creditor waives an express condition precedent
to a loan modification when it signs and accepts payments under that
modification without satisfaction of the condition precedent.
Facts: Plaintiff purchased a home through a mortgage loan
and deed of trust, which she jointly executed with her husband (“Husband,”
collectively “Plaintiffs”). The deed of trust provided that Plaintiff
could modify the terms of the mortgage loan without Husband’s approval.
Plaintiff later applied to her mortgage servicer for a
permanent loan modification. The servicer returned a signed copy of the
modification agreement (the “Modification”), which stated that the modification
was effective as of February 1, 2010. Despite language in the
Modification requiring signatures from both mortgagors, Husband never
signed. Plaintiff made payments under the Modification, which the were accepted. The servicer later assigned the loan to Defendants.
Plaintiff continued to make payments pursuant to the Modification, which
Defendants rejected, insisting that the Modification was ineffective. Defendants
reported to credit agencies that Plaintiffs were in default and appointed
trustees to foreclose on the home.
Plaintiffs filed an action alleging, inter alia,
violations of the Maryland Consumer Debt Collection Act and the
Maryland Consumer Protection Act, defamation, injurious falsehood, and
breach of contract. Defendants moved to dismiss.
Analysis: The Court found that all of Plaintiff’s claims hinged on the validity of the Modification. Defendants contended that the Modification was ineffective because the servicer never waived, in writing, the stated requirement of both signatures. The Court rejected this argument, reasoning that statements or actions may constitute waiver of a condition precedent in a contract. Although the Modification expressly required both signatures, the servicer waived this requirement through its actions of returning the signed Modification and accepting payments without Husband’s signature. After rejecting Defendants' statute of limitations arguments, the Court denied the motion to dismiss.
The opinion is available in PDF.
Analysis: The Court found that all of Plaintiff’s claims hinged on the validity of the Modification. Defendants contended that the Modification was ineffective because the servicer never waived, in writing, the stated requirement of both signatures. The Court rejected this argument, reasoning that statements or actions may constitute waiver of a condition precedent in a contract. Although the Modification expressly required both signatures, the servicer waived this requirement through its actions of returning the signed Modification and accepting payments without Husband’s signature. After rejecting Defendants' statute of limitations arguments, the Court denied the motion to dismiss.
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