Section 46 Wrongful Foreclosure

• Library: Consumer Law and Practice 2010

If a borrower was not in default or there were fundamental errors committed in conducting the sale, a borrower may have an action for wrongful foreclosure. As the court said in Dobson v. Mortgage Electronic Registration Systems, Inc., 259 S.W.3d 19, 22 (Mo. App. E.D. 2008), "what constitutes a 'wrongful foreclosure' sufficient to set aside a sale and what constitutes a 'wrongful foreclosure' sufficient to recover damages in tort are not the same." "When a foreclosure is wrongful because no default giving rise to a right to sell exists, the mortgagor has two remedies: [either] let the sale stand and sue at law for damages or . . . bring an equitable action to have it set aside." Id. (citing Peterson v. Kansas City Life Ins. Co., 98 S.W.2d 770, 775 (Mo. 1936)). "If the mortgagee did have the right to foreclose, but the sale was otherwise void or voidable, then the remedy is a suit in equity to set the sale aside." Id.

A tort action for damages for wrongful foreclosure lies against a mortgagee only when the mortgagee had no right to foreclose at the time foreclosure proceedings were commenced. Peterson, 98 S.W.2d at 773-75; Moore v. Moore, 544 S.W.2d 279, 282 (Mo. App. W.D. 1976); Spires v. Lawless, 493 S.W.2d 65, 72 (Mo. App. S.D...