Filing bankruptcy on the eve of a foreclosure sale is a common practice.  When I was in private practice, I often wondered why debtors who hadn’t paid their mortgage in x months thought a miracle was going to happen in the 30 days between receiving the notice of the foreclosure sale and the foreclosure sale.  OR why they waited until the day before the sale to even call my office to make an appointment so their case could be filed before the 9 a.m. sale. (And need I remind you that this was in the days before electronic filing—the petition would have to be hand delivered to the Clerk’s office?)

And now I can add to my wondering–why someone would buy real estate and not have a title search done.

The West Virginia Supreme Court strongly urges buyers to spend the money for a title search in the case of Pavone v. NPL Mortgage Acquisitions, LLC., No. 20-0970, decided March 7, 2022. (Check the Court’s website for the opinion.) 

            Clete Pavone bought property in West Virginia from Patrick Russell in October of 2018.  He didn’t bother with a title search so didn’t know there was an unpaid deed of trust in favor of Equity South Mortgage.  He found out six months later when he got the foreclosure notice from a trustee acting for NPL Mortgage Acquisitions, LLC.

Pavone filed suit to stop the foreclosure and claimed that there was a “fatal break” in the assignments, so the foreclosure couldn’t proceed. (And any bankruptcy attorney who has plowed through the assignments to determine who is the creditor on a mortgage claim knows that there is almost always a break in the assignments.)  The circuit court ruled against him on the “after-acquired property doctrine,” which provides that “property acquired by a grantor, who previously attempted to convey title to land which the grantor did not in fact own, inures automatically to the benefit of prior grantees.”

Pavone appealed to the WV Supreme Court which did not address the merits of his argument finding, as it noted in Footnote 5, that he lacked standing to challenge the validity of the assignments.  The case was remanded the circuit court with instructions to dismiss it.

The Supreme Court said that it had long recognized that the “prudential standing rule…normally bars litigants from asserting the rights or legal interests of others in order to obtain relief from an injury to themselves.”  Pavone was neither a party to nor beneficiary of any of the assignments.

The Court held “that a litigant who is not a party to a mortgage assignment or a party intended to benefit from the assignment lacks standing to challenge the assignment.”

So now Pavone has the choice of letting the property be foreclosed upon or paying the debt owed by the seller.