The court concluded that the mortgagee had standing, at least in equity: There can be as little doubt that the mortgagee may, by injunction, stay the commission of waste upon the mortgaged premises, when he makes a proper case in equity and shows that the commission of the threatened acts will materially impair the value of the property subject to the lien so as to render it an inadequate security for the mortgage debt. This Part then turns to the evolution of standing in waste law to include mortgagees. 2d Waste 13 (1975)). [8] Pamela Foohey et al., Life in the Sweatbox, 94 Notre Dame L. Rev. The act or omission had to create waste: (1) [b]y diminishing the value of the estate; (2) [b]y increasing the burthen upon it; (3) [b]y impairing the evidence of title.[48]. June 15, 2018); City of Philadelphia v. Wells Fargo & Co., No. Expansion of Standing in the Mortgage Context: Special Limitations, 2.. [13] But rather than going back down as the economy has recovered, lender claims continue to increase. . L. Rev. [109] Harris v. Bannon, 78 Ky. 568, 570 (1880). 2d 646, 652 (Ct. App. 326, 341 (Bankr. Melissa B. Jacoby, Home Ownership Risk Beyond a Subprime Crisis: The Role of Delinquency Management, 76 Fordham L. Rev. Even as waste law began to expand, courts still emphasized the specific relationship of the parties involved and the nature of the property interests at stake. Abrams Inc. (In re Miller), 156 F.3d 598, 605 (5th Cir. [80], With that said, the court did limit the availability of equitable relief. [208] Cty. 165, 166 (1990) (arguing bankruptcy would enslave debtors to creditors [i]f we required individual debtors with no assets to repay their creditors out of future earnings, because this would separate the person from their labor); Stewart E. Sterk, Restraints on Alienation of Human Capital, 79 Va. L. Rev. 292.13 are satisfied, including, but not limited to: The off-site property owner did not cause the original (citing 5 Richard R. Powell, The Law of Real Property 56.06 (1992)). Mtg. Indus., Inc., 637 S.W.2d 55, 58 (Mo. 1997). By 1975, an American Jurisprudence article noted that anyone with a specific lien against real estate has a right to restrain waste by the owner of the real estate.[105] Courts specifically cited to the treatise in adopting or affirming the wider standing rule.[106]. The waste of concern usually has single or multiple pollutants of concern that are not only harmful to the environment but also the microorganisms present in an area. [182] The court reasoned that it is the majority view in the United States that a mortgagee may maintain an action for waste prior to a default in the mortgage covenants or the commencement of a foreclosure action.[183] The court found the lien versus title question not particularly relevant: This is true whether the mortgagee has fee title to, or merely a lien upon, the mortgaged premises because a mortgage is everywhere considered as passing the title to land, so far as may be necessary for the protection of the mortgagee, and to give him the full benefit of his security.[184], III. when it appears that by the acts complained of the mortgage security is impaired.[77] The court cited a few cases in support of this proposition, including Van Pelt. [271] Prudential Ins. [186] Scholars have argued a variety of reasons to prefer home ownership, most falling into these three primary categories: (1) it builds household wealth and economic self-sufficiency; (2) it generates positive social-psychological states; and (3) it fosters stable neighborhoods and communities.[187] Property theorists have long, recognized an American obsession with home ownership and the role that it plays in wealth building within American society. 135, 146 (2007). 2000) (unpublished table decision) (It is easy to second-guess [the debtors] choices in hind-sight, but there is a difference between optimism and recklessness. (citing In re Rembert, 141 F.3d at 282)). Continuing payment obligations arising from waste judgments also create constitutional problems due to the loss of future earnings to pay a creditor. Rptr. I suggest waste cases should be treated more favorably than gambling cases in some circumstances. and the mortgagor is for most purposes regarded as the sole owner of the land.[160] The court then concluded that [t]he mortgagee has title and ownership enough to make his security available, but for substantially all other purposes he is not regarded as owner.[161] As of 1900, Connecticut had rejected allowing a mortgagor to be liable to the mortgagee for waste. DOT) jointly developed the hazardous waste transporter regulations. The mortgagee does not have an expectation of future possession. The mortgage context is quite different. [9] Unsurprisingly, when faced with dire economic circumstances for an extended period of time, borrowers might choose to remove and sell fixtures, as the Mirners did, while trying to maintain ownership of the home. 1994). Issuing an injunction would remove that choice from the homeowner and perhaps force them into a foreclosure situation that might otherwise be avoidable with some patience. [309] Cornelison v. Kornbluth, 542 P.2d 981, 98687 (Cal. Uploaded By ShadowFriend101. 691, 71315 (1928)). [267], Notably, however, in some jurisdictions permissive waste is likely to be routinely (and, perhaps, unthinkingly) covered exactly as voluntary waste is simply because the jurisdiction does not distinguish between the two any longer. [177] Delano v. Smith, 92 N.E. . [219] After years of debate over the correct interpretation of the intent requirement,[220] the U.S. Supreme Court addressed the willful and malicious standard in Kawaauhau v. [196] Waste law exacerbates this situation, because waste claims follow borrowers in ways that a mortgage balance cannot. [184] Genesco Inc., 557 F. Supp. Bankruptcy law marks few claims as nondischargeable, because such continuing debts jeopardize the key purpose of bankruptcy law in providing a fresh start. 420, 422 (Ga. 1930) (quoting Roby v. Newton, 49 S.E. City of Murfreesboro, Tennessee v. BFI Waste Systems of Tennessee, LLC 1997). In other words, even if waste has occurred, there may be no cause provided that the property has increased in value in the market such that the security interest remains adequate. In other words, taking an axe to the bathtub is intentionally acting to harm the lender; selling a chandelier while trying to make house payments and get another job is not. The Restatement follows this approach, finding that the mortgagee can recover damages, limited by the amount of the waste, to the extent that the waste has impaired the mortgagees security.[308] The distinction between thinking of the security interest versus thinking of the damage to the market value matters. Courts apply this as a single standard that may be proven either via subjective intent or via objective substantial certainty of harm.[214] Waste claims, possibly even permissive waste claims, will meet this standard, because the reasonable person understands that removing a fixture or failing to repair the falling porch will harm the property. 1. Waste law is a historic cause of action, dating to the Statute of Marlborough, and thus it has a long and complex history. But see AT&T Universal Card Servs. [203] Specifically, Brown explained that one half of all subprime borrowers actually qualified for conventional financing, a disproportionate number of which were black borrowers.[204], Indeed, in a landmark case, the City of Miami sued Bank of America and Wells Fargo, bringing complaints under the Fair Housing Act (FHA), alleging that the lenders intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than they issued to similarly situated white, non-Latino customers.[205] The banks challenged the Citys standing as an aggrieved person under the statute. The rule in the common law was that the writ of waste lay only against the tenants of estates created by the law, as distinguished from those which came into being through act of the owner.[59] The substantial remedies of waste, therefore, applied to protect property interests created by law, and not those that were created independently by contract, like leases and mortgages. The cause was no longer limited to any particular set of property relationships (such as life tenant-reversioner, lessor-lessee, etc.). 326 (Bankr. (2) Did Kawaauhau create a totally subjective standard which relates solely to the internal workings of the debtors mind, or a more objective one? [287] Meyer v. Hansen, 373 N.W.2d 392, 395 (N.D. 1985) (citing Moore v. Phillips, 627 P.2d 831, 834 (Kan. Ct. App. [156] Morse v. Whitcher, 15 A. 17-10058, 2018 Bankr. 1816); Hippesly v. Spencer (1820) 56 Eng. [5] Mirner, 2010 Bankr. Professor Howards Article traces the various policy justifications behind the choices between discharge and non-discharge of debts in bankruptcy. The role of waste in creating peonage is particularly important in light of studies that have demonstrated that subprime and predatory lenders particularly targeted blacks. Co., 18 Md. . [62] See, e.g., Malone & Foote v. Marriott, 64 Ala. 486, 493 (1879) (reinstating an injunction protecting a mortgagee on the grounds that it protected the partys interests prior to the filing of the foreclosure suit). [233] Id. I, st. 2; R.C., c. 116, s. 3; Code, s. 629; Rev., s. 858; C.S., s. 893) (same). The court found this argument unconvincing, noting that [t]ax policy and tort law are separate fields. The court reasoned, [t]hat the state has chosen not to impose personal liability on property owners for real property taxes says nothing about owners liability to other persons for the tort of waste. The court noted that waste generally protected lenders from any act which will substantially impair their real property security. The court then found that such a rule can properly be extended to nonpayment of real property taxes regardless of whether the omission also creates tax or contract liability. Id. LEXIS 2120, at *3. [227], The Court concluded judgments arising from negligently or recklessly inflicted injuries could be discharged. This Article then considers whether standing for lenders is appropriate in the context of the history of waste law, as well as property law more generally. The mortgagor is liable to the mortgagee for waste.[181]. [7] Mirner, 2010 Bankr. [288] Chetek State Bank v. Barberg, 489 N.W.2d 385, 387 (Wis. Ct. App. 191 (2009) (arguing that the Bankruptcy Code amendments of 2005 realized Thirteenth Amendment constitutional difficulties that had been speculative for decades). The Fourth Circuit engaged this question in depth in Jaffe-Spindler Co. v. Genesco, Inc.[149] The court concluded that [l]ien states, generally, only allow a mortgagee to recover for waste if the value of the collateral goes below the amount of the outstanding indebtedness.[150] By contrast, title theory jurisdictions allow a mortgagee to recover for any diminution in the value of security given for a debt.[151] The court viewed the title approach as distinct because any diminution in value injures the mortgagees property in a title state. [333] Id. LEXIS 2120, at *5. [254] Baldwin v. Kilpatrick (In re Baldwin), 245 B.R. [102] Prue v. Royer, 67 A.3d 895, 91415 (Vt. 2013). Most courts expanded standing to mortgagees very early for the purposes of injunctions to restrain future waste of the mortgage security. The court found, There are Oklahoma cases dealing with acceleration clauses in real estate mortgages which involve acceleration for failure to provide insurance or for commission of waste.[294] The court previously held that acceleration clauses in a mortgage were not objectionable as being in the nature of a penalty or forfeiture.[295] With that said, the court limited the holding, noting equity will relieve against operation of an acceleration clause where the conduct of the mortgagee has been unconscionable or inequitable.[296], Traditionally, waste law in the modern era has measured damages in terms of the change in market value of the property. Problems of Remedies: Measuring When Waste Has Occurred, D. Gendler examined the effectiveness of bankruptcy proceedings for saving a primary residence. [331] Minor, 694 N.W.2d at 509 (citing Bank of Commerce v. Paine, Webber, Jackson & Curtis, 158 N.W.2d 350, 352 (Wis. 1968)); see also Covington v. Pritchett, 428 N.W.2d 121, 124 (Minn. Ct. App. Co. v. Mathis, 334 P.2d 186 (Or. Freehold Land Mortg. 577, 583 (N.D. Ga. 2006). We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information . Bankruptcy cases, legislative histories, and scholarly works document how carefully those choices are made and how those choices represent important social policies. W.D. Rptr. If the failure to maintain the property or pay taxes or insurance is attributable to the economic circumstances of the mortgagor, the mortgagee should be limited to the recourses permitted by the mortgage contract and relevant state law. [224] The Supreme Court accepted the Eighth Circuits alignment of the willful and malicious standard with the traditional standard for an intentional tort: that the actor intend the consequences of an act, not simply the act itself.[225] The Court revisited an earlier case, Tinker v. Colwell,[226] which had set the standard for tort dischargeability, and reasoned that the outcome in Tinker depended on the finding that the debtor had acted in criminal trespass, which sounded as an intentional tort. Torts judgments might not be dischargeable as debts in bankruptcy proceedings. Such actions would be logically quite different from a waste cause of action in that the ordinary tort rules would not apply to a claim based on the breach of a term in a contract. at 395 (citing Smith v. Cap Concrete, 184 Cal. Part IV focuses on property law and delves into the details of how importing traditional waste doctrines into the mortgage context has the potential to create serious and unjust impacts for borrowers. [120] Ginsberg v. Lennar Fla. Holdings, Inc., 645 So. 1177, 1181 (2012) (arguing that the housing bubble was primarily caused by an excessive supply of housing finance); White et al., supra note 132 (citing lending practices as a primary cause of the financial crisis). The Court vacated the lower courts judgment and remanded for further proceedings, specifically to determine the proximate cause standard that should be applied. 1977); 93 C.J.S. 4.6 (Am. : Mortgs. Chapter 2. Actions For Nuisance, Waste,and Willful Trespass, In Certain Waste to energy refers to the process of converting municipal solid waste (MSW), otherwise known as trash, into usable heat, electricity, or fuel. [62] Courts reasoned that coverage of the mortgage situation rests upon the broad equitable consideration, that, during the life of the mortgage, the security it affords ought to be preserved unimpaired; that the mortgagor, and whoever stands in his shoes, is in conscience bound to its preservation.[63] Such an expansion to only equitable remedies essentially just provided a way for the mortgagee to make sure there was no interference before, and not after a decree of foreclosure and sale, which settles conclusively the rights and equities of the parties.[64] Under such logic, the mortgagees standing was limited to only equitable relief. [59] Camden Tr. The economics of pollution (article) | Khan Academy serves clients in Illinois cities such as Palatine, Schaumburg, Inverness, Arlington Heights, Rolling Meadows, Glenview, Hoffman Estates, Bartlett, Des Plaines, Elk Grove Village, Mt. [37], The parties liable for waste and the parties granted standing to bring a cause of action for waste have changed throughout time. Other courts have allowed claims by mortgagees only much more recentlywith a number adopting expanded standing rules between the 1990s and the present. LEXIS 127, at *42 (Ct. App. Backyard Burning | Wastes | US EPA 99-3339, 2000 U.S. App. [291], Some courts now specifically hold that forfeiture is only allowed when it is authorized by statute. [68] The court focused on the fact that [t]he rights of the holder of the mortgage were therefore paramount to [the mortgagors] rights, and any attempt on his part to impair the mortgage as a security, was a violation of the plaintiffs rights.[69] The court concluded that the law would support a case for waste, because [t]he plaintiffs security was thereby impaired.[70] The court noted that when the mortgagee sues for waste, the action is not based upon the assumption that the plaintiffs land has been injured, but that his mortgage as a security has been impaired.[71] Because of this, the court determined that [h]is damages, therefore, would be limited to the amount of injury to the mortgage, however great the injury to the land might be.[72] Notably, the court went on to conclude that the timing of the suit for waste vis--vis foreclosure proceedings was irrelevant: It could, therefore, be of no consequence whether the injury occurred before or after forfeiture of the mortgage.[73] As other courts adopted the rule of standing for the mortgagee, not all followed the remainder of the courts lenient approach for such cases. Ctr. Thus, waste claims can arise from an economic loss remediable under the law of contracts. Eastwood, 241 P.3d at 126061. Kimbrough v. Reed (pg. The case law only seems to suggest equitable remedies. [223] Id. [274] Camden Tr. Moreover, this approach would maintain the fresh start for those honestly struggling borrowers on the other side of bankruptcy. 4.6 (Am. Rep. 1214; 3 Atk. W.D. [47] Minor & Wurts, supra note 11, 380381, at 33233. LEXIS 2783, at *10 n.7 (Conn. Super. The reasoning behind this was that the current possessor of the property was often someone who had a very limited claim to the estate (such as a life estate), while the plaintiff would have a much longer and more permanent interest (the reversion). 1023, 1048 (2018). The BAD MONEY is the money wasted on interest payments, hire purchase and bank charges.. Dunedin could have funded the Pacific Cable with the money we have just wasted on a stadium.. [8] During that time, struggling citizens often forgo even basic necessities such as food and medical care. 410, 417 (Bankr. 1978)). Waste to Energy - MDD [74] Prudential Ins. [213] Understandably, Congress has chosen to secure some torts judgments past bankruptcy. The traditional rule of waste limited coverage to situations involving permanent injury to a property. The general rule in Wyoming is that the mortgagee has a right to restrain action, but even this right is qualified to situations where the property would be diminished in value by the threatened removal to such an extent as to render the mortgage security insufficient or inadequate.[116], Kansas resembles Wyoming in that there are few modern cases. 1. property is seized to satisfy a tax lien. [132] See generally Alan White et al., The Impact of State AntiPredatory Lending Laws on the Foreclosure Crisis, 21 Cornell J.L. 1965)) (emphasis omitted). A dense B dirty C upon D with Co. v. Goos, 66 N.W. Jill M. Fraley, Mortgage Waste Case Study (2019) (unpublished research) (on file with author) [hereinafter Mortgage Waste Case Study]. 1934). J. [207] A number of additional jurisdictions have now brought similar claims, alleging discriminatory mortgage practices that targeted blacks and Latinos for riskier mortgages. This problem is particularly compelling given that the extension of waste law to mortgages has happened over an extensive period of time, often sporadically and often judicially. The Restatement says that waste occurs when there is damage that reduces value, whether negligently or intentionally.[282] Additionally, the Restatement specifically includes situations where the mortgagor fails to maintain and repair the real estate in a reasonable manner, except for repair of casualty damage or acts of third parties not the fault of the mortgagor.[283] The Restatement then expands this duty to fit with the mortgage contract provisions as well, suggesting that there is waste where the mortgagor materially fails to comply with covenants in the mortgage respecting the physical care, maintenance, construction, demolition, or insurance against casualty of the real estate or improvements on it.[284] Finally, the Restatement addresses the issue of tax payments, finding that there is waste if the mortgagor fails to pay before delinquency property taxes or governmental assessments secured by a lien having priority over the mortgage.[285], Not all commentators, however, would agree with the Restatement approach. California, similarly, does not distinguish between active and passive in the context of waste law. [215] See Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277, 282 (6th Cir. 2d Waste 35 (2019)). L. Rev. Within waste law, the ownership interest provides the lynchpin for standing for a claim. [265], Permissive waste is particularly interesting in the context of mortgages because borrowers who are economically struggling may be unable to afford routine maintenance on the home, or may, at a minimum, delay such maintenance. State Bank, Osseo v. Foss, 197 N.W.2d 662, 666 (Minn. 1972) (forbidding double recovery for the same wrong). This Part begins with a brief primer on the core concepts involved in waste law and follows that with the history of standing for waste law. Illegal dumping also known as "fly-tipping" has been a problem for both cities and rural areas for decades. Law Inst. Sav. and except for a very limited purpose, the mortgage is regarded as mere security. 1 (2017) (reviewing the law and economics-based attacks on the fee simple as an efficient mechanism of ownership and arguing for the social value that landownership has on individual freedom). [67] 4 James Kent, Commentaries On American Law 16566 (7th ed., New York, William Kent 1851). [178], The courts reasoning is that [s]uch right of action is founded not upon the right to present possession, but on title to the estate.[179] Notably, Massachusetts concludes that there does not even have to be inadequate security: He may maintain such an action, although his is a junior mortgage and although the security remains ample for his protection. D. Ariz. 1992). The court stated, [i]f property values in general are declining, a deficiency judgment and a judgment for waste would be identical up to the point at which the harm caused by the mortgagor is equal to or less than the general decline in property values resulting from market conditions.[314] Additionally, the court continued, [w]hen waste is committed in a depressed market, a deficiency judgment, although reflecting the amount of the waste, will of course exceed it if the decline of property values is greater.[315] On the other hand, the court reflected, [h]owever, when waste is committed in a rising market, there will be no deficiency judgment, unless the property was originally overvalued; in this event, there would be no damages for waste unless the impairment due to waste exceeded the general increase in property values.[316], In California, a statute protects borrowers, proscribing a deficiency judgment after any foreclosure sale, private or judicial, of property securing a purchase money mortgage.[317] The purpose of the provision is in the event of a depression in land values, to prevent the aggravation of the downturn that would result if defaulting purchasers lost the land and were burdened with personal liability.[318], The California Supreme Court had to determine if the statute would apply to prevent an action in waste, a tort action, as distinct from an action based on a contract. This Part draws particular attention to districts that resist standing for mortgagees or limit remedies to injunctions, as well as to other ways that courts have limited the cause of action in the context of mortgages by adding hurdles for mortgagees. 1989). [134] See, e.g., Adam J. Levitin & Susan M. Wachter, Explaining the Housing Bubble, 100 Geo. L. Rev. 1086, 1097 (1976); see also Cornelison v. Kornbluth, 542 P.2d 981, 990 (Cal. [286] Christopher G. Tiedeman, The American Law of Real Property 265, at 384 (3d ed. [340] See, e.g., Joseph William Singer, Property and Social Relations: From Title to Entitlement, in Property and Values: Alternatives to Public and Private Ownership 320 (Charles Geisler & Gail Daneker eds., 2000); Stephen R. Munzer, Property as Social Relations, in New Essays in the Legal and Political Theory of Property 3675 (Stephen R. Munzer ed., 2001); Carol M. Rose, Property & Persuasion: Essays on the History, Theory, and Rhetoric of Ownership (1994). [273] Id. Howard explains the concern that bankruptcy law could become a shelter for debtors who have engaged in dishonesty or in culpable disregard for the rights of other persons. Id. [42] Given that the duty arises in the context of a relationship, it is unsurprising that the law would expand in a symmetrical way: enlarging both the parties who are liable and the parties who have standing to sue. Boulevard, 103 Cal.
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