Consumer Finance Litigation

In Etta Lowery v. Wells Fargo Home Mortgage, No. 2131060, 2015 WL 1525153 (Ala. Civ. App. Apr. 3, 2015), the Alabama Court of Civil Appeals reversed the trial court's judgment on the pleadings entered in favor of Defendant-Appellee Wells Fargo on Plaintiff-Appellant Etta Lowery's claims relating to the notarization of her mortgage. Lowery had filed a complaint in the trial court against Wells Fargo alleging that her mortgage with Wells Fargo was void because it was notarized by a person she had never met. She also alleged that Wells Fargo concealed the improper notarization from her. Lowery sought both damages and equitable relief. Wells Fargo moved for judgment on the pleadings, characterizing Lowery's claim as one for "notary liability," which, according to Wells Fargo, was time-barred. Wells Fargo also argued Lowery was barred from equitable relief pursuant to the unclean-hands doctrine because she had failed to offer to pay the remaining loan balance. The trial court granted Wells Fargo's motion, dismissing Lowery's claims with prejudice. On appeal, Lowery argued that Wells Fargo incorrectly characterized her claim as one for "improper notarization." Lowery argued that her claim was pursuant to sections 35-4-20 and 35-4-24 of the Alabama Code, which govern the execution of conveyances for the alienation of land. Under these provisions, a mortgage is valid only if the person signing appears before a notary and acknowledges her signature. The Court of Civil Appeals held that, because Lowery alleged that she never met the notary who notarized her signature, she sufficiently alleged that her mortgage was void. The Court of Civil Appeals also held that the trial court should not have considered the unclean hands doctrine because the pleadings did not address Lowery's alleged refusal to tender payment. The issue of nonpayment arose only on oral argument, in an unsubstantiated statement made by Wells Fargo's counsel. By considering this statement-a matter outside of the pleadings-the trial court treated the motion as a motion for summary judgment. Doing so without first notifying Lowery constituted prejudicial error, the Court of Civil Appeals held, because Lowery did not have an opportunity to respond in kind. Wells Fargo had argued in the alternative that, even if the mortgage was void, it would be entitled to an equitable mortgage. The Court of Civil Appeals rejected this argument, noting that Wells Fargo could not prevail on a motion for judgment on the pleadings based on an equitable mortgage that had not yet been adjudicated to exist. Finally, Wells Fargo had argued that Lowery's claim for fraudulent concealment was time-barred. While Lowery had alleged she discovered the improper notarization in 2013, Wells Fargo argued, based on matters outside the pleadings, that Lowery should have discovered the fraud years prior. Rejecting this argument, the Court of Civil Appeals noted that the trial court could not consider this factual dispute without first properly converting the motion to one for summary judgment.