In a third-party complaint captioned as Avery Patrick v. Wells Fargo Bank, N.A., 2018 WL 6613737, Docket No. A-2270-17T3 (App. Div. Dec. 18, 2018), a residential mortgage loan borrower, Avery Patrick, appealed an order of summary judgment rendered by the Superior Court, Middlesex County, Law Division, dismissing his common law tort claim for trespass against his former loan servicer, Wells Fargo.  On appeal, the Appellate Division affirmed.

The Appellate Division held that the borrower executed a note and mortgage that gave the mortgagee and its loan servicer the express right to enter the property to protect its interest in the event of default and abandonment of the premises.  On review of the record, the Appellate Division determined that, after the borrower defaulted on the loan, the loan servicer sent an inspection company to inspect the property on multiple occasions.  Ultimately, the inspection reported that the property appeared to be abandoned and/or vacated.  Accordingly, to protect its collateral, the loan servicer properly secured the property by changing the locks.  The borrower thereafter asserted the trespass claim.

The trial court dismissed the trespass cause of action, and the Appellate Division affirmed, on two bases.  First, the applicable six-year statute of limitations had expired.  Second, and perhaps more importantly, the Court held that even without the lapse of the statute of limitations the cause of action was futile because the loan servicer had the contractual right under the mortgage documents to enter and secure the property in the event of default and abandonment.  Here, the court was persuaded by the factual record that the property had indeed been abandoned, and the court noted that the borrower did not even attempt to re-enter the property until three months following the lockout – further suggesting abandonment.

The decision underscores the importance for loan servicers of ensuring that the property preservation vendors they retain heavily document inspections with photographs, correspondence records, and other evidence demonstrating that properties they enter and secure are indeed abandoned and vacant.

Troutman Sanders regularly defends investors, lenders, mortgage servicers, and other financial institutions with property preservation issues.