Statutory Foreclosures in Arkansas: The Law and Recent Developments
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Statutory Foreclosures in Arkansas: The Law
and Recent Developments
Lynn Foster *
More than thirty states have statutory foreclosure
laws, 1 which allow lenders to foreclose without a lawsuit. 2
Arkansas is one of these states. The national foreclosure
crisis has resulted in amendments to the Arkansas statute
*
Arkansas Bar Foundation Professor, University of Arkansas at Little Rock
Bowen School of Law. I am grateful to the following attorneys for their review of
earlier versions of this article and, in some cases, their insight and feedback on
various aspects of current Arkansas foreclosure law and business: Randy Bueter,
Joel Hargis, Wesley Lasseigne, Kathy Cruz, Drake Mann, Chris Travis, and Shellie
Wallace. Thanks also to Jennifer Davis, UALR Bowen School of Law, 2013, for her
assistance with research. This article was completed with the assistance of a
research grant from the UALR Bowen School of Law.
1. Nonjudicial foreclosures are also known as “statutory foreclosures,” “power
of sale foreclosures,” “foreclosures by advertisement,” and “sales by trustees.”
Because the Arkansas statute is titled the Statutory Foreclosure Act, this article will
use the term “statutory foreclosure” throughout. See ARK. CODE ANN. § 18-50-101
(Supp. 2011).
2. See ALA. CODE § 35-10-12 (2012); ALASKA STAT. ANN. § 34.20.070 (West
2012); ARIZ. REV. STAT. ANN. § 33-807 (2012); CAL. CIV. PROC. CODE § 2924
(West 2013); COLO. REV. STAT. ANN. § 38-38-101 (West 2012); D.C. CODE § 42-815
(2012); GA. CODE ANN. § 44-14-160 (West 2012); HAW. REV. STAT. § 667-21 (West
2012); IDAHO CODE ANN. § 45-1503 (West 2012); IOWA CODE ANN. § 654.18 (West
2012); MD. CODE ANN., REAL PROP. § 7-105 (West 2012); MASS. GEN. LAWS ANN.
ch. 244, § 14 (West 2012); MICH. COMP. LAWS ANN. § 600.3201 (West 2012); MINN.
STAT. ANN. § 580.01 (West 2012); MISS. CODE ANN. § 89-1-55 (West 2012); MO.
ANN. STAT. § 443.290 (West 2012); MONT. CODE ANN. § 71-1-223 (2011); NEV.
REV. STAT. ANN. § 107.080 (West 2011); N.H. REV. STAT. ANN. § 479:25 (2013);
N.M. STAT. ANN. § 48-10-10 (West 2012); N.C. GEN. STAT. ANN. § 45-21.1 (West
2012); OKLA. STAT. ANN. tit. 46, § 43 (West 2012); OR. REV. STAT. ANN. § 86.710
(West 2012); R.I. GEN. LAWS ANN. § 34-27-1 (West 2012); S.D. CODIFIED LAWS §
21-48-1 (2012); TENN. CODE ANN. § 35-5-101 (West 2012); TEX. PROP. CODE ANN.
§ 51.002 (West 2012); UTAH CODE ANN. § 57-1-23 (West 2012); VT. STAT. ANN. tit.
12, § 4961 (West 2012); VA. CODE ANN. § 55-59.1 (West 2012); WASH. REV. CODE
ANN. § 61.24.026 (West 2012); W. VA. CODE ANN. § 38-1-3 (West 2012); WIS. STAT.
ANN. § 708.05 (West 2012); WYO. STAT. ANN. § 34-3-102 (West 2012). Since the
foreclosure crisis began, a number of states, such as Hawaii, Massachusetts, and
Nevada, have enacted legislation to make statutory foreclosure more difficult.
ALAN WHITE, STATE FORECLOSURE MEDIATION LAWS: EXAMPLES AND
RESEARCH FOR A UNIFORM STATUTE 1 (2012), available at
http://www.uniformlaws.org/shared/docs/mortgage%20foreclosure/4_2012may11_R
REMFFP_State%20Foreclosure%20Mediation%20Laws%20memo_White.pdf.112 ARKANSAS LAW REVIEW [Vol. 66:111
and new national mortgage servicing standards, both of
which provide debtors with more rights and extend the
foreclosure process. The foreclosure crisis also spawned
numerous cases about the right of various entities to use the
Arkansas statutory foreclosure procedure, some of which
are still playing out in state and federal courts. All of these
factors combined to decrease the number of statutory
foreclosures in Arkansas in 2012 to perhaps the lowest
number since the year 2000. 3 This article discusses these
developments and the current status of statutory
foreclosures in Arkansas.
I. BACKGROUND
Arkansas enacted its current statutory foreclosure
statutes, sections 18-50-101 to -117 of the Arkansas Code in
1987. 4 At that time, the Arkansas General Assembly found
the existing foreclosure laws, which required appraisal
before sale and allowed an unwaivable one-year statutory
right of redemption, to be “awkward.”5 The legislature
characterized the new act as “efficient and fair.” 6 The
statute was amended in 1989, 1999, 2001, 2003, 2007, 2009,
and 2011. 7 An additional amendment was proposed but not
considered in the 2012 fiscal legislative session, 8 and it is
likely to be reconsidered in 2013.
3. Holmes’ Ruling To Open Foreclosure Bottleneck, CITY WIRE (June 4, 2012,
4:36 PM), http://www.thecitywire.com/node/22264.
4. Act 53, 1987 Ark. Acts 121, 121-35. The late Robert M. Wilson, Jr., the
founder of Wilson & Associates, P.L.L.C., one of the preeminent foreclosure law
firms in Arkansas, was the chief author of the legislation. Robert M. Wilson, Jr.,
MARTINDALE.COM, www.martindale.com/Robert-M-Wilson-Jr/12785798-lawyer.
htm (last visited Feb. 28, 2013).
5. Act 53, 1987 Ark. Acts 121, 135.
6. Act 53, 1987 Ark. Acts 121, 135.
7. Act 532, 1989 Ark. Acts 1231, 1231-33; Act 983, 1999 Ark. Acts 3642, 3642-
52; Act 1196, 2001 Ark. Acts 4411, 4411-12; Act 1303, 2003 Ark. Acts 4570, 4570-72;
Act 721, 2007 Ark. Acts 3750, 3750-52; Act 482, 2009 Ark. Acts 2122, 2129-30; Act
885, 2011 Ark. Acts 3510, 3510-18; Act 901, 2011 Ark. Acts 3615, 3615-22. The 2009
amendments were technical in nature. See Act 482, 2009 Ark. Acts 2122, 2129-30.
8. An amendment to H.B. 1147, unrelated to the rest of the bill, was
introduced in the 2012 fiscal legislative session to do away with the “authorized to
do business in Arkansas” requirement. Amend. No. 1 to H.B. 1147, 88th Gen.
Assemb., Fiscal Sess. (Ark. 2012). The amendment was passed but then repealed in
committee, and re-introduction is anticipated in 2013. Id. The amendment
attempted to repeal section 18-50-117 and would add the following language to2013] STATUTORY FORECLOSURES 113
At common law, a statutory foreclosure could not take
place unless authorized by the mortgage. 9 For this reason,
the “deed of trust” was created. In most states, a deed of
trust is the legal equivalent of a mortgage with a power of
sale. 10 In Arkansas,
Under a deed of trust, the borrower conveys legal
title in the property by a deed of trust to the trustee. In
this state, the naked legal title to real property included
in a mortgage passes to the mortgagee, or to the trustee
in a deed of trust, to make the security available for the
payment of the debt. The trustee is limited in use of
the title to passing title back to the grantor/borrower in
the case of payment, or to the lender in the event of
foreclosure. The lender holds the indebtedness and is
the beneficiary of the deed of trust. A trustee under a
deed of trust is not a true trustee. Under a deed of
trust, the trustee’s duties are limited to: (1) upon
default undertaking foreclosure and (2) upon
satisfaction of the debt to reconvey the deed of trust. 11
The trustee in a deed of trust is typically a bank or
bank official, a bank subsidiary (such as ReconTrust
Company), a mortgage company or company official, or an
attorney. 12 In the case of mortgages, which historically did
not contain powers of sale, Arkansas law currently implies
a power of sale “in every mortgage of real property situated
in this state that is duly acknowledged and recorded.” 13
section 18-50-116: “The holder or the mortgage loan servicer for the holder of a
note secured by a mortgage or deed of trust is not required to register with the
Secretary of State or to obtain a certificate of authority to transact business in this
state in order to enforce the mortgage or deed of trust under this chapter or any
other law of this state.” Id. This change would clarify the statute, although the
amendment would significantly change the effect of section 18-50-117 of the
Arkansas Code.
9. 1 GRANT S. NELSON & DALE A. WHITMAN, REAL ESTATE FINANCE LAW
§ 1.4 (5th ed. 2007).
10. Id. § 1.6; see also Agri Bank FCB v. Maxfield, 316 Ark. 566, 574, 873
S.W.2d 514, 518 (1994) (“A deed of trust is in legal effect a mortgage . . . .” (citing
Tate v. Dinsmore, 117 Ark. 412, 416, 175 S.W. 528, 529 (1915))).
11. Mortg. Elec. Registration Sys., Inc. v. Sw. Homes of Ark., 2009 Ark. 152, at
6, 301 S.W.3d 1, 4 (citations omitted) (internal quotation marks omitted).
12. ARK. CODE ANN. § 18-50-102(a)(2) (Supp. 2011).
13. ARK. CODE ANN. § 18-50-115(a)(1) (Repl. 2003).114 ARKANSAS LAW REVIEW [Vol. 66:111
Thus, the absence of a power-of-sale provision in a
mortgage is not a bar to a statutory foreclosure.
Real estate that is “used primarily for agricultural
purposes” is not subject to statutory foreclosure. 14 In 2004,
the Arkansas Supreme Court held that under the version of
section 18-50-116 of the Arkansas Code in force at the time,
such a defense must be raised prior to the sale, otherwise it
was barred.15 However, in 2007, the General Assembly
amended section 18-50-116 of the Arkansas Code to once
again allow a mortgagor to successfully assert this defense
after the sale (although it may not be asserted against a
bona-fide purchaser). 16
Although the statutory-foreclosure statute may be (but
rarely is) used against commercial properties, the consensus
of numerous real-estate attorneys is that the statutory-
foreclosure process is used for residential properties and
that most residential foreclosures are statutory
foreclosures. 17 There are, however, attorneys who never
use the statutory-foreclosure statute, preferring the judicial
process because of its guarantee of due process and good
title (with respect to named interested parties), backed by a
court decree.
The common wisdom is that statutory foreclosures are
faster and less expensive than judicial foreclosures.18 This
line of thinking must be questioned in the wake of the
National Mortgage Settlement and amendments in some
states that have slowed the statutory-foreclosure process.
According to RealtyTrac, the State of Arkansas ranks
twelfth in the nation in terms of the speed of its statutory-
14. ARK. CODE ANN. § 18-50-116(c) (Supp. 2011).
15. Cockrell v. Union Planters Bank, 359 Ark. 8, 15, 194 S.W.3d 178, 183
(2004); see also ARK. CODE ANN. § 18-50-116(d)(2).
16. Act 721, 2007 Ark. Acts 3750, 3751-52.
17. In fact, the original 1987 Act not only excluded agricultural property, but
also limited the procedure to “mortgages or deeds of trust on one to four family
residential real property,” and the Act also did not apply to a deed of trust “securing
an indebtedness incurred in connection with the construction of a dwelling, building
or other improvement on the trust property.” Act 53, 1987 Ark. Acts 121, 133-34.
18. NELSON & WHITMAN, supra note 9, § 7.19 (“[W]here it is in common use,
power of sale foreclosure has provided an effective foreclosure remedy with a cost in
time and money substantially lower than that of its judicial foreclosure
counterpart.”).2013] STATUTORY FORECLOSURES 115
foreclosure process. 19 It is doubtful that this ranking
reflects the impact of Act 885 however. 20 Mortgagees now
have a new equation to use when weighing the costs and
benefits of judicial versus statutory foreclosures, especially
if a default judicial proceeding is anticipated. The cost of a
default judicial proceeding would include the cost of the
complaint, filing of a lis pendens, and attorney’s fees. On
the other hand, a statutory foreclosure involves not only
recording costs, but also the cost of publishing notice at the
courthouse and on the Internet, as well as attorney’s fees. 21
However, homeowners may be more likely to counterclaim
in a judicial foreclosure than to file their own lawsuit in the
case of a statutory foreclosure.
II. OVERVIEW OF THE STATUTE
In a typical Arkansas statutory foreclosure prior to
July 2011, the debtor’s default triggered the process, and if
no resolution was reached, the foreclosing lender would
record a “notice of default and intention to sell” in the
property records. 22 Within a month of the recording, the
notice would also have to be mailed by both certified and
first-class mail to the mortgagor, any successor in interest of
record to the mortgagor or of whom the mortgagee had
actual notice, any junior lienor either of record or of whom
the mortgagee had actual notice, and to anyone requesting
notice. 23 Sixty days after recording the notice, the sale
could take place. 24 The statute regulating the time and
place of sale has remained unchanged: sales must take place
19. Foreclosure Laws and Procedures by State, REALTYTRAC,
http://www.realtytrac.com/foreclosure-laws/foreclosure-laws-comparison.asp (last
visited Jan. 6, 2013).
20. According to Randy Bueter of Wilson & Associates, P.L.L.C., following
Act 885 and the National Mortgage Settlement, Arkansas’s timeline for a statutory
foreclosure has increased from ninety days to about 150 days. Interview with Randy
Bueter, Partner, Wilson & Assocs., P.L.L.C., (Oct. 25, 2012); see infra VI.A.
21. Interview with Joel Hargis, Crawley & DeLoache, Attorneys at Law,
PLLC, (Jan. 4, 2013). Indeed, in the case of In re Burrow, PHH Mortgage Company
charged $5637 for the posting and publication of a statutory foreclosure! No. 3:09-
bk-18876, 2011 WL 1103354, at *1 (Bankr. E.D. Ark. Mar. 22, 2011). The court
disallowed the fees as unreasonable. Id. at *7.
22. ARK. CODE ANN. § 18-50-104(a)(1) (Supp. 2011).
23. ARK. CODE ANN. § 18-50-104(c).
24. ARK. CODE ANN. § 18-50-104(a)(2).116 ARKANSAS LAW REVIEW [Vol. 66:111
in general, on weekdays, during the day, either at the
courthouse or the premises for sale.25 Anyone, including
the mortgagee and the mortgagor, may bid at the sale; if
there is a trustee, the trustee may not bid on the trustee’s
own account but may bid for the beneficiary. 26
Bidding must start at two-thirds of the “entire
indebtedness due.”27 Presumably, if there are junior lienors
to whom the debtor is also in default, this amount refers
only to the amount of indebtedness owed to the foreclosing
creditor. The statute also declares sales to be concluded
when the highest bid is accepted by the person conducting
the sale. 28 This provision has involved some back-and-forth
between the legislature and the bankruptcy court. Debtors
often file for bankruptcy around the time of a foreclosure
sale. If a debtor files for bankruptcy before the sale is final,
the foreclosure is subject to bankruptcy’s automatic stay. 29
Prior to 1999, there was a conflict between the District
Courts for the Eastern and Western Districts of Arkansas
with respect to when a foreclosure sale was final. In the
case of In re Henson, the District Court for the Western
District of Arkansas ruled that a sale was final at the time
the trustee’s deed was recorded,30 and five years later the
District Court for the Eastern District of Arkansas decided
In re Bland, where it ruled that the sale was final at the time
the gavel fell on the winning bid.31 The next case to present
this issue was In re Tomlin, in which the debtor filed for
bankruptcy less than four hours after payment from the
winning bid was tendered. 32 Judge Mixon, after a thorough
discussion of federal and state law on the issue, ruled that
under Arkansas law a statutory-foreclosure sale is final
when the trustee’s deed is recorded, 33 disagreeing with the
Eastern District’s ruling in Bland. 34
25. ARK. CODE ANN. § 18-50-107(a) (Supp. 2011).
26. ARK. CODE ANN. § 18-50-107(b).
27. ARK. CODE ANN. § 18-50-107(b)(3).
28. ARK. CODE ANN. § 18-50-107(d).
29. 11 U.S.C. § 362 (2006).
30. 157 B.R. 867, 869 (Bankr. W.D. Ark. 1993).
31. 227 B.R. 163, 166 (Bankr. E.D. Ark. 1998).
32. 228 B.R. 916, 917 (Bankr. E.D. Ark. 1999).
33. Id. at 921.
34. Id. at 920.2013] STATUTORY FORECLOSURES 117
Less than two months later, the ink in the Tomlin
decision having scarcely dried, the Arkansas General
Assembly amended the Statutory Foreclosure Act to define
the conclusion of the sale as the moment the highest bid
was accepted. 35 Further, the General Assembly declared
that the trustee’s or mortgagee’s deed, although not
required to be recorded until ten days after the sale, would
relate back to the time of sale. 36 Finally, a new provision
stated that redemption would be barred after the sale
“notwithstanding that the deed to and possession of the
trust property have yet to be delivered.” 37
Judge Mixon had occasion to revisit the issue in the
case of In re Jenkins. 38 Noting the 1999 revisions to the Act,
the court focused on the provisions that stated at any time
prior to delivery of the deed, the trustee or mortgagee
could declare the sale null and void, which allowed the
trustee or mortgagee to agree to pay the purchase price
after the day of the sale. 39 Considering the provisions of 11
U.S.C. § 1332 alongside the Statutory Foreclosure Act, the
court concluded that for bankruptcy purposes, the debtor’s
property is not “sold” until consideration is paid, the
trustee’s deed is delivered, and the sale can no longer be
declared null and void. 40
Most of the time in Arkansas, creditors sacrifice their
right to a deficiency judgment by pursuing a statutory
foreclosure. This is one trade-off in favor of the
homeowner. The statute sets out a mathematical formula
to determine when a deficiency judgment may be
awarded. 41 A judgment is available for the lesser of these
two differences: the debt minus fair market value or the
debt minus the sale price. 42
35. Act 983, 1999 Ark. Acts 3642, 3643 (codified as amended at ARK. CODE
ANN. § 18-50-107(d) (Supp. 2011)).
36. Act 983, 1999 Ark. Acts 3642, 3649-50 (codified as amended at ARK. CODE
ANN. § 18-50-111(b) (Repl. 2003)).
37. Act 983, 1999 Ark. Acts 3642, 3649 (codified at ARK. CODE ANN. § 18-50-
108(b) (Repl. 2003)).
38. 422 B.R. 175, 176-77 (Bankr. E.D. Ark. 2010).
39. Id. at 180-81.
40. Id. at 182.
41. ARK. CODE ANN. § 18-50-112(b) (Repl. 2003).
42. ARK. CODE ANN. § 18-50-112(b).118 ARKANSAS LAW REVIEW [Vol. 66:111
So in a normal market, where the debt is $100,000 and
fair market value is $150,000, the difference would
effectively be zero. 43 Regardless of the difference by which
the debt exceeds the sale price, the mortgagee could not
acquire a deficiency judgment. On the other hand, using an
example of an underwater home, if the debt was $120,000,
the fair market value was $110,000, and the sale price was
$80,000, the creditor could recover $10,000 as a deficiency
judgment. If the mortgagee or beneficiary is entitled to a
deficiency judgment, it must be sought within twelve
months after the sale. 44 A purchaser is entitled to
immediate possession of the property, 45 which may be
obtained either by filing a complaint and the deed,
whereupon an ex parte writ of assistance shall be issued, or
by filing an action for unlawful detainer. 46 The sale
terminates the interests of the mortgagor or grantor, any
successors in interest thereto, and junior lienors who have
been given notice. 47 Sale proceeds are distributed,
appropriately, to pay the sale expenses and the debt,48 and
any surplus goes first to junior lienholders and finally to the
mortgagor or grantor. 49 The mortgagee’s or trustee’s deed
must contain recitals of compliance containing the statutory
requirements of notice and the conduct of the sale. 50 Upon
recording, the recitals are prima facie evidence of the truth
of the matters therein, but as discussed below, recitals are
conclusive in favor of a bona-fide purchaser.51
Arkansas law also allows a debtor under threat of a
statutory foreclosure to “reinstate” a mortgage or deed of
trust, irrespective of whether the acceleration clause is
triggered. 52 This reinstatement period runs from the filing
of the notice of default to the foreclosure sale. 53 If the
43. See ARK. CODE ANN. § 18-50-112(b).
44. ARK. CODE ANN. § 18-50-112(a)(1).
45. ARK. CODE ANN. § 18-50-107(f)(1) (Supp. 2011).
46. ARK. CODE ANN. § 18-50-107(f)(2).
47. ARK. CODE ANN. § 18-50-108(a) (Repl. 2003).
48. ARK. CODE ANN. § 18-50-109 (Repl. 2003).
49. ARK. CODE ANN. § 18-50-109(d).
50. ARK. CODE ANN. § 18-50-111(a)(1) (Repl. 2003).
51. ARK. CODE ANN. § 18-50-111(a)(2).
52. ARK. CODE ANN. § 18-50-114 (Repl. 2003).
53. ARK. CODE ANN. § 18-50-114(a)(1).2013] STATUTORY FORECLOSURES 119
mortgagor or grantor pays the appropriate party the “entire
amount then due” and any costs and expenses actually
incurred, including trustee’s and attorney’s fees, the
mortgage will be reinstated. 54 The statute is clear that the
remainder of the principal is not due, only the amount
owed had no default occurred. 55 If the mortgage is
reinstated, a cancellation of the notice of default must be
recorded.56
III. DUE PROCESS CONCERNS
Potential lack of due process is a weakness of
statutory-foreclosure laws. 57 Therefore, constitutional
objections may be raised with respect to notice, hearing,
waiver, and state and federal action on grounds of due
process. 58 Arkansas’s notice requirements are better than
those of many states, as Arkansas requires a certified and
first-class mailing to the debtor and junior lienors. 59
Only three decisions have discussed the constitutional
issues of the Statutory Foreclosure Act. In Parker v.
BankcorpSouth Bank, the Arkansas Supreme Court upheld
the constitutionality of Arkansas’s Act. 60 In Parker, the
plaintiff argued the Statutory Foreclosure Act violated
procedural due process under both the U.S. and Arkansas
Constitutions. 61 The court held, first, that under the U.S.
Constitution, there was “no state action” involved under
the Arkansas statute: 62 “It was the bank who was the actor
in this foreclosure action, the bank that followed the
procedures, and the bank that initially loaned Ms. Parker
the money to purchase her home. No state actor was
involved, nor was any assistance of a state official
required.” 63 Mere enactment did not constitute state
54. ARK. CODE ANN. § 18-50-114(a)(1).
55. ARK. CODE ANN. § 18-50-114(a)(1).
56. ARK. CODE ANN. § 18-50-114(b).
57. NELSON & WHITMAN, supra note 9, §§ 7.23-.30.
58. Id. §§ 7.24-.28.
59. ARK. CODE ANN. § 18-50-104(c) (Supp. 2011).
60. 369 Ark. 300, 302, 253 S.W.3d 918, 920 (2007).
61. Id. at 303, 253 S.W.3d at 920.
62. Id. at 304, 253 S.W.3d at 921.
63. Id. at 308, 253 S.W.3d at 924.120 ARKANSAS LAW REVIEW [Vol. 66:111
action. 64 Consistent with the Arkansas Constitution, the
second prong of Arkansas’s two-pronged state-action test
was not met: the party charged with depriving plaintiff of
her rights via the foreclosure process was not a state actor. 65
As for the second case, in 2004 the United States
District Court for the Eastern District of Arkansas came to
a similar conclusion with respect to the U.S. Constitution.66
In the third case, the debtor in bankruptcy court argued
that he did not receive actual notice of the foreclosure
sale. 67 Although he did not allege deprivation of due-
process rights, the foreclosing mortgage company
nonetheless introduced uncontradicted evidence that
notices were mailed to the debtor in compliance with the
statute. 68 The court noted that “actual notice of the
[foreclosure] sale is not required if the statutory
requirements are adhered to.” 69
IV. THE PLAYERS
Who may use statutory foreclosure in Arkansas, and in
what capacity, has proven to be the subject of repeated
litigation that effectively shut down statutory foreclosures
for months in 2011 and 2012. 70 This litigation arose in part
as a result of recent amendments to the statute. 71
The parties involved in a residential foreclosure can be
divided into three categories. First, there is the
homeowner/debtor/grantor/mortgagor, the person who
pledged the home as collateral for a loan. Second, there is
64. Id. at 310, 253 S.W.3d at 925.
65. Parker, 369 Ark. at 310-11, 253 S.W.3d at 925 (“First, the deprivation must
be caused by the exercise of some right or privilege created by the State or by a rule
of conduct imposed by the State or by a person for whom the State is responsible. . .
. Second, the party charged with the deprivation must be a person who may fairly be
said to be a state actor. This may be because he is a state official, because he has
acted together with or has obtained significant aid from state officials, or because his
conduct is otherwise chargeable to the State.” (alteration in original) (quoting
Leonards v. E.A. Martin Mach. Co., 321 Ark. 239, 246, 900 S.W.2d 546, 551 (1995))).
66. See Hernandez v. Fleet Mortg. Corp., No. 4:01-cv-00442-BRW (E.D. Ark.
Feb. 25, 2004).
67. In re Gatlin, 357 B.R. 519, 522-23 (Bankr. W.D. Ark. 2006).
68. Id. at 521.
69. Id. at 522.
70. Holmes’ Ruling To Open Foreclosure Bottleneck, supra note 3.
71. Id.2013] STATUTORY FORECLOSURES 121
the owner of the note—the lender/creditor/mortgagee. If a
deed of trust is involved, this party is the beneficiary of the
trust. This party may also be the ultimate assignee or
successor in title to the note and mortgage, if it is
transferred after the closing, as most notes and mortgages
are today. In today’s environment of mortgage
securitization, the mortgagee or beneficiary may be hard to
track down, as instruments are almost always sold at least
once, and often are sold several times, winding up in the
hands of private investors, such as Fannie Mae, Freddie
Mac, or similar entities. The note may be placed in a
securitization trust, in which case the trustee of the trust
(not to be confused with the trustee of a deed of trust)
would own legal title to the note. 72
There may or may not be a third party, one who has
“standing” to file and publish the notice, conduct the sale,
etc. In a judicial foreclosure, a mortgagee that is an entity
(as most are) must be represented by an attorney in court,
as entities cannot appear pro se.73 In cases of statutory
foreclosure, theoretically an entity-mortgagee could file
notice, conduct the sale, and perform other necessary tasks
without the assistance of a lawyer, although in practice the
entity will usually appoint an agent by means of a limited
power of attorney to perform these tasks. 74 If the
instrument is a deed of trust, the trustee will usually carry
out the foreclosure procedure by virtue of its power of sale.
Additionally, today there is almost always a mortgage
servicer that handles the administration of the instrument,
collects payments, and carries out the foreclosure. The
mortgage servicer, usually a mortgage company or bank,
has the power to act for the mortgagee/beneficiary/note
owner and may even hold the note. 75 Thus, the third party
72. Adam J. Levitin & Tara Twomey, Mortgage Servicing, YALE J. ON REG. 1,
14 n.35, 16 (2011).
73. Nisha, LLC v. TriBuilt Constr. Grp., LLC, 2012 Ark. 130, at 13, ___ S.W.3d
___, ___; Ark. Bar Ass’n v. Union Nat’l Bank, 224 Ark. 48, 50, 273 S.W.2d 408, 410
(1954).
74. If the mortgagee does conduct its own foreclosure, it may not charge the
borrower a fee or any costs. ARK. CODE ANN. § 18-50-102(a)(2)(C) (Supp. 2011).
75. For a discussion of the difference between categories two and three, and
how their differences led to problems with standing to foreclose, see PERMANENT
EDITORIAL BD. FOR THE UNIF. COMMERCIAL CODE, APPLICATION OF THE122 ARKANSAS LAW REVIEW [Vol. 66:111
could be an attorney-in-fact, a trustee, a mortgage servicer,
or there may be no third party at all if the mortgagee itself
conducts the foreclosure.
In recent years, a fourth category, the Mortgage
Electronic Registration System (MERS), was sometimes a
player as well. MERS is basically an electronic mortgage
registry that was created to bypass the recording of all
mortgage and deed of trust assignments in county records.
An instrument may be sold several times on the secondary
market. Without some record of the assignments, bona-
fide purchasers and similar parties will have no notice.
However, often such assignments go unrecorded in county
records. MERS was created to fix this problem. MERS
calls itself both a “mortgagee” and a “nominee,” which has
led to some confusion.76 MERS’s attempts to foreclose on
properties led to mixed results in the courts, with some
states giving MERS the green light and others, including
Arkansas, ruling against MERS. 77 However, since 2011,
MERS no longer carries out foreclosures for lenders. 78
Additionally, MERS has been the object of a recent spate
of suits by county clerks in various states. 79 Such a suit was
filed in Arkansas in 2011 and was dismissed with prejudice
in 2012. 80 This suit was one of a number of “copycat”
lawsuits filed in several states, most filed by clerks. 81
UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE
NOTES 5-6 (2011), available at http://www.uniformlaws.org/Shared/Committees
_Materials/PEBUCC/PEB_Report_111411.pdf; Dale A. Whitman & Drew
Milner, Foreclosing on Nothing: The Curious Problem of the Deed of Trust
Foreclosure Without Entitlement To Enforce the Note, 66 ARK. L. REV. (forthcoming
Apr. 2013) .
76. Daniel P. Weber, The Magic of the Mortgage Electronic Registration
System: It Is and It Isn’t, 85 AM. BANKR. L.J. 239-41 (2011).
77. See Mortg. Elec. Registration Sys., Inc. v. Sw. Homes of Ark., 2009 Ark.
152, at 1-2, 301 S.W.3d 1, 2 (2009) (holding that MERS was not an agent of the
lender, a holder of legal title, nor an entity entitled to necessary-party status). For a
discussion of different state courts’ reactions to MERS, see Weber, supra note 76, at
246-54.
78. Carrie Bay, MERS Bows Out of Foreclosure and Bankruptcy Proceedings,
DSNEWS.COM (July 27, 2011), http://www.dsnews.com/articles/mers-bows-out-of-
foreclosure-and-bankruptcy-proceedings-2011-07-27.
79. See, e.g., Brown v. Mortg. Elec. Registration Sys., Inc., ___ F. Supp. 2d ___,
___, 2012 WL 5416922 (W.D. Ark. Sept. 17, 2012).
80. Id. at *4. The suit, filed in Hot Spring County Circuit Court, was removed
to the Western District of Arkansas. Id. at *1. The court ruled that the plaintiffs
failed to state claims of illegal exaction, unjust enrichment, and violation of the2013] STATUTORY FORECLOSURES 123
One area of recent litigation focused on sections 18-50-
102 and 18-50-117 of the Arkansas Code and the
qualifications of trustees/attorneys-in-fact and
mortgagees/beneficiaries. In 1987, the original language of
subsection two of section 18-50-102 of the Arkansas Code
discussed the regulation of successor trustees. 82 The
subsection was titled “Qualifications of trustee-
appointment of successor trustee” and set forth four
categories of eligible trustees: (1) attorneys; (2) banks or
savings and loans; (3) corporations authorized to conduct
trust business; and (4) state agencies. 83 “Trustee” was
defined as “a person to whom legal title to real property is
conveyed by a deed of trust.” 84 The statute required banks
and savings and loans to be authorized to do business under
the laws of either Arkansas or the United States; the statute
further required corporations to be authorized to conduct
trust business either in Arkansas or the United States. 85
Clearly, section 18-50-102 of the Arkansas Code was
intended only to apply to trustees, not to attorneys-in-fact.
Other sections, however, contemplated “mortgagees” filing
and publishing notices and conducting sales, 86 where
“mortgagee” was defined as “the person holding an interest
Arkansas Deceptive Trade Practices Act; further, the court found that there is no
duty to record mortgages under Arkansas law. Id. at *2-4. The suit was dismissed
with prejudice. Id. at *4.
81. See, e.g., Fuller v. Mortg. Elect. Registration Sys., Inc., ___ F. Supp. 2d ___,
___, 2012 WL 3733869, at *2, *18 (M.D. Fla. June 27, 2012) (dismissing lawsuit
brought by Florida clerks); Christian Cnty. Clerk v. Mortg. Elec. Registration Sys.,
Inc., No. 5:11CV-00072-M, 2012 WL 566807, at *1 (W.D. Ky. Feb. 21, 2012).
Potential class actions similar to those in Arkansas have been filed in Texas, Florida,
Oklahoma, and Michigan. See Denise Richardson, More Lawsuits Against MERS
Seek Millions in Lost Filing Fees, GIVE ME BACK MY CREDIT (Nov. 15, 2011, 6:16
PM), http://www.givemebackmycredit.com/blog/2011/11/more-lawsuits-against-
mers-seek-millions-in-lost-filing-fees.html. The author knows of no cases filed
earlier than those in Arkansas, although mortgagors have filed class actions against
MERS as well.
82. Act 53, 1987 Ark. Acts 121, 122-23. This section of Arkansas’s statute
appears to be modeled after Utah’s statute. See UTAH CODE ANN. § 57-1-21 (West
2012) (containing the same structure and setting forth similar categories of potential
trustees).
83. Act 53, 1987 Ark. Acts 121, 122-23.
84. Act 53, 1987 Ark. Acts 121, 121.
85. Act 53, 1987 Ark. Acts 121, 122.
86. Act 53, 1987 Ark. Acts 121, 124-26. Typically the phrase “mortgagee or
trustee” is used.124 ARKANSAS LAW REVIEW [Vol. 66:111
in real property as security for the performance of an
obligation.”87
By 2003, the language of these sections had changed.
The statute was modified to allow statutory-foreclosure
proceedings to be conducted by “an affiliate of a bank or
savings and loan association authorized to do business
under the laws of Arkansas or those of the United States,
which is either an Arkansas bank or a registered out of
state bank [and] . . . maintains a branch in the State of
Arkansas.” 88 The definition of “mortgagee” was expanded
in 1999 to also include a mortgagee’s attorney-in-fact, 89 and
section 18-50-102 of the Arkansas Code was amended that
same year to impose the same requirements upon an
attorney-in-fact. 90 The 1999 amendments also required any
power of attorney or substitution of trustee to be recorded
before a trustee’s or mortgagee’s deed was recorded.91
Also in 2003, a completely new section was added to
the statute. Section 18-50-117 of the Arkansas Code
required any person “availing” themselves to the statutory-
foreclosure procedure to be authorized to do business in
the state. 92 The emergency clause stated the justification
for the new section: “foreign entities” were “availing
themselves to the provisions” of the Statutory Foreclosure
Act “to the detriment of Arkansas citizens.” 93 Logically,
given the legislative intent expressed in the emergency
clause, it would seem that the new section 18-50-117 was
intended to apply to the note-owner/lender/mortgagee/
beneficiary or successor in title, and not to the entity or
agent that was actually conducting the foreclosure. Section
18-50-102 of the Arkansas Code already existed and set out
the qualifications for trustees and attorneys-in-fact. It
would not make sense for section 18-50-117 to duplicate an
existing section. Furthermore, section 18-50-102 allowed
banks, trust companies, and affiliates to qualify as trustees
or agents if they were authorized to do business in the
87. Act 53, 1987 Ark. Acts 121, 122.
88. Act 1303, 2003 Ark. Acts 4570, 4571-72.
89. Act 983, 1999 Ark. Acts 3642, 3643.
90. Act 983, 1999 Ark. Acts 3642, 3644.
91. Act 983, 1999 Ark. Acts 3642, 3645.
92. Act 1303, 2003 Ark. Acts 4570, 4571.
93. Act 1303, 2003 Ark. Acts 4570, 4572.2013] STATUTORY FORECLOSURES 125
United States. In other words, two sets of requirements
existed: one for agents or trustees in section 18-50-102 and
one for owners of the note in section 18-50-117. Section 18-
50-117, however, went unremarked by debtors’ attorneys
until 2010.
In 2010, Chase Home Finance, L.L.C. (Chase), a
mortgage company, initiated statutory foreclosures against
two properties, one owned by Daniel and Susan Johnson
and the other owned by Tracy Estes. 94 Similarly, in 2010,
J.P. Morgan Chase Bank, N.A. (J.P. Morgan), a national
bank, initiated a statutory foreclosure against property
owned by Tammy Peeks. 95 Chase later transferred its two
proofs of claim to J.P. Morgan. 96 In all three cases, Wilson
& Associates, P.L.L.C., was the attorney-in-fact handling
the foreclosure procedure and sale. 97 All of the
homeowners petitioned for Chapter 13 bankruptcy between
September 2010 and January 2011 in the Eastern District of
Arkansas. 98 In all three cases, the bankruptcy petitions
halted the foreclosures, 99 and the creditors were listed as
long-term secured creditors in the Chapter 13 plans.100 The
dispute centered on whether the creditors could add
foreclosure fees and costs to the debt owed by the
homeowners. 101 The instruments used to create the debt
gave J.P. Morgan the right to foreclosure fees and costs, but
the debtors contended that J.P. Morgan and Chase had no
right to use statutory foreclosure because the entities were
not “authorized to do business” in Arkansas, as section 18-
50-117 required.102
First, J.P. Morgan argued that because it used Wilson
& Associates to conduct the foreclosures, it was in
compliance with Arkansas law and that the “authorized to
94. In re Johnson, 460 B.R. 234, 239 (Bankr. E.D. Ark. 2011), rev’d, JPMorgan
Chase Bank, N.A. v. Johnson, 470 B.R. 829, 837 (E.D. Ark. 2012).
95. Id.
96. Id.
97. Id.
98. Id.
99. In re Johnson, 460 B.R. at 239.
100. Id.
101. Id. at 239-40.
102. Id. at 240.126 ARKANSAS LAW REVIEW [Vol. 66:111
do business” provision did not apply.103 However, the court
ruled that the plain language of section 18-50-117 obligated
J.P. Morgan to satisfy the requirements of both 18-50-117
and 18-50-102 for a valid statutory foreclosure. 104 Indeed,
the judge noted that the 2011 amendments to the Statutory
Foreclosure Act (effective after the bankruptcies were filed
but before the lawsuits were filed) made the requirements
for “authorized to do business in Arkansas” even stricter—
the attorney-in-fact or trustee must have a brick-and-
mortar presence in Arkansas. 105 The court also pointed to
the emergency clause in Act 1303 for support, which stated
that “foreign entities not authorized to do business in the
State of Arkansas” were availing themselves to statutory
foreclosures “to the detriment of Arkansas citizens,” and
the “act is immediately necessary because these entities
should be authorized to do business in the State of
Arkansas before being able to use the Statutory
Foreclosure Act.” 106 Refuting J.P. Morgan’s argument on
another ground, the court found that if the sale is
conducted by an agent for a mortgagee, the agent has only
the delegated powers of the mortgagee.107 Because J.P.
Morgan did not have the power to use a statutory
foreclosure, Wilson & Associates did not either.
J.P. Morgan next argued that the Wingo Act conflicted
with the Statutory Foreclosure Act and that the former
should control. 108 The Wingo Act was enacted in 1987, the
same year as the Statutory Foreclosure Act, and requires
foreign corporations that “transact business” in Arkansas to
obtain a certificate of authority from the Secretary of
State. 109 The Wingo Act contains a list of activities that do
not constitute “transacting business” and, thus, do not
103. Id. at 241-42. J.P. Morgan argued that section 18-50-117 of the Arkansas
Code applied to either the owner of the note or the foreclosing entity—here the
attorney-in-fact. Id.
104. In re Johnson, 460 B.R. at 242.
105. Id.
106. Id. (quoting Act 1303, 2003 Ark. Acts 4570).
107. Id. at 243; see also ARK. CODE ANN. § 18-50-102(d) (Supp. 2011). The
same is true for a trustee who holds a power of sale by virtue of a deed of trust.
ARK. CODE ANN. § 18-50-102(b)(2).
108. In re Johnson, 460 B.R. at 243.
109. ARK. CODE ANN. § 4-27-1501(a) (Repl. 2001).2013] STATUTORY FORECLOSURES 127
require a certificate. 110 On the list are “[m]aintaining . . .
any proceeding” and “enforcing mortgages.” 111 J.P.
Morgan argued that the Wingo Act did not require a
corporation to be authorized to do business to foreclose a
mortgage. 112 However, using the statutory rule of
construction that the more specific statute controls, the
court ruled that the Statutory Foreclosure Act carved out a
specific exception to the Wingo Act. 113
J.P. Morgan cited the case of Omni Holding &
Development Corp. v. C.A.G. Investments, Inc., in which
the Arkansas Supreme Court held that a creditor suing on a
promissory note did not need a certificate of authority from
the Secretary of State because the creditor’s actions were
exempt under the Wingo Act. 114 However, the court’s
response was that Omni merely held that “a creditor can
file a lawsuit in furtherance of collection activities without a
certificate of authority.” 115 The issue in In re Johnson was
not whether J.P. Morgan could foreclose by a lawsuit; it was
whether J.P. Morgan could use statutory foreclosure.
Because J.P. Morgan was a national bank, could it be
authorized to do business in Arkansas without a certificate
from the Secretary of State? The court noted that statutory
law indicated that “authorized to do business” would be
satisfied by a certificate. 116 However, the court declined to
rule that such a certificate would necessarily fulfill the
requirement.117 The opinion states that both parties
stipulated that J.P. Morgan was not authorized to do
business in Arkansas, but (as the district court noted on
appeal) this statement is not supported by the transcript,
which states that the stipulation was actually that J.P.
Morgan did not have a certificate from the Secretary of
110. ARK. CODE ANN. § 4-27-1501(b).
111. ARK. CODE ANN. § 4-27-1501(b)(1), (8).
112. In re Johnson, 460 B.R. at 243.
113. Id. at 244.
114. Id. (citing Omni Holding & Dev. Corp. v. C.A.G. Invs., Inc., 370 Ark. 220,
258 S.W.3d 374 (2007)).
115. Id. (citing Omni Holding & Dev. Corp. v. C.A.G. Invs., Inc., 370 Ark. 220,
226, 258 S.W.3d 374, 379 (2007)).
116. Id. at 241 n.5.
117. In re Johnson, 460 B.R. at 241 n.5.128 ARKANSAS LAW REVIEW [Vol. 66:111
State. 118 As of this writing, J.P. Morgan has zero branches
in Arkansas and is not registered on the Secretary of State’s
website; J.P. Morgan’s only presence seems to be numerous
ATM machines throughout the state. 119
Additionally, J.P. Morgan argued that the National
Banking Act (NBA) 120 preempts the requirement that a
bank be authorized to do business in Arkansas to initiate a
statutory foreclosure. 121 The court found no express
preemption of state law in the language of the Act. 122
Similarly, the doctrine of “field preemption” did not apply
because banks are generally subject to state law in the areas
of the acquisition and transfer of property and the right to
collect their debts. 123 The second type of implied
preemption, “conflict preemption,” is divided into two
subtypes: “physical impossibility preemption” and
“obstacle preemption.”124 Neither type was evident here. 125
In discussing preemption, the court concluded that the
requirement to be authorized to do business in Arkansas
would not significantly impair the bank’s ability to conduct
its business of banking. 126 The court stated that having to
bring judicial foreclosures did not significantly impair a
bank’s ability to collect its debts, 127 noting that almost half
of the states do not permit statutory foreclosure at all. 128
One consequence of In re Johnson was the reluctance
of many, if not most, title insurers to insure any title to
statutorily foreclosed properties. Most insurers took the
stance that title was insurable for properties already
conveyed to bona-fide purchasers. However, insurers were
118. Id. at 238-39; see also JPMorgan Chase Bank, N.A. v. Johnson, 470 B.R.
829, 833 (E.D. Ark. 2012).
119. A Google search of “JPMorgan Chase Bank Arkansas” retrieves only a
listing of sixty-nine “Chase-Visa” ATMs within Arkansas. Chase Bank Locations by
City in Arkansas, USA LOCATOR, http://usalocator.org/chase-bank-locations/
arkansas (last visited Feb. 18, 2013).
120. 12 U.S.C. § 38 (2006).
121. In re Johnson, 460 B.R. at 246.
122. Id.
123. Id. (quoting Watters v. Wachovia Bank, N.A., 550 U.S. 1, 11 (2007)).
124. Id. at 247.
125. Id.
126. In re Johnson, 460 B.R. at 247.
127. Id. at 248.
128. Id. (citing Grant S. Nelson & Dale A. Whitman, Reforming Foreclosure:
The Uniform Nonjudicial Foreclosure Act, 53 DUKE L.J. 1399, 1403 (2004)).2013] STATUTORY FORECLOSURES 129
not willing to insure statutory foreclosures in midstream,
preferring that lenders instead file judicial foreclosures.129
The three cases consolidated in the case of In re
Johnson were appealed and all three, along with two others,
were eventually assigned to Judge Holmes. 130 Jones v.
JPMorgan Chase Bank, N.A. involved a statutory
foreclosure, to which the Joneses objected on similar
grounds to those in In re Johnson,131 and Rivera v.
JPMorgan Chase Bank was a potential class-action
lawsuit. 132 Several weeks after the In re Johnson decision,
Rivera was remanded to federal court and filed in the
Eastern District of Arkansas, listing all residents subject to
a statutory foreclosure initiated by J.P. Morgan within the
previous five years as a putative class, irrespective of
whether these residents had filed for bankruptcy. 133 Rivera
alleged violations of the Arkansas Deceptive Trade
Practices Act, unjust enrichment, slander of title, and
prayed for invalidation of the foreclosures, damages, and
attorney’s fees. 134 These lawsuits were joined with In re
Johnson. 135
In May 2012, the district court disagreed with the
bankruptcy court and reversed In re Johnson in the
consolidated-case decision in JPMorgan Chase Bank, N.A.
v. Johnson.136 The court first noted that section 18-50-117
of the Arkansas Code makes no distinction between
banking and other types of business.137 The court further
noted that only banks, savings and loans, and mortgage
companies can use the statutory-foreclosure procedure
under section 18-50-116 of the Arkansas Code. 138 It stated
that the NBA authorizes federally chartered banks to
129. Interview with Wesley Lasseigne, Senior Vice President & General
Counsel, Lenders Title Co. (Oct. 30, 2012).
130. JPMorgan Chase Bank, N.A. v. Johnson, 470 B.R. 829, 831 (E.D. Ark.
2012).
131. Id.
132. Id.; see also Class Action Complaint, Rivera v. JPMorgan Chase Bank,
No. 3:11CV00198-SWW (E.D. Ark. Oct. 3, 2011) (on file with author).
133. Johnson, 470 B.R. at 832.
134. See id.
135. Id. at 831.
136. Id. at 837.
137. Id. at 835 n.4.
138. Johnson, 470 B.R. at 835 n.4.130 ARKANSAS LAW REVIEW [Vol. 66:111
engage in real-estate lending and reasoned that this power
would be rendered a nullity if banks could not later
foreclose. 139 Unlike the bankruptcy court, the district court
seemed not to consider that judicial foreclosure would still
be an avenue open to J.P. Morgan. 140
The court interpreted “authorized to do business in
Arkansas” under section 18-50-117 of the Arkansas Code
to mean that a foreclosing entity could be authorized either
under Arkansas or federal law, applying wording from
section 18-50-102 of the Arkansas Code.141 The court did
not discuss the apparent difference in focus of the two
statutes; instead, the court noted that section 18-50-102
provides that a bank could be authorized to do business in
Arkansas under either state or federal law. 142 The court
examined other provisions of the Arkansas Code in
explaining that the Wingo Act requires foreign
corporations to obtain a certificate from the Secretary of
State, and Arkansas banking statutes provide that in some
instances an out-of-state bank must obtain a certificate
from the Arkansas Bank Commissioner (which J.P. Morgan
did not have).143 Because section 18-50-117 merely stated
that an entity must be “authorized to do business in this
state” but not necessarily under state law and because
section 18-50-117 did not specifically require a certificate,
J.P. Morgan was authorized to use the statutory-foreclosure
procedure through a charter from the Office of the
Comptroller of the Currency (OCC). 144
J.P. Morgan raised issues of federal preemption,
violation of the Commerce Clause, and violation of due
process. 145 None of these arguments were addressed by the
court; instead, the issue was decided solely by
139. Id.
140. Id.
141. Id. at 836.
142. Id.
143. Johnson, 470 B.R. at 836.
144. Id. at 834, 837.
145. Id. at 837 n.10.2013] STATUTORY FORECLOSURES 131
interpretation of Arkansas statutes. 146 This case is currently
on appeal to the Eighth Circuit Court of Appeals. 147
Whereas the bankruptcy court noted the 2011 changes
to the Statutory Foreclosure Act, even though these
changes were not in effect with respect to the litigation, the
district court expressed in a footnote that the 2011
amendments did not apply in the cases and declined to
discuss their substance. 148 Nonetheless, the 2011
amendments are worth a glance. In addition to imposing
the brick-and-mortar requirements on attorneys-in-fact and
trustees, the 2011 amendments eliminated being authorized
to do business under the laws of the United States as a
qualification to foreclose a mortgage or deed of trust. 149
Thus, if a bank is nationally chartered and authorized to do
business under the laws of the United States—but not of the
State of Arkansas—the bank could not serve as a
trustee/attorney-in-fact. 150 This seems to indicate that the
legislature intended to make section 18-50-102 more like
section 18-50-117, further restricting who could both use the
statute and actually file statutory foreclosures.
Subsequent to the district court decision, title-
insurance underwriters once again allowed title to be
insured on foreclosures by entities covered by the Johnson
decision. For example, in July, a leading title insurer
released a revised underwriting standard based on the
Johnson ruling that stated the company would insure a
statutory foreclosure if the “foreclosing entity” was either a
national bank chartered by the OCC, a foreign entity with a
certificate from the Secretary of State, an out-of-state bank
with a certificate from the Arkansas Bank Department, or
an Arkansas individual or entity authorized to do business
in Arkansas.151
Even if Johnson is affirmed on appeal, entities that are
not covered by the decision are still availing themselves to
146. Id.
147. Interview with Joel Hargis, Crawley & DeLoache, Attorneys at Law,
PLLC (Jan. 4, 2013).
148. Johnson, 470 B.R. at 836 n.5.
149. ARK. CODE ANN. § 18-50-102 (Supp. 2011).
150. ARK. CODE ANN. § 18-50-102(a).
151. Interview with Wesley Lasseigne, Senior Vice President & General
Counsel, Lenders Title Co. (Oct. 30, 2012).132 ARKANSAS LAW REVIEW [Vol. 66:111
statutory foreclosure. For example, a pending case in
Miller County concerns a statutory foreclosure in which the
foreclosing entity is Deutsche Bank National Trust Co., as
Trustee for Soundview Home Loan Trust 2006-WF2. 152
There, Deutsche Bank is acting as the trustee of a
residential mortgage securitization trust. 153 The
homeowners argue that the trust company, as the owner of
the note, fails to meet the requirements of section 18-50-117
of the Arkansas Code because the company is not
authorized to do business in Arkansas. 154 Additionally,
even if the court followed Judge Holmes’s decision (and it
is not bound to, as it is a state court), the party availing
itself to the statute here is not a bank but a trust
company. 155 The OCC charters banks, not trust companies.
If the trust company does not have an Arkansas certificate
or registration, it seemingly would not be authorized to do
business in Arkansas, and thus not qualified under section
18-50-117. While for some the name “trust company”
simply denotes a bank, it may be a stand-alone organization
and independent in its own right.156
152. Post-Hearing Reply Brief, Deutsche Bank Nat’l Trust Co. v. Collins, No.
CV-2010-292-1 (Miller Cnty. Cir. Ct. Dec. 6, 2012) (on file with author).
153. Such a trustee is not a power of sale trustee. The trustee of a mortgage-
backed securitization (MBS) trust holds legal record title to the mortgage loans;
equitable title is held by investors, typically large institutional investors. For a
recent discussion of the role of the trustee in mortgage-backed securities, see
generally CORPORATE TRUST COMM., AM. BANKERS ASS’N, THE TRUSTEE’S
ROLE IN ASSET-BACKED SECURITIES (2010), available at
http://www.aba.com/aba/documents/press/RoleoftheTrusteeinAssetBackedSecuritie
sJuly2010.pdf. As the Corporate Trust Committee explains:
The trustee of an MBS trust may have no or very limited information
on either the borrower or the status of the mortgage loan. While
foreclosure and any legal action with respect to trust properties must be
brought in the trustee’s name as the legal owner of the loans,
foreclosure activity and the post-maintenance, sale and disposition of
the trust properties are managed entirely by the loan servicers.
Id. at 10.
154. Post-Hearing Reply Brief, supra note 152, at 2.
155. About the OCC, OFFICE COMPTROLLER CURRENCY: U.S. DEPARTMENT
TREASURY, http://www.occ.gov/about/what-we-do/mission/index-about.html (last
visited Feb. 19, 2013).
156. Trust Examination Manual: Section 10—Other Trust Matters, FED.
DEPOSIT INS. CORP., http://www.fdic.gov/regulations/examinations/trustmanual/
section_10/section_x.html#D3 (last visited Jan. 13, 2013).2013] STATUTORY FORECLOSURES 133
Without legislative amendments the final word on this
issue could come from the Arkansas Supreme Court.
Currently at least three cases dealing with this issue are
pending in Arkansas circuit courts. 157 One may reach the
Arkansas Supreme Court in the near future. Clarification
from the legislature may also be at hand. As discussed
above, an amendment to a bill introduced in the 2012 fiscal
session would seem to completely eliminate the legislative
intent behind the 2003 amendment that restricted note
owners to those with an Arkansas connection. 158 Arguably
this requirement makes it easier for debtors to
communicate and possibly negotiate with the note owner.
However, Act 885, Act 901, and the National Mortgage
Settlement Standards discussed below should help to
alleviate this problem.
V. VOID VERSUS VOIDABLE
What if, ultimately, a court was to rule that an entity
was not authorized to avail itself to the statutory-
foreclosure procedure under section 18-50-117 of the
Arkansas Code? If the home was still in the hands of the
foreclosing entity, bought as an REO by the entity at the
sale, then the sale could be set aside. But if a bona-fide
purchaser purchased the property, either at the sale or
later, then the void versus voidable question arises.
The traditional rule is that a defect in a foreclosure
that is so substantial that it renders the sale void causes no
title to pass to the sale purchaser or any subsequent
grantees. 159 Typical grounds for voidness include a forged
mortgage, no default on the part of the mortgagor, or
failure to follow “fundamental procedural requirements.” 160
In Arkansas, a sale held at the wrong courthouse in a
county with two county seats was held void because the
157. Post-Hearing Reply Brief, supra note 152, at 1-3; First Amended and
Substituted Complaint, Dial v. Deutsche Bank Nat’l Trust Co., No. 60-CV-2011-
5011 (Pulaski Cnty. Cir. Ct. Mar. 22, 2012) (on file with author); Order Granting
Motion for Partial Summary Judgment, Pearce v. Staggs, No. CV 2006-3543 (Pulaski
Cnty. Cir. Ct. Feb. 21, 2012) (on file with author).
158. See supra note 8 and accompanying text.
159. NELSON & WHITMAN, supra note 9, § 7.20.
160. Id.134 ARKANSAS LAW REVIEW [Vol. 66:111
statute requires the notice of intention to sell to set out the
“time, date, and place of sale.” 161 Remarking that the
Statutory Foreclosure Act is to be strictly construed, the
court set aside the sale even though the trial court found
the alleged irregularities in the sale did not harm or
prejudice the rights of the homeowners.162 The court noted
further that under section 18-50-103 of the Arkansas Code,
the “trustee . . . may not exercise a power of sale unless” the
specified requirements are satisfied.163 Procedurally in
Henson, the plaintiffs petitioned to set aside the sale. 164
Another Arkansas case set aside a mortgage for the
procedural violation of sending the notice of default to the
debtor eleven calendar days after recording, rather than
“ten days” as specified by the statute.165 The Arkansas
Supreme Court interpreted “days” to be calendar days.166
In 1999, the Arkansas General Assembly amended the
statute to allow the mortgagee or trustee up to thirty days
after recording in which to mail the notice of default to the
debtor, thus raising the possibility that a debtor may receive
notice that his or her home will be up for sale less than a
month before the sale date. 167 A bankruptcy court,
applying Arkansas law, set aside a statutory foreclosure sale
where the published notice of default contained an
incorrect street address (even though the mortgagee knew
the street address had been changed and sent the debtor’s
notice to the new, correct address). 168
In 1999, perhaps in response to Henson, the Arkansas
General Assembly amended section 18-50-116 of the
Arkansas Code to require a mortgagor to assert any
defense or claim before the statutory-foreclosure sale took
161. Henson v. Fleet Mortg. Co., 319 Ark. 491, 497, 892 S.W.2d 250, 253 (1995)
(emphasis in original) (quoting ARK. CODE ANN. § 18-50-104 (Supp. 2011)).
162. Id.
163. Id. at 493-94, 892 S.W.2d at 251 (emphasis in original) (citing ARK. CODE
ANN. § 18-50-103 (Supp. 2011)).
164. Id. at 493, 892 S.W.2d at 251.
165. Union Nat’l Bank of Ark. v. Nichols, 305 Ark. 274, 278-80, 807 S.W.2d 36,
38-39 (1991).
166. Id. at 278, 807 S.W.2d at 38.
167. Act 983, 1999 Ark. Acts 3642, 3645-46 (codified as amended at ARK.
CODE ANN. § 18-50-104(c) (Supp. 2011)).
168. In re Gatlin, 357 B.R. 519, 523 (Bankr. W.D. Ark. 2006).You can also read
