Sandra Janvrin v. Federal National Mortgage Association & a.

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

In Case No. 2017-0721, Sandra Janvrin v. Federal National
Mortgage Association & a., the court on July 11, 2019, issued
the following order:

Having considered the briefs and oral arguments of the parties, the court
concludes that a formal written opinion is unnecessary in this case. The
appellant, Sandra Janvrin, appeals an order of the Superior Court (Wageling,
J.) denying her petition to enjoin the foreclosure sale of her home, and to set
aside the mortgage held by appellee Federal National Mortgage Association
(FNMA), and serviced by appellee PNC Mortgage, a division of PNC Bank, NA
(PNC). We reverse and remand.

The pertinent facts are as follows. Janvrin’s home, which she inherited
unencumbered, is located in Salem. Janvrin has a tenth-grade education, is
not experienced in financial matters, and, as of 2007, was unemployed, on
medical disability, and receiving social security benefits. In 2007, Janvrin’s
son, William Brightman, and his children lived with his girlfriend, Angela
Warren, in Warren’s multi-unit home located in Haverhill, Massachusetts. In
approximately July of 2007, Warren asked Janvrin to loan her $40,000 to pay
an arrearage on Warren’s mortgage, using Janvrin’s home as collateral, and
Janvrin orally agreed to take out a loan to do so. In furtherance of the loan,
Janvrin provided Warren with her date of birth, social security number, and
income information. On July 31, 2007, a loan application in Janvrin’s name
was submitted, presumably by Warren, to E-Loan, Inc., an internet-based
lender. On August 8, 2007, Warren submitted false information regarding
Janvrin’s employment status and income. On August 9, 2007, E-Loan
approved a loan in the amount of $100,000.

On August 10, 2007, Warren brought Janvrin to Pentucket Bank, where,
in order to facilitate receipt of the loan proceeds, they added Janvrin’s name to
Warren’s account. Because E-Loan was an internet-based lender, a power of
attorney was necessary to provide the requisite authority for an agent to sign
the loan documents on Janvrin’s behalf. Therefore, while at the bank, Janvrin
also signed a limited power of attorney, which was notarized by a bank
employee. Janvrin, trusting Warren, did not read the document. Thereafter,
Warren used the signed and notarized limited power of attorney to create a
fraudulent limited power of attorney. In that document, Warren added the
name of Janvrin’s husband, Gary Janvrin, and forged both his and Janvrin’s
signatures on the altered document. Additionally, Janvrin’s name was
misspelled, her forged signature appeared on the signature lines for both the
principal and the agent, and the document specified that the closing was to
occur in July 2007. By its terms, the fraudulent limited power of attorney
authorized Thomas Betz, apparently affiliated with E-Loan in some manner, to
act as agent for Janvrin and her husband in executing documents for a
$100,000 loan.

On August 13, 2007, Betz executed the loan documents — an
acknowledgement of attorney-in-fact, quit-claim deed, mortgage, and note —
on behalf of Janvrin and her husband. On August 16, 2007, Janvrin again
accompanied Warren to Pentucket Bank, where she signed duplicate copies of
another limited power of attorney, each of which was notarized by a bank
employee. Janvrin again did not read the documents. Thereafter, as before,
Warren used the signed and notarized limited power of attorney to create a
fraudulent limited power of attorney: she added Gary Janvrin’s name, and
forged both his and Janvrin’s signatures. By its terms, this fraudulent limited
power of attorney authorized a closing on August 13, 2007, and authorized
Betz to act as agent for Janvrin and her husband in executing documents for a
$100,000 loan. On September 6, 2007, E-Loan recorded the fraudulent
August 16, 2007 limited power of attorney, along with the loan documents
executed by Betz. Neither of the limited powers of attorney actually signed by
Janvrin on August 10, 2007 and August 16, 2007 were introduced as evidence
at trial.

On August 20, 2007, the loan proceeds, in the amount of $94,541.00,
were deposited into the joint bank account at Pentucket Bank. Warren used
the funds to pay off the arrearage on her mortgage and for other personal
expenses. Janvrin did not receive any of the loan proceeds, nor was she aware
that they had been deposited in the account.

On October 2, 2007, the first mortgage payment of $690.68 was made
out of the joint account. In November 2007, when no further payments on the
loan had been made, National City Mortgage Bank, the loan servicer, began
calling Janvrin and sending her certified mail. However, Janvrin never opened
the mail, and the calls were made to Warren’s phone number. In early 2008,
an individual purporting to be Janvrin negotiated a repayment plan with
National City’s legal counsel, Harmon Law Offices. On May 14, 2008, a
forbearance agreement was signed by an individual who, the trial court found,
was “purporting to be [Janvrin], but who was not [Janvrin].”

Prior to the execution of the forbearance agreement, on March 17, 2008,
Janvrin’s mortgage was assigned to FNMA. On approximately April 29, 2008,
Janvrin learned that National City was planning to foreclose on her home. She
contacted Harmon Law Offices, informed it that she was a victim of fraud, and
asked what she needed to do to keep her home. Janvrin was told that, to stop
the foreclosure, she needed to send the firm $3,941.22. On May 20, 2008,
Janvrin did so, and National City suspended the planned foreclosure.

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 After her initial report of fraud to Harmon Law Offices, Janvrin continued
to report the fraud to the firm, as well as to PNC — which, in October 2008,
had acquired National City and begun servicing the loan. As the trial court
observed,

[s]he frequently told the person who answered her telephone call
that she was the victim of a fraud and that she believed someone
was looking into it. . . . [Janvrin] had few, if any, resources to
obtain legal assistance, and she relied on a belief that once
notified, PNC would locate the source of the fraud. She attempted
to alert the police, local courts, and Pentucket Bank of her claim of
fraud. She also attempted to garner assistance from an attorney,
with little luck.

Janvrin continued to make payments on the loan, but, in November
2009, she notified PNC that she needed assistance. On December 16, 2009,
Janvrin and PNC entered into a forbearance agreement setting forth a modified
repayment plan. On July 10, 2010, in response to another request for
assistance, the parties entered into a loan modification agreement.

Sometime between April and July 2012, Janvrin was visiting a family
member who lived in Warren’s home, and she discovered a box containing
various documents related to the loan. Among the documents in the box were
limited power of attorney forms — both blank and bearing signatures. Janvrin
brought the box of documents to Attorney Ralph Stein. Stein sent a letter to
PNC notifying it of the fraud, and asserting that, due to the forged limited
power of attorney, the loan was invalid and the mortgage was a nullity. In
response to Stein’s letter, PNC reviewed the mortgage file, and found, inter alia,
that there were signature and name spelling discrepancies on various loan
documents, including the August 10, 2007 limited power of attorney and the
May 14, 2008 forbearance agreement. Nonetheless, on December 20, 2012,
PNC responded to Stein’s letter, stating that Janvrin would not be excused
from the loan as she had “reaffirmed her obligation to pay the loan in full in the
Loan Modification Agreement.”

On January 26, 2015, PNC sent a letter to Janvrin informing her that
her mortgage was delinquent, and that, to avoid foreclosure, she could choose
to enter into a new trial loan modification agreement, sell her home, or execute
a deed-in-lieu of foreclosure. On February 6, 2015, Janvrin signed the new
trial loan modification agreement. According to PNC, as of February 2015,
Janvrin owed $102,687.08 in principal and interest on the loan, $8,146.08
more than the original disbursement in 2007. On May 22, 2015, PNC offered
her a new permanent loan modification agreement. As of that date, more than
seven years after the date of the original disbursement, Janvrin had made loan
payments totaling $73,479.62. Utilizing the assistance of Attorney Roger
Phillips through the New Hampshire Foreclosure Relief Project, Janvrin

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attempted to negotiate with PNC on a “compromised mortgage amount
representing the $40,000.00 original loan to which [she] agreed [with Warren]”
— but to no avail. In July 2015, after PNC and FNMA commenced foreclosure
proceedings, Janvrin filed a petition in superior court to enjoin the foreclosure
and set aside the mortgage. After a bench trial, the trial court denied her
petition. This appeal followed.

On appeal, Janvrin argues that the trial court erred when it denied her
petition because, she contends, the loan and mortgage were issued without her
authorization and were, therefore, void. She also argues that the trial court
erred when it concluded that she failed to adequately assert a request for
equitable relief in her petition. PNC and FNMA counter that the trial court did
not err when it denied Janvrin’s petition. Further, they argue that, even if the
loan and mortgage were invalid, Janvrin ratified them by signing the
forbearance and loan modification agreements. We agree with Janvrin that the
trial court erred, and remand for the trial court to further consider certain
issues discussed below.

We first consider Janvrin’s argument that the loan and mortgage were
void because they were issued without her authorization. She contends that,
because Betz only received the fraudulent limited powers of attorney, there was
no agency relationship between her and Betz. “Whether or not authority exists
for one person to act on another’s behalf is a question of fact for the trial court,
which we will not disturb unless the finding is not supported by the evidence or
is erroneous as a matter of law.” Patterson v. Tirollo, 133 N.H. 623, 627-28
(1990). “A trial court’s finding is supported by the evidence if a reasonable
person could have arrived at the same conclusion based on the evidence
presented.” Id. at 628.

“An agency relationship, or lack thereof, does not turn solely upon the
parties’ belief that they have or have not created one.” Dent v. Exeter Hosp., 155 N.H. 787, 792 (2007). “Rather, the necessary factual elements to establish
agency involve: (1) authorization from the principal that the agent shall act for
him or her; (2) the agent’s consent to so act; and (3) the understanding that the
principal is to exert some control over the agent’s actions.” Id. (quotation
omitted). “An agency relationship exists only if there has been a manifestation
by the principal to the agent that the agent may act on his account, and
consent by the agent so to act.” Richardson v. Sibley, 101 N.H. 377, 379
(1958) (quotation omitted); see also Restatement (Second) of Agency § 7, cmts
a-c, § 26, cmts a-c (1958). “The principal’s manifestation need not be express
to be valid; it may be oral or implied from the parties’ conduct.” Patterson, 133
N.H. at 627. Similarly, “[t]he granting of actual authority and consent to act
with such authority may be either express or implied from the parties’ conduct
or other evidence of intent.” Dent, 155 N.H. at 792. “Express authority arises
when the principal explicitly manifests its authorization of the actions of its
agent.” Bouffard v. State Farm Fire & Cas. Co., 162 N.H. 305, 311 (2011)

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(quotation and ellipsis omitted). “Implied authority, on the other hand, follows
as a reasonable incident or construction of the terms of express authority, or
results from acquiescence by the principal in a course of dealing by the agent.”
Id. at 311-12. “Such authority can arise from words used, from customs, or
from the relations of the parties.” Id. at 312. “The doctrine of implied actual
authority focuses upon the agent’s understanding of his authority: whether the
agent reasonably believed, because of conduct of the principal (including
acquiescence) communicated directly or indirectly to him, that the principal
desired him so to act.” Sinclair v. Town of Bow, 125 N.H. 388, 393 (1984)
(emphasis omitted).

Janvrin contends that Betz was not authorized to act on her behalf in
executing the loan documents because there was no “manifestation of
authority” from her to Betz. She argues that, as a result of Warren’s
fraudulent actions, no limited power of attorney actually signed by her was ever
transmitted to Betz — who only received the forgeries — and, therefore,
because there was no “manifestation of authority,” there was no agency
relationship. PNC and FNMA first counter that this argument was not
preserved. We disagree. Janvrin explicitly raised the argument to the trial
court in her request for findings of fact and rulings of law. Although that alone
was sufficient to preserve the issue for appeal, we also note that Janvrin
explicitly raised the argument in her Opposition to PNC and FNMA’s Motion in
Limine to Exclude Evidence of Forgery. Furthermore, Janvrin also raised it
through her argument that, due to the deficient and fraudulent limited powers
of attorney, Betz was not authorized to act as her agent, and the loan and
mortgage were void. This argument challenges the validity of the agency
relationship, which necessarily requires a manifestation of authority from the
principal to the agent. See Richardson, 101 N.H. at 379. Therefore, we
conclude that Janvrin’s manifestation argument was preserved.

Next, PNC and FNMA argue that Janvrin’s manifestation argument fails
because it is contrary to the trial court’s findings that, even if Betz did not have
express actual authority, “at a minimum, Mr. Betz had implied actual authority
to bind [Janvrin] to the August 13, 2007 note and mortgage at the time that he
executed those documents,” because “Betz would have reasonably believed,
because of [Janvrin’s] conduct in signing the limited power of attorney, that
[Janvrin] desired him to so act.” (Quotations omitted.) PNC and FNMA
contend that Janvrin cannot meet her burden to show that these findings are
unsupported by the evidence. We disagree.

We first note, with regard to this argument, that the trial court found
that Betz relied on the fraudulent limited powers of attorney when he
purported to bind Janvrin to the loan and mortgage. This finding is evidenced
by the trial court’s statement that, “[b]y virtue of the doctored power of attorney
document(s), on August 13, 2007, an acknowledgment of attorney-in-fact, quit-
claim deed, mortgage, and note were executed by Thomas Betz on [Janvrin’s]

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and/or Gary Janvrin’s behalf.” (Emphasis added.) The fraudulent limited
powers of attorney on their own — neither signed by Janvrin, nor
acknowledged by a notary or other statutorily authorized person — could not
have provided the requisite authority to Betz. See RSA 477:9 (2013) (“Every
power of attorney to convey real estate must be signed and acknowledged.”).

Nonetheless, PNC and FNMA contend that the trial court’s finding of
implied actual authority is supported by the fact that Janvrin did indeed sign
limited powers of attorney on August 10, 2007 and August 16, 2007, both of
which were notarized. However, as we have said: “An agency relationship
exists only if there has been a manifestation by the principal to the agent that
the agent may act on his account, and consent by the agent so to act.”
Richardson, 101 N.H. at 379 (quotation omitted). Here, the record does not
reflect that Betz ever received or became aware of the authentic limited powers
of attorney. Rather, Warren interposed herself between the purported principal
and agent — because of her fraud, no actual manifestation of authority from
Janvrin ever reached Betz.

PNC and FNMA seek to overcome the lack of a manifestation by
conflating the authentic limited powers of attorney actually signed by Janvrin
with the fraudulent limited powers of attorney relied upon by Betz. Thus, PNC
and FNMA urge us to defer to the trial court’s conclusion that “the ‘original’
forms which [Janvrin] actually signed were materially identical to the forms
which purport to bear Gary Janvrin’s signature, except that Warren apparently
added Gary Janvrin’s name and forged signature to those forms, and further
forged [Janvrin’s] signature on the altered forms.” Even if this conclusion were
correct, it would not change our analysis — the limited powers of attorney
relied upon by Betz were fraudulent, and the authentic limited powers of
attorney were never manifested to Betz. See RSA 477:9; Richardson, 101 N.H.
at 379.

We observe, as did the trial court, that “[t]he doctrine of implied actual
authority focuses upon the agent’s understanding of his authority: whether the
agent reasonably believed, because of conduct of the principal (including
acquiescence) communicated directly or indirectly to him, that the principal
desired him so to act.” Sinclair, 125 N.H. at 393 (quotation and emphasis
omitted). However, we do not see how Betz could have reasonably believed,
based on Janvrin’s conduct, that he had been given such authority. The
record does not reflect that Betz ever interacted, directly or indirectly, with
Janvrin, his purported principal. Nor does it reflect that Betz was aware of any
actual conduct by Janvrin. Although, as we have explained, Janvrin did sign
limited powers of attorney, the record reflects that, due to Warren’s fraudulent
actions, Betz never received or became aware of them. Moreover, it would not
have been reasonable for Betz to have relied on the August 10, 2007 limited
power of attorney because Janvrin’s name was misspelled, her (forged)
signature appeared as both the principal and the agent, and it specified a

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closing one month earlier, in July 2007. Indeed, the mere existence of the
August 16, 2007 limited power of attorney suggests that E-Loan may well have
had concerns about the facial validity of the August 10, 2007 limited power of
attorney.

PNC and FNMA argue that, even if the August 10, 2007 limited power of
attorney did not provide the requisite authorization, the August 16, 2007
limited power of attorney “authorized, affirmed, and ratified the execution of
the loan documents by Betz.” They base this argument on the trial court’s
finding that the August 16, 2007 limited power of attorney “arguably applied
retroactively” to the earlier closing. However, because the August 16, 2007
limited power of attorney delivered to E-Loan three days after closing was the
fraudulent one, not the one Janvrin actually signed, it could not have provided
the requisite authorization through ratification. See DeRochemont v. Holden, 99 N.H. 80, 83 (1954) (“The law is well settled that effective ratification requires
that the principal act with full knowledge of what the agent has done and with
an intention to adopt his acts.” (citation omitted)).

For the reasons set forth above, the trial court’s finding that an agency
relationship existed between Janvrin and Betz was both unsupported by the
evidence and erroneous as a matter of law. See Patterson, 133 N.H. at 627-28.
New Hampshire law requires that “[e]very deed or other conveyance of real
estate shall be signed by the party granting same and acknowledged by the
grantor before a justice, notary public or commissioner.” RSA 477:3 (2013).
Here, the loan documents were not signed by Janvrin, or signed on her behalf
with her authorization; therefore, because there was no mutual assent between
the parties, we hold that the loan documents were void ab initio. See RSA
477:3 (2013); 1 Richard A. Lord, Williston on Contracts § 3:4, at 284 (4th ed.
2007) (observing that where there is no mutual assent between the parties
“there can be no contract”); Neuman v. Neumann, 971 N.Y.S.2d 322, 324 (N.Y.
App. Div. 2013) (“Since the power of attorney was forged and, as a result, was
void, the subject deed and mortgage are, therefore, also void.”); Chase v.
Ameriquest Mortgage Co., 155 N.H. 19, 22-23 (2007) (holding that a mortgage,
which contained a forged signature and did not satisfy the statutory formalities
of execution, could not constitute a charge on the homestead right).

PNC and FNMA also argue that, even if the original loan and mortgage
were void, Janvrin ratified them when she signed the December 16, 2009
Forbearance Agreement, the July 10, 2010 Loan Modification Agreement, and
the February 6, 2015 Trial Loan Modification Agreement, each of which
contained provisions purportedly ratifying her obligations under the loan and
mortgage. Although PNC and FNMA made this argument below, the trial court,
having found that the loan and mortgage were valid, did not reach the issue of
ratification.

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 Notably, the ratification argument advanced by PNC and FNMA presents
us with an issue of first impression in New Hampshire: whether a loan and
mortgage that have been held to be void ab initio can, in fact, be ratified. The
authorities and courts are divided on this issue. Williston on Contracts
provides that “if a promise is void, it creates no legal obligation and the
promisor is without power to ratify [the] promise. A promisor may not bind
him- or herself under a new promise to perform an antecedent void promise.”
1 Williston on Contracts § 1:20, at 73-74; see also Restatement (Second) of
Contracts § 163, cmt. c at 444 (1981) (“[T]he recipient of a misrepresentation
may be held to have ratified the contract if it is voidable but not if it is ‘void.’”).

On the other hand, Corbin on Contracts states a contrary position: “In
cases where the transaction of the parties is in fact a mutual agreement, but is
legally void, and also in cases where there is no contract for the reason that
there are no mutual expressions of assent, the parties may nevertheless follow
the transaction by action that is itself legally operative.” 1 Timothy Murray,
Corbin on Contracts § 1.7, at 26 (rev. ed. 2018); see also Annotation, Joining in
instrument as ratification of or estoppel as to prior ineffective instrument
affecting real property, 7 A.L.R.2d 294, 302 (1949) (“Upon principles closely
[analogous] to the law of agency, the unauthorized execution of an instrument
affecting the title to land may be approved and adopted, or otherwise
confirmed, by the owner thereof or of an interest in the land, through joinder in
or execution of a subsequent instrument having that effect, expressly or by
legal implication, through operation of ratification or estoppel, if the other
essential elements are present.”). The case law is similarly split. Compare
Hermes v. Title Guarantee & Trust Co., 24 N.E.2d 859, 860 (N.Y. 1939)
(holding unassented to, fraudulent mortgage ratifiable), and Humble Oil &
Refining Co. v. Clark, 87 S.W.2d 471, 474 (Tex. 1935) (holding void lease
ratifiable), with Wamsley v. Champlin Refining and Chemicals, Inc., 11 F.3d
534, 539 (5th Cir. 1993) (observing that void promises are not contracts and
are not ratifiable), and Yvanova v. New Century Mortg. Corp., 365 P.3d 845,
852 (Cal. 2016) (same).

Because the trial court found that the loan and mortgage were valid, it
did not address ratification. For the same reason, the parties did not fully
develop arguments regarding ratification in their appellate briefs. Accordingly,
we remand for the trial court to consider this issue in the first instance. See
Huguelet v. Allstate Ins. Co., 141 N.H. 777, 780 (1997) (remanding for
consideration of argument not decided by the trial court in the first instance).

If, on remand, the trial court determines that, as a matter of law, the
loan and mortgage, which are void ab initio, can be ratified, the trial court will
next consider whether the loan and mortgage were validly ratified by Janvrin.
As part of that inquiry, the trial court will need to address any defenses to
ratification that Janvrin might assert.

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 Finally, in the interest of judicial economy, we address the following
issue because it is likely to arise on remand. See Kelleher v. Marvin Lumber &
Cedar Co., 152 N.H. 813, 847 (2005). Janvrin argues that, because her
petition is an equitable action under RSA 498:1, the trial court erred when it
concluded that Janvrin failed to adequately assert a request for equitable relief
in her petition. PNC and FNMA counter that we should defer to the trial court’s
ruling, and that “a passing reference is not sufficient to properly raise this
claim.” We agree with Janvrin. In her petition, Janvrin invoked RSA 498:1,
which provides that “[t]he superior court shall have the powers of a court of
equity” in cases involving “fraud” and “the redemption and foreclosure of
mortgages.” RSA 498:1 (2010). Moreover, in her petition, Janvrin asserted
that she was a victim of fraud, requested injunctive relief, and styled her initial
pleading, in part, as a “Bill in Equity to Enjoin Foreclosure Sale.” See Chase,
155 N.H. at 23 (recognizing that a petition to enjoin a mortgage foreclosure
initiated a case in equity and invoked the superior court’s equitable powers).
Accordingly, we hold that the trial court’s equitable powers have been properly
invoked.

In light of our decision, we need not address the parties’ remaining
arguments.

Reversed and remanded.

LYNN, C.J., and HICKS, BASSETT, and DONOVAN, JJ., concurred.

Eileen Fox,
Clerk

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