## Facts

- David and Crystal Holm bought a residence with a loan owned by the Federal Home Loan Mortgage Corporation and serviced by Wells Fargo Home Mortgage, Inc.
- After the Holms fell behind, they entered a payment plan with Wells Fargo.
- Following storm damage, a Wells Fargo agent mistakenly believed the property was abandoned and accelerated the loan.
- Foreclosure counsel informed the Holms they needed to pay about $7,000 to reinstate; later counsel demanded full payoff plus fees, and a foreclosure sale was scheduled.
- On the eve of sale, the Holms alleged Wells Fargo agreed to accept about $10,000 to reinstate and postpone the sale and said funds need not be delivered before the sale to secure postponement.
- The morning of the sale, the Holms were told the sale would be postponed, but the sale proceeded and the Federal Home Loan Mortgage Corporation acquired the property.
- Wells Fargo returned the Holms’ tendered funds as untimely and later refused reinstatement even after further tender.
- The Holms sued Wells Fargo for wrongful foreclosure (money damages) and sought to quiet title against the Federal Home Loan Mortgage Corporation.
- During discovery, the trial court found repeated noncompliance by the mortgage companies and imposed sanctions striking their pleadings and barring them from presenting evidence, objecting, or cross-examining at trial.
- After a bench trial, the court found wrongful foreclosure, awarded compensatory damages, emotional distress damages, and punitive damages, and quieted title in the Holms.

## Issues

1. Whether the trial court abused its discretion by imposing severe discovery sanctions, including striking pleadings and effectively limiting the mortgage companies’ participation at trial.
2. Whether substantial evidence supported a finding that Wells Fargo foreclosed without the legal right to do so.
3. Whether the mortgage companies had a constitutional right to a jury trial on the amount of actual and punitive damages for wrongful foreclosure, despite discovery sanctions establishing liability.
4. Whether quiet-title relief could stand when the damages determination required a jury.

## Decision

- The Supreme Court of Missouri affirmed the discovery sanctions, holding the trial court did not abuse its discretion given repeated, obstructive discovery conduct and prior orders compelling compliance.
- The court affirmed liability for wrongful foreclosure, holding substantial evidence supported the finding that Wells Fargo exercised the power of sale without the right to do so under the circumstances found by the trial court.
- The court reversed the damages award because wrongful foreclosure is a legal action in which the Missouri Constitution preserves the right to a jury determination of damages absent waiver; the trial court erred by setting damages in a bench trial.
- The court reversed the quiet-title judgment to the extent it was part of a remedial package tied to the improperly determined damages.
- The case was remanded for a new jury trial limited to determining actual and punitive damages for wrongful foreclosure and for further proceedings consistent with the jury’s verdict.

## Legal Principles

- Trial courts have broad discretion to impose severe discovery sanctions, including striking pleadings and limiting trial participation, when a party repeatedly and willfully fails to comply with discovery orders.
- A foreclosure is wrongful when the mortgagee or servicer uses the power of sale without the legal right to do so.
- Even when liability is established through discovery sanctions akin to default, the amount of damages in a legal action must be determined by a jury unless the right to jury trial is waived.
- Equitable relief affecting title that is tied to the damages remedy may require reconsideration when the damages determination must be made by a jury.

## Conclusion

The Missouri Supreme Court upheld severe discovery sanctions and the finding that Wells Fargo wrongfully foreclosed, but held that the Missouri Constitution required a jury to determine actual and punitive damages; it therefore reversed the damages and related title relief and remanded for a jury trial on damages.


Holm v. Wells Fargo Home Mortg., Inc., 514 S.W.3d 590 (Mo. 2017)