DLJ Mortgage Capital, Inc. v. Stevens - Foreclosure Appeal

U.S. C O U RT O F A PPEALS FOR THE T HIRD C IRCUIT No. 24 - 2264 DLJ M ORTGAGE C APITAL, I NC. v. N EAL A NTONIO S TEVENS; C ARLVIN L EONARD S TEVENS, a/k/a Calvin Leona rd Stevens; S YLVIN R ODFORD S TEVENS; K EVIN W INFIELD S TEVENS; R H EA R ENEA S TEVENS; et al. N EAL A NTONIO S TEVENS; C ARLVIN L EONARD S TEVENS, a/k/a Calvin Leona rd Stevens; S YLVIN R ODFORD S TEVENS; K EVIN W INFIELD S TEVENS; R HEA R ENEA S TEVENS, Appellants _____________ _______________ _ On Appeal from the District Court, D.V.I. Judge Wilma A. Lewis, No. 1:21 - cv - 00013 Before: H ARDIMAN, B IBAS, and P ORTER, Cir cuit Judges Submitted Dec. 9, 2025; Filed Feb. 18, 2026 ____________ _ ___ _____________ O PINION OF THE C OUR T B IBAS, Cir cuit Judge. In litigation and life alike, you must speak up when it is time to do so. Carlton Stevens’ s heirs did not. After a lender foreclosed on Stevens’ s properties in St. Croix, the heirs raised a slew of affirmative defenses in their answer to the complaint. Y et when the lender mo ved for

2 summary judgment, the heirs failed to mention them. Now, they belatedly seek to revi v e the d efenses, but they forfeited them by their silence. And because the ir one remaining a rgu - ment is meritless, we will AFFIRM the District Court. I. DLJ F ORECLOSES ON S TEVENS ’ S P ROPER T IES This case starts with a piece of land. In 1997, Carlton Ste- ven s mortgaged sev eral adjacent p lots to Banco Popular d e Puerto Rico in exchange for a $392,000 loan, to be rep aid with interest. The mortgage described the land as comprising sev- eral plots, some developed and so me undeveloped. Stevens stopped making payments an d then di ed in 20 1 1. Banco Popu- lar later assigned its rights as mortgagee to DL J. In 2018, DLJ sued several of Stevens’ s heirs, the IRS (which had two tax liens on the properties), and three other subordinate li enholders in the Superio r Court of the V ir gin Islands. It raised four claims: debt, foreclosure, quiet title, and reforming a scr ivener ’ s error in the mortg age for omittin g another undeveloped plot (called 20 - BC) from the list of prop- erties mortgaged. The IRS removed the lawsuit to federal court under 28 U.S.C. § 1444, but it was dismissed as a party once the parties realized that the tax liens had expired. The heirs failed to appear at all, so the clerk of court entered default s against them. Nearly six months later, the heirs finally showed up, filin g an answer with thirty - three affirmative defenses. They and DLJ then stipulated to vacate the defaults against them. But when DLJ moved for summary judgment on the d ebt and foreclosure c laims, the heirs again failed to respond. Several months later, before rul ing on t he unopp osed summa ry judgme nt moti on, the

3 District Court sua sponte asked DLJ to submi t document s sup- porting its request for reformation. After DLJ did so, th e Dis- trict Court gave the heirs a chan ce to register their opposition to that claim. T he h e irs filed a three - page response ob jecting to reformation on equitable grounds. But they submitted no evi- dence of their own. The District Court then gran ted summary judgment against the heirs and the one subordinate lienholder who had appeared in the case, as well as d efault judgment against the rest o f the subordinate lienh olders. It also reformed t he mortgage to incl ude the omitted plot, 20 - BC, con cluding that its omission was a mutual mistake. The heirs now appeal. W e review the grant of summary judgment de novo, applying the same standard as the District Court. T undo v. County of Pas saic, 923 F.3d 283, 28 6 – 87 (3d Cir. 2019). W e review the District Cou rt’ s finding that there was a mutual mistake justifying reformation fo r clear error. See Fed. R. Civ. P. 52(a)(6); Thomas v. T rans W orld Ai rlines, Inc., 457 F.2d 1053, 1058 (3d Cir. 1972) (Aldisert, J., co ncur - ring); see also Resolution T r. Corp. v. Midwest Fed. Sav. Bank of Minot, 36 F.3d 785, 799 (9th Ci r. 1993). II. T HE H EIRS F ORFEITED T HEIR D EFENSES On appe al, the heirs primarily argue that the District Co urt was wrong to grant summary judgment to DL J on the debt and foreclosure claims, throwing spaghetti at the wall and hoping that some of the mess will stick. They say the foreclo sure vio- lated federal statutes and regulatio ns, that DLJ acted with un- clean hands, that it failed to prove that it was a holder in due course of the note and mortg age, and that its suit was barred by the Virgin Islands’ six - year statute of limitation s for b reaches

4 of contract. But though their answer men tioned th o se defenses, the heirs never rais ed them in opposition to summary judgment. We have never had occasion to d ecide what happe ns if a party fails to re - raise a defense in opposition to summary judg - ment. But our sister circuits treat that failure as a n “abandon- ment of the defense.” Diversey Lever, Inc. v. Ecolab, Inc., 191 F.3d 1350, 1 352 – 53 (Fed. Cir. 1999); see also Vela v. City of Houston, 276 F.3d 659, 6 78 (5th Ci r. 2001) (holding tha t, even when an issue was pleaded earlier in its answer, a party “ in his opposition to a motion for summary judgment cann ot abandon an issue and then … by d rawing on the pleadings resurrect the abandone d issue”) (quoting another Fifth Circu it case, in turn quoting Edward B. Marks Music Corp. v. Cont’l Rec. Co., 222 F.2d 488, 4 92 (2d Cir. 1955)); Grenier v. Cyanamid Plastics, Inc., 70 F.3d 6 67, 678 (1st Cir. 19 95) (similar); Es t. of Shapi ro v. United States, 63 4 F.3d 1055, 1060 (9th Cir. 2011) (similar); cf. Butler v. Daimler Trucks N. Am., LLC, 74 F.4th 1131, 1151 (10th Cir. 20 23) (s ame result for failure to raise factual dis- pute); Sprafka v. Med. Device Bus. Servs., Inc., 139 F.4th 65 6, 662 (8th Cir. 2025) (sa me result for failure to oppose basis for summary j udgment). We now hold, consistent with those cases, that a party’s failure to raise a defense in o pposition t o summar y judgment forfeits that defense, even if the party raised it in an answer earlier in the litigation. That m eans that the party cannot renew the defense before us, since we will not “consider on appeal issues which were not presen ted to the district court.” Royce v. Hahn, 151 F.3d 11 6, 125 (3d C ir. 1998).

5 We pause to underscore our use of the term “forfeit ure” rather than “waiver” in this context. The distinction between the two matters: “A lthough we cannot reach waived argu- ments, appellate courts may ‘resurrect’ forfeited arguments in ‘extraordinary circumstances. ’ ” United States v. Dowdell, 70 F.4th 134, 140 (3d Cir. 2023) (quoting Wood v. Milyard, 566 U.S. 463, 471 & n.5 (2012)). “ Waiver is the ‘ intentional relin- quishment or abandonment of a known right. ’ ” Id. (q uoting Johnson v. Z erbst, 304 U.S. 458, 4 64 (2023)). Forfeiture is the “failure to make the timely assertion of a right.” Id. (qu oting United States v. Olano, 507 U.S. 725, 733 (1993)). Under ou r precedents, when a litigant raises an argument “in passing (such as, in a footnote)” but fails to “sq uarely argue []” it, we consider it a forfeiture, not a waiver. Kalu v. Spaul ding, 113 F.4th 311, 344 n. 21 (3d Cir. 2024); see also United States v. Heatherly, 985 F.3d 254, 270 (3d Cir. 2021) (treating failu re to “develop [] … a rgumen ts p ro perly” as forfeiture). That logic applies with equal force when a litigant formulaic al ly invokes an affirmative defense in an answer, but fails to mention, let alone develop, the defense in opposition to summary judgment. So we use the term “forfeiture” to describe that situation. By not even deign ing to respond to DLJ’s summary - judgment moti on, Stevens’s heirs forfeited thei r arguments attacking the District Court’s grant of summary judgment. And no “ extrao rdinary circumstances” exist that could persuade us to address those arguments on th e merits notwithstanding the heirs’ forfeiture. Dowdell, 70 F.4 th at 140. So we will affirm the District Court’s entry of summary judgment in DLJ’s favor.

6 III. T HE H EIRS ’ C HALLENGE TO R EFORMA TION F AILS Although the heirs d id not respond to DLJ’s summary judg- ment motion, they did respond (at the Distric t Court’s urging) to DLJ’s arguments for reform ing the mortgage to include plot 20 -B C. They e cho thos e argument s on ap peal. But we will not disturb the Dis trict Court’s f inding that th e parties made a mutual mistake w arranting reformation unless it was clearly erroneous. That deferential standard means that the heirs’ chal- lenge to the District Court’s d ecision to reform the mortgage lose s on the merits. “Where a writing that evidences or embodies an ag reement … fails to express the agreem ent because of a mistake of bo th parties …, the court may at the req uest of a party reform the writing to express the agreement ….” Massac v. Gov’t of V.I., Off. of Lt. Gov., 74 V.I. 3 20, 325 (Super. Ct. 2021) (quoti ng Restatement (Second) of Contracts § 155 (1981)). The party seeking reformation bears the burden of proving mutual mis- take by clear and convincing evidence. Id. Below, DLJ’s primary (o nly, really) evidence in favor o f reformation was a government map o f the subject properties from 1972, which not es that plot 20 - B C was to be joined fo r- ever with one of the plo ts referenced in the mortgage docu- ments, plot 20 - BB. (DLJ also proffered the 1996 quitclaim deed conveying the properties to Stevens, which referred to the 1972 map.) Yet the 197 2 map is not particularly strong evi- dence of a mutual mistake, since it notes that two other plots (20 -B D and 20 - BE) were also to be “ con joine d in perpetuity,” and th e mortg age doc ument s refer enced both of those p lots indiv idually. App. 18 (quoting D. Ct. Dkt. No. 92 - 1).

7 The other evidence th at DL J submitted was even less per- suasive. For example, DL J provided records of 2014 and 2018 title searches, both of which concluded that the two plots were forever joined. But those searches n ot only postdated the mort- gage documents; they also relied on the same 1972 map and 1996 quitclaim deed. DLJ also submitted property - tax records listing plot 20 - BC together with the other plots, all under a sin- gle parcel ID number. But the tax records say little on their own, because that single parcel ID number also included a p lot (20 - B) everyone agrees was not encumbere d by the mor tgage. With all that said, the h eirs submitted zero evidence un der- mining the weak ev idence offered by DLJ. And they su bmit none before us, instead just stressing the mortgage’s failure to mention plot 20 - BC, a failure uncorrected in a later modifica- tion of the mortgage. Yet that wil l often be true in cases of mutual mis take; a mistaken omission is no barrier to f ixing such a mistake. The heirs also claim th at the mortgage is a con- tract of adhesion, suggesting that unequal bargaining power made it inequitable to reform the co ntract. But even if it was an adhesion contract, “the mere fact th at a contract is adhesive does not — without more — render it unconsci onable” and unfair to enforce. Allen v. Hovensa, LLC, 59 V.I. 43 0, 440 (20 13). And the heirs never argue, let alone sh ow, that the mortgage’s specific terms were so substantively unreasonable as to prevent enforcement. Were we confronti ng the qu estion in the first instance, we might well conclude that DLJ failed to show the existence of a mutual mistake by clear and convincing evidence. But we are not. Instead, we are reviewing the District Court’s contrary finding for clear error. W e may disturb the District Court’s

8 conclusi on onl y if it is (1) “completely devoid of minimum ev- identiary support displaying some hu e of credibility,” or (2) “ bears no rational relationship to the supportive evidentiary data.” DiFederico v. Rolm Co., 201 F.3d 2 00, 208 (3d Cir. 2000) (internal quotation marks omitted). Since D LJ submitted some probative evidence in support of its position and the heirs submitted none, we cannot say that the District Court clearly erred in finding a mutual mistake that warranted reformation of the mortgage documents to include p lo t 20 - BC. * * * * * T o p reserve ar guments on app eal fro m a summary j udg- ment, litigants must have raised those arguments in the district court at that stage of the litigation; they cannot rely on having raised them in an earlier answer. Because the h eirs failed to do so and the District Court’ s reformation of the mortgage was no t clearly erroneous, we will AFFIRM the District Cou rt’ s sum- mary judgment for DLJ, as well as its reform ation. Counsel for Appellan t s Martial A. W ebster, Sr. Counsel for Appellee Matthew R. Reinhardt Kyle R. W aldner Q UINT AIROS P RIETO W OOD & B OYER