Igou v. Bank of America, N.A ( 2020 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
January 30, 2020
2020COA15
No. 18CA0841, Igou v. Bank of America, N.A. — Creditors and
Debtors — Forcible Entry and Detainer — Limitation of Actions
— When Cause of Action Accrues
A division of the court of appeals considers when a claim to
foreclose on a mortgage accrues where the mortgage agreement
gives the creditor the option to accelerate the entire loan if the
debtor defaults on a monthly payment. The division concludes
that, after a default, if the creditor notifies the debtor that the entire
mortgage will be accelerated on a specific future date if the debtor
fails to cure the default by that date, the debt is accelerated and the
claim accrues once that date arrives and the debt remains uncured.
The division also considers whether, after the debt in this case
had been accelerated, that acceleration was abandoned under Bank
of New York Mellon v. Peterson, 2018 COA 174M. The division
concludes that it was.
COLORADO COURT OF APPEALS 2020COA15
Court of Appeals No. 18CA0841
Jefferson County District Court No. 17CV30449
Honorable Diego G. Hunt, Judge
Darrell Igou,
Plaintiff-Appellant,
v.
Bank of America, N.A.,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division II
Opinion by JUDGE PAWAR
Dailey and Terry, JJ., concur
Announced January 30, 2020
Law Offices of John G. Nelson, John G. Nelson, Denver, Colorado, for Plaintiff-
Appellant
Snell & Wilmer, L.L.P., Kevin Walton, Denver, Colorado; Severson & Werson,
P.C., William A. Aspinwall, San Francisco, California, for Defendant-Appellee
¶1 Plaintiff, Darrell Igou, filed claims for declaratory judgment
and injunctive relief against defendant, Bank of America, N.A.,
(BOA). Both claims were based on Igou’s allegation that BOA’s
C.R.C.P. 120 motion, filed in a separate case and seeking
authorization to foreclose on Igou’s home, was barred by the statute
of limitations. At trial, after Igou had presented his evidence, the
district court dismissed both of Igou’s claims under C.R.C.P.
41(b)(1), ruling that, based on Igou’s evidence, BOA’s C.R.C.P. 120
motion was not barred by the statute of limitations. We affirm.
I. Background
¶2 Igou executed a promissory note with a creditor in exchange
for a loan to buy a home. The note was secured by the deed of trust
for the home. The promissory note required Igou to make monthly
payments for thirty years and provided that if Igou defaulted by
failing to make any of those monthly payments, the creditor had the
option to accelerate the debt and require immediate payment of the
loan’s entire remaining balance. The deed of trust provided that if
the creditor accelerated the debt, it could also “invoke the power of
sale” and foreclose on the home.
1
¶3 BOA subsequently acquired the promissory note. Igou
defaulted in June 2010. In August 2010, BOA sent Igou a letter
titled “NOTICE OF INTENT TO ACCELERATE.” It stated that if Igou
failed to cure the default by September 5, 2010, “the mortgage
payments will be accelerated with the full amount remaining
accelerated and becoming due and payable in full, and foreclosure
proceedings will be initiated at that time.” Igou failed to cure the
default by September 5, 2010. But BOA took no further action for
almost two years.
¶4 In June 2012, BOA filed a notice of election and demand for
sale by public trustee with the Public Trustee of Jefferson County.
But BOA did not file a C.R.C.P. 120 motion seeking the district
court’s authorization for a foreclosure sale based on this notice.
Instead, BOA withdrew the notice in October 2013.
¶5 In April 2016, BOA sent Igou a new letter titled “NOTICE OF
INTENT TO ACCELERATE AND RIGHT TO CURE.” Much like the
first, this letter offered Igou the opportunity to cure the default by
paying all of the monthly installment payments he had missed up to
that date. And it stated that if he did not cure the default by May
14, 2016, “the mortgage payments will be accelerated with the full
2
amount of the loan remaining accelerated and becoming due and
payable in full, and foreclosure proceedings will be initiated at that
time.”
¶6 Igou failed to cure the default by May 14, 2016. And in July
2016, BOA filed another notice of election and demand for sale by
public trustee. In December 2016, BOA filed a C.R.C.P. 120 motion
in district court, which the court granted.
¶7 Igou then filed the two claims whose dismissal is the subject of
this appeal. The first claim was for declaratory judgment that
BOA’s C.R.C.P. 120 motion was barred by the six-year statute of
limitations. The second claim was for an injunction to prevent BOA
from foreclosing on the home. The district court granted Igou a
preliminary injunction, and the parties tried the case to the court.
¶8 After Igou presented his evidence, BOA moved for dismissal
under C.R.C.P. 41(b)(1), arguing that Igou had failed to show that
he was entitled to relief. The district court ruled that based on the
law and Igou’s evidence, BOA’s C.R.C.P. 120 motion was not barred
by the statute of limitations because it accrued, at the earliest, in
June 2012 when BOA filed its first notice of election and demand
3
for sale. The court therefore granted BOA’s motion and dismissed
Igou’s claims with prejudice.
¶9 Igou appeals, arguing that the district court erred by ruling
that BOA’s C.R.C.P. 120 motion was timely. We affirm the district
court’s ruling, but on different grounds. See Blood v. Qwest Servs.
Corp., 224 P.3d 301, 329 (Colo. App. 2009) (The appellate court
“can affirm on any ground supported by the record.”), aff’d, 252
P.3d 1071 (Colo. 2011).
II. The District Court Properly Dismissed Igou’s Claims
¶ 10 The standard of review for an order granting dismissal under
C.R.C.P. 41(b)(1) is “whether judgment in favor of defendant is
justified on the evidence presented.” Gold Hill Dev. Co., L.P. v. TSG
Ski & Gold, LLC, 2015 COA 177, ¶ 44 (quoting Colo. Coffee Bean,
LLC v. Peaberry Coffee Inc., 251 P.3d 9, 25 (Colo. App. 2010)).
Because the facts relevant to whether BOA’s foreclosure claim was
timely are undisputed, we review that issue de novo. See Colo.
Coffee Bean, 251 P.3d at 25.
A. Accrual, Acceleration, and Abandoning an Acceleration
¶ 11 The parties agree that BOA’s action under C.R.C.P. 120 was
governed by the statute of limitations in section 13-80-103.5(1)(a),
4
C.R.S. 2019, which required that BOA file it within six years of its
accrual. 1 Because BOA’s action sought to recover a debt, it accrued
on the date the debt became due. See § 13-80-108(4), C.R.S. 2019;
Hassler v. Account Brokers of Larimer Cty., Inc., 2012 CO 24, ¶¶ 19-
21.
¶ 12 Generally, when a loan is to be repaid in monthly installments,
each default on an individual monthly installment payment results
in the accrual of a separate cause of action, each with its own
limitations period. See Castle Rock Bank v. Team Transit, LLC,
2012 COA 125, ¶ 22. In contrast, if the loan agreement contains an
acceleration clause giving the creditor the option to require
immediate payment of the entire balance of the loan if the borrower
defaults on a single monthly installment payment, only a single
claim to recover the entire debt accrues. Id. at ¶ 23. Under these
circumstances, the entire debt becomes due, and a claim to recover
that debt accrues, when the creditor triggers the acceleration
clause. Id. To trigger the acceleration clause, the creditor “must
1 Neither the parties nor the district court raised whether the proper
statute of limitations is that found at section 4-3-118(a), C.R.S.
2019. We therefore do not address this issue.
5
perform some clear, unequivocal affirmative act evidencing his
intention to take advantage of the accelerating provision.” Id.
(quoting Moss v. McDonald, 772 P.2d 626, 628 (Colo. App. 1988)).
Other divisions of this court, and the supreme court, have
consistently held that the debt becomes due and the claim accrues
when the creditor evidences his “intent to accelerate” the debt.
Hassler, ¶ 26; see Castle Rock Bank, ¶ 23; Bauer Dev. Co. v. Nu-
West, Inc., 757 P.2d 1149, 1150 (Colo. App. 1988).
¶ 13 After the trial in this case, a division of this court announced
Bank of New York Mellon v. Peterson, 2018 COA 174M. For the first
time in Colorado, the division held that after exercising an option to
accelerate a debt, a creditor may abandon that acceleration. Id. at
¶ 36. To do so, the creditor “must manifest its intent to abandon
acceleration by a clear affirmative act.” Id. at ¶ 34.
¶ 14 Abandoning the acceleration “restores the note’s original
maturity date for purposes of accrual of the statute of limitations.”
Id. at ¶ 39. Abandonment does not toll the statute of limitations.
Instead, it restores the parties, for purposes of the statute of
limitations, to the position they were in before the debt was
accelerated. Consequently, if the creditor reaccelerates the debt
6
after abandoning the first acceleration, a new claim accrues with a
new six-year limitations period. Id. at ¶ 40.
¶ 15 The Peterson division held that the creditor in that case
abandoned its original acceleration “by not only withdrawing the
foreclosure but also by communicating its abandonment to the
borrower.” Id. at ¶ 37. Indeed, the division further noted, after the
first acceleration, the creditor negotiated a loan modification and
sent the borrower a new acceleration warning letter providing the
borrower another opportunity to cure the default. Id.
B. BOA’s Rule 120 Motion was Timely Because BOA Abandoned
the Original Acceleration and then Reaccelerated the Debt
¶ 16 We disagree with the district court’s ruling that BOA’s claim
accrued when it filed the first notice of election and demand for sale
in June 2012. Instead, we conclude that BOA accelerated Igou’s
debt, and a claim therefore accrued, in September 2010. But BOA
then abandoned that acceleration. It then reaccelerated the debt in
May 2016, causing a new claim to accrue, rendering the C.R.C.P.
120 motion filed in December 2016 timely. Based on this
conclusion we also disagree with Igou’s argument that the claim
accrued in June 2010 at the time of default.
7
1. BOA Accelerated the Debt in September 2010
¶ 17 BOA’s August 2010 letter was titled “NOTICE OF INTENT TO
ACCELERATE.” And it stated that if Igou failed to cure the default
by September 5, 2010, “the mortgage payments will be accelerated
with the full amount remaining accelerated and becoming due and
payable in full.” The words “will be accelerated” were in bold. This
letter was a clear, unequivocal, and affirmative act evidencing
BOA’s intent to accelerate Igou’s debt as of September 5, 2010.
Consequently, when September 5, 2010, came and went without
Igou curing the default, a claim to foreclose on the home accrued
and the statute of limitations began to run.
¶ 18 We are not persuaded otherwise by BOA’s argument that the
letter could not have caused a claim to accrue because it merely
indicated that the debt would be accelerated on some future date if
Igou failed to cure by then. This argument is contrary to the plain
meaning of the word “will,” which is mandatory and not permissive.
The letter communicated to Igou that if the default remained
uncured on September 5, 2010, the debt would automatically and
certainly be accelerated at that time. See In re Neusteter Realty Co.,
79 B.R. 30, 31-32 (D. Colo. 1987) (Creditors’ letter to borrowers in
8
default stating “unless the default on all the notes listed above are
[sic] cured within the next ten days, I hereby give you notice that we
intend to accelerate and pursue appropriate legal remedies”
accelerated the debt when borrowers failed to cure the default after
ten days.).
¶ 19 BOA’s argument is also contrary to Green Tree Financial
Servicing Corp. v. Short, 10 P.3d 721 (Colo. App. 2000). In that
case, another division of this court analyzed when a creditor’s claim
to foreclose on a loan in default accrued. Id. at 722. As in our
case, the terms of the loan in Green Tree gave the creditor the
option to accelerate the debt in the event of a default. Id. After the
borrower defaulted, the creditor sent the borrower a letter stating
that if the borrower failed to cure the default “in the time allowed by
the notice, [creditor] hereby accelerates the entire contract balance
due and payable at the end of such cure period and may exercise its
rights under the law.” Id. at 723. The division held that this letter
caused the accelerated debt to become due, and the creditor’s claim
for the accelerated debt to accrue, when the cure period expired
twenty days later with the default still uncured. Id.
9
¶ 20 BOA attempts to distinguish Green Tree by pointing out that
the creditor’s letter in that case used different language than BOA
did here. The Green Tree creditor stated that if the borrower failed
to cure the default by a specific date, the creditor “hereby
accelerates the [debt],” id. at 723; here, BOA’s letter stated that if
Igou failed to cure the default by a specific date, “the mortgage
payments will be accelerated.” We conclude that this difference is
insignificant for purposes of accrual. In both cases, the creditor is
telling the borrower that if the default is not cured by a specific date
in the future, the creditor intends to accelerate the debt at that
time. And we agree with the Green Tree division that, when a
creditor gives a borrower notice that a debt will be accelerated on a
specific date in the future if the borrower fails to cure the default by
then, and that date arrives with the default still uncured, the
accelerated debt becomes due and the statute of limitations for an
action on that debt begins to run.
¶ 21 Nothing in our supreme court’s opinion in Hassler leads us to
a different conclusion. In that case, the supreme court analyzed
when the balance of a car loan became due, thereby triggering
accrual for a claim to recover it. Hassler, ¶ 22. As here and in
10
Green Tree, the loan agreement contained an acceleration clause
that the creditor could choose to exercise if the borrower defaulted.
Id. at ¶ 7. After the borrower defaulted, the creditor repossessed
the car and sent the borrower a letter stating that the borrower
could “get the [car] back at any time before we sell it by paying us
the full amount you owe (not just the past due payments), including
our expenses.” Id. at ¶ 8.
¶ 22 The supreme court held that the creditor’s claim to recover on
the debt accrued when the creditor sent the letter. Id. at ¶ 26. In
doing so, the court characterized the relevant inquiry as “whether
[the creditor] exercised its option to accelerate [the borrower’s]
debt.” Id. at ¶ 23 (emphasis added). One could argue that this
statement means that an action to recover an optionally accelerated
debt accrues when the creditor actually exercises that option, rather
than when the creditor gives clear, unequivocal, and affirmative
notice of its intent to do so. But such a reading takes the supreme
court’s words out of context.
¶ 23 The Hassler creditor’s letter stated that the debt had already
been accelerated. Id. at ¶ 8. The only question before the court,
therefore, was whether this statement caused the creditor’s claim to
11
accrue. The supreme court had no reason to address, and did not
address, the effect of a creditor’s conditional statement that a debt
would be accelerated at a specific future date. Moreover, in
Hassler, the court reiterated that a claim accrues when the creditor
performs an affirmative act that clearly and unequivocally evidences
an “intent to accelerate” the debt. Id. at ¶ 26.
¶ 24 We recognize that other states have articulated slightly
different tests for when a claim to recover a debt accrues. Texas
courts hold that a claim “accrues only when the holder actually
exercises its option to accelerate.” Holy Cross Church of God in
Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). And to actually
exercise an option to accelerate, a creditor must do two things: (1)
give notice of its intent to accelerate; and (2) give notice of the
actual acceleration. Id. Put differently, a creditor must give
“separate notices of the intent to accelerate a debt and the actual
acceleration of that debt.” Perry v. Cam XV Tr., 579 S.W.3d 773,
777 (Tex. App. 2019).
¶ 25 Similarly, in New York, a claim accrues when the creditor
takes some affirmative action “evidencing the holder’s election to
take advantage of the accelerating provision.” Bank of N.Y. Mellon v.
12
Maldonado, 97 N.Y.S.3d 162, 164 (N.Y. App. Div. 2019) (emphasis
added). A creditor’s statement that a debt “will be accelerated” on a
specific future date if the default is not cured does not suffice for
accrual because it is “‘merely an expression of future intent that
[falls] short of an actual acceleration’ and, thus, [does] not
constitute an exercise of the mortgage’s acceleration clause.” Id. at
165 (quoting Milone v. U.S. Bank Nat’l Ass’n, 83 N.Y.S.3d 524, 529
(N.Y. App. Div. 2018)).
¶ 26 Under either the Texas or New York test for accrual, BOA’s
claim may not have accrued on September 5, 2010, because both of
those tests require notice of actual acceleration. In contrast, our
supreme court requires notice of only the creditor’s “intent to
accelerate.” Hassler, ¶ 26 (emphasis added). And we conclude that
BOA made clear its intent to accelerate the debt as of September 5,
2010.
2. BOA Abandoned the Acceleration and then Reaccelerated the
Debt
¶ 27 When BOA accelerated the debt on September 5, 2010, a claim
to foreclose on the home accrued and the statute of limitations
began to run. But BOA withdrew the notice of election and demand
13
for sale it had filed and recorded that withdrawal. Notably, BOA
also sent Igou a second acceleration warning letter, based on
subsequent missed payments, offering him another chance to cure
the default and avoid paying the entire accelerated balance of the
debt. Similar to Peterson, we conclude that this record supports a
conclusion that BOA manifested its intent to abandon the
September 2010 acceleration by clear affirmative conduct.
¶ 28 The second acceleration warning letter also set the
reacceleration in motion. Like the first letter, the second letter was
a clear, unequivocal, and affirmative act evidencing BOA’s intent to
accelerate the debt if Igou failed to cure the default by May 14,
2016, the end of the cure period. The evidence was undisputed
that Igou failed to cure the default. The debt was therefore
reaccelerated as of May 14, 2016, and a new six-year limitations
period began to run in which BOA could file a C.R.C.P. 120 motion.
Later that same year, BOA filed a notice of election and demand for
sale and then the successful C.R.C.P. 120 motion at issue here.
Because BOA filed its C.R.C.P. 120 motion within six years of the
May 2016 acceleration, we conclude that it was timely.
C. Lovell v. Goss
14
¶ 29 We recognize that Igou argues on appeal, as he did below, that
BOA’s original six-year limitations period began to run when he first
defaulted in June 2010, not when BOA first elected to accelerate
the note in September 2010. He relies on a Colorado Supreme
Court case from 1909, Lovell v. Goss, 45 Colo. 304, 101 P. 72
(1909). We find Lovell distinguishable and therefore inapplicable to
this case.
¶ 30 In Lovell, like here, several promissory notes were secured by a
deed of trust. Id. at 308, 101 P. at 73. But the terms of the Lovell
notes were different than those here. The Lovell notes provided that
“a failure to pay said interest or any part thereof when due shall
cause this whole note to become due, payable, and recoverable at
once and the said interest to be counted as principal.” Id.
Similarly, the deed of trust provided that
in case of default in any of said payments of
principal or interest as aforesaid, or of a
breach of any of the covenants or agreements
herein, then and in that case the whole of said
principal sum hereby secured, and the interest
to the time of sale . . . shall and may at once
become due and payable.
Id.
15
¶ 31 After the Lovell borrower defaulted on the notes by failing to
make an interest payment, the lender elected to accelerate the debt
and foreclose on the property. Id. at 308-09, 101 P. at 74. But the
lender did not initiate foreclosure proceedings until more than six
years after the initial default. Id. at 311, 101 P. at 74. The
supreme court held that a claim to collect the accelerated debt and
foreclose on the property accrued on the date of the initial default,
not the date on which the lender elected to accelerate the debt. Id.
at 311-12, 101 P. at 74-75. It explained this holding as follows:
It certainly cannot be said that the notes could
be declared due at any date desired by the
payee [lender]. Their language will not permit
of such a construction. . . . According to the
language of the notes, the cause of action
accrued at the date they were finally due, or
the date default was made in the payment of
interest. In this case the payee [lender],
having acted upon account of the nonpayment
of interest after it became due and before the
final maturity of the notes, and on account
thereof, elected to declare all of them ‘due,
payable, and recoverable at once’ as per the
terms of the notes; this being the language in
the notes. When, at once? Under the
circumstances of this case, and in this
connection, it certainly means at once ‘upon
default in the payment of interest thereon
when due,’ as stated in the notes, and we
think this was the construction placed thereon
by the parties at the time.
16
Id. at 313-14, 101 P. at 75.
¶ 32 We understand Lovell to mean that when the language of a
note and deed of trust provides for the automatic acceleration of a
debt upon default, a cause of action to collect the entire accelerated
debt accrues on the date of that default and the statute of
limitations begins to run at that time. In contrast, there is no
dispute that in this case acceleration was not automatic upon
default, but instead occurred only at the creditor’s option following
a default. We therefore find Igou’s reliance on Lovell misplaced.
¶ 33 Moreover, even if Igou is correct that the original limitations
period began at default in June 2010, BOA abandoned the
acceleration that triggered the first limitations period. BOA’s
reacceleration, based upon subsequent missed payments, triggered
a new limitations period, within which BOA filed its C.R.C.P. 120
motion.
D. Mootness
¶ 34 BOA argues, for the first time at oral argument, that this
appeal is moot because the home has already sold at a foreclosure
sale. Both BOA and Igou filed motions asking us to take judicial
17
notice of documents that they each claim are relevant to this issue.
We deny both motions.
¶ 35 There is no dispute that Igou filed this action well before any
foreclosure sale. Based on this fact alone, we conclude that the
appeal is not moot. See Thomas v. Lynx United Grp., LLC, 159 P.3d
789, 792 (Colo. App. 2006) (determining that foreclosure of
borrower’s interest in property does not render the borrower’s
action challenging that foreclosure moot as long as the borrower
acquiesced to the foreclosure due to the “actual or implied
compulsion of a court’s power” (quoting FCC Constr., Inc. v. Casino
Creek Holdings, Ltd., 916 P.2d 1196, 1198 (Colo. App. 1996))).
III. Conclusion
¶ 36 The district court’s judgment is affirmed.
JUDGE DAILEY and JUDGE TERRY concur.
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