Court Opinion

ID: 4503093
Source: CourtListenerOpinion
Date Created: 2020-01-30 19:02:51.394918+00
Date Added: 2024-06-11T14:54:19.011743
License: Public Domain

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.

                                   18