In Courtney v. KeyBank N.A.; Ditech Financial LLC (In re Courtney), 623 B.R. 549 (B.A.P. 8th Cir. Jan. 14, 2021), the BAP determined that a deed-of-trust creditor did not lull debtor into false sense of security prior to foreclosing and, therefore, the debtor could not bring suit in equity to set aside the trustee’s sale and claims that the debtor failed to address in her appellate brief were abandoned and did not have to be addressed. The debtor had appealed the bankruptcy court’s entry of judgment in favor of the bank creditor defendant. In In re Courtney, the BAP affirmed the bankruptcy court’s entry of judgment in favor of the bank on all counts.
The debtor became delinquent on a second mortgage held by the bank. Nine months had passed when the bank mailed the debtor a monthly statement, which stated the amount to cure the default and that such default payment was due that same month. The debtor contacted the bank seeking to reinstate the loan and was told to contact the bank foreclosure department for a complete written payoff statement, which included legal fees and costs. Shortly thereafter, foreclosure counsel sent the debtor a letter with the reinstatement amount that included the default amount plus legal fees and costs and other charges. In response, the debtor tendered only the default amount, which was rejected by the bank as insufficient to reinstate the mortgage. One week later, the bank foreclosed on the property.
Soon thereafter, the debtor filed for chapter 7, received a discharge, and her case was closed. The bank paid off the first mortgage and received a lien release. The debtor filed a motion to impose the automatic stay to stop the bank from instituting eviction proceedings against her. The bankruptcy court reopened her case and ordered the bank to abstain until the matter was resolved by declaratory judgment. The debtor commenced an adversary proceeding against the bank for wrongful foreclosure, breach of good faith and fair dealing, violation of the Missouri Merchandising Practices Act (MMPA), and unjust enrichment. Following a trial on the matter, the bankruptcy court found that neither the evidence nor the law supported the debtor’s argument that the bank lulled her into believing that, if she paid off the cure amount, the bank would not foreclose. Additionally, the bankruptcy court concluded that the bank did not waive its right to timely payments by sending the initial default statement; it had the right to accelerate the second mortgage and foreclose; the debtor’s loss was her delinquency on payments not the incorrect amount on the default notice; and the debtor’s claims against the bank were time barred.
The BAP held that the bankruptcy court’s conclusion that the debtor was advised by the bank about the inaccuracy of the monthly statement with the default amount was not clearly erroneous. Additionally, the BAP concurred with the bankruptcy court’s finding that the bank was not legally required to send a statement to the debtor and affirmed the bankruptcy court’s legal conclusion that the bank did not violate any relevant statute or duty in connection with providing reinstatement information to debtor. The BAP concluded that the record supports the bankruptcy court’s conclusion that debtor could not have been lulled into a false sense of security regarding the foreclosure sale. Furthermore, the BAP concluded that debtor’s claims related to the MMPA and the bank’s breach of duty were abandoned because she did not address them in her appellate brief. Finally, the BAP determined that the bankruptcy court did not err in concluding that the debtor’s claims under TILA and RESPA are time-barred.
Co-Editors in Chief
Alexander J. Beeby, Larkin Hoffman Daly & Lindgren Ltd.
Kesha Tanabe, Tanabe Law