Bank of New York v. Peterson

2018 COA 174, 442 P.3d 1006

• Court: Colorado Court of Appeals
• Decided: December 13, 2018
• Docket: 17CA0156
• Status: Published

Opinion

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 December 13, 2018

2018COA174

No. 17CA0156, Bank of New York v. Peterson — Creditors and Debtors — Foreclosures — Forcible Entry and Detainer; Limitation of Actions — When a Cause of Action Accrues

Defendants-Appellants assert that the 2015 foreclosure and

the resulting judgment of possession cannot be legally enforced

because the six-year statute of limitations (for an action for default

on a promissory note) had already expired. In particular, they claim

that Bank of New York Mellon, formerly known as Bank of New York

(the Bank), triggered the statute of limitations in 2008 when it

accelerated the obligation on the note.

The Bank admits that it accelerated the note in 2008 by

initiating foreclosure proceedings but argues that it abandoned the

acceleration in 2010 by withdrawing the foreclosure and providing

defendants-appellants another opportunity to cure the default. The Bank asserts that the abandonment restored the note’s original

maturity date for purposes of accrual. A division of the court of

appeals agrees and therefore affirms. COLORADO COURT OF APPEALS 2018COA174

Court of Appeals No. 17CA0156 Archuleta County District Court No. 15CV10 Honorable Gregory G. Lyman, Judge

Bank of New York Mellon, f/k/a Bank of New York, as Trustee, on behalf of the Holders of the Alternative Loan Trust 2007-16CB Mortgage Pass Through Certificates, Series 2007-16-CB, its Successors and Assigns,

Plaintiff-Appellee,

v.

Timothy Peterson and Dyan Frances Parker,

Defendants-Appellants.

JUDGMENT AFFIRMED

Division V Opinion by JUDGE LICHTENSTEIN Román and Furman, JJ., concur

Announced December 13, 2018

Akerman, LLP, Justin D. Balser, Taylor T. Haywood, Denver, Colorado, for Plaintiff-Appellee

Blair K. Drazic, Loma, Colorado, for Defendants-Appellants ¶1 Plaintiff-Appellee, Bank of New York Mellon, formerly known

as Bank of New York (the Bank), filed an unlawful detainer action

after acquiring title to a house through foreclosure. Defendants-

Appellants, Timothy Peterson and Dyan Frances Parker, appeal the

district court’s judgment granting the Bank possession.

¶2 Peterson and Parker assert that the 2015 foreclosure and the

resulting judgment of possession cannot be legally enforced because

the six-year statute of limitations (for an action for default on a

promissory note) had already expired.1 In particular, they claim

that the Bank triggered the statute of limitations in 2008 when it

¶3 The Bank admits that it accelerated the note in 2008 by

initiating foreclosure proceedings, but it argues that it abandoned

the acceleration in 2010 by withdrawing the foreclosure and

providing Peterson’s son (the borrower) another opportunity to cure

the default. The Bank asserts that the abandonment restored the

note’s original maturity date for purposes of accrual. We agree with

the Bank and, therefore, we affirm.

1 We do not address the propriety of challenging an underlying foreclosure in a subsequent forcible entry and detainer action.

1 I. Background

¶4 On May 14, 2007, the borrower obtained a $261,000 loan

evidenced by a promissory note for a house in Archuleta County,

Colorado. The promissory note required monthly payments through

June 1, 2037, and contained an optional acceleration clause. The

borrower secured the loan with a deed of trust on the property, and

the Bank was the holder of the note and deed of trust. Peterson is

the borrower’s attorney-in-fact.

¶5 The borrower soon thereafter stopped making payments. On

October 17, 2007, he received a letter from the Bank titled “NOTICE

OF DEFAULT AND ACCELERATION.”2 The letter provided that the

borrower had the “right to cure the default,” but that if he did not

cure by November 16, 2007,

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.

(Emphasis in original.)

2The letter was sent by mortgage servicer, Countrywide Home Loans, on behalf of the Bank (the holder of the promissory note).

2 ¶6 The borrower received another letter, this time demanding that

he cure the default by December 16, 2007. The borrower did not

respond to either letter.

¶7 The Bank did not take any action on the default until October

2008. Meanwhile, the borrower and his father, Peterson, executed

an “Option to Purchase” agreement stating that Peterson would

make the monthly payments due on the note. The agreement

purported to grant Peterson “full power of attorney,” including

“negotiating refinancing, payment plans, financial, and all legal

issues” for the property.

¶8 After executing the agreement, Peterson and Parker began

occupying the property.

¶9 Then, in October 2008, the Bank initiated foreclosure

proceedings (the 2008 foreclosure). On December 5, 2008, the

Bank moved for a court order authorizing the sale of the property

pursuant to C.R.C.P. 120. But later that month, the Bank

approved the borrower’s request for a loan modification, whereby

the borrower would owe a $2017.97 monthly payment. That same

month, Peterson remitted a $2017.97 check on the borrower’s

3 behalf. But neither Peterson nor the borrower made any more

payments.

¶ 10 Even so, on March 26, 2010, the Bank withdrew the 2008

foreclosure. It subsequently sent the borrower a new acceleration

warning letter providing him another opportunity to cure the

default.

¶ 11 Nearly five years later, in January 2015, the Bank initiated

and pursued foreclosure proceedings (the January 2015

foreclosure) and the district court authorized the property’s sale.3

The Bank purchased the property in the foreclosure sale.

¶ 12 Two months later, the Bank commenced the present action to

acquire possession and evict Peterson and Parker from the

property.

¶ 13 Peterson and Parker filed an answer and affirmative defense

and counterclaims. They asserted that they had superior title to

the property, contending that the statute of limitations expired

3 On appeal, the Bank filed a motion requesting this court to take judicial notice of a 2008 notice of election and demand for sale, the 2010 withdrawal of this notice, and a 2015 notice of election and demand for sale—all of which were recorded with the Archuleta County Clerk and Recorder. We take judicial notice of the fact that these documents were recorded. See Doyle v. People, 2015 CO 10, ¶ 8.

4 before the January 2015 foreclosure. They argued that the Bank

accelerated the loan in 2008, which triggered the six-year statute of

limitations, and, thus, the January 2015 foreclosure was void. They

moved to preliminarily enjoin the Bank from expelling them.

¶ 14 The Bank moved to dismiss the counterclaims pursuant to

C.R.C.P. 12(b)(5). The Bank argued that it did not accelerate the

loan in 2008.4 But even if it did, it argued its withdrawal of the

foreclosure in 2010 abandoned any prior acceleration. Either way,

it contended that the six-year limitations period had not expired by

the time of the January 2015 foreclosure.

¶ 15 The district court agreed with the Bank and concluded as

follows:

 The Bank “ma[de] a persuasive argument” that the

documents it filed and sent to the borrower did not

accelerate the loan.

 Even if the loan was accelerated prior to January 8,

2009, the acceleration was abandoned when the Bank

withdrew the 2008 foreclosure.

4On appeal, the Bank now admits that it accelerated the loan in 2008.

5 ¶ 16 The court concluded that the foreclosure was conducted

lawfully and the Bank had the “superior right to possession of the

Property.” It ordered Peterson and Parker to vacate, but stayed the

order conditioned on monthly payments of $1000 into the court

registry. The court subsequently entered judgment for the Bank on

its claim and on the defendants’ counterclaims. It awarded the

Bank $45,624.40 in attorney fees and costs.

¶ 17 Peterson and Parker now appeal the judgment and the

attorney fee and cost award.

II. Standing

¶ 18 Because Peterson and Parker assert a possessory interest in

the property that secured the note, we conclude they have standing

in the current action.

¶ 19 Traditional standing principles do not apply to defendants who

raise an affirmative defense in response to a complaint as there is

little concern that defendants will advance claims in which they

have no stake. Mortg. Invs. Corp. v. Battle Mountain Corp., 70 P.3d

1176, 1182, 1182 n.7 (Colo. 2003). Indeed, “a defendant may

assert an affirmative defense in response to a complaint, which

asserts that the defendant has an interest in the action.” Id.

6 (emphasis added); see also Sandstrom v. Solen, 2016 COA 29, ¶¶

14-20 (if a party’s claim to a parcel of land injures a defendant’s

claim to that same property, the defendant has established an

injury-in-fact to a legally protected interest).

III. Statute of Limitations and the January 2015 Foreclosure

¶ 20 Peterson and Parker argue that the 2015 foreclosure was

barred by the six-year statute of limitations. They contend that the

statute was triggered in 2008 when the Bank accelerated the loan.

¶ 21 The Bank now admits that it accelerated the loan in 2008,5

but argues that it abandoned the acceleration in 2010, thereby

restoring the note’s original maturity date for purposes of accrual.

We agree with the Bank, and therefore conclude its 2015

foreclosure was timely.

A. Standard of Review

¶ 22 “Whether a statute of limitations bars a particular claim is a

question of fact.” Trigg v. State Farm Mut. Auto. Ins., 129 P.3d

5 The Bank concedes it accelerated the loan in October 2008 when it initiated foreclosure proceedings by “deliver[ing] its first notice of election and demand to the public trustee.” See Hassler v. Account Brokers of Larimer Cty., Inc., 2012 CO 24, ¶ 22 (holding that acceleration requires a clear, unequivocal act evincing an intent to invoke the creditor’s contractual option to accelerate).

7 1099, 1101 (Colo. App. 2005). “However, if undisputed facts

demonstrate that the plaintiff had the requisite information as of a

particular date, then the issue of whether the statute of limitations

bars a particular claim may be decided as a matter of law.” Id.

B. Relevant Law

¶ 23 There is a six-year statute of limitations for the recovery of a

debt under a security agreement. §§ 13-80-103.5(1)(a), -108(4),

C.R.S. 2018; Hassler v. Account Brokers of Larimer Cty., Inc., 2012

CO 24, ¶¶ 13-15. The statute is triggered whenever the debt

“becomes due” by the terms of the agreement. See Hassler, ¶ 22.

¶ 24 As pertinent here, the statute is triggered on the day after the

date of maturity of a promissory note. Rossi v. Osage Highland

Dev., LLC, 219 P.3d 319, 321 (Colo. App. 2009) (citing Nagy v.

Landau, 807 P.2d 1227, 1228-29 (Colo. App. 1990)).

¶ 25 However,

if an obligation that is to be repaid in installments is accelerated either automatically by the terms of the agreement or by the election of the creditor pursuant to an optional acceleration clause — the entire remaining balance of the loan becomes due immediately and the statute of limitations is triggered for all installments that had not previously become due.

8 Hassler, ¶ 22 (emphasis added); see also § 4-3-118(a), C.R.S. 2018

(If a due date is accelerated, an action must be brought “within six

years after the accelerated due date.”).

¶ 26 Once the statute of limitations has expired, any lien created by

the instrument is extinguished. § 38-39-207, C.R.S. 2018; see

Rossi, 219 P.3d at 322 (“By its plain terms, this statute does not

merely affect a creditor’s ability to enforce a lien. It destroys the

lien.”).

C. Abandonment

¶ 27 Several jurisdictions recognize that a lender may abandon the

acceleration of a note, which has the effect of restoring the note’s

original maturity date for purposes of accrual. See, e.g., Boren v.

U.S. Nat’l Bank Ass’n, 807 F.3d 99, 1104 (5th Cir. 2015).

¶ 28 Peterson and Parker argue that Colorado law does not

recognize “abandonment” of an acceleration. They rely on language

in Hassler that states that “the creditor’s course of conduct

following acceleration is irrelevant.” ¶ 36. But this language is

taken out of context.

¶ 29 The issue in Hassler was whether a creditor bank sufficiently

manifested its intent to invoke an acceleration of a car loan, given

9 that a “clear, unequivocal act is necessary to invoke an optional

acceleration clause.” Id. at ¶ 25.

¶ 30 There, the creditor bank repossessed a car and sent the debtor

a letter demanding that he repay the entirety of his debt. Id. at ¶ 5.

But it was still sending the debtor monthly billing statements for

the loan. Hassler held that because there was “some act of the

creditor [that] amounted to a clear manifestation of its intent to

accelerate,” this “conduct following acceleration is irrelevant,”

because:

[F]ollowing repossession and receipt of the repossession letter, [the debtor] was on notice that he could only retake possession by repaying the entire amount owed on the loan. Any contradictory action that [the creditor bank] may have later taken was insufficient to un-ring this bell.

Id. at ¶ 36.

¶ 31 Thus, the language cited by Peterson and Parker was limited

by its context; it applied only to the determination whether a

creditor bank’s invocation of an acceleration clause was

unequivocal.

¶ 32 In fact, no Colorado case has directly addressed whether a

creditor may subsequently abandon its acceleration of a loan.

10 Because Colorado has not yet had the opportunity to address the

issue of abandonment, we will do so here.

¶ 33 Other jurisdictions have recognized that lenders may abandon

the right to accelerate a note after it has already exercised its option

to accelerate. See Boren, 807 F.3d at 1104; Paggen v. Bank of Am.,

N.A., No. 17-CV-012410RBJ, 2018 WL 4075881, at *5 (D. Colo.

Aug. 27, 2018) (citing cases); Mitchell v. Fed. Land Bank, 174

S.W.2d 671, 676 (Ark. 1943).

¶ 34 The concept of abandonment is based on the principle of

waiver. Boren, 807 F.3d at 1105. Waiver is the intentional

relinquishment of a known right or privilege. Dep’t of Health v.

Donahue, 690 P.2d 243, 247 (Colo. 1984). Thus, to abandon (or

waive) an acceleration, a lender must manifest its intent to abandon

acceleration by a clear affirmative act. See, e.g., Boren, 807 F.3d at

104-06.

¶ 35 The acceleration of a note can be abandoned “by agreement or

other action of the parties.” Id. (holding that a lender abandoned

acceleration by sending notice to the borrower that the lender is no

longer seeking to collect the full balance of the loan and will permit

the borrower to cure its default); Bartram v. U.S. Bank Nat’l Ass'n,

11 211 So. 3d 1009, 1021 (Fla. 2016) (stating that “the dismissal of the

foreclosure action had the effect of revoking the acceleration”);

Andra R Miller Designs v. US Bank NA, 418 P.3d 1038 (Ariz. Ct. App.

2018) (holding that a creditor’s recorded cancellation of the

trustee’s sale was an affirmative act sufficient to revoke an

acceleration); see also Paggen, 2018 WL 4075881, at *5 (citing

cases); Deutsche Bank Nat’l Tr. Co. Ams. v. Bernal, 59 N.Y.S.3d 267,

273 (N.Y. Sup. Ct. 2017).

¶ 36 The great weight of authority recognizes this right of

abandonment. And because our supreme court already recognizes

that the doctrine of waiver applies to acceleration, see, e.g.,

Goodwin v. Dist. Court, 779 P.2d 837, 843-44 (Colo. 1989), we

conclude that, in Colorado, a lender may abandon the acceleration

of a note.

¶ 37 Here, the Bank abandoned its previous acceleration of a loan

by not only withdrawing the foreclosure but also by communicating

its abandonment to the borrower. Indeed, the borrower and the

Bank negotiated a loan modification after the Bank sent the

borrower a new acceleration warning letter providing him another

opportunity to cure the default.

12 ¶ 38 On this record, we conclude that the district court correctly

determined that acceleration was abandoned.

¶ 39 As pertinent here, abandonment restores the note’s original

maturity date for purposes of accrual of the statute of limitations.

See Boren, 807 F.3d at 104; Mitchell, 174 S.W.2d at 676-77 (holding

that the bank had the right, by its unilateral act, to waive its

acceleration and restore all the terms of the mortgages as originally

executed).

¶ 40 Thus, when the Bank abandoned its acceleration of the loan

prior to the January 2015 foreclosure, the loan was restored to its

original nature as an installment loan with a maturity date of June

1, 2037. Accordingly, we conclude the limitations period had not

expired when the Bank foreclosed on the property.

¶ 41 Because of our resolution above, we need not address the

Bank’s alternative arguments in support of the timeliness of the

January 2015 foreclosure.

IV. Attorney Fees and Costs

¶ 42 After granting the Bank possession of the property, the district

court awarded attorney fees to the Bank pursuant to section 13-40-

123, C.R.S. 2018. The statute provides for an award of attorney

13 fees and costs to the prevailing party in a forcible entry and

detainer action. Because the Bank was the prevailing party, we

decline to disturb the award.

V. Conclusion

¶ 43 We affirm the judgment and the award of attorney fees.

JUDGE ROMÁN and JUDGE FURMAN concur.