Igou v. Bank of America, N.A

2020 COA 15, 459 P.3d 776

• Court: Colorado Court of Appeals
• Decided: January 30, 2020
• Docket: 18CA0841
• 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 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.