Article courtesy of Clint Culpepper of Baker Botts
A debtor challenged a notice of intent to accelerate by asserting a statute of limitations defense. The case was determined based on the sufficiency of notice to the debtor of the intent to abandon a previous acceleration notice.
U.S. Bank Nat’l Ass’n v. Lamell, 2022 U.S. App. LEXIS 15251, 2022 WL 1800860 (5th Cir. June 2, 2022) (opinion not yet released for publication)
In U.S. Bank Nat’l Ass’n v. Lamell, 2022 U.S. App. LEXIS 15251, 2022 WL 1800860 (5th Cir. June 2, 2022) (opinion not yet released for publication), a debtor defaulted on their loan payment regarding a tract of land. In 2010, the mortgage servicer gave a notice of intent to accelerate the loan. At that time, the debtor filed suit in state court alleging fraud-related claims arising from certain tax assessments and charges on his property. The debtor received his first notice of acceleration in June 2010, to which he did not respond, and the lender accelerated the loan, declaring the total amount to be due. This continued after the loan was transferred from the original lender to another lender, and then eventually to the final lender. At this time, the parties involved in the fraud claim settled, to which the court entered final judgment on the agreement and dismissed all the claims asserted with prejudice. On July 2, 2019, the final lender sent its first notice of foreclosure to the debtor. The following day, four years after accelerating the refinanced loans, the lenders filed an action seeking declarations that the statute of limitations did not prevent enforcement of the loan agreement, claim preclusion barred the debtor from asserting any claims against enforcement of the agreement, and that the agreement may be enforced by foreclosure. The court held that the lender failed to abandon an acceleration of a defaulted loan when the only notice given to the borrower was a monthly statement purporting to demand less than the full amount of the loan. Precedent showed that to adequately abandon a prior acceleration, a lender must demonstrate an unequivocal manifestation of intent to no longer accelerate the loan. The lenders argued that it gave the borrower adequate notice by demanding less than the full accelerated amount. However, the court rejected this argument. The court stated that the demand letter alone—without any language that would allow the borrower to conclude the loan had not yet been accelerated—did not constitute sufficient notice. From this reasoning, the court concluded that the lender did not abandon the acceleration, and therefore, there existed a genuine dispute of material fact that constituted a reversal and remand. The issue of whether the 2010 acceleration was abandoned was to be outcome determinative because under Texas law an entity must bring suit for foreclosure of real property not later than four years after the cause of action accrues, which is deemed to be at the time of acceleration.