Article courtesy of Ariel Emmanuel (King & Spalding)
U.S. Bank Trust National Association, as Trustee of the Tiki Series IV Trust v. Jerry K. Walden, Jr., No. 23-50662, 2024 WL 5181964 (5th Cir. Dec. 2024)
The borrowers (the “Waldens”) obtained a loan from the original lender in 2008, which loan was secured by a deed of trust on the Waldens’ real property. In 2017, the loan was assigned to an intermediate lender. And during the time the loan was held by such intermediate lender, the Waldens failed to make payments on the loan, so such intermediate lender served a notice of acceleration on the Waldens in 2018, and filed a lawsuit against the Waldens in 2019. In 2020, the district court entered a judgment authorizing the non-judicial foreclosure of the Waldens’ real property. The Waldens’ appealed this judgment. While the appeal was pending, the intermediate lender assigned the loan to U.S. Bank Trust National Association, the current lender (“U.S. Bank”). The judgment of the district court was affirmed by the Fifth Circuit Court of Appeals in 2021. After such affirmation, U.S. Bank and its servicer sent a notice of default to the Waldens on August 13, 2021 (the “Default Notice”), which notice stated that the Waldens could cure the outstanding defaults by paying $346,060.32. The Waldens still failed to pay this amount, and U.S. Bank subsequently issued a notice in November 2021 that the real property will be sold at a foreclosure sale on January 4, 2022. U.S. Bank then filed a lawsuit on December 31, 2021, arguing that it had a right to foreclosure pursuant to the final judgment the court previously issued to the intermediate lender. The district court entered a summary judgment for non-judicial foreclosure.
On the Waldens’ appeal from the summary judgment, the Fifth Circuit Court of Appeals concluded that U.S. Bank owned the loan and had standing, but it abandoned acceleration on the loan via a notice that unequivocally manifested its intent to abandon. U.S. Bank had argued that the Default Notice was inadvertently sent and that the notice, by itself, did not manifest unequivocal intent to abandon acceleration, because U.S. Bank later sent the Waldens another notice of foreclosure sale later that year. The Court of Appeals noted that an acceleration of a note can be abandoned by agreement or other action of the parties. The central element is intent, which must be unequivocally manifested. The Court of Appeals cited precedent that intent can be shown by informing a borrower of the total amount necessary to bring the loan current. They also pointed to the fact that the Default Notice said that any prior demands or notices of acceleration have been withdrawn, cancelled and abandoned. The Court of Appeals concluded with reversing the district court’s order granting summary judgment.
