United States Bankruptcy Appellate Panel
For the Eighth Circuit
___________________________
No. 20-6016
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In re: Vanessa Courtney
llllDebtor
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Vanessa Courtney
lllllllllllllllllllllPlaintiff - Appellant
v.
KeyBank N.A.; Ditech Financial LLC,
formerly known as Green Tree Servicing, LLC
lllllllllllllllllllllDefendants - Appellees
____________
Appeal from United States Bankruptcy Court
for the Eastern District of Missouri - St. Louis
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Submitted: November 16, 2020
Filed: January 14, 2021
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Before SHODEEN, DOW and SANBERG, Bankruptcy Judges.
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DOW, Bankruptcy Judge.
The subject of this case is a foreclosure sale by KeyBank National
Association (the “Bank”) of real property (the “Property”) owned by Vanessa
Courtney (the “Debtor). After the Debtor filed for bankruptcy, she filed a
complaint against the Bank to set aside the foreclosure in equity (the “Complaint”).
The Bankruptcy Court rendered judgment in favor of the Bank on all counts, and
the Debtor appealed. For the reasons that follow, we affirm.
STANDARD OF REVIEW
A bankruptcy court’s legal conclusions are subject to de novo review.
Fisette v. Keller (In re Fisette), 455 B.R. 177, 180 (8th Cir. BAP 2011). Here we
review de novo whether the Bankruptcy Court’s conclusions interpreting the
relevant statutes and cases and applying them to the undisputed facts are correct.
We review a bankruptcy court’s findings of fact for clear error. In re Potts,
421 B.R. 518, 521 (8th Cir. BAP 2010). “A finding is ‘clearly erroneous' when
although there is evidence to support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mistake has been
committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).
FACTUAL BACKGROUND
The parties have stipulated to the following facts. The Debtor jointly owned
the Property located in St. Louis, Missouri. The first note and deed of trust was
dated March 31, 2006, and held by ABN Amro Mortgage Group (the “First
Mortgage”), predecessor to Ditech Financial LLC fka Green Tree Servicing LLC
(“Ditech”). The principal amount of the First Mortgage was $68,750. The Bank
originated a second mortgage secured by the Property on September 20, 2007, in
the principal amount of $21,871.50 (the “Second Mortgage”).
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The Debtor became delinquent on the Second Mortgage in October, 2016.
On July 3, 2017, the Bank mailed the Debtor her usual and customary monthly
statement notifying her that the amount necessary to cure the default was $2,145.28
which was due by July 26, 2017 (the “July 3 Statement”). On July 7, 2017, the
Debtor initiated a phone call to the Bank to discuss reinstating her loan. The Bank
advised the Debtor to contact the Bank’s foreclosure counsel to obtain a complete
and correct written payoff statement that included legal fees and costs.
On July 11, 2017, after Debtor’s telephone request, the Bank’s foreclosure
counsel mailed Debtor a letter with the reinstatement amount of $6,179.86, broken
down into payments, late charges and foreclosure fees (the “Reinstatement
Notice”). On July 13, 2017, the Debtor tendered the amount of $2,145.28 to the
Bank via USPS Priority Mail. The Bank rejected that sum as insufficient to
reinstate the Second Mortgage, and returned it to the Debtor. At no time did the
Debtor remit the full amount in arrears.
On July 18, 2017, the Bank foreclosed on the Property (the “Foreclosure
Sale”). The Debtor filed her Chapter 7 petition on September 25, 2017. The Bank
subsequently paid off the First Mortgage in the amount of $56,227.25, and Ditech
released its lien. The Debtor received a discharge in January of 2018, and soon
thereafter, the case was closed. Two months later, the Debtor filed a motion to
impose the automatic stay to stop the Bank from instituting eviction proceedings
against her. The case was reopened, and the Bankruptcy Court ordered the Bank to
abstain from removing the Debtor from the Property until the matter was resolved
by declaratory judgment. This adversary proceeding ensued.1
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Ditech is a co-defendant in this adversary proceeding, but subsequently filed bankruptcy. No relief
from the automatic stay was granted in that case to allow the Debtor to pursue relief against Ditech.
The Debtor and the Bank conceded that dismissing Ditech as a party was the most appropriate
course of action, so the Bankruptcy Court ordered that all relief sought against Ditech be denied due
to lack of jurisdiction.
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The Debtor’s Complaint contains four counts: 1) wrongful foreclosure in
equity, 2) breach of good faith and fair dealing, 3) violation of the Missouri
Merchandising Practices Act (the “MMPA”), and 4) unjust enrichment against
Ditech.
The Debtor continues to live in the Property without paying any funds to the
Bank.
BANKRUPTCY COURT ORDER
After a trial on the matter, the Bankruptcy Court found that neither the
evidence nor the law supported the idea that the Bank lulled the Debtor into
believing that if she paid the amount indicated on the July 3 Statement, the
foreclosure sale would not take place. It concluded that the fact that the Debtor
followed up with the Bank to verify the reinstatement amount demonstrated that
she knew she was not entitled to rely on the July 3 Statement. Additionally, the
Bankruptcy Court concluded the Bank did not waive its right to timely payments
by sending the July 3 Statement because at no time did the Bank act in a manner
inconsistent with that right. The Bankruptcy Court therefore denied the relief
sought by the Debtor for wrongful foreclosure in equity.
The Bankruptcy Court also denied the relief sought for breach of good faith
and fair dealing under Missouri law. It concluded that the Bank had the right to
accelerate the Second Mortgage and foreclose because the Debtor was delinquent
in her payments.
The Bankruptcy Court set out the elements of the MMPA and found that the
element of causation was not established. The cause of the Debtor’s loss was her
delinquency on her payments, not the incorrect amount appearing on the July 3
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Statement. Therefore, the Bankruptcy Court denied the relief sought by the Debtor
under the MMPA.
Finally, the Bankruptcy Court found that the Debtor’s claims against the
Bank under the Truth in Lending Act (“TILA”) or the Real Estate Settlement
Procedures Act (“RESPA”) were barred. The statute of limitations pertaining to
these alleged violations expired, so the relief requested was denied.
DISCUSSION
The Debtor argues that the Bankruptcy Court erred in concluding that the
Debtor was advised by the Bank that the July 3 Statement was inaccurate. The
Bank counters that the Debtor was in contact with the Bank prior to remitting her
alleged reinstatement amount, and was advised to obtain updated figures. The
record supports the Bankruptcy Court’s conclusion in favor of the Bank. The
Debtor stipulated that “KeyBank advised Plaintiff that she had to contact
KeyBank’s foreclosure counsel to obtain a written payoff statement that included
legal costs and fees.” The notes from the Bank’s telephone records, a stipulated
exhibit, indicate that the Debtor was so advised. Nowhere in the Debtor’s briefing
does she dispute that. The call notes also establish that the Debtor called the
Bank’s foreclosure department as instructed; that very fact contradicts her position
that the Bank did not advise her of the inaccuracy of the July 3 Statement. Finally,
while there is no evidence proving the Debtor’s receipt of the Reinstatement
Notice, there is evidence that the Bank advised her that the correct amount would
be forthcoming in a letter. Therefore, we find that the Bankruptcy Court’s
conclusion that the Debtor was advised by the Bank about the inaccuracy of the
July 3 Statement was not clearly erroneous.
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The Debtor also contends that the Bankruptcy Court erred in determining
that the Bank was excused from sending an accurate statement to the Debtor. The
Bankruptcy Court relied on federal disclosure requirements to reach its conclusion:
a periodic statement need not be sent for an account if the creditor deems it
uncollectible or if delinquency collection proceedings have been instituted. 12 CFR
§1026.5(b)(2)(i). In this case, the Debtor was in default and the Bank had
commenced collection efforts. The Debtor concedes these facts. We therefore
concur with the Bankruptcy Court’s finding that the Bank was not legally required
to send a statement to the Debtor.
The Debtor argues in the alternative that whether the Bank was required to
provide her with a statement is irrelevant — what is relevant is that the Bank was
the only party possessing the information regarding the reinstatement amounts and
was obligated under Missouri law to accurately disclose it, citing Mo. Rev. Stat.
§408.554 of the Missouri Statutes. That section, however, pertains to notices of
default, not reinstatement, and states that after a borrower has been in default for
ten days for failure to make a required payment, a lender may give the borrower the
notice described therein. §408.554.1 (emphasis added). We acknowledge that
the Bank had knowledge superior to that of the Debtor, and perhaps should have
followed up with her by phone in addition to mailing the Reinstatement Notice.
Nevertheless, we affirm the Bankruptcy Court’s legal conclusion that the Bank did
not violate any relevant statute or duty in connection with providing reinstatement
information to the Debtor.
The Debtor contends that the Bankruptcy Court erred in concluding that she
failed to meet her burden of proving wrongful foreclosure in equity. Under
Missouri law, if a mortgagee had the right to foreclose, but the sale was otherwise
void or voidable, then the remedy is a suit in equity to set the sale aside. Dobson v.
Mortgage Elec. Registration Sys., Inc./GMAC Mortgage Corp., 259 S.W.3d 19, 22
(Mo. Ct. App. 2008). This remedy can only be invoked if fraud, unfair dealing or
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mistake was involved in the trustee’s sale. Ice v. IB Property Holdings, LLC, 2010
WL 1936175 *3 (W.D. Mo. May 13, 2010)(citations omitted). One example of
unfair dealing in this context is when the mortgagee lulls the mortgagor into a
sense of security and then forecloses under the deed of trust, without giving actual
notice to the mortgagor. Shumate v. Hoefner, 347 Mo. 391, 395 (1941).
The Debtor asserts that the Bank’s words and conduct lulled her into
believing that the property would not be foreclosed or that someone would follow-
up with her prior to the foreclosure sale if the sums she tendered were insufficient
to reinstate the Second Mortgage. She cites In re Keith, 211 B.R. 355 (Bankr.
W.D. Mo. 1997), as a case directly on point, but the case can be distinguished. In
Keith, the debtor received two separate communications from two different
branches of the bank holding the deed of trust securing her home loan. One branch
sent the debtor a letter notifying her that a foreclosure sale would take place on
October 24, 1996. The other branch sent her a default notice informing her that
she could cure the default by paying a certain amount no later than November 5,
1996. In reliance on the latter, the debtor made the required payment in October,
but the foreclosure sale took place on October 24. Unlike the Debtor in this case,
the debtor in Keith testified that she believed if she made all her past due payments
by November 5 that she would have cured the default. The court was convinced
from the debtor’s testimony that the information given to the debtor was confusing,
and that the debtor was not sophisticated enough to understand that communication
inconsistencies may exist between different branches of a bank. The court found
that a letter informing the debtor that she had additional time to cure a default,
mailed after notice of a foreclosure sale, could well have lulled her into a sense of
security and made her believe the sale had been postponed. Id. at 358.
Such is not the case here. The Debtor did not testify at the hearing, so there
was no testimony as to the Debtor’s confusion or beliefs which the Bankruptcy
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Court could consider. The only evidence on which the Bankruptcy Court could
rely was the conduct of the Bank and of the Debtor as established by the written
record. The Bank followed its standard procedures insofar as it mailed the usual
and customary monthly statement to the Debtor, kept records of its telephone
conversations with the Debtor, mailed the detailed Reinstatement Notice to the
Debtor, and rejected the insufficient payment made by the Debtor. Most
significant is the undisputed fact that the Bank informed the Debtor that the
amount stated in the July 7 Statement was incorrect. There is no evidence that the
Bank’s foreclosure notice and procedures were deficient. While the Bank could
have been more diligent in responding to the Debtor’s phone calls, there is no
evidence of unfair dealing or fraud on its part. Regarding the Debtor’s conduct,
the record established that she was in default, that she called the Bank’s foreclosure
department to verify the reinstatement amount, and that she was informed that she
would soon be receiving a letter with the corrected amount. Despite being
informed, she decided to send an amount that was insufficient to reinstate her loan.
From both a legal standpoint and a practical one, the Debtor cannot rely on
tendering an amount she knew was insufficient to reinstate her mortgage in order
to set aside the Foreclosure Sale later. The record supports the Bankruptcy Court’s
conclusion that she could not have been lulled by the Bank into a false sense of
security regarding the Foreclosure Sale.
With respect to the Debtor’s claims in her Complaint related to the MMPA
and the Bank’s breach of its duty of good faith, those claims have been abandoned
because she did not address them in her appellate brief. Even if they had not been
abandoned, the Debtor would be unable to prove the MMPA’s required element of
causation. See Mo. Rev. Stat. §407.025.1 (to maintain a claim under the MMPA,
the claimant must demonstrate that he or she purchased merchandise for personal,
family or household use, and suffered an ascertainable loss caused by an unfair
practice). As noted above, the record demonstrates that the loss of the Debtor’s
property was caused by her default in her payments, not as a result of the Bank’s
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fraud or deceptive practices. See Williams v. HSBC Bank USA, N.A., 467 S.W.3d
836, 843 (Mo. Ct. App. 2015)(MMPA claim denied since foreclosure occurred
because debtor was delinquent in mortgage payments, not due to bank’s alleged
violations).
Finally, the Bankruptcy Court did not err in concluding that the Debtor’s
claims under TILA and RESPA are time-barred. Pursuant to 15 U.S.C. §1640(e),
TILA actions must be brought within one year of the alleged violation, in this case,
either July 3, 2017 (the date of the initial cure statement), or July 18, 2017 (the
date of the foreclosure sale). Likewise, under 12 C.F.R. §1024.35(g)(iii), a Notice
of Error for an alleged RESPA violation must be sent to the creditor within one
year. The statute of limitation on the TILA claim has expired, and there is no
evidence that the Debtor ever sent the Bank a Notice of Error under RESPA.
For the foregoing reasons, we affirm the Bankruptcy Court’s order denying
all relief requested by the Debtor in her Complaint.
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