Krystal One Acquisitions, L.L.C. v. Bank of America, N.A.
705 F. App'x 232
| 5th Cir. | 2017Background
- Fred and Cathy Patterson executed a promissory note secured by a deed of trust on a Houston home in June 2000; Bank of America now holds the note.
- A homeowners’ association placed a subordinate lien after the Pattersons defaulted; Krystal One purchased the property at the HOA foreclosure sale in 2015.
- Krystal One sued Bank of America in Texas state court on April 4, 2016, seeking to enjoin an allegedly scheduled trustee’s sale and arguing Bank of America’s lien was time-barred because acceleration occurred more than four years earlier.
- Bank of America removed the case to federal court and moved for summary judgment asserting its senior lien remained enforceable.
- The dispositive legal question was whether Bank of America had "actually exercised" optional acceleration more than four years before Krystal One’s suit, thereby starting the 4-year statute of limitations for foreclosure.
- The district court granted summary judgment for Bank of America; the Fifth Circuit affirmed because Krystal One did not show a clear notice of acceleration predating April 4, 2012 (and even if accrual occurred April 20, 2012, Krystal One’s suit was timely).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bank of America actually accelerated the loan, starting the 4-year limitations period | Krystal One: acceleration occurred more than four years before suit (so lien time-barred) | Bank of America: no clear, unequivocal notice of acceleration was sent; limitations did not start earlier | Held: No summary-judgment evidence of a clear notice of acceleration; suit was timely even if accrual occurred April 20, 2012 |
| Whether the Oct. 31, 2011 letter constituted acceleration | Krystal One: letter shows intent to accelerate and starts limitations | Bank of America: letter was only a notice of intent to accelerate (allowed cure) | Held: Oct. 31, 2011 letter was only a notice of intent to accelerate, not acceleration |
| Effect of partial payment received Jan. 2012 | Krystal One: (argued acceleration had already occurred) | Bank of America: acceptance of partial payment indicates no unconditional acceleration | Held: Acceptance of partial payment supports that acceleration had not been unequivocally exercised |
| Whether a trustee’s-sale notice (Apr. 20, 2012) necessarily triggered accrual | Krystal One: could argue accrual before April 4, 2012 | Bank of America: no clear evidence it unequivocally accelerated before suit | Held: Court did not decide whether Apr. 20 notice triggered accrual because Krystal One’s April 4, 2016 suit was timely even if accrual was Apr. 20, 2012 |
Key Cases Cited
- Boren v. U.S. Nat. Bank Ass'n, 807 F.3d 99 (5th Cir. 2015) (acceleration occurs only when holder actually exercises optional acceleration; requires notice of intent and notice of acceleration)
- Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562 (Tex. 2001) (discusses accrual when acceleration is exercised)
- EMC Mortg. Corp. v. Window Box Ass'n, Inc., 264 S.W.3d 331 (Tex. App. 2008) (both notice of intent and clear notice of acceleration are required; cure rights distinguish intent from acceleration)
- Ogden v. Gibraltar Sav. Ass'n, 640 S.W.2d 232 (Tex. 1982) (proper notice of acceleration cuts off right to cure and makes full debt due)
- Karam v. Brown, 407 S.W.3d 464 (Tex. App. 2013) (notice of intent plus trustee’s-sale notice can show unequivocal acceleration)
- Burney v. Citigroup Glob. Markets Realty Corp., 244 S.W.3d 900 (Tex. App. 2008) (similar rule on notices evidencing acceleration)
- Meadowbrook Gardens, Ltd. v. WMFMT Real Estate Ltd. P'ship, 980 S.W.2d 916 (Tex. App. 1998) (treats trustee’s-sale notice as evidence of acceleration in context)
- McLemore v. Pac. Sw. Bank, FSB, 872 S.W.2d 286 (Tex. App. 1994) (same)