623 B.R. 549
8th Cir. BAP2021Background
- Debtor Vanessa Courtney owned St. Louis property subject to a first mortgage (2006) and a KeyBank second mortgage (2007, ~$21,871).
- Debtor became delinquent on the second mortgage in Oct 2016. On July 3, 2017 KeyBank sent its usual monthly statement showing a cure amount; Debtor called KeyBank and was told to contact foreclosure counsel for a written payoff including fees.
- Foreclosure counsel mailed a detailed reinstatement notice on July 11 stating a larger payoff; Debtor sent the July 3 amount ($2,145.28) on July 13, Bank returned it as insufficient; foreclosure sale occurred July 18, 2017.
- Debtor filed Chapter 7 on Sept 25, 2017; Bank paid off the first mortgage; Debtor received discharge and later filed this adversary to set aside the foreclosure and assert MMPA, breach of good faith, unjust enrichment, and TILA/RESPA claims.
- Bankruptcy Court denied all relief: found no evidence of lulling or unfair dealing, held Bank was not required to send the disputed periodic statement, found MMPA causation lacking, and ruled TILA/RESPA claims time-barred.
- Debtor remained in the property; she appealed and the panel affirmed the Bankruptcy Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Wrongful foreclosure / lulling into false security | July 3 statement misled Courtney to believe sale would not occur; Bank lulled her | Bank told Courtney to obtain written payoff from foreclosure counsel and advised July 3 amount was incorrect; she called and was informed a letter with corrected amount would follow | No lulling; debtor knew statement might be inaccurate, tendered insufficient funds, foreclosure valid |
| Duty to provide accurate periodic/reinstatement statement | Bank (having exclusive info) was obligated under Missouri law to accurately disclose reinstatement amount | Reg Z/Regulations except sending a periodic statement when account uncollectible or collection instituted; debtor was in default and collection commenced | Bank not legally required to send an accurate periodic statement under the circumstances |
| MMPA and breach of good faith | Bank’s misleading communications caused Debtor’s loss | Loss resulted from Debtor’s payment default, not bank’s conduct | Claims abandoned on appeal and, alternatively, fail for lack of causation |
| TILA / RESPA claims timeliness | Violations occurred July 3 (statement) or July 18 (sale) | Claims are barred by applicable one-year limitations | TILA/RESPA claims time-barred; dismissed |
Key Cases Cited
- In re Fisette, 455 B.R. 177 (8th Cir. BAP 2011) (de novo review of legal conclusions)
- In re Potts, 421 B.R. 518 (8th Cir. BAP 2010) (clear-error standard for factual findings)
- United States v. United States Gypsum Co., 333 U.S. 364 (1948) (standard for clear-error review)
- Dobson v. Mortgage Elec. Registration Sys., Inc./GMAC Mortgage Corp., 259 S.W.3d 19 (Mo. Ct. App. 2008) (equity remedy to set aside sale requires fraud, unfair dealing, or mistake)
- Shumate v. Hoefner, 347 Mo. 391 (1941) (lulling doctrine: lender may not lull mortgagor then foreclose without actual notice)
- In re Keith, 211 B.R. 355 (Bankr. W.D. Mo. 1997) (conflicting bank communications can lull unsophisticated debtor)
- Williams v. HSBC Bank USA, N.A., 467 S.W.3d 836 (Mo. Ct. App. 2015) (MMPA claim fails where foreclosure resulted from debtor default, not bank misconduct)