In re Hall
| Decision Date | 03 August 2001 |
| Docket Number | No. 00-43421-13.,00-43421-13. |
| Citation | 265 BR 435 |
| Parties | In re Joan April HALL, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
Debtor Joan April Hall purchased her residence from her mother, Mary G. Lilleston-Jordon, in the mid-1980s. In connection therewith, the debtor executed a Promissory Note dated October 7, 1985 (the "Note") in the principal amount of $22,049.23, payable in monthly installments of $231.61 and bearing an annual interest rate of 10%. Also on October 7, 1985, the debtor executed a Deed of Trust which was recorded with the Recorder of Deeds in Jackson County, Missouri, on October 11, 1985 (the "Deed of Trust"). An amortization schedule submitted by the debtor's mother indicates that, had the debtor made the payments on the Note as scheduled, it would mature on September 1, 2001.1 The debtor never made a payment on the Note, however, despite the fact that she has apparently lived in the house since 1985 and still claims the house as her place of residence on her bankruptcy schedules.2
At some point in recent years, the debtor's relationship with her mother appears to have become rather contentious and, during the summer of last year, the debtor's mother began foreclosure proceedings on the house, with the foreclosure sale scheduled for August 3, 2000. The county taxing authority had also scheduled an advertised tax sale to be held on September 18, 2000, as a result of unpaid property taxes. On August 3, 2000, the date on which the mother's foreclosure sale was scheduled, the debtor obtained a temporary restraining order to prevent the sale. The debtor also filed a quiet title action in the Jackson County Circuit Court.
On September 18, 2000, the debtor filed her Chapter 13 bankruptcy petition, thereby staying the sale of the residence by the county taxing authority for unpaid real estate taxes. In her bankruptcy schedules, the debtor lists this property as her place of residence and claims an $8,000 homestead exemption in the residence under Mo.Rev.Stat. § 513.475. She lists no rent or home mortgage payment on her Schedule J, but lists expenses for utilities, home maintenance and real estate taxes. On her Schedule D, Creditors Holding Secured Claims, she lists her mother as a creditor, listing the value of the real estate at $50,000 but indicating that the amount of her mother's claim is zero. She has also indicated that this claim is disputed. In her Chapter 13 Plan, the debtor has reflected no payment on the mortgage, either through the plan or otherwise, and she indicates that any mortgage lien held by Mary G. Lilleston-Jordan is to be avoided.
On October 12, 2000, the debtor's mother filed a Proof of Claim, asserting a secured claim in the amount of $55,123.09, all of which is claimed as an arrearage. On December 13, 2000, the debtor filed an Objection to her mother's Proof of Claim, asserting that the claim should be disallowed because (1) the entire amount, including the entire principal amount, was listed as an arrearage, and (2) since the Promissory Note and Deed of Trust had not been collected upon for over ten years, they are invalid. On January 19, 2001, the debtor's mother filed an amended Proof of Claim asserting a secured claim in the amount of $22,049.23 together with interest in the amount of $30,500.84, for a total claim of $52,550.07, all of which is again claimed as an arrearage. She also filed an Application for Order Modifying Automatic Stay, seeking to have the stay lifted so that she can foreclose and sell the property. Specifically, the debtor's mother asserts she will suffer irreparable harm because the debt is past due, because the debtor has not provided proof of insurance, because she is delinquent in paying her real estate taxes, and because the debtor's mother's interest is not adequately protected.
The parties have submitted briefs on the issue of whether the debtor's mother is barred by the statute of limitations from collecting on the Note and foreclosing the Deed of Trust. They agree that the issue of the validity of the debtor's mother's claim is an issue to be determined in accordance with state law, see Grogan v. Garner, 498 U.S. 279, 283, 111 S.Ct. 654, 657, 112 L.Ed.2d 755 (1991), but they disagree on the application of the Missouri law to the facts in this case.
Missouri statute provides that "an action upon any writing, whether sealed or unsealed, for the payment of money or property" shall be commenced within ten years. Mo.Rev.Stat. § 516.110. In addition:
No suit, action or proceeding under power of sale to foreclose any mortgage or deed of trust, to secure any obligation to pay money or property, shall be had or maintained after such obligation has been barred by the statutes of limitation of this state; nor in any event after the lapse of twenty years from the date at which the last maturing obligation secured by the instrument sought to be foreclosed is due on the face of such instrument. . . .
Thus, in Missouri, "the period of limitations on a promissory note is ten years." Sabine v. Leonard, 322 S.W.2d 831, 837 (Mo. banc 1959) (citing Mo.Rev. Stat. § 516.110); accord Estell v. Estate of Iden, 714 S.W.2d 774, 777 (Mo.Ct.App. 1986). "Also, if recovery on a note has been barred by the statute, the right to foreclose a deed of trust securing the same is also barred." Id. (citing Mo.Rev.Stat. § 516.150; Oehler v. Philpott, 263 S.W.2d 201 (Mo.1953)). In other words, a creditor cannot foreclose on a deed of trust if recovery on the promissory note is barred by the statute of limitations, which, pursuant to § 516.110, is ten years.
In addition, § 516.100 provides:
Civil actions, other than those for the recovery of real property, can only be commenced within the periods prescribed in the following sections, after the causes of action shall have accrued; provided, that for the purposes of sections 516.100 to 516.370, the cause of action shall not be deemed to accrue when the wrong is done or the technical breach of contract or duty occurs, but when the damage resulting therefrom is sustained and is capable of ascertainment, and, if more than one item of damage, then the last item, so that all resulting damage may be recovered, and full and complete relief obtained.
Mo.Rev.Stat. § 516.100. And, the Missouri Supreme Court has interpreted this provision as follows:
By the specific term of the amended statute § 516.100 the cause of action for breach of an installment contract for the payment of money shall not be deemed to accrue (for purposes of computing the limitation period) until the last item shall become due so that all damages (unpaid installments) may be recovered and complete relief obtained in one action.
Sabine, 322 S.W.2d at 837 (overruling Stark Bros. Co. v. Gooding, 175 Mo.App. 353, 162 S.W. 333 (1914)).3 In other words, Estell v. Estate of Iden, 714 S.W.2d at 777; see also Reed v. Rope, 817 S.W.2d 503, 508 (Mo.Ct.App.1991) ().
As a result, pursuant to Missouri statutory and case law, because the final payment on the Promissory Note in the case at bar is not due until September of 2001, the statute of limitations as to the entire obligation under the Note does not begin to run until then.
The debtor asserts, however, that pursuant to the acceleration clause contained in the Promissory Note, all payments (including the final one, for purposes of § 516.100) became due when she missed the first payment in December of 1985 and that the ten-year statute of limitations began running at that time. Specifically, the Promissory Note provides that "if default is made in the payment of any installment when due, then all the remaining installments shall become due and payable at once." The debtor asserts that, because of the acceleration clause, the statute began running in December 1985, when the first payment went unpaid, and would have therefore run out in December of 1995.
At first blush, this argument appears to have some merit. Nevertheless, this Court concludes that the debtor is incorrect on this point: the acceleration clause does not change the time at which the statute of limitations on the Promissory Note begins to run in this case because the debtor's mother never made an affirmative overt act evidencing an intention to invoke the acceleration provision.
The debtor correctly points out that acceleration clauses may contain language indicating either "automatic" acceleration on default (i.e., that the entire amount shall become due and payable upon default), or "optional" acceleration on default (i.e., that the seller may declare the entire amount due and payable upon default), or a combination of the two. Contrary to the debtor's assertion, however, acceleration clauses are not self-operative in Missouri, even when the acceleration clause language appears to be automatic, as it does in the case at bar.
As the debtor concedes, in Putthoff v. Walker, 213 Mo.App. 228, 248 S.W. 619 (1923), the Missouri Court of Appeals expressly held that an acceleration clause identical to the one in the case at bar was not self-executing. Id. at 621. The debtor asserts, however, that Putthoff was incorrectly decided and she cites several Missouri Supreme Court cases which she contends hold to the contrary.4
However, even assuming the cases cited by the debtor stand for the proposition that the debtor contends they do, the Missouri Supreme Court...
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