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Wells Fargo Bank Minnesota, National Association v. Holoway

Court of Appeals of Louisiana, First Circuit

May 24, 2019

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, SOLELY IN ITS CAPACITY AS TRUSTEE, UNDER THE POOLING AND SERVICING AGREEMENT DATED MARCH 1, 2000, HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 2000-1
v.
MICHAEL E. HOLOWAY

          On Appeal from the Twenty-Second Judicial District Court In and for the Parish of St. Tammany State of Louisiana Docket No. 2009-13483 Honorable Martin Coady, Judge Presiding

          Melissa H. Harris Stephen Rider New Orleans, Louisiana and Lindsay G. Falkner Metairie, Louisiana Counsel for Plaintiff/ Appellant Wells Fargo Bank, National Association, Successor by Merger to Wells Fargo Bank Minnesota, National Association, Solely in its Capacity as Trustee for Provident Bank Home Equity Loan Asset Backed Certificates, Series 2000- 1

          Robert Angelle Charles V. Cusimano, III Metairie, Louisiana Counsel for Defendant/ Appellee Michael E. Holoway

          BEFORE: WHIPPLE, C.J., McCLENDON, AND HIGGINBOTHAM, JJ.

          McCLENDON, J.

         This appeal arises from an action to enforce a promissory note and mortgage, which the trial court dismissed upon finding the action had prescribed. For the reasons that follow, we affirm.

         FACTS AND PROCEDURAL HISTORY

         On December 14, 1999, Defendant Michael E. Holoway executed a promissory note in the principal sum of $196, 000 ("the note"), secured by an "Act of Mortgage" ("the mortgage") encumbering land and improvements located at 106 Woodlawn Drive, Mandeville, Louisiana 70471 ("106 Woodlawn Drive"). The note and mortgage were recorded in St. Tammany Parish as Instrument No. 1179277 (collectively, "the loan.") Defendant failed to pay monthly installments on the Loan in September of 2002. The Loan, originally payable to Crossland Mortgage Corporation, was acquired by The Provident Bank ("Provident") subsequent to Defendant's default.

         Provident gave Defendant notice of default in accordance with the terms of the Loan in a letter dated June 11, 2003. Provident then filed suit to foreclose on the property located at 106 Woodlawn Drive on August 28, 2003 ("the original foreclosure suit"). It is undisputed that the filing of the original foreclosure suit accelerated the Loan ("the acceleration") and interrupted the five-year liberative prescription period that began to run when Defendant first failed to pay a monthly installment on the Loan ("the interruption").

         In December of 2003, Mr. Holoway filed a petition under Chapter 13 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Louisiana ("the first bankruptcy suit"). On August 17, 2004, the bankruptcy court lifted an automatic stay in the matter to enable Provident to continue foreclosure proceedings. However, Provident did not take further action in that suit. The first bankruptcy suit was dismissed by the court on January 14, 2005.

         In March of 2007, Mr. Holoway filed a second petition for Chapter 13 bankruptcy, which was converted to a Chapter 7 bankruptcy ("the second bankruptcy suit"). Litton Loan Servicing, LLP, filed a claim in the second bankruptcy suit regarding the note on behalf of Plaintiff Wells Fargo.[1] The Loan was identified in the second bankruptcy suit and 106 Woodlawn Drive was initially included in the bankruptcy estate. On September 12, 2008, an "Order of Abandonment" signed by the bankruptcy court removed 106 Woodlawn Drive from the bankruptcy estate. The second bankruptcy suit was discharged November 3, 2008.

         On June 16, 2009, Wells Fargo filed the instant action (sometimes herein "the second foreclosure suit") seeking to enforce the Loan against Mr. Holoway.[2] However, the original foreclosure suit was dismissed on grounds of abandonment pursuant to Louisiana Code of Civil Procedure Article 561 on December 6, 2017.

         On January 24, 2018, Defendant filed a Peremptory Exception of Prescription in the instant matter. Defendant contended that there were two interrelated consequences of the dismissal of the original foreclosure suit: one was that the interruption of prescription that occurred with the filing of the original foreclosure suit was rendered ineffective because once a suit is abandoned it is as if the suit never existed; the other was that the acceleration of the Loan that occurred with the filing of the original foreclosure suit remained effective, because the acceleration occurred as a result of the contractual relationship between the parties. Defendant argued that as a result, the prescriptive period began to run when the Loan was accelerated by the filing of the original foreclosure suit, and the second foreclosure suit was therefore prescribed when it was filed over five years later. In opposition, Plaintiff argued that Defendant had acknowledged his debt in the bankruptcy proceedings before prescription accrued, which recommenced the five-year prescriptive period and made filing of the instant suit timely.

         The trial court heard Defendant's Exception of Prescription on April 11, 2018, and took the matter under advisement. In Reasons for Judgment issued on May 3, 2018, the trial court granted the Exception of Prescription and ordered Defendant to submit a written judgment. On June 8, 2018, a judgment was signed granting the Exception of Prescription, dismissing Plaintiff's suit, and ordering the cancellation of the inscription of the mortgage in the St. Tammany Parish records. It is from this judgment that Wells Fargo now appeals, presenting the following issues for review:

1. Whether the trial court erred in granting an Exception of Prescription on a mortgage foreclosure where the borrower acknowledged the debt in his bankruptcy by listing the mortgage loan as a debt in his Amended Chapter 13 Plan, and by including regular payments towards the mortgage debt in his proposed bankruptcy plan.
2. Whether the trial court erred in finding that the bankruptcy trustee lacked the authority to acknowledge the mortgage ...

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