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The Bank of New York Mellon v. Oldemeyer

Court of Appeals of Louisiana, Third Circuit

October 9, 2019



          Kent B. Payne COUNSEL FOR DEFENDANT/RELATOR: Kristi Fair formerly known as Kristi Oldemeyer

          Ronnie J. Berthelot The Law Offices of Herschel C. Adcock, Jr., L.L.C. COUNSEL FOR PLAINTIFF/RESPONDENT: The Bank of New York Melon formerly known as The Bank of New York, as Trustee

          Jason O. Methvin Curator ad hoc for Michael E. Oldemeyer

          Court composed of Elizabeth A. Pickett, Phyllis M. Keaty, and Jonathan W. Perry, Judges.


         Relator/Defendant, Kristi Fair, formerly known as Kristi Oldemeyer ("Kristi"), seeks supervisory review of the trial court's judgment which denied her peremptory exception of prescription. For the following reasons, we grant the writ and make it peremptory.


         This litigation began on July 30, 2018, when Respondent/Plaintiff, the Bank of New York Mellon, formerly known as the Bank of New York (hereinafter referred to as "the Bank"), filed a "Petition for Mortgage Foreclosure by Executory Process with Appraisal" in connection to Kristi's execution of a promissory note on July 20, 2006. The question presented in this matter largely concerns whether certain filings within a Chapter 13 bankruptcy proceeding Kristi's ex-husband, Michael Oldemeyer, instituted, constitutes an "acknowledgment" of the debt sufficient to interrupt the five-year prescriptive period applicable to actions to enforce promissory notes.


         On July 20, 2006, Michael and Kristi Oldemeyer, while married, made and executed a promissory note in the amount of $100, 000.00, payable in monthly installments beginning September 1, 2006, and continuing through August 1, 2036. Both Michael and Kristi signed the note as "Borrower," with Home Loan Center, Inc. d/b/a LendingTree Loans, the original note holder, being identified as "Lender." The promissory note contained an acceleration clause providing that in the event of default, the holder of the note may require the borrower to immediately pay the full amount of the principal owed. It further provided that "[i]f more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed." The promissory note was secured by a mortgage on the couple's property, located at 2143 Johnson Chute Road in Natchitoches, Louisiana.

         On January 14, 2010, the Oldemeyers[1] received a "Notice of Intent to Accelerate" from the new note holder, Bank of America Home Loans, [2] after failing to make their monthly payment on December 1, 2009. Specifically, the notice provided: "If the default is not cured on or before February 13, 2010, the mortgage payments will be accelerated with the full amount remaining accelerated and becoming due and payable in full, and foreclosure proceedings will be initiated at that time." (First alteration in original.) No further payments were made by either Michael or Kristi, leaving an unpaid balance of $96, 454.40 on the promissory note.

         On December 29, 2011, Michael (now presumably divorced from Kristi) filed a voluntary petition with the Western District of Louisiana to institute a Chapter 13 bankruptcy proceeding.[3] Therein, on Schedule F ("Creditors Holding Unsecured Nonpriority Claims"), Michael listed Bank of America Home Loans as a creditor for an "obliation [sic] for home located at 2143 Johnson Chute Rd., Natchitoches, LA (ownned [sic] by ex-wife)" in the amounts of $96, 769.40 and $18, 235.00. However, on Schedule H ("Codebtors"), Michael checked a box stating that he "has no codebtors." In any event, Michael listed "None" in Schedule A ("Real Property"), under which he was ordered to "list all real property[.]" In the accompanying "Bankruptcy Rule 3015(d) Summary and Notice of a Chapter 13 Plan of Repayment" ("plan"), Michael agreed to make monthly payments (via payroll deduction) of $874.00 for an estimated term of sixty months beginning January 28, 2012. However, the plan's cover page specified that the only amount to be repaid under the plan was attributable to "Non-Priority Unsecured Creditors," the sum of which was stated as "$46, 182.80 (of which $11, 333.00 will be paid to student loans)."[4] Notably, under Section I(C) of the plan, entitled, "DEBTOR WILL PAY THESE CREDITORS DIRECTLY OR SATISFY CLAIM BY SURRENDER OF COLLATERAL", neither the creditor of the subject property, Bank of America Home Loans (or any transferees of the note), nor the mortgage itself was listed by Michael in the corresponding sections.[5] In fact, Michael was first asked under Subsection I(C)(1) whether he, as the debtor, "WILL PAY MORTGAGE(S) ON PRINCIPAL RESIDENCE/REAL PROPERTY, " to which he responded "NONE" under the space provided to list any creditors, and left blank the spaces provided to detail the corresponding "Collateral," "Estimated Monthly Payment," and a beginning date for payment. Further, under Subsection I(C)(3), he was asked to indicate whether "AS SOON AS POSSIBLE AFTER PLAN CONFIRMATION DATE, [HE] WILL SURRENDER PROPERTY TO SECURED CREDITOR TO SATISFY CREDITOR'S SECURED CLAIM, " to which he, again, responded "NONE" as to any creditor, leaving blank the spaces provided to detail the "Collateral/Property to be Surrendered" and "Terms of Surrender." The only reference to the subject debt was featured on the plan's cover page, as follows: "Special Provisions and/or Changes to Sections III, IV, or V of the Model Plan: Upon confirmation of this plan, the in rem co-debtor stay shall be lifted with regard to the claim of Bank of America. No further motion to lift the stay shall be required."

         A hearing to confirm the plan was then ordered by the bankruptcy court on March 6, 2012, and the Bank alleges to have appeared as a secured creditor and successor of Bank of America Home Loans, over no objection of Michael. On March 20, 2012, the plan was confirmed by an order of the court, which thereby modified the term for payment to forty-five months from the initial term of sixty months. The plan remained unchanged in all other aspects, and again included the special provision inscription noted above.

         Pursuant to 11 U.S.C. § 362, Michael's bankruptcy filing created a bankruptcy estate and automatic stay which effectively prohibited any of Michael's creditors from pursuing him (in personam) and/or his property (in rem) during the proceedings.[6] Moreover, under 11 U.S.C. § 1301, this automatic stay extends to protect any non-filing co-debtor that is liable on such debt with the filing debtor during the pendency of the proceedings, often referred to as a "co-debtor stay." Thus, it is undisputed between the parties that an automatic stay arose as of the date of the bankruptcy filing, or December 29, 2011.

         On April 29, 2014, the Bank, as trustee, [7] moved to lift the stay as to both "the Debtor," Michael, and "the non-filing Co-Debtor," Kristi, citing irreparable damage from its inability to foreclose on the property. Interestingly, the Bank alleged therein that "[t]he Debtor's confirmed plan provides for the surrender of the property."

         On May 20, 2014, the bankruptcy court ordered the termination of the automatic stay, thereby allowing the Bank to foreclose or otherwise exercise its security interest with respect to the property. The court also ordered (emphasis added): "The above property is hereby abandoned as property of the above bankruptcy estate[.]"

         On April 5, 2016, the court issued an order granting Michael a discharge pursuant to 11 U.S.C. § 1328(a).[8] Having fully administered the bankruptcy proceedings, the court then ordered the discharge of the trustee in the matter on May 27, 2016. [9]

         On July 30, 2018, the Bank filed a "Petition for Mortgage Foreclosure by Executory Process with Appraisal" before the trial court. The Bank asserted that the unpaid principal balance on the promissory note amounted to $96, 454.40, and prayed that the court order the issuance of a writ of seizure and sale as to the mortgaged property to satisfy the debt. The trial court ordered the writ on August 9, 2018, thereby directing the Natchitoches Parish Sheriff to sell the subject property at public auction.

         On September 18, 2018, Kristi filed a "Petition for Injunction to Arrest Seizure and Sale and for Expedited Hearing." She asserted entitlement to an injunction, without bond, "because the obligation underlying the mortgage sued upon herein has been extinguished by prescription, [and] the order directing the issuance of the writ of seizure and sale was rendered without sufficient authentic evidence having been submitted to the court[.]" As to the issue of prescription, Kristi argued that under La.R.S. 10:3-118(a), the debt evidenced by the promissory note was "extinguished and/or legally unenforceable" since more than five years had elapsed from the date any payments became due and exigible, which Kristi asserted to have occurred on the date that payments were accelerated, or February 13, 2010, until the Bank filed suit on July 30, 2018.[10] Next, Kristi argued the Bank was precluded from proceeding by executory process under La.Code Civ.P. art. 2635(A)(2). She alleged that the act of mortgage executed by the parties and submitted by the Bank in obtaining executory process did not meet the requirements of an authentic act because it was signed by only one witness. She also asserted that because the judgment which purported to correct the erroneous property description was "not a valid, final judgment since it lacks the required decretal language[, ]" that the property description in the act of mortgage failed to match the description in the order of seizure and sale.[11]

         In response, the Bank filed a memorandum opposing Kristi's prescription defense.[12] At the outset, we note the Bank misrepresents Kristi's prescription argument in stating that "[Kristi] contends that the notice is proof that the debt was accelerated on January 14, 2010, the date of the notice." (emphasis added). Kristi, in fact, argued the debt was accelerated as of February 13, 2010, the date indicated for acceleration by the note holder. The Bank further argued, "[t]he meaning of that notice is to be determined by the Court[, ]" and then proceeded to assert that under 11 U.S.C. § 108, [13] the automatic stay created by Michael's bankruptcy filing effectively acted to interrupt the "'tolling' of statutes of limitation during the time the stay was in effect".[14] Additionally, the Bank argued that "within the bankruptcy case, Michael Oldemeyer filed certain pleadings that are tantamount to an acknowledgment of the debt owed[.]" (footnote omitted). This acknowledgment, it argued, was sufficient to interrupt prescription "so that prescription did not begin to run again until theautomatic [sic] stay was lifted." (footnote omitted). The Bank alleged further:

When Michael Oldemeyer listed Bank of New York as one of his creditors[15] and Bank of New York filed its motion to lift the automatic stay to enforce the terms and conditions of the promissory note and mortgage, that was an acknowledgment and prescription began to run again from April 29, 2014. Prescription was again interrupted on May 20, 2014 when the Bankruptcy Court signed the order lifting the stay.

         In December 2018, Kristi filed the peremptory exception of prescription now at issue, along with an accompanying memorandum primarily reasserting the same arguments presented in her petition for injunction. She contended the Bank bore the burden of proving an interruption or suspension of prescription because the Bank's petition was prescribed on its face. Kristi asserted Michael's mere listing of the purported debt in his bankruptcy schedules was not an unequivocal acknowledgment sufficient to interrupt prescription, especially considering that no payments were either contemplated or made in fact, under the Chapter 13 plan. She asserted that Michael could not be considered her joint or solidary co-obligor following his discharge in bankruptcy, which she alleged was retroactive to the filing of the bankruptcy petition. Finally, Kristi argued 11 U.S.C. § 108 (cited by the Bank as authority in arguing that prescription was interrupted during the time the automatic stay was in effect) "merely tolls, or suspends prescription and does not interrupt prescription" during that time, with the suspension effectually expiring upon the termination of the stay ordered on May 20, 2014.

         The Bank responded with a memorandum opposing the exception of prescription, reasserting many of the same arguments. It also argued that because both Kristi and Michael signed the promissory note, both agreed to be bound for the same debt and, thus, both were considered solidary co-obligors such that an interruption of prescription, if any, as to one is effective as to the other. According to the Bank, because "[p]rescription was interrupted until May 20, 2014 when the Bankruptcy Court signed the order lifting the stay[, ]" its filing of suit on July 30, 2018, was within the five-year prescriptive period for enforcing obligations evidenced by promissory notes.

         In reply, Kristi asserted that "[a]t most, plaintiff has shown a suspension of prescription that is insufficient to extend the prescriptive period to the more than 8 year period [sic] from acceleration to the filing of this suit." Specifically, she argued that none of Michael's filings rose to the level of an acknowledgment. Kristi highlighted that while the Bank had the burden of proving prescription had not tolled, the exhibits it offered in opposition did not contain any bankruptcy schedules; rather, the only documents it filed, namely the plan, merely demonstrated that the creditor filed a proof of claim, which, without more, cannot be construed as an acknowledgment by the debtor.[16] Additionally, she asserted:

As a matter of fact, Michael Oldemeyer's bankruptcy filings amount to a rejection, not an acknowledgment, of plaintiff's claims under the note. The Chapter 13 plan attached to plaintiff's opposition as P-1 provides that no payments are to be made on the subject note under the plan. Plaintiff has produced no evidence that Michael Oldemeyer promised to pay or otherwise acknowledged the debt sued upon here. In fact, plaintiff's pleadings establish that Oldemeyer made no payments on the note after acceleration, nor did anyone else.
Michael Oldemeyer's Chapter 13 plan provides for no payments whatsoever on the note sued upon herein. His plan, in effect, is a repudiation of the debt. By listing plaintiff's claim on his schedules (if he indeed did so), then providing for no payments on it, [Michael] Oldemeyer effectively denied the claim. Therefore, his bankruptcy filings cannot be construed as an acknowledgment of debt.

         Citing both Louisiana jurisprudence[17] and federal law under 11 U.S.C. § 558, [18] Kristi concluded that a mere admission of the existence of a claim without any clear, specific, and positive statement admitting liability and/or promising to pay the debt, does not prove an acknowledgment sufficient to interrupt prescription. Even if Michael's actions were sufficient to acknowledge the debt, he could not have been liable for the whole of the debt after he filed for bankruptcy, given the substantial modification of his obligations post-filing, and thus, "he does not fit the definition of a solidary obligor under La.Civ.Code art. 1794." Moreover, Kristi contends the Bank erroneously interprets 11 U.S.C. ยง 108(c) in arguing ...

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