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Paggen v. Bank of America, N.A.

United States District Court, D. Colorado

August 27, 2018

TROY D. PAGGEN, Plaintiff,
BANK OF AMERICA, N.A. and PUBLIC TRUSTEE'S OFFICE OF ARAPAHOE COUNTY, and any and all other parties who may have an interest in the subject property, Defendants.


          R. Brooke Jackson, United States District Judge.

         This order addresses defendant's motion for summary judgment [ECF No. 38]. For the reasons given below, the motion is granted.

         I. BACKGROUND

         This case involves a dispute over the accrual date of the six-year statute of limitations period for promissory notes per Colo. Rev. Stat. § 13-80-103.5(1)(a). In 2003, Plaintiff Troy Paggen obtained a loan for $520, 000. ECF No. 38 at 2. The loan required him to make monthly payments beginning in 2003 and ending in 2033. Id. He secured the loan with a deed of trust on his Aurora, Colorado property. Id. Mr. Paggen's last loan payment was for the January 1, 2009 payment period. ECF No. 4 at 2. After missing his February 1, 2009 payment, Mr. Paggen's loan went into default status on February 2, 2009. Id.

         In response to the missed payments, Defendant Bank of America, N.A. (BANA) (through BANA's former loan servicer, Countrywide Home Loans Servicing) sent Mr. Paggen a letter on March 19, 2009, notifying Mr. Paggen of his default and providing him an opportunity to cure his default of $7, 886 by April 18, 2009. ECF No. 38-2 at 26, Ex. 3. Mr. Paggen did not cure. ECF No. 4 at 3. BANA then initiated foreclosure by delivering a notice of election and demand for sale (NED) to the Arapahoe County public trustee on June 30, 2009; the county recorded the NED on July 9, 2009. Id. at 29, Ex. 4. The public trustee set an initial sale date for November 4, 2009. ECF No. 39 at 7, Ex. 2. BANA then obtained an order authorizing sale of the Aurora property on August 12, 2009. ECF No. 38-2 at 31, Ex. 5. However, Mr. Paggen applied for a short sale with BANA in 2009 and continued to request short sale approval through November 2010. ECF No. 38-1 at ¶ 11, Ex. A. This prevented BANA from proceeding with a foreclosure sale through November 2010. Id. In addition to the request for a short sale, a federally mandated foreclosure hold (based on the Making Home Affordable program) also prevented BANA from proceeding with foreclosure in 2009. Id. BANA withdrew the 2009 NED on July 28, 2011. ECF No. 38-3 at 4, Ex. 8.

         BANA initiated a second NED on October 14, 2011, which Arapahoe County recorded on October 19, 2011. Id. at 6, Ex. 9. Like before, the public trustee set an initial sale date, this time for February 15, 2012. ECF No. 39 at 11, Ex. 4. On February 4, 2012, Mr. Paggen filed for Chapter 7 bankruptcy. ECF No. 29-4 at 3, Ex. F. In his Chapter 7 Individual Debtor's Statement of Intention form-a statement made under penalty of perjury-Mr. Paggen indicated that he would surrender his Aurora property. ECF No. 29-4 at 48-50, Ex. G. The U.S. Bankruptcy Court granted a discharge on May 4, 2012. Id. at 52, Ex. H. BANA placed the foreclosure on hold on June 11, 2012, due to a settlement with the Department of Justice. It then removed the hold on December 16, 2013. ECF No. 38-1 at ¶ 17, Ex. A. BANA withdrew the 2011 NED on July 5, 2012. ECF No. 38-3 at 20, Ex. 13.

         In June 2014, BANA's new loan servicer (Ocwen Loan Serving, LLC) notified Mr. Paggen that he had until July 30, 2014, to bring the account current. ECF No. 38-3 at 22-23, Ex. 14. At the time, Mr. Paggen owed $218, 138. Id. The letter stated that “[f]ailure to bring your account current may result in our election to exercise our right to foreclose on your property. Upon acceleration, your total obligation will be immediately due . . . .” Id. In 2016, Mr. Paggen's loan transferred again to a third loan servicer (now Shellpoint Mortgage Serving). Id. at 30, Ex. 16. On February 15, 2016, Shellpoint sent a similar letter as Ocwen. It stated that Mr. Paggen owed $287, 051, and that if he failed to cure the default by the end of March, “Shellpoint will accelerate the maturity date of the Note and declare all outstanding amounts under the Note immediately due and payable.” Id. When Mr. Paggen did not cure, BANA initiated its third NED on January 9, 2017. Id. at 34, Ex. 17. At the present time, the loan remains in default. ECF No. 38 at 4.

         Plaintiff Troy Paggen initiated this action on April 24, 2017, in the District Court of Arapahoe County, Colorado. ECF No. 4 at 1. In his complaint, Mr. Paggen sought a Determination of Interests Pursuant to C.R.C.P. 105 and Declaratory Relief. Specifically, he asserted that the six-year statute of limitations began to run on February 2, 2009, the day he first defaulted on his loan, thus expiring on February 3, 2015. ECF No. 4 at 4. Mr. Paggen also sought a determination that the deed of trust was extinguished and unenforceable, and the underlying debt evidenced by the promissory note held by BANA was time-barred and uncollectable. Id. at 5. BANA responded with a motion for summary judgment, arguing that it timely initiated foreclosure because the six-year statute of limitations begins to run on acceleration as opposed to default. ECF No. 38 at 1. Then, BANA argued it effectively abandoned its 2009 and 2011 foreclosures by withdrawing those actions, thus restoring the loan's installment status and its original 2033 maturity date. Id. at 2.


         BANA moves for judgment on the pleadings and summary judgment. The Court will use the summary judgment standard of review in ruling on this matter.

         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. The Court will examine the factual record and make reasonable inferences therefrom in the light most favorable to the nonmoving party. Concrete Works of Colorado, Inc. v. City & Cty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).

         III. ANALYSIS

         As a preliminary matter, the Court notes that federal question jurisdiction is absent in this case. Therefore, the Court must have diversity of citizenship jurisdiction over the parties. The Court has diversity of citizenship jurisdiction if (1) the matter in controversy exceeds $75, 000, exclusive of interest and costs, and (2) the dispute is between citizens of different states. 28 U.S.C. § 1332(a)(1). In this case, the amount in controversy exceeds $75, 000 because the deed of trust secures a loan in the original principal amount of $520, 000 and the current unpaid principal is $516, 737. ECF No. 1 at 3; ECF No. 38-1 at ¶ 23. Second, there is complete diversity between the parties because Mr. Paggen is a Colorado citizen and BANA is a North Carolina citizen. ECF No. 1 at 2. Because the parties satisfy the amount in controversy requirement and complete diversity exists, the Court finds that diversity of citizenship jurisdiction exists in this lawsuit and subject matter jurisdiction is proper. The Court will apply Colorado law. See Erie R. Co. v. Tompkins, 304 U.S. 64, 79-80 (1938).

         In its two motions, BANA makes four primary arguments: First, that loan acceleration, not default, triggers the six-year statute of limitations. Second, that Mr. Paggen cannot demonstrate acceleration. Third, that even if BANA did accelerate, the NED withdrawals restored the loan to pre-acceleration status. And fourth, that equity should prevent Mr. Paggen from challenging foreclosure.[1] ECF Nos. 29 and 38.

         A. Acceleration, not default, triggers the six-year statute of limitations.

         “Whether a statute of limitations bars a particular claim is a question of fact.” Trigg v. State Farm Mut. Auto. Ins., 129 P.3d 1099, 1101 (Colo.App. 2005). “However, if undisputed facts demonstrate that the plaintiff had the requisite information as of a particular date, then the issue of whether the statute of limitations bars a particular claim may be decided as a matter of law.” Id.

         In this case, the parties agree that Colo. Rev. Stat. § 13-80-103.5(1)(a), which provides for a six-year statute of limitations period for the enforcement of any instrument securing the payment of a debt, governs in this case. ECF Nos. 38 and 40. They also agree on the facts. However, the parties disagree as to the legal date of accrual for the statute of limitations. BANA argues the statute of limitations begins when the lender ...

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