CHARLESTON – The state Supreme Court has clarified the statute of limitations on challenges to foreclosure sales and on actions with respect to violations arising from consumer loans in answers to two questions certified to the court.

The questions were certified to the Court from the Circuit Court of Kanawha County in November 2011 and were answered by the Court on June 18. Justice Menis E. Ketchum wrote the opinion and Justice Robin Jean Davis, while concurring in part, filed a dissenting opinion.

The questions arose out of litigation between James E. McCormick and Tribeca Lending Corporation regarding the foreclosure sale of McCormick’s home and his subsequent counterclaims.

On Sept. 30, 2005, McCormick refinanced the mortgage on his Saint Albans home with a loan he obtained from Tribeca. After McCormick allegedly failed to make his monthly loan payments, Tribeca sent him a notice he was in default and that he had a right to cure the default.

After the default was not cured, Tribeca accelerated the loan’s payments, according to the provisions of the contract, causing the balance of the loan to become immediately due and payable, the opinion says.

A foreclosure sale was held on Dec. 19, 2007 and Tribeca bought the property. In 2008, Tribeca filed an unlawful detainer action against McCormick, alleging that he was unlawfully occupying the property. In 2009, the circuit court dismissed the action due to inactivity and on June 2, 2011, Tribeca filed a new unlawful detainer action against McCormick.

McCormick answered the complaint, asserting numerous counterclaims against Tribeca alleging violations of the state Consumer Credit and Protection Act (W.Va. Code § 46A-1-101 to 8-102). The circuit court conditionally dismissed McCormick’s counterclaims and additionally certified two questions to the state Supreme Court. The first was:

Is W.Va. Code § 38-1-[4a], which gives a borrower one year to challenge the validity of a foreclosure sale, and provides in applicable part that “no action or proceeding to set aside a trustee’s sale... shall be filed or commenced more than one year from the date of the sale” applicable when counter-claims are asserted challenging the enforceability of the underlying mortgage loan agreement in response to an unlawful detainer action?

“Applying this holding to the facts of the case presently before us,” Ketchum wrote in response to the first question, “we find that the statute of limitation provided by W.Va. Code § 38-1-4a does not operate to bar Mr. McCormick’s counterclaims.

“The counterclaims that Mr. McCormick asserted in response to Tribeca’s unlawful detainer action allege that Tribeca has violated various provisions of the Consumer Credit and Protection Act by allegedly committing the following acts: issuing Mr. McCormick an unconscionable loan; intentionally misrepresenting the amount of the loan’s monthly payments and its escalating interest rate; relying on a fraudulent appraisal that misrepresented the market value of the Saint Albans house; and assessing illegal charges in its attempt to collect a debt from Mr. McCormick.

“None of Mr. McCormick’s counterclaims challenge the procedural posture of the trustee’s sale nor do his counterclaims allege a failure to comply with the procedural requirements of a trustee’s sale. W.Va. Code § 38-1-4a does not apply to bar Mr. McCormick’s counterclaims in this case.

“Accordingly, we answer the first certified question in the negative.”

The court then moved to the second question:

Under W.Va. Code § 46A-5-101[1]6, which provides in applicable part that “[w]ith respect to violations arising from other consumer credit sales or consumer loans, no action pursuant to this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement.” (emphasis added) When does the statute of limitations begin to run: the date the applicable Loan was accelerated and all amounts became due and payable; or, the projected date of the final installment payment of the executed loan agreement?

“Mr. McCormick contends that the phrase 'scheduled payment' means only one thing: the periodic payments scheduled by the loan, with the last such payment occurring on the date of maturity.

"Mr. McCormick’s counsel asserts that the mortgage loan from Tribeca was scheduled for 360 monthly payments to begin in 2005, with a scheduled maturity in 2035. Mr. McCormick therefore argues that the one-year statute of limitation on any action under the Consumer Credit and Protection Act would not begin to run until 2035.

“Tribeca argues that the 2005 loan agreement and mortgage papers stated that once Mr. McCormick defaulted on his loan agreement, the scheduled monthly payments ceased, the loan was accelerated, and the full amount was due in one final payment.

“In 2007, Tribeca notified Mr. McCormick that he was in default and his loan payments accelerated. Tribeca therefore asserts that the one-year statute of limitation began to run on that date, expired in 2008, and that Mr. McCormick’s 2011 claims were untimely. We agree.

“We conclude that under W.Va. Code § 46A-5-101(1), which provides that an action under the West Virginia Consumer Credit and Protection Act involving certain 'regulated consumer loans' must be brought within one year after the 'due date of the last scheduled payment of the agreement,' the statute of limitation begins to run on the date under the parties’ agreement providing for the final periodic payment of the debt.

“However, if the periodic payments are accelerated under the terms of the agreement, causing all payments to become immediately due and payable by the consumer, then the statute of limitation begins to run on the date when the accelerated payment is due.

Davis agreed “wholeheartedly” with the majority’s answer to the first certified question but did not agree with the response to the second question.

“Although it continued to sit on its laurels for another few years, Tribeca resurrected its unlawful detainer action like a proverbial phoenix in 2011, nearly three and one-half years after it obtained title to the subject property and nearly two years after it allowed its first unlawful detainer action to be dismissed because it failed to see it through to its fruition," Davis wrote.

“Under the statute of limitations grace period provided by W. Va. Code § 46A-5-102, it is clear that Mr. McCormick timely asserted his consumer counterclaims in response to Tribeca’s second unlawful detainer action.

“In light of the foregoing, I respectfully concur with the majority’s resolution of the first certified question in this case. However, I strongly dissent from the majority’s disposition of the second certified question.”

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