http://www.fbtbankingresource.com/ Frost Brown & Todd LLC RSS Feed en-US Copyright Frost Brown & Todd LLC webmaster@sablaw.com Wed, 10 Mar 2010 15:57:13 GMT Wed, 10 Mar 2010 15:57:13 GMT http://www.fbtbankingresource.com/banklit/blog/BlogEntry.aspx?_entry=a1b45949-4c9a-4606-a7a7-904c5e4fbac7&RSS=true http://www.fbtbankingresource.com/banklit/blog/BlogEntry.aspx?_entry=a1b45949-4c9a-4606-a7a7-904c5e4fbac7&RSS=true February 24, 2010
The fee for each judicial sale shall be as follows; 5% of the first $5,000 of the final bid, or in the case of several lots sold at the same time under the same judgment, 5% of the first $5,000 of the aggregate of the final bids, 2% for the nest [sic] $20,000 of the final bid or bids; 1 1/2% for the next $175,000 of the final bid or bids; and 1/2% for the excess over $200,000 of the final bid or bids. In no case shall the fee be more than $5,000. If the property is withdrawn from sale, a fee of $100 or not more than 50% of what the sale fee would have been based upon the appraisal value of the property, shall be allowed by the circuit court. If the sale is not confirmed through no fault of the master commissioner a fee of no more than the sale fee shall be allowed.

The dispute over interpretation of the foregoing paragraph can be summarized as follows: creditors argue that the plain language of the regulation provides that the Master Commissioner’s fee in a cancelled sale is “capped” at an amount equal to 50% of $5,000, or $2,500; however, the Master Commissioners have argued that the plain language of the regulation provides a “cap” only on completed sales and that no “cap” applies on cancelled sales.

The perception has been that counsel for the lienholder regularly concedes to the Master Commissioners’ interpretation by paying the amount demanded (although higher than what is believed to be required under the regulation) largely due to the small amount of money involved on a per-case basis. However, one party recently raised the disputed interpretation before the Kentucky Court of Appeals. In Arterburn v. First Community Bank, et al., 299 S.W.3d 595 (Ky. App. Nov. 2009), the Court of Appeals realized how absurd (or, in their words, “ludicrous”) the results could be when the regulation is applied as the Master Commissioners’ have suggested, for instance, that fees owed in cancelled sales are greater than if a sale is completed.. As a result, the Court of Appeals concluded that the logical reading of the regulation required the application of a $2,500 “cap” on fees owing the Master Commissioner after a sale is cancelled.

On its face, the Court of Appeals’ ruling in Arterburn may not seem to affect much as most cases benefiting from the ruling will typically result in savings for parties of a few thousand dollars. However, for institutional creditors and parties who are often responsible for paying those fees, and given the increase in cancelled sales due to workouts, forbearance agreements and bankruptcy filings, the savings over time may no longer be insignificant.]]> Blog Entry http://www.fbtbankingresource.com/banklit/blog/BlogEntry.aspx?_entry=e9317716-08bc-4080-bb52-04853f8c6614&RSS=true http://www.fbtbankingresource.com/banklit/blog/BlogEntry.aspx?_entry=e9317716-08bc-4080-bb52-04853f8c6614&RSS=true February 11, 2010 Smither v. Asset Acceptance, LLC, 919 N.E.2d 1153 (Ind.Ct.App. 2010). Jason Smither (“Smither”) owed over $1,700 on a credit card issued by Provident Bank. On September 18, 2000, Provident Bank “charged off” Smither’s account and subsequently sold the account to Asset Acceptance, LLC (“Asset”). On May 30, 2006, Asset filed suit against Smither, seeking damages of $2,152.67, plus interest. The court concluded that the six-year limitation period for an “account” or unwritten contract as opposed to a written contract for the payment of money applied to the lawsuit brought by Asset to recover Smither’s debt.

The court noted that “[e]ssentially, when a consumer uses a bank issued credit card to make a purchase, the bank pays the merchant on behalf of the consumer, and that amount is treated as a loan by the bank to the consumer, with repayment contractually governed by the terms of the credit card agreement” and “[t]he issuance of a credit card and accompanying cardholder agreement ‘is a standing offer to extend credit that may be revoked at any time’ and ‘each time the credit card is used, a separate contract is formed between the cardholder and bank’.” Id. (internal citations omitted).

The court concluded that it would treat Smither’s debt as an open account debt for statute of limitations purposes. Therefore, the general rule that the statute of limitations for an action on an open account “commences from the date the account is due” governed. The statements in the record indicated that Smither last made payment on the account on February 9, 2000, and thereafter Provident Bank requested a minimum payment of $45.00 on the account due March 11, 2000. Smither never made that payment, nor any other, and made no additional charges to the account. The court concluded that regardless of whether it considered the statute of limitations to have begun running on the date of Smither’s last payment or the next payment due date thereafter, Asset’s lawsuit filed on May 30, 2006 was more than six years after both dates.

Asset contended that it was entitled to delay the running of the statute of limitations because the credit card agreement governing Smither’s account contained an option acceleration clause. However, the court rejected this argument and determined that Asset could not show that the “charge off” in September, 2001 equated to exercising an optional acceleration clause. The court stated that even if Provident Bank internally believed it was invoking the acceleration clause when it “charged off” Smither’s debt, it never took any affirmative action to notify Smither of that fact and such notification plainly is a requirement for invoking an optional acceleration clause. Furthermore, the final bill in the record submitted by Providen was sent in December, 2000, and requested a minimum payment of $670.00 on a total balance of $2,152.67. The Court held that this request was fatally inconsistent with Asset’s contention that Providen had already involved the optional acceleration clause in September, 2000.

Viewing Smither’s credit card account as an open account, Provident Bank and its successor, Asset, had at the very least six years from March 11, 2000 to file suit against Smither seeking collection of any part of the debt he incurred. The Complaint filed on May 30, 2006 was beyond the six-year statute of limitations and, therefore, was time barred.]]> Blog Entry