Louisiana appellate court affirms district court’s decision in SCRA case

Courts SCRA Mortgages Servicemembers Foreclosure Appellate Louisiana

On June 29, the Court of Appeal for the Second District of Louisiana affirmed a trial court’s grant of summary judgment in favor of a national bank in an SCRA case. According to the opinion, an active duty servicemember and his wife filed for bankruptcy after purchasing a mortgage on a property from a national bank (defendant). The defendant appeared in the bankruptcy proceedings and moved to abandon the property for purposes of eventual foreclosure. The plaintiffs moved out of the state and were granted a discharge under Chapter 7 bankruptcy laws. The defendant has not foreclosed on the property, asserting that the mortgage account remains subject to the protections of the federal SCRA. The plaintiffs filed suit, claiming ownership of the property due to the defendant’s failure to foreclose against them within five years of the abandonment of the property in the bankruptcy, asserting that their obligations under the mortgage are prescribed.

The appellate court agreed that the mortgage account is subject to the protections of the SCRA, which tolls any state prescriptive period for the duration of one’s active-duty military service. According to the opinion, despite “no evidence of repayment” to the bank of any of the underlying mortgage debt, the plaintiffs claimed ownership of the subject property because the bank failed to “foreclose against them within five years of the abandonment of the property in the bankruptcy.” Agreeing with the bank that the mortgage account still remained subject to the protections of the SCRA, the court determined that: (i) the servicemember and his wife “cannot point to any law or jurisprudence that would provide an exception to the mandatory tolling provision of the SCRA [50 U.S.C. § 3936] in these circumstances;” (ii) the couple “never executed a waiver of rights form”; (iii) the “five-year prescriptive period [under Louisiana law] has been tolled on the mortgage” for the entirety of the servicemember’s active-duty military service; and (iv) the bank’s time to foreclose on the subject property “has not prescribed, as the prescriptive period has not started to run.” The appellate court concluded that the couple’s “obligations on the mortgage have not been extinguished, and they are not the owners of the subject property.”