Bowie National Bank v. Stevens
18 U.C.C. Rep. Serv. (West) 148, 532 S.W.2d 67, 19 Tex. Sup. Ct. J. 80 (1975)
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Rule of Law:
A creditor who has previously waived the right to accelerate a loan by repeatedly accepting late payments can revoke that waiver and proceed with foreclosure by giving the debtor clear notice of its intent to enforce the loan's terms, after which the debtor must tender the past-due amount to prevent foreclosure.
Facts:
- A. D. and Fern Gibbons executed a note and deed of trust, with payments to be made at Bowie National Bank, which was later acquired by C. W. Ford.
- Bobby F. Stevens acquired the property in 1968, assuming the already-delinquent note.
- Stevens missed additional payments in 1969, 1970, and 1971, but the note holder, C.W. Ford, consistently accepted the late payments.
- On March 2, 1971, Bowie National Bank purchased the note from C. W. Ford with the specific intent to foreclose and offset losses from Stevens' other unrelated loans.
- On March 8, 1971, the Bank posted foreclosure notices.
- That same day, Stevens went to the Bank to make a payment, but the bank president informed him they were foreclosing and suggested he apply the payment to another note, which he did.
- After receiving this direct notice of the Bank's intent to foreclose, Stevens made no further attempts to tender the delinquent payments.
- The property was sold to the Bank at a foreclosure sale on April 6, 1971.
Procedural Posture:
- Debtors, Stevens et al., sued Bowie National Bank in a state trial court, seeking to cancel the trustee's deed from the foreclosure sale.
- A jury found for the defendant Bank, and the trial court entered a judgment in the Bank's favor.
- Stevens, as appellant, appealed to the Texas Court of Civil Appeals, an intermediate appellate court.
- The Court of Civil Appeals reversed the trial court's judgment and rendered judgment for Stevens, ordering that the trustee's deed be set aside.
- The Bowie National Bank, as petitioner, appealed to the Supreme Court of Texas, the state's highest court.
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Issue:
Does a creditor's prior waiver of the right to accelerate a delinquent loan prevent foreclosure if the creditor subsequently gives the debtor clear notice of its intent to accelerate and foreclose, and the debtor fails to cure the default?
Opinions:
Majority - Greenhill, Chief Justice
No. A creditor's prior waiver of the right to accelerate a loan does not prevent a subsequent foreclosure if the creditor provides clear notice of its intent to require strict compliance and the debtor then fails to cure the default. While C.W. Ford's consistent acceptance of late payments constituted a waiver, justifying Stevens's belief that default would be disregarded, that waiver was not permanent. When Bowie National Bank acquired the note and unequivocally notified Stevens on March 8 of its intent to accelerate and foreclose, Stevens's belief that the waiver would continue was no longer justified. This notice effectively revoked the waiver and reinstated the Bank's right to enforce the contract's terms. At that point, the duty shifted to Stevens to tender the full amount of the delinquencies to prevent the sale. Because he failed to do so, the foreclosure was valid under the terms of the deed of trust.
Analysis:
This decision clarifies the dynamic nature of waiver in the context of loan acceleration and foreclosure. It establishes that a waiver created by a course of conduct (accepting late payments) is not irrevocable and can be withdrawn. The ruling provides a clear mechanism for creditors to reinstate their contractual rights by giving unambiguous notice to the debtor. This protects debtors from being misled by a creditor's past leniency while preserving the creditor's ultimate right to enforce the security agreement after providing the debtor a final opportunity to cure the default.
