French v. BMO Harris Bank, N.A.

Ann Sobotta defaulted on her mortgage, and BMO Harris Bank, N.A. (defendant) began state-court foreclosure; her mortgage contained a due-on-sale clause accelerating the debt upon any sale or transfer of the property. Sobotta died while foreclosure was pending, and title passed to her nephew and estate executor, Thomas French (plaintiff), who filed Chapter 13 bankruptcy for the estate, automatically staying the foreclosure, and proposed to restructure the estate's mortgage debt. The bank objected that a federal bankruptcy provision barred Chapter 13 restructuring of debt secured only by the debtor's principal residence, the bankruptcy court agreed and lifted the stay, and French appealed to the district court, raising for the first time the Garn-St. Germain Act, which bars enforcing a due-on-sale clause when property passes to a relative because of the borrower's death.