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Statute of Limitations & Bankruptcy

Statute of Limitations & BankruptcyDiane Drain2024-02-25T07:28:49-07:00

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STATUTE OF LIMITATIONS IN BANKRUPTCY

IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.  WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.

Debtors may amend their Schedules at any time — F.R.Bankr.P 1009 — but some courts hold that this right is dependent upon the Debtors’ acting in good faith and no other parties being prejudiced by the late amendment. See, e.g., In re Cinelli, Chapter 7, Case No. 05-16962 , United State Bankruptcy Court of the Northern District of New York , 2006 Bankr. LEXIS 3432; In re Price, Bankruptcy Case No. 06-62721-MGD , United States Bankruptcy Court for the Northern District of Georgia, Atlanta Division, 2006 Bankr. LEXIS 3247.

Kertesz v. Ostrovsky (01/28/04 – No. G030640, G031373) (California Appellate Districts) Plaintiffs’ complaint, seeking an unpaid judgment, was timely; the limitations period was tolled by defendant’s bankruptcy petition and by the resulting automatic stay. Judgment of dismissal is accordingly reversed.

The limitations period in an action on a contract provides, in pertinent part: An action for debt shall be commenced and prosecuted within six years after the cause of action accrues, and not afterward if the indebtedness is evidenced by or founded on …[a] contract in writing that is executed in this state. A.R.S. § 12-548(A)(1).

Under Arizona law, the six-year statute of limitations codified in A.R.S. § 12-548, begins to run on the due date of each matured but unpaid installment. Navy Fed. Credit Union v. Jones, 187 Ariz. 493, 494, 930 P.2d 1007, 1008 (App. 1996). However, with regard to unmatured future installments, where the subject contract contains an optional acceleration clause, the six-year limitations “period commences on the date the creditor exercises the optional acceleration clause.


The Arizona Statute of Limitations Applicable to Collection Lawsuits and Non-Judicial Trustee’s Foreclosure Sales of Real Property, article by Larry O. Folks, Folks Hess, PLLC (1/2021).

Excerpts:

  1. Can a lender collect upon a promissory note that matured six or more years ago?

Short answer: No. The statute of limitations applies to each matured/defaulted note installment payment separately as it becomes due under the note amortization schedule, and it does not begin to run on any installment until it is due. Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 270, 418 P.3d 1038, 1043 (App.  2018)  review denied (July 3, 2018). See also, Ancala Holdings L.L.C.  v.  Price, 220 Fed.  App.  569, 572 (9th Cir.

2007) (a cause of action “accrues” each time a party fails to perform as required by the contract) and Ortiz v. Trinity Fin. Servs. LLC, 98 F.Supp. 3d 1037, 1042 (D. Ariz. 2015) (each time the debtor fails to make a payment when it becomes due, a separate breach occurs and a cause of action “accrues”, starting the clock).

Because the maturity date of a promissory note is the last scheduled installment payment of the debt instrument, the cause of action for that final installment payment “accrues” on the loan maturity date.  As a result, a lender cannot sue upon the promissory note six years or more after the scheduled maturity date.

EXAMPLE: Loan Maturity Date:  1/1/2015. Current Date: 1/2/2021. A Collection Lawsuit or Foreclosure Sale is barred, as more than six years have passed since the loan maturity date.

7.   Application of the six-year statute of limitations to loans that have not been accelerated:

When does a cause of action “accrue” upon a defaulted unmatured installment promissory note for the purpose of calculating the six-year statute of limitation if the lender has not taken an affirmative act to accelerate the loan?

Short answer: The statute of limitations applies to each matured/defaulted Note installment payment separately as it becomes due under the Note amortization schedule, and does not begin to run on any installment until it is due.

If the creditor does not exercise the option to accelerate an installment contract debt and/or to determine the date of “accrual” of a cause of action upon a matured/defaulted monthly installment payment, the statute of limitations applies to each matured/defaulted Note installment payment separately as it becomes due under the Note amortization schedule, and does not begin to run on any installment until it is due. Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 270, 418 P.3d 1038, 1043 (App.  2018)  review denied (July 3, 2018). See also, Ancala Holdings L.L.C.  v. Price, 220 Fed.  App.  569, 572 (9th Cir. 2007) (a cause of action “accrues” each time a party fails to perform as required by the contract) and Ortiz v. Trinity Fin. Servs. LLC, 98 F.Supp. 3d 1037, 1042 (D. Ariz. 2015) (each time the debtor fails to make a payment when it becomes due, a separate breach occurs and a cause of action “accrues,” starting the clock).

The rules discussed above concerning deter- mining the date of “accrual” of a cause of action based upon a defaulted mortgage loan installment promissory note have been applied consistently by the Arizona Court of Appeals and the United States District Court for the District of Arizona in the following line of cases: Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 418 P.3d 1038 (AZ App. 2018) review denied (July 3,

2018).  Baseline Financial Services v.  Madison, 229 Ariz. 543, 278 P.3d 321 (AZ App. 2012); Navy Federal Credit Union v. Jones, 187 Ariz. 493, 930 P.2d 1007 (AZ App. 1996); Hummel v. Rushmore Loan Management LLC, 2018 WL 3744858 (D. AZ 2018); and Ortiz v. Trinity Financial Services LLC, 98 F.Supp.3d 1037 (D. AZ. 2015). Furthermore, as was fully discussed above, the Arizona Supreme Court, in Mertola, LLC v. Santos, 244 Ariz. 488, 490, 796 Ariz. Adv. Rep. 16, 422 P.3d 1028, 1030 (2018) distinguished installment debt from credit card debt in the context of selecting the correct rules to determine when a cause of action “accrues” to calculate the six-year statute of limitation.

EXAMPLE #1: Loan Maturity Date: 1/1/21. Last Payment: 1/1/15. Current Date: 1/2/21. Both a Collection Lawsuit and a Foreclosure Sale are barred.

EXAMPLE #2: Loan Date: 1/1/10. Loan Maturity Date:   1/1/40.   Loan   is   not   accelerated.   Last Payment Made: 1/1/15. Current Date: 1/2/21. The limitations period bars a suit on any payments due under the loan on 1/1/15 or earlier. The lender may, however, still commence a Collection Lawsuit or Foreclosure Sale based upon the installment payments due from 2/1/15 going forward.

  1. Do the same rules apply to determine when a cause of action “accrues” to pursue a

non-judicial Foreclosure Sale of real property as apply to a matured or unmatured installment promissory note?

Short answer: Yes.

See, Andra R. Miller Designs LLC v. US Bank, 244 Ariz. 265, 269, 418 P.3d 1038, 1042 (AZ Ct. App. 2018), review denied (July 3, 2018).


There are cases from the State of Washington that have held that when a debtor files BK, the SOL on foreclosures runs from the date of the last payment that was due PRIOR to the date of discharge.  Silvers v. U.S. Bank Nat. Ass’n, 2015 WL 5024173 (W.D. Wash. 2015) (even with an installment note, the statute of limitation to enforce a deed of trust began to run as of the date the installment payment was due immediately preceding the date of discharge; because the debtor received a Chapter 7 discharge on January 25, 2010, the statute of limitation began to accrue with respect to commencing a trustee sale when the Jan 1, 2010 payment was due, which was more than 6 years prior to the commencement of the trustee sale); Edmundson v. Bank of America, 194 Wash. App. 920, 931, 378 P.3d 272, 278 (Ct. App. 2016) (in an installment note, the statute of limitations for all future installments accrues when each future installment becomes due but left unpaid until the debtors no longer had personal liability under the note as of the date of their bankruptcy discharge); Jarvis v. Federal National Mortgage Ass’n, 2017 WL 1438040 (W.D. Wash 2017) (the last payment due on an installment note commences the final six-year period to enforce a deed of trust securing the note, such as in the situation when either the final payment becomes due, when a lender accelerates the note, or upon the payment due date immediately prior to the discharge of a borrower’s personal liability in bankruptcy).


ARIZONA SUPREME COURT DECIDES STATUTE OF LIMITATION RUNS FROM THE DATE OF FIRST UNCURED MISSED PAYMENT

Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ debt collectionSupreme Court, 7-27-18)  Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.

Decision:

Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2).  We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.


Harle v. Williams: No. 1 CA-CV 17-0665 (Az Ct Appeals, Div One 3-14-19)  Holds that the enforcement period on a judgment is tolled until the judgment is executable, and this judgment wasn’t executable until the date of William’s breach.

Harle and Williams were business partners, then the partnership split.  Harle sued Williams. In 2011 the two reached a settlement in which Williams agreed to a total judgment amount and to make monthly payments. As long as Williams made his monthly payment, according to the terms of the settlement, Harle was precluded from recording or enforcing the judgment.  The superior court held the judgment had not expired.  After all, the court implied, it would be very unfair to allow a debtor to promise the world to a judgment holder in order to convince them to hold off on recording a judgment, but then back out after 5 years, and leave the judgment holder  “[prejudiced in the extreme].”  (NOTE – renewal of judgments in Arizona is now changed from 5 to 10 years).

Melikian v. McCormick, No. 15-3983, (8th Cir. U.S. Court of Appeal) recently affirmed a bankruptcy court’s rejection of a proof of claim filed by a creditor where the claim was based upon a debt which was time barred by the creditor’s failure to comply with the applicable state law deadline for pursuing a deficiency judgment following a non-judicial foreclosure.

The bankruptcy court determined that automatic stay provisions of Section 362 of the Bankruptcy Code impliedly preempted the Arizona state law concerning the 90-day deadline — by preventing the creditor from perfecting service on the debtors — but, Section 108(c) provided for the resumption of any state limitations following the expiration of the automatic stay. Under this legal framework, the bankruptcy court determined that the creditor was required to proceed with its deficiency action per Arizona state law no later than Dec. 16, 2013 which it failed to do so. Thus, the bankruptcy court concluded that the creditor’s claim was barred.

Pursuant to A.R.S. Section 33-814, the 90-day period at hand expired on Jan. 7, 2013 – i.e. 90 days after the trustee’s sale on Oct. 9, 2012. However, the automatic stay in the bankruptcy did not expire until Nov. 14, 2013 when the chapter 11 case was closed. Accordingly, the Court found that the bankruptcy court correctly concluded that pursuant to Section 108(c)(2) the operative deadline for the creditor to seek a deficiency judgment under Section 33-814 lapsed on Dec. 16, 2013.

The applicable Arizona statute provides that “[W]ithin ninety days after the date of [a trustee’s sale], an action may be maintained to recover a deficiency judgment] against any person” obligated — directly or indirectly — under the contract secured by the deed of trust. Ariz. Rev. Stat. s. 33-814(A) (“Section 33-814”). If no action is brought within that timeline the statute provides that “the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist.” Id. at s. 33-814(D). Per the courts in Arizona, this provision has been deemed a statute of repose.

The bankruptcy court’s ruling rejecting the creditor’s claim was upheld by both the District Court and the Eighth Circuit.

Melikian v. McCormick, No. 15-3983, (8th Cir. U.S. Court of Appeal) recently affirmed a bankruptcy court’s rejection of a proof of claim filed by a creditor where the claim was based upon a debt which was time barred by the creditor’s failure to comply with the applicable state law deadline for pursuing a deficiency judgment following a non-judicial foreclosure.

The bankruptcy court determined that automatic stay provisions of Section 362 of the Bankruptcy Code impliedly preempted the Arizona state law concerning the 90-day deadline — by preventing the creditor from perfecting service on the debtors — but, Section 108(c) provided for the resumption of any state limitations following the expiration of the automatic stay. Under this legal framework, the bankruptcy court determined that the creditor was required to proceed with its deficiency action per Arizona state law no later than Dec. 16, 2013 which it failed to do so. Thus, the bankruptcy court concluded that the creditor’s claim was barred.

Pursuant to A.R.S. Section 33-814, the 90-day period at hand expired on Jan. 7, 2013 – i.e. 90 days after the trustee’s sale on Oct. 9, 2012. However, the automatic stay in the bankruptcy did not expire until Nov. 14, 2013 when the chapter 11 case was closed. Accordingly, the Court found that the bankruptcy court correctly concluded that pursuant to Section 108(c)(2) the operative deadline for the creditor to seek a deficiency judgment under Section 33-814 lapsed on Dec. 16, 2013.

The applicable Arizona statute provides that “[W]ithin ninety days after the date of [a trustee’s sale], an action may be maintained to recover a deficiency judgment] against any person” obligated — directly or indirectly — under the contract secured by the deed of trust. Ariz. Rev. Stat. s. 33-814(A) (“Section 33-814”). If no action is brought within that timeline the statute provides that “the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist.” Id. at s. 33-814(D). Per the courts in Arizona, this provision has been deemed a statute of repose.

The bankruptcy court’s ruling rejecting the creditor’s claim was upheld by both the District Court and the Eighth Circuit.

In re Sladky, 4:20-bk-09417-BMW (AZ BK Court, 6/6/21) Based upon the foregoing, the November 11, 2015 Email constitutes an acknowledgment under Arizona law. The November 11, 2015 Email served to restart the running of the statute of limitations, see PNL Asset Mgmt Co., 970 P.2d at 964, and WAB timely took action to collect on the Note and foreclose the DOT fewer than six years after the November 11, 2015 Email was sent. The Court need not determine whether the November 17, 2015 Email or Letter also constitute  acknowledgments.

Given that the Debtor’s argument that the DOT is unenforceable relies upon the Note being time-barred, the Debtor’s argument that the DOT is avoidable fails.

The November 11, 2015 Email satisfies the requirements of A.R.S. § 12-508 and bars the defense of the statute of limitations. As recognized by the Arizona Supreme Court, “[t]he defense of the  statute of limitations is not to be condemned in any case to which it is clearly and fairly applicable, but a court should not and will not go out of its way to give its benefit to a [debtor] who seeks to take advantage of the leniency of [a] creditor to defeat the collection of a just debt which [the debtor] admits has never been paid.” Wooster v. Scorse, 140 P. 819, 821 (Ariz. 1914) (quoting Senninger v. Rowley, 116 N.W. 695, 698 (Iowa 1908)); accord Dalos v. Novaheadinc, No. 1 CA-CV 07-0459, 2008 WL 4182996, at *2 (Ariz. Ct. App. Mar. 18, 2008) (quoting Wooster, 140 P. at 821).


ARIZONA SUPREME COURT DECIDES STATUTE OF LIMITATION RUNS FROM THE DATE OF FIRST UNCURED MISSED PAYMENT

Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ debt collectionSupreme Court, 7-27-18)  Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.

Decision:

Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2).  We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.


Home Equity Line of Credit:

Webster Bank v. Mutka February 9, 2021. The Arizona Court of Appeals, Div. One, held that the statute of limitations on a home equity line of credit with a defined maturity date commences on the due date of each matured but unpaid installment and, as to unmatured future installments, the period commences on the date the creditor exercises the optional acceleration clause. As in Navy Federal Credit Union v. Jones, 187 Ariz. 494 (Ct. App. 1996), the statute of limitations does not begin to run on future installments due under a HELOC until the lender accelerates the debt. The Court of Appeals distinguished the HELOC from credit card debt, which was the focus in Mertola LLC v. Santos, 244 Ariz. 488 (Ariz. 2018), and which had held that a cause of action to collect the entire outstanding credit card debt accrues upon default – that is, when the debtor first fails to make a full, agreed-to minimum monthly payment.


The Arizona Statute of Limitations Applicable to Collection Lawsuits and Non-Judicial Trustee’s Foreclosure Sales of Real Property, article by Larry O. Folks, Folks Hess, PLLC (1/2021).

Excerpts:

  1. Can a lender collect upon a promissory note that matured six or more years ago?

Short answer: No. The statute of limitations applies to each matured/defaulted note installment payment separately as it becomes due under the note amortization schedule, and it does not begin to run on any installment until it is due. Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 270, 418 P.3d 1038, 1043 (App.  2018)  review denied (July 3, 2018). See also, Ancala Holdings L.L.C.  v.  Price, 220 Fed.  App.  569, 572 (9th Cir.

2007) (a cause of action “accrues” each time a party fails to perform as required by the contract) and Ortiz v. Trinity Fin. Servs. LLC, 98 F.Supp. 3d 1037, 1042 (D. Ariz. 2015) (each time the debtor fails to make a payment when it becomes due, a separate breach occurs and a cause of action “accrues”, starting the clock).

Because the maturity date of a promissory note is the last scheduled installment payment of the debt instrument, the cause of action for that final installment payment “accrues” on the loan maturity date.  As a result, a lender cannot sue upon the promissory note six years or more after the scheduled maturity date.

EXAMPLE: Loan Maturity Date:  1/1/2015. Current Date: 1/2/2021. A Collection Lawsuit or Foreclosure Sale is barred, as more than six years have passed since the loan maturity date.

7.   Application of the six-year statute of limitations to loans that have not been accelerated:

When does a cause of action “accrue” upon a defaulted unmatured installment promissory note for the purpose of calculating the six-year statute of limitation if the lender has not taken an affirmative act to accelerate the loan?

Short answer: The statute of limitations applies to each matured/defaulted Note installment payment separately as it becomes due under the Note amortization schedule, and does not begin to run on any installment until it is due.

If the creditor does not exercise the option to accelerate an installment contract debt and/or to determine the date of “accrual” of a cause of action upon a matured/defaulted monthly installment payment, the statute of limitations applies to each matured/defaulted Note installment payment separately as it becomes due under the Note amortization schedule, and does not begin to run on any installment until it is due. Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 270, 418 P.3d 1038, 1043 (App.  2018)  review denied (July 3, 2018). See also, Ancala Holdings L.L.C.  v. Price, 220 Fed.  App.  569, 572 (9th Cir. 2007) (a cause of action “accrues” each time a party fails to perform as required by the contract) and Ortiz v. Trinity Fin. Servs. LLC, 98 F.Supp. 3d 1037, 1042 (D. Ariz. 2015) (each time the debtor fails to make a payment when it becomes due, a separate breach occurs and a cause of action “accrues,” starting the clock).

The rules discussed above concerning deter- mining the date of “accrual” of a cause of action based upon a defaulted mortgage loan installment promissory note have been applied consistently by the Arizona Court of Appeals and the United States District Court for the District of Arizona in the following line of cases: Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 418 P.3d 1038 (AZ App. 2018) review denied (July 3,

2018).  Baseline Financial Services v.  Madison, 229 Ariz. 543, 278 P.3d 321 (AZ App. 2012); Navy Federal Credit Union v. Jones, 187 Ariz. 493, 930 P.2d 1007 (AZ App. 1996); Hummel v. Rushmore Loan Management LLC, 2018 WL 3744858 (D. AZ 2018); and Ortiz v. Trinity Financial Services LLC, 98 F.Supp.3d 1037 (D. AZ. 2015). Furthermore, as was fully discussed above, the Arizona Supreme Court, in Mertola, LLC v. Santos, 244 Ariz. 488, 490, 796 Ariz. Adv. Rep. 16, 422 P.3d 1028, 1030 (2018) distinguished installment debt from credit card debt in the context of selecting the correct rules to determine when a cause of action “accrues” to calculate the six-year statute of limitation.

EXAMPLE #1: Loan Maturity Date: 1/1/21. Last Payment: 1/1/15. Current Date: 1/2/21. Both a Collection Lawsuit and a Foreclosure Sale are barred.

EXAMPLE #2: Loan Date: 1/1/10. Loan Maturity Date:   1/1/40.   Loan   is   not   accelerated.   Last Payment Made: 1/1/15. Current Date: 1/2/21. The limitations period bars a suit on any payments due under the loan on 1/1/15 or earlier. The lender may, however, still commence a Collection Lawsuit or Foreclosure Sale based upon the installment payments due from 2/1/15 going forward.

  1. Do the same rules apply to determine when a cause of action “accrues” to pursue a

non-judicial Foreclosure Sale of real property as apply to a matured or unmatured installment promissory note?

Short answer: Yes.

See, Andra R. Miller Designs LLC v. US Bank, 244 Ariz. 265, 269, 418 P.3d 1038, 1042 (AZ Ct. App. 2018), review denied (July 3, 2018).


Harle v. Williams: No. 1 CA-CV 17-0665 (Az Ct Appeals, Div One 3-14-19)  Holds that the enforcement period on a judgment is tolled until the judgment is executable, and this judgment wasn’t executable until the date of William’s breach.

Harle and Williams were business partners, then the partnership split.  Harle sued Williams. In 2011 the two reached a settlement in which Williams agreed to a total judgment amount and to make monthly payments. As long as Williams made his monthly payment, according to the terms of the settlement, Harle was precluded from recording or enforcing the judgment.  The superior court held the judgment had not expired.  After all, the court implied, it would be very unfair to allow a debtor to promise the world to a judgment holder in order to convince them to hold off on recording a judgment, but then back out after 5 years, and leave the judgment holder  “[prejudiced in the extreme].”  (NOTE – renewal of judgments in Arizona is now changed from 5 to 10 years).

Discharge did not automatically accelerate the due date on the promissory note

Bank of New York Mellon v SFR Investments Pool, filed 2/4/24, 9th Circuit, Court of Appeals Nev. Rev. Stat. § 104.3118(1) establishes a six-year statute of limitations for judicial foreclosure actions. Specifically, “an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within 6 years after the due date or dates stated in the note or, if a due date is accelerated, within 6 years after the accelerated due date.” § 104.3118(1)

“we conclude that the previous homeowner’s bankruptcy discharge did not automatically accelerate the due date on the promissory note for purposes of triggering the limitations period under Nev. Rev. Stat. § 104.3118(1)”


Brown v. Quantum3 Group LLC; MOMA Funding LLC, (In re Brown) BAP No. SC-18-1121-SFL (9th Circuit, Sep 03,2019)  Ruling : BAP for 9th Cir. affirmed ruling of bankruptcy court (SD Cal.) overruling debtors’ claim objection. Statute of limitations was continuously tolled by applicable state law during pendency of bankruptcy and entry of discharge did not re-start limitations period. Discharge injunction further tolled California 4-year limitations period. Debtors Charles and Holly Brown appeal the overruling of their objection to creditor MOMA Funding LLC’s unsecured proof of claim of $832.30. The Browns objected on the ground that the claim was barred by the applicable statute of limitations. They acknowledge that the statute of limitations had not run when they filed their bankruptcy case but contend that the claim is barred by the applicable statute of limitations because the applicable limitations period expired postpetition before the creditor filed its claim.
We AFFIRM the order overruling the Browns’ claim objection. We agree with the bankruptcy court’s conclusion that the time to commence an action on the underlying claim has been continuously tolled by applicable state law since the filing of the Browns’ bankruptcy. We publish because no prior published decision has determined whether the discharge injunction triggers the limitations period suspension provided for in the relevant California tolling statute – California Code of Civil Procedure (“C.C.P.”) § 356.


Does obtaining a bankruptcy discharge start the running of the statute of limitations?

Since the entry of a bankruptcy discharge means that no future payments are due (even with secured debts) that may mean the entry of the discharge starts the running of the statute of limitations, but no Arizona cases on point. (Discussion in CLE program presented by Larry Hirsch and Brad Pack 1-2019)

Ortez, 98 F.3rd 1037 (1998), Debtor files bankruptcy, discharge entered, years later the secured lender starts foreclosure.  District Court states the statute of limitations runs from each each installment (follows Navy Federal).

As of 12/2018 Arizona court have not answer this question, but several Washington cases have dealt with the issue.  (Arizona follows Washington if there is no case on point).  (Note – Arizona and Washington have the same statute of limitations and trustee sale process, and equivalent of Navy Federal case).

Series of Washington cases:

Jarvis v FNMA, 17-35428 (9th Cir Ct App, 6/14/19)  The Jarvises never reaffirmed or made any further payments on the note after their bankruptcy, and neither Fannie Mae nor any prior holder of the deed of trust ever accelerated the debt or initiated foreclosure proceedings. The statute of limitations to foreclose on the deed of trust ran from the last installment due before the Jarvises’ bankruptcy discharge in February 2009 and expired before the Jarvises brought this quiet-title action nearly seven years later in February 2016. Summary judgment in favor of the Jarvises on their quiet-title claim was therefore appropriate. See Wash. Rev. Code § 7.28.300

Silvers, 2015 W.L. 5024173 (Statute of limitations begins running the last time any payment was due.  The discharge 1/25/2010, therefore statute of limitations runs from the discharge date because  no longer any payments due.  Edmundson v. Bank of Am., 378 P.3d 272, 194 Wash. App. 920 (2016) Chapter 13 case.  Chapter 13 discharge, trustee’s sale set within 6 years of the discharge date.  The discharge eliminated the personal obligation to pay the debt therefore starts the statute of limitations.  The Statute of Limitations commences with the first payment missed after entry of Discharge. Jarvis v. Fed. Natl. Mortg. Assn., 2017 WL 1438040;

Brad Pack disagrees citing Johnson v. Home State Bank, 501 U.S. 78 (1991) (bankruptcy discharges personal liability while leaving in rem rights intact.)  Ortiz v. Trinity Fin. Services LLC, 98 F. Supp. 3d 1037, 1044 (D. Ariz. 2015) (borrower failed to demonstrate likely success of claim on merits that SOL barred DOT foreclosure despite fact that notice of trustee’s sale not recorded for over 9 years after bk filing).

HELOC – What is the maturity date for statute of limitations?

Prince Eric Luv v West Coast Servicing, Div 1, Ct Appeals, Washington, 8/2/21.  COBURN, J. — West Coast Servicing, Inc. (WCS) appeals a trial court decision on cross-motions for summary judgment quieting title in Prince Eric Luv. WCS contends that the trial court erred in ruling that the statute of limitations barred foreclosure of the deed of trust that secured Luv’s home equity loan. We adhere to our decision in Edmundson v. Bank of America, 194 Wn. App. 920, 378 P.3d 272 (2016), and hold that the six-year statute of limitations to enforce a deed of trust commences from the date the last payment on the note was due prior to the discharge of a borrower’s personal liability in bankruptcy. Because WSC initiated foreclosure more than six years after Luv’s bankruptcy discharge, the action was time barred. We therefore affirm.

Webster Bank v. Mutka, CA-CV 20-0120 (Az Court of App-, Div 1 2/9/21) William D. Mutka appeals the judgment in favor of Webster Bank NA on its claim for breach of a home-equity line of credit agreement. Mutka argues the suit was untimely because the limitations period began to accrue upon his first missed payment. See Mertola, LLC v. Santos, 244 Ariz. 488, 492, ¶ 21 (2018). We hold that the statute of limitations on a home equity line of credit with a defined maturity date “commences on the due date of each matured but unpaid installment and, as to unmatured future installments, the period commences on the date the creditor exercises the optional acceleration clause.” Navy Federal Credit Union v. Jones, 187 Ariz. 494 (App. 1996). We affirm.


1 CA-CV 18-0476 – Monroe v. AZ Acreage, et al.

1. Whether the U.C.C.’s six-year statute of limitation governing actions to recover money owed under promissory notes (A.R.S. § 47-3118(A)), rather than the four-year statute of limitation governing instruments created outside the state (A.R.S. § 12-544(3)), apply to the promissory notes and related deeds of trust executed in Nevada. 2. Whether the U.C.C.’s six-year statute of limitation governing actions to recover money owed under promissory notes (A.R.S. § 47-3118(A)), rather than the four-year statute of limitation governing instruments created outside the state (A.R.S. § 12-544(3)), apply to the guaranty agreements executed in Nevada.

CREDITOR FILED TO PRESERVE JUDGMENT LIEN (STATUTE OF LIMITATIONS RUNS) DURING BANKRUPTCY

In re Dobos, 9th Cir BAP, 8/2/19 A creditor seeking to enforce an avoided lien needs to ensure that the lien does not otherwise expire during the course of the litigation or appeal. In this case, a judgment creditor whose lien had been avoided filed a motion to reopen the debtor’s bankruptcy case but then failed to take further action for two years. In the meantime, the judgment lien expired under state law. As a result, the bankruptcy court’s dismissal of the nondischargability action was affirmed. Further, a motion to dismiss filed after an answer has been filed is still proper under Rule 12(c) or 12(h)(2).

The bankruptcy court granted a debtor’s motion to dismiss judgment creditors’ adversary proceeding seeking to have a judgment lien deemed nondischargable. The bankruptcy court ruled that the judgment creditors’ failure to act to preserve their judgment liens during the pendency of the bankruptcy case and the subsequent motion to reopen the bankruptcy case made it proper for the court to dismiss the case on the pleadings alone.

A.R.S. 12-508Effect of acknowledgment upon barred action When an action is barred by limitation no acknowledgment of the justness of the claim made subsequent to the time it became due shall be admitted in evidence to take the action out of the operation of the law, unless the acknowledgment is in writing and signed by the party to be charged thereby.


Stimpson v. Midland Credit Management 18-35833 (9th Cir. Ct Apps, 12/18/19) The Ninth Circuit affirmed the district court’s summary judgment in favor of defendant in an action under the Fair Debt Collection Practices Act. It rejected plaintiff’s claim that a debt collector’s letter was deceptive or misleading under 15 U.S.C. § 1692e because it attempted to persuade him to pay a time-barred debt. A debt collector is entitled to collect a lawful, outstanding debt even if the statute of limitations has run, so long as the debt collector does not use means that are deceptive or misleading and otherwise complies with legal requirements. There is nothing inherently deceptive or misleading in attempting to collect a valid, outstanding debt, even if it is unenforceable in court.

NOTE: removal or removing means “moving”

12-506Action barred by foreign statute of limitation, bankruptcy or insolvency

A. No action shall be maintained against a person removing to this state from another state or foreign country to recover upon an action which was barred by the law of limitations of the state or country from which he migrated.

B. No action shall be brought to recover money from an immigrant who was released from its payment by the bankruptcy or insolvency laws of the state or country from which he migrated.

12-507Action against person removing to this state

No demand against a person who removes to this state, incurred prior to his removal, shall be barred by the statute of limitation until he has resided in this state one year, unless barred at the time of his removal to this state by the laws of the state or country from which he migrated.

Intent of § 12-507 providing that no demand against the person who removes to Arizona, incurred prior to removal, shall be barred by statute of limitations until he has resided in Arizona one year unless barred at time of removal in state or country from which he immigrated, read in conjunction with § 12-506 prohibiting action against person removing to Arizona from another state which is barred by latter’s statute of limitations, is to permit statute of limitations of state in which cause of action accrued and of which defendant was a resident to bar an action in Arizona, if it expired at time of defendant’s removal, but to grant plaintiff an additional year in which to institute action if statute had not yet run at time of defendant’s removal. Bailey v. Superior Court In and For Pima County (App. Div.2 1985) 143 Ariz. 494, 694 P.2d 324.

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