AZ Court of Appeals denies that discharge commences the statute of limitations on foreclosure.
Diaz v BBVA, No.2 CA-CV 2021-0046 (AZ Court of Appeals, 2nd Div, 12/1/2021) Pedro and Noemi Diaz appeal from the trial court’s dismissal of their action for quiet title. The Diazes contend the court erred by concluding that the six-year statute of limitations to enforce the subject deed of trust would not begin to run until the earlier of its maturity date or the creditor’s acceleration of the underlying debt. The Diazes contend that the limitations period began, at the latest, when their debt was discharged in bankruptcy. For the following reasons, we affirm the trial court’s dismissal of the Diazes quiet title action.
Under the deed of trust, the Diazes’ failure to “meet the repayment terms” of the HELOC after March 2012 was an event of default. Upon an event of default, BBVA could elect “one or more” of identified remedies, including acceleration (as lender, by declaring “the entire indebtedness immediately due and payable”) and foreclosure (as trustee, “by notice and sale,” or as lender, “by judicial foreclosure”). The Diazes agreed in the deed of trust that BBVA does “not give up any of [its] rights under [the] Deed of Trust unless [it] does so in writing,” and that “[t]he fact that [BBVA] delays or omits to exercise any right will not mean that [BBVA] has given up that right.” They further agreed that the deed of trust would secure any obligation to BBVA “whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable.” It is undisputed that BBVA had not, as of the date of the complaint, exercised or attempted to exercise either acceleration or foreclosure under the deed of trust.
The Diazes similarly assert that BBVA was obliged to foreclose on the home either within six years of the first missed payment, or, at the latest, within six years of the last payment due just before their bankruptcy discharge. BBVA argues in response, as it did below, that it was entitled to wait to foreclose (or exercise any other available remedy under the deed of trust) until the April 2040 maturity date of the deed of trust. Any applicable statute of limitations, it argues, does not begin to run any sooner than that maturity date unless it affirmatively takes some earlier remedial action such as acceleration. It argues, also as it did below, that-as we held recently in Webster Bank N.A. v. Mutka, 250 Ariz. 498, ¶ 12 (App. 2021) – Mertola applies only to unsecured credit card debt, not secured debt as that involved here.
Arizona courts, therefore, have not adopted the Jarvis reasoning that the debtor is freed of his obligation for all purposes, thus necessarily triggering the statute of limitations as a consequence. As discussed above, Arizona requires that the lender take affirmative steps to accelerate the debt to trigger the statute of limitations. Failing that, a secured lender has until the maturity of the note or deed of trust to exercise his remedies in enforcing his secured interest. BBVA took no such affirmative steps to accelerate the debt. Although certainly, as a practical matter, the bankruptcy discharge bars BBVA from accelerating that debt by deeming it “immediately due and owing” and obtaining a money judgment, that remedy was lost only by the Diazes’ unilateral action of seeking bankruptcy protection. We see no statutory command that the practical loss of the remedy of acceleration by operation of the bankruptcy laws should also affect the other remedies available to BBVA under the deed of trust, namely judicial and non-judicial foreclosure. Indeed, as stated above, the Diazes expressly agreed that the deed of trust would continue to secure their obligation to BBVA “whether the obligation to repay” the debt “may be or hereafter may become otherwise unenforceable.” And, although the Diazes do not ask us to depart from Stewart, we see no cogent reason to do so. Therefore, the trial court did not err in refusing to apply the reasoning of Jarvis.
- 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.
- 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).
Absent express statement, recording a notice of trustee’s sale, by itself, does not accelerate a debt
Bridges v. Nationstar, CA-CV19-0556 (AZ Ct. Appeals, Division One 1/14/21) Nationstar Mortgage, L.L.C. appeals the trial court’s order granting Lavelle Bridges summary judgment and denying its own summary judgment motion. Nationstar argues that the statute of limitations did not run on Bridges’ debt because the recording of a notice of trustee’s sale, by itself, did not accelerate the debt. We hold that absent an express statement of acceleration in the notice of trustee’s sale, or other evidence of an intent to accelerate, recording a notice of trustee’s sale, by itself, does not accelerate a debt. The notices of trustee’s sale here contained no statement accelerating the debt and Nationstar did not otherwise invoke the acceleration clauses according to the terms in the deed of trust or the promissory note. Because Bridges offered no other evidence of acceleration, we reverse and remand for further proceedings.
Monroe v. AZ Acreage, et al, Boyd Family Partnership v. Sunny Lakes Ranchos 1 CA-CV 18-0476, 18-0478, 19-0170, 19-0171 (Consolidated) FILED 5-16-2019 For the following reasons, we hold: (1) the six-year statute of limitations in Arizona Revised Statutes (“A.R.S.”) section 47-3118(A) (2019) controls the underlying debts, the deeds of trust, and the guaranties signed by Mardian; (2) Appellees had standing to seek foreclosure of the deeds of trust; (3) the certification of each class satisfied the requirements for initiating a foreclosure action as outlined in the deeds of trust; and (4) Nevada Revised Statutes (“N.R.S.”) section 645B.340 did not apply to bar Appellees’ claims.
See ARS 33-714 (enacted after De Anza). The relevant part of De Anza is the part of its holding that the SOL does not extinguish the debt, it merely bars an action on the debt or to foreclose. De Anza Land & Leisure Corp. v. Raineri, 137 Ariz. 262, 266, 669 P.2d 1339, 1343 (App. 1983) (“In the case at bar, however, the debt is not extinguished; rather, the remedy for an action on the debt is merely barred.”)