[WSBARP] Release of Deed of Trust/Quiet Title?
Kary Krismer
Krismer at comcast.net
Wed Feb 3 15:41:07 PST 2021
What we do know is that it is correct that the Chapter 7 doesn't
discharge the lien, just the personal liability on the note. But the
note is where the payments derive from. The deed of trust typically
merely refers to the timing of payments by reference to the note. I
think neither my first email nor Edmundson's SOL analysis may be based
on bankruptcy law as much as state law. Simply put, it is a bit illusory
if not absurd to have a SOL analysis that refers to the due date of
payments that are no longer due! I realize however that this would be
problematic on DOTs with notes that did not have acceleration clauses,
if there are any such things.
Turning to Edmundson, that decision may have a fundamental flaw prior to
the SOL discussion in that the bankruptcy in that case was a Chapter 13,
not a Chapter 7. This is important because: (1) The prior Bankruptcy
Code did allow a Chapter 13 debtor's plan to avoid a DOT lien if the
lien was entirely unsecured by any equity, as was often the case on
second loans; and (2) If a creditor had not objected to a confirmed plan
which did improperly provide for avoidance of the lien, then the lien
would still be avoided even if that avoidance wasn't allowed by the
facts if contested. The first may have changed with the Bankruptcy Act
and the second may have changed through either the Act or case law. I
haven't practiced bankruptcy over over 15 years now, and haven't kept up
on such things. But it very well may be that a better understanding of
bankruptcy law and the facts of that underlying case could have kept the
court from needing to address the SOL issue.
Kary L. Krismer
206 723-2148
On 2/3/2021 8:31 AM, Samuel M. Meyler wrote:
>
> Correction… 8+ years, not 18+ years, since discharge and missed
> payments. Slip of the finger!
>
> Thanks, Joseph. I was previously aware that the statute of
> limitations accrues for each installment at the time that the
> installment is due on the note but I am no bankruptcy guru and had to
> research the interplay with bankruptcy law. From what I gather, the
> bankruptcy code does not discharge/eliminate the lien/security but
> under Washington law, the statute of limitations to foreclose on the
> lien/security accrued at the time of the first missed payment because
> no installment could become due after that point as a result of the
> discharge. /_Edmundson v. Bank of Am_.,/ 194 Wn. App. 920, 378 P.3d
> 272 (2016). The lender could have foreclosed on their 2nd position
> DOT within 6 years but it has been more than 8 years. The lender
> likely chose to forego spending money and time foreclosing because of
> the fact that they were in 2nd position.
>
> /Edmundson/ provides that…
>
> Loan servicer's action to foreclose on deed of trust that secured
> promissory note accrued, and six-year limitations period governing
> action to foreclose began to run, each month in which borrowers'
> defaulted on installment note and deed of trust by failing to make
> monthly payment, *until borrowers' personal liability on note was
> discharged in chapter 13*./_Edmundson v. Bank of Am._/, 194 Wn. App.
> 920, 378 P.3d 272 (2016) (“Correspondingly, the statute of limitations
> for each subsequent monthly payment accrued on the first day of each
> month after November 1, 2008 *until the Edmundsons no longer had
> personal liability under the note. They no longer had such liability
> as of the date of their bankruptcy discharge, December 31, 2013.
> *Thus, from December 1, 2008 through December 1, 2013, the statute of
> limitations accrued for each monthly payment under the terms of the
> note as each payment became due.”)
>
> The ruling in /Edmundson/ has been followed and upheld by both state
> and federal courts since that time… “The Washington State Court of
> Appeals expressly stated in /Edmundson/ that the statute of
> limitations on enforcement of a deed of trust payable in installments
> accrues when the last installment payment is due prior to discharge of
> a borrower's personal liability on the corresponding promissory
> note. 378 P.3d at 277.” /_Hernandez v. Franklin Credit Mgmt. Corp._/,
> BR 18-01159-TWD, 2019 WL 3804138, at *3 (W.D. Wash. Aug. 13, 2019),
> /_aff'd sub nom._/ /_In re Hernandez_/, 820 Fed. Appx. 593 (9th Cir. 2020)
>
> /__/
>
> “Every federal court that has addressed this specific statute of
> limitations issue has also adopted the holding in /Edmundson/. /See,
> e.g./, /Jarvis/, Case No. C16-5194-RBL, Dkt. No. 47 at 6. Further, the
> Court does not see any reason to conclude that the Washington State
> Supreme Court would reach a contrary decision. Thus, the Bankruptcy
> Court, as a federal court applying Washington law, was required to
> apply the rule announced in /Edmundson/. /See//Gravquick A/S/, 323
> F.3d at 1222. Regardless of the potential policy implications it
> identified, the Bankruptcy Court erred by treating the relevant
> portion of the /Edmundson/ decision as /dicta.” Id./
>
> **
>
> *Samuel M. Meyler*
>
> *Meyler Legal, PLLC *
>
> 1700 Westlake Ave. N., Ste. 200
>
> Seattle, Washington 98109
>
> *Tel:*206.876.7770
>
> *Fax:*206.876.7771
>
> *Email:*samuel at meylerlegal.com <mailto:samuel at meylerlegal.com>
>
> *NOTICE:*
>
> This electronic message contains information which may be Confidential
> or Privileged and constitutes an electronic communication within the
> meaning of the Electronic Communications Privacy Act 18 USC 2510. The
> information is intended to be for the use of the individual or entity
> named above. If you are not the intended recipient, please be aware
> that any disclosure, copying, distribution or use of the contents of
> this information is prohibited. If you received this transmission in
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>
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <wsbarp-bounces at lists.wsbarppt.com> *On Behalf Of *Joseph McIntosh
> *Sent:* Wednesday, February 3, 2021 8:03 AM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> *Subject:* Re: [WSBARP] Release of Deed of Trust/Quiet Title?
>
> I don’t think SOL matters. If you’re a lender, and you want ample
> time for full performance, you negotiate a lengthy maturity. On loans
> that have gone unpaid and not seen action for years, the fine print
> will probably disclose a lengthy maturity.
>
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>
> [mailto:wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>] *On Behalf Of *Roger Hawkes
> *Sent:* Wednesday, February 03, 2021 7:57 AM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
> <mailto:wsbarp at lists.wsbarppt.com>>
> *Subject:* Re: [WSBARP] Release of Deed of Trust/Quiet Title?
>
> I haven’t thought of this for a while; but, why don’t lenders modify
> their contracts to refer to a state that has really long sols?
>
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>
> <wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>> *On Behalf Of *Joseph McIntosh
> *Sent:* Wednesday, February 3, 2021 7:43 AM
> *To:* WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com
> <mailto:wsbarp at lists.wsbarppt.com>>
> *Subject:* Re: [WSBARP] Release of Deed of Trust/Quiet Title?
>
> A bankruptcy discharge does not eliminate a secured debt, or its
> repayment schedule, it just eliminates a remedy – personal recourse.
> There’s a couple discharge provisions in the code address this.
>
> If there have been 18 years of missed payments, some would be
> currently time barred by the state’s 6 yr statute for enforcement of
> written contracts, but some not. The lien still is still intact as to
> some missed payments that have not yet expired under the statute, and
> others if they have not yet come due.
>
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>
> [mailto:wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>] *On Behalf Of *Kary Krismer
> *Sent:* Wednesday, February 03, 2021 7:14 AM
> *To:* wsbarp at lists.wsbarppt.com <mailto:wsbarp at lists.wsbarppt.com>
> *Subject:* Re: [WSBARP] Release of Deed of Trust/Quiet Title?
>
> I'm not familiar with those appellate court cases, but if the statute
> of limitations argument is based on due date of periodic payments I
> have a hard time seeing how due date for a periodic payment could be
> after it was discharged. So seemingly the bankruptcy discharge date
> would be the latest date for the statute of limitations for all the
> payments. But if so, doesn't that line of cases presumably work in
> favor of the OP's client since all the payments would have been due
> over 18 years ago?
>
> Also, to the extent that the Bankruptcy Act does have applicable
> language, it would presumably say that the creditor's claim was the
> full amount, not just those payments prior to bankruptcy. I don't
> see, however, how such provisions would affect a states law SOL.
>
> Kary L. Krismer
> 206 723-2148
>
> On 2/3/2021 5:58 AM, Joseph McIntosh wrote:
>
> A quiet title can be maintained if the statute of limitations for
> enforcement of the lien is expired. Commencement of the statue
> typically depends on when rights contractually accrue, so you
> would have to look at the contract, and particularly, it’s
> maturity. If it’s an installment thirty year mortgage, there
> might be some payments that have not yet come due (and rights to
> enforce that have not accrued), unless there was an event of
> acceleration.
>
> There is some goofy language from a recent WA appellate court that
> says a bankruptcy discharge matures a secured loan, although that
> language has been pretty widely panned, and there’s a couple cases
> in the pipeline seeking correction of that language. Nothing from
> the bankruptcy code says a personal discharge matures or
> accelerates secured debt.
>
> *From:* wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>
> [mailto:wsbarp-bounces at lists.wsbarppt.com
> <mailto:wsbarp-bounces at lists.wsbarppt.com>] *On Behalf Of *Samuel
> M. Meyler
> *Sent:* Tuesday, February 2, 2021 7:41 PM
> *To:* 'WSBA Real Property Listserv' <wsbarp at lists.wsbarppt.com>
> <mailto:wsbarp at lists.wsbarppt.com>
> *Subject:* [WSBARP] Release of Deed of Trust/Quiet Title?
>
> Listmates,
>
> Property owner has a 1^st and 2^nd position mortgage/deeds of
> trust encumbering the property. Owner files for bankruptcy in
> 2012. Standard Order of Discharge enters. Owner works out a loan
> modification with the 1^st position lender but does not with the
> 2^nd . 2^nd DOT continues to appear on title now that the property
> is being sold. It has now been over 18 years since the
> discharge. What are the options here? Has anyone ever had
> success in getting a lender in this position to release/reconvey?
> Should the 2^nd DOT be removed via quiet title action? Thanks for
> your input.
>
> **
>
> *Samuel M. Meyler*
>
> *Meyler Legal, PLLC *
>
> 1700 Westlake Ave. N., Ste. 200
>
> Seattle, Washington 98109
>
> *Tel:*206.876.7770
>
> *Fax:*206.876.7771
>
> *Email:*samuel at meylerlegal.com <mailto:samuel at meylerlegal.com>
>
> *NOTICE:*
>
> This electronic message contains information which may be
> Confidential or Privileged and constitutes an electronic
> communication within the meaning of the Electronic Communications
> Privacy Act 18 USC 2510. The information is intended to be for the
> use of the individual or entity named above. If you are not the
> intended recipient, please be aware that any disclosure, copying,
> distribution or use of the contents of this information is
> prohibited. If you received this transmission in error, please
> notify the sender and delete the copy you received together with
> any attachments. Thank you.
>
> ***Disclaimer: Please note that RPPT listserv participation is not restricted to practicing attorneys and may include non-practicing attorneys, law students, professionals working in related fields, and others.***
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