[WSBARP] Acceleration & Chapter 7 Discharge /// Copper Creek Homeowners Association v. Wilmington Savings Fund Society, et. al

[Kary Krismer]

There are apparently two other cases. Eng v. Specialized Loan filed 
12/13/21 and Love v. West Coast Servicing.  And apparently some conflict 
between the cases, but I have not read them to compare.

Kary L. Krismer
206 723-2148

On 1/19/2022 12:34 PM, Ann Marshall wrote:
> ​Hi, All:
>
> I know this issue has been percolating for a few years. I saw this 
> published Division 1 case from yesterday and, well, old habits die 
> hard I guess, so I did a case summary! Here it is if you're interested 
> in this issue. Disclaimer: rely at your peril & always consult the 
> full opinion before use! 😀
>
> *Holding*: The Washington Court of Appeals Division 1 held that a 
> discharge in a Chapter 7 bankruptcy case does not accelerate an 
> installment promissory note, reversing the trial court’s summary 
> judgment in favor of the current property owner. Accordingly, the 
> statute of limitations barred recovery of certain installment 
> payments, but not the entirety of the debt.
>
>
> *Facts*:
>
>   * 2007: the Kurtzes purchased residential property, obtained a loan,
>     and granted a deed of trust to secure the loan. Mr. Kurtz was
>     active duty in the military at the time of the loan and through
>     2020. The property was in a HOA called Copper Creek.
>   * 2007 or 2008: the Kurtzes failed to make monthly mortgage payments
>     and moved out of the property in 2008.
>   * February 2010: Ms. Kurtz filed a Chapter 7 bankruptcy.
>   * June 2010: the debt was discharged in the bankruptcy as to Ms.
>     Kurtz and the BK case was closed June 18, 2010.
>   * July 2010: the Kurtzes failed to pay HOA assessments.
>   * March 2011: Mr. Kurtz filed a Chapter 7 bankruptcy.
>   * July 13, 2011: the debt was discharged in the bankruptcy as to Mr.
>     Kurtz, and his case BK closed on July 18, 2011.
>   * November 2018: the HOA recorded a lien for unpaid assessments and
>     commenced a judicial foreclosure. It did not seek to foreclose or
>     otherwise impar the DOT because the DOT was senior.
>   * October 30, 2019: the trustee on the Selene DOT issued a Notice of
>     Trustee’s Sale.
>   * June 2020: Copper Creek/HOA obtained title to the property through
>     a deed in lieu of foreclosure from the Kurtzes.
>
>     The HOA sought to restrain the trustee’s sale, asserting that the
>     statute of limitations barred enforcement of the DOT. Selene
>     challenged Copper Creek’s standing. Copper Creek obtained a deed
>     in lieu of foreclosure from the Kurtzes and obtained title to the
>     property. Discovery disputes ensued and eventually the trial court
>     granted summary judgment in favor of Copper Creek, quieting title
>     free and clear of the Selene DOT and awarding attorney’s fees to
>     Copper Creek in the amount of approximately $96,000.
>
>     *Analysis*:
>
>     First, the Court held that Mr. Kurtz’s active military service
>     tolled the state statute of limitations under 50 U.S.C. § 3936(a),
>     the Servicemembers Credit Relief Act (SCRA). Specifically, the
>     6-year statute of limitations on the unpaid installments began to
>     run on July 14, 2011, the day after Mr. Kurtz’s BK discharge.
>
>     Second, the Court held that the BK discharge did not accelerate
>     the maturity date of an installment promissory note, noting that
>     the debt could still be enforced in rem. The Court noted that
>     several federal court decisions relying on /Edmundson v. Bank of
>     America/, 194 Wn. App. 920, 378 P.3d 272 (2016) for the
>     proposition that discharge accelerates an installment note were in
>     error. The Court also said that, to the extent that unpublished
>     state court opinions have repeated the federal interpretation,
>     were in error. The Court discussed the/Edmundson/case in depth, as
>     well as the cases that have interpreted it. The Court held that
>     the bankruptcy discharge did not change the debt, the note, or the
>     payment schedule. Therefore, because the discharge did not
>     accelerate the note, the statute of limitations did not run on the
>     entirety of the debt, but only on those payments due prior to
>     November 2013.
>
>     Third, the Court reversed the trial court’s attorney fee award in
>     favor of Copper Creek. And it awarded fees and costs to Selene
>     because Copper Creek acquired its interest from Kurtz through the
>     deed in lieu of foreclosure and is subject to the terms of the DOT.
>
>
> Full opinion here: https://www.courts.wa.gov/opinions/pdf/820834.pdf
>
>
>
>
>
>
> *__*
>
> cid:image005.png at 01D46634.8C1313A0
>
> 	
>
> *Ann T. Marshall, Esq.
> *Mediator/Arbitrator
>
> *JAMS -/Local Solutions. Global Reach.^TM /*
>
> 1420 Fifth Ave. | #1650 | Seattle, WA  98101
>
> Cell/Text: 206.619.8043
>
> E-mail: amarshall at jamsadr.com
>
> www.jamsadr.com <https://www.jamsadr.com/marshall/>
>
>
>
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