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

Thu Jan 20 07:22:40 PST 2022

Yes.  The more accurate phrasing would be the interest acquired is subject to the DOT.  Copper Creek is not in the absence of mutual assent of the contracting parties for an assumption.

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Ann Marshall
Sent: Thursday, January 20, 2022 7:20 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] Acceleration & Chapter 7 Discharge /// Copper Creek Homeowners Association v. Wilmington Savings Fund Society, et. al

While the discussion of the Edmundson case was in depth, the attorney fee award was not! The court dealt with it in basically 2 sentences: “Copper Creek acquired its interest from Kurtz through the deed in lieu of foreclosure and is subject to the terms of the DOT. Selene/Wilmington is entitled to attorney fees as the prevailing party under the DOT.”

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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 <jmcintosh at McCarthyHolthus.com<mailto:jmcintosh at McCarthyHolthus.com>>
Sent: Thursday, January 20, 2022 6:51:56 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: Re: [WSBARP] Acceleration & Chapter 7 Discharge /// Copper Creek Homeowners Association v. Wilmington Savings Fund Society, et. al

The contractual fee award is curious.

Copper Creek was not a party to the loan contract with the mortgage lender.  Copper Creek did not assume the loan contract with the lender when it acquired the real property.

Is the court saying if you acquire an in rem interest in real property, you personally sub-into all prior contracts entered-into by the grantor?  That can’t be the case.

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Ann Marshall
Sent: Wednesday, January 19, 2022 12:40 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>>
Subject: [WSBARP] Acceleration & Chapter 7 Discharge /// Copper Creek Homeowners Association v. Wilmington Savings Fund Society, et. al

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

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