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<span style="font-family: Calibri, Helvetica, sans-serif;"></span>Hi, All:</div>
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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! <span contenteditable="false" id="😀">😀</span></div>
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<b><span style="font-family: Calibri, Helvetica, sans-serif; font-size: 12pt;">Holding</span></b><span style="font-family: Calibri, Helvetica, sans-serif; font-size: 12pt;">: 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.</span><span style="font-family:"Times New Roman", serif"><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></span></p>
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<span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"><b>Facts</b></span><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">:</span><span class="Apple-converted-space" style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></p>
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<li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">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.</span><span class="Apple-converted-space" style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">2007 or 2008: the Kurtzes failed to make monthly mortgage payments and moved out of the property in 2008.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">February 2010: Ms. Kurtz filed a Chapter 7 bankruptcy.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">June 2010: the debt was discharged in the bankruptcy as to Ms. Kurtz and the BK case was closed June 18, 2010.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">July 2010: the Kurtzes failed to pay HOA assessments.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">March 2011: Mr. Kurtz filed a Chapter 7 bankruptcy.</span><span class="Apple-converted-space" style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">July 13, 2011: the debt was discharged in the bankruptcy as to Mr. Kurtz, and his case BK closed on July 18, 2011.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">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.</span><span class="Apple-converted-space" style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li style="font-size:12pt;font-family:Calibri, Helvetica, sans-serif"><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">October 30, 2019: the trustee on the Selene DOT issued a Notice of Trustee’s Sale.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p></li><li><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;">June 2020: Copper Creek/HOA obtained title to the property through a deed in lieu of foreclosure from the Kurtzes.</span><o:p><span style="font-size: 12pt; font-family: Calibri, Helvetica, sans-serif;"> </span></o:p><br>
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<span style="font-size: 12pt;">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.</span><o:p><span style="font-size: 12pt;"> </span></o:p><br>
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<span style="font-size: 12pt;"><b>Analysis</b></span><span style="font-size: 12pt;">:</span><span class="Apple-converted-space" style="font-size: 12pt;"> </span><o:p><span style="font-size: 12pt;"> </span></o:p><br>
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<span style="font-size: 12pt;">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.</span><span class="Apple-converted-space" style="font-size: 12pt;"> </span><o:p><span style="font-size: 12pt;"> </span></o:p><br>
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<span style="font-size: 12pt;">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 </span><span style="font-size: 12pt;"><i>Edmundson v. Bank of America</i></span><span style="font-size: 12pt;">, 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</span><span class="Apple-converted-space" style="font-size: 12pt;"> </span><span style="font-size: 12pt;"><i>Edmundson</i></span><span class="Apple-converted-space" style="font-size: 12pt;"> </span><span style="font-size: 12pt;">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.</span><span class="Apple-converted-space" style="font-size: 12pt;"> </span><o:p><span style="font-size: 12pt;"> </span></o:p><br>
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<span style="font-size: 12pt;">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.</span><o:p><span style="font-size: 12pt;"> </span></o:p></li></ul>
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Full opinion here: <a href="https://www.courts.wa.gov/opinions/pdf/820834.pdf" id="LPlnk123150">https://www.courts.wa.gov/opinions/pdf/820834.pdf</a></div>
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<b><span style="margin:0px; font-size:10pt">Ann T. Marshall, Esq.<br>
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