Copper Creek (Marysville) | Washington Court of Appeals on Effect of Bankruptcy Discharge on Statute of Limitations
On April 11, 2022, the Court of Appeals of Washington, Division 1 granted the motion for reconsideration and withdrew its opinion dated January 18, 2022. Respondents had filed a motion for reconsideration, seeking reversal of summary judgment quieting title in favor of the Appellants (Copper Creek). Copper Creek (Marysville) Homeowners Ass’n v. Kurtz, No. 82083-4-I (Wash. Ct. App. Apr. 11, 2022). The Court held that the trial court erred in determining that the statute of limitations rendered the respondents’ deed of trust unenforceable.
As per the facts of the case, in 2007, Shawn and Stephanie Kurtz bought a real property with a note of $303,472.00 which was secured by a deed of trust. Shawn was engaged in active duty in the United States military at that time and continued with the same till September 2020. The purchased property was within the Copper Creek (Marysville) Homeowners Association and Shawn and Stephanie Kurtz were obligated to pay annual assessments of $400. However, in January 2008, Shawn and Stephanie separated and the latter moved out of the property. Thereafter, the Kurtez did not pay on the note in either 2008 or 2009. In 2010, Stephanie filed for Chapter 7 bankruptcy protection and included the property. On the debtor’s statement of intention, she noted the mortgage and her intention to surrender the property. She thereby received a discharge, which included the property. A year later, in 2011, Shawn filed a separate Chapter 7 bankruptcy and surrendered the property as well. He included Copper Creek as a creditor holding a secured claim for homeowner’s dues in the amount of $1,826.50. The bankruptcy was discharged after a few months.
In 2008, Copper Creek recorded a notice of claim of lien against the property in the amount of $15,278.68 in assessments, fees, interest, and attorney fees and costs that had accrued on the property, and filed for judicial foreclosure to recover the delinquent assessments. In April 2019, Copper Creek and the Kurtzes entered an agreed order with the court for the appointment of a custodial receiver. Copper Creek recorded the order appointing the receiver with Snohomish County Superior Court. The receiver spent $22,470.24 rehabilitating the property and began renting it at a fair market value. After completion of the repairs, the Quality Loan Service Corporation of Washington (QLS) tried to enforce the terms of the note as secured by the DOT through nonjudicial foreclosure which prompted Copper Creek to bring the action to quiet title.
Upon refusal, Copper Creek filed a motion to restrain the sale, and a complaint against the Kurtzes, respondents, and QLS for lien foreclosure, restraint of the trustee sale, wrongful foreclosure, and quiet title. It then filed a motion for summary judgment. The same was opposed by the respondents and a motion for judgment on the pleadings was filed. The trial court concluded that the SCRA tolling provision did not apply to the foreclosure action, which allowed the statute of limitations to run on the DOT. The SCRA tolls statutes of limitations in lawsuits involving service members.
However, the Court held that the SCRA applied and tolled the statute of limitations until Shawn no longer had personal liability on the note. That occurred on July 13, 2011, the date of the discharge of his personal liability on the debt. Therefore, the statute of limitation began on all of the past installments on July 13, 2011. Further, the bankruptcy eliminated only Shawn’s personal liability on the note. The debt, the note, and the payment schedule remain unchanged. The notice of nonjudicial foreclosure was given on October 20, 2019, prior to the November payment coming due. Any outstanding installments prior to November 2013, were not enforceable in the foreclosure action due to the six-year statute of limitations. But, enforcement of the DOT was not barred as to the remainder due under the note. Thus, the trial court erred by quieting title in Copper Creek.
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