Andra R Miller Designs LLC v. U.S. Bank Na

• Decision Date: 13 February 2018
• Docket Number: No. 1 CA-CV 16-0723,1 CA-CV 16-0723
• Citation: 418 P.3d 1038
• Parties: ANDRA R MILLER DESIGNS LLC, Plaintiff/Appellee, v. US BANK NA, et al., Defendants/Appellants.
• Court: Arizona Court of Appeals

418 P.3d 1038

ANDRA R MILLER DESIGNS LLC, Plaintiff/Appellee,

v.US BANK NA, et al., Defendants/Appellants.

No. 1 CA-CV 16-0723

Court of Appeals of Arizona, Division 1.

FILED February 13, 2018

Ramras Legal PLC, Phoenix, By Ari Ramras, Counsel for Plaintiff/Appellee

Quarles & Brady LLP, Phoenix, By Scott A. Klundt, Lauren E. Stine (argued), Amelia B. Valenzuela, Counsel for Defendant/Appellant

Judge Paul J. McMurdie delivered the opinion of the Court, in which Presiding Judge Lawrence F. Winthrop and Judge Jennifer B. Campbell joined.

OPINION

McMURDIE, Judge:

¶ 1 U.S. Bank NA ("Bank") appeals the superior court's grant of summary judgment in favor of Andra R Miller Designs, LLC ("Miller") and the resulting final judgment. We reverse and remand to the superior court for further proceedings consistent with this opinion and hold that: (1) a purchaser of real property acquired at an execution sale under Arizona Revised Statutes ("A.R.S.") section 12–1622 has standing to assert a statute of limitations defense under A.R.S. § 33–816 and no additional contractual privity is necessary; (2) a creditor may unilaterally revoke its acceleration of debt; (3) unilateral revocation of the debt's acceleration requires an affirmative act by the creditor, which must communicate to the debtor that the debt's acceleration has been cancelled; (4) a notice of cancellation of the trustee's sale may be an affirmative act by the creditor sufficient to communicate to the debtor, and to any third party investigating title to the property, that the creditor cancelled the debt's acceleration if it contains a statement revoking the acceleration; and (5) recording the notice of cancellation of trustee's sale with language revoking the acceleration constitutes sufficient notice that the creditor has revoked the debt's acceleration.

FACTS AND PROCEDURAL BACKGROUND

¶ 2 The real property in question is a home located in Paradise Valley ("Property") in the Clearwater Hills Improvement Association ("HOA"). In July 2006, Don Davis ("Borrower") executed an Adjustable Rate Note ("Note") in favor of Washington Mutual Bank, FA ("WAMU") in the principal amount of $1,940,000. The Note was secured by a Deed of Trust ("Deed") encumbering the Property in the same amount. The Deed and Note allowed the lender to accelerate the debt upon default as follows: "If the default is not cured ... Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law."

¶ 3 Borrower failed to make the monthly payment due on September 1, 2008, and failed to cure his default after notice by WAMU. The notice sent by WAMU also contained a reference to the acceleration clause. In January 2009, the trustee recorded a Notice of Trustee's Sale ("2009 Notice"), but no sale was held. On March 5, 2012, the trustee recorded a "Cancellation of Notice of Sale, of Declaration of Default and Demand for Sale, and of Notice of Breach and Election to Cause Sale" ("2012 Cancellation Notice"), which included the following clause (Acceleration Revocation Clause):

NOW THEREFORE: Notice is hereby given that the Beneficiary and/or the Trustee does hereby rescind, cancel and withdraw said Declaration of Default and Demand for Sale and said Notice of Breach and Election to Cause Sale; it being understood, however, that this cancellation shall not in any manner be construed as waiving or affecting any breach or default past, present or future, under said Deed of Trust, or as impairing any right or remedy thereunder, but is, and shall be deemed to be, only an election, without prejudice, not to cause a sale to be made pursuant to said Declaration and Notice, and shall in no way jeopardize or impair any right, remedy or privilege secured to the Beneficiary and/or the Trustee, under said Deed of Trust, nor modify nor alter in any respect any of the terms, covenants, conditions or obligations thereof, and said Deed of Trust and all obligations secured thereby are hereby reinstated and shall be said and remain in force the same as if said Declaration and Notice had not been made and given.

¶ 4 In February 2013, the HOA obtained a Judgment and Decree of Foreclosure and Order of Sale for unpaid planned community assessments, and other costs, in the amount of approximately $16,000. The Property was to be sold at a sheriff's sale, but the sale was not held at that time.

¶ 5 In May 2013, the trustee recorded a new Notice of Trustee's Sale ("2013 Notice"). In January 2014, the loan servicer sent Borrower a Notice of Default—Right to Cure ("Right to Cure Notice"), notifying Borrower he had the right to cure his default by paying $1,033,052.10 by February 22, 2014. The Right to Cure Notice stated that the lender could accelerate the debt if the borrower failed to cure the default. In June 2014, the trustee recorded a "Cancellation of Notice of Sale" ("2014 Cancellation Notice") to cancel the 2013 Notice. The 2014 Cancellation Notice contained the same Acceleration Revocation Clause as the 2012 Cancellation Notice.

¶ 6 In December 2014, the trustee recorded a new Notice of Trustee's Sale. In February 2015, Miller purchased the HOA Judgment. On March 26, 2015, a sheriff's sale was executed on the HOA Judgment, and Miller purchased the Property for the sum of $41,000. On March 27, 2015, Miller filed to enjoin Bank from foreclosing on its lien and conducting the trustee's sale of the Property. Both sides moved for summary judgment. The court granted summary judgment in favor of Miller, finding Banks's claim was barred by the statute of limitations based on Bank's acceleration of the debt in the 2009 Notice. Bank filed for reconsideration.

¶ 7 In its Motion for Reconsideration, Bank claimed it had paid $453,277 in property taxes and insurance on behalf of the Property, $62,596 of which was paid on or after April 1, 2015. Bank argued the later amount entitled it to initiate a foreclosure action, even if suit on the original loan amount was barred by the statute of limitations. See Deutsche Bank Tr. Co. Americas v. Beauvais , 188 So.3d 938, 941 (Fla. 3d DCA 2016) (en banc) (holding that even though a lender's right to foreclose a previously accelerated loan balance was barred by the statute of limitations, the lender was not barred from initiating foreclosure based on different acts if the new foreclosure action was brought within the applicable statute of limitations); Singleton v. Greymar Assocs. , 882 So.2d 1004, 1007 (Fla. 2004) (lender permitted to maintain a separate action for foreclosure for a default which occurred after acceleration on an earlier default). The superior court denied reconsideration, and entered a final judgment holding that Bank's lien was unenforceable. Bank timely appealed. We have jurisdiction pursuant to A.R.S. §§ 12–120.21(A)(1) and –2101(A)(1).

DISCUSSION

¶ 8 Bank argues the superior court erred by granting summary judgment because (1) Miller had no standing to raise the statute of limitations defense against Bank's enforcement of its lien; (2) if Miller does have standing, Bank revoked the debt's acceleration, which reset the statute of limitations on its foreclosure action; (3) the loan documents authorized Bank to pay for insurance and property taxes after the 2009 Notice, and the superior court should have considered Bank's argument even if it was first raised in a motion for reconsideration; and (4) it was error to hold that the lien was "unenforceable."

¶ 9 In reviewing an order granting summary judgment, we view the facts in the light most favorable to Bank, the party against which summary judgment was granted, and determine "de novo whether there are any genuine issues of material fact and whether the trial court erred in its application of the law." Galati v. Lake Havasu City , 186 Ariz. 131, 133, 920 P.2d 11, 13 (App. 1996) (quoting Gonzalez v. Satrustegui , 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App. 1993) ); Ariz. R. Civ. P. 56(a).

I. Miller Had Standing to Raise the Statute of Limitations Defense.

¶ 10 Bank argues the superior court erred by finding the applicable statute of limitations expired on January 21, 2015, because Miller was not in privity to the Note, the Deed, or the Borrower, and thus did not have standing to raise a statute of limitations defense.¹ Whether a party has standing to assert a statute of limitations defense is a question of law we review de novo . See Baier v. Mayer Unified Sch. Dist. , 224 Ariz. 433, 438, ¶ 15, 232 P.3d 747, 752 (App. 2010) (citing Robert Schalkenbach Found. v. Lincoln Found., Inc., 208 Ariz. 176, 180, ¶ 15, 91 P.3d 1019, 1023 (App. 2004) ).

A. The Applicable Statute of Limitations.

¶ 11 An action to collect a debt evidenced by a written contract "shall be commenced and prosecuted within six years after the cause of action accrues, and not afterward." A.R.S. § 12–548(A)(1). "The defense of the statute of limitations is a personal privilege that a debtor or one in privity may elect to urge or waive." Acad. Life Ins. Co. v. Odiorne , 165 Ariz. 188, 190, 797 P.2d 727, 729 (App. 1990) (citing Trujillo v. Trujillo , 75 Ariz. 146, 148, 252 P.2d 1071, 1073 (1953) ). When the statute of limitations expires, however, the debt is not extinguished; rather, the remedy for an action on the debt is merely barred. Provident Mut. Bldg.–Loan Ass'n v. Schwertner , 15 Ariz. 517, 518–19, 140 P. 495, 496–97 (1914) (when a debt has not been paid, the debt is not extinguished by the expiration of the limitation period, "only the remedy has been lost," preventing recovery when "properly invoked by the debtor"); De Anza Land & Leisure Corp. v. Raineri , 137 Ariz. 262, 266, 669 P.2d 1339, 1343 (App. 1983).

¶ 12 "The deed of trust scheme is a creature of statutes." Zubia v. Shapiro , 243 Ariz. 412, ––––, 408 P.3d 1248, 1250, 2018 WL 387772, *4, ¶ 15 (2018) (quoting BT Capital, LLC v. TD Serv. Co. of Ariz. , 229 Ariz. 299, 300, ¶ 9...