Copper Creek (Marysville) Homeowners Ass'n v. Kurtz

• Decision Date: 11 April 2022
• Docket Number: 82083-4-I
• Citation: 508 P.3d 179
• Parties: COPPER CREEK (MARYSVILLE) HOMEOWNERS ASSOCIATION, a Washington nonprofit corporation, Respondent, v. Shawn A. KURTZ and Stephanie A. Kurtz, husband and wife and the marital or quasi-marital community composed thereof; Quality Loan Service Corporation of Washington, a Washington corporation, Defendants, Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, not individually but as trustee from Pretium Mortgage Acquisition Trust, Selene Finance LP, Appellants.
• Court: Washington Court of Appeals

508 P.3d 179

COPPER CREEK (MARYSVILLE) HOMEOWNERS ASSOCIATION, a Washington nonprofit corporation, Respondent,

v.Shawn A. KURTZ and Stephanie A. Kurtz, husband and wife and the marital or quasi-marital community composed thereof; Quality Loan Service Corporation of Washington, a Washington corporation, Defendants,Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, not individually but as trustee from Pretium Mortgage Acquisition Trust, Selene Finance LP, Appellants.

No. 82083-4-I

Court of Appeals of Washington, Division 1.

FILED April 11, 2022

Anne Marie Dorshimer, Anne Marie Dorshimer, Stoel Rives LLP, 600 University St. Ste. 3600, Seattle, WA, 98101-4109, Amy Edwards, Stoel Rives LLP, 760 Sw 9th Ave. Ste. 3000, Portland, OR, 97205-2584, for Appellants.

Marlyn Kathryn Hawkins, Marlyn Kathryn Hawkins, Barker Martin PS, Samantha Jean Brown, Barker Martin, One Convention Place, 701 Pike St. Ste. 1150, Seattle, WA, 98101-3946, for Respondent.

PUBLISHED OPINION

Appelwick, J.

¶1 Selene/Wilmington seeks reversal of summary judgment quieting title in favor of Copper

Creek. Relying on Edmundson v. Bank of America, 194 Wash. App. 920, 378 P.3d 272 (2016), the trial court determined the statute of limitations rendered the Selene/Wilmington deed of trust unenforceable. This was error.

¶2 The statute of limitations ran against the deed of trust only to the extent it ran against the underlying debt. The underlying debt was an installment debt. The statute of limitations accrued on each individual installment as it came due. Bankruptcy discharge of the debtor did not extinguish the debt, modify the schedule of payments, or accelerate the maturity date. And, the lender did not accelerate the maturity date of the loan. The statute of limitations on each of the missed installments began running from the date they came due. Bankruptcy did not toll the statute of limitations. The discharge left intact the lender's option to enforce the debt against the property in rem.

¶3 However, the Servicemembers Credit Relief Act (SCRA), 50 U.S.C. § 3936(a), tolled the period for any action to enforce the debt until the debtor, an active duty servicemember, was relieved of personal liability on the debt by the discharge in bankruptcy. At that time, the statute of limitations began to run on any unpaid installments. Selene/Wilmington may enforce the deed of trust, except to the extent the statute of limitations has rendered any unpaid installments uncollectable.

¶4 We reverse and remand for further proceedings.

FACTS

¶5 In 2007, Shawn and Stephanie Kurtz purchased real property with a note for $303,472.00 secured by a deed of trust (DOT).¹ Shawn was active duty in the United States military at the time and continued to be an active duty serviceman until at least September 2020. The property was within the Copper Creek (Marysville) Homeowners Association and the Kurtzes were obligated to pay annual assessments of $400.

¶6 In January 2008, Shawn and Stephanie separated and Stephanie moved out of the property. The Kurtzes stopped paying on the note in 2008 or 2009. Stephanie filed for Chapter 7 bankruptcy protection in February 2010. Stephanie included the property secured by the DOT on the bankruptcy schedule of creditors holding secured claims. On the debtor's statement of intention, Stephanie noted the mortgage and her intention to surrender the property. Stephanie did not claim the property as exempt. Stephanie received a bankruptcy discharge in June 2010. The note was among the claims discharged without payment. Stephanie's bankruptcy case was closed on June 18, 2010.

¶7 The Kurtzes ceased payment of their annual assessment to Copper

Creek in July 2010.

¶8 Shawn filed a separate Chapter 7 bankruptcy in March 2011. He identified the property secured by the DOT and his intention to surrender it. Shawn did not claim the property as exempt. Shawn also included Copper

Creek as a creditor holding a secured claim for homeowners’ dues in the amount of $1,826.50. His bankruptcy was discharged on July 13, 2011 and his case closed on July 18, 2011.² The note was among the claims discharged without payment.

¶9 The property sat vacant and fell into disrepair. In November 2018, Copper

Creek recorded a notice of claim of lien against the property for the $15,278.68 in assessments, fees, interest, and attorney fees and costs that had accrued on the property. Copper Creek filed for judicial foreclosure to recoup the delinquent assessments.³ Copper Creek acknowledges that it named only the Kurtzes as defendants in the judicial foreclosure, omitting the lenders because its assessment lien was junior to the lender and it was not seeking to foreclose the lender's interest. Copper Creek requested appointment of a receiver to "obtain possession of the Lot, refurbish it to a reasonable standard for rental units, and rent the Lot or permit its rental to others." In April 2019, Copper Creek and the Kurtzes entered an agreed order with the court for 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 fair market value.

¶10 Shortly after completion of the repairs to the property, Quality Loan Service Corporation of Washington (QLS) as Trustee commenced nonjudicial foreclosure on the property on behalf of successor beneficiary Wilmington Savings Fund Society FAB and loan servicer Selene Finance LP (together "Selene/Wilmington"). On October 30, 2019, QLS provided a notice of trustee sale of the property to Copper

Creek. In February 2020, Copper Creek notified QLS that enforcement of the DOT was barred by the statute of limitations and demanded discontinuation of the sale. QLS refused and Copper Creek filed a motion to restrain the sale.

¶11 Copper

Creek also filed a complaint against the Kurtzes, Selene/Wilmington, and QLS for lien foreclosure, restraint of the trustee sale, wrongful foreclosure, and quiet title.⁴ In April 2020, Selene/Wilmington filed a CR 12(b)(6) motion to dismiss the action to quiet title for lack of standing. Prior to a ruling on that motion, Copper Creek received a deed in lieu of foreclosure from the Kurtzes that was recorded with the county on June 10, 2020.

¶12 In May 2020, Selene/Wilmington contacted Shawn and Stephanie and asked if they would execute a waiver of the statute of limitations on the underlying loan: "Given that you both seem to have moved on from the Property now, executing such a document likely wouldn't impact you much, if at all, but i[t] could help my client in the underlying litigation, and we'd be willing to give you something in exchange for your trouble." Shawn refused and notified Copper

Creek of the request.

¶13 In June 2020, Copper

Creek moved to continue the sale and the motion to dismiss. The trial court granted Copper Creek's motion, continuing both the trustee sale and the motion to dismiss to allow the parties time to conduct discovery. The court entered an order compelling discovery with a deadline of July 7, 2020, and awarded attorney fees to Copper

Creek. QLS then cancelled the sale.

¶14 Copper

Creek requested and received leave to amend its complaint to reflect its standing through the deed in lieu of foreclosure. Selene/Wilmington did not comply with discovery requests by the deadline. On July 10, 2020, QLS provided notice of trustee sale on the property to be conducted in October 2020. Copper Creek moved to enjoin the sale, and the trial court granted the motion.

¶15 Copper

Creek requested an additional continuance on the motion to dismiss and moved for default judgment due to Selene/Wilmington's failure to provide discovery or file an answer to the amended complaint. In support of its motion to dismiss, Selene/Wilmington argued that because the property formerly belonged to a member of the United States military, the SCRA applied to toll the statute of limitations on the DOT. After oral argument on several competing motions, the trial court denied Selene/Wilmington's motion to dismiss and awarded Copper Creek attorney fees. The court expressed concern about Selene/Wilmington's "bad faith compliance with the rules in terms of discovery." In an attempt to force Selene/Wilmington to complete discovery, the court entered an order of default against Selene/Wilmington that would "enter on August 14, 2020 unless an order striking this default is entered by this court before said date." Selene/Wilmington answered the complaint and the parties stipulated to strike the order of default.

¶16 Copper

Creek then filed a motion for summary judgment. Selene/Wilmington opposed the summary judgment and filed a CR 12(c) motion for judgment on the pleadings. After oral arguments, the trial court granted the summary judgment and quieted title in Copper Creek. The court struck Selene/Wilmington's motion for judgment on the pleadings as a CR 11 sanction. The trial court also awarded reasonable attorney fees to Copper Creek under RCW 4.84.185, the contractual attorney fee provision in the DOT, and also "as a matter of equity because [of Selene/Wilmington's] bad faith and misconduct shown repeatedly throughout this case." The court subsequently entered a judgment against Selene/Wilmington for $96,779.09 in attorney fees.

¶17 Selene/Wilmington appeals the court's orders on summary judgment, motion to dismiss, motion for judgment on the pleadings, and the judgment for attorney fees.

DISCUSSION

¶18 The trial court granted summary judgment quieting title as to Copper

Creek, because the statute of limitations had run on enforcement of the DOT. We review orders on summary judgment de novo. Kim v. Lakeside Adult Family Home, 185 Wash.2d 532, 547, 374 P.3d 121 (2016). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Folsom v. Burger King, 135 Wash.2d 658, 663, 958 P.2d 301 (1998) (citing CR 56(c...