Kerns v. Wells Fargo Bank, N.A.

• Decision Date: 27 September 2018
• Docket Number: Record No. 171068
• Citation: 296 Va. 146,818 S.E.2d 779
• Court: Virginia Supreme Court
• Parties: Dennis W. KERNS v. WELLS FARGO BANK, N.A.

296 Va. 146

818 S.E.2d 779

Dennis W. KERNS

v.WELLS FARGO BANK, N.A.

Record No. 171068

Supreme Court of Virginia.

SEPTEMBER 27, 2018

Henry W. McLaughlin, Richmond, for appellant.

Terry C. Frank (Benjamin A. Wills ; Kaufman & Canoles, Richmond, on brief), for appellee.

PRESENT: All the Justices

OPINION BY JUSTICE D. ARTHUR KELSEY

In the circuit court, Dennis W. Kerns claimed that Wells Fargo Bank, N.A. ("Wells Fargo") had breached a mortgage loan agreement by failing to give him a contractually required opportunity to cure his default and by improperly accelerating the balance due after his default—leading ultimately to a foreclosure sale of the property. Ruling on Wells Fargo’s plea in bar, the circuit court concluded that the debt acceleration had triggered the accrual of Kerns’s breach of contract claims. Because that breach had occurred more than five years before Kerns filed suit, the court dismissed the suit pursuant to the applicable statute of limitations. Finding no error in the court’s ruling, we affirm.

I.

In 2009, Kerns borrowed money from a mortgage lender to purchase property. The loan was accompanied by a promissory note and a deed of trust. Paragraph 7(C) of the note provided:

If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

J.A. at 14.¹

The lender assigned the note to Wells Fargo.² At some point within the following year, Kerns fell behind in his mortgage payments. Wells Fargo sent him, by certified U.S. mail, a pre-acceleration notice advising him that he was

in default for failure to make payments due. Unless the payments on your loan can be brought current by July 20, 2010, it will become necessary to require immediate payment in full (also called acceleration) of your Mortgage Note and pursue the remedies provided for in your Mortgage or Deed of Trust, which include foreclosure.

Id. at 39. The notice, which was dated June 20, 2010, explained the consequences if Kerns failed to bring the account current:

If funds are not received by the above referenced date, we will proceed with acceleration. Once acceleration has occurred, we may take steps to terminate your ownership in the property by a foreclosure proceeding, which could result in Lender or another person acquiring ownership of the property. ...

You have the right to reinstate your Mortgage Note and Mortgage or Deed of Trust after acceleration, and to have enforcement of the Mortgage discontinued and to have the Mortgage Note and Mortgage remain fully effective as if acceleration had never been required. However, any future negotiations attempting to reinstate your loan or any payment of less than the full amount due shall not require Wells Fargo Bank, N.A.’s waiver of the acceleration unless otherwise agreed to, in writing, by Wells Fargo Bank, N.A.

Id. Kerns received the pre-acceleration notice but does not claim that he made any further payments on the debt.

Treating the entire loan balance as due, Wells Fargo instructed the trustee to foreclose on the property. The trustee advertised for and later conducted the foreclosure sale on August 23, 2011. As Kerns concedes,³ these events necessarily imply that Wells Fargo accelerated the entire debt prior to the date of foreclosure. When Kerns did not leave the property following the foreclosure, Wells Fargo filed an unlawful detainer action against him. The general district court ruled in favor of Wells Fargo and ordered Kerns to vacate the property. On de novo appeal, the circuit court ordered the same.

Exactly five years after the foreclosure sale, on August 23, 2016, Kerns filed the present suit, a breach of contract action against Wells Fargo. Kerns alleged that Wells Fargo had breached the promissory note and deed of trust by issuing the pre-acceleration notice dated June 20, 2010. That notice, Kerns claimed, had been "back-dated to June 20, 2010," but actually had been mailed on June 21. Id. at 3. Kerns based that claim on a United States Postal Service "Track & Confirm" report showing "Electronic Shipping Info Received" on June 21, 2010. Id. at 41. Using June 21, rather than June 20, as the date that the notice had been mailed, Kerns claimed that Wells Fargo had issued "a 29-day notice rather than a 30-day notice." Id. at 3. Wells Fargo had thus "breached" the terms of the loan agreement and deed of trust. Id. at 5.

Wells Fargo defended the suit on several grounds, including that (i) the five-year statute of limitations, Code § 8.01-246(2), barred the breach of contract claims; (ii) Kerns had failed to plead causation because he did not allege that he could have cured his default if Wells Fargo had given him a 30-day notice instead of a 29-day notice;⁴ and (iii) the United States Postal Service "Track & Confirm" report did not identify the actual date that Wells Fargo had deposited the letter in a mailbox. Ruling on Wells Fargo’s plea in bar, the circuit court held that the five-year statute of limitations barred the breach of contract claims. The court’s final order did not address Wells Fargo’s remaining defenses.⁵

II.

On appeal, Kerns argues that the circuit court erred when it dismissed the breach of contract claims on statute-of-limitations grounds and ruled that the five-year limitation period began to run earlier than the date of the foreclosure sale. In response, Wells Fargo contends that the court correctly held that the breach of contract claims accrued at the earlier time of the wrongful acceleration of the debt caused by the allegedly defective pre-acceleration notice.⁶

A.

Absent a genuine issue of material fact, a circuit court’s "denial of a plea in bar as to the statute of limitations is a question of law that this Court reviews de novo." Thorsen v. Richmond SPCA , 292 Va. 257, 277, 786 S.E.2d 453 (2016) (citing Van Dam v. Gay , 280 Va. 457, 460, 699 S.E.2d 480 (2010) ). Because there are no facts in dispute, we decide this appeal entirely on governing principles of law.

The limitation period in a pure statute of limitations, unlike that in a statute of repose, see, e.g. , Commonwealth v. Owens-Corning Fiberglas Corp. , 238 Va. 595, 598-99, 385 S.E.2d 865 (1989), begins to run on the date of accrual.⁷ That date depends upon two different things: the type of claim asserted and the nature of the accrual. Code § 8.01-230 provides:

In every action for which a limitation period is prescribed, the right of action shall be deemed to accrue and the prescribed limitation period shall begin to run from the date the injury is sustained in the case of injury to the person or damage to property, when the breach of contract occurs in actions ex contractu and not when the resulting damage is discovered, except where the relief sought is solely equitable or where otherwise provided under § 8.01-233, subsection C of § 8.01-245, §§ 8.01-249, 8.01-250 or other statute.

Under this statute, a right of action on a tort claim involving personal injury or property damage accrues on "the date the injury is sustained." Code § 8.01-230. In contrast, a right of action on a breach of contract claim generally accrues "when the breach of contract occurs" and "not when the resulting damage is discovered." Id.

A different statute specifies the length of the limitation period. The statute governing written contracts provides that a civil action "founded upon a contract ... shall be brought within the following number of years next after the cause of action shall have accrued: ... (2) In actions on any contract which is not otherwise specified and which is in writing and signed by the party to be charged thereby, or by his agent, within five years whether such writing be under seal or not." Code § 8.01-246 (emphasis added).

Both Code § 8.01-230 and Code § 8.01-246(2) address the concept of accrual but apply it to different topics. Code § 8.01-230 defines the "accrual" of a "right of action." The "prescribed limitation period ... begin[s] to run" on the date of the "breach" and not on the date when the "resulting damage is discovered." Code § 8.01-230. Code § 8.01-246(2) prescribes a five-year limitation period running from the day of the "accrual" of a "cause of action" that is "founded" on a written contract.

B.

We have explained on several occasions the distinction between a right of action and a cause of action:

A "right of action " is a legally recognized "remedial right" to "enforce a cause of action ," which is simply the "set of operative facts" that causes a claimant to assert his claim. Id. (emphases added); see also Black’s Law Dictionary 266, 1520 (10th ed. 2014) (defining "cause of action" as a "group of operative facts giving rise to one or more bases for suing" and "right of action" as the "right to bring a specific case to court"). The distinction between a right of action and a cause of action should not be dismissed as an odd, rhetorical anachronism. It factors into many modern legal doctrines, including res judicata, accrual for statute-of-limitations purposes, and, pertinent here, a party’s right to seek judicial remedies.

Cherrie v. Virginia Health Servs., Inc., 292 Va. 309, 314, 787 S.E.2d 855 (2016) (emphases in original); see also Graham v. Community Mgmt. Corp. , 294 Va. 222, 227 n.2, 805 S.E.2d 240 (2017). "[A]nd while ‘[t]he two may accrue at the same time,’ they ‘will not of necessity do so.’ " Graham , 294 Va. at 227-28, 805 S.E.2d 240 (second alteration in original) (citation omitted).

Until today, we have not directly faced the specific problem implicated by this case. The two statutes relevant to Kerns’s claims appear to initiate the limitation period on different dates: Code § 8.01-230 commences the running of the limitation period, i.e., starts the...