Creagan, Jr. v. Nationstar Mortgage LLC

Filing 34

ORDER granting 22 Defendant's Motion for Summary Judgment; denying 23 Plaintiff's Motion for Summary Judgment; this matter is DISMISSED WITH PREJUDICE; signed by Judge Ronald B. Leighton.(DN)

HONORABLE RONALD B. LEIGHTON

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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JAMES P CREAGAN JR,
Plaintiff,

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v.

CASE NO. C17-5138 RBL
ORDER

NATIONSTAR MORTGAGE LLC,

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Defendant.

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THIS MATTER is before the Court on Defendant Nationstar’s Motion for Summary

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Judgment [Dkt. # 22] and on Plaintiff Creagan’s Cross Motion for Summary Judgment [Dkt. #

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23].

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The case involves a mortgage, a default, and a bankruptcy. In 2006, Creagan borrowed

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some $760,000 from Countywide Bank, secured by a deed of trust on his home. He made

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payments for less than three years before the economy and the value of the home fell

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dramatically. He stopped paying his mortgage and on July 17, 2009 the then-loan servicer issued

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a “NOTICE OF INTENT TO ACCELERATE” that warned him he was in default, and

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explained what would happen if he did not cure that default:

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ORDER - 1

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[Dkt. # 31 at 27 (Ex. 5)].
Creagan did not make the required payments and his lender did not foreclose. Instead, the

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servicer(s) continued to work on some sort of resolution to Creagan’s default and to avoid

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foreclosure. Those efforts were not successful.

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In December 2012 Creagan sought and obtained protection under the Chapter 7 of

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Bankruptcy Code. Creagan’s personal liability for the debt was discharged, and the bankruptcy

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was closed at the end of 2013. According to Defendant Nationstar, Creagan sought and obtained

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approval to sell the home. He did not do so.

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He has not made any payments since June 2009. In December, 2016, Nationstar

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commenced foreclosure proceedings on the deed of trust. In January, 2017, Creagan sued for

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quiet title, claiming that six year limitations period for enforcing the deed of trust accrued when

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he received the Notice of Intent to Accelerate, and that that period has now expired. He asks the

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Court to determine that he owns the home free and clear.

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Nationstar and Creagan now seek summary judgment. The Motions are opposite sides of

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the same coin. Creagan claims the debt was accelerated as a matter of law in July 2009, and

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Nationstar claims the Notice did not have the legal effect of accelerating the debt, and the

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limitations period on its right to foreclose has not run.

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A deed of trust is a written installment contract subject to Washington’s six-year

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limitations period. See RCW 4.16.040 (2012) (governing deeds of trust). Each installment

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triggers the limitations period for that missed payment: “[W]hen recovery is sought on an

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obligation payable by installments[,] the statute of limitations runs against each installment from

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the time it becomes due; that is, from the time when an action might be brought to recover it.”

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Herzog v. Herzog, 23 Wn.2d 382, 388, 161 P.2d 142, 144–45 (1945); see also 25 David K.

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ORDER - 2

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Dewolf, Keller W. Allen & Darlene Barrier Caruso, Washington Practice: Contract Law and

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Practice § 16:20, at 196 (2012–13 Supp.) (“Where a contract calls for payment of an obligation

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by installments, the statute of limitations begins to run for each installment at the time such

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payment is due.”).

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The last payment owed commences the final six-year period to enforce a deed of trust

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securing a loan. This situation occurs when the final payment becomes due, such as when the

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note matures or a lender unequivocally accelerates the note’s maturation. See 4518 S. 256th, LLC

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v. Karen L. Gibbon, P.S., 195 Wn. App. 423, 434–35, 382 P.3d 1 (2016), review denied sub nom.

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4518 S. 256th, LLC v. Gibbon, 187 Wn.2d 1003, 386 P.3d 1084 (2017); see also Westar

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Funding, Inc. v. Sorrels, 157 Wn. App. 777, 784, 239 P.3d 1109 (Wash. App. Div. 2, 2010). It

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also occurs at the payment owed immediately prior to the discharge of a borrower’s personal

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liability in bankruptcy, because after discharge, a borrower no longer has forthcoming

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installments that he must pay. See Edmundson, 194 Wn. App. at 931; see also Silvers v. U.S.

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Bank Nat. Ass’n, 2015 WL 5024173, at *4.

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Acceleration is the lender’s prerogative. In Washington, “acceleration does not occur

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automatically by invoking the power of sale.” 4518 S. 256th, LLC v. Karen L. Gibbon, P.S., 195

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Wn. App. 423, 444, 382 P.3d 1 (2016), review denied sub nom. 4518 S. 256th, LLC v. Gibbon,

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187 Wn.2d 1003, 386 P.3d 1084 (2017). Rather, it “must be made in a clear and unequivocal

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manner [that] effectively apprises the maker that the holder has exercised his right to accelerate

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the payment date.” Glassmaker v. Ricard, 23 Wn. App. 35, 38, 593 P.2d 179 (1979) (emphasis

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added). In Edmundson v. Bank of America, N.A., No. 740116-4-I (Court of Appeals Division I,

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July 11, 2016) held that it was “well settled” that the discharge of personal liability (the Note) in

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bankruptcy does not affect the creditor’s ability to foreclose on its security (the Deed of Trust).

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ORDER - 3

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Nothing in the Deeds of Trust Act supports the conclusion that the lien of a deed of trust on real

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property is discharged under state law when the note or other secured obligation is no longer

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enforceable.

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Creagan argues that the Notice used the word “will” and concedes that that word

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connotes “in the future,” but the core of his argument is that he did not do the thing the Notice

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said was required to prevent acceleration: cure the default. He does not acknowledge that the

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Notice also threatened foreclosure if he did not so cure, but that has not yet occurred, either.

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The legal question is whether a Notice of Intent to Accelerate (in the future, contingent

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on debtor’s failure to cure) necessarily means that the Note is irrevocably accelerated as a matter

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of law when the time for cure passes without a cure. Creagan supplies no on-point authority for

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the proposition that a Notice of Acceleration is a self-executing event. To the contrary, as

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Nationstar correctly points out, the acceleration must be done in a “clear and unequivocal”

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manner that apprises the [debtor] that the [creditor] “has exercised”—past tense—the “right to

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accelerate.” See Glassmaker v. Ricard, 23 Wn. App. 35, 38 (1979). See also Erickson v.

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America’s Wholesale Lender, 2018 Wn. App. LEXIS 811 (Aril 16, 2018) (notice of intent did

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not accelerate debt; acceleration required affirmative act or refused to accept installment

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payments) (citing Rodgers v. Rainier Nat’l Bank. 111 Wn.2d 232 (1988). Even commencement

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of the foreclosure process—invoking the power of sale—does not automatically accelerate the

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debt. Karen L. Gibbon, P.S , supra. It would be an odd result if warning an in-default debtor,

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pre-sale, pre-acceleration, of the consequences of a failure to cure did automatically accelerate

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the debt with no additional affirmative act on the part of the lender

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The Notice coupled with the failure to cure do not together add up to an acceleration as a
matter of law. Creagan’s Motion for Summary Judgment on this point is DENIED, and

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ORDER - 4

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Nationstar’s Motion is GRANTED. Creagans’ Quiet Title and Injunctive Relief claims are

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DISMISSED with prejudice.

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IT IS SO ORDERED.

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Dated this 28th day of August, 2018.

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A

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Ronald B. Leighton
United States District Judge

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ORDER - 5