Nazario Hernandez v. Franklin Credit Mgmt. Corp.

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 8, 2020
• Docket: 19-35719
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 8 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: NAZARIO HERNANDEZ, No. 19-35719

Debtor, D.C. No. 2:19-cv-00207-JCC ______________________________

NAZARIO HERNANDEZ, MEMORANDUM*

Plaintiff-Appellee,

v.

FRANKLIN CREDIT MANAGEMENT CORPORATION; DEUTSCHE BANK NATIONAL COMPANY, as Trustee for BOSCO Credit II Trust Series 2010-1,

Defendants-Appellants.

Appeal from the United States District Court for the Western District of Washington John C. Coughenour, District Judge, Presiding

Submitted August 31, 2020** Seattle, Washington

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: HAWKINS and McKEOWN, Circuit Judges, and KENDALL, *** District Judge.

Appellants Franklin Credit Management Corp. and Deutsche Bank National

Co. appeal the district court’s order reversing the bankruptcy court’s dismissal of an

adversary proceeding brought against them by Debtor Nazario Hernandez in a

chapter 13 bankruptcy proceeding. We have jurisdiction under 28 U.S.C. §

158(d)(1) as the district court’s order “finally dispose[d] of a discrete dispute within

the larger case.” In re Gugliuzza, 852 F.3d 884, 897 (9th Cir. 2017) (quoting Bullard

v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015)) (alterations omitted). We review

the bankruptcy court’s decision directly, its factual findings for clear error and

conclusions of law de novo.1 In re Lee, 889 F.3d 639, 644 (9th Cir. 2018).

The bankruptcy court erred in concluding the statute of limitations on

Appellants’ deed of trust was not triggered by Debtor’s chapter 7 discharge. Under

Washington law, the statute of limitations on a written installment contract,

including the deed of trust here, is six years. Wash. Rev. Code. § 4.16.040. With

an installment contract, as here, “the statute of limitations runs against each

*** The Honorable Virginia M. Kendall, United States District Judge for the Northern District of Illinois, sitting by designation. 1 We grant Debtor’s motion for judicial notice. (Dkt. Entry No. 24).

2 installment from the time it becomes due,” which can occur until the last installment

due before there is no longer personal liability due under the note. 4518 S. 256th,

LLC v. Karen L. Gibbon, P.S., 382 P.3d 1, 6 (Wash. Ct. App. 2018); Edmundson v.

Bank of Am., 378 P.3d 272, 278 (Wash. Ct. App. 2016).

Here, Debtor received a chapter 7 discharge in 2012 and thereafter neither

reaffirmed nor made any further payment on the note. Despite this, Appellants took

no action to collect payment, did not seek to accelerate the debt, and did not initiate

foreclosure proceedings. In these circumstances, the statute of limitations for

Appellants to foreclose on the deed of trust ran from the last installment due before

Debtor’s discharge and expired before Debtor sought a chapter 13 discharge and

brought the adversary proceeding. The bankruptcy court therefore erred in granting

Appellants’ motion to dismiss the adversary proceeding, which the district court

correctly recognized in reversing the bankruptcy court’s decision. We note the

bankruptcy court’s concern that finding the statute of limitations triggered by the

discharge date poses issues should a debtor continue paying or seek to affirm the

note following discharge. However, those circumstances were not present here and

a straightforward application of Washington law that the bankruptcy court was not

free to ignore renders this result. See Edmundson, 378 P.3d at 278.

AFFIRMED.