THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 9 RHETT E. TAYLOR and LAURIE D. CASE NO. C19-1142-JCC TAYLOR, 10 ORDER 11 Plaintiffs, v. 12 PNC BANK, NATIONAL ASSOCIATION, 13 Defendant. 14 15 16 This matter comes before the Court on Defendant’s motion to dismiss (Dkt. No. 8). 17 Having thoroughly considered the parties’ briefing and the relevant record, the Court finds oral 18 argument unnecessary and hereby DENIES the motion for the reasons explained herein. 20 Plaintiffs are the record owners of real property located at 6228 165th Pl. SW, 21 Lynnwood, WA 98037-2725 (the “property”). (Dkt. No. 1 at 2.) On March 6, 2007, Plaintiffs 22 borrowed $150,000 from National City Bank on a home equity line of credit (the “HELOC 23 loan”). (Id.) Plaintiffs executed an equity reserve agreement and a deed of trust that was recorded 24 against the property. (Id. at 2–3; see Dkt. Nos. 1-3 at 2–7, 1-4 at 2–8.) The equity reserve 25 agreement reflected an “open-end line of credit” whose “total amount will be required to be 26 repaid in two hundred forty (240) equal monthly payments . . . .” (Dkt. No. 1-3 at 2, 4.) The deed 1 of trust established a lien against the property and had a maturity date of March 6, 2037. (Dkt. 2 No. 1-4 at 2–3.) The listed events of default under the deed of trust included fraud, failure to 3 make a timely payment, and Plaintiffs taking any action or inaction adversely affecting the 4 property or Defendant’s rights in the property. (Id. at 5.) Under the deed of trust, Defendant’s 5 remedies for an event of default included acceleration of the debt and foreclosure of the property. 6 (Id.) The HELOC loan is currently owned by Defendant and had a balance of $152,885.47 on 7 June 11, 2019. (Dkt. No. 1 at 3.) 8 On February 11, 2011, Plaintiffs filed a Chapter 7 bankruptcy petition in the U.S. 9 Bankruptcy Court for the Western District of Washington. (Id.) On May 23, 2011, the 10 bankruptcy court granted Plaintiffs a discharge pursuant to 11 U.S.C. §§ 727. (Id.; see Dkt. No. 11 1-5 at 2.) On July 23, 2019, Plaintiffs filed their complaint in this action seeking to quiet title to 12 the property. (Dkt. No. 1.) Plaintiffs contend that Washington’s six-year statute of limitations on 13 actions to enforce promissory notes and accompanying deeds of trust has run on the HELOC 14 loan following the bankruptcy court’s discharge in May 2011, and therefore they are entitled to 15 quiet title against Defendant. (Id. at 3–4.) Defendant moves to dismiss Plaintiffs’ complaint for 16 failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 8.) 18 A. Motion to Dismiss Legal Standard 19 The Court may dismiss a complaint that “fail[s] to state a claim upon which relief can be 20 granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must contain 21 sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. 22 Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). A claim has facial plausibility when the plaintiff 23 pleads factual content that allows the Court to draw the reasonable inference that the defendant is 24 liable for the misconduct alleged. Id. at 678. In addition, the complaint may be dismissed if it 25 lacks a cognizable legal theory or states insufficient facts to support a cognizable legal theory. 26 Zixiang v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013). 1 B. Statute of Limitations under Washington Law 2 Under Washington law, a promissory note and deed of trust are written contracts that are 3 subject to a six-year statute of limitations. See Wash. Rev. Code § 4.16.040(1); Cedar W. 4 Owners Ass’n v. Nationstar Mortg., LLC, 434 P.3d 554, 559 (Wash. Ct. App. 2019). An action 5 “can only be commenced” within six years “after the cause of action has accrued.” Wash. Rev. 6 Code § 4.16.005. The six-year statute of limitations on a deed of trust accrues “when the party is 7 entitled to enforce the obligations of the note.” Wash. Fed., Nat’l Ass’n v. Azure Chelan LLC, 8 382 P.3d 20, 30 (Wash. Ct. App. 2016). 9 When a promissory note and deed of trust are payable in installments, the six-year statute 10 of limitations accrues for each monthly installment from the time it becomes due. Edmundson v. 11 Bank of America, N.A., 378 P.3d 272, 277 (Wash. Ct. App. 2016) (citing Herzog v. Herzog, 161 12 P.2d 142, 145 (Wash. 1945)). In Edmundson, the Washington State Court of Appeals ruled that 13 the six-year statute of limitations period for enforcing a deed of trust payable in installments 14 begins to accrue on each date that a borrower defaults on a payment until the borrowers’ personal 15 liability is discharged in a bankruptcy proceeding, as after that point no future installment 16 payments will be due. 378 P.3d at 278. Washington and federal courts have since followed the 17 legal rule announced in Edmundson. See Jarvis v. Fed. Nat’l Mortg. Ass’n, 726 F. App'x 666, 18 667 (9th Cir. 2018) (“The final six-year period to foreclose runs from the time the final 19 installment becomes due . . . [which] may occur upon the last installment due before discharge of 20 the borrower’s personal liability on the associated note”), aff’ing Jarvis v. Fed. Nat’l Mortg. 21 Ass’n, Case No. C16-5194-RBL (W.D. Wash. 2017); U.S. Bank NA v. Kendall, 2019 WL 22 2750171, slip op. at 4 (Wash. Ct. App. 2019) (noting that although a deed of trust’s lien is not 23 discharged in bankruptcy, the limitations period for an enforcement action nonetheless “accrues 24 and begins to run when the last payment was due” prior to discharge); Hernandez v. Franklin 25 Credit Mgmt. Corp. et al., Case No. C19-0207-JCC, Dkt. No. 14 (W.D. Wash. 2019) (applying 26 Edmundson to conclude that creditors’ ability to enforce the underlying deed of trust became 1 time-barred six years after “the last date an installment payment was due prior to” bankruptcy 2 discharge).1 3 The equity reserve agreement and accompanying deed of trust were installment contracts 4 requiring Plaintiffs to make monthly payments to service the HELOC loan. (See Dkt. Nos. 1-3, 5 1-4.) Plaintiffs received a Chapter 7 bankruptcy discharge on May 23, 2011. (Dkt. No. 1 at 3.) 6 Therefore, the statute of limitations on Defendant’s ability to enforce the deed of trust began to 7 accrue on the last date an installment payment was due prior to the discharge. See Edmundson, 8 378 P.3d at 278.2 Defendant has not established that it took any actions following the discharge 9 that could have tolled the six-year statute of limitations under Wash. Rev. Code § 4.16.040(1); 10 (see Dkt. Nos. 8 at 2–3, 12 at 2–3). Therefore, as Plaintiffs’ discharge occurred beyond the six- 11 year statute of limitations imposed by Wash. Rev. Code § 4.16.040(1), Defendant has not 12 established that Plaintiffs’ complaint to quiet title in the property fails to state a claim upon 13 which relief can be granted. See Fed. R. Civ. P.
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THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 9 RHETT E. TAYLOR and LAURIE D. CASE NO. C19-1142-JCC TAYLOR, 10 ORDER 11 Plaintiffs, v. 12 PNC BANK, NATIONAL ASSOCIATION, 13 Defendant. 14 15 16 This matter comes before the Court on Defendant’s motion to dismiss (Dkt. No. 8). 17 Having thoroughly considered the parties’ briefing and the relevant record, the Court finds oral 18 argument unnecessary and hereby DENIES the motion for the reasons explained herein. 20 Plaintiffs are the record owners of real property located at 6228 165th Pl. SW, 21 Lynnwood, WA 98037-2725 (the “property”). (Dkt. No. 1 at 2.) On March 6, 2007, Plaintiffs 22 borrowed $150,000 from National City Bank on a home equity line of credit (the “HELOC 23 loan”). (Id.) Plaintiffs executed an equity reserve agreement and a deed of trust that was recorded 24 against the property. (Id. at 2–3; see Dkt. Nos. 1-3 at 2–7, 1-4 at 2–8.) The equity reserve 25 agreement reflected an “open-end line of credit” whose “total amount will be required to be 26 repaid in two hundred forty (240) equal monthly payments . . . .” (Dkt. No. 1-3 at 2, 4.) The deed 1 of trust established a lien against the property and had a maturity date of March 6, 2037. (Dkt. 2 No. 1-4 at 2–3.) The listed events of default under the deed of trust included fraud, failure to 3 make a timely payment, and Plaintiffs taking any action or inaction adversely affecting the 4 property or Defendant’s rights in the property. (Id. at 5.) Under the deed of trust, Defendant’s 5 remedies for an event of default included acceleration of the debt and foreclosure of the property. 6 (Id.) The HELOC loan is currently owned by Defendant and had a balance of $152,885.47 on 7 June 11, 2019. (Dkt. No. 1 at 3.) 8 On February 11, 2011, Plaintiffs filed a Chapter 7 bankruptcy petition in the U.S. 9 Bankruptcy Court for the Western District of Washington. (Id.) On May 23, 2011, the 10 bankruptcy court granted Plaintiffs a discharge pursuant to 11 U.S.C. §§ 727. (Id.; see Dkt. No. 11 1-5 at 2.) On July 23, 2019, Plaintiffs filed their complaint in this action seeking to quiet title to 12 the property. (Dkt. No. 1.) Plaintiffs contend that Washington’s six-year statute of limitations on 13 actions to enforce promissory notes and accompanying deeds of trust has run on the HELOC 14 loan following the bankruptcy court’s discharge in May 2011, and therefore they are entitled to 15 quiet title against Defendant. (Id. at 3–4.) Defendant moves to dismiss Plaintiffs’ complaint for 16 failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 8.) 18 A. Motion to Dismiss Legal Standard 19 The Court may dismiss a complaint that “fail[s] to state a claim upon which relief can be 20 granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must contain 21 sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. 22 Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009). A claim has facial plausibility when the plaintiff 23 pleads factual content that allows the Court to draw the reasonable inference that the defendant is 24 liable for the misconduct alleged. Id. at 678. In addition, the complaint may be dismissed if it 25 lacks a cognizable legal theory or states insufficient facts to support a cognizable legal theory. 26 Zixiang v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013). 1 B. Statute of Limitations under Washington Law 2 Under Washington law, a promissory note and deed of trust are written contracts that are 3 subject to a six-year statute of limitations. See Wash. Rev. Code § 4.16.040(1); Cedar W. 4 Owners Ass’n v. Nationstar Mortg., LLC, 434 P.3d 554, 559 (Wash. Ct. App. 2019). An action 5 “can only be commenced” within six years “after the cause of action has accrued.” Wash. Rev. 6 Code § 4.16.005. The six-year statute of limitations on a deed of trust accrues “when the party is 7 entitled to enforce the obligations of the note.” Wash. Fed., Nat’l Ass’n v. Azure Chelan LLC, 8 382 P.3d 20, 30 (Wash. Ct. App. 2016). 9 When a promissory note and deed of trust are payable in installments, the six-year statute 10 of limitations accrues for each monthly installment from the time it becomes due. Edmundson v. 11 Bank of America, N.A., 378 P.3d 272, 277 (Wash. Ct. App. 2016) (citing Herzog v. Herzog, 161 12 P.2d 142, 145 (Wash. 1945)). In Edmundson, the Washington State Court of Appeals ruled that 13 the six-year statute of limitations period for enforcing a deed of trust payable in installments 14 begins to accrue on each date that a borrower defaults on a payment until the borrowers’ personal 15 liability is discharged in a bankruptcy proceeding, as after that point no future installment 16 payments will be due. 378 P.3d at 278. Washington and federal courts have since followed the 17 legal rule announced in Edmundson. See Jarvis v. Fed. Nat’l Mortg. Ass’n, 726 F. App'x 666, 18 667 (9th Cir. 2018) (“The final six-year period to foreclose runs from the time the final 19 installment becomes due . . . [which] may occur upon the last installment due before discharge of 20 the borrower’s personal liability on the associated note”), aff’ing Jarvis v. Fed. Nat’l Mortg. 21 Ass’n, Case No. C16-5194-RBL (W.D. Wash. 2017); U.S. Bank NA v. Kendall, 2019 WL 22 2750171, slip op. at 4 (Wash. Ct. App. 2019) (noting that although a deed of trust’s lien is not 23 discharged in bankruptcy, the limitations period for an enforcement action nonetheless “accrues 24 and begins to run when the last payment was due” prior to discharge); Hernandez v. Franklin 25 Credit Mgmt. Corp. et al., Case No. C19-0207-JCC, Dkt. No. 14 (W.D. Wash. 2019) (applying 26 Edmundson to conclude that creditors’ ability to enforce the underlying deed of trust became 1 time-barred six years after “the last date an installment payment was due prior to” bankruptcy 2 discharge).1 3 The equity reserve agreement and accompanying deed of trust were installment contracts 4 requiring Plaintiffs to make monthly payments to service the HELOC loan. (See Dkt. Nos. 1-3, 5 1-4.) Plaintiffs received a Chapter 7 bankruptcy discharge on May 23, 2011. (Dkt. No. 1 at 3.) 6 Therefore, the statute of limitations on Defendant’s ability to enforce the deed of trust began to 7 accrue on the last date an installment payment was due prior to the discharge. See Edmundson, 8 378 P.3d at 278.2 Defendant has not established that it took any actions following the discharge 9 that could have tolled the six-year statute of limitations under Wash. Rev. Code § 4.16.040(1); 10 (see Dkt. Nos. 8 at 2–3, 12 at 2–3). Therefore, as Plaintiffs’ discharge occurred beyond the six- 11 year statute of limitations imposed by Wash. Rev. Code § 4.16.040(1), Defendant has not 12 established that Plaintiffs’ complaint to quiet title in the property fails to state a claim upon 13 which relief can be granted. See Fed. R. Civ. P. 12(b)(6); Zixiang, 710 F.3d at 999. 15 For the foregoing reasons, Defendant’s motion to dismiss (Dkt. No. 8) is DENIED. 16 // 17 // 18
19 1 Defendant argues that the Court should decline to follow the reasoning in Edmundson, Jarvis, and Kendall because those “courts’ consideration of the effect of a discharge on a statute 20 of limitations is incomplete and unpersuasive.” (Dkt. No. 8 at 6.) The Court declines Defendant’s invitation to ignore preceding case law, including that of the Ninth Circuit. 21 Defendant also argues that this case is factually distinguishable from Hernandez and asks 22 the Court to reconsider its prior interpretation of Edmundson. (See Dkt. No. 12 at 2–3, 5–6.) Defendant’s attempts to distinguish this case from Hernandez are unavailing, and the Court will 23 not revisit its prior analysis of Edmundson. 24 2 Neither party has specified when Plaintiffs’ last installment payment prior to the discharge was due to Defendant. (See Dkt. Nos. 1 at 2–3, 8 at 2–3.) However, more than six 25 years have passed since Plaintiffs’ discharge on May 23, 2011, and thus any installment payments due prior to that date must fall outside of the six-year statute of limitations. See Wash. 26 Rev. Code § 4.16.040(1). 1 DATED this 26th day of September 2019. A 2 3 4 John C. Coughenour 5 UNITED STATES DISTRICT JUDGE
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