United States District Court, D. Arizona
ORDER
Honorable Rosemary Marquez, United States District Judge.
Pending
before the Court are Plaintiffs William and Carolyn
Donges' Motion for Partial Summary Judgment (Doc. 54) and
Defendant USAA Federal Savings Bank's Motion for Summary
Judgment (Doc. 64).[1] The summary judgment motions are fully
briefed and suitable for determination without oral argument.
For the following reasons, summary judgment will be granted
in favor of Defendant.
I.
Standard of Review
Summary
judgment is proper “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A fact is material if it “might affect the
outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A factual dispute is genuine if the evidence is such
that a reasonable trier of fact could resolve the dispute in
favor of the nonmoving party. Id. In evaluating a
motion for summary judgment, the court must “draw all
reasonable inferences from the evidence” in favor of
the non-movant. O'Connor v. Boeing N. Am., Inc.,
311 F.3d 1139, 1150 (9th Cir. 2002). A reasonable inference
is one which is supported by “significant probative
evidence” rather than “threadbare conclusory
statements.” Barnes v. Arden Mayfair, Inc.,
759 F.2d 676, 680-81 (9th Cir. 1985) (internal quotation
marks omitted). If “the evidence yields conflicting
inferences [regarding material facts], summary judgment is
improper, and the action must proceed to trial.”
O'Connor, 311 F.3d at 1150.
The
party moving for summary judgment bears the initial burden of
identifying those portions of the record, together with
affidavits, if any, that it believes demonstrate the absence
of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). If the movant meets
this burden, the burden shifts to the nonmovant to
“come forward with specific facts showing that there is
a genuine issue for trial.” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(internal quotation marks and emphasis omitted); see
also Fed. R. Civ. P. 56(c)(1).
II.
Background[2]
On
April 9, 2004, Plaintiffs entered into a Home Equity Line of
Credit (“HELOC”) with Defendant, establishing a
line of credit of $50, 000. (Doc. 70, ¶ 6.) Plaintiffs
subsequently entered into two more HELOC agreements,
increasing their line of credit by $50, 000 and $183, 800,
respectively. (Id. ¶¶ 8, 10.) All three
HELOCs were consolidated and secured by deeds of trust on
Plaintiffs' home in Tucson, Arizona.[3] (Id.
¶¶ 2, 6, 8, 10.) The HELOC has a maturity date of
April 9, 2024. (Id. ¶¶ 6, 8, 10.)
Plaintiffs
borrowed the full line of credit. (Doc. 72, ¶ 18.)
Plaintiffs made timely minimum payments until defaulting on a
monthly minimum payment due on October 19, 2009. (Doc. 70,
¶ 16.) Defendant sent Plaintiffs a letter on October 4,
2017, stating that a foreclosure would occur if Plaintiffs
did not show the debt was invalid or pay the debt within 30
days. (Doc. 72, ¶ 33.) On November 27, 2017, Defendant
filed a Notice of Trustee's Sale. (Doc. 72, ¶
34.)[4]
III.
Discussion
A.
Statute of Limitations[5]
Defendant
contends that it is entitled to summary judgment because the
statute of limitations on its right to foreclose did not
begin running until it accelerated the debt in November 2017,
through the initiation of foreclosure proceedings. Plaintiffs
assert that Defendant's right to foreclose accrued no
later than May 2011, which puts Defendant's October 2017
demand for payment outside of Arizona's six-year statute
of limitations. Summary judgment will be granted in favor of
Defendant.
There
is a threshold legal question on which the parties disagree:
when does the statute of limitations begin running on a claim
for a borrower's default on a HELOC that has a defined
maturity date? Plaintiffs argue that the statute begins
running on the entire outstanding debt when the borrower
first fails to make a full minimum monthly payment. They rely
exclusively on the Arizona Supreme Court's recent
decision in Mertola, LLC v. Santos, 422 P.3d 1028
(Ariz. 2018). Defendant relies on Navy Federal Credit
Union v. Jones, 930 P.2d 1007, 1008 (Ariz.Ct.App. 1996),
which set forth the longstanding rule that the statute of
limitations “commences on the due date of each matured
but unpaid installment and, as to unmatured future
installments, the period commences on the date the creditor
exercises the optional acceleration clause.” For the
following reasons, the Navy Federal rule applies.
In
Navy Federal, the defendant's husband defaulted
on a promissory note that was payable to the plaintiff over
15 years in equal monthly installments. Id. Years
after the first missed payment, the plaintiff accelerated the
balance on the note and then filed suit when the defendant
did not pay. Id. The defendant argued that the
plaintiff's claim accrued at the time of the first missed
payment, thus making the plaintiff's claim untimely under
the six-year limitation period. Id. The plaintiff
argued that its claim did not accrue until it accelerated the
balance on the note. Id. at 1008-09.
The
Arizona Court of Appeals concluded that both parties were
“partly correct.” Id. at 1009. The
defendant was “partially correct in contending that
each time her husband defaulted on an installment payment,
[the plaintiff] could have sued for the amount of that
installment any time within the six-year statute of
limitations.” Id. The plaintiff was
“also partly correct, however, ” because
“the statute of limitations runs as to future
installments from the date the creditor exercises the
[optional] acceleration clause.” Id. In other
words, the statute of limitations does not commence on an
unmatured installment unless the creditor accelerates it.
See id.
In
Mertola, the Arizona Supreme Court refused to apply
the Navy Federal rule to credit-card debt, holding
instead that “when a credit-card contract contains an
optional acceleration clause, a cause of action to collect
the entire outstanding debt accrues upon default: that is,
when the debtor first fails to make a full, agreed-to minimum
monthly payment.” 422 P.3d at 1032. The court
distinguished between closed accounts, which typically
involve a fixed principal amount and defined schedule of
repayment, and credit-card contracts, under which the
ultimate debt, monthly payment, and final payment date vary
depending on how the card is used and the current interest
rate, and found that
[b]ecause a closed-end installment contract involves an exact
sum that must be paid in full in equal payments by an
agreed-on date, a cause of action for the entire balance owed
will accrue no later than that date. After that date, the
creditor may not prevent the statute of limitations from
running simply by refusing to accelerate the debt.
Under credit-card contracts like the one at issue here,
however, the date when the entire debt will become due is
uncertain and may not occur until far in the future. To hold
that a cause of action on the debt does not accrue until the
creditor exercises his right to accelerate would vest the
creditor with unilateral power to extend the statutory
limitation period and permit interest to continue to accrue,
long after it is clear that no further payments will be made,
subject only to a standard of reasonableness and other
equitable doctrines. This would ...