Like us before Noted, the statute of limitations for actions to enforce a note or trust deed can be a brutally effective sword for borrowers in Washington State. Under RCW 7.28.300’s six-year statute of limitations, a borrower is entitled to a “judgment relief” against the security instrument or “foreclosure action.” . . would be prohibited by the limitation period.Copper Creek (Marysville) Owners Ass’n c. Kurtz, 502 P.3d 865, 869 (Wash. Ct. App. 2022), the Washington Court of Appeals Division 1 resolved a central issue regarding the statute of limitations, namely the effect, if any, of a discharge from bankruptcy on the start of the statute of limitations for each installment of a mortgage loan. Since 2017, Washington state and federal courts have found, in a series of unreported decisions, that a bankruptcy discharge begins the statute of limitations for each mortgage payment. To see, for example, Jarvis c. Fed. Nat’l Mortg. Ass’n, no. C16-5194-RBL, 2017 WL 1438040, at *1 (WD Wash. 24 April 2017). Courts have consistently held that at the expiration of six years after discharge from bankruptcy, the statute of limitations expired for all installments and the borrower was entitled to a judgment vacating title against the collateral instrument.
copper stream rejects the basis of the result in cases like Jarvis. As the Washington Court of Appeals explained:
The debtor’s bankruptcy discharge did not extinguish the debt, change the payment schedule, or accelerate the due date. And, the lender has not accelerated the due date of the loan. The limitation period for each of the missed deadlines began to run from their due date. The bankruptcy did not ring the limitation period. The discharge left intact the lender’s option to enforce the debt on the real property.
copper stream502 P.3d at 869. Rejecting the idea that a bankruptcy discharge begins the statute of limitations on all payments, the court set aside the judgment for quiet title.
Borrowers seeking relief under Washington’s titles law can enter the wording “Bankruptcy did not impose the statute of limitations” in copper stream. However, it would be inappropriate to rely on this wording, as the statement must be read in the overall context of the decision and the existing law, which expressly provides for the toll where a lender is prohibited from enforcing its security. , such as when an automatic suspension is in effect. To see RCW 4.16.230; Merceri v Deutsche Bank AG(the bankruptcy code suspends all acts intended to exercise control over the assets of the bankruptcy estate, including foreclosure, and therefore imposes a limitation period under RCW 4.16.230).
The clarity provided by copper stream should help borrowers and lenders understand their rights after a borrower has received a discharge from bankruptcy. The familiar rule that a release does not affect a lender’s in rem remedy is now clarified under Washington law.