Bridges v. Nationstar Mortg., LLC (1/14/2021)

March 10, 2021

Arizona Court of Appeals Division One holds that absent an express statement of acceleration in the notice of a trustee’s sale or other evidence of an intent to accelerate, recording a notice of trustee’s sale, by itself, does not accelerate a debt.

An employee received a loan from his employer in 2007, secured by a deed of trust against his property.  The note and deed of trust included an optional acceleration clause; the note required that the employee be given the notice of acceleration and the deed of trust required that the employee be given notice of a default, the action required to cure the default, a date by which the default must be cured, and a warning that failure to cure might result in acceleration and sale of the property.  A year later in 2008, the employee defaulted and never made another payment.  A notice of default was sent but it did not warn of the possibility of acceleration.  Two notices of trustee’s sales were recorded (in January 2009 and May 2009), neither of which referred to the optional acceleration clause and neither of which led to a sale.  The loan was sold to a loan servicer.  The employee then entered bankruptcy twice (in January 2011 and March 2014), staying the loan servicer’s ability to foreclose.  He also applied five times (between January 2012 and January 2016) for loan modifications and twice to participate in a short sale program.  This resulted in a suspension of the foreclosure process each time.  In January 2016, the employee sued for declaratory relief on the grounds that the six-year statute of limitations had run.  The parties cross moved for summary judgment on the issue of whether the 2009 notices of trustee’s sale had accelerated the debt, resulting in the statute of limitations running no later than May 2015.  The employee’s motion was granted, and the loan servicer appealed.

The Court of Appeals reversed.  The Court held more than a notice of trustee’s sale is required to accelerate a debt, such as complying with terms of an optional acceleration in a deed of trust, which did not occur in this case.  Further, A.R.S. § 33-813(A) states that when “all or a portion of a principal sum . . . becomes due or is declared due,” the debtor can reinstate by paying the entire amount due.  If merely filing a notice of default that did not declare all the principal sum was due triggered a requirement to pay the entire amount due, this would render the phrase “portion of a principal sum” superfluous.  Since neither the employer nor the loan servicer ever purported to accelerate the debt pursuant to the requirements in the note or the deed of trust, the statute of limitations never started to run.  On remand, the superior court was instructed to enter summary judgment for the loan servicer.

Presiding Judge Howe delivered the unanimous opinion of the court.  Judge Cattani and Judge Bailey joined.