The Supreme Court of Arizona just issued a landmark and favorable ruling on the statute of limitations in foreclosure Bridges v. Nationstar Mortgage LLC, — P.3d —, 2022 WL 3905320. It ruled that the registration of a notice of sale by the trustee does not constitute proof of forfeiture of the term. The opinion matters because Arizona borrowers routinely claim that registering a notice of sale confirms the lender accelerated the loan, triggering the final statute of limitations to collect the debt.
Arizona has enacted a six-year statute of limitations for lenders or loan servicers to collect debts secured by trust deeds. ARS § 12-548(A)(1). The final six-year period to recover any portion of the loan through foreclosure or lawsuit begins when the loan is accelerated. To accelerate a loan with an optional acceleration provision, the lender must “undertake an affirmative act to clear to the debtor he accelerated the obligation. Andra R. Miller Designs LLC vs. US Bank NA418 P.3d 1038, 1043 (Ariz. App. 2018) (emphasis in original).
The borrower in Bridges v. Nationstar Mortgage LLC argued that the lender had made it clear that it was invoking the optional acceleration provision of the trust deed by simply registering the trustee’s notice of sale. The trial court agreed, granting summary judgment for Mr Bridges and barring Nationstar from enforcing the debt in full because more than six years have passed since the former repairman registered the notice of sale .
However, Troutman Pepper attorneys Justin Balser and Erin Edwards argued in the Arizona Court of Appeals that simply registering a notice of sale by the trustee cannot accelerate a debt. Among other reasons, Arizona Revised Statute Section 33-813(A) allows the borrower to reinstate the loan only for the amount then owed, which may be only a “portion of the principal sum”, up to on the eve of the foreclosure sale. This is true despite the prior registration of the notice of sale. Since the borrower can only restore part of the principal balance 24 hours before the sale, the law specifies that a notice of sale cannot automatically accelerate a loan.
The Arizona Court of Appeals agreed, holding “in the absence of an express statement of acceleration in the notice of sale by the trustee, or other evidence of an intention to accelerate, the registration of a notice of sale by the trustee, in itself, does not accelerate a debt”. Bridges v. Nationstar Mortgage LLC, 481 P.3d 701 (Arizona App. 2021). She reversed Mr. Bridges’ summary judgment and remanded the superior court to enter judgment in favor of Nationstar.
Mr. Bridges then petitioned the Arizona Supreme Court for review. The Supreme Court also accepted the argument that the plain language of Section 33-813(A) of Arizona’s revised statute only allows reinstatement of a portion of the total debt despite registration. prior to the notice of sale. Therefore, the mere registration of a notice of sale does not prove the lender’s intention to accelerate the loan and trigger the final limitation period. The Arizona Supreme Court returned for entry of summary judgment in favor of Nationstar.