The Shoemaker Goes with Holes in his Sole…
Posted on December 31, 2018 in UCC AND CONTRACT LAWMy dad & mom taught me so many things. My dad would sometimes say, the “shoe-maker-goes-with-holes-in-his-sole”. Here is a blog about the “hole in my sole”.
I am married to a prolific & wonderful person. She is devote Christian. She is as beautiful as a model, as smart as any “New York Times” feminist and as compassionate as Mother Theresa. She also happens to be a self taught designer/developer. Her name is Andra Miller. You can ask her kids Billy, Timothy, Mark or Ellie who she is. She is and always been a mom first, entrepreneur second. *** Check out below a link of a house she built in Clearwater Hills, in Paradise Valley, AZ. That is what started this litigation-mission-to-a-pro-wall-street-appeals published decision in Arizona. This Arizona opinion solidifies that the little guy never gets a real break without a huge fight, at least not in Arizona. I will die trying to undo these types of injustices. This is just my little personal ditty.
So, here’s the detailed saga.
Lenders routinely accelerate notes after a default occurs, calling the entire loan due immediately. A lender may change its mind and unilaterally revoke the acceleration. Never, does a lender fail to foreclose on its real property collateral before the six year statute of limitations (SOL) expires. Yet, they sure did in Clearwater Hills. In Andra R. Miller Designs, LLC v. U.S. Bank, N.A., 244 Ariz. 265, 418 P.3d 1038 (Ct. App. 2018), a unique set of facts involving these issues led the Arizona Court of Appeals to hold that proper revocation of acceleration resets the statute of limitations. This is 99% bogus in my humble opinion. Why? Because the ‘lender who screwed up’ and failed to honor the six year SOL was JP Morgan who was a successor in interest to WAMU. Yes, that WAMU! The predatory group of bullshit bankers who should have all gone to prison. Then, ‘Crook Fund II 2’, JP Morgan, bought this WAMU loan for pennies on the dollar.
The facts are, way before Andra learned about Clearwater, WAMU made a $1,940,000 loan evidenced by a promissory note and secured by a deed of trust. The borrower defaulted in September 2008. The borrower was a total tool. He did not want to pay his debt. The default prompted WAMU to notice a default, accelerate the note, and initiate a trustee’s sale of the home in 2009. After the lender accelerated the note, the six year statute of limitations began to run. See A.R.S. § 12-548(A)(1) and A.R.S. § 33-816. Pretty standard facts of a lender getting back the home so far, right? Then the crazy wall-street-scam starts taking place. Over four years after the trustee cancelled the first trustee’s sale, Clearwater Hills (HOA) obtained a judgment authorizing it to foreclose against the house by sheriff’s sale. Why? Because the tool was not paying the HOA. The HOA, however, did not proceed with foreclosure at that time.
In 2013, WAMU accelerated the debt—again—and initiated yet another trustee’s sale of the home. Again, the trustee’s sale did not occur. Instead, in 2014, the trustee recorded a second notice of cancellation of sale that—again—revoked the acceleration of the note.
In December 2014, the Ivy League boys at JP Morgan initiated yet another trustee’s sale. Before it could complete the sale, however, Andra Miller purchased the junior HOA judgment and foreclosed. Before buying the HOA judgement, she had built the house in Clearwater & saw the dilapidated state of the WAMU/JP MORGAN house. The day after Miller took ownership of the home, she sued the lender to stop the trustee’s sale from occurring. Miller won the first round. This judge was spot on. Yet, Arizona Appeal Courts do not mess with wall street. Miller argued that the failure to complete a trustee’s sale within six years after the initial acceleration barred JP Morgan from enforcing its lien. Ha Ha said the Court of Appeals. Miller lost round II.
So, how does Arizona protect wall street?
The Appeal opinion explains that “unilateral revocation of the debt’s acceleration [like acceleration itself] requires an affirmative act by the creditor that communicates to the debtor that the creditor has revoked the debt’s acceleration.” Id. at 271, 418 P.3d at 1044 (citing Fed. Nat. Mort. Ass’n v. Mebane, 208 A.D.2d 892, 618 N.Y.S.2d 88, 89 (1994)) (emphasis added). In Miller, the mere cancelling of the trustee’s sales—alone—would not have been sufficient to revoke the acceleration. Because the recorded cancellations, however, purported to revoke the acceleration, that provided sufficient notice to the borrower to constitute a valid revocation. Accordingly, notice is of paramount concern for accelerations and revocations alike. Say what? Did these guys to to night law school?
The Court unsurprisingly held that Miller—who was not a party to the note—had standing to assert a statute of limitations defense. The Court recognized that the statute of limitations defense is a “personal privilege” that only a contracting party may raise. Miller, 224 Ariz. at 269, 418 P.3d at 1042 (quoting Acad. Life Ins. Co. v. Odiorne, 165 Ariz. 188, 190, 797 P.2d 727, 719 (Ct. App. 1990)). However, because the sheriff’s sale statute provides that “the purchaser is substituted to and acquires all right, title, interest and claim of the judgment debtor thereto,” the Court of Appeals determined that Miller inherited standing by statute. Id. (quoting A.R.S. § 12-1626(A)). Absent this language in the statute, it is unclear whether Miller would have been able to assert the statute of limitations defense.
The Court of Appeals noted that “[t]he revocation of an acceleration would not reset the statute of limitations for payments already in default.” Id. at n.2 (citing Wheel Estate Corp. v. Webb, 139 Ariz. 506, 508, 679 P.2d 529, 531 (Ct. App. 1983)). Thus, the lender could not collect for the months of missed payments that occurred more than six years before enforcement. Instead, the lender was limited to collecting the amount that became due within the six years of the trustee’s sale. This means that each missed monthly payment on an unaccelerated note constitutes a new default with its own six year statute of limitations period. To this of you keeping track, we had to settle with the JP Morgan folks w/ a split amount. Andra & I were very blessed to have Ari Ramrass, an Arizona real estate lawyer walk us through this split ruling and prepare the pleadings all the way. For now, Andra and I will go back to putting our heads down with a realization that the banks, wall street and the “system” will protect each other as much as possible; not the little guy. If a bank has given you a raw deal, please call Bill at 602-319-6899.
Here is the link for the house Andra built in Clearwater Hills.