Nazario Hernandez v. Franklin Credit Mgmt. Corp. ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS SEP 8 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: NAZARIO HERNANDEZ, No. 19-35719
Debtor, D.C. No. 2:19-cv-00207-JCC
______________________________
NAZARIO HERNANDEZ, MEMORANDUM*
Plaintiff-Appellee,
v.
FRANKLIN CREDIT MANAGEMENT
CORPORATION; DEUTSCHE BANK
NATIONAL COMPANY, as Trustee for
BOSCO Credit II Trust Series 2010-1,
Defendants-Appellants.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Submitted August 31, 2020**
Seattle, Washington
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: HAWKINS and McKEOWN, Circuit Judges, and KENDALL, *** District
Judge.
Appellants Franklin Credit Management Corp. and Deutsche Bank National
Co. appeal the district court’s order reversing the bankruptcy court’s dismissal of an
adversary proceeding brought against them by Debtor Nazario Hernandez in a
chapter 13 bankruptcy proceeding. We have jurisdiction under 28 U.S.C. §
158(d)(1) as the district court’s order “finally dispose[d] of a discrete dispute within
the larger case.” In re Gugliuzza, 852 F.3d 884, 897 (9th Cir. 2017) (quoting Bullard
v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015)) (alterations omitted). We review
the bankruptcy court’s decision directly, its factual findings for clear error and
conclusions of law de novo.1 In re Lee, 889 F.3d 639, 644 (9th Cir. 2018).
The bankruptcy court erred in concluding the statute of limitations on
Appellants’ deed of trust was not triggered by Debtor’s chapter 7 discharge. Under
Washington law, the statute of limitations on a written installment contract,
including the deed of trust here, is six years. Wash. Rev. Code. § 4.16.040. With
an installment contract, as here, “the statute of limitations runs against each
***
The Honorable Virginia M. Kendall, United States District Judge for
the Northern District of Illinois, sitting by designation.
1
We grant Debtor’s motion for judicial notice. (Dkt. Entry No. 24).
2
installment from the time it becomes due,” which can occur until the last installment
due before there is no longer personal liability due under the note. 4518 S. 256th,
LLC v. Karen L. Gibbon, P.S., 382 P.3d 1, 6 (Wash. Ct. App. 2018); Edmundson v.
Bank of Am., 378 P.3d 272, 278 (Wash. Ct. App. 2016).
Here, Debtor received a chapter 7 discharge in 2012 and thereafter neither
reaffirmed nor made any further payment on the note. Despite this, Appellants took
no action to collect payment, did not seek to accelerate the debt, and did not initiate
foreclosure proceedings. In these circumstances, the statute of limitations for
Appellants to foreclose on the deed of trust ran from the last installment due before
Debtor’s discharge and expired before Debtor sought a chapter 13 discharge and
brought the adversary proceeding. The bankruptcy court therefore erred in granting
Appellants’ motion to dismiss the adversary proceeding, which the district court
correctly recognized in reversing the bankruptcy court’s decision. We note the
bankruptcy court’s concern that finding the statute of limitations triggered by the
discharge date poses issues should a debtor continue paying or seek to affirm the
note following discharge. However, those circumstances were not present here and
a straightforward application of Washington law that the bankruptcy court was not
free to ignore renders this result. See Edmundson, 378 P.3d at 278.
AFFIRMED.
3