Lavelle Bridges v. Nationstar Mortgage LLC

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
LAVELLE BRIDGES,
Plaintiff/Appellee,
v.
NATIONSTAR MORTGAGE L.L.C., A DELAWARE CORPORATION,
Defendant/Appellant.
No. CV-21-0024-PR
Filed August 31, 2022
Appeal from the Superior Court in Maricopa County
The Honorable Hugh Hegyi, Judge (Ret.)
The Honorable Danielle J. Viola, Judge
No. CV2016-000605
REVERSED AND REMANDED WITH INSTRUCTIONS
Opinion of the Court of Appeals, Division One
250 Ariz. 475 (App. 2021)
VACATED
COUNSEL:
Nathaniel Nickele (argued), Law Office of Nathaniel P. Nickele, PLLC,
Peoria, Attorney for Lavelle Bridges
Andrew M. Jacobs (argued), Amanda Z. Weaver, Snell & Wilmer L.L.P.,
Phoenix; and Erin E. Edwards, Troutman Pepper Hamilton Sanders LLP,
Chicago, Illinois, Attorneys for Nationstar Mortgage L.L.C.
BRIDGES V. NATIONSTAR MORTGAGE L.L.C.
Opinion of the Court
JUSTICE BEENE authored the Opinion of the Court, in which CHIEF
JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, and JUSTICES
BOLICK, LOPEZ, MONTGOMERY, and KING joined.
JUSTICE BEENE, Opinion of the Court:
¶1 When parties execute a deed of trust and the debtor later
defaults on the debt secured by the deed of trust, Arizona law authorizes
the sale of the trust property. A.R.S. § 33-807. If the trustee chooses to sell
the property, the trustee must first record and serve a notice of trustee’s
sale. A.R.S. § 33-808. Here, we address whether recording this notice
accelerates the debt as a matter of law. 1 For the following reasons, we hold
that it does not.
BACKGROUND
¶2 Lavelle Bridges worked as a branch manager for a home loan
company. In 2007, he obtained a $500,000 loan for which he executed a
promissory note secured by a deed of trust against his residential property.
The promissory note and deed of trust included optional acceleration
clauses authorizing the lender to accelerate the debt if Bridges defaulted.
To initiate the acceleration clauses, the promissory note required that
Bridges be given notice of acceleration, and the deed of trust also required
that the lender provide notice to Bridges of “(a) the default; (b) the action
required to cure the default; (c) a date . . . by which the default must be
cured; and (d) that failure to cure the default . . . may result in
acceleration . . . and sale of the property.”
¶3 In 2008, Bridges defaulted on the loan. The lender sent
Bridges a notice of default, but it did not state that failure to cure the default
would result in the acceleration of the loan or sale of the property. Bridges
1 Although we granted review on a second issue, our holding
today makes it unnecessary to the disposition of this appeal, and we decline
to address it. See State v. Milke, 177 Ariz. 118, 129 (1993) (stating that
reviewing courts should not address issues that are unnecessary to
disposition of an appeal).
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BRIDGES V. NATIONSTAR MORTGAGE L.L.C.
Opinion of the Court
did not cure the default, which led to two notices of trustee’s sales being
recorded, one in January 2009 and another in May 2009. However, neither
notice invoked the optional acceleration clause, and the property was not
sold. In 2011, Nationstar Mortgage L.L.C. (“Nationstar”) began servicing
the loan.
¶4 In January 2016, Bridges sought declaratory relief, arguing
that Nationstar could not foreclose on the property because the six-year
statute of limitations had expired. See A.R.S. § 12-548(A)(1). Bridges then
moved for summary judgment asserting that the 2009 notices of trustee’s
sales accelerated the debt, triggering the statute of limitations, and that the
statute of limitations had run by either January or May 2015. Nationstar
responded and cross-moved for summary judgment, arguing that the
notices of trustee’s sales did not accelerate the debt and that Bridges
presented no evidence that Nationstar intended to accelerate the debt. The
trial court granted Bridges’ summary judgment motion, concluding that the
notices of trustee’s sales accelerated the debt.
¶5 The court of appeals reversed. Bridges v. Nationstar Mortg.,
L.L.C., 250 Ariz. 475, 476 ¶ 1 (App. 2021). It held that “absent an express
statement of acceleration in the notice of 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.” Id.¶6 We granted review to determine whether recording a notice
of trustee’s sale accelerates a debt as a matter of law, a matter of statewide
concern. We have jurisdiction pursuant to article 6, section 5(3) of the
Arizona Constitution.
DISCUSSION
¶7 “[W]e review a grant of summary judgment de novo, viewing
the evidence in the light most favorable to the party against whom
summary judgment was entered.” Dabush v. Seacret Direct LLC, 250 Ariz.
264, 267 ¶ 10 (2021).
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BRIDGES V. NATIONSTAR MORTGAGE L.L.C.
Opinion of the Court
¶8 Bridges argues that recording a notice of trustee’s sale
accelerates the debt as a matter of law because the debtor has a reasonable
expectation that the lender intends to sell the property and collect on the
entire debt, notwithstanding the requirements for acceleration in the note
and deed of trust. We disagree.
¶9 A promissory note is a contract secured by a deed of trust. See
A.R.S. § 33-813(A); see also Hogan v. Wash. Mut. Bank, 230 Ariz. 584, 587 ¶ 10
(2012). Parties are generally “free to contract as they please,” Shattuck v.
Precision-Toyota, Inc., 115 Ariz. 586, 588 (1977) (quoting Naify v. Pacific Indem.
Co., 76 P.2d 663, 667 (Cal. 1938)), and when entered into voluntarily, courts
will enforce the contract’s provisions, 1800 Ocotillo, LLC v. WLB Grp., Inc.,
219 Ariz. 200, 202 ¶ 8 (2008) (“[B]argains struck between competent parties
will be enforced.”).
¶10 Here, the promissory note gave the lender discretion to
accelerate the debt, rather than automatically accelerating the debt upon
default. See Prevo v. McGinnis, 142 Ariz. 298, 302 (App. 1984) (concluding
that default resulted in automatic acceleration). Additionally, the
promissory note required the lender to give notice of acceleration. We must
enforce the provisions of the promissory note, and the parties are bound by
their agreement. See 1800 Ocotillo, 219 Ariz. at 202 ¶ 8.
¶11 A deed of trust, however, “is a creature of statutes.” In re
Krohn, 203 Ariz. 205, 208 ¶ 9 (2002); see also A.R.S. §§ 33-801 to -821. The
deed of trust statutory scheme allows lenders to sell property without
judicial action, and “thus strip[s] borrowers of many of the protections
available under a mortgage.” Krohn, 203 Ariz. at 208 ¶ 10 (emphasis
omitted) (quoting Patton v. First Fed. Sav. & Loan Ass’n, 118 Ariz. 473, 477
(1978)). For this reason, courts should interpret a deed of trust consistent
with its plain language and in favor of protecting borrowers. Id.; see also
Schaeffer v. Chapman, 176 Ariz. 326, 328 (1993).
¶12 As previously noted, Bridges defaulted on the loan. While the
terms of the deed of trust provided that failure to remedy the default may
result in the debt being accelerated and the property being sold, to actually
trigger the acceleration clause, the lender was obligated to notify Bridges
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Opinion of the Court
about the default and the action and date required to cure the default. The
deed of trust’s plain language does not create a self-executing or automatic
acceleration upon default. Consequently, the debt was not automatically
accelerated under the provisions contained in the deed of trust. See
Schaeffer, 176 Ariz. at 328 (noting that courts should interpret a deed of trust
consistent with its plain language).
¶13 Furthermore, the notices in this case did not refer to or invoke
the deed of trust’s optional acceleration clause. Neither default notice
mentioned acceleration and neither notice of trustee’s sale included any
language that communicated to Bridges that the lender was accelerating the
debt. This omission from the notices, coupled with no other evidence of
acceleration, leads us to conclude that recording the notices of trustee’s sale
did not accelerate Bridges’ debt.
¶14 The plain language of § 33-813(A), which sets forth the
procedure for reinstating a defaulted contract secured by a deed of trust,
supports this conclusion. “[W]e follow fundamental principles of statutory
construction, the cornerstone of which is the rule that the best and most
reliable index of a statute’s meaning is its language and, when the language
is clear and unequivocal, it is determinative of the statute’s construction.”
Janson ex rel. Janson v. Christensen, 167 Ariz. 470, 471 (1991).
¶15 Section 33-813(A) provides that “[i]f . . . all or a portion of a
principal sum . . . of the contract . . . secured by a trust deed becomes due
or is declared due by reason of a breach or default,” the debtor “may
reinstate by paying . . . the entire amount then due”—not the entire loan
balance—as late as the day before the trustee’s sale. (Emphasis added.)
Accordingly, when a trustee’s sale is merely noticed under § 33-813(A), the
entire debt is not accelerated because under the plain language of the
statute a debtor can cure the default and reinstate the contract by paying
only the “amount then due” before the trustee’s sale is held. Id.
¶16 The Montana Supreme Court reached the same conclusion
under analogous circumstances in Puryer v. HSBC Bank USA, 419 P.3d 105(Mont. 2018). See S.K. Drywall, Inc. v. Devs. Fin. Grp. Inc., 169 Ariz. 345, 348
(1991) (recognizing that decisions from other jurisdictions are persuasive
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Opinion of the Court
when the “statute is comparable to our own”). In Puryer, the court
construed a statute very similar to Arizona’s § 33-813(A). There, the debtor
asserted that filing a notice of sale “accelerated the amount due and
constituted a maturity of the entire debt” under state law. 419 P.3d at 110
¶ 13. The controlling Montana statute works exactly like our § 33-813(A):
Whenever all or a portion of any obligation secured by a trust
indenture has, prior to the maturity date fixed in the
obligation, become due or been declared due by reason of a
breach or default . . . the grantor[,] . . . at any time prior to the
time fixed by the trustee for the trustee’s sale[,] . . . may pay
to the beneficiary . . . the entire amount then due under the terms
of the trust indenture . . . other than the portion of the principal
that would not then be due if a default had not occurred and cure
the existing default.
Mont. Code Ann. § 71-1-312(1) (West 2021) (emphasis added). In rejecting
the debtor’s argument, the Montana Supreme Court concluded:
A Notice of Sale does not cause maturity of the entire debt
owed if a borrower, at any point, may cure the default by only
paying the amount due at that time, rather than being
required to pay the entire loan balance. We determine based
on the language of . . . § 71-1-312(1), . . . the Notices of Sale did
not accelerate the entire debt due. As provided in § 71-1-
312(1) . . . payment of only the amount in arrears reinstates
the trust indenture.
Puryer, 419 P.3d at 110–11 ¶ 16.
¶17 The Montana Supreme Court concluded that a notice of sale
does not accelerate the entire debt if the debtor can cure the default by
paying the amount then owed and not the entire amount of the loan. Id.Similarly, § 33-813(A) allows a debtor, after a notice of trustee’s sale is
recorded, to reinstate a contract secured by a deed of trust by paying the
amount currently owed prior to a trustee’s sale. Thus, a plain reading of
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Opinion of the Court
§ 33-813(A) supports the conclusion that the recording of a notice of
trustee’s sale does not accelerate a debt. 2
¶18 Despite this plain reading of § 33-813(A), Bridges, citing
Baseline Financial Services v. Madison, 229 Ariz. 543 (App. 2012), urges us to
create a bright-line rule that would establish that the recording of a notice
of a trustee’s sale accelerates a debt even when the terms of the deed of trust
do not require notice of acceleration.
¶19 There, the parties entered into an installment contract for the
purchase of an automobile. Baseline, 229 Ariz. at 544 ¶ 2. The contract
contained an optional acceleration clause that did not require notice to the
debtor. Id. The debtor stopped making loan payments and the vehicle was
repossessed. Id. ¶ 3.
¶20 The court of appeals explained that to exercise its option to
accelerate the debt, the creditor “must undertake some affirmative act to
make clear to the debtor it has accelerated the obligation” even if the parties
agreed the option to accelerate does not require notice to the debtor. Id. ¶ 8
(emphasis added). The court determined that the lender’s repossession of
the vehicle “was an affirmative act sufficient to exercise the acceleration
clause.” Id. at 546 ¶ 15.
¶21 Here, Bridges contends that the recording of the notice of
trustee’s sale constitutes an “affirmative act,” much like the vehicle
repossession that occurred in Baseline, and should be recognized as a
sufficient exercise of acceleration notifying the debtor that the lender
2 In Andra R Miller Designs LLC v. US Bank, 244 Ariz. 265, 270 ¶ 16
(App. 2018), the court of appeals concluded that the recording of a notice of
trustee’s sale constituted an affirmative act that accelerated the debt. In that
case, however, the notice of sale referenced the acceleration clause and
neither party asserted that the notice did not accelerate the debt. Id. at 267
¶ 3, 270 ¶ 16. We disapprove Andra R Miller Designs to the extent it conflicts
with our interpretation of § 33-813(A) under circumstances like the one
presently before us.
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Opinion of the Court
intends to sell the property to collect the entire amount of the debt. Bridges
overstates Baseline.
¶22 In Mertola, LLC v. Santos, 244 Ariz. 488, 492 ¶¶ 19, 21 (2018),
this Court addressed, among other issues, the reach of Baseline’s holding.
There, we were asked to decide when the statute of limitations commenced
on credit-card debt that is subject to an optional acceleration clause. Id. at
490 ¶ 7. In discussing this issue, we stated that “debt on a closed account
[e.g., a trust deed], unlike credit-card debt, is often secured by collateral,
requiring the creditor to accelerate the debt to exercise the right to repossess
or foreclose.” Id. at 492 ¶ 19. We then went on to make the unremarkable
assertion that proceeding against collateral, which is what the Baseline
creditor did by repossessing the debtor’s car, constitutes effective notice of
debt acceleration. Id. (citing Baseline, 229 Ariz. at 544 ¶¶ 2–3); see also Navy
Fed. Credit Union v. Jones, 187 Ariz. 493, 495 (App. 1996) (noting that
demanding full payment before all installments are due constitutes a
sufficiently affirmative act of acceleration); Prevo, 142 Ariz. at 302(concluding that commencement of judicial foreclosure under a deed of
trust, in which any default triggered the whole debt due, operates as an
affirmative act of acceleration).
¶23 For reasons not germane to this appeal, we declined to apply
Baseline’s holding to credit-card debt. Mertola, 244 Ariz. at 492 ¶ 21. More
importantly, we specifically declined to decide whether Baseline applied to
other types of debt, such as a closed-end installment contract, the type of
contract at issue in this case. Id.
¶24 Today, we answer the question we declined to address in
Mertola as it pertains to a promissory note secured by a deed of trust:
recording a notice of trustee’s sale, by itself, is not an affirmative act that
accelerates the debt. This conclusion is supported by the fact that the
lenders did not accelerate the debt by exercising their right to sell Bridges’
property, see § 33-807(A) (authorizing foreclosure by power of sale or by
judicial foreclosure seeking judgment for the “entire amount determined
due” under A.R.S. § 33-725(A)), and § 33-813(A)’s plain language that
allows the debtor to cure its default and reinstate the contract by paying the
entire amount in arrears before the trustee’s sale. See supra, ¶¶ 14–17.
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Opinion of the Court
CONCLUSION
¶25 For the foregoing reasons, we reverse the trial court and
remand for entry of summary judgment in favor of Nationstar. Nationstar
requests attorney fees under A.R.S. § 12-341.01(A). In our discretion, we
award attorney fees to Nationstar upon compliance with Arizona Rule of
Civil Appellate Procedure 21.
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