Pub. 11 2021 Issue 1

11 PUB. 10 2020 ISSUE 4 asked questions (“FAQs”) that our firm often receives. Our responses to the FAQs: • Are limited to an analysis of current Arizona law, • Do not take into account arguments that may be made with respect to the tolling of the statute of limitations as a result of the federal COVID-19 moratoriums or for other reasons, and • Are not intended to be a substitute for independent legal research and analysis when making the ultimate decision to pur- sue collection of a given defaulted loan. 1. What is the Arizona statute of lim- itations that applies to collecting on a defaulted promissory note or credit card agreement? Short answer: Six years. The Arizona statute of limitations applica - ble to a lender’s breach of contract cause of action based upon a defaulted promissory note or a credit card agreement is six years. A.R.S. § 12-548 sets forth said applicable six-year statute of limitations as follows: 12-548. Contract in writing for debt; six- year limitation; choice of law. A. An action for debt shall be commenced and prosecuted within six years after the cause of action accrues, and not after - ward, if the indebtedness is evidenced by or founded on either of the following: 1. A contract in writing that is executed in this state. 2. A credit card as defined in section 13- 2101, paragraph 3, subdivision (a). 2. Does the same six-year statute of limitations apply to a non-judicial trustee’s Foreclosure Sale of real property? Short answer: Yes. In February 2018, the Arizona Court of Appeals held that the six-year limitations continued on page 12 The Arizona Statute of Limitations Applicable to Collection Lawsuits and Non- Judicial Trustee’s Foreclosure Sales of Real Property By Larry O. Folk, Folks Hess PLLC T HE GREAT RECESSION CAUSED AN alarming decline in both the Ari- zona real estate market and many borrowers’ and guarantors’ finan - cial positions. One effect was that, for years, many lenders elected not to pursue collec- tion of eligible defaulted loans through: • Collection lawsuits based upon credit card agreements and promissory notes (“Col- lection Lawsuits”); and • Non-judicial trustee’s foreclosure sales of real property based upon mortgage loan promissory notes and deeds of trust (“Foreclosure Sales”). As time has passed since the Great Reces - sion, both the Arizona real estate market and the financial position of many previous - ly distressed borrowers and guarantors have improved significantly. That has resulted in lenders deciding to pursue Collection Lawsuits and Foreclosure Sales based upon loans that have been in payment default or fully matured for years. COVID-19 is now causing an even further delay of lenders exercising their collec- tion rights and remedies concerning many defaulted loans due to a new recession in Arizona and moratoriums imposed by the federal government against lenders con- ducting certain Foreclosure Sales. Regardless of the reason for the lender’s de - lay in collecting upon a dormant defaulted loan, borrowers and guarantors are quick to assert the affirmative defense of the Arizo - na statute of limitations as a bar against the lender pursuing the long-delayed Collection Lawsuit or Foreclosure Sale. Although many of the Collection Lawsuits and Fore - closure Sales are, in fact, now time-barred by the Arizona statute of limitations, the analysis to determine whether or not the statute of limitations applies is complex. To assist in deciding whether or not the statute of limitations bars a Collection Lawsuit or Foreclosure Sale, we have prepared the following list of frequently