Pub. 11 2021 Issue 1

12 www.azbankers.org period of A.R.S. § 12-548(A)(1) applies equally to bar a lawsuit to collect upon an unsecured promissory note and conducting a non-judicial Foreclosure Sale. Refer to Andra R. Miller Designs LLC v. US Bank, 244 Ariz. 265, 269, 418 P.3d 1038, 1042 (AZ Ct. App. 2018), review denied (July 3, 2018). 3. Can a lender collect upon a prom- issory note that matured six or more years ago? Short answer: No. The statute of limitations applies to each matured/defaulted note installment pay - ment separately as it becomes due under the note amortization schedule, and it does not begin to run on any installment until it is due. Refer to Andra R. Miller Designs LLC v. US Bank NA, 244 Ariz. 265, 270, 418 P.3d 1038, 1043 (App. 2018), review denied (July 3, 2018). See also, Ancala Holdings L.L.C. v. Price, 220 Fed. App. 569, 572 (9th Cir. 2007) (a cause of action “accrues” each time a party fails to per- form as required by the contract) and Ortiz v. Trinity Fin. Servs. LLC, 98 F.Supp. 3d 1037, 1042 (D. Ariz. 2015) (each time the debtor fails to make a payment when it becomes due, a separate breach occurs and a cause of action “accrues,” starting the clock). Because the maturity date of a promisso- ry note is the last scheduled installment payment of the debt instrument, the cause of action for that final installment pay - ment “accrues” on the loan maturity date. As a result, a lender cannot sue upon the promissory note six years or more after the scheduled maturity date. EXAMPLE: Loan Maturity Date: 1/1/2015. Current Date: 1/2/2021. A Collection Law - suit or Foreclosure Sale is barred, as more than six years have passed since the loan maturity date. 4. When does a cause of action “accrue” upon a defaulted credit continued from page 11 card agreement loan for the purpose of calculating the six-year statute of limitation? Short answer: On the date of the first uncured missed payment upon the credit card loan. The Arizona Supreme Court, in Mertola v. Santos, 244 Ariz. 488, 489, 796 Ariz. Adv. Rep. 16, 422 P.3d 1028, 1029 (2018) held that whether or not a credit card lender ex- ercises an optional acceleration clause in a defaulted credit card agreement, the cause of action to collect the entire credit card balance due “accrues” as of the date of the first uncured missed payment. EXAMPLE: Last Payment On Credit Card: 1/1/2015. Current Date: 1/2/2021. Collec - tion Lawsuit based upon the credit card agreement is barred. 5. Are there different rules to deter - mine when a cause of action “accrues” for applying the six-year statute of limitations concerning a suit on an installment promissory note versus a credit card agreement? Short answer: Yes. They are discussed below. 6. Application of the six-year statute of limitations to accelerated loans: When does a cause of action “accrue” upon a defaulted un-matured install- ment promissory note for the purpose of calculating the six-year statute of limitation if the lender has taken an affirmative act to accelerate the loan? Short answer: The cause of action “ac- crues” on the date that the lender takes an affirmative act to exercise the option to accelerate the debt. When a creditor has the power to accelerate an installment contract debt, the six-year statute of limitations begins to run on the date that the creditor takes an affirmative act to exercise the option to accelerate the debt. Refer to Mertola v. Santos, 244 Ariz. 488, 491, 796 Ariz. Adv. Rep. 16, 422 P.3d 1028, 1031 (2018) citing Navy Federal Credit Union v. Jones, 187 Ariz. 493, 495, 930 P.2d 1007, 1009 (AZ App. 1996) (“[I]f the acceleration clause in a debt payable in installments is optional, a cause of action as to future non-delinquent installments does not ‘accrue’ until the creditor chooses to take advantage of the clause and accelerate the balance”). In addition, the creditor must undertake some affirmative act to make clear to the debtor that the debt has been accelerated. Id. See also, Baseline Financial Services v. Madison, 229 Ariz. 543, 544, 78 P.3d 321, 322 (AZ App. 2012) (“when an installment contract contains an optional acceleration clause, an action as to future installments does not ‘accrue’ until the holder exercises the option to accelerate”). EXAMPLE: Loan Date: 1/1/2010. Loan Maturity Date: 1/1/2040. Loan Acceleration Date: 1/1/2021. A Collection Lawsuit or Foreclosure Sale may be initiated within six years after the acceleration date — until 1/1/2027. 7. Application of the six-year statute of limitations to loans that have not been accelerated: When does a cause of action “accrue” upon a defaulted un-matured install- ment promissory note for the purpose of calculating the six-year statute of limitation if the lender has not taken an affirmative act to accelerate the loan? Short answer: The statute of limitations applies to each matured/defaulted Note installment payment separately. It be- comes due under the Note amortization schedule and does not begin to run on any installment until it is due. If the creditor does not exercise the option to accelerate an installment contract debt and/or to determine the date of “accrual” of a cause of action upon a matured/defaulted monthly installment payment, the statute of limitations applies to each matured/default - ed Note installment payment separately as it becomes due under the Note amortization schedule, and does not begin to run on any installment until it is due. Refer to Andra R. Miller Designs LLC v. US Bank NA, 244