As we previously noted, the statute of limitations on actions to enforce a note or deed of trust can be a brutally effective sword for borrowers in Washington State. Under the six-year limitations period of RCW 7.28.300, a borrower is entitled to “judgment quieting title” against the security instrument where “an action to foreclose . . . would be barred by the statute of limitations.”Copper Creek (Marysville) Homeowners Ass’n v. Kurtz, 502 P.3d 865, 869 (Wash. Ct. App. 2022), Division 1 of the Washington Court of Appeals resolved an issue central to the statute of limitations—i.e., the effect, if any, of a bankruptcy discharge on the commencement of the limitations period on each installment of a mortgage loan. Since 2017, state and federal courts in Washington have concluded, in a series of unpublished rulings, that a bankruptcy discharge commences the statute of limitations on each and every installment of a mortgage loan. See, e.g., Jarvis v. Fed. Nat’l Mortg. Ass’n, No. C16-5194-RBL, 2017 WL 1438040, at *1 (W.D. Wash. Apr. 24, 2017). Courts routinely held that upon the expiration of six years after the bankruptcy discharge, the limitations period expired as to all installments, and the borrower was entitled to judgment quieting title against the security instrument.

Copper Creek rejects the underpinning of the result in cases like Jarvis. As explained by the Washington Court of Appeals:

Bankruptcy discharge of the debtor did not extinguish the debt, modify the schedule of payments, or accelerate the maturity date. And, the lender did not accelerate the maturity date of the loan. The statute of limitations on each of the missed installments began running from the date they came due. Bankruptcy did not toll the statute of limitations. The discharge left intact the lender’s option to enforce the debt against the property in rem.

Copper Creek, 502 P.3d at 869. In rejecting the notion that a bankruptcy discharge commences the limitations period on all installments, the court reversed the judgment for quiet title.

Borrowers seeking to find relief within Washington’s quiet title statute may seize upon the “Bankruptcy did not toll the statute of limitations” phrasing in Copper Creek. Reliance on that language, however, would be misplaced because the statement must be read within the entire context of the decision and the existing statute, which expressly provides for tolling where a lender is prohibited from enforcing its security—such as when an automatic stay is in effect. See RCW 4.16.230; Merceri v. Deutsche Bank AG, (bankruptcy code stays all acts to exercise control over property of the bankruptcy estate, including foreclosure, and therefore tolls statute of limitations under RCW 4.16.230).

The clarity provided by Copper Creek should help borrowers and lenders understand their rights after a borrower receives a discharge in bankruptcy. The familiar rule that a discharge does not affect a lender’s in rem remedy is now clarified under Washington law.