In Washington State the statute of limitations on actions to enforce a note or deed of trust can be a brutally effective sword for borrowers. The limitations period is six years, and a borrower may sue for quiet title where “an action to foreclose . . . would be barred by the [statute of limitations].” RCW 7.28.300. If successful, the borrower is entitled to “judgment quieting title” against the security instrument. Two commonly litigated issues arising in this context are tolling and acceleration. The Court of Appeals of Washington recently published two noteworthy opinions as they relate to installment loans that should dampen quiet title claims based on the statute of limitations.
Quiet title litigation based on RCW 7.28.300 often involves a loan in which foreclosure is delayed one or more times because of loss mitigation or bankruptcy filed by the borrower—easily extending the foreclosure well beyond six years of the default or acceleration. The potentially harsh effects of events beyond a lender’s control, such as bankruptcy, is ameliorated by RCW 4.16.230, which provides that a limitations period is tolled when “an action is stayed by . . . statutory prohibition.” The automatic stay under 11 U.S.C. § 362 is one such statutory prohibition. Nonetheless, borrowers have argued that § 362 is not a statutory prohibition for purposes of the tolling statute because a creditor may seek relief from the stay.
Continue Reading Merceri Times Two Equals Clarity on the Statute of Limitations in Washington State