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Davis v. Wells Fargo Bank, N.A.

United States District Court, D. Colorado

October 10, 2017

DON J. DAVIS and THE DJD-038 TRUST, A MEGA TRUST, Plaintiffs,
v.
WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE HOLDERS OF THE BCAP LLC TRUST 2006-AA1, THE PUBLIC TRUSTEE'S OFFICE OF LA PLATA COUNTY, COLORADO, and ANY AND ALL OTHER PARTIES WHO MAY HAVE AN INTEREST IN THE SUBJECT PROPERTY, Defendants.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Nina Y. Wang, Magistrate Judge

         This matter comes before the court on Defendant Wells Fargo Bank, N.A., as Trustee for the Holders of the BCAP LLC Trust 2006-AA1's (“Wells Fargo”) Motion to Dismiss. [#8, filed March 27, 2017]. The Motion was referred to the undersigned Magistrate Judge pursuant to the Order Referring Case dated March 29, 2017 [#11] and the memorandum dated April 6, 2017 [#14]. After carefully reviewing the Motion and related briefing, the entire case file, and the applicable case law, this court respectfully RECOMMENDS that the Motion to Dismiss be GRANTED.

         BACKGROUND

         Plaintiffs Don Davis (“Mr. Davis”) and the DJD-038 Trust (the “Trust”) (collectively, “Plaintiffs”) initiated this action on February 6, 2017 by filing a Complaint in the District Court of La Plata County, Colorado. See [#3]. The Complaint seeks a Determination of Interests Pursuant to C.R.C.P. 105 and declaratory relief, arising out of the pending foreclosure of property located at 580 Lake Purgatory Drive, Durango, Colorado (the “Property”). [Id.] The Trust is the owner of the Property, and Mr. Davis is the borrower listed on the Deed of Trust encumbering the Property. Wells Fargo is the purported holder of the note, which is secured by the Property through the Deed of Trust. The Deed of Trust is signed by Mr. Davis and was recorded with the La Plata County Clerk and Recorder on May 11, 2006. The last payment made to the loan was dated January 1, 2008, and thus the loan was in default as of February 2, 2008. [Id. at ¶¶ 10, 11]. Wells Fargo consequently elected to accelerate the note, and filed a Notice of Election and Demand for Sale on June 12, 2008. Wells Fargo ultimately withdrew the foreclosure and filed a second and third foreclosure in December 2009 and April 2013, both of which Defendant later withdrew. [Id. at ¶¶ 12-14]. On April 23, 2014, Wells Fargo filed a fourth foreclosure associated with a Notice of Election and Demand for Sale, which is the subject of this lawsuit. [Id. at ¶ 15]. Plaintiffs assert that Wells Fargo failed to enforce the promissory note within the applicable six-year statute of limitations, and thus “the deed of trust is automatically extinguished and the default provisions therein, ” are now voided. [Id. at ¶ 17]. Specifically, Plaintiffs argue that the statute of limitations was triggered on February 2, 2008, when they defaulted on the loan, the statute of limitations expired on February 3, 2014, and Defendant's foreclosure attempt on April 23, 2014 is time-barred.

         Wells Fargo removed this action on March 20, 2017, and filed the pending Motion to Dismiss on March 27, 2017. See [#1, #8]. Plaintiffs filed a Response on April 17, 2017 [#18], and Defendant filed a Reply on May 1, 2017 [#29]. On June 9, 2017, this court held a Scheduling Conference and entered a Scheduling Order setting certain pre-trial dates and deadlines, which the court subsequently extended for good cause. [#36, #37, #45]. The court has jurisdiction over this matter pursuant to 28 U.S.C. 1332(a).

         LEGAL STANDARD

         Wells Fargo moves for dismissal pursuant to Fed.R.Civ.P. 12(b)(6), which permits a court to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion under Rule 12(b)(6), the court must “accept as true all well-pleaded factual allegations … and view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). However, a plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         Rather, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (citation omitted). “The burden is on the plaintiff to frame ‘a complaint with enough factual matter (taken as true) to suggest' that he or she is entitled to relief.” Id. The ultimate duty of the court is to “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).

         ANALYSIS

         Wells Fargo moves for dismissal on the basis that the statute of limitations on actions to enforce promissory notes and deeds of trust accrues on the date of acceleration, rather than on the date that Plaintiffs failed to pay their loan installment. See [#8]. Defendant contends, “the relevant inquiry for determining when [an] action [to recover an installment debt] accrued is whether [the lender] exercised its option to accelerate [the] debt, ” and “[i]f [the lender] did accelerate the debt, then the ultimate issue becomes on what date did this occur and trigger the statute of limitations governing the . . . action.” [Id.] In Response, Plaintiffs repeat the argument presented in the Complaint, i.e., the six-year statute of limitations was triggered by their default, and thus the statute of limitations began running on February 2, 2008. [#18 at 6].

         As an initial matter, the court notes that in cases arising under diversity jurisdiction, as here, the court must “ascertain and apply the state law.” Wade v. EMCASCO Ins. Co., 483 F.3d 657, 665 (10th Cir. 2007) (citations omitted). The federal court must follow the most recent decisions of the state's highest court. Id. at 665-66. “Where no controlling state decision exists, the federal court must attempt to predict what the state's highest court would do, ” and, in doing so, “may seek guidance from decisions rendered by lower courts in the relevant state.” Id. at 666. The Parties agree that Colo. Rev. Stat. § 13-80-103.5 provides that the governing statute of limitations is six-years; they disagree only as to the date of accrual. After review of the applicable case law and the undisputed facts of this case, this court respectfully recommends that the Motion to Dismiss be granted for the reasons set forth below.[1]

         Section 13-80-103.5 instructs that “[a]ll actions for the enforcement of rights set forth in any instrument securing the payment of or evidencing any debt, ” shall be commenced within six years after the cause of action accrues and not thereafter. Id. at § 13-80-103.5(1)(a). Section 13-80-108(4) instructs that “[a] cause of action for debt, obligation, money owed, or performance shall be considered to accrue on the date such debt, obligation, money owed, or performance becomes due.” In support of their position that the claim accrued on the date they first missed a loan payment, Plaintiffs cite Application of Church, 833 P.2d 813 (Colo.App. 1992). Application of Church sets forth the general rule that “if a money obligation is payable in installments, a separate cause of action arises on each installment and the statute of limitations begins to run against each installment when it becomes due, ” and holds that the rule applies even if the note holder declines to exercise its option to accelerate the note. Id. at 814-15. In so holding, Application of Church distinguished a Colorado Supreme Court case from the beginning of the twentieth century, which holds that the statute of limitations runs from the date of default upon which the election to accelerate is based, not from the date of the election itself. Id. at 815 (citing Lovell v. Goss, 45 Colo. 304, 101 P. 72 (1909)).

         More recently, a division of the Colorado Court of Appeals held that in an action for replevin of a mobile home commenced by a creditor's assignee exactly six years after it had sent a notice of default and acceleration to the borrowers, the claim for replevin “did not accrue until the date the entire indebtedness became due and [the assignee] first had a right to obtain possession of its collateral.” Green Tree Financial Servicing Corp. v. Short, 10 P.3d 721, 722-23 (Colo.App. 2000). The court agreed with the assignee that such a date was twenty days after the assignee had sent the notice of default and acceleration. Id. at 723 (distinguishing Lovell v. Goss on the basis that Lovell “was decided long before the enactment in 1975 of §§ 5-5-111 and 5-5-112, which create the notice requirement applicable here and preclude a creditor under a consumer credit transaction from pursuing a replevin remedy prior to the expiration of the 20-day notice period”).

         Twelve years later, the Colorado Supreme Court addressed the date of accrual with respect to an action for a deficiency judgment resulting from the purchase of a vehicle, which had served as collateral under a security agreement that provided for monthly installment payments. See Hassler v. Account Brokers of Larimer County, Inc., 274 P.3d 547 (Colo. 2012). Following the borrower's default on the loan, the lender repossessed the vehicle, sold it at auction, and applied the proceeds to the balance of the loan. The proceeds were insufficient to cover the balance and the lender's successor in interest subsequently sued the borrower to recover the deficiency. The lawsuit was initiated more than six years after the borrower had defaulted on the loan and the lender had repossessed the vehicle, but less than six years after the vehicle had been sold at auction. The en banc court held that “under Colorado law and the ...


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