Webster Bank v. Mutka

                                IN THE
                             DIVISION ONE

                 WEBSTER BANK NA, Plaintiff/Appellee,


               WILLIAM D. MUTKA, Defendant/Appellant.

                          No. 1 CA-CV 20-0128
                           FILED 2-9-2021

          Appeal from the Superior Court in Maricopa County
                         No. CV2017-002343
               The Honorable Teresa A. Sanders, Judge



Tiffany & Bosco, P.A., Phoenix
By Leonard J. McDonald, Jr., Michael F. Bosco
Counsel for Plaintiff/Appellee

Thomas A. Morton, PLLC, Phoenix
By Thomas A. Morton
Counsel for Defendant/Appellant
                       WEBSTER BANK v. MUTKA
                         Opinion of the Court


Judge Maria Elena Cruz delivered the opinion of the Court, in which
Presiding Judge James B. Morse Jr. and Judge Paul J. McMurdie joined.

C R U Z, Judge:

¶1            William D. Mutka appeals the judgment in favor of Webster
Bank NA on its claim for breach of a home-equity line of credit agreement.
Mutka argues the suit was untimely because the limitations period began
to accrue upon his first missed payment. See Mertola, LLC v. Santos, 

244 Ariz. 488

, 492, ¶ 21 (2018). We hold that the statute of limitations on a home
equity line of credit with a defined maturity date “commences on the due
date of each matured but unpaid installment and, as to unmatured future
installments, the period commences on the date the creditor exercises the
optional acceleration clause.” Navy Federal Credit Union v. Jones, 

187 Ariz. 494

(App. 1996). We affirm.


¶2             In February 2007, Mutka and Webster Bank entered into a
home equity consumer revolving loan agreement, also known as a home
equity line of credit (“HELOC”). The agreement allowed Mutka to borrow
up to $73,000 over roughly the first fifteen years, secured by a deed of trust
on Mutka’s home. During that period, the agreement required Mutka to
make monthly interest payments but did not require him to pay anything
toward the principal. The agreement provided that during the second
fifteen years, Mutka would have to make monthly principal payments
equal to 1/180th of the outstanding loan balance, plus interest and any
unpaid late or other charges. The loan was payable in full in February 2037.

¶3             Mutka failed to pay the monthly interest due in April 2011.
At the time, he had drawn $72,716.27 in principal. Mutka made no further
payments on the loan. Six and a half years later, Webster Bank exercised its
right under the loan agreement to accelerate the debt and sued Mutka to
collect the balance.

¶4            Mutka moved for summary judgment, arguing the applicable
six-year statute of limitations barred Webster Bank’s claim. The superior

                       WEBSTER BANK v. MUTKA
                         Opinion of the Court

court denied Mutka’s motion, and after a trial, the court entered judgment
in favor of Webster Bank for $98,063.93.

¶5          Mutka timely appealed. We have jurisdiction pursuant to
Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).


¶6            The interpretation of a statute of limitations is a legal
question, which we review de novo. 

Mertola, 244 Ariz. at 490

, ¶ 8. Pursuant
to A.R.S. § 12-548(A),

      An action for debt shall be commenced and prosecuted within
      six years after the cause of action accrues, and not afterward,
      if the indebtedness is evidenced by or founded on either of
      the following:

      1. A contract in writing that is executed in this state.


¶7            Webster Bank filed its complaint in December 2017, more
than six years after Mutka defaulted by failing to make his monthly interest
payment in April 2011. When a fixed debt is payable in installments, the
statute of limitations “commences on the due date of each matured but
unpaid installment and, as to unmatured future installments, the period
commences on the date the creditor exercises the optional acceleration
clause.” Navy 

Federal, 187 Ariz. at 494

. Applying that principle here, the
superior court entered judgment for Webster Bank for the unpaid principal
balance and for all interest payments that came due within the six-year
period before the bank filed suit.

¶8            Mutka, however, argues a default on a HELOC is governed
by Mertola, which held that the Navy Federal rule does not apply to credit
card debt. Mertola held that “a cause of action to collect the entire
outstanding [credit card] debt accrues upon default: that is, when the
debtor first fails to make a full, agreed-to minimum monthly payment.”

Mertola, 244 Ariz. at 492

, ¶ 21. Under that rule, Mutka argues, Webster
Bank’s claim was barred because it filed its complaint eight months too late.

¶9             In Mertola, our supreme court expressly declined to decide
whether Navy Federal would apply to any debt other than that arising from
a credit card. Donges v. USAA Federal Savings Bank, 

391 F. Supp. 3d 907

, 911
(D. Ariz. 2019) held that the Navy Federal rule applied to a HELOC with a

                       WEBSTER BANK v. MUTKA
                         Opinion of the Court

defined maturity date. We agree with the ruling in Donges and hold that,
as in Navy Federal, the statute of limitations does not begin to run on future
installments due under a HELOC until the lender accelerates the debt.

¶10            In distinguishing Navy Federal, the supreme court in Mertola
emphasized the difference between a “closed-end” debt and a credit-card
debt. In a closed-end debt such as a promissory note or the installment debt
at issue in Navy Federal, “the principal amount of the debt is fixed and there
is a ‘defined schedule of repayment’ specifying precisely the size of each
payment . . . and when the payment falls due, ‘until the debt is fully

repaid.’” 244 Ariz. at 291

, ¶ 16. The court said that, by contrast, although a
credit card may have a credit limit, the amount the borrower owes each
month and the date the principal balance will be due may fluctuate
depending on the amount charged and changes in the interest rate.

Id. The court expressed

concern that if the Navy Federal rule were applied to credit
card debt, a creditor could unilaterally extend the statute of limitations by
refraining from exercising its right to accelerate, allowing interest to accrue
at higher default rates.

Id. at ¶ 19.

Additionally, the court pointed out,
credit card debt is often unsecured, so creditors do not have the incentive
to accelerate the debt immediately by exercising a right to repossess or

Id. ¶11

          Mutka argues his HELOC resembled a credit card account
because it had an established billing cycle, annual fee, over-limit fees, and
terms on which Webster Bank could limit or suspend his right to borrow.
The differences between a credit card account and a HELOC are more
significant, however, than the similarities as they pertain to the statute of
limitations. Like the HELOC in Donges, Mutka’s line of credit agreement
specified a maturity date on which the entire debt would become due.1
Although the ultimate amount Mutka would borrow was not known until
the end of the initial fifteen-year draw period, after that date, the amount of
the principal indebtedness would be fixed, and the loan agreement set out
a repayment schedule. Mutka’s HELOC also was secured by real property,
giving Webster Bank an additional incentive to collect on its debt through
foreclosure. See 

Mertola, 244 Ariz. at 492

, ¶ 19.

1      Mutka contends his HELOC did not have a defined maturity date,
but the loan agreement he executed expressly stated: “If not sooner paid, I
promise to pay all amount I owe under this Agreement on the Maturity
Date stated in subsection 1.d. above.”

                        WEBSTER BANK v. MUTKA
                          Opinion of the Court

¶12             Mutka cites cases from other jurisdictions that he asserts
“treat a home equity line of credit as a revolving credit agreement.”
However, as Webster Bank notes, the cases are not compelling because they
do not analyze how the statute of limitations applies to a HELOC.
Although Mutka contends Donges is not controlling authority on Arizona
law, we may consider it for its persuasive value. Arizonans for Second
Chances, Rehab., & Pub. Safety v. Hobbs, 

249 Ariz. 396

, 412, ¶ 60 n.6 (2020)
(citing district court orders “as persuasive authority”). And, contrary to his
contention, the court in Donges did not mistakenly conclude that Mertola
applied only to credit-card debt; it recognized that in Mertola “the Arizona
Supreme Court expressly declined to decide which rule applies for other
types of debt.” 

Donges, 391 F. Supp. 3d at 912

(internal quotations omitted).

¶13            As explained above, the maturity date in Mutka’s agreement
prevents Webster Bank from unilaterally extending the statute of
limitations period. Additionally, Webster Bank was deterred from failing
to act because it can only collect monthly payments within the six-year
statute of limitations. Webster Bank was essentially penalized for its delay
in filing and unable to collect on payments outside the statute of limitations
between April 2011 and December 2011.

¶14           Finally, there is no meaningful distinction between a creditor
foreclosing on the secured property, as was the case in Donges, and this case,
where Webster Bank was only trying to collect a money judgment.2


¶15           For the foregoing reasons, we affirm. Both parties request
their attorneys’ fees incurred on appeal pursuant to A.R.S.
§ 12-341.01, and Webster Bank additionally requests its attorneys’ fees
pursuant to the parties’ loan agreement. As the prevailing party and
pursuant to the parties’ agreement, Webster Bank may recover its

2      Although we agree with the ruling in Donges in that the Navy Federal
rule applies to a HELOC with a defined maturity date, and now hold that
limitations does not begin to run on future installments due under a
HELOC until the lender accelerates the debt, we note that in Bridges v.
Nationstar Mtg., 1 CA-CV 19-0556, 

2021 WL 126562

(Ariz. App. Jan. 14, 2021)
we recently held that “absent an express statement of acceleration in the
notice of trustee’s sale, or other evidence of an intent to accelerate, recording
a notice of trustee’s sale, by itself, does not accelerate a debt.”

                      WEBSTER BANK v. MUTKA
                        Opinion of the Court

reasonable attorneys’ fees and taxable costs upon compliance with Arizona
Rule of Civil Appellate Procedure 21.

                       AMY M. WOOD • Clerk of the Court
                       FILED: AA


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