                     NOTICE: NOT FOR OFFICIAL PUBLICATION.
 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                 AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE


 NATIONAL COLLEGIATE STUDENT LOAN 2006-3, Plaintiff/Appellee,

                                        v.

               DUSTIN MILIC, et al., Defendants/Appellants.

                             No. 1 CA-CV 18-0705
                               FILED 10-22-2019


           Appeal from the Superior Court in Maricopa County
                          No. CV2015-053352
                 The Honorable Bruce R. Cohen, Judge

      AFFIRMED IN PART; REVERSED IN PART; REMANDED


                                   COUNSEL

Gurstel Law Firm PC, Scottsdale
By Jesse H. Walker, Brad J. Clark, Shannon N. Crane, Kerry A. Markert,
Jesse Vassallo Lopez, Dwayne D. Burns, Brennan S. Murray, Michael S.
Hartsock
Counsel for Plaintiff/Appellee

Arizona Consumer Law Group, PLC, Mesa
By John N. Skiba
Counsel for Defendants/Appellants
                            NCSL v. MILIC, et al.
                            Decision of the Court



                      MEMORANDUM DECISION

Judge Lawrence F. Winthrop delivered the decision of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Michael J. Brown joined.


W I N T H R O P, Judge:

¶1             Appellant Dustin Milic appeals the superior court judgment
entered in favor of The National Collegiate Student Loan 2006-3 (“National
Collegiate”) in a default action against Milic and his sister, Destiny Milic
(collectively, “Milic”). For the reasons set forth below, we affirm in part,
reverse in part, and remand for further proceedings consistent with this
decision.

                 FACTS AND PROCEDURAL HISTORY

¶2            In June 2006, Dustin Milic borrowed $27,838 from JPMorgan
Chase Bank as a student loan; an origination fee of $2,585.86 brought the
total principal of the loan to $30,421.86. His sister, Destiny Milic, co-signed
the loan. Bank One and JPMorgan Chase Bank merged, and Bank One
became the successor lender.

¶3           In September 2006, the Milic loan was packaged with
thousands of other loans as part of a portfolio sold to the National
Collegiate Funding LLC, which then transferred the Milic loan to National
Collegiate. American Education Services (“AES”) managed the loan as
National Collegiate’s pre-default servicer.

¶4             The first of 240 installment payments became due in July 2008.
Milic failed to make several installment payments, and AES “charged off”1
the loan on January 3, 2012. At that time, Transworld Systems, Inc. (“TSI”)
began managing the loan as the default servicer for National Collegiate.

¶5            National Collegiate filed suit on September 18, 2015, seeking
judgment for $43,780.57, the outstanding balance of the loan; $5,672.76 in
interest accrued between the charge off on January 3, 2012 and March 6,
2014; unspecified interest accrued after March 2014; and costs. In April

1      To “charge off” is to “treat (an account receivable) as a loss or
expense because payment is unlikely.” Charge Off, Black’s Law Dictionary
(11th ed. 2019).


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                            NCSL v. MILIC, et al.
                            Decision of the Court

2017, an arbitrator found in favor of National Collegiate for the entire
amount. Milic moved to vacate the judgment on procedural grounds, and
the court granted the unopposed motion, allowing Milic to timely appeal
the arbitration award and request a trial de novo in superior court.

¶6             The superior court heard the matter in a bench trial on July
30, 2018. The only witness, TSI employee James Cummins, testified
regarding National Collegiate’s records as produced and maintained by
AES and TSI. Cummins testified that AES and TSI operate as loan servicers
for National Collegiate and that TSI is “the dedicated custodian of records”
for National Collegiate. National Collegiate introduced records of the Milic
loan through Cummins’ testimony, and the court admitted the exhibits over
Milic’s objections.

¶7            Following the bench trial, the court found that Milic breached
the contract and entered judgment in favor of National Collegiate as the
successor in interest for the principal balance of the loan plus accrued
interest and costs. Milic timely appealed. We have jurisdiction under
Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(1).

                                 ANALYSIS

       I.     Business Records Exception

¶8            Milic argues that the superior court erred by admitting
National Collegiate’s exhibits under the business records exception to the
general prohibition against hearsay evidence. Milic contends that the
exhibits, which show the repayment history and loan balance, do not fall
within the business records exception because National Collegiate failed to
lay a sufficient foundation for admission of the records and because the
records were not business records per se, but rather created for the
purposes of litigation. We review the superior court’s evidentiary ruling
for abuse of discretion. Sitton v. Deutsche Bank Nat. Trust Co., 233 Ariz. 215,
220, ¶ 23 (App. 2013).

¶9            Under the business records exception, a record of a regularly
conducted activity is admissible as an exception to hearsay if (A) the record
was made at or near the time by—or from information transmitted by—
someone with knowledge; (B) it was kept in the course of regularly
conducted business; (C) it was made as a regular practice of business; (D) a
qualified witness testifies as to the qualifying criteria; and (E) the opponent
fails to show the record lacks trustworthiness. Ariz. R. Evid. (“Rule”)
803(6). A court may find records prepared by a third party to be
trustworthy business records if the entity relies on the third-party prepared


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                           NCSL v. MILIC, et al.
                           Decision of the Court

records “as part of their ordinary course of business.” State v. Parker, 231
Ariz. 391, 402, ¶ 33 (2013).

¶10           First, Milic argues that Cummins’ testimony failed to lay an
adequate foundation to support the trustworthiness of three documents
detailing the account activity and outstanding balance of the loan.
Specifically, Milic challenges the admission of Exhibit 6, which documents
the loan financial activity from disbursement through the date it was
charged off; Exhibit 7, which details requested deferments or forbearances
on the loan; and Exhibit 8, which documents the repayment schedule. AES
created and maintained records of the loan while AES managed the loan for
National Collegiate. Once AES “charged off” the loan after a period of non-
payment, TSI took over management of the loan as National Collegiate’s
“default servicer.” Milic contends that because Cummins testified that he
accessed records through an AES system, neither Cummins’ employer TSI
nor National Collegiate had incorporated the documents into their
respective business records.

¶11             Milic’s argument, however, ignores the roles that AES and TSI
play compiling and maintaining National Collegiate’s records; National
Collegiate naturally relies on its own records and may move its own records
into evidence, either by stipulation or following the testimony of its
custodian as provided in Rule 803(6)(D). Cummins testified as a custodian
of National Collegiate’s records in his position as a TSI employee. He
testified about his familiarity with National Collegiate’s records as
produced and maintained by AES and TSI on National Collegiate’s behalf,
described National Collegiate’s relationship with its records custodians,
and explained how TSI uses AES documents in servicing National
Collegiate’s loans in default. In establishing how National Collegiate—
through TSI—relies on the AES documents, Cummins’ testimony offered a
reasonable basis for the court to conclude the records were admissible. See
State v. Griffith, 1 CA-CR 18-0040, 2019 WL 3789230, at *3, ¶ 10 (Ariz. App.
Aug. 13, 2019) (mem. decision) (“[G]enerally no reason exists to question
the trustworthiness and reliability of a statement relied on by a business
because businesses normally require authentic, truthful statements to
function.”).

¶12           Second, Milic contends that TSI produced the AES records
solely to prepare for the instant litigation. Documents prepared solely for
litigation generally do not fall within the business records exception, but a
reproduction of a regularly kept record—even if produced for litigation—
may qualify as a business record. Parker, 231 Ariz. at 401, ¶ 30. Here,
Cummins testified that he logged into the AES database to retrieve the pre-


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                             NCSL v. MILIC, et al.
                             Decision of the Court

existing records, which TSI employees can access but cannot alter.
Cummins also testified that he regularly accesses the records to prepare for
arbitration or a trial and that he also accesses and produces the records
when borrowers “ask for their loan history.” The physical print-outs reflect
December 6, 2016 as the date Cummins accessed and printed the records
from the AES database. Milic contends this date instead signals the date
the documents were created; this assertion, however, is not supported by
the evidence. Cummins testified that the subject information was recorded
and the underlying business documents prepared by AES—on behalf of
National Collegiate—in the ordinary course of business prior to any
litigation. See Jack B. Weinstein & Margaret A. Berger, Federal Evidence
§ 901.08[2], at 901-84 (Joseph M. McLaughlin ed., rev. 2012) (“[P]rintouts
prepared specifically for litigation from databases that were compiled in the
ordinary course of business are admissible as business records to the same
extent as if the printouts were, themselves, prepared in the ordinary course
of business.”), cited with approval in Parker, 231 Ariz. at 401, ¶ 30; see also Fed.
R. Evid. 1006 (“The proponent may use a summary, chart, or calculation to
prove the content of voluminous writings . . . that cannot be conveniently
examined in court.”). Accordingly, we find no abuse of discretion in the
admission of Exhibits 6, 7, or 8.

       II.     Statute of Limitations

¶13           Milic also argues that the superior court erred in finding that
the October 2010 partial payment extended the statute of limitations on
installment payments that accrued prior to September 18, 2009. The accrual
of the cause of action and the interpretation of a statute of limitations are
legal questions that we review de novo. See Larue v. Brown, 235 Ariz. 440,
443, ¶ 14 (App. 2014).

¶14           Milic’s promissory note is a contract in writing subject to the
six-year statute of limitations in A.R.S. § 12-548. When a fixed debt is
payable in installments, the statute of limitations applies to each installment
separately unless the parties have agreed otherwise. Navy Fed. Credit Union
v. Jones, 187 Ariz. 493, 495 (App. 1996). If a debtor fails to make an
installment payment, the creditor then has the right to sue for that missed
payment, triggering the statute of limitations for that installment. See
Johnson v. Johnson, 195 Ariz. 389, 391, ¶ 11 (App. 1999). If the contract has
an optional acceleration clause, the creditor may exercise the clause to
accelerate the balance of the loan and trigger a cause of action for all future
installments. See Navy Fed. Credit Union, 187 Ariz. at 495. An acceleration
clause, however, “is of no moment to the accrual of a cause of action for a



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                            NCSL v. MILIC, et al.
                            Decision of the Court

defaulted installment.” Id. (quoting 54 C.J.S. Limitations of Actions § 153
(1987)).

¶15            The statute of limitations issue in this case hinges on a single
payment of $298.18 made by Milic in October 2010. The loan agreement set
monthly installments of $383.44; the first installment became due in July
2008. National Collegiate filed suit on September 18, 2015, accelerating the
debt owed for the future installments. The parties do not dispute that
installment payments that accrued after September 18, 2009 fall within the
six-year statute of limitations. Rather, the parties dispute whether Milic’s
partial installment payment in October 2010 reset the limitations for the
installments due prior to September 18, 2009.

¶16           The superior court found that the statute of limitations would
time-bar the “installments due from July, 2008 through August, 2009,
together with interest that accruing thereon.” The court continued,
however, noting it “cannot ignore the installment payment made by
Plaintiff in October 2010, in the sum of $298.18. The court concludes that
this payment triggers a new clock for the statute of limitations, extending
the statute of limitations to October, 2016.” This finding swept the
otherwise-barred installments within the statute of limitations, and the
court found National Collegiate’s suit timely as to all installments dating to
July 2008. In light of precedential case law, we disagree.

¶17            Milic relies on Mertola, LLC v. Santos, 244 Ariz. 488 (2018), in
which our Supreme Court held that a cause of action to collect the entire
outstanding debt in a credit card contract accrues on default. Specifically,
Milic cites the court’s statement that “[p]artial repayment . . . does not cure
the default or reset the limitations period” when a debtor has defaulted on
a payment. Id. at 492, ¶ 21. National Collegiate contends that Mertola
applies only to credit card debt and cites the court’s apparent distinction
between credit card debt and installment contracts. See id. at 491, ¶ 16. The
court, however, made the distinction in determining how an acceleration
clause affects a cause of action for the entire outstanding debt. Id. at 492,
¶ 21. The distinction is inapposite to the issue here: whether a partial
payment resets the statute of limitations for installments that would
otherwise be time-barred.

¶18            The language in Mertola on which Milic relies does not appear
to be limited to credit card debt:

       But, as we held in Browne, a debtor may cure a default if the
       creditor accepts a payment of arrearages that brings the



                                      6
                            NCSL v. MILIC, et al.
                            Decision of the Court

       account current consistent with the parties’ contract. By
       allowing the debtor to cure the default, the creditor
       relinquishes its pending cause of action to collect the debt,
       and the statute of limitations commences only upon a new
       default. Partial repayment, however, does not cure the
       default or reset the limitations period.

Id. at 492, ¶ 21 (citing Browne v. Nowlin, 117 Ariz. 73, 75 (1977)) (citations
omitted). Notably, the Browne decision involved a disputed default in an
installment contract—not credit card debt. Browne, 117 Ariz. at 74-75. The
court in Mertola expressly declined to extend its decision to other debts such
as installment payments. Mertola, 244 Ariz. at 492. But we find no reason—
and National Collegiate offers no persuasive reason—to distinguish
between credit card debt and installment payments in evaluating a partial
payment’s effect on the statute of limitations under A.R.S. § 12-548.

¶19             The partial payment language in Mertola echoes this court’s
finding in Cheatham v. Sahuaro Collection Serv., Inc., 118 Ariz. 452 (App.
1978). In Cheatham, this court examined facts similar to those before us: The
debtor executed a promissory note requiring payments in two installments,
then failed to pay either installment due in 1965. Id. at 453. Beginning in
1968, the debtor made sporadic partial payments over five years, but the
creditor failed to file suit until 1975. Id. This court held that the cause of
action accrued upon the missed installments in 1965, that the creditor’s
action fell outside the six-year statute of limitations, and that “under
Arizona law part payment does not, in itself, avoid the bar of A.R.S. § 12-
548.” Id. at 454. The Cheatham court looked to A.R.S. § 12-508 and found
that to lift the time bar on a claim under the statute, the debtor must make
an “acknowledgement . . . in writing and signed by the party to be charged.”
Id. at 454 (quoting A.R.S. § 12-508). Thus, the court held that a partial
payment alone did not satisfy § 12-508. Id. at 454-55.

¶20           Here, the statute of limitations began to run on each
installment when Milic failed to make a payment under the terms of the
loan agreement. The October 2010 partial payment did not toll or otherwise
affect the statute of limitations as to the prior unpaid installments. See
Cheatham, 118 Ariz. at 454; see also Mertola, 244 Ariz. at 492, ¶ 21. Likewise,
National Collegiate’s suit accelerating the future installments did not affect
the statute of limitations applicable to the prior delinquent installments.
Navy Fed. Credit Union, 187 Ariz. at 495.

¶21          National Collegiate’s suit was timely as to the unpaid
installments due between September 2009 and September 2015. We


                                      7
                           NCSL v. MILIC, et al.
                           Decision of the Court

conclude, however, the statute of limitations bars National Collegiate’s
action on the unpaid installments due before September 2009, and we find
the superior court erred in finding that, in the absence of a written
acknowledgement by Milic, the October 2010 payment lifted the time bar
as to those installments. Accordingly, we reverse the court’s order finding
the statute of limitations restarted as to installments due prior to September
18, 2009.

¶22          The court’s order does not delineate the amount in principal
and interest that should be attributed to the time-barred installment
payments. We therefore remand the matter to the superior court for that
determination.

       III.   Attorneys’ Fees on Appeal

¶23           Both parties request an award of attorneys’ fees and costs
expended on this appeal. Neither party is entirely successful in this appeal,
and we deny fees to both parties. Because Milic has succeeded, however,
in reducing the amount of the judgment, we award the appellants their
taxable costs on appeal upon compliance with ARCAP 21. See A.R.S. § 12-
342(A).

                               CONCLUSION

¶24           For the foregoing reasons, we affirm the admission of Exhibits
6, 7, and 8; reverse the finding that the October 2010 partial payment
restarted the statute of limitations for installments due prior to September
18, 2009; remand for the superior court to recalculate and enter an amended
judgment in favor of National Collegiate consistent with this decision; and
award taxable costs to the appellants.




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




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