 1       IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

 2 Opinion Number: ________________

 3 Filing Date: December 28, 2018

 4 NO. A-1-CA-36014

 5 LSF9 MASTER PARTICIPATION TRUST,

 6        Plaintiff-Appellant,

 7 v.

 8 JOANN SANCHEZ and FRANK
 9 F. SANCHEZ,

10        Defendants-Appellees,

11 and

12   WELLS FARGO BANK, N.A. BY
13   MERGER WITH WELLS FARGO
14   FINANCIAL BANK, and CANVASBACK
15   FINANCIAL SERVICES, LLC,

16        Defendants.

17 APPEAL FROM THE DISTRICT COURT OF DOÑA ANA COUNTY
18 Mary W. Rosner, District Judge

19   McCarthy & Holthus, LLP
20   Joshua T. Chappell
21   Karen Weaver
22   Albuquerque, NM

23 for Appellant

24
1 Eric Ortiz & Associates
2 Eric N. Ortiz
3 Albuquerque, NM

4 for Appellees
 1                                       OPINION

 2 VIGIL, Judge.

 3   {1}   Wells Fargo (Bank) appealed from the district court’s order dismissing its

 4 foreclosure action against Joann and Frank Sanchez (Homeowners) with prejudice.

 5 During the pendency of the appeal, and after briefing was completed, Bank filed a

 6 motion to substitute LSF9 Master Participation Trust (LSF9) as appellant in the

 7 case, which we granted. LSF9 raised no new claims after our order of substitution,

 8 and as such, we address the arguments raised by Bank. Bank made two arguments

 9 on appeal: (1) the district court erred in dismissing its entire foreclosure claim as

10 barred by the applicable statute of limitations, NMSA 1978, § 37-1-3(A) (2015);

11 and (2) the district court abused its discretion in denying Bank leave to amend its

12 complaint to plead the tolling effect on the statute of limitations of Homeowners’

13 three bankruptcy cases. We reverse.

14 BACKGROUND

15   {2}   The material facts are not in dispute. On October 30, 2007, Homeowners

16 executed a note and mortgage to secure a $203,669.41 loan. The mortgage was

17 secured by real property located in Las Cruces, New Mexico. The note and

18 mortgage provided for periodic payments in the amount of $1,712.55 to be paid on

19 the fourth day of every month beginning on December 4, 2007. The note and

20 mortgage also contained acceleration clauses, providing that in the event of default,

21 Bank “may require [Homeowners] to pay immediately the full amount of
 1 [p]rincipal which has not been paid and all the interest that [Homeowners] owe on

 2 that amount.”

 3   {3}   Homeowner defaulted on the loan on October 4, 2008. Bank filed a

 4 foreclosure action against Homeowners on October 7, 2009. In this action, Bank

 5 asserted that it was exercising its option under the note to accelerate and declare

 6 immediately payable and due the full amount of principal and all interest still owed

 7 under the note.

 8   {4}   On June 21, 2011, during the pendency of the first foreclosure action,

 9 Homeowners filed for Chapter 13 bankruptcy, which was dismissed without

10 prejudice on August 18, 2011, for failure to file information. Homeowners filed a

11 second bankruptcy under Chapter 13 on November 17, 2011, which was dismissed

12 for failure to make plan payments on June 15, 2012. During the pendency of the

13 second bankruptcy, Bank voluntarily dismissed the first foreclosure action on

14 March 20, 2012. Homeowners thereafter filed a third bankruptcy under Chapter 7

15 on August 21, 2012, which resulted in a discharge order entered on January 23,

16 2013.

17   {5}   On February 22, 2016, Bank filed its second, and the currently operative,

18 foreclosure action against Homeowners stemming from Homeowners’ October 4,

19 2008 default. Bank alleged in the complaint that its claim was for the accelerated

20 unpaid balance and that it had sent Homeowners a notice of default and a demand

                                            2
 1 letter on August 28, 2015, requesting Homeowners cure of the default. Although

 2 not specifically alleging Homeowners’ three bankruptcy cases, Bank only sought

 3 in rem relief in the complaint. However, concurrent with the complaint, Bank filed

 4 a notice of bankruptcy discharge and disclaimer of deficiency that referenced

 5 Homeowners’ successful Chapter 7 bankruptcy and included a copy of the order of

 6 discharge as an exhibit.

 7   {6}   Homeowners filed a motion to dismiss pursuant to Rule 1-012(B)(1), (6)

 8 NMRA. Homeowners argued that the statute of limitations for a written contract of

 9 six years pursuant to Section 37-1-3(A) applied, and because more than six years

10 had elapsed between their default on October 4, 2008, and Bank’s filing of the

11 second foreclosure action on February 22, 2016, Bank’s foreclosure claim was

12 barred.

13   {7}   Bank responded that pursuant to Welty v. Western Bank of Las Cruces,

14 1987-NMSC-066, 106 N.M. 126, 740 P.2d 120, new and separate breaches of the

15 note and mortgage occurred between Homeowners’ original default on October 4,

16 2008 and October 7, 2009, when Bank accelerated the loan—and each separate

17 breach of the note and mortgage accrued a new six-year period of limitation for

18 each missed payment. Bank therefore argued that while its claim for some of

19 Homeowners’ oldest missed payments may have been barred by Section 37-1-3,

20 the majority of Homeowners’ missed payments, including the accelerated balance

                                           3
 1 as of October 7, 2009, fell within the statute of limitations in light of the tolling of

 2 the limitations period because of Homeowners’ three bankruptcy cases pursuant to

 3 11 U.S.C. § 362 (2012) (stating the circumstances in which the filing of a

 4 bankruptcy petition triggers an automatic stay of other proceedings involving the

 5 property of a debtor or bankruptcy estate), and NMSA 1978, Section 37-1-12

 6 (1880) (governing the effect of a stay on the computation of statutes of

 7 limitations).

 8   {8}   After a hearing, the district court dismissed Bank’s foreclosure complaint

 9 with prejudice. The district court ruled that it would not consider the tolling effect

10 of Homeowners’ bankruptcy filings and denied Bank’s request to amend its

11 complaint to plead facts concerning Homeowners’ bankruptcies and their tolling

12 effect on the limitation period for Bank’s foreclosure claim. The district court did

13 not provide reasoning explaining why it would not grant Bank leave to amend its

14 complaint, but apparently agreed with Homeowners’ argument that “[t]here has

15 been nothing that prevented [Bank] from filing a motion to amend” between the

16 filing of the complaint and litigation of Homeowners’ motion to dismiss, and that

17 “if [Bank] wished to remedy the problem by amending the complaint, they had the

18 opportunity to do that and they failed to do so.”

19   {9}   Bank appeals from the order of dismissal with prejudice.




                                              4
 1 DISCUSSION

 2 I.       Standard of Review

 3   {10}   “When facts relevant to a statute of limitations issue are not in dispute, the

 4 standard of review is whether the district court correctly applied the law to the

 5 undisputed facts.” Haas Enters. v. Davis, 2003-NMCA-143, ¶ 9, 134 N.M. 675, 82

 6 P.3d 42. “We review questions of law de novo.” Id. Further, insofar as our analysis

 7 involves statutory interpretation, our review is de novo. See Wolinsky v. N.M. Corr.

 8 Dep’t, 2018-NMCA-071, ¶ 3, 429 P.3d 991, cert. denied, 2018-NMCERT-___

 9 (No. S-1-SC-37287, Oct. 26, 2018).

10 II.      Dismissal of Bank’s Foreclosure Claim Was Precluded by Section 37-1-

11 3

12   {11}   Bank argues that the district court erred in dismissing its entire foreclosure

13 claim with prejudice as barred by the statute of limitations, Section 37-1-3(A)

14 (providing that “[a]ctions founded upon any bond, promissory note, bill of

15 exchange or other contract in writing shall be brought within six years”). Bank

16 concedes that certain of Homeowners’ missed payments due prior to Bank’s

17 October 7, 2009 acceleration of the balance remaining under the note may have

18 been barred when Bank filed the second foreclosure action on February 22, 2016.

19 However, Bank asserts that the limitation period had not run on the accelerated

20 balance as of October 7, 2009, considering the import of Welty and the tolling of

                                               5
 1 the limitation period due to Homeowners’ three bankruptcy cases and Bank’s 2015

 2 demand letter. We agree.

 3 A.       Homeowners’ Missed Payments Prior to Bank’s October 7, 2009
 4          Acceleration

 5   {12}   Generally, “[i]n a breach of contract action, the statute of limitations begins

 6 to run from the time of the breach.” Welty, 1987-NMSC-066, ¶ 8. In the context of

 7 an installment contract, like the note in this case, see Maffett v. Emmons, 1948-

 8 NMSC-012, ¶¶ 1, 6, 52 N.M. 115, 192 P.2d 557 (construing a note promising

 9 periodic payments as an installment contract), our Supreme Court held in Welty

10 that

11          under contract obligations payable by installments, the statute [of
12          limitations defined in Section 37-1-3(A)] would have begun to run
13          only with respect to each installment when due. The statute would
14          have begun to run with respect to the whole indebtedness only from
15          the date of an exercise of the option to declare the whole indebtedness
16          due.

17 Welty, 1987-NMSC-066, ¶ 9.

18   {13}   Under the foregoing authority, we conclude that the payments due between

19 October 4, 2008 and October 4, 2009, prior to Bank’s October 7, 2009 acceleration

20 of the balance due under the note, were barred by the statute of limitations at the

21 time of Bank’s filing of the second foreclosure action. Pursuant to the note, which

22 provided that payments were due on the fourth day of every month, the last

23 payment Homeowners failed to make prior to the October 7, 2009 acceleration was

                                               6
 1 the payment scheduled for October 4, 2009. Applying Welty, the limitation period

 2 for this missed payment accrued on October 4, 2009, and ran six years later, on

 3 October 4, 2015—142 days before Bank filed the second foreclosure action on

 4 February 22, 2016. See 1987-NMSC-066, ¶ 9. It follows that the statute of

 5 limitations for each payment missed by Homeowners prior to the October 4, 2009

 6 payment also ran prior to Bank’s filing of the second foreclosure action. Id.

 7 B.       Homeowners’ Obligation Under the Note After Bank’s October 7, 2009
 8          Acceleration

 9   {14}   The fundamental dispute in this case concerns the tolling effect of

10 Homeowners’ three bankruptcy filings and Bank’s 2015 demand letter on the

11 running statute of limitations for Bank’s claim for the remaining amount due under

12 the note after Bank’s October 7, 2009 acceleration.

13   {15}   Bank argues that mandatory stays on its foreclosure claim were triggered by

14 Homeowners’ bankruptcy filings, which tolled the statute of limitations for the

15 periods of time during which those cases were pending pursuant to 11 U.S.C.

16 § 362(a) and Section 37-1-12. See § 37-1-12 (providing that “[w]hen the

17 commencement of any action shall be stayed or prevented by injunction order or

18 other lawful proceeding, the time such injunction order or proceeding shall

19 continue in force shall not be counted in computing the period of limitation”).

20 Further, relying on our Supreme Court’s statement in Welty, 1987-NMSC-066, ¶ 9,

21 that where a contract prohibits commencement of a suit for default within thirty
                                             7
 1 days of demand, the statute of limitations is tolled during that period, Bank asserts

 2 that under the terms of the note, following service of the demand letter to

 3 Homeowners on August 28, 2015, the limitation period was tolled for an additional

 4 thirty days. Based on these asserted periods of tolling of the limitation period for

 5 Bank’s claim for the accelerated balance as of October 7, 2009, Bank contends that

 6 the second foreclosure action was timely filed within the six-year limitation period.

 7   {16}   Homeowners respond that although generally “the filing of a bankruptcy

 8 petition operates as a stay of the commencement or continuation of judicial actions

 9 such as the foreclosures at issue in this case[,]” here, § 362(c)(3) and 11 U.S.C. §

10 108(c) (2012) operate as an exception or limitation to the general rule stated in §

11 362(a). Specifically, under these sections of the Bankruptcy Code, Homeowners

12 argue that Bank is not entitled to toll the time of Homeowners’ bankruptcies. It

13 follows, Homeowners assert, Bank’s second foreclosure action was filed after the

14 statute of limitations had run.

15   {17}   The commencement of a case under the Bankruptcy Code “creates an estate.

16 Such estate is comprised of . . . all legal or equitable interests of the debtor in

17 property as of the commencement of the case.” 11 U.S.C. § 541(a)(1) (2016). The

18 filing of a petition under the bankruptcy code “operates as a stay, applicable to all

19 entities, of . . . any act to obtain possession of property of the estate or of property

20 from the estate or to exercise control over property of the estate[.]” § 362(a)(3).

                                              8
 1   {18}   Pursuant to § 362(c)(3)(A), “if a single or joint case is filed by or against a

 2 debtor is filed by or against a debtor who is an individual in a case under Chapter

 3 7, 11, or 13, and if a single or joint case of the debtor was pending within the

 4 preceding 1-year period but was dismissed . . . the stay under subsection (a) with

 5 respect to any action taken with respect to a debt or property securing such debt . . .

 6 shall terminate with respect to the debtor on the 30th day after the filing of the later

 7 case.” (Emphases added.) Similarly, pursuant to § 108(c):

 8          if applicable nonbankruptcy law . . . fixes a period for commencing or
 9          continuing a civil action in a court other than a bankruptcy court on a
10          claim against the debtor, or against [a codebtor] . . . protected under
11          section 1201 or 1301 of this title, and such period has not expired
12          before the date of the filing of the petition, then such period does not
13          expire until the later of--

14                (1) the end of such period, including any suspension of such
15                period occurring on or after the commencement of the case;
16                or

17               (2) 30 days after notice of the termination or expiration of the
18               stay under section 362, 922, 1201, or 1301 of this title, as the
19          case may be, with respect to such claim.

20 (Emphasis added.)

21   {19}   While Homeowners are correct to note that § 362(c)(3) and § 108(c) can

22 operate as exceptions or limitations to the mandatory stays described in § 362(a) in

23 actions filed by or against the debtor, Homeowners fail to recognize the

24 significance, as Bank argues in its reply brief, of the material distinction drawn in


                                               9
 1 bankruptcy law between actions against the debtor and actions against the estate,

 2 as described in § 541, in the context of § 362(a). Bank argues that the precedent of

 3 “[a] majority of federal courts, including the Tenth Circuit’s Bankruptcy Appellate

 4 Panel[,]” which would have applied to Homeowners’ bankruptcy case that was

 5 brought in New Mexico, holds that termination of the automatic stay occurs,

 6 pursuant to § 362(c)(3)(A), only with regard to the debtor—not the estate. In

 7 support of this argument, Bank cites In re Holcomb, 380 B.R. 813 (B.A.P. 10th

 8 Cir. 2008).

 9   {20}   In Holcomb, the Tenth Circuit Bankruptcy Appellate Panel held that:

10          a majority of courts have [concluded] . . . the automatic stay
11          terminates under § 362(c)(3)(A) only with respect to the debtor and
12          the debtor’s property but not as to the property of the estate. These
13          courts reason that if Congress meant to terminate the stay in its
14          entirety, it would have done so in plain language[.] . . . On this basis,
15          we conclude that the language of § 362(c)(3)(A) terminates the stay
16          only as to the debtor and the debtor’s property.

17 380 B.R. at 815-16 (citations omitted). Accordingly, following the Tenth Circuit

18 precedent in Holcomb, we conclude that § 362(c)(3) and § 108(c), each of which

19 apply only to actions brought by or against the debtor, do not apply to this case in

20 which Bank sought only in rem relief against the property of Homeowners’

21 bankruptcy estate. See Fed. Nat’l Mortg. Ass’n v. Chiulli, 2018-NMCA-054, ¶ 2,

22 425 P.3d 739 (recognizing that in the event of a default on a promissory note, the



                                               10
 1 mortgagee has an independent remedy to sue on the note or in rem against the

 2 mortgaged property to satisfy the debt).

 3   {21}   Concluding § 362(c)(3) and 108(c) do not apply to this case, we turn to

 4 Bank’s argument that, pursuant to Section 37-1-12, the statute of limitations for its

 5 claim for the accelerated balance as of October 7, 2009, was tolled during the

 6 periods in which Homeowners’ three bankruptcies were pending in federal

 7 bankruptcy court as a result of § 362(a) automatic stays.

 8   {22}   Homeowners’ respond, in pertinent part, that “[e]ven if this Court reads

 9 Section 37-1-12 as tolling the time in which the bankruptcy stay was in effect, . . .

10 the Bank may not toll the 58 days of the first bankruptcy because the [f]irst

11 [f]oreclosure [l]awsuit, which was filed prior to the first bankruptcy, was pending

12 during the first bankruptcy.” In support, Homeowners’ cite Butler v. Deutsche

13 Morgan Grenfell, Inc., 2006-NMCA-084, ¶ 18, 140 N.M. 111, 140 P.3d 532 for

14 the proposition that “Section 37-1-12 does not apply unless the ‘commencement’

15 of an action is stayed or prevented[.]’ ”

16   {23}   We assume without deciding that Homeowners argument concerning the

17 applicability of Section 37-1-12 to the automatic stay resulting from their first

18 bankruptcy is correct. Furthermore, we also assume that this rationale also applies

19 to the approximate four-month period in which both Homeowners’ second

20 bankruptcy (filed on November 17, 2011) and Bank’s first foreclosure actions were

                                               11
 1 concurrently pending in federal bankruptcy and New Mexico state district court

 2 prior to Bank’s voluntary dismissal of the first foreclosure action on March 20,

 3 2012. However, notwithstanding these assumptions, we conclude sufficient tolling

 4 of the limitation period as a result of the stays resulting from Homeowners’ second

 5 bankruptcy (which remained pending after Bank’s voluntary dismissal of the first

 6 foreclosure action) and third bankruptcy cases operated to bring Bank’s filing of

 7 the second foreclosure action within the six-year limitation period as contemplated

 8 by Section 37-1-12.

 9   {24}   First, under the undisputed facts, 88 days passed between Bank’s March 20,

10 2012 voluntary dismissal of the first foreclosure action and the dismissal of

11 Homeowners’ second bankruptcy case on June 15, 2012. Second, 156 days passed

12 between Homeowners’ filing of the third bankruptcy case on August 21, 2012 and

13 the bankruptcy court’s January 23, 2013 discharge order. It follows, consistent

14 with Section 37-1-12, that the automatic stays pursuant to § 362(a), resulting from

15 Homeowners’ second and third bankruptcies, operated to toll the limitation period

16 for Bank’s claim for the accelerated balance as of October 7, 2009, for a total of

17 244 days. The six-year limitation period for the accelerated balance was originally

18 scheduled to run on October 7, 2015; however, based on the 244-day tolling of the

19 limitation period, we conclude that limitation period was pushed to run on May 27,

20 2016. Therefore, when Bank filed the second foreclosure action on February 22,

                                            12
 1 2016, 107 days remained under the statute of limitations for Bank to refile its

 2 action for the accelerated balance. Accordingly, we conclude that the district court

 3 erred in dismissing Bank’s entire foreclosure claim as precluded by the statute of

 4 limitations.

 5   {25}   In so concluding, we briefly address the issue raised by Bank concerning the

 6 tolling effect of Bank’s 2015 demand letter, which Bank argues should apply to

 7 toll the limitation period for an additional thirty days on grounds that Homeowners

 8 failed to respond to the argument, constituting a concession of the issue. See, e.g.,

 9 State v. Templeton, 2007-NMCA-108, ¶ 22, 142 N.M. 369, 165 P.3d 1145 (stating

10 that the failure to respond to contentions made in an answer brief is “a concession

11 on the matter”). Based on our conclusion above that Bank’s claim for the

12 accelerated balance as of October 7, 2009 was filed within the statute of

13 limitations, determination of this issue is unnecessary. Similarly, based on our

14 conclusion above, we do not address Bank’s second argument—that the district

15 court abused its discretion in denying Bank leave to amend the second foreclosure

16 complaint to plead Homeowners’ three bankruptcy cases.

17 CONCLUSION

18   {26}   The district court’s order of dismissal is reversed. We remand for further

19 proceedings consistent with this opinion.

20   {27}   IT IS SO ORDERED.

                                             13
1                               _________________________________
2                               MICHAEL E. VIGIL, Judge

3 WE CONCUR:


4 _________________________________
5 M. MONICA ZAMORA, Judge


6 _________________________________
7 JULIE J. VARGAS, Judge




                                  14
