Plein v. Lackey

• Decision Date: 17 April 2003
• Docket Number: No. 72560-8.,72560-8.
• Citation: 67 P.3d 1061,149 Wash.2d 214
• Court: Washington Supreme Court
• Parties: Paul PLEIN, Respondent, v. Chester LACKEY and Lee Cameron, Jane Doe Cameron, and their marital community, Petitioners.

67 P.3d 1061

149 Wash.2d 214

Paul PLEIN, Respondent, v. Chester LACKEY and Lee Cameron, Jane Doe Cameron, and their marital community, Petitioners.

No. 72560-8.

Supreme Court of Washington, En Banc.

Argued February 13, 2003.

Decided April 17, 2003.

As Amended on Denial of Reconsideration June 6, 2003.

Belcher Swanson Lackey Doran Lewis, et al., John Belcher, Bellingham, for Petitioners.

John Mills, Tacoma, for Respondent.

Betts Patterson & Mines, Thomas F. Peterson, Seattle, as amicus curiae on behalf of Washington Land Title Ass'n.

MADSEN, J.

Lee Cameron signed a promissory note both in his corporate capacity and individually, secured by a deed of trust, to purchase property from Sunset Investments for his corporation, Alpen Group, Inc. Later, Cameron paid off the Sunset note. He then sought to enforce the instrument and foreclose the deed of trust when Alpen defaulted. He claims he signed the note as an accommodation party and was therefore entitled to foreclose. We agree. We also agree that the plaintiffs' failure to obtain a preliminary injunction or restraining order barring the nonjudicial foreclosure sale waived any right to contest the validity of the foreclosure. We reverse the Court of Appeals and reinstate the trial court's grant of summary judgment in favor of Cameron.

Facts

In 1997, Paul Plein, Bruce White, and Lee Cameron formed Alpen Group Inc. to buy and sell real estate (the group formerly operated as a partnership). In April 1997, Alpen purchased a lot from Sunset Investments, issuing a promissory note for $75,000 to Sunset with the promise to pay stated: "For value received, ALPEN GROUP, INC., A WASHINGTON CORPORATION, promise(s) to pay to SUNSET INVESTMENTS...." The note was secured by a deed of trust naming Sunset as the beneficiary and Alpen as the grantor. It was signed by Cameron as "Secretary/Treasurer" and by White as "Vice-President". Cameron, his wife, Plein (who was president), and his wife each signed "individually."

Alpen also borrowed $136,500 from Columbia State Bank, executing a promissory note also secured by a deed of trust. Columbia loaned the money in part on Sunset's agreement to subordinate its interest in the property to Columbia's. Alpen commenced constructing a log home on the lot. However, more funds were needed, and Cameron advanced $30,000. The money was still insufficient to complete the project and trade creditors were owed an additional $45,000. Cameron declined to loan any more money to Alpen. The parties state that Plein, as president of Alpen, issued deeds of trust against the log home to secure the debt to the trade creditors.

At some point thereafter, Plein was ousted and Cameron became president. Alpen issued a promissory note for the $30,000 that Cameron had advanced to Alpen, secured by another deed of trust on the property. Then, one of the trade creditors sued Alpen in Thurston County Superior Court. The record does not contain any information about that suit beyond the parties' brief descriptions, but it evidently involved a number of claims and cross-claims resulting in payment to the creditor who sued and a judgment entered against Alpen in favor of Plein for $45,000, which Plein recorded. In addition, Cameron received all the stock in Alpen.

At this point, the creditors, in order of their secured interests in the log home property, were (1) Columbia, (2) Sunset, (3) the unpaid trade creditors, (4) Cameron, and (5) Plein. Any equity remaining in the property would be that of Alpen.

According to plaintiffs, "around the time the Thurston County suit was being litigated," the note to Columbia Bank came due and Columbia refused to extend the loan. Clerk's Papers (CP) at 105. In October 1998, Cameron paid the amount due to Columbia with his personal funds and Columbia endorsed the note to Cameron. In addition, Columbia assigned the beneficial interest in its deed of trust to Cameron. Then, in December 1998, the pivotal transaction in this case occurred. Cameron paid the amount due Sunset, Sunset endorsed the promissory note for this loan to Cameron, and Sunset assigned its beneficial interest in its deed of trust to Cameron.

By these two transactions, Cameron, as beneficiary of the two deeds of trust originally issued to Columbia Bank and Sunset, claimed secured interests in the property superior to all other secured interests. He also continued to have a secured interest junior to the trade creditors based on his loan of $30,000 to Alpen.

In October 1999, Cameron, as assignee of the Sunset note, hired attorney Chester Lackey to begin nonjudicial foreclosure proceedings as a result of Alpen's default on the Sunset note. All of the secured creditors received notice of the foreclosure informing them that the trustee's sale of the property would be held on March 31, 2000.

On February 7, 2000, Plein and the trade creditors (hereafter Plein) brought this suit against Cameron and Lackey (hereafter Cameron), seeking a permanent injunction barring the trustee's sale and a declaration that the deed of trust was void because the underlying debt had been paid, i.e., there was no default on the underlying debt. Plein did not seek a preliminary injunction or any other order restraining the sale. On March 28, three days before the scheduled sale, Plein filed a motion for summary judgment, claiming that undisputed facts showed that Cameron paid off the Sunset note on behalf of Alpen, thus extinguishing the debt. Plein further claimed that he was entitled to an order declaring that his and the trade creditors security interests were superior to Cameron's and that the foreclosure proceedings were void.

Plein did not obtain a preliminary injunction or restraining order restraining the sale, and on March 31, the trustee's sale occurred. Cameron, the only bidder, bought the property for $245,312.35 (approximately the total of the Columbia, Sunset, and Cameron notes).

On May 1, 2000, Cameron filed a cross-motion for summary judgment. He argued there was no evidence supporting Plein's motion for summary judgment because Mr. Plein's declaration, the only material submitted by Plein, was not made on personal knowledge. Cameron also argued he was entitled to summary judgment because the evidence indisputably established that Cameron purchased the Sunset and Columbia notes and obtained valid assignments of the promissory notes and deeds of trust for his personal benefit, rather than paying on behalf of Alpen. Cameron also argued that Plein failed to timely and properly object to the sale, pointing out Plein did not seek a preliminary injunction or a restraining order in time to restrain the trustee's sale.

The trial court granted Cameron's motion and dismissed Plein's complaint. Plein appealed and the Court of Appeals reversed. That court reasoned that where a person is individually liable on a note and pays it, the individual cannot also foreclose because the debt has been extinguished. The court held that there are disputed facts regarding Cameron's personal liability on the Sunset note that preclude summary judgment. In addition, the Court of Appeals reasoned that if Cameron was personally liable on the note, then Plein's failure to obtain an order restraining the foreclosure sale would make no difference because the debt would have been extinguished, Cameron would have nothing on which to foreclose, and the trustee's sale would be null and void. Plein v. Lackey, 111 Wash.App. 143, 43 P.3d 1268, review granted, 147 Wash.2d 1020, 60 P.3d 93 (2002).

Cameron petitioned for review by this court; his petition was granted. For the first time, he specifically relies on RCW 62A.3-419, a provision in the Uniform Commercial Code, to argue that he signed the Sunset note as an accommodation party, and that as such he had the right, once he paid the note, to enforce the instrument against Alpen and to foreclose the deed of trust.¹ The Washington Land Title Association was granted leave to file an amicus curiae brief in support of the petition for review. Amicus is primarily concerned that the Court of Appeals' decision validates postsale challenges to trustees' sales based upon defenses to default, leading to instability in land titles where there is a trustee's deed in the chain of title.

Analysis

Application of RCW 62A.3-419 resolves the first issue in this case, whether Cameron signed the Sunset note as an accommodation party. However, before turning to the substantive argument, the initial question is whether Cameron may raise the issue of accommodation status when he (1) did not argue accommodation status under Uniform Commercial Code provision RCW 62A.3-419 (hereafter section .3-419) to the trial court, and (2) he raises the argument for the first time in this court.

The trial court granted summary judgment in favor of Cameron. Generally, an appellate court may affirm a grant of summary judgment on an issue not decided by the trial court provided that it is supported by the record and is within the pleadings and proof. Int'l Bhd. of Elec. Workers v. Trig Elec. Constr. Co., 142 Wash.2d 431, 435, 13 P.3d 622 (2000); Wendle v. Farrow, 102 Wash.2d 380, 382, 686 P.2d 480 (1984); cf. Ertman v. City of Olympia, 95 Wash.2d 105, 108, 621 P.2d 724 (1980)

(a superior court decision will not be reversed where the reason given is erroneous if the judgment or order is correct). The parties must have had a full and fair opportunity to develop facts relevant to the decision. Bernal v. Am. Honda Motor Co., 87 Wash.2d 406, 414, 553 P.2d 107 (1976). Moreover, while the general rule is that parties may not raise a new issue for the first time in a petition for review, Fisher v. Allstate Ins. Co., 136 Wash.2d 240, 252, 961 P.2d 350 (1998), "[a] party may present a ground for affirming a trial court decision which was not presented to the trial court if the record has been sufficiently developed to fairly consider the ground." RAP 2.5(a).

Here, section .3-419 provides an...