Bank of America, N.A. v. Owens

• Decision Date: 16 November 2009
• Docket Number: No. 61671-4-I.,61671-4-I.
• Citation: 153 Wn. App. 115,221 P.3d 917
• Court: Washington Court of Appeals
• Parties: BANK OF AMERICA, N.A., a national association, Respondent, v. J'Amy Lyn OWENS, an unmarried person, Appellant, Kenneth Treiger, a married person as to his separate estate, Appellant, Shulkin Hutton, Inc., P.S., a Washington professional service corporation; and Edmund John Wood, Defendants.

221 P.3d 917

153 Wn. App. 115

BANK OF AMERICA, N.A., a national association, Respondent, v. J'Amy Lyn OWENS, an unmarried person, Appellant, Kenneth Treiger, a married person as to his separate estate, Appellant, Shulkin Hutton, Inc., P.S., a Washington professional service corporation; and Edmund John Wood, Defendants.

No. 61671-4-I.

Court of Appeals of Washington, Division 1.

November 16, 2009.

Jerry Richard Kimball, Attorney at Law, Catherine Wright Smith, Edwards Sieh Smith & Goodfriend PS, Seattle, WA, for Appellants.

Cynthia B. Whitaker, Law Offices of Cynthia B. Whitaker, Edmund John Wood, Wood & Jones PS, Seattle, WA, for Defendants.

Thomas Scott Linde, Schweet Rieke & Linde PLLC, Mercer Island, WA, for Respondent.

GROSSE, J.

¶ 1 A decree of dissolution is a judgment. A judgment creates a lien against real estate when the judgment is entered. Here, the supplemental decree gave Kenneth Treiger a lien for one-half of the proceeds of the sale of the property, less costs and the outstanding mortgage. In addition to entering and filing the judgment, Treiger recorded it before Bank of America obtained its judgment. Accordingly, the trial court erred in failing to give Treiger's lien priority over the Bank's lien.

FACTS

¶ 2 This appeal is from the order entered in a declaratory judgment action filed, pursuant to an agreement referred to as the "trust agreement," by appellant Kenneth Treiger, respondent Bank of America (the Bank), Treiger's former wife J'Amy Lyn Owens, and two other parties who are not parties to this appeal. The parties filed the action to determine the amount and priority of the parties' claims to certain funds held in trust from the sale of real property, referred to as the "Maplewood property."

¶ 3 Treiger and Owens were married in July 1997 and separated on June 1, 2000. On June 26, 2000, Treiger and Owens purchased the Maplewood property as husband and wife. They filed for dissolution in February 2001.

¶ 4 In January 2002, during the pendency of the dissolution action but before entry of a decree of dissolution, Treiger filed a chapter 13 bankruptcy petition, which was converted to a chapter 7 bankruptcy in April 2002. In February 2002, Owens filed a separate chapter 11 bankruptcy petition.

¶ 5 The bankruptcy court in Treiger's case lifted the stay to allow the parties' dissolution action to proceed in superior court. The superior court entered a decree of dissolution on June 19, 2002 and reserved property and debt issues until the bankruptcy proceedings concluded.

¶ 6 In an adversary proceeding against Owens, Treiger's chapter 7 trustee obtained a bankruptcy court ruling that the Maplewood property was community property and therefore property of Treiger's bankruptcy estate.

¶ 7 While the parties were married, Owens, as part owner of a business called "The Retail Group," executed a promissory note and borrowing agreement in favor of the Bank. The Retail Group defaulted under the note and agreement, and the Bank filed a claim in Treiger's bankruptcy action.

¶ 8 In April 2004, nearly two years after entry of the decree of dissolution, Treiger's trustee and Owens entered a settlement agreement in which the trustee agreed to convey his entire interest in the Maplewood property to Owens, subject to all liens of record against the property, in exchange for $215,000 from Owens. By trustee's quitclaim deed dated April 29, 2004, the trustee conveyed all of the bankruptcy estate's interest in the Maplewood property to Owens, "a single individual."

¶ 9 Treiger's chapter 7 case was closed in March 2005. Owens' chapter 11 case was dismissed in July 2005.

¶ 10 Treiger and Owens returned to state court to distribute the property in the dissolution. On May 9, 2006, the superior court entered a supplemental decree of dissolution, dividing their assets and liabilities. In the supplemental decree, the court ordered that the Maplewood property be sold and that Treiger be awarded one-half of the proceeds of the sale of the property. The court also ordered specified amounts to be deducted from Owens' share of the proceeds of the sale and awarded to Treiger. The supplemental decree contains a judgment summary identifying the Maplewood property by the assessor's property tax parcel or account number and identifying the money judgments awarded to Treiger.

¶ 11 On October 27, 2006, Treiger recorded a number of documents entitled "orders" or "decrees" that had been entered in the dissolution proceeding, including the supplemental decree. Treiger recorded the following documents on October 27, 2006:

1. "Order on Pre-Trial Motion" entered on March 21, 2006 and recorded under King County Auditor's Number 20061027001370 (Document 1370).

2. "Order on Attorney's Fees" entered on March 29, 2006 and recorded under King County Auditor's Number 20061027001371 (Document 1371).

3. "Supplemental Decree of Dissolution" entered on May 9, 2006 and recorded under King County Auditor's Number 20061027001372 (Supplemental Decree).

4. "Order on Motion for Attorney Fees" entered on June 9, 2006 and recorded under King County Auditor's Number 20061027001373 (Document 1373).

5. "Order on Show Cause Re Contempt/Judgment" entered on June 12, 2006 and recorded under King County Auditor's Number 20061027001374 (Document 1374).

6. "Order Requiring Appellant to File Complete Report of Proceedings" entered on July 18, 2006 and recorded under King County Auditor's Number 20061027001375 (Document 1375).

7. "Order Regarding Closing of Sale of Real Property Located at 10263 Maplewood Pl. S.W., Seattle and Distribution of Proceeds" entered on August 28, 2006 and recorded under King County Auditor's Number 20061027001376 (Document 1376).

¶ 12 In July 2006, the Bank filed an action against Owens, seeking payment of the debt she guaranteed. In November 2006, the Bank amended its complaint to add a claim "in rem" against any separate property of Owens awarded to Treiger. The trial court awarded the Bank judgment in the amount of $593,519.24. The Bank moved for a prejudgment writ of attachment on the Maplewood property. The trial court granted the Bank's motion and directed the issuance of a prejudgment writ of attachment on the Maplewood property against only Owens' interest in the property. A writ of attachment issued in accordance with the court's order and was recorded on December 20, 2006.

¶ 13 The Maplewood property was sold in May 2007. Because of the conflicting claims against the property or its proceeds, the title company would not insure the pending sale unless the parties with the claims entered an agreement allowing the sale to close. Accordingly, Owens, Treiger, the Bank, the title insurance company, Owens' attorney, and the trustee entered an "Agreement Regarding Closing of Sale and Holding of Net Proceeds in Trust" (the trust agreement). In the trust agreement, the parties agreed to execute the necessary documents to allow the sale to close and the title company to insure the purchasers' title. The parties also agreed that any of them could file a declaratory judgment action, naming the other parties as defendants and seeking a declaration regarding the priority and extent of the claims asserted by Owens, Treiger, the Bank, and Owens' attorney in the net sale proceeds held in trust by the trustee. The trust agreement recites: "Owens, as her separate estate, is the owner of the Property."

¶ 14 After the proceeds from the sale of the Maplewood property were placed in trust pursuant to the trust agreement, the Bank filed a declaratory judgment action to determine the priority of the parties' claims to the funds and the amount of those claims. On cross motions for summary judgment brought by Owens, Treiger, and the Bank, the trial court concluded that the matter was controlled by the trust agreement in which the parties agreed that the Maplewood property was Owens' separate estate. The court also concluded that apart from the money judgments, the supplemental decree did not grant Treiger a lien or other interest in the Maplewood property, but rather awarded him half of the proceeds from the sale of the property, "which is one-half of the monies received by Owens as the seller of the Maplewood [p]roperty after payment of all encumbrances including deeds of trust and recorded liens which attached to the Maplewood [p]roperty prior to the sale on May 20, 2007." The court ordered distribution of the net proceeds from the sale of the Maplewood property in the following order:

(1) payment of Owens' $40,000 homestead exemption;

(2) payment to Treiger of the four judgments he recorded on October 27, 2006 (documents 1371, 1373, 1374, and the money judgments awarded in the supplemental decree);

(3) payment on the Bank's judgment lien which attached to the property pursuant to the prejudgment writ of attachment;

(4) payment to Treiger of other judgments entered and recorded after the Bank recorded its writ of attachment; and

(5) payment of any remaining amount held in trust to Treiger and Owens in accordance with the supplemental decree of dissolution or any other order entered in the dissolution proceeding.

¶ 15 Treiger appeals, arguing that the trial court erred by determining that the Maplewood property was Owens' separate property and by granting the Bank's prejudgment writ of attachment priority over documents 1370, 1375, and 1376.

ANALYSIS

Characterization of the Maplewood Property

¶ 16 Treiger argues that the trial court erred not only by finding that the trust agreement governed the character of the Maplewood property but by characterizing the property after Owens purchased it from the bankruptcy estate as Owens' separate property. We disagree.

¶ 17 Central to Treiger's arguments is his allegation that the Maplewood property was community property even after his bankruptcy trustee quitclaimed the property to Owens. However, the character of property as community or separate is determined as of the date of its...