BNC Mortgage, Inc. v. Tax Pros, Inc.
| Citation | 111 Wash.App. 238,46 P.3d 812 |
| Decision Date | 19 April 2002 |
| Docket Number | No. 26048-4-II.,26048-4-II. |
| Parties | BNC MORTGAGE, INC., a California corporation, Appellant, v. TAX PROS, INC., an Oregon corporation, Respondents. Floyd B. Scott and Margaret E. Scott, husband and wife, Defendants. |
| Court | Court of Appeals of Washington |
46 P.3d 812
111 Wash.App. 238
v.
TAX PROS, INC., an Oregon corporation, Respondents.
Floyd B. Scott and Margaret E. Scott, husband and wife, Defendants
No. 26048-4-II.
Court of Appeals of Washington, Division 2.
April 19, 2002.
Donald Jeffrey Courser, Stoel Rives Llp, Vancouver, for Appellant.
BNC Mortgage, Inc., and Tax Pros, Inc., hold liens on the same piece of real property. Each claims that its lien is superior to the other's. The trial court held that Tax Pros' lien is superior, and we affirm.
In 1993, Floyd and Margaret Scott owned and operated a corporation called Mobile Truss, Inc. (hereinafter Mobile). Mobile borrowed money from Tax Pros. The Scotts personally guaranteed that Mobile would pay its debt. Mobile defaulted and later declared bankruptcy.
On December 9, 1994, in Clark County Superior Court cause number XX-X-XXXXX-X, Tax Pros sued the Scotts on their personal guarantee. On December 12, 1994, Tax Pros and the Scotts stipulated to a prejudgment writ of attachment.1 On December 13, 1994, the sheriff recorded the writ with the Clark County Auditor, thus attaching the Scotts' Clark County residence.2
On May 5, 1995, Tax Pros moved for partial summary judgment. On September 29, 1995, the superior court granted Tax Pros' motion. The court ruled that the record showed, so clearly reasonable minds could not differ, that the Scotts owed Tax Pros $268,009. The court expressly directed entry of a partial final judgment, even though it had yet to resolve some of Tax Pros' claims. The judgment was entitled "Partial Summary Judgment" and included, pursuant to CR 54(b), the following language:
4. All other issues not specifically resolved herein shall remain for trial.
5. The Court finds that defendants are liable to plaintiffs for the amount set forth herein, that continued delay in the collection of this amount is detrimental to the plaintiff and the interests
In January 1996, the Scotts obtained a $285,000 loan from Ford Consumer Finance Corporation. They secured the loan with a deed of trust against their residence. The deed was signed on January 23 and recorded on January 24. Tax Pros received $170,000 of the loan proceeds and partially satisfied its 1995 judgment.4 Because part of the $170,000 went to pay interest, the unpaid balance on Tax Pros' judgment continued to exceed $100,000.
In exchange for receiving the $170,000, Tax Pros made two concessions pertinent here. First, it signed a written subordination contract dated January 18, 1996. That agreement provided in part as follows:
1. Tax Pros, Inc .... [,] referred to herein as "subordinator", is the owner and holder of an Amended Judgment entered in Clark County Superior Court Cause # XX-X-XXXXX-X.
2. Ford Consumer Finance Company[,] referred to herein as "lender", is the owner and holder of a mortgage dated January 23, 1996, executed by Floyd and Margaret Scott, recorded under Auditor's file No. 9601240050.
3. Floyd Scott and Margaret Scott, husband and wife, referred to herein as "owner", are the owners of all the real property described in the mortgage identified above in paragraph 2.
4. In consideration of benefits to "subordinator" from "owner", receipt and sufficiency of which is hereby acknowledged, and to induce "lender" to advance funds under its mortgage and all agreements in connection therewith, the "subordinator" does hereby unconditionally subordinate the lien of his mortgage identified in Paragraph 1 above to the lien of "lender's["] mortgage, identified in Paragraph 2 above.[5]
Second, Tax Pros agreed not to pursue its unresolved claims in Clark County cause XX-X-XXXXX-X—if the Scotts made regular monthly payments on the remaining balance of its 1995 judgment. If the Scotts failed to make such payments, Tax Pros would further prosecute those claims.
After the Ford loan transaction, the Scotts did not make regular monthly payments on the balance of Tax Pros' judgment. Almost immediately, they were again in default to Tax Pros.
In March 1996, the Scotts sought a loan from BNC. BNC was willing to loan $378,750, secured by a deed of trust against the Scotts' residence and subject to various other conditions. Accordingly, it established an escrow and obtained a title report showing Tax Pros' 1994 lawsuit, 1995 judgment, and 1996 subordination agreement with Ford.
On May 31, 1996, while the loan was still in escrow, BNC asked Tax Pros to sign a subordination agreement in favor of BNC. Tax Pros refused.
BNC's loan closed in late July 1996, notwithstanding Tax Pros' refusal to sign a subordination agreement in BNC's favor. Ford was paid the amount remaining on its deed of trust ($272,885), Tax Pros was paid the amount remaining on its "Partial Summary Judgment" ($129,082), and Tax Pros filed a full satisfaction of its partial summary judgment.
In April 1997, Tax Pros asked for a trial on its unresolved claims in cause number XX-X-XXXXX-X. In June 1997, after a three-day bench trial, the court ruled that the Scotts owed Tax Pros an additional $107,321 in damages, plus reasonable attorney fees and costs. The Scotts then filed for personal bankruptcy, so the entry of judgment was delayed.
only against the assets of Floyd and Margaret Scott secured in favor of [Tax Pros] by way of the Writ of Attachment previously entered in this matter.... Said previously issued Writ of Attachment is expressly preserved and the property attached therein is subject to execution to be issued pursuant to this judgment.[6]
In July 1999, BNC filed the present declaratory judgment action against Tax Pros and the Scotts. BNC alleged that its deed of trust was superior to Tax Pros' 1999 judgment. BNC also alleged that Ford's deed of trust was superior to the 1999 judgment because of the Ford-Scott-Tax Pros subordination agreement, and that BNC should be equitably subrogated to Ford's deed of trust.
On or about October 1, 1999, Tax Pros moved for summary judgment.7 Its Oregon counsel, a man named Roy Thompson, testified about the context within which the written subordination agreement had been signed. He stated in the first of his two affidavits:8
7. In late 1995 settlement discussion began [with] ... counsel for Floyd and Margaret Scott. The parties eventually agreed that in order to allow the Scotts to obtain financing, Tax Pros would subordinate its first position Writ of Attachment to a $285,000 deed of trust in favor of Ford Consumer Credit Corporation. $170,000 of the $285,000 loan was to be paid to Tax Pros. In order to protect Tax Pros' then second position security interest, the remaining loan proceeds were to be used to complete the home. As a further protection, the Scotts were to make monthly payments at an agreed upon interest rate. Tax Pros would forgive further litigation or collection efforts against the Scotts as long as these payments were made. If payments were not made, Tax Pros would be free to proceed further against the Scotts.[9]
Thompson stated in the second of his two affidavits:
3. My [first] Affidavit was drafted by Tax Pros' Washington counsel and proofread by me. The Affidavit was drafted inaccurately by Washington counsel. I did not catch the error ... before signing it.
4. In fact, the Writ of Attachment was never discussed with Ford Consumer Finance Co. When Tax pros initially settled with the Scotts in early 1996, the agreement was that Tax Pros' existing judgment would be subordinated to the Ford Consumer Finance Co. Deed of Trust. The Judgment was to be amended to add language I though[t] important to Tax Pros. The Scotts were to make payments on the balance of the judgment. If they made the payments to completion, there would be no further litigation....
5. The settlement strategy was to use the unlitigated claims as additional security against the Scott's failure to make payments on the portion of the judgment remaining unpaid after payment from the proceeds of the Ford loan.... At no time did Tax Pros intend to subordinate the unliquidated claims to the Ford loan.
6.... Subordinating the entire set of claims ... was never proposed by Ford. Had it been, it would have been
On October 21, 1999, BNC asked to postpone the hearing on Tax Pros' motion. It said that "through such discovery devices as interrogatories and/or depositions," it wanted to explore "the intent of the parties to the original subordination agreement."11 In the end, however, BNC never offered testimony from Ford, the Scotts, or anyone else involved in the Ford loan transaction. It relied exclusively on Thompson's testimony supplemented by the escrow file from its own loan transaction.12
In January 2000, the trial court granted Tax Pros' motion for summary judgment. It ruled or assumed that Tax Pros' 1999 judgment related back to the 1994 writ of attachment, and thus was superior to BNC's deed of trust. It expressly ruled that Tax Pros had not subordinated its 1999 judgment to Ford's deed of trust; that Tax Pros' 1999 judgment related back to its 1994 writ of attachment; and that Tax Pros' 1999 judgment was superior to Ford's deed of trust. It commented that if it had found Ford's deed of trust to be superior, it would have subrogated BNC to Ford's lien.
In February 2000, BNC obtained new counsel and sought reconsideration. The trial court allowed BNC to present additional evidence, re-examined its determinations, and reached the same result. In May 2000, the trial court entered a final...
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