Butko v. STEWART TITLE
| Decision Date | 21 January 2000 |
| Docket Number | No. 23208-1-II.,23208-1-II. |
| Citation | 991 P.2d 697 |
| Parties | Anne I. BUTKO, a widow; Richard Butko, a single man; Creekridge Glen, Inc., a Washington corporation; Richard Butko, for and on behalf of Madrona, Inc., a Washington corporation; and Parkview Point, Inc., a Washington corporation, Appellants, v. STEWART TITLE COMPANY OF WASHINGTON, INC., Respondent. |
| Court | Washington Court of Appeals |
Guy William Beckett, Seattle, for Appellants.
Richard Edward Keefe, Peter Scott Ehrlichman, Camden Michael Hall, Foster Pepper & Shefelman, Seattle, for Respondent.
Anne Butko and her son, Richard Butko, sued escrow agent Stewart Title Company of Washington, Inc. over the 1993 closing of a loan and real estate transaction. They alleged that Stewart Title engaged in breach of contract, fraud, conspiracy, intentional interference with a business expectancy, breach of fiduciary duties, negligence, and conversion. The trial court dismissed the matter on summary judgment. Finding genuine issues of material fact only as to Richard Butko's breach of fiduciary duty claim and Anne Butko's conversion claim, we affirm in part and reverse in part.
In the 1980s, Anne Butko, Richard Butko, attorney G. Patrick Healy, and Patrick Healy's brother, Michael Healy, formed about two dozen corporations and partnerships, each pertaining to a particular property. The following background information is necessary to understand the dispute between these former partners and Stewart Title Company of Washington, Inc. (Stewart Title).
Anne Butko, Patrick Healy, and Michael Healy were co-equal shareholders in Creekridge Glen, Inc. In July 1990, Anne Butko and the Healys, acting as co-equal shareholders in Creekridge Glen and in another corporation, Healko, purchased 722 acres located in Pierce County (Creekridge Glen property). In October 1992, over Anne Butko's objection, Patrick Healy conveyed the Creekridge Glen property to C. G., Inc., a new corporation jointly owned by the Healy brothers.1 In January 1993, C. G., Inc. filed for bankruptcy and listed Anne Butko as codebtor. In August 1993, Patrick Healy pledged the Creekridge Glen property to secure the Shulman loan, described below.
Anne Butko and the Healy brothers also were co-equal shareholders and directors of Parkview Point, Inc. Ten Parkview Point subdivision lots had been pledged as additional security for the loans (the Centrum and Macri loans discussed below) used to finance the purchase of the Creekridge Glen property. Sometime later, Anne Butko and Patrick Healy conveyed the Parkview Point property from one of their partnerships, Healy Palisades, to Parkview Point.
In 1993, Patrick Healy conveyed nine of the Parkview Point lots pledged as security for the Centrum and Macri loans to the assignees of those notes, and pledged another five lots as security for the Shulman loan.2 Anne Butko claims she did not authorize those transactions.
Richard Butko and Patrick Healy were co-equal shareholders and directors in Madrona, Inc., which held title to property in Pierce County (Madrona property). In October 1992, Patrick Healy acquired Richard Butko's interest in Madrona over Richard Butko's objection. In 1993, Patrick Healy pledged 71 Madrona lots as security for the Shulman loan.3
To finance the purchase of the Creekridge Glen property, Anne Butko and the Healys signed promissory notes for two loans: one in favor of Centrum Financial Services (Centrum note), and one in favor of Macri Investments (Macri note). As security for these two loans, they each pledged their personal residences and other properties.4 They defaulted on the Centrum and Macri notes in February 1991, interest began accruing at 36 percent, and the lenders initiated various foreclosure actions.
After Patrick Healy put C. G., Inc. into Chapter 11 bankruptcy proceedings, Centrum moved to lift the Chapter 11 stay or, in the alternative, dismiss the case. Meanwhile, Patrick Healy sought a loan from equity financier Alex Shulman, trustee of Alaska Distributors Company 1990 Restated Profit Sharing Plan and Trust, to pay off the Centrum and Macri notes. Shulman agreed to loan $1.7 million to C.G., Inc. and Madrona, Inc. The Creekridge Glen property, 71 lots of the Madrona property, five Parkview Point lots, and other property located in King County served as security for the new loan.
Contemporaneously with the Shulman loan negotiations, Patrick Healy negotiated with Raymond Davis, in-house counsel for Stewart Holding Company (Stewart Holding), who was attempting to collect on the Centrum note on behalf of assignee Stewart Guaranty, and with Peter Murphy, president of Jackpot Investments, Inc., assignee of the Macri note.5 Stewart Title Guaranty (Stewart Guaranty) and Pacific Northwest Realty Holding Company (another Stewart entity, and parent company of Jackpot),6 eventually agreed to satisfy the notes for $1,158 million in cash and deeds to nine of the Parkview Point lots pledged as security for the 1990 loans.
The parties retained Stewart Title to close the Shulman loan and the Parkview Point conveyance simultaneously.
On June 25, 1993, Stewart Holding in-house counsel Davis faxed a letter to Stewart Guaranty counsel Ed Sato listing Stewart Holding's conditions for satisfying the Centrum and Macri notes (Sato letter). One of these conditions was a corporate resolution containing Anne Butko's signature authorizing the conveyances. In what he described as "an excess of caution," Davis "wanted Anne Butko to confirm this deed in lieu of foreclosure." Davis also discussed these requirements with Murphy.
On June 25, 1993, Stewart Title sent Patrick Healy its request for a corporate resolution containing Anne Butko's authorization of the Parkview Point conveyance. Stewart Guaranty's conditions, as outlined in the Sato letter and discussed between Davis and Murphy, formed the basis of this request.
Patrick Healy then sent Stewart Title a Parkview Point corporate resolution authorizing conveyance of the lots to the Centrum and Macri assignees. But the resolution contained Patrick Healy's signature only. When the closing officer saw the resolution, she wrote: "This seems awfully self-serving to me!" on her copy of the document.
Unsure whether the Parkview Point resolution was adequate to close the transaction, the closing officer sought guidance from her supervisors (either Peter Murphy or the supervising closing officer). But when First American Title Insurance Company (FATCO) indicated it was willing to issue title insurance without first obtaining Anne Butko's signatures, Stewart Title decided it could also forego her signature.
On July 22, 1993, Richard Butko wrote the Healy brothers a letter in which he acknowledged Patrick Healy's request that he and his mother execute "various documents, agreements, consents to action" and that Anne Butko agree to additional encumbrances and promissory notes aimed at settling debts with Centrum, Macri, and others. Richard Butko requested detailed information regarding "the new financing which [Patrick Healy had] proposed."
On July 26, 1993, Patrick Healy sent a letter to Richard Butko's attorney containing a general discussion of Crestview Glen and Parkview Point in conjunction with the refinancing and a request that Richard Butko return the "Consent to Action" regarding Parkview Point. The letter did not mention Shulman or the upcoming closing.
Patrick Healy told Davis that he could obtain title insurance from FATCO without having to obtain Anne Butko's signature. He said that he was working on behalf of Anne Butko and she did not want to become involved any further in the transaction.7
FATCO's Pierce County manager/counsel Paul Hammann agreed to insure the transaction based in part on his perception that "Patrick Healy was running the show." Davis also approved of Healy's plan, and FATCO issued a commitment to issue title insurance.
Shulman issued a set of escrow instructions that included disbursements to the assignees of the Centrum and Macri notes but contained no specific instructions as to the Parkview Point conveyances. The instructions noted merely that the "Stewart Title Guaranty Company lien ... has been reconveyed or will be reconveyed simultaneously with the closing of this Loan." Neither the Shulman instructions nor the Sato letter lists Parkview Point or Anne Butko as parties to the transaction.
Patrick Healy filed the Shulman closing instructions and other documents pertaining to the Shulman loan in the C. G., Inc. Chapter 11 bankruptcy court file. Sato also filed a pleading in the bankruptcy case referencing the pending closing. But although Anne Butko was listed as a codebtor in the bankruptcy and had filed at least one pleading in the bankruptcy case, she did not receive a copy of the Shulman loan documents or Sato's pleading.
Closing commenced on August 18, 1993, when Shulman delivered a check to Stewart Title. Richard Butko claims he first learned of the closing on August 19. Then, late in the afternoon of August 19, counsel for the Butkos faxed a letter to Stewart Title (Butko letter) in which the Butkos asserted equitable ownership interests in the relevant properties and the corporations holding title to those properties.
Anne and Richard Butko claimed in the letter that (1) they had no advance knowledge of the closing and did not approve of it, (2) Healy lacked legal authority to carry out the transaction, and (3) the transaction was void...
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