Carlson v. Gibraltar Sav. of Washington, F.A.

• Decision Date: 25 January 1988
• Docket Number: Nos. 19717-7-,19724-0-I,s. 19717-7-
• Court: Washington Court of Appeals
• Parties: Richard CARLSON, and Doris Carlson, husband and wife, Appellants, v. GIBRALTAR SAVINGS OF WASHINGTON, F.A., a federally chartered savings and loan association, f/d/b as Queen City Savings and Loan, a state chartered savings and loan association; and Mad Dog Builders, Inc., a Washington corporation, Respondents. James J. HAWKINS, a single man, Appellant, v. GIBRALTAR SAVINGS OF WASHINGTON, F.A., a federally chartered savings and loan association, f/d/b as Queen City Savings and Loan, a state chartered savings and loan association; and Mad Dog Builders, Inc., a Washington corporation, Respondents.

Page 424

50 Wn.App. 424

749 P.2d 697

Richard CARLSON, and Doris Carlson, husband and wife, Appellants, v. GIBRALTAR SAVINGS OF WASHINGTON, F.A., a federally chartered

savings and loan association, f/d/b as Queen City Savings

and Loan, a state chartered savings and loan association;

and Mad Dog Builders, Inc., a Washington corporation, Respondents.

James J. HAWKINS, a single man, Appellant, v. GIBRALTAR SAVINGS OF WASHINGTON, F.A., a federally chartered

savings and loan association, f/d/b as Queen City Savings

and Loan, a state chartered savings and loan association;

and Mad Dog Builders, Inc., a Washington corporation, Respondents.

Nos. 19717-7-I, 19724-0-I.

Court of Appeals of Washington Division 1.

Jan. 25, 1988.

David A. Leen, Leen & Moore, William R. Bishin, Seattle, for appellants Richard and Doris Carlson.

Jonathan B. Noll, Foster, Pepper & Riviera, Seattle, for respondent Gibralter Sav. of Washington.

Charles B. Allen, Bellevue, for James J. Hawkins.

Gary Gosanko, Seattle, for Mad Dog Builders, Inc.

PEKELIS, Judge.

James J. Hawkins and Richard and Doris Carlson appeal from a summary judgment dismissing their action to invalidate a trustee's sale.

I.

David and Susan Hawkins are the officers and shareholders of Mad Dog Builders, Inc. ("Mad Dog"). Appellant James Hawkins is the son of David and Susan Hawkins. Appellants Richard and Doris Carlson are friends and neighbors of the Hawkins'. In June, 1980, the Carlsons loaned $15,000 to Mad Dog. The loan was secured by a deed of trust on property owned by Mad Dog at 714 Bellevue Avenue East in Seattle ("the property"). In order to develop condominium units on the property, Mad Dog borrowed $2,500,000 from Queen City Savings and Loan Association ("Queen City") in August, 1980. This loan, too, was secured by a deed of trust on the property. The Carlsons agreed to subordinate their interest to that of Queen City.

By late 1981, Mad Dog had encountered financial difficulties and was unable to pay its subcontractors. Several materialmen's liens were filed, among them that of Lone Star Industries, Inc. ("Lone Star"). ¹ On March 8, 1982, Mad Dog was notified that the Queen City loan was in default. On June 1, 1982, the trustee under the deed of trust sent Mad Dog a notice of foreclosure and notice of trustee's sale. The sale was scheduled to take place on September 10, 1982.

On July 28, 1982, Mad Dog and David and Susan Hawkins commenced a lawsuit against Queen City ("the Queen City lawsuit"), alleging that Queen City had breached its loan commitment. On September 10, 1982, the day of the scheduled sale, Mad Dog obtained a preliminary injunction preventing Queen City from foreclosing on the property for 6 months. On February 2, 1983, upon Queen City's motion to dissolve or modify the preliminary injunction, the court ordered that the injunction would terminate on March 10, 1983, and that the trustee's sale should take place on April 29, 1983.

On March 10, 1983, a second notice of trustee's sale was sent to Mad Dog, the Carlsons, and Lone Star, informing them that the sale would take place on April 29, 1983. However, Mad Dog obtained an automatic stay when it filed for bankruptcy in April, 1983. As a result of the bankruptcy proceedings, the sale was postponed. On June 20, 1983, a bankruptcy judge dissolved the stay, thus permitting the sale to proceed.

Meanwhile, Mad Dog renewed its efforts in state court to have the sale enjoined. In April, 1983, Mad Dog made a motion to extend the preliminary injunction, which was denied. On June 23, 1983, the day before the scheduled sale, Mad Dog brought a motion for reconsideration of this order. The motion was heard on June 24, 1983, and was denied at 1:50 p.m. The trustee's sale took place the same day at 2:15 p.m., ² at which time the property was sold to Queen City for $3,389,879.22, the amount of the debt secured by the deed of trust. The sale to Queen City extinguished Lone Star's and the Carlsons' interest in the property.

Mad Dog proceeded with its lawsuit against Queen City for breach of the loan agreement. In February, 1984, the jury found, by special verdict, that Queen City had breached its agreement to loan Mad Dog sufficient funds to complete the condominium project and awarded Mad Dog and David and Susan Hawkins a total of $350,000 in damages for lost profits. Both sides appealed.

On May 25, 1984, Mad Dog and David and Susan Hawkins brought a second lawsuit against Queen City ("the foreclosure lawsuit"). This cause of action was based on Mad Dog's claim that the judgment in the earlier Queen City lawsuit had established that the foreclosure was improper. On this basis, they sought to set aside the foreclosure sale and quiet title to the property in Mad Dog. Shortly thereafter, Queen City went into receivership. Respondent Gibraltar Savings of Washington ("Gibraltar") acquired substantially all the assets and liabilities of Queen City, including the property, the judgment in the Queen City lawsuit, and the defense of the foreclosure lawsuit.

On October 5, 1984, Mad Dog and David and Susan Hawkins entered into a settlement agreement with Gibraltar. Gibraltar agreed to pay $498,000 to the Hawkins' and Mad Dog's creditors. In addition, Gibraltar granted Howell Street Associates, Inc. ("Howell Street"), the Hawkins' designee, an option to purchase the property for $1,374,000 which was to be exercised on or before January 1, 1985. In exchange, the Hawkins agreed to release all claims against Gibraltar. Pursuant to the settlement agreement, the Queen City lawsuit and the foreclosure lawsuit were dismissed with prejudice. Although Gibraltar granted it an extension, Howell Street was unable to obtain the financing it needed and the option expired on March 7, 1985. ³

In July, 1986, Hawkins was advised that Gibraltar had entered into a contract to sell the property to 714 Joint Venture. On August 13, 1986, appellants Richard and Doris Carlson initiated this lawsuit against Gibraltar, seeking to invalidate the foreclosure sale and reinstate their interest in the property. On August 15, appellant James Hawkins, the son of David and Susan Hawkins, purchased Lone Star's lien. Three days later, on August 18, James Hawkins, as assignee of Lone Star's lien, brought a separate lawsuit against Gibraltar seeking to invalidate the foreclosure sale, reinstate the lien, and enjoin Gibraltar from selling the property.

The two suits were consolidated, and both sides moved for summary judgment. On November 14, 1986, the trial court granted Gibraltar's motion for summary judgment, finding that the trustee's sale complied with RCW Chapter 61.24 and the requirements of Cox v. Helenius, 103 Wash.2d 383 693 P.2d 683 (1985). After their motions for reconsideration were denied, James Hawkins and the Carlsons brought this appeal.

II.

On an appeal from an order of summary judgment, the reviewing court engages in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). A motion for summary judgment should be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. CR 56(c). The court must consider all facts submitted and all reasonable inferences therefrom in the light most favorable to the nonmoving party, and the motion should be granted only if, from all the evidence, reasonable persons could reach but one conclusion. Wilson, 98 Wash.2d at 437, 656 P.2d 1030.

The appellants contend that the trial court erred in determining that the trustee's sale complied with RCW Chapter 61.24. Specifically, they argue that the sale was improper because there was no default on the underlying obligation secured by the deed of trust, see RCW 61.24.030(3) (1983), ⁴ and because there was an action pending on the underlying obligation, see RCW 61.24.030(4) (1983). ⁵ They also argue that the sale was improperly rescheduled under RCW 61.24.130(3) after the termination of the preliminary injunction, and that Gibraltar exceeded the time provided for continuance of the sale under RCW 61.24.040(6). Finally, the appellants argue that on June 24, 1983, the sale was continued until 2:15 p.m. without the "public proclamation" required by RCW 61.24.040(6).

The trial court found, as Gibraltar contended, that the trustee's sale complied with all the requirements of RCW Chapter 61.24. In addition, Gibraltar argues on appeal, as it did at trial, that the suit is barred by laches. This court may affirm the trial court's judgment on any theory argued below. Lew v. Seattle School Dist. 1, 47 Wash.App. 575, 579, 736 P.2d 690 (1987). While it was unnecessary for the trial court to reach the issue of laches, we take a different approach, decide that issue first, and hold that the suit is barred by laches. We emphasize, however, that we do so not because we have evaluated and rejected the trial court's rationale. Rather, we believe that where laches bars an action, logic and judicial economy dictate that the court avoid the substantive issues altogether.

III.

Laches is an implied waiver arising from knowledge of a given state of affairs and acquiescence in it. Buell v. Bremerton, 80 Wash.2d 518, 522, 495 P.2d 1358 (1972). The elements of laches are:

(1) knowledge or reasonable opportunity to discover on the part of a potential plaintiff that he has a cause of action against a defendant; (2) an unreasonable delay by the plaintiff in commencing that cause of action [and]; (3) damage to [the] defendant resulting from the unreasonable delay.

Buell, 80 Wash.2d at 522, 495 P.2d 1358.

A.

The record shows that the appellants knew or should have known by early 1983 that they might have a cause of action against Queen City. Both the Carlsons and Lone Star, James Hawkins' assignor, received notice of the trustee's...