Felton v. Citizens Federal Sav. and Loan Ass'n of Seattle

• Decision Date: 05 April 1984
• Docket Number: No. 49070-8,49070-8
• Citation: 101 Wn.2d 416,679 P.2d 928
• Court: Washington Supreme Court
• Parties: Harold G. FELTON & Larell C. Felton, husband and wife, Appellants, v. CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION OF SEATTLE, A Federally Chartered Savings and Loan Association; Pioneer National Title Insurance Company, A Washington Corporation; Transamerica Title Insurance Company, A Foreign Corporation; Frank Desimone, Sr. & Lisa Desimone, husband and wife and the marital community composed thereof; and, Louis Desimone & Jane Doe Desimone, husband and wife and the marital community composed thereof, Respondents.

Page 416

101 Wn.2d 416

679 P.2d 928

Harold G. FELTON & Larell C. Felton, husband and wife, Appellants, v. CITIZENS FEDERAL SAVINGS AND LOAN ASSOCIATION OF SEATTLE, A

Federally Chartered Savings and Loan Association; Pioneer

National Title Insurance Company, A Washington Corporation;

Transamerica Title Insurance Company, A Foreign Corporation;

Frank Desimone, Sr. & Lisa Desimone, husband and wife and

the marital community composed thereof; and, Louis Desimone

& Jane Doe Desimone, husband and wife and the marital

community composed thereof, Respondents.

No. 49070-8.

Supreme Court of Washington,

En Banc.

April 5, 1984.

Stephen Cramer, Des Moines, for appellants.

Tewell, Thorpe & Findlay, Inc., Richard Thorpe, Seattle, for respondent Citizens Fed. Savings & Loan Assoc.

Michael Alfieri, Seattle, for respondent Desimone, et al.

Preston, Thorgrimson, Ellis & Holman, John Gose, Shannon Skinner, Seattle, amicus for respondents.

DORE, Justice.

This is an appeal from a summary judgment dismissing appellants' action on the ground that a homestead is not exempt from a nonjudicial sale conducted pursuant to a power of sale in a deed of trust. We affirm.

In 1979, Harold and Larell Felton, appellants, purchased a residence in Renton from Bernard and Florence Barringer. As a part of this transaction the Feltons assumed a $48,000 purchase money obligation the Barringers owed respondent Citizens Federal Savings and Loan Association (Citizens). This debt was secured by a deed of trust, which the Feltons and Citizens agreed would also secure the Feltons' assumed obligations. The deed of trust allowed Citizens to "invoke the power of sale" pursuant to applicable law if the Feltons defaulted. It also allowed the trustee to postpone the sale of the property "for a period or periods not exceeding 30 days" by public announcement at the time and place fixed in the notice of sale.

On January 25, 1980, the Feltons filed a declaration of homestead on the property.

Notice of default was sent to the Feltons on February 20, 1981. On August 14, 1981, a Notice of Trustee's Sale was recorded, scheduling the sale for November 20, 1981. At the Feltons' request, the trustee postponed the sale to December 18, 1981, then to January 8, 1982, and finally to March 12, 1982. The sale was conducted on March 12, despite Mr. Felton's last minute attempts to arrange a contract assignment to avoid the sale.

On April 1, 1982, the Feltons filed the present action seeking to void the trustee's sale and to quiet their title to the property. The trial court granted Citizens' motion for summary judgment of dismissal. The Feltons appeal directly to this court for a determination of whether a homestead is exempt from a nonjudicial foreclosure sale conducted pursuant to a power of sale in a deed of trust.

I

Article 19, section 1 of the Washington State Constitution provides:

The legislature shall protect by law from forced sale a certain portion of the homestead and other property of all heads of families.

In response to this constitutional mandate, the Legislature passed, in 1895, what is now RCW 6.12, the homestead act. The act exempts from "execution or forced sale" the homestead, except as provided in the statute. RCW 6.12.090. (The homestead is defined in RCW 6.12.010-.050.) The exceptions to this general exemption of homestead property are found in RCW 6.12.100, which states, in pertinent part:

The homestead is subject to execution or forced sale in satisfaction of judgments obtained:

(1) On debts secured by ... vendor's liens upon the premises;

(2) On debts secured by ... mortgages on the premises, executed and acknowledged by the husband and wife or by any unmarried claimant; ...

The Feltons contend that their homestead is exempt from a nonjudicial trustee sale because such a sale is an "execution" or "forced sale" under RCW 6.12.090. This would mean that the only way Citizens could reach the Feltons' homestead would be through one of the exceptions to the general rule of exemption. RCW 6.12.100. The exceptions found in RCW 6.12.100, however, appear to allow only certain types of judgment creditors to reach the homestead. Citizens is not a judgment creditor.

The Feltons argue that this statutory scheme sets up a potential conflict between RCW 6.12 and those provisions of RCW 61.24 (trust deed act) which allow nonjudicial trustee sales of residential property. This conflict, the Feltons argue, can only be resolved by requiring all deeds of trust involving homestead property to be foreclosed judicially. ¹

II

Before we reach the issue of whether the Feltons' homestead is exempted from a nonjudicial trustee sale by the homestead act, we must determine whether or not the Feltons' declaration of homestead was valid. Citizens argues that the Feltons were unable to declare a homestead in this case because the deed of trust assumed by the Feltons was, in effect, a conveyance of the property. This would mean that appellants had nothing in which to claim a homestead. ²

Citizens' argument is, basically, an assertion that one must have a legal, as opposed to equitable, interest in a declared homestead. Defendant relies on Security Sav. & Loan v. Busch, 84 Wash.2d 52, 523 P.2d 1188 (1974) for this proposition. In Busch, however, the court held that a valid homestead on property in which a family had a legal interest was extinguished when the family "voluntarily parted with all interest in the ... property by means of a quitclaim deed." Busch, at 56, 523 P.2d 1188. The court based its conclusion on the fact that the quitclaim deed conveyed all legal and equitable rights in the property. Busch, at 56, 523 P.2d 1188. Busch does not, then, stand for the proposition that a legal interest in the subject property is a prerequisite for any homestead declaration. Indeed, as was stated (in dicta) in Desmond v. Shotwell, 142 Wash. 187, 188, 252 P. 692 (1927), "nowhere in the [homestead] statutes ... is there any requirement that the person asserting the right must own either a legal or an equitable interest in the property claimed." What was required by RCW 6.12 at all times relevant to this case was that homestead claimants live on the property as their home, or intend to do so. RCW 6.12.050. Thus, possession was (and is) the key to the right to homestead. In Edgley v. Edgley, 31 Wash.App. 795, 644 P.2d 1208 (1982), the court stated:

[T]he right to a homestead does not depend upon title, but upon occupancy and use. See also 73 A.L.R. 116, 128 (1931); 74 A.L.R.2d 1355 (1960). The statute is designed to protect the home; there is no provision for apportioning interest. To this end, the statute has been interpreted not to deprive a declarant of the right to a homestead where another party also has an interest in the property. Downey v. Wilber, 117 Wash. 660, 202 P. 256 (1921); Desmond v. Shotwell, 142 Wash. 187, 252 P. 692 (1927); Swanson v. Anderson, 180 Wash. 284, 38 P.2d 1064 (1934).

31 Wash.App. at 797-98, 644 P.2d 1208.

In short, there has never been any statutory or common law requirement that the "owner" of a homestead in Washington have a legal interest in the property. A homestead may be based upon the equitable interest of a grantor of a deed of trust. ³ Thus, the Feltons' declaration of homestead was valid.

III

This conclusion brings us to the question of whether a homestead is exempt from a nonjudicial trustee sale conducted pursuant to a power of sale in a deed of trust. In order for a homestead to be exempted from a trustee sale by RCW 6.12.090, such sale must come under the category of either a "forced sale" or an "execution". ⁴ RCW 6.12.090.

A

Is a nonjudicial foreclosure sale under a deed of trust a forced sale? The legislative history of the homestead act, passed in 1895, is of little help. However, decisions of that era interpreting the phrase "forced sale" indicate that a sale conducted by a trustee pursuant to a deed of trust empowering him to sell is not a forced sale. In Peterson v. Hornblower, 33 Cal. 266 (1867), the California Supreme Court interpreted the meaning of "forced sale" as it appeared in the California Constitution homestead provision (which contained the same language as is found in the Washington Constitution, article 19, section 1). The court stated:

[W]here the owner of the homestead consents to a sale under execution or other legal process, it is not a forced sale. It makes no difference in respect to it being forced or voluntary, whether he consents directly to the sale or does the same indirectly by consenting to or doing those acts or things that necessarily or usually eventuate in a sale. A foreclosure sale, whether under the power of sale contained in the mortgage or in pursuance of a decree, is not a forced sale within the meaning of the Constitution or the statute.

33 Cal. at 277.

In Moran v. Clark, 30 W.Va. 358, 377, 4 S.E. 303 (1887), the West Virginia Supreme Court in concluding that "[t]he sale of the homestead under a deed of trust, or under a decree of foreclosure of a mortgage thereon, is not a 'forced sale,' within the meaning of the Constitution, which exempts a homestead from 'forced sale' ", stated:

[N]early all cases so hold and, it seems to us, with reason. It is hard to see how a sale can be called "forced" where one consents, either directly or indirectly, that it shall be made, and in the very instrument in which the lien is created. He does it directly when he executes a power of sale, and he does so indirectly when he does that which at the time was intended in a certain contingency should eventuate in a sale of the property.

30 W.Va. at 375, 4 S.E. 303. See also Hicks v. Mid-Florida Production Credit Ass'n, 374 So.2d 566 (Fla.Dist.Ct.App.1979); Curtis Inn v. Pratte, 94 N.H. 380, 54 A.2d 357, 359 (1947); Karcher v. Gans, 13 S.D. 383, 83 N.W. 431 (1900); Morris v. Marshall, 305 S.E.2d 581 (W.Va.1983). ⁵

Washington courts have defined a forced sale as follows:

A forced sale is...