Glidden v. Municipal Authority of Tacoma

• Decision Date: 15 July 1988
• Docket Number: No. 54509-0
• Citation: Glidden v. Municipal Authority of Tacoma, 111 Wn.2d 341, 758 P.2d 487 (Wash. 1988)
• Court: Washington Supreme Court
• Parties: Marian A. GLIDDEN, a widow, and Patricia D. Rourke, an attorney licensed to practice in the State of Washington, Plaintiffs, v. MUNICIPAL AUTHORITY OF TACOMA, a public corporation, Appellant, Old Stone Bank, a corporation, and McCarthy, Holum, Golob & Causseaux, Inc., P.S., a professional services corporation, Respondents, and Seattle First National Bank, a corporation; Abbott Consulting Services, Inc., a corporation; Mount Bay Corporation, a corporation; Vincents Apartment Washer Services, Inc., a corporation; Terrence F. McCarthy and "Jane Doe" McCarthy, husband and wife; Everett A. Holum and "Jane Doe" Holum, husband and wife; Gordon A. Golob and "Jane Doe" Golob, husband and wife; Stephen K. Causseaux and "Jane Doe" Causseaux, husband and wife; Wayne M. Glidden and Marian A. Glidden, husband and wife, and Patricia Rourke and "Jane Doe" Rourke, wife and husband, Third Party Defendants.

Page 341

111 Wn.2d 341

758 P.2d 487

Marian A. GLIDDEN, a widow, and Patricia D. Rourke, an attorney licensed to practice in the State of Washington, Plaintiffs, v. MUNICIPAL AUTHORITY OF TACOMA, a public corporation, Appellant Old Stone Bank, a corporation, and McCarthy, Holum, Golob &amp Causseaux, Inc., P.S., a professional services corporation, Respondents and Seattle First National Bank, a corporation; Abbott Consulting Services, Inc., a corporation; Mount Bay Corporation, a corporation; Vincents Apartment Washer Services, Inc., a corporation; Terrence F. McCarthy and "Jane Doe" McCarthy, husband and wife; Everett A. Holum and "Jane Doe" Holum, husband and wife; Gordon A. Golob and "Jane Doe" Golob, husband and wife; Stephen K. Causseaux and "Jane Doe" Causseaux, husband and wife; Wayne M Glidden and Marian A. Glidden, husband and wife, and Patricia Rourke and "Jane Doe" Rourke, wife and husband, Third Party Defendants.

No. 54509-0.

Supreme Court of Washington, En Banc.

July 15, 1988.

Steven L. Larson, Tacoma, for appellant.

Preston, Thorgrimson, Ellis & Holman, John A. Gose, Desmond L. Brown, Seattle, for Old Stone Bank of Wash.

Lane, Powell, Moss & Miller, Evan Thomas, Seattle, for McCarthy, Holum, Golob & Causseaux, Inc.

DURHAM, Justice.

In October 1986, Patricia Rourke, as trustee under a deed of trust, conducted a nonjudicial foreclosure sale of property in Pierce County. Appellant Municipal Authority of the City of Tacoma (Municipal Authority) was the successful bidder at the sale and received from Rourke a trustee's deed containing recitals that notice of the sale had been sent "to all persons entitled thereto", and that the sale complied in all respects to the notice requirements of Washington's deeds of trust act, RCW 61.24.

The issue presented for decision is what protection these recitals, and the "conclusive evidence" standard of RCW 61.24.040(7), afford Municipal Authority against a claim to the property asserted by respondent Old Stone Bank (OSB), a junior lienor who was not notified of the sale in the manner required by the deeds of trust act. Municipal Authority asserts that because it is a bona fide purchaser for value (BFP), RCW 61.24.040(7) vests it with clear title. OSB contends that because Municipal Authority is itself a junior lienor, the "conclusive evidence" rule of RCW 61.24.040(7) does not protect it from challenges based on flawed foreclosure procedures. OSB also asserts that Municipal Authority does not qualify as a BFP.

We hold that the "conclusive evidence" rule of RCW 61.24.040(7) applies to junior lienholders in the same manner as to disinterested purchasers. We find also that, in the posture this case comes to us, it cannot be said that Municipal Authority is not a BFP as a matter of law. Thus, we reverse the trial court's order of summary judgment in favor of OSB and remand the case for further proceedings.

I

The property in dispute, by means of separate deeds of trust, secured debts owed by the Mount Bay Corporation to plaintiff Marian Glidden ($37,640.16), respondent OSB ($88,500), and appellant Municipal Authority ($38,605). Glidden is the senior lienholder, with OSB and Municipal Authority, respectively, occupying the second- and third-order lienholder positions. There are at least two other junior lienors.

When Mount Bay defaulted on its debt to Glidden in 1986, Rourke, as trustee, initiated foreclosure proceedings pursuant to the power of sale provision in the Glidden deed of trust. In May 1986, Rourke notified Mount Bay that it was in default. On June 5, Rourke served on Mount Bay notice that the trust property would be sold at public auction on October 17, 1986, if Mount Bay's default was not cured before October 7. Rourke recorded this notice with the county auditor and posted it on the property but did not notify any of the junior lienholders about the impending foreclosure sale as required by RCW 61.24.040(1)(b).

Municipal Authority learned of the sale from the posted notice, and called Rourke on June 16 to request copies of the notice and of her foreclosure report. Between June 16 and October 17, the scheduled date of Rourke's sale, Municipal Authority and Rourke communicated on several occasions. On at least two of these occasions, Bryan Chushcoff, an attorney for Municipal Authority, asked Rourke if she had given notice of the planned foreclosure sale to junior encumbrancers. Rourke responded each time by saying: "Of course, Bryan, I always do." On the day of the sale, another Municipal Authority official asked Rourke if she had notified junior lienholders. Again she said that she had.

While Rourke's foreclosure plans were going forward, OSB set in motion its own foreclosure of the property. OSB initiated foreclosure proceedings in June and scheduled a sale for December. Rourke first learned of OSB's sale on June 20 in a phone conversation with OSB's attorney and received further notice of it in September, at which time she confirmed with OSB's trustee that OSB knew about Rourke's October sale. Municipal Authority also learned of OSB's planned sale in September.

Municipal Authority and Glidden were the only bidders at Rourke's sale. Glidden bid $37,640.19, the amount of Mount Bay's indebtedness to her. Municipal Authority bid $37,845. Rourke accepted Municipal Authority's bid.

Immediately after the sale, Chushcoff appeared at Rourke's law office to tender the purchase price. He received a receipt for the payment, and returned later in the day to pick up the trustee's deed. During this second visit, Chushcoff and Rourke speculated as to why OSB had not entered a bid. Terry McCarthy, a partner in Rourke's firm, happened into the conversation and asked Rourke if she had served OSB with notice. Rourke asserted that she had and told McCarthy and Chushcoff that OSB representatives had indicated to her that they knew about the sale.

The trustee's deed Municipal Authority received contained the following recitals:

7. The Trustee ... in accordance with law, caused copies of the statutory "Notice of Trustee's Sale" to be transmitted by mail to all persons entitled thereto and either posted or served prior to ninety days before the sale ...

* * *

9. All legal requirements and all provisions of said Deed of Trust have been complied with, as to acts to be performed and notices to be given, as provided in Chapter 61.24 RCW.

On October 29, Rourke learned from OSB's title company that OSB had not received notice of the sale and after checking her records realized that other junior lienholders also had not received proper notice. Rourke immediately called Municipal Authority and asked that the sale be undone. After some weeks of discussions, Rourke tendered to Municipal Authority its purchase price and a quitclaim deed. Municipal Authority refused the tender.

Glidden and Rourke commenced this action in December 1986, seeking a judgment declaring void the October 17 sale and the trustee's deed Rourke issued to Municipal Authority following the sale on the basis that Rourke had failed to serve proper notice on the junior lienholders. In its answer, Municipal Authority asserted that as a BFP it acquired clear title to the sale property pursuant to RCW 61.24.040(7). Municipal Authority asked that title be quieted in its favor, or in the alternative that Rourke and her law firm be held liable for damages in the amount of the fair market value of the property, at a minimum of $146,000.

OSB, impleaded by Municipal Authority as a third party defendant, answered Municipal Authority's claims by contending that as a junior lienor it was entitled to, but did not receive, statutory notice of the foreclosure sale, and that Rourke's failure to comply with statutory notice requirements renders the sale void as to OSB's interests in the property. Had it known of the sale, OSB asserted, it would have cured Mount Bay's default and thus preserved its interests. OSB also refuted Municipal Authority's claim to being a BFP and requested a ruling that Rourke's sale is void and that OSB's interests in the property remain valid.

On OSB's motion for summary judgment, the trial court ruled OSB's second priority lien to be "a valid, existing, enforceable lien" notwithstanding Municipal Authority's purchase because OSB "was an omitted junior lienor in that it was not notified of the sale[.]" Thus, the court held, OSB "may proceed to foreclose its Deed of Trust or exercise any rights under the Old Stone Deed of Trust and promissory note secured thereby." ¹ The trial court made no finding on Municipal Authority's status as a BFP. We granted Municipal Authority's petition for direct review.

II

Washington's deeds of trust act, RCW 61.24, authorizes nonjudicial foreclosures of deeds of trust as a time-efficient alternative to judicial mortgage foreclosure proceedings. See Gose, The Trust Deed Act in Washington, 41 Wash.L.Rev. 94 (1966). We have previously identified three principal goals of the deed of trust private sale program:

First, the nonjudicial foreclosure process should remain efficient and inexpensive. Second, the process should provide an adequate opportunity for interested parties to prevent wrongful foreclosure. Third, the process should promote the stability of land titles.

(Citation omitted.) Cox v. Helenius, 103 Wash.2d 383, 387, 693 P.2d 683 (1985).

As this case well illustrates, these goals "are often difficult to reconcile." Comment, Court Actions Contesting the Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323, 330 (1984). Permitting "omitted junior lienors" such as OSB to retain collateral interests in land that has been sold at auction, while advancing the second objective, would undermine the third. Conversely preventing such omitted parties from challenging nonjudicial foreclosures in order to protect the title obtained by a sale purchaser such as Municipal Authority would favor the third objective over the second.

We...