Koegel v. Prudential Mut. Sav. Bank
| Decision Date | 11 April 1988 |
| Docket Number | Nos. 19438-1-,19556-5-I and 20267-7-I,s. 19438-1- |
| Citation | 752 P.2d 385,51 Wn.App. 108 |
| Parties | Richard Lee KOEGEL, an unmarried individual, Appellant. v. PRUDENTIAL MUTUAL SAVINGS BANK, a Washington corporation; U.S. Trustee Corporation, a Washington corporation; and Roderick McNae and Jane Doe McNae, husband and wife, a Washington marital community, Respondents. |
| Court | Washington Court of Appeals |
Jordan M. Hecker, Watson & Longley, Seattle, for appellant Richard Lee koegel.
Richard Pitt, George, Hull & Porter, Seattle, for Prudential Mut. Sav. bank.
Robert E. Ordal and David S. Kerruish, Ordal & Jones, Seattle, for Roderick McNae.
David A. Leen, Leen & Moore, Seattle, for U.S. Trustee Corp.
In these consolidated appeals, Richard Lee Koegel seeks to set aside a nonjudicial foreclosure sale, recover damages, and quiet title. Koegel appeals from separate summary judgments in favor of Roderick and Jane Doe McNae, purchasers of the foreclosed property; the U.S. Trustee Corporation, trustee on the deed; and Prudential Mutual Savings Bank, beneficiary on the deed. We affirm.
On August 13, 1980, Richard Lee Koegel 1 executed a deed of trust assigning several parcels of land along Lake Washington Boulevard to secure repayment of a $250,000 loan. The deed of trust listed Prudential as beneficiary and Safeco Title Insurance Company as trustee. Prudential later appointed U.S. Trustee as successor trustee on the deed.
Koegel defaulted on the October 1985 loan payment and on all subsequent payments. Prudential initiated nonjudicial foreclosure proceedings under the power of sale provision of the trust deed on January 9, 1986. That notice of default and commencement of foreclosure, issued by U.S. Trustee, contained an inaccurate description of the property. A corrected version of the notice of default was issued on January 15, 1986 properly describing the subject property but also describing a parcel that had previously been conveyed and was no longer part of the transaction.
Koegel failed to cure the defaults. On February 10, 1986, U.S. Trustee issued a notice of trustee's sale, setting the sale date for May 16, 1986. The original sale date was postponed four times at Koegel's request. Koegel threatened to enjoin the sale but did not do so.
On June 5, 1986, the day prior to one of the scheduled sales, Koegel's attorney wrote to the trustee requesting a 90-day continuance of the sale and indicating that he was still confused as to which property was being foreclosed, that neither he nor his client had received formal notice of the resetting of the foreclosure sale, and that he would enjoin any attempt to hold a foreclosure sale. U.S. Trustee responded on June 11, 1986 indicating that in order to procure a further continuance, Koegel would either have to submit a written plan for curing the default or document a defect in the foreclosure process. Koegel did not submit any such material to the trustee.
The foreclosure sale was held on June 13, 1986. The property was purchased by Roderick McNae for approximately $260,000. McMillan and his attorney attended the sale and made no request for a continuance or objection to the process.
Koegel filed suit on June 27, 1986 against McNae, U.S. Trustee, and Prudential. McNae's motion for summary judgment was granted on October 3, 1986, and Koegel's motion for reconsideration was denied on October 21, 1986. U.S. Trustee's motion for summary judgment was granted on November 13, 1986. Prudential's motion for summary judgment was granted on March 27, 1987. Prudential was also awarded attorney's fees and costs.
Koegel appealed all three dismissals to this court, where they were ordered consolidated.
We first examine appellant's allegations of defects in the foreclosure process.
Appellant contends U.S. Trustee breached its duty by proceeding with the foreclosure sale despite being aware that the notice of sale was sent less than 30 days after the second (corrected) notice of default.
The parties agree the first notice of default, issued January 9, 1986, contained an inaccurate description of the property to be foreclosed. The second notice of default, issued January 15, 1986, contained a description of the property identical to that in the deed of trust. It also, however, contained an additional description of a plot that had been conveyed and was no longer part of the transaction. The notice of trustee's sale was issued on February 10, 1986. RCW 61.24.030(6) 2 requires the trustee to send to the debtor a notice of default containing a description of the property at least 30 days prior to issuing a notice of sale.
Thus, although the trustee's notice of sale was sent to appellant 31 days after the original notice of default, it was sent only 25 days after the corrected notice of default. This court recently noted that
because power-of-sale foreclosures are undertaken without judicial scrutiny, both deed of trust statutes and deeds of trust should be construed in favor of borrowers:
A mortgage generally may be foreclosed only by filing a civil action while, under a Deed of Trust, the trustee holds a power of sale permitting him to sell the property out of court with no necessity of judicial action. The Deed of Trust statutes thus strip borrowers of many of the protections available under a mortgage. Therefore, lenders must strictly comply with the Deed of Trust statutes, and the statutes and Deeds of Trust must be strictly construed in favor of the borrower.
Patton v. First Fed. Sav. & Loan Ass'n, 118 Ariz. 473, 477, 578 P.2d 152 (1978).
Queen City Sav. & Loan Ass'n v. Mannhalt, 49 Wash.App. 290, 294-95, 742 P.2d 754 (1987), review granted, 109 Wash.2d 1020 (1988). Furthermore, a trustee is held to an exceedingly high standard when exercising his fiduciary duty. Cox v. Helenius, 103 Wash.2d 383, 388-89, 693 P.2d 683 (1985). Strict construction of RCW 61.24.030 leads to the inevitable conclusion that U.S. Trustee's notice of sale was sent without 30 days' notice of default since the original notice of default did not contain a description of the property subject to foreclosure. This is not to say, however, that the strict compliance requirement eliminates any consideration of prejudice before a sale may be set aside. See discussion infra.
Appellant's contentions that he was prejudiced by this lapse are disingenuous. The notice of default listed the loan which was in arrears. From that information, appellant would be on notice that the property offered as collateral for that loan would be in jeopardy of foreclosure. The purpose of the notice of default is to notify the debtor of the amount he owes and that he is in default. In fact, the notice of default properly listed the amount of arrears and noted the deed of trust that was subject to foreclosure. That deed would also have put appellant on notice as to which property was in jeopardy. Furthermore, appellant's argument on appeal focuses on his allegation that he was confused as to which of his properties was being foreclosed. However, there is no dispute that the notice of sale, which serves to inform debtors which property is subject to foreclosure, contained an accurate description of the property and was issued well prior to the 90 days in advance of the sale required by RCW 61.24.040.
Appellant was notified of his right to enjoin the sale by the notice of trustee's sale, as required by RCW 61.24.040(1)(f). Appellant was aware of the technical defects in the notices of default. Nonetheless, appellant neither provided U.S. Trustee with documentation of the precise errors alleged, nor acted to restrain the sale. In fact, the trustee granted appellant a series of continuances, postponing the sale from May 16, 1986 to June 13, 1986. The continuances alone would ameliorate any harm appellant suffered by having 5 fewer days' notice between the notice of default and notice of sale than required by RCW 61.24.030(6).
Thus, while the rationale of Queen City is persuasive in that the streamlined procedures of nonjudicial foreclosure leave debtors with minimal protections, necessitating close scrutiny of those procedures by our courts, it does not require avoidance of a sale where, as here, the trustee's error was nonprejudicial and the debtor could have invoked judicial protection prior to the sale but failed to do so. Queen City did not foreclose a requirement that prejudice be established in order to void a sale where, as here, the trustee's error was a technical, formal error, nonprejudicial, and correctable. See, G. Osborne, G. Nelson, & D. Whitman, Real Estate Finance Law § 7.20, at 478 (1979) (). In fact, it wasn't necessary for the Queen City court to reach that issue.
The nonjudicial foreclosure act has 3 basic public policy objectives:
First, the nonjudicial foreclosure process should remain efficient and inexpensive. Peoples Nat'l Bank v. Ostrander, 6 Wn.App. 28, 491 P.2d 1058 (1971). 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.
Cox, at 387, 693 P.2d 683. Avoiding the sale in this circumstance would undermine all three objectives, especially considering appellant's failure to pursue presale remedies. The Queen City case, moreover, did not address the issue of waiver, i.e., the debtor's failure to take advantage of presale remedies. Thus, we are persuaded by the rationale of Peoples Nat'l Bank v. Ostrander, 6 Wash.App. 28, 491 P.2d 1058 (1971), favoring the streamlined nonjudicial...
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