Miebach v. Colasurdo

• Court: Washington Supreme Court
• Writing for the Court: DOLLIVER; WILLIAM H. WILLIAMS; PEARSON
• Citation: Miebach v. Colasurdo, 102 Wn.2d 170, 685 P.2d 1074 (Wash. 1984)
• Decision Date: 28 June 1984
• Docket Number: No. 50104-1
• Parties: William MIEBACH, Respondent, v. Dominic COLASURDO, et al., Petitioners.

Page 170

102 Wn.2d 170

685 P.2d 1074

William MIEBACH, Respondent, v. Dominic COLASURDO, et al., Petitioners.

No. 50104-1.

Supreme Court of Washington En Banc.

June 28, 1984.

Edmund J. Wood, John F. Jones, Seattle, for petitioners.

Witherspoon, Kelley, Davenport & Toole, Kristine Chrey, Seattle, for respondent.

DOLLIVER, Justice.

Defendant Valeria Colasurdo seeks reversal of the decisions rendered by the trial court and Court of Appeals which quieted title to her residence in plaintiff William Miebach. In February 1974, Valerie Shearer, daughter of Valeria Colasurdo, executed an installment note in favor of Group Health Credit Union for $1,300 to purchase a Mercedes automobile. Valeria Colasurdo and her husband, Dominic, signed the note as comakers. The note provided that each maker was bound as principal, not as surety, and waived any right to presentment, demand, protest, notice of nonpayment, objection to assignment of the note for collection or to suit thereon. Shearer made two payments to the credit union. Thereafter, the credit union assigned the note to Washington Credit, Inc., a collection agency.

After Washington Credit received a few payments from Shearer, further collection efforts failed. Washington Credit filed suit in Seattle District Court in June 1977 to collect the amount due. Shearer was personally served. The Colasurdos were served by substitute service upon their 15-year-old foster daughter, Samatra Phillips, who was then residing at the Colasurdos' home. Valeria Colasurdo testified she never received this notice. Neither Shearer nor the Colasurdos appeared. A default judgment was entered against the parties, jointly and severally, in August 1977 in the amount of $1,150.24.

Following the filing of the judgment, a praecipe for a writ of execution was issued to Gary Culver, Washington Credit attorney, in June 1978. Culver testified he drove by the Colasurdo residence in an attempt to locate personal property. Pursuant to his usual practice, he searched for personal property (e.g., boats, cars) outside of the house, but made no other inquiry. Unable to locate any personal property, Culver wrote to the sheriff's office requesting the sheriff to levy upon and sell at an execution sale the Colasurdo residence. At that time, the sheriff would rely on an attorney's statement and not independently verify the existence of any personal property.

In June 1978, the sheriff recorded a writ of execution against the Colasurdo residence. Pursuant to former RCW 6.24.010(2), a notice of the sheriff's sale was posted on the Colasurdo property and published for 5 consecutive weeks in the Daily Journal of Commerce. While admitting she saw the posted notice, Valeria Colasurdo testified she knew of no outstanding debts and believed if there was any problem her daughter would take care of it. Moreover, she considered the notice to be a "scare tactic" used by the finance company towards Valerie and believed if there was a problem involving her home, her mortgage company would personally contact her.

Neither Shearer nor the Colasurdos attended the July 1978 sheriff's sale. At the time of the sale the home had a fair market value of $106,000, in which the Colasurdos had a $77,000 equity. The residence was sold to Washington Credit, the only bidder, for $1,340.02, in full satisfaction of the default judgment. No objections were filed and an order confirming the sale was entered on September 21, 1978. In December 1978, Washington Credit assigned its interest obtained by the sheriff's certification of purchase to Master Mortgages, Inc., for $850. Master Mortgages was a real property holding company solely owned by Gary Culver. Neither Shearer nor the Colasurdos paid the judgment during the 1-year redemption period. The property was conveyed by sheriff's deed to Master Mortgages in August 1979.

In August 1979, plaintiff Miebach, a real estate investor, contacted Culver to inquire generally about the ramifications of sheriff's sales. The two met several times over the next few weeks, during which Miebach expressed interest in purchasing the Colasurdo residence. Miebach knew the property had been sold as a result of a judgment against the Colasurdos. He also knew the Colasurdos were in possession and that improvements were being made to the premises. Miebach believed he only needed to institute an unlawful detainer action. In deciding to purchase the property, Miebach relied on his search of the records and title insurance.

In September 1979, Master Mortgages conveyed the property by special warranty deed to Arctic Trading Company for $15,000. Arctic Trading shared office space with Master Mortgages. Culver then acted as Arctic's attorney and received one-half of its sale profits. In October 1979 Arctic, represented by Culver, conveyed the Colasurdo property by special warranty deed to Miebach for $80,000. On October 31, 1979, Miebach served upon the Colasurdos a 3-day notice to vacate. Valeria Colasurdo testified this was the first time she learned Washington Credit had sued her. The Colasurdos did not vacate the premises. Thereafter, Miebach brought an unlawful detainer action. The Colasurdos answered, asserted legal and equitable defenses, and later brought a separate action to vacate the default judgment and set aside the sheriff's sale. By stipulation, the two actions were consolidated by the trial court.

Dominic Colasurdo died on May 15, 1980. Pursuant to a valid community property agreement, all interest in the residence passed to Valeria Colasurdo.

At trial, testimony addressed whether the 15-year-old foster daughter, Samatra Phillips, was a "person of suitable age and discretion" with whom to leave the complaint and notice. The trial court held Valeria Colasurdo failed to show by clear and convincing evidence that Phillips was not a person of "suitable discretion" and thus the substituted service on the Colasurdos was valid. The court found Valeria Colasurdo had actual and constructive notice of the sheriff's sale, but took no action; the order of confirmation of sale cured all irregularities and no jurisdictional defects were found; and all conveyances were in accordance with Washington law. Miebach was deemed a bona fide purchaser. With a "heavy heart" the court rendered judgment for Miebach and dismissed Colasurdo's action.

Colasurdo appealed. Court of Appeals, Division One, affirmed in a 2 to 1 decision. Miebach v. Colasurdo, 35 Wn.App. 803, 670 P.2d 276 (1983). The majority held Colasurdo failed to sustain her burden to vacate the judgment or challenge service and notice requirements. Specifically Colasurdo was found to have waived her right to object to any irregularities with the sheriff's sale as the order of confirmation was entered in September 1978 and she did not move to set it aside until January 1980. Miebach, 35 Wn.App. at 812-13, 670 P.2d 276. RCW 6.24.100(4). The majority affirmed the trial court's determination that Miebach was a bona fide purchaser, thus foreclosing equity intervention. Judge Williams, dissenting, examined Miebach's actions and concluded he was not a bona fide purchaser. 35 Wn.App. at 819, 670 P.2d 276. He recognized the gross inadequacy of the purchase price--less than 2 percent of fair market value. 35 Wn.App. at 820, 670 P.2d 276. Lastly, he viewed the execution sale as being "tainted by unfairness because no true effort was made to satisfy the debt from the Colasurdos' personal property. Equity requires that this sale be set aside." 35 Wn.App. at 821-22, 670 P.2d 276.

I

Appellant asserts the courts below erred in refusing to set aside the sheriff's sale based on the fact Miebach was not a bona fide purchaser, the gross inadequacy of the price paid, and the irregularities surrounding the sale.

Whether Miebach was a bona fide purchaser is a question of mixed law and fact. Hudesman v. Foley, 73 Wn.2d 880, 889-91, 441 P.2d 532 (1968). "A bona fide purchaser for value is one who without notice of another's claim of right to, or equity in, the property prior to his acquisition of title, has paid the vendor a valuable consideration." Glaser v. Holdorf, 56 Wn.2d 204, 209, 352 P.2d 212 (1960). The notice "need not be actual, nor amount to full knowledge ..." Daly v. Rizzutto, 59 Wash. 62, 65, 109 P. 276 (1910). See Glaser v. Holdorf, supra at 209, 352 P.2d 212; Paganelli v. Swendsen, 50 Wn.2d 304, 308-09, 311 P.2d 676 (1957); 77 Am.Jur.2d Vendor and Purchaser §§ 656-57 (1975).

"It is a well-settled rule that where a purchaser has knowledge or information of facts which are sufficient to put an ordinarily prudent man upon inquiry, and the inquiry, if followed with reasonable diligence, would lead to the discovery of defects in the title or of equitable rights of others affecting the property in question, the purchaser will be held chargeable with knowledge thereof and will not be heard to say that he did not actually know of them. In other words, knowledge of facts sufficient to excite inquiry is constructive notice of all that the inquiry would have disclosed."

(Citation omitted.) Peterson v. Weist, 48 Wash. 339, 341, 93 P. 519 (1908). See 2 J. Pomeroy, Equity § 605 (5th ed. 1941).

While our determination of what is sufficient to put an ordinary prudent person upon inquiry notice has varied, see Hudesman v. Foley, supra, Daly v. Rizzutto, supra, Peterson v. Weist, supra, a review of the record persuades us Miebach was not a bona fide purchaser. At trial Miebach testified he had been an investor for 23 years and had "ventured into real estate." After the purchase of the Colasurdo home, he had made other sheriff sale investments. One involved a default judgment taken by Washington Credit for an unpaid candy bill of $205.20. Robeson v. Helland, 32 Wn.App. 487, 488, 648 P.2d 461 (1982). The Robesons' Bellevue home was sold at a sheriff's sale to the minor children of Gary Culver. Miebach later acquired title for $33,000. Six days later he deeded the...