Plein v. Lakey
| Decision Date | 12 April 2002 |
| Docket Number | No. 26153-7-II.,26153-7-II. |
| Citation | 43 P.3d 1268,111 Wash.App. 143 |
| Parties | Paul PLEIN, Appellant, v. Chester LAKEY and Lee Cameron, Jane Doe Cameron and their marital community, Respondents. |
| Court | Washington Court of Appeals |
John Stratford Mills, Tacoma, for Appellants.
John Robert Rizzardi, Thomas Michael McBride, Cairncross & Hempelmann P.S., Seattle, for Respondents.
Lee Cameron paid a debt for which he, as the sole remaining shareholder and corporate officer of Alpen Group, Inc., may have been personally liable. Claiming he took assignment of the note and deed of trust securing it, Cameron then foreclosed on the property securing the instruments and extinguished the liens of all junior creditors. Plein and other junior creditors sued, claiming that Cameron could not take assignment of the note because he was paying off a debt that he owed. Moreover, because the payment extinguished the debt, Cameron had no interest to foreclose. The trial court granted Cameron summary judgment and dismissed Plein's case to enjoin or reverse the trustee sale of property. Plein appeals.
Because we hold that whether Cameron was personally liable on the debt is a material issue of disputed fact, we remand.
Alpen Group, Inc. was formed in 1997 to purchase unimproved property for investment. In April 1997, Alpen purchased a parcel of land from Sunset Investments, financed through a deed of trust and promissory note for $75,000. The corporation's three shareholders/corporate officers (appellant1 Paul Plein, respondent Lee Cameron, and Bruce White) signed the note individually, and Cameron and White also signed in their corporate capacities (secretary/treasurer and vice president, respectively).
Alpen built a log home on the property with funds borrowed from Columbia State Bank. A separate promissory note and deed of trust secured this debt for $136,500, but the record does not establish whether the officers signed the note individually.
Because the Columbia construction loan was insufficient to pay all trade creditors who worked on the property, Plein (then president of Alpen) issued deeds of trust securing the creditors' interests with the log home as security. At some point Plein was "ousted" as president.2 Cameron then became president of Alpen and issued himself a deed of trust securing Alpen's debt to him for $30,000 he had previously advanced to pay the various trade creditors.
One of Alpen's trade creditors, Crystal Concrete, sued for payment. As a result of the litigation, Alpen paid off Crystal Concrete, Cameron received all stock in Alpen, and Plein obtained a judgment lien against Alpen for $45,000. Thus the various creditors' priority with secured interests in the log home owned by Alpen were first, Columbia;3 second, Sunset; third, the remaining trade creditors; fourth, Cameron; and fifth, Plein.
In October 1998, Columbia purportedly assigned its interest under the deed of trust to Cameron "for valuable consideration." Clerk's Papers at 8. Likewise, on December 7, 1998, Sunset purportedly assigned its interest to Cameron. Cameron characterizes the transactions as follows: "I purchased from Columbia State Bank and Sunset Investments their promissory notes and deeds of trust given by the Alpen Group, Inc." Clerk's Papers at 9.4 The record does not reflect the amounts remaining to be paid on the notes or the amounts Cameron paid for them.
In October 1999, Cameron hired attorney Chester Lackey (also respondent in this action) to foreclose on the property under the purported assignment of the Sunset debt.5 A Notice of Trustee's Sale dated December 20, 1999, was posted in a conspicuous place on the property indicating that a trustee's sale would take place on March 31, 2000.6
Plein and the other junior creditors filed this action on February 7, 2000, to enjoin the trustee sale. They also sought a declaration that the deed of trust being foreclosed was void because the underlying note had been paid and the debt extinguished.
On March 28, 2000, Plein filed a motion for summary judgment. The trustee sale was held as scheduled three days later. Cameron was the only bidder. He bid $245,312.35, which was less than the total debts owed to the various lienholders.
Cameron filed a cross motion for summary judgment, and the parties agreed to hear the two motions on the same day.
Plein asserted there were no facts in dispute, arguing that because Cameron signed the deed of trust and promissory note to Sunset in his personal capacity, he was personally liable on Alpen's debt to Sunset and the money he paid Sunset extinguished the debt. Therefore, he claimed, Cameron had no interest to foreclose, and the trustee sale is null and void. Cameron contended that he did not pay a debt on behalf of Alpen but, rather, purchased the promissory note and deed of trust. He asserted that the endorsements of Sunset and Columbia conclusively established that he is entitled to assume their priority status and foreclose.
Cameron asserted that there were no facts in dispute in order for his motion to prevail, but that material facts were in dispute regarding Plein's motion. Without first determining whether Cameron was personally liable on the deed of trust and promissory note the trial court granted summary judgment in Cameron's favor and dismissed Plein's claims with prejudice. Plein appeals. We answer two questions: (1) was summary judgment appropriate when there is a dispute regarding Cameron's personal liability on the debts? And (2) can an individual who is personally liable on a debt purchase an assignment of that debt and then foreclose the property securing that debt, cutting off creditor claims subordinate to the assignment?
This court reviews motions for summary judgment de novo, engaging in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment is appropriate only if the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of any genuine issues of material fact and demonstrate that the moving party is entitled to judgment as a matter of law. CR 56.
There are two issues on which the parties disagree:7 (1) whether Cameron was personally liable on the debt8 and (2) the legal effect of Cameron's payments to Sunset.
In his complaint and motion for summary judgment, Plein alleges that Cameron was personally liable on the notes. Cameron denied this allegation in his answer. Whether Cameron was indeed personally liable on one or both of the debts is a question of fact. Industrial Fin. Co. v. Lovell, 9 Wash.App. 829, 833, 515 P.2d 1304 (1973) ().
Cameron signed the promissory note evidencing the debt to Sunset twice, first above a signature line that read "LEE L. CAMERON, SECRETARY/TREASURER" and then above a line that read, "LEE L. CAMERON, INDIVIDUALLY". Clerk's Papers at 17. His wife also signed the note "individually." Id. Signing in this way appears to bind Cameron personally on the debt, but this, the amount still owed on the debt before Cameron paid, and the amount Cameron paid Sunset are issues of material fact that must be decided before the legal question (whether Cameron took assignment of or paid off the debt to Sunset) can be addressed. Because the record raises but does not resolve these issues, this case is not ripe for summary judgment.9 Thus, we hold that the record establishes disputed issues of material fact that the trial court must resolve and we remand.
Plein contends that Cameron was personally liable on the debt and that Cameron's payments to Sunset could not lead to an assignment of the notes, but could only pay off the debt. Because the payment extinguished the debt, he argues, it precluded any right to subsequently foreclose on the property. Cameron counters that the debt belonged to Alpen—a separate entity for which he was not personally responsible—and that Plein failed to present evidence that Cameron paid the debt "on behalf of Alpen. Thus, he argues that he (Cameron) independently purchased the claims and security instruments of Columbia and Sunset.
The real difference in the parties' approach is that Plein views the issue as a legal question; namely, what happens when a debtor takes assignment of a debt on which he is liable. And Cameron views it as a factual question; namely that since Plein presented no evidence to dispute the documents showing endorsement, and since he (Cameron) declares that he did not pay on behalf of Alpen, Plein's argument must fail for lack of proof. But the legal significance of a financial transaction is not dictated by the parties' characterization of the transaction; it is a question of law that we review de novo.
RCW 62A-3.602(a) defines the payment of an instrument:
[A]n instrument is paid to the extent payment is made (i) by or on behalf of a party obligated to pay the instrument.... To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged....
An assignment of a claim from a creditor to a debtor is, in legal effect, satisfaction and payment of the debt, and rights based on it are extinguished. Home Indemnity Co. v. McClellan Motors, Inc., 77 Wash.2d 1, 5, 459 P.2d 389 (1969). See also Dial v. Inland Logging Co., 52 Wash. 81, 86, 100 P. 157 (1909) (...
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