Seattle Mortg. Co. v. Unknown Heirs of Gray

Decision Date14 June 2006
Docket NumberNo. 33664-2.,33664-2.
Citation136 P.3d 776,133 Wn. App. 479
CourtWashington Court of Appeals
PartiesSEATTLE MORTGAGE COMPANY, INC., its successors in interest and/or assigns, Respondent, v. UNKNOWN HEIRS OF Daisy GRAY; United States; Tacoma Public Utilities; Tacoma Community Redevelopment Authority; Occupants of the premises; and all persons or parties unknown claiming any right, title, estate lien or interest in the real estate described in the complaint, Appellants.

Jason Wilson-Aguilar, Routh Crabtree Olsen PS, Bellevue, WA, for Respondent.

Ward Douglas Groves, Tacoma City Attorneys Office, Tacoma, WA, for Appellants.

VAN DEREN, A.C.J.

¶ 1 City of Tacoma Public Utilities Department (Tacoma PUD) appeals the trial court's summary judgment order in favor of Seattle Mortgage Company. Tacoma PUD argues that (1) its lien against Daisy Gray's real property was not extinguished by Seattle Mortgage's foreclosure action following Gray's death; and (2) the trial court erred in failing to recognize a constitutional, statutory, or equitable basis for Tacoma PUD to deny electrical services to the real property until its energy conservation improvement loan is repaid.

¶ 2 We affirm, holding that the trial court properly granted summary judgment to Seattle Mortgage as a matter of both law and equity.

FACTS

¶ 3 In June 1999, Seattle Mortgage loaned Daisy Gray $135,000 in exchange for a promissory note and a deed of trust against her residence in Tacoma. Seattle Mortgage recorded the deed on June 28, 1999. The note and deed of trust contained an acceleration clause allowing Seattle Mortgage, in the event of default, to demand the entire outstanding balance of the debt.

¶ 4 In August 1999, Tacoma PUD loaned Gray $3,186.96 for energy conservation improvements to her home.1 It was a low income, zero interest loan funded by Tacoma PUD ratepayers. Tacoma PUD secured the conservation loan with a lien on Gray's home and it executed a contract with Gray that provided that, in the event of default, Tacoma PUD could disconnect the electrical services to the home until the debt was satisfied. Gray's obligation to repay the loan arose only if she vacated the premises or converted to a different form of power. Default occurred if she failed to make payment within 90 days of either occurrence. The lien was recorded in Pierce County on October 15, 1999.

¶ 5 Gray died in October 2002 and payment on the Seattle Mortgage debt stopped on October 22, 2002. In July 2004, Seattle Mortgage filed a complaint for foreclosure on Gray's home based on the unpaid balance of $85,315.38 plus interest and late charges. The total debt was $89,058.82. Seattle Mortgage named Tacoma PUD as a defendant in the foreclosure action.2

¶ 6 Tacoma PUD answered the complaint and claimed that its lien was not inferior or subordinate to Seattle Mortgage's interest. It maintained the right to refuse future utility services to the property until Gray's debt was paid. It asserted: "Plaintiff or other parties taking title to and/or possession of the subject Property are equitably estopped from obtaining future utility services thereto unless or until the charges associated with said municipal energy conservation loan are paid in full." Clerk's Papers at 48.

¶ 7 Seattle Mortgage moved for partial summary judgment against Tacoma PUD's claim, arguing that it had priority and that the purchaser at the foreclosure sale should take the property free and clear of Tacoma PUD's subordinate interest.

¶ 8 The trial court granted Seattle Mortgage's motion for partial summary judgment against Tacoma PUD. CP 156. It held that (1) Seattle Mortgage's deed of trust had priority over Tacoma PUD's conservation lien; (2) foreclosure of Seattle Mortgage's deed would extinguish Tacoma PUD's lien; and (3) the purchaser at the foreclosure sale would take the property free and clear of Tacoma PUD's interest. Tacoma PUD moved for reconsideration, which the trial court denied.

¶ 9 In its oral decision on Tacoma PUD's motion for reconsideration, the trial court stated:

[I]t's the equities that demand the results in this case. The City seeks to effectuate its proprietary interest and suggests they can do virtually anything to do that. They justify it under public policy and the theory being that this is for the good of everybody to promote energy efficiency, but what they are really asking to do is to have the ability to tie up a piece of property and have that ability to tie up the piece of property survive death, survive foreclosure, survive anything that gets in the way of the City's action. . . . That's just too paternalistic and not equitable at all.

Report of Proceedings (July 17, 2005) at 12.

¶ 10 Tacoma PUD appeals.

ANALYSIS
A. Standard of Review

¶ 11 When reviewing an order of summary judgment, we engage in the same inquiry as the trial court. Grundy v. Thurston County, 155 Wash.2d 1, 6, 117 P.3d 1089 (2005). 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 that the moving party is entitled to judgment as a matter of law. CR 56(c). We consider all facts submitted and all reasonable inferences from them in the light most favorable to the nonmoving party. Grundy, 155 Wash.2d at 6, 117 P.3d 1089. The motion should be granted only if, from all the evidence, reasonable persons could reach but one conclusion. Lilly v. Lynch, 88 Wash.App. 306, 312, 945 P.2d 727 (1997).

B. Constitutional Authority

¶ 12 Tacoma PUD argues that (1) Seattle Mortgage erroneously argued to the trial court that Tacoma's lien on the property did not comply with article VIII section 7 of the Washington State Constitution; and (2) its lien is consistent with and mandated by the Washington State Constitution. Seattle Mortgage does not dispute that Tacoma PUD had the right to the lien but contends that the constitutional provisions do not grant Tacoma PUD's lien priority or super priority over prior recorded liens or security interests in the real property.

1. Article VIII

¶ 13 Tacoma PUD cites article VIII, sections 7 and 10, of Washington's Constitution, as authority for its conservation loan program and its right to enforce its lien against Gray's property.

¶ 14 Article VIII, section 7 states:

No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation.

¶ 15 Article VIII, section 10 states:

Notwithstanding the provisions of section 7 of this Article, any county, city, town, quasi municipal corporation, municipal corporation, or political subdivision of the state which is engaged in the sale or distribution of water, energy, or stormwater or sewer services may, as authorized by the legislature, use public moneys or credit derived from operating revenues from the sale of water, energy, or stormwater or sewer services to assist the owners of structures or equipment in financing the acquisition and installation of materials and equipment for the conservation or more efficient use of water, energy, or stormwater or sewer services in such structures or equipment. Except as provided in section 7 of this Article, an appropriate charge back shall be made for such extension of public moneys or credit and the same shall be a lien against the structure benefited or a security interest in the equipment benefited. Any financing for energy conservation authorized by this article shall only be used for conservation purposes in existing structures and shall not be used for any purpose which results in a conversion from one energy source to another.

(Emphasis Added).

¶ 16 In City of Tacoma v. The Taxpayers of the City of Tacoma, our Supreme Court upheld the constitutionality of conservation loan programs. 108 Wash.2d 679, 705, 743 P.2d 793 (1987) (holding loan programs constitutional because the City received sufficient, bargained for consideration in the form of public benefit from electric conservation).

¶ 17 Further, article VIII, section 10 specifically authorizes Tacoma PUD to establish a lien against the structure or a security interest in the equipment for energy conservation purposes to ensure repayment. This provision entitles Tacoma PUD to traditional lien law protections. In the event of default, it can foreclose on the property or assert its rights in the equipment financed. Here, Tacoma PUD had a lien on Gray's real property and its legal remedy was foreclosure on that property.

¶ 18 Thus, we hold that article VIII authorized Tacoma PUD to grant Gray the conservation loan and establish a lien against her house in the event of default.

2. Tacoma v. Taxpayers

¶ 19 Tacoma PUD argues that the holding in Taxpayers does not preclude it from requiring repayment for energy conservation loans.3 108 Wash.2d at 679, 743 P.2d 793. Again, we agree with Tacoma PUD.

¶ 20 In Taxpayers, the city of Tacoma sought to validate its energy conservation ordinance authorizing Tacoma PUD to finance such measures for privately owned property. 108 Wash.2d at 681, 743 P.2d 793. The City established the program to lessen its reliance on outside sources of power and to respond to environmental concerns, Native American treaty rights, and the lack of hydroelectric power sites. Taxpayers, 108 Wash.2d at 682, 743 P.2d 793. The ordinance authorized the City to use public funds to install energy conservation measures in private structures without requiring the citizens receiving the funds to repay the city. Taxpayers, 108 Wash.2d at 684, 743 P.2d 793.

¶ 21 Our Supreme Court held that the program was statutorily authorized and was constitutional because the public received valid...

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