Steward v. Good

• Decision Date: 23 May 1988
• Docket Number: No. 20280-4-I
• Citation: Steward v. Good, 754 P.2d 150, 51 Wn.App. 509 (Wash. App. 1988)
• Parties: Gary STEWARD and Shirley Steward, husband and wife, Appellants, v. Bruno GOOD and Ann E. Good, husband and wife; Gary F. Faull and Jane Doe Faull, husband and wife; and Benson Realty, Inc., a Washington corporation, Respondents.
• Court: Washington Court of Appeals

Page 509

51 Wn.App. 509

754 P.2d 150

Gary STEWARD and Shirley Steward, husband and wife, Appellants, v. Bruno GOOD and Ann E. Good, husband and wife; Gary F. Faull and Jane Doe Faull, husband and wife; and Benson Realty, Inc., a Washington corporation Respondents.

No. 20280-4-I.

Court of Appeals of Washington Division 1.

May 23, 1988.

Kristine A. Chrey, Witherspoon, Kelley, Davenport & Toole, Seattle, for appellants Gary and Shirley Steward.

Lawrence J. Warren, Warren & Kellog, P.S., Renton, for respondents Bruno and Ann E. Good.

Richard A. Jackson, Anderson & Jackson, Renton, for respondent Benson Realty, Inc.

Merrick, Hofstedt & Lindsey, Seattle, for respondent Gary S. Faull.

GROSSE, Judge.

Gary and Shirley Steward appeal an order on summary judgment which quieted title to certain real estate in favor of Bruno and Ann Good. The Goods' title issued pursuant to a nonjudicial foreclosure sale under the Washington deed of trust act (RCW 61.24.010 et seq.). The Stewards' primary contention on appeal is that issues of fact existed with respect to the trustee's failure to strictly comply with the statutory prerequisites of the deed of trust act and with respect to the adequacy of the purchase price, both of which precluded the entry of a summary judgment. The Stewards also allege that the Goods were not bona fide purchasers for value. For their part, the Goods contend the Stewards waived any rights to contest the trustee's sale because they had adequate notice of the foreclosure but then failed to utilize any presale remedies. The Goods also contend the Stewards are precluded from raising the bona fide purchaser issue for the first time on appeal.

The original owners of the condominium in issue here, the Worleys, granted a deed of trust in favor of Benson Realty, Inc., to secure the repayment of an obligation in the amount of $3,000. At a later date, the Worleys conveyed the condominium by quitclaim deed to the Terhunes who later conveyed the property by statutory warranty deed to the Stewards. This transfer to the Stewards was in September of 1984, for the approximate amount of $64,000.

The original deed of trust designated Transamerica Title Insurance Company as the trustee. The title company resigned as trustee on March 21, 1986. Thereafter, on March 24, 1986 Benson Realty appointed Gary Faull as successor trustee, and on March 26, 1986 the resignation and the appointment of the successor were recorded. On March 17, 1986, 9 days before his appointment, Faull mailed a notice of default to the Stewards and other interested parties. The Stewards have not denied receiving a copy of the notice. The notice of sale was dated April 17, 1986 and was filed on June 17, 1986. Faull conducted a sale on July 18, 1986. Benson Realty bid in the indebtedness owed to it. The Goods then bid a greater sum ($4,870) and became the property owners.

The issue presented in this case is whether, and under what circumstances, a party may obtain post-sale relief from a trustee's sale, i.e., set it aside, where the subject real property has been sold to third party strangers to the original transaction. We believe the recent case of Koegel v. Prudential Mut. Sav. Bank, 51 Wash.App. 108, 752 P.2d 385 (1988), is dispositive of the issue raised by the Stewards with regard to strict compliance with the nonjudicial foreclosure procedures. However, the facts in the case before us suggest additional issues requiring consideration and discussion.

Here, the third party strangers, the Goods, claim the status of bona fide purchasers and argue that once an established bona fide purchaser purchases, there may be no post-sale relief for alleged irregularities in the sale. RCW 61.24.040(7). See also Comment, Court Actions Contesting the Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323, 336 (1984). We agree with that proposition but are constrained to review the Stewards' claim that summary judgment on this issue was improper because there is a genuine issue of fact as to the status of the Goods in that regard. In the case at bar, the trial court quieted title by summary judgment. The essential facts are not in dispute, therefore, we as the reviewing court must determine whether the Goods are entitled to summary judgment as a matter of law. See Hartley v. State, 103 Wash.2d 768, 774, 698 P.2d 77 (1985).

Although the Stewards did not expressly designate part of their challenge in the trial court as "the Goods were not bona fide purchasers," they did raise the issue of the inadequacy of the purchase price. Whether the Goods were bona fide purchasers is a question of mixed law and fact. Miebach v. Colasurdo, 102 Wash.2d 170, 175, 685 P.2d 1074 (1984) (citing Hudesman v. Foley, 73 Wash.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 Wash.2d 204, 209, 352 P.2d 212 (1960).

"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).

A review of the record persuades us that the Goods were, in fact, bona fide purchasers for value. The affidavit of Bruno Good indicates: At or before the time of the sale, the Goods had little real estate investing experience; they had no notice of any claims of any defects in the sale, nor were they aware of any other party's claim to, any right to, or equity in, the property that might defeat a trustee's deed; further, before the sale, the Goods had not met the trustee nor had any communication from him that would indicate any defects in the presale procedure. Ann Good went to the sale, and after the opening bid, made a slightly higher bid. Thereafter she was informed she had won the auction for the property. Valuable consideration, i.e., $4,870, was paid for the right to the property. Thus, the Goods showed they lacked any actual notice and also showed the payment of a valuable consideration. The burden of showing that the purchase price was so inadequate as to put the Goods on inquiry notice then shifted to the Stewards. They did not meet this burden. The Stewards contend that obtaining the property for this small price amounts to a windfall. There is, however, nothing in the record to indicate what, if any, equity the Stewards had at the commencement of the default proceedings. Moreover, "[a] naked assertion of unresolved factual questions is not sufficient to oppose a motion for summary judgment." Jacobsen v. State, 89 Wash.2d 104, 111, 569 P.2d 1152 (1977). The record does not specifically disclose whether the property was subject to a mortgage on which the Stewards may have defaulted. There is, however, an indication in the record that an indebtedness was due and owing to Pacific First Federal Savings Bank. On the record before us, we cannot say the purchase price was inadequate. Therefore, the Goods were bona fide purchasers, they are entitled to claim the benefit of RCW 61.24.040(7), ¹ and title in the property was properly quieted in them.

Courts have universally recognized that the mere inadequacy of price alone of property obtained at an execution sale provides insufficient reason for setting aside a sale. See Annot., Inadequacy of Price as Basis for Setting Aside Execution or Sheriff's Sale--Modern Cases, 5 A.L.R.4th 794 (1981). However, the Stewards rely on Miebach v. Colasurdo, for the proposition that " 'when there is a great inadequacy, [additional] slight circumstances indicating unfairness will be sufficient to justify a decree setting the sale aside' on equitable grounds." (Citations omitted.) Miebach, 102 Wash.2d at 177-78, 685 P.2d 1074. As stated above, we do not find the purchase price inadequate. But even assuming, arguendo, the price was sufficiently low for a reasonable person to be put on inquiry notice, what would an inquiry in this case have produced? The result would have been the same. Most certainly there were procedural defects in the sale, however, those defects were not indicative of unfairness. The Stewards argue that the technical violations should be characterized as "slight circumstances indicating unfairness surrounding the sale" and rely heavily on Queen City Sav. & Loan Ass'n v. Mannhalt, 49 Wash.App. 290, 742 P.2d 754 (1987), review granted, 109 Wash.2d 1020 (1988). In Queen City, the court cited with approval 1 V. Towne, Wash.Prac. § 605 (2d ed. 1976), wherein it is stated, "These foreclosure proceedings must conform exactly to the statute." In the case at bar, there is no doubt that the exact letter of the law has...