The Bank of New York v. Barbanti
| Decision Date | 12 December 2013 |
| Docket Number | 31034-5-III |
| Parties | THE BANK OF NEW YORK, As Trustee, Pursuant to the Terms of that Certain Pooling and Servicing Agreement Dated as of November 1, 1996 Related to Metropolitan Asset Funding, Inc., Mortgage Pass-Through Certificates Series 1996-A, Respondent, v. MARCO T. BARBANTI, ROYAL POTTAGE ENTERPRISES, Inc., and JUNCO FROST LAVINIA, Inc., Appellants, STERLING SAVING BANK, UNIFUND CCR PARTNERS, and BANKERS TRUST COMPANY OF CALIFORNIA, Defendants. |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
Appellants Marco T. Barbanti, Junco Frost Lavinia Inc., and Royal Pottage Enterprises Inc., appeal a summary judgment order, in favor of plaintiff Bank of New York (BONY), judicially foreclosing a real estate contract and quieting title to the sold commercial property. Appellants' assignments of error raise issues regarding standing and real party in interest, the propriety of summary judgment, the timing of judicial foreclosure procedures, and the availability of quiet title remedies. We affirm the trial court's entry of summary judgment declaring appellant Barbanti to be in default in his obligations under the real estate contract. We reverse the trial court's quieting of title in favor of BONY and remand for purposes of proceeding with the statutorily required foreclosure process, after resolving the amount of the debt owed.
This case involves a contract to purchase and sell real estate subject to a deed of trust securing a promissory note, an arrangement that eventually involved six parties, and that this court previously addressed in Bank of New York v Hooper, 164 Wn.App. 295, 298-302, 263 P.3d 1263 (2011) review denied, 173 Wn.2d 1021 (2012). The facts have not changed substantially from the prior litigation.
Brian R. Hooper and Lisa M. Hooper owned commercial property on North Division Street in Spokane. In March 1993, they signed a promissory note for $143, 000 secured by a deed of trust on the property in favor of Metropolitan Mortgage and Securities Company. Then, in May 1996, the Hoopers signed a real estate contract selling the property to Barbanti for $160, 000. Barbanti paid the Hoopers $7, 000 down, agreed to pay them $19, 450.17 in monthly installments, and agreed to fund their monthly payments for the $133, 549.83 still owed on the promissory note secured by the deed of trust.
The real estate contract provided that Barbanti would purchase the property subject to the deed of trust. He agreed the purchase price he must pay included the principal then due under the related promissory note, which was $133, 549.83 But Barbanti did not assume this obligation directly to Metropolitan Mortgage. Instead, he separately promised to the Hoopers to obey the note's and deed of trust's terms. And, he agreed, "Th[is] covenant[ ]... shall survive the delivery of the Seller's deed and bill of sale to the Purchaser." Clerk's Papers (CP) at 177. The contract's default clause reads:
18. PURCHASER'S DEFAULT. The Purchaser shall be in default under this contract if it (a) fails to observe or perform any term, covenant or condition herein set forth or those of any Prior Encumbrances, or (b) fails or neglects to make any payment of principal or interest or any other amount required to be discharged by the Purchaser precisely when obligated to do so----
CP at 181. The remedies clause reads, in relevant part:
Later Barbanti arranged to pay Metropolitan Mortgage's escrow directly for amounts owed under the note secured by the deed of trust.
Metropolitan Mortgage assigned its interest as payee under the promissory note and beneficiary under the deed of trust to BONY in February 1997. In March 2003, Barbanti stopped paying the portion of the purchase price due under note secured by the deed of trust but continued paying the portion of the purchase price due to the sellers, Hoopers. Barbanti quitclaimed his interest in the property to Royal Pottage on July 17, 2003. Junco Frost Lavinia obtained a judgment lien against the property.
In April 2009, BONY sued, in an earlier action, to foreclose the deed of trust on the property. In its complaint, BONY sought a money judgment and decree of foreclosure against the Hoopers. BONY's complaint named, as defendants, other persons and entities alleged to have an interest in the property, including Barbanti and Royal Pottage.
In August 2010, Barbanti moved to dismiss BONY's foreclosure action as time barred under the statute of limitations. Barbanti admitted he failed to make payments to escrow to satisfy the note and the underlying deed of trust as required by his real estate contract with the Hoopers.
In September 2010, before the hearing on Barbanti's motion to dismiss, the Hoopers signed a Deed and Seller's Assignment of Real Estate Contract, under which they quitclaimed their interest in the property and assigned their seller's interest in the real estate contract to BONY. BONY did not record the assignment. Thereafter, Barbanti continued to pay to the escrow company, the portion of the purchase price due to the seller under the real estate contract. The escrow agent continued to disburse the payments to the Hoopers, rather than BONY. BONY has never accelerated the debt owed.
At the dismissal hearing on September 24, 2010, BONY asked the court to deny dismissal and allow it to amend its complaint to assert a claim enforcing the real estate contract based upon Barbanti's breach of his obligations under the contract. The trial court orally granted the dismissal motion, apparently denying the amendment request.
On October 28, 2010, BONY filed this second lawsuit to enforce the real estate contract against Barbanti. On October 29, 2010, the court, in the first suit, entered orders: dismissing the bank's foreclosure action as barred by the statute of limitations; directing a reconveyance of the deed of trust; quieting title in "fee ownership" to Royal Pottage; and entering judgment in favor of appellant Barbanti and others for reasonable attorney fees and costs. On appeal, this court, in October 2011, reversed the trial court's order quieting title in "fee ownership" because the property was still subject to the real estate contract. We also reversed the award of reasonable attorney fees and costs.
Barbanti obtained a payoff quote from the escrow agent. On March 26, 2012, he paid $14, 790.45, received the fulfillment deed along with the original real estate contract stamped "PAID IN FULL, " and recorded the deed. CP at 167.
In this second lawsuit, the trial court granted BONY summary judgment, judicially foreclosed the real estate contract, and quieted title to the property in the bank's favor.
Appellants contend BONY lacks standing and is not a real party in interest to file this suit to foreclose the real estate contract. They base this contention upon the fact that, despite the Hoopers' assignment of their seller's interest in the real estate contract to the bank, the escrow agent thereafter continued disbursing Barbanti's real estate contract payments to the Hoopers, who continued collecting them without the bank's objection. Appellants also argue that, because the right to receive real estate contract payments is personal property, the party holding the right must memorialize it in a filing under the Uniform Commercial Code (UCC) article 9A, chapter 62A RCW. It is undisputed that the bank failed to do so and, thus failed to perfect its security interest. We do not address whether BONY had standing or was a real party in interest, since appellants waived the right to assert these defenses when they did not assert them in the trial court.
Appellants failed to file an answer to respondent's complaint and thus failed to assert standing and real party In interest as defenses. Appellants did not expressly assert that BONY lacked standing nor was a real party in interest when responding to the bank's summary judgment motion. Appellants contend they indirectly asserted the defenses when, in opposition to BONY's motion, they questioned the validity of the deed and seller's assignment and presented evidence supporting the defenses. Appellants also contend they may raise a standing issue for the first time on appeal because it concerns subject matter jurisdiction.
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