Union Bank, N.A. v. Blanchard

• Decision Date: 06 June 2016
• Docket Number: No. 72805–9–I,72805–9–I
• Citation: 194 Wash.App. 340,378 P.3d 191
• Parties: Union Bank, N.A., successor-in-interest to the Federal Deposit Insurance Corporation, as receiver of Frontier Bank, Respondent, v. John T. Blanchard and Jane Doe Blanchard, husband and wife; Randy S. Previs and Katie L. Previs, husband and wife, Appellants.
• Court: Washington Court of Appeals

194 Wash.App. 340

378 P.3d 191

Union Bank, N.A., successor-in-interest to the Federal Deposit Insurance Corporation, as receiver of Frontier Bank, Respondent

v.John T. Blanchard and Jane Doe Blanchard, husband and wife; Randy S. Previs and Katie L. Previs, husband and wife, Appellants.

No. 72805–9–I

Court of Appeals of Washington, Division 1.

FILED: June 6, 2016

John Thomas Blanchard, Attorney at Law, 340 N 133rd St., Seattle, WA, 98133–7402, John Graeme Young, Williams Kastner & Gibbs PLLC, 601 Union St., Ste. 4100, Seattle, WA, 98101–2380, Randy S. Previs (Appearing Pro Se), Katie L. Previs (Appearing Pro Se), 22819 Woodway Park Road, Woodway, WA, 98020, for Appellants.

Joseph Emil Shickich Jr., Riddell Williams PS, 1001 4th Ave., Ste. 4500, Seattle, WA, 98154–1065, for Respondent.

Dwyer, J. ¶ 1 When Wellington Hills Park, LLC defaulted on a debt owed to Union Bank, Union commenced this action on commercial guaranties executed by John Blanchard, Randy Previs, and Katie Previs (the guarantors) securing that debt. The guarantors asserted numerous affirmative defenses and counterclaims in response, but the trial court concluded that Union was entitled to judgment as a matter of law on its claims and dismissed the guarantors' counterclaims. Because the trial court was correct to enforce the absolute and unconditional guaranties and the guarantors do not establish a genuine issue of material fact with regard to their claims and defenses, we affirm.

I

A. Blanchard and the Previses give guaranties of borrower's indebtedness to Frontier Bank

¶ 2 Wellington Hills Park (borrower) is a limited liability company that owned the Wellington Hills Business Campus in Woodinville (the property). Its members are Randy and Katie Previs (85 percent owners), who are long-time real estate investors and developers, and John Blanchard (15 percent owner), “an experienced business and real estate attorney,” who also served as borrower's general counsel.

¶ 3 In 2005, borrower obtained a construction loan to develop the property from Frontier. Borrower executed a promissory note evidencing the debt owed to Frontier.¹ The note was secured by a construction deed of trust that encumbered the property and an assignment of rents. It was also secured by individual guaranties executed by Blanchard and each of the Previses (the guaranties).

¶ 4 As part of the loan transaction, Blanchard and the Previses each signed three documents. Specifically, they each signed the note as a member of borrower, signed an individual commercial guaranty, and signed the final loan agreement twice—first as a member of borrower, then as a guarantor.²

¶ 5 Borrower defaulted on the note when it came due on January 5, 2010.

B. Frontier fails and Union buys Frontier's assets from the Federal Deposit Insurance Corporation (FDIC), including the note and guaranties

¶ 6 On April 30, 2010, the Washington State Department of Financial Institutions closed Frontier. The FDIC was appointed as the receiver to liquidate Frontier and wind up its affairs. The same day, Union purchased certain of Frontier's assets from the FDIC, including the note and the guaranties. With respect to the assets it purchased, Union succeeded to the FDIC's rights as Frontier's receiver. The FDIC also authorized Union to avail itself of statutory protections available to the FDIC and its assignees.

¶ 7 The final day to file claims against Frontier with the FDIC was August 4, 2010; neither Blanchard nor the Previses filed claims by that deadline.

C. The Snohomish County Superior Court appoints a receiver for borrower and the property; Appellants actively oppose the acts of the receiver

¶ 8 On November 19, 2010, Union filed an application for the appointment of a custodial receiver for borrower and the property in Snohomish County Superior Court (the receivership court).³ On December 21, 2010, the receivership court entered its order appointing Turnaround Inc. as custodial receiver.

¶ 9 On July 27, 2011, Union moved to convert the custodial receivership to a general receivership. Blanchard and Randy Previs opposed the motion. The receivership court entered an order converting the case to a general receivership and appointing Turnaround as general receiver, which became effective on November 17, 2011.

¶ 10 On December 19, 2011, the receiver gave notice of the deadline to file proofs of claim in the receivership. Blanchard, the Previses, and Randy Previs, as assignee of Veritas Development, Inc. (Veritas),⁴ filed claims.

¶ 11 On April 27, 2012, the receiver moved for an order approving a settlement agreement and release of claims in connection with a soft cost insurance claim previously asserted by borrower. Blanchard and Randy Previs opposed the settlement. On June 1, 2012, the receivership court entered an order approving the settlement agreement and release of claims. In support of its order, the court found “that the [a]greement is fair and equitable, and in the best interests of the estate and its creditors, and that the responses or objections should be over-ruled.”

¶ 12 On July 26, 2012, the receiver moved the receivership court for an order to approve bid procedures for the sale of the property. On August 31, 2012, the court granted the motion and entered its bid procedures order.

¶ 13 On January 23, 2013, the receiver gave notice of the successful bidder under the bid procedures order and set a hearing to approve the sale. Blanchard, Randy Previs, and Veritas opposed the proposed sale. On January 31, 2013, the receivership court approved the sale of the property by a purchase and sale agreement between the receiver and OIBP Wellington Hills, LLC (OIBP) for a purchase price of $10,850,000.

¶ 14 On February 8, 2013, Randy Previs and Veritas sought revision of the sale order, but their revision motion was denied. On March 25, 2013, they filed a notice of appeal of the sale order with this court.⁵

¶ 15 Blanchard and the Previses did not post the $7,102,611 bond required to supersede the judgment and stop the sale. Instead, they had borrower declare bankruptcy.

D. Borrower declares bankruptcy; the bankruptcy court rejects Appellants' opposition and directs the sale of the property

¶ 16 On August 20, 2013, borrower filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Western District of Washington (the bankruptcy court).⁶ The Chapter 7 voluntary petition was signed by Randy Previs, as borrower's managing member.

¶ 17 On September 13, 2013, the Chapter 7 trustee (the trustee) filed a motion requesting that the bankruptcy court approve the sale of the property to OIBP and stating that “assurance and speed of closing” were critical and that “the Trustee cannot ignore the history of the dispute and the decisions made by the Receiver, the tenant, the Bank, the County, the Superior Court and the Court of Appeals.”

¶ 18 The trustee also filed his own declaration in support of the sale, stating:

I have concluded, based on the facts and circumstances of this case, that I should seek Bankruptcy Court approval to sell the Property to OIPB Wellington Hills, LLC, pursuant to essentially the same terms as those agreed to in the state court receivership case.... I have determined it is not in the best interest of the estate and its creditors to accept the offer of Veritas and put it before the Court for approval, or to open up this matter to an auction or to a new marketing process.

¶ 19 Veritas and Blanchard filed objections to the trustee's motion. Randy Previs, under the letterhead of Seavestco, Inc., filed an objection both to the trustee's motion and to the receiver's continued control of the property pending its sale. On October 16, 2013, the bankruptcy court granted the trustee's motion, made findings, and entered its order approving the sale of the property.

¶ 20 On October 30, 2013, Veritas filed a notice of appeal from the bankruptcy sale order.

¶ 21 On November 26, 2013, the sale of the property closed and, from the sale proceeds, the closing agent disbursed $9,696,411.88 to Union pursuant to its construction deed of trust.

E. The bankruptcy court enforces the guaranties and subordinates Appellants' proofs of claim to Union's claim

¶ 22 Blanchard, the Previses, and Veritas, by Randy Previs as its assignee, filed proofs of claims in the bankruptcy case.

¶ 23 On March 31, 2014, Union moved for summary judgment against Blanchard and the Previses on the ground that the subordination provision in the guaranties subordinated their proofs of claim to Union's claims. In their opposition to the motion, Blanchard and the Previses argued that “Union Bank's conduct in conducting the receivership of Wellington Hills Business Park was substantively unconscionable, rendering the personal guaranties—including the subordination clause—unenforceable.”

¶ 24 On May 27, 2014, the bankruptcy court entered summary judgment in favor of Union, upholding the guaranties, enforcing the subordination provisions in the guaranties, and holding that “all distributions on [Appellants'] claims must be paid to Union Bank.”

F. The receivership and bankruptcy case appeals are voluntarily dismissed with prejudice; the cases are closed

¶ 25 On December 23, 2013, Veritas, borrower, and the trustee agreed to dismiss with prejudice the appeal from the bankruptcy sale order. The appeal was dismissed with prejudice on December 31, 2013. On January 30, 2015, the bankruptcy court entered its order discharging the trustee and closing the case.

¶ 26 On January 7, 2014, Randy Previs and Veritas moved this court to withdraw its appeal of the sale order of the receivership court. The appeal was dismissed on January 23, 2014. On December 18, 2014, the receivership court entered an order approving the receiver's final report and discharging the receiver.

G. This action is commenced; Appellants assert affirmative defenses and counterclaims

¶ 27 On March 29, 2013, while the receivership case was pending and before the bankruptcy case was commenced, Union filed...