Donovick v. Seattle-First National Bank

Brachtenbach, J. —

The issue is whether two separate deeds of trust on separate properties, securing one obligation, may be nonjudicially foreclosed in separate sales, one sale immediately following the other? The trial court held the foreclosures were valid; the Court of Appeals affirmed in an unpublished opinion. Donovick v. Seattle-First Nat'l Bank, noted at 48 Wn. App. 1008 (1987). We affirm.

This case arises out of an approximate $205,000 loan from defendant bank to plaintiff debtors. The debt was evidenced by a single promissory note. Debtors contemporaneously executed two deeds of trust, one on commercial property and one on a residence.

Approximately 15 months after default by the debtors, bank began separate but simultaneous nonjudicial foreclosure proceedings against both properties. Debtors failed to cure the default. The trustee first sold the residential property and immediately thereafter sold the commercial property. Bank bid one-half of the debt on each property. Debtor husband and his attorney were present at the sale. Debtor recorded the proceedings. Neither debtor husband nor his attorney objected to either sale. No challenge is made to statutory procedures leading to the two sales.

After debtors were ordered to vacate the commercial premises by writ of restitution, they demanded that the trustee reconvey the commercial property to them, contending that its sale was unauthorized because the sale of the residential property extinguished the entire debt. Debtors then sued bank to quiet title to the commercial property; bank counterclaimed seeking confirmation of its title. The trial court granted a partial summary judgment for bank, quieting title and issuing a writ of restitution.

The essence of debtors' argument is that nonjudicial foreclosure of a deed of trust satisfies the underlying debt, precluding a creditor from foreclosing on another deed of trust that secures the same obligation. Debtors conclude that allowing foreclosure of the second deed of trust here is equivalent to granting a deficiency judgment prohibited by RCW 61.24.100.

Debtors argue for a literal reading of the language of RCW 61.24.100, which provides that a nonjudicial foreclosure "shall satisfy the obligation secured by the deed of trust foreclosed". A statute, however, must be read in its entirety, not piecemeal. State v. Parker, 97 Wn.2d 737, 741, 649 P.2d 637 (1982). Considering the statute as a whole we find debtors' arguments unpersuasive.

Initially, we note that the deed of trust act does not mandate or even contemplate that the entirety of the security must be sold in gross as a single parcel. Had the properties involved here been described in a single deed of trust, RCW 61.24.040(4) would have authorized the trustee to conduct the sales exactly as they took place. The trustee could have sold the properties "in gross or in parcels as the trustee shall deem most advantageous". See RCW 61.24-.040(4).

The question then is whether the statute mandates a different result here because the debt was secured by two deeds of trust instead of one.

Reading the entirety of RCW 61.24 in the context of the mortgage laws and the history of deed of trust legislation, it is apparent that there was contemplated a quid pro quo between lenders and borrowers. The borrower, for example, relinquished his right of redemption. See RCW 61.24.050 ("After sale, as in this chapter provided, no person shall have any right by statute or otherwise to redeem from the deed of trust or from the sale.") The secured party, on the other hand, gave up any right to a deficiency judgment. See RCW 61.24.100. By giving up the right to a deficiency judgment, however, the secured party did not also give up the right to realize upon the security given.

A literal reading of RCW 61.24.100 here as urged by debtors would ignore the intent of the statutory scheme and give an unjustified, unwarranted windfall to the debtor — a windfall completely without merit in logic or equity in principle. The statute does not prohibit the use of separate deeds of trust to secure a single obligation. Moreover, RCW 61.24.100 does not preclude creditor bank from realizing upon and exhausting the security given by debtors under the circumstances of this case.

The inequity of debtors' position here is illustrated by the record. We note that the satisfaction of the obligation by foreclosure is without regard to the sale price or fair value. See RCW 61.24.100. At the time of the sales at issue, debtors had a remaining unpaid indebtedness of $89,796.56 owed to bank. This debt was originally secured by the two deeds of trust at issue. Debtors now contend that bank is limited to foreclosure only on the parcel first sold — the residence.

The record shows at most a gross equity of approximately $64,000 in the residence, which had been listed for sale, but for which debtors had received no offers to purchase. The other property, the commercial property, was subject to prior security interests and taxes totaling $110,811. After securing a writ of restitution bank expended an additional $18,047 for maintenance. This property had been listed for sale for $150,000, but with no offers received. Neither property represented full realization of the unpaid debt. Even together the sales of the two parcels amounted to less than full recovery for bank.

These calculations, of course, are based upon paper valuations. The marketplace may yield different results. Our analysis demonstrates only that bank accrued no advantage by the use of two deeds of trust. Likewise, no evidence suggests that the net result from debtors' standpoint would have been different had one deed of trust described both parcels, or had the two properties been sold in gross or separately. Bank's use of two deeds of trust did not deprive debtors of their statutory rights to cure the defaults, or to reinstate. The property sold was no more than debtors had given as security 4 years before sale. Debtors' obligation has now been satisfied and they are not subject to any deficiency, even if bank sustained an actual loss in foreclosing nonjudicially upon the properties.

Debtors also argue that the result here will frustrate the policy objectives of the act as enunciated in Cox v. Helenius, 103 Wn.2d 383, 387-88, 693 P.2d 683 (1985). We disagree. The first point in Cox is that nonjudicial foreclosures should remain efficient and inexpensive. Debtors merely speculate that successive foreclosures over a long period of time would decrease efficiency and increase costs. We find no evidence of this alleged result. Next, the process should provide an adequate opportunity for interested parties to prevent wrongful foreclosure. Specific statutory remedies exist to make appropriate challenges. See RCW 61.24.130. Debtors here make no claim of improper procedures in the foreclosure process. Finally, the process should promote the stability of land titles. Property used to secure a debt is subject to foreclosure. No instability beyond that created by a voluntary encumbrance results.

We emphasize that the trustee here held the two sales at the same time, one immediately following the other. This is the same result which could have occurred under RCW 61.24.040(4) if the two parcels had been described in one instrument. Debtors have demonstrated no harm, nor do we perceive any, from the method of foreclosure here employed. It might be that different procedures, such as delaying sale of the second parcel to the lender's unfair advantage or to the debtor's substantial detriment, or otherwise circumventing the purposes of the act could lead to a conclusion contrary to that we reach here. Those circumstances, however, are not before us. Thus, we tailor our holding closely to the facts of this case.

Finally, counsel for bank seeks attorney fees. The Court of Appeals granted bank's request for its attorney fees; petitioners raised no issue in their petition for review about the correctness of that award. Before this court, counsel did not comply with RAP 18.1(c) because he failed to file his affidavit 7 days prior to oral argument. Opposing counsel for debtor, however, does not challenge the requested amount, $1,672, nor does he challenge the request to waive strict compliance in light of extenuating circumstances set forth in the affidavit.

Generally, strict compliance with RAP 18.1(c) is required. Under these circumstances, however, the purpose of the rule has been satisfied; requested fees are granted. Marketing Unlimited, Inc. v. Jefferson Chem. Co., 90 Wn.2d 410, 414, 583 P.2d 630 (1978).

Affirmed.

Pearson, C.J., Dolliver, Andersen, Callow, and Durham, JJ., and Hamilton, J. Pro Tern., concur.