Wt Properties, Llc v. Leganieds, Llc

-8 H. I U- 4c
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
WT PROPERTIES, LLC, a Washington No. 73752-0-
limited liability company,
DIVISION ONE
Respondent,
LEGANIEDS, LLC, a Washington limited PUBLISHED
liability company; MODEL REMODEL,
LLC, a Washington limited liability FILED: August 8, 2016
company; JASON LEGAT and
JOHN/JANE DOE LEGAT, spouses, and
the marital community comprised
thereof; and DANIEL NIEDER and
JOHN/JANE DOE NIEDER, spouses,
and the marital community comprised
thereof,
Appellants.
Cox, J. — Where the dominant and servient estates of an easement vest
in the same person, the merger doctrine generally extinguishes the easement.1
But merger does not apply where the rights of innocent third persons would be
prejudiced.2
1 Radovich v. Nuzhat, 104 Wn. App. 800, 805, 16 P.3d 687 (2001) (citing
Coast Storage Co. v. Schwartz, 55 Wn.2d 848, 853, 351 P.2d 520 (1960));
Restatement (Third) of Prop.: Servitudes § 7.5 (2000).
2 ]d, (citing Moblev v. Harkins, 14 Wn.2d 276, 282, 128 P.2d 289 (1942));
Restatement (Third) of Prop.: Servitudes § 7.5 cmt. d; Id § 7.5 reporter's note
(citing Heritage Communities of N.C Inc. v. Powers, Inc., 49 N.C. App. 656, 272
S.E.2d 399 (1980) (outstanding deed of trust is sufficient interest to prevent
termination of easement by merger of dominant and servient estates)).
No. 73752-0-1/2
Here, the predecessors in interest to WT Properties, LLC reserved an
easement for ingress, egress, and utilities in certain property that the parties to
this litigation refer to as the "Access Strip." Thereafter, these same predecessors
in interest granted a deed of trust to Viking Bank in the Access Strip and adjacent
property. Later, these same predecessors in interest acquired title to the Access
Strip. Thus, the dominant and servient estates of the easement vested in them
at the same time. Because applying the doctrine of merger to extinguish the
easement would have prejudiced the bank's security interest under these
circumstances, merger does not apply. The trial court properly granted summary
judgment to WT Properties.
The trial court also properly denied summary judgment on the cross
motion of Leganieds, LLC, the fee owner of the Access Strip burdened by the
easement. Leganieds's cross claim that the easement violates a restrictive
covenant is not ripe for review. Thus, the trial court properly dismissed, without
prejudice, this cross claim.
We affirm the trial court in all respects.
The material facts are not in dispute. The Maybrook Plat was established
in 1948. The plat contains a restrictive covenant that contains both size and use
restrictions. The former sets a minimum lot size of 6,000 square feet and a
minimum lot width of 60 feet. The latter restricts property in the plat to
"residence" uses.
In early 2006, Binod Prasad and Basant Prasad owned the property that is
involved in this litigation. They are the predecessors in interest to WT Properties
and Leganieds. These parties each now own parts ofthe property formerly
2
No. 73752-0-1/3
owned by the Prasads. Rehabitat Northwest Inc., who is not a party to this
litigation, owned at times relevant to this dispute other parts of the property
formerly owned by the Prasads.
In October 2006, the Prasads conveyed to Rehabitat property described
as "Parcel I" and "Parcel II" in the diagram that follows. The Prasads expressly
reserved in the deed to Rehabitat an easement from 170th Street for ingress,
egress, and utilities in these two parcels. This is the Access Strip. The
easement is for the benefit of the property—"Parcel A" and "Parcel B"—to the
south on the diagram that follows.3
On February 14, 2007, the Prasads executed and delivered a deed of trust
to their property—"Parcel A" and "Parcel B"—to Viking Bank. The deed of trust
secured their financial obligations to the bank.
In May 2007, the Prasads and Rehabitat participated in a boundary line
adjustment to their adjacent properties. The recorded documents for this
adjustment show that this transaction vested the Prasads with title to the Access
Strip.4 At the same time, they also held an easement in the Access Strip.
Moreover, Viking Bank held a deed of trust that encumbered both the Access
Strip and the property it benefited to the south.
A diagram of the properties, as they appeared after the May 2007
boundary line adjustment, follows:
3 Clerk's Papers at 135-37.
4 ]d at 84, 85, 112, 151-52.
No. 73752-0-1/4
-S. 170* St. S. 170m St.
Parcel II Parcel I
(Lot 18 and (Lot T6~and
the West 7 ft the East 12 ft
of Lot 17) of Lot 17)
When the Prasads and
Rehabitat NW
executed the
Boundary Line
Adjustment, the west
Parcel A boundary of Parcel l
and the east boundary
(2923049180)
of Parcel II were
pushed back to
become coextensive
with the easement
area. Through the
BLA, the Prasads
acquired ownership of
Parcel B all of Lot 17 except the
West 7 feet and the
(2923049260)
East 12 feet thereof
The Prasads defaulted on their loan from Viking Bank. In 2011, the bank
directed a successor trustee under the deed of trust securing the bank's loan to
conduct a nonjudicial foreclosure. The successor trustee did so, eventually
conducting a trustee's sale in 2011.
WT Properties was the successful bidder at this trustee's sale. For
reasons not relevant to this case, WT Properties obtained a trustee's deed only
for Parcel A and Parcel B, and not also for the Access Strip, after this sale.
In 2012, the Prasads conveyed title to the Access Strip to Leganieds. The
easement in the Access Strip was still of record.
In February 2014, WT Properties commenced this action, seeking to quiet
title in the Access Strip to confirm the existence of the easement of record.
No. 73752-0-1/5
Leganieds answered and made a counterclaim to quiet title to eliminate this
easement.
In October 2014, the trial court granted summary judgment in favor of
Leganieds, ruling that it was the fee owner of the Access Strip. But the court
reserved for a future determination whether WT Properties held an easement in
the Access Strip. Neither party contests that ruling.
In April 2015, WT Properties moved for summary judgment, seeking to
quiet title in the easement in the Access Strip. Leganieds made a cross motion
for summary judgment, seeking to quiet title in the Access Strip free and clear of
this easement. The trial court granted summary judgment to WT Properties,
ruling that it held an easement in the Access Strip. The trial court denied
Leganieds's cross motion to quiet title.
The court also dismissed, without prejudice, Leganieds's claim to enforce
the restrictive covenant in the Maybrook Plat that limited the use of property in
the plat to "residential" use. It did so on the basis that this claim was not ripe for
consideration.
Leganieds appeals.
MERGER AND EXCEPTIONS
Leganieds argues that the merger doctrine extinguished the easement in
the Access Strip. It reasons that this is so because the Prasads simultaneously
held both the easement and fee ownership in the Access Strip after the 2007
boundary line adjustment transaction. We hold that merger did not apply to
extinguish the easement. To hold otherwise would prejudice Viking Bank, an
innocent third person.
No. 73752-0-1/6
Innocent Third-Person Exception
Summary judgment is proper when "'there is no genuine issue as to any
material fact and ... the moving party is entitled to judgment as a matter of
law.'"5 There is a genuine issue of material fact if"'reasonable minds could differ
on the facts controlling'" the litigation's outcome.6 This court considers "the
evidence and all reasonable inferences from [such] evidence in the light most
favorable to the nonmoving party."7
We review de novo a trial court's grant of summary judgment.8
"Merger may occur when the fee interest and a charge, such as a[n]. . .
encumbrance, vest in the possession of one person."9 There is no merger
"'where the party in whom the two interests are vested does not intend such a
merger to take place, or where it would be inimical to the interest of the party in
whom the several estates have united, [or when merger] would prejudice the
rights of innocent third persons.'"™
5 Wuthrich v. King County, 185 Wn.2d 19, 24-25, 366 P.3d 926 (2016)
(internal quotation marks omitted) (quoting Owen v. Burlington N. & Santa Fe
R.R. Co., 153 Wn.2d 780, 787, 108 P.3d 1220 (2005)); see also CR 56(c).
6 Knight v. Dep't of Labor & Indus.. 181 Wn. App. 788, 795, 321 P.3d 1275(quoting Ranger Ins. Co. v. Pierce County, 164 Wn.2d 545, 552, 192 P.3d 886(2008)), review denied, 181 Wn.2d 1023 (2014).
7 Keck v. Collins, 184 Wn.2d 358, 370, 357 P.3d 1080 (2015).
8 Wuthrich, 185 Wn.2d at 24.
9 In re Tr.'s Sale of Real Prop, of Ball, 179 Wn. App. 559, 564, 319 P.3d
844 (2014).
10 Radovich, 104 Wn. App. at 805 (emphasis added) (quoting Moblev, 14
Wn.2d at 282).
No. 73752-0-1/7
Here, the Prasads reserved an easement for ingress, egress, and utilities
in the Access Strip for the benefit of their property to the south (Parcels A and B)
in their 2006 deed to Rehabitat. This Access Strip burdens the property beneath
it because the easement provides access to and from 170th Street to the north
for the benefit of the property to the south.
In February 2007, the Prasads executed and delivered a deed of trust to
Viking Bank to secure their financial obligations to the bank. The deed of trust
granted a security interest in the following described property:
[A]ll of [the Prasads's] right, title, and interest in and
to the following described real property, together with all
existing or subsequently erected or affixed buildings,
improvements and fixtures; all easements,.. . and similar
matters, (the "Real Property") located in King County,
State of Washington.t11i
Thus, this deed of trust encumbered both the Access Strip (the
easement) as well as the benefited property to the south (Parcels A and B).
Thereafter, the Prasads acquired title to the Access Strip as a result of the
boundary line adjustment it conducted with Rehabitat in May 2007. Thus, both
title to the Access Strip as well as the easement in that same property vested in
the Prasads at the same time. More importantly, Viking Bank had a security
interest by way of its deed of trust in the same property at the time when the
Prasads owned the property. Elimination of the easement would have prejudiced
the bank in at least two ways. First, it would have lost part of its collateral for the
loan. Second, it would also have lost access to and from 170th Street in the
11 Clerk's Papers at 140 (emphasis added).
No. 73752-0-1/8
event of foreclosure. For these reasons, under a well-established exception to
the merger doctrine, merger does not apply. Doing so would have prejudiced the
bank.
Leganieds acknowledges that one exception to merger is where applying
the doctrine "would prejudice the rights of innocent third persons."12
Nevertheless, it argues that the merger doctrine extinguished the easement
under the circumstances of this case. It cites Schlagerv. Bellport13 to support its
argument that "Washington courts have no trouble applying the merger doctrine"
to easements.
But that is not the question. Rather, the question is whether a well-
established exception to the merger doctrine applies to the circumstances of this
case. As we have explained, the exception does apply. Schlager does not
support a different result.
There, this court determined that merger applied, extinguishing a height
restriction covenant. But this court reached that conclusion because there were
no outstanding interests in the dominant or servient lots that were unified under
single ownership.14 Thus, that case is distinguishable from this one.
Leganieds also argues that merger applies because WT Properties was
not an innocent third person. The innocence or lack thereof of WT Properties is
immaterial to the proper analysis of whether merger applies. That is because
12 Appellant's Opening Brief at 22.
13 118 Wn. App. 536, 76 P.3d 778 (2003).
14 ]d at 541-42.
8
No. 73752-0-1/9
Viking Bank, not WT Properties, was the innocent third person whose interests
would have been prejudiced by the application of the merger doctrine.
Likewise, it is also irrelevant that the bank is not a party to this litigation.
What is relevant is that it had a security interest in the property at the relevant
time: when the Prasads owned the property.
Leganieds further argues that "[tjhere has been no showing that Viking
Bank, was, or would be, harmed in any way by" merger. We previously
explained why we reject this argument.
Lastly, Leganieds argues that Washington has not adopted a "mortgage"
exception to the merger doctrine. It is unclear to this court what Leganieds
means by this argument.
Both the supreme court and lower courts in this state have recognized the
existence of several exceptions to application of the merger doctrine. One of
them is the innocent third person exception that governs this case. This is an
exception recognized both by the courts of this state as well as other respected
authorities.
It is not relevant that the innocent third person in this case is the holder of
a deed of trust, which is a "species" of a mortgage.15 This is not a bar to the
application of the rule. So, we simply do not accept this argument to the
contrary.
15 Rustad Heating & Plumbing Co. v. Waldt, 91 Wn.2d 372, 377, 588 P.2d
1153(1979).
No. 73752-0-1/10
RESTRICTIVE COVENANT
Leganieds also takes issue with the trial court's dismissal, without
prejudice, of its claim that the easement should be extinguished on the ground
that it violates a use restriction in the Maybrook Plat. We hold that the trial court
correctly ruled that this claim is not ripe for consideration.
Leganieds makes two related arguments. First, it argues that the
easement was invalid upon its formation. Second, it argues that, if it exists, its
use must be enjoined. Both arguments are premised on the existence of a
restrictive covenant that restricts use of the property subject to the easement to
"residential" purposes. And neither deals with the elements of ripeness, which
we now discuss.
Ripeness
Leganieds argues that the trial court erred in concluding that Leganieds's
claim to invalidate the easement and enjoin its use was not ripe. We disagree.
Claims are ripe for judicial review "'ifthe issues raised are primarily legal,
do not require further factual development, and the challenged action is final.'"16
A court must also consider the hardship to the parties if the court declines to
address the issue.17 But "[c]urrent hardship is not a strict requirement for
16 State v. Cates, 183 Wn.2d 531, 534, 354 P.3d 832 (2015) (internal
quotation marks omitted) (quoting State v. Sanchez Valencia. 169 Wn.2d 782,
786, 239 P.3d 1059 (2010)).
17 Id
10
No. 73752-0-1/11
ripeness."18 Ripeness concerns are satisfied ifthere is a "sufficient immediate
effect."19
We review de novo whether an issue is ripe.20
Here, Leganieds seeks to invalidate the easement and enjoin its use
based on a restrictive covenant that prohibits uses other than "residential" on the
property. The property to which the easement is subject is also subject to this
restriction of record. On this basis, Leganieds seeks relief.
WT Properties raises a number of defenses to these claims. Among them
is that the covenant may not be enforced against a non-owner and that equitable
doctrines of unclean hands and estoppel bar enforcement of this restrictive
covenant.
In sum, further factual development of the record is required to test
whether these defenses are proper. Accordingly, at least one of the elements of
the ripeness requirement is not met. The trial court properly dismissed, without
prejudice, Leganieds's claims on the basis they were not ripe for consideration.
18 Jafar v. Webb. 177 Wn.2d 520, 525, 303 P.3d 1042 (2013).
19 id
20 Wash. State Commc'n Access Project v. Regal Cinemas. Inc., 173 Wn.
App. 174, 209, 293 P.3d 413 (2013).
11
No. 73752-0-1/12
Leganieds argues that the restrictive covenant should "not [be] subject to
injunction standards or technicalities about whether a covenant can be enforced
against an easement holder or only against fee owners." But it cites no authority
for this argument, and we need not consider it further.21
We affirm the Order Granting Plaintiff's Motion for Summary Judgment
and Denying Defendant's Cross Motion for Summary Judgment.
a^A.X
WE CONCUR:
7*r\ *Ke 7 (\ k->
21 See Darkenwald v. Emp't Sec. Dep't, 183 Wn.2d 237, 248, 350 P.3d
647 (2015); RAP 10.3(a)(6).
12