Michael & Helen Uribe v. Libey, Ensley & Nelson, PLLC

FILED
MAY 5,2015
In the Office of the Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
MICHAEL URIBE and HELEN URIBE )
husband and wife, ) No. 32315-3-111
)
Appellants, )
)
v. )
) UNPUBLISHED OPINION
LIBEY, ENSLEY & NELSON, PLLC, a )
Washington professional limited liability )
company; BANK OF WHITMAN, now )
known as COLUMBIA BANK, successor )
in interest to the FDIC as Receiver of )
Bank of Whitman; and GARY LIBEY and )
JANE DOE LIBEY, husband and wife and )
the marital community comprised thereof, )
)
Respondents. )
I
KORSMO, J. - This appeal arises from the nonjudicial foreclosures of deeds of
I
trust securing cross-collateralized commercial loans. Concluding that the trial court
I
I
properly granted summary judgment in favor of the defendants, we afftrm.
FACTS ~
f
In the early 2000s, Michael and Helen Uribe owned a 1,000 acre tract of land in
Benton County, then valued in excess of$3.75 million. They also owned a substantially
II
1
i
less valuable piece of property in Franklin County. In order to finance a commercial I'
f
No. 32315-3-III
Uribe, et ux v. Libey, Ensley & Nelson, PLLe, et al
endeavor, the Uribes took out a loan in the amount of$I,665,185.50 from the Bank of
Whitman (Bank). The loan was secured by a deed of trust on the Franklin County
property, a mortgage on the Benton County property, and a security interest in some
vehicles and equipment used in the Uribes' business. A few years later, the Uribes took
out a second commercial loan from the Bank in the amount of$571,000. This loan was
secured by a deed of trust on the Benton County property, a mortgage on the Franklin
County property, and a security interest in that same business property. Additionally, the
deed of trust on the Benton County property included a clause whereby it further secured
all prior indebtedness by the Uribes to the Bank.
Following the collapse of the real estate market, the Uribes defaulted on both
loans. In March 2009, the Bank sent the Uribes notices of default. Before the Bank
could take any further action, the Uribes filed for bankruptcy, resulting in an automatic
stay on all foreclosure proceedings. The Bank then filed a motion for relief from the stay.
One year later, the bankruptcy court lifted the stay and abandoned the property from the
estate. That court determined that the total value of the security assets ($2,550,171) was
less than the total debt owed on the two loans ($2,745,982.78). The Bank then initiated
nonjudicial foreclosure proceedings on the two deeds of trust, as well as a replevin action
on the business property.
The Bank sent new notices of default and then appointed Gary Libey as trustee.
Mr. Libey sent notices of trustee's sales to the interested parties. On September 8, 2010,
2
No. 32315-3-III
Uribe, et ux v. Libey, Ensley & Nelson, PLLe, et al
the notices and Mr. Libey's appointment as trustee were filed with the Franklin and
Benton County Auditors. The notices were recorded approximately two hours before the
appointments were recorded.
On December 17,2010, both properties were sold at auction to the Bank; there
were no other bidders. First, the Franklin County property was sold for $390,000 and the
purchase price was credited to the Franklin County loan. Then, the Benton County
property was sold for $1.2 million, with the purchase price credited in part to the Benton
County loan and in part to the Franklin County loan. In the separate replevin action, the
Bank realized an additional $281,487.14 from the sale of the Uribes' business property.
On December 28 and 30, Mr. Libey recorded the trustee's deeds for the two properties,
acknowledging full satisfaction of both loans. The Bank subsequently sold the Benton
County property to Randall Rupp for approximately $1.28 million.
Ten months later, the Uribes brought an action against the Bank, Gary Libey,
Libey Ensley & Nelson, PLLC, Randall Rupp, and 7HA Family, LLC, alleging violations
of the Deeds of Trust Act (DTA), chapter 61.24 RCW, and the Consumer Protection Act
(CPA), chapter 19.86 RCW, as well as collusive bidding, conversion, civil conspiracy,
and racketeering. The Bank settled with the Uribes. The superior court later granted
summary judgment in favor of the remaining defendants. The Uribes appealed from that
decision, reasserting only their claims under the DTA and CPA.
3
No. 32315-3-III
Uribe, et ux v. Libey, Ensley & Nelson, PLLC, et al
ANALYSIS
The Uribes allege two violations of the DTA, relating respectively to the validity
and procedure of the trustee's sale, which we will address in that order. Our resolution of
those issues precludes any need to discuss the CPA claim.
The Validity a/the Sale
The Uribes contend that because the notices of trustee's sales were recorded two
hours prior to Mr. Libey's appointment as trustee, the trustee's sales were invalid and
should be rescinded. In response, Mr. Libey contends that under the DTA, the Uribes
waived their ability to challenge the validity of the trustee's sale by failing to bring an
action to enjoin the sale.
The DTA should be construed liberally to further its basic objectives: (1) that the
nonjudicial foreclosure process be efficient and inexpensive, (2) that the process should
allow adequate opportunity for parties to prevent wrongful foreclosure, and (3) that the
process should promote the stability ofland titles. Cox v. Helenius, 103 Wash. 2d 383, 387,
693 P.2d 683 (1985). In order to prevent wrongful foreclosure, a statutory cause of
action is available to the debtor to enjoin an invalid foreclosure. See RCW 61.24.130.
To promote stability of land titles, failure to bring an action "may result in a waiver of
any proper grounds for invalidating the Trustee's sale." RCW 61.24.040(1)(t)(IX).
Waiver ofa post-sale challenge occurs where a party (1) received notice of the right to
enjoin the sale, (2) had actual or constructive knowledge of a defense to foreclosure prior
4
No. 32315-3-III
Uribe, et ux v. Libey, Ensley & Nelson, PLLC, et al
to the sale, and (3) failed to bring an action to obtain a court order enjoining the sale.
Plein v. Lackey, 149 Wn.2d 214,227,67 P.3d 1061 (2003). Waiver is not strictly applied.
It only will occur where it is equitable under the circumstances and furthers the goals of
the act. Albice v. Premier Mortg. Servs. o/Wash., Inc., 174 Wash. 2d 560, 570,276 P.3d
1277 (2012).
It is uncontested that the Uribes received adequate notice of their statutory rights
and that they did not bring an action to enjoin the trustee's sale. They argue that waiver
is inappropriate because they had no actual knowledge of the filing defects related to the
appointment of Libey and his notices of sale. However, the Uribes had constructive
knowledge of the order in which the documents were recorded by the county clerk. I That
is sufficient for waiver. Additionally, equitable considerations favor applying waiver to
these circumstances. The Uribes are complaining of an extremely minor, technical
failure in the foreclosure proceeding, which has not apparently harmed them in any way.
Finally, applying waiver here furthers the purposes of the DTA by promoting the stability
of land titles in a situation where the complaining party had ample opportunity to correct
the error before the sale. Consequently, application of waiver is appropriate in this
situation.
I Indeed, the Uribes' theory of liability against Rupp was that Rupp purchased the
property with constructive notice of the filing defect.
5
No. 32315-3-III
Uribe, et ux v. Libey, Ensley & Nelson, PLLC, et al
The Uribes argue unpersuasively that waiver cannot apply to procedural
irregularities. They rely on inapposite precedent. See Schroeder v. Excelsior Mgmt.
Grp., LLC, 177 Wash. 2d 94, 297 P.3d 677 (2013); Bavand v. One West Bank, FS.B., 176
Wash. App. 475, 309 P.3d 636 (2013). Unlike the present situation, both of these cases
dealt with situations where the lender lacked statutory authority under the DTA to initiate
the foreclosure, and the borrower brought an action to enjoin the sale.
The Uribes argue alternatively that waiver does not apply to an action for
damages, and that if the sale is not to be invalidated, they should be able to obtain money
damages. 2 Again, the cases cited to support this argument do not apply as they involve
contractual or common law waiver rather than the statutory waiver of the DTA. See
Schroeder, 177 Wash. 2d at 114; Klem v. Wash. Mut. Bank, 176 Wash. 2d 771, 796, 295 P.3d
1179 (2013). Failure to bring an action under the DTA to enjoin a foreclosure cannot
serve to waive claims for damages in certain situations. See RCW 61.24.127. However,
that provision does not apply to the commercial loans at issue here. RCW 61.24.127(4).
If this court were to conclude that waiver never applies to claims for damages, this
provision of the DTA would be meaningless. Courts will not construe a statute so as to
render it meaningless. State v. KL.B., 180 Wash. 2d 735, 742, 328 P.3d 886 (2014).
2 It seems doubtful that the Uribes would be able to sustain a claim for damages,
as they have been unable to clearly state any harm actually resulting from this defect.
6
No. 32315-3-111
Uribe, et ux v. Libey, Ensley & Nelson, PLLe, et al
The Procedure ofthe Sale
The Uribes make a variety of contentions that aspects of the sale violated the
DTA, all of which are without any legal support.
First, they contend that recovering on the Franklin County loan against the Benton
County property constituted a deficiency judgment in violation of the DTA.3 RCW
61.24.100. However, the DTA specifically allows for a party to pursue multiple
foreclosures against separate collateral securing a commercia/loan. 4 RCW
61.24.1 00(3)(b).
Next, the Uribes argue that Mr. Libey violated the DTA by failing to deposit the
surplus from the sale of the Benton County property with the clerk of the county court.
RCW 61.24.080. However, the Benton County deed of trust secured not just the Benton
County loan, but also all other debt owed by the Uribes to the Bank. Since the total debt
owed far exceeded the proceeds from the sale, there was no surplus to deposit.
Finally, the Uribes argue that because the Franklin County property was sold first,
and the trustee's deed for the Franklin County property states that its sale satisfied in full
3 In briefing this issue, the Uribes rely heavily on a letter from Mr. Libey to the
bank describing the anticipated foreclosure process and requesting indemnification. They
argue that this letter indicated that Mr. Libey knew the foreclosure was unlawful. In fact
the letter states a considered belief that the sale would be in compliance with the DTA,
but that he expected trouble because the Uribes are "quite litigious."
The trial court ruled on this issue relying on Donovick v. Seattle-First Nat'l Bank,
4
111 Wash. 2d 413, 757 P.2d 1378 (1988).
7
No. 32315-3-111
Uribe, et ux v. Libey, Ensley & Nelson, PLLe, et al
the obligation secured by that deed of trust, the Franklin County loan was satisfied before
the Benton County property was sold. However the Trustee's Deed was issued five days
after both sales, and consequently after the Franklin County loan was credited with a
portion of the sale from the Benton County property.
Because there is no merit to the Uribes' claims under the DTA, we need not
address their claim under the CPA or their request for attorneys' fees.
Affirmed.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
WE CONCUR:
Brown, J.
8