Bank of N.Y. Mellon v. Bartol

1

BANK OF NEW YORK MELLON, as Trustee for CWABS Inc., Asset-Backed Certificates, Series 2007-2, Appellant, v. GWEN S. BARTOL, Respondent.

No. 85773-8-I

Court of Appeals of Washington, Division 1

August 19, 2024

UNPUBLISHED OPINION

FELDMAN, J.

The central issue in this appeal is whether Bank of New York Mellon, as Trustee for CWABS Inc., Asset-Backed Certificates Series 2007-2 (BNY Mellon), can pursue claims to reform the legal description of encumbered property for a loan made to Gwen S. Bartol when it asserted claims seeking the same relief, unsuccessfully, in a prior lawsuit. Because BNY Mellon's claims are barred by claim preclusion, we affirm the trial court's ruling dismissing the claims on summary judgment and affirm the trial court's ruling awarding attorney fees and costs in Bartol's favor.

I

Bartol is the owner of the property commonly known as 26867 156th Place SE, Covington, WA, King County (the Property). The Property is comprised of four Parcels: (1) King County parcel #2622059034 (Parcel 9034); (2) King County parcel #2622059047 (Parcel 9047); (3) King County parcel #2622059054 (Parcel 9054); and (4) King County parcel #2622059140 (Parcel 9140). Parcel 9047 is made up of two tracts: Tract A and Tract B. Bartol's house is located on Parcel 9054 and Tract B of Parcel 9047. No portion of Bartol's house is located on Tract A.

In March 2007, Bartol obtained a loan from America's Wholesale Lender and signed a Deed of Trust encumbering Parcel 9054 (where roughly half of her house is located) and Parcel 9034 (which does not include any portion of her house) as security for the loan. At closing, Bartol also signed a document correction agreement whereby she agreed to "comply with Lender's request to execute acknowledge, initial and deliver to Lender any documentation Lender deems necessary to replace or correct the lost misplaced, misstated, inaccurate or otherwise missing documents."

On June 30, 2011, BNY Mellon became the beneficiary of the Deed of Trust. On February 25, 2015, Bartol received a document titled "Notice of Trustee's Sale" from MTC Financial Inc., a successor trustee. The document notified Bartol that she had a number of "delinquent payment[s]" and that the Property encumbered by the Deed of Trust (Parcels 9034 and 9054) "will be sold to satisfy the expense of sale and obligation secured by the Deed of Trust." In response, Bartol notified MTC Financial that "[o]nly half of the house is being foreclosed on and a vacant lot. The other half of my home has been left out. I own four parcels here and you have them confused." On December 10, 2018, Bartol received a notice of default from Select Portfolio Servicing. Bartol and BNY Mellon agreed to mediation where Bartol again explained that the Deed of Trust encumbered property that included only a portion of her residence.

On March 13, 2020, BNY Mellon issued another notice of default notifying Bartol that if she does not "cure said alleged default . . . the property . . . may be sold at public auction . . . ." In July 2020, BNY Mellon filed a complaint (the First Lawsuit) against Bartol. On October 27, 2020 BNY Mellon sent an email to Bartol's counsel requesting that "Bartol sign . . . a corrected Deed of Trust . . . correcting the legal description of the Property in the Deed of Trust." Bartol's counsel replied on November 5, 2020 indicating that Bartol would not sign a corrective document.

On January 15, 2021, BNY Mellon filed an amended complaint alleging two causes of action. First, BNY Mellon alleged that Bartol breached the document correction agreement by "refusing to sign a corrective document to correct the error in the legal description of the Property in the Deed of Trust." Second, BNY Mellon alleged a cause of action for reformation, which sought to reform the Deed of Trust "to include the legal descriptions of the two missing tax parcels [(Parcels 9047 and 9140)]." In other words, BNY Mellon asserted that all four parcels (9034, 9047, 9054, and 9140) should be encumbered as security for the loan.

On July 26, 2021, after a two-day trial, the trial court entered findings of fact and conclusions of law concluding that Bartol did not breach the document correction agreement because "the requested amendment would not have corrected the mutual mistake made in the Deed of Trust." As for BNY Mellon's request to reform the Deed of Trust, the court found that a "mutual mistake was made by Bartol and America's Wholesale Lender in executing the Deed of Trust to encumber only parcel 9054 and 9034." The court reasoned:

The Court finds that Plaintiff's claim to reform the Deed of Trust to encumber all four parcels owned by Bartol is not an appropriate remedy for the mutual mistake. Instead, the Court finds that reformation to amend the Deed of Trust to reflect the parties' original intent to encumber Parcel 9054 and Parcel 9047 is an appropriate remedy. BNY Mellon is entitled to reformation of the Deed of Trust to include the legal descriptions of the Parcel 9054 and Parcel 9047.

Thus, while the court rejected BNY Mellon's argument that all four parcels should be encumbered, it agreed that the two parcels that included portions of Bartol's house (9047 and 9054) should be encumbered.

To effectuate its ruling, the trial court entered a final judgment on September 23, 2021 wherein the court struck the original legal descriptions in the Deed of Trust and replaced them with a revised legal description. While the revised description of Parcel 9054 is generally correct (missing only two words), the revised description of Parcel 9047 includes only Tract A of Parcel 9047 despite the fact that two tracts make up Parcel 9047-Tract A and Tract B-and the only portion of Bartol's home that is located on Parcel 9047 is located on Tract B and not on Tract A.

To correct these mistakes, BNY Mellon filed a CR 60 motion titled "Plaintiff's Motion to Correct Final Judgment." Regarding Parcel 9054, BNY Mellon requested that the court amend the legal description to add the two missing words, which are "218 feet." Regarding Parcel 9047, BNY Mellon sought to replace the legal description of Tract A with a legal description of Tract B so that the Deed of Trust would encumber the portion of Parcel 9047 that includes Bartol's house.

On January 10, 2022, the court entered an order granting in part and denying in part BNY Mellon's CR 60 motion. The court granted BNY Mellon's motion with regard to Parcel 9054 to read as BNY Mellon requested. But the court denied BNY Mellon's motion with regard to the proposed legal description for Parcel 9047. The court reasoned that:

. . . no legal basis exists nor does this court have the authority to grant Plaintiffs Motion to "correct" the language describing Parcel [9047]. The Final Judgment entered by the Trial Court (Judge Cahan), is consistent with the language contained within the admitted Trial Exhibit No. 2. Judge Cahan, the finder of fact and law, adopted that language when she executed the Final Judgment. As such, outside of an agreement of the parties, no legal basis for this judicial officer to disturb Judge Cahan's orders.

Thereafter, the court entered its amended final judgment on March 16, 2023, reforming the Deed of Trust. Consistent with the court's order granting in part and denying in part BNY Mellon's motion to correct the final judgment, the amended final judgment includes the modified legal description of Parcel 9054 but continues to include the legal description for the portion of Parcel 9047 that does not include Bartol's residence.

BNY Mellon commenced this lawsuit (the Second Lawsuit) on March 21, 2023. It asserts two causes of action for reformation. The first cause of action seeks reformation of the final judgment in the First Lawsuit. In this first cause of action, BNY Mellon alleges that by "mutual mistake or scrivener's error, the legal description of Parcel 9047 in the Final Judgment . . . is incorrect" and "should be reformed to the correct legal description of Parcel 9047." The second cause of action alleges that by "mutual mistake or scrivener's error, the legal description of Parcel 9047 in the [2023] Deed of Trust is incorrect" and "should be reformed to the correct legal description of Parcel 9047."

BNY Mellon and Bartol each filed a motion for summary judgment. In its summary judgment motion, BNY Mellon argued that because the trial court in the First Lawsuit relied on a void deed, the 2023 Deed of Trust and Judgment "must be reformed to replace the legal description of Parcel 9047 with the legal description in Bartol's vesting deed, the 1993 Quit Claim Deed." Bartol's 1993 vesting deed includes substantially the same legal description of Parcel 9047 as BNY Mellon requested in the CR 60 motion. At the conclusion of the hearing on both parties' motion for summary judgment, the trial court issued an oral ruling denying BNY Mellon's motion because issues of fact precluded the requested relief.

Bartol's motion for summary judgment, in contrast, sought to dismiss BNY Mellon's reformation claims based on preclusion principles (both issue preclusion and/or claim preclusion) because those claims were, or could have been, litigated in the First Lawsuit. At the conclusion of the summary judgment hearing, the trial court reserved ruling on this motion. Three days after the hearing, the trial court issued an order memorializing its decision to deny BNY Mellon's motion for summary judgment and granting Bartol's motion for summary judgment. The trial court did not specify whether it granted Bartol's motion based on issue preclusion, claim preclusion, or both.

BNY Mellon appeals.

II

BNY Mellon argues that the trial court erred in dismissing its reformation claims on summary judgment. We di...