CAPITAL INV. CORP. OF WASH. v. KING CTY.

47 P.3d 161

CAPITAL INVESTMENT CORP. OF WASHINGTON, Appellant, v. KING COUNTY, a political subdivision, et al., Respondents.

No. 26405-6-II.

Court of Appeals of Washington, Division 2.

May 24, 2002.

Kenneth Wendell Masters, Charles Kenneth Wiggins, Wiggins Law Office, Bainbridge

Is, Scott Alexander Candoo, Tacoma, for Appellant.

Janine Elizabeth Joly, Deputy Pros Atty, for Respondents.

MORGAN, J.

In Fidelity Mutual Savings Bank v. Mark,¹ the Washington Supreme Court held that a judgment debtor could not transfer a right to redeem without also transferring the underlying interest in the land. In this case, we analogously hold that a redemptioner by judgment lien may not transfer a right to redeem without also transferring the underlying judgment. The trial court so ruled, and thus we affirm.

FACTS

Judgments: In 1997, there were three judgments against Eric Piltz. The judgment creditors were (or would become²) David Ordell, 5-11 Properties, and Judgment Enforcement Administration (JEA).

Liens: Each of the three judgments was a lien against Piltz's King County real estate, which included some apartments on East Olive Avenue in Seattle (hereafter "the East Olive property"). It appears from subsequent events that Ordell's lien was superior; that 5-11's was next; and that JEA's was inferior.

Order of sale: In September 1997, Ordell obtained an order of sale from the King County Superior Court. The order directed the King County Sheriff to sell the East Olive property, subject to redemption, to satisfy Ordell's unpaid judgment.

Sale: In December 1997, the King County Sheriff held an execution sale at which Ordell was the successful bidder. Ordell paid $38,346, and the sheriff issued a certificate of purchase. The superior court confirmed the sale, and four redemptions followed.

First redemption: In late May 1998, JEA notified the sheriff that it intended to redeem from Ordell. The sheriff notified Ordell, who stated the amount needed to redeem. In late June 1998, JEA paid $40,573 and received a certificate of redemption.

Second redemption: A few weeks after JEA redeemed from Ordell, 5-11 notified the sheriff that it intended to redeem from JEA. The sheriff notified JEA, which stated the amount needed to redeem. In late August 1998, 5-11 paid $41,071 and received a certificate of redemption.

Third redemption: JEA wanted to re-redeem from 5-11, but it lacked the $135,000 that it needed to do that. Thus, it arranged to borrow $158,000 from Capital Investment Corporation of Washington (CICW). As security, JEA gave a written assignment in which it stated:

Judgment Enforcement Agency ... hereby assigns to [CICW], for security purposes, all of JEA's right, title and interest in and to that certificate of redemption evidencing the redemption of certain real property located at 1205 & 1211 East Olive, Seattle, Washington, ... together with all of JEA's right, title and interest in and to such property, and together with the rents, profits and proceeds thereof, including the proceeds of any re-redemption of such property.³

JEA did not assign, as security or otherwise, its judgment against Piltz or its judgment lien against Piltz' East Olive property.

JEA signed the loan documents on October 26, 1998. The same day, CICW delivered to the King County Sheriff cashier's checks for the redemption amount, a letter on CICW's letterhead, and, we assume for purposes of this appeal, a copy of the assignment quoted above.⁴ The letter stated:

Judgment Enforcement Agency wishes to complete its redemption of the real property known as 1205 & 1211 East Olive, Seattle, Washington.... To effectuate that redemption, we hand you for the account of Judgment Enforcement Agency the following:

1. Cashiers checks totaling $134,714.19; and

2. A copy of an Assignment of Certificate of Redemption for Security Purposes evidencing a security interest in Judgment Enforcement Agency's certificate of redemption in favor of Capital Investment Corporation of Washington.

Please issue the certificate of redemption in favor of Judgment Enforcement Agency.... Please retain the copy of the Assignment of Certificate of Redemption in your files, as evidence of Capital Investment Corporation's security interest. In the event the property is re-redeemed, you should contact ... Capital Investment Corporation regarding payment and satisfaction of that security interest.

If the property is not re-redeemed, please issue your Sheriff's deed to Judgment Enforcement Agency....⁵

On November 2, 1998, the sheriff gave JEA a certificate of redemption.

Fourth redemption: On November 10, 1998, the judgment debtor, Piltz, quitclaimed to 5-11 all of his right, title, and interest in the East Olive property. On November 16, 1998, 5-11 notified the sheriff that it had acquired Piltz's interest and intended to exercise Piltz's right to redeem. The sheriff notified JEA—but not CICW—and JEA stated that $245,030 would be needed to redeem. 5-11 paid the $245,030, and 5-11 acquired the property as Piltz' successor in interest.⁶ The sheriff forwarded the $245,030 to JEA—which then did not pay CICW.

Effects: An example drawn from the WASHINGTON STATE BAR ASSOCIATION'S REAL PROPERTY DESKBOOK describes the effects of these redemptions. It states:

An illustration of the California [Washington]⁷ scramble system may be valuable at this point. Suppose A, B, C, and D are lienors on certain property with A being the senior mortgagee, B the second in priority, C third, and D fourth. At A's foreclosure sale following an action to which B, C, and D were parties, A bids in for the full amount of his lien and thereby becomes the purchaser of the property. After the sale C redeems from A by paying the amount A paid plus expenses, taxes, and other amounts allowed by statute. A's lien was extinguished by the foreclosure sale so he cannot re-redeem from C, but B still has an unsatisfied lien and can redeem. If B redeems he must pay the purchase price, expenses, and any liens held by C which are senior to B's lien. Assuming no expenses have been paid by C, B need only pay what C paid plus interest since C's lien is junior to the lien under which B seeks to redeem. Since C's lien is still unsatisfied, he may now re-redeem from B by paying what B paid, interest, expenses, and the amount of B's lien, since B's lien is senior to the lien of C. Should the mortgagor now desire to redeem from C, he must pay the amount which C paid (the purchase price plus the amount of B's lien, which C now owns), expenses, and also the amount of C's lien. Since D cannot now redeem because the effect of the sale has been terminated by the mortgagor's redemption, the statute provides that D's still unsatisfied lien will reattach to the property. The mortgagor now holds the property subject only to D's lien.⁸

Here, A is Ordell; B is 5-11; C is JEA (or CICW, if CICW is JEA's successor in interest); and D does not exist.

Lawsuit: In February 2000, CICW sued JEA and the sheriff. It alleged that JEA had failed to repay the $158,000 loan, and that the sheriff, "[i]n negligent dis-regard of the security documents," had "wrongfully delivered" $158,000.00 to JEA.⁹ JEA defaulted and is not involved in this appeal. The sheriff moved for summary judgment, and the trial court granted the motion. CICW then filed this appeal.

DISCUSSION

On appeal, CICW claims that the sheriff had duties to notify it of the impending fourth redemption, and to pay it $158,000 of the $245,030 required to make that redemption. The sheriff denies owing any duty to CICW.

When umpiring a redemption, a sheriff has a conditional duty to notify and a conditional duty to pay. RCW 6.23.080(1) provides:

(1) The person seeking to redeem shall give the sheriff at least five days' written notice of intention to apply to the sheriff for that purpose. It shall be the duty of the sheriff to notify the purchaser or redemptioner, as the case may be, ... of the receipt of such notice.... At the time specified in such notice, the person seeking to redeem may do so by paying to the sheriff the sum required. The sheriff shall give the person redeeming a certificate stating the sum paid on redemption, from whom redeemed, the date thereof and a description of the property redeemed....

RCW 6.23.070 provides that after the sheriff receives the sum required to redeem, he or she shall forward that sum "to the person from whom the property is redeemed[.]"

The sheriff owes these conditional duties to the person from whom the redemption is being made. In the case of a first redemption, that person is the purchaser, or his or her successor in interest.¹⁰ In the case of a second or subsequent redemption, that person is the redemptioner who last redeemed the property, or that redemptioner's successor in interest.¹¹ CICW was not the purchaser here, so the sheriff owed duties to it only if it was (1) a "redemptioner" or (2) the "successor in interest" of a redemptioner.

I.

The first question is whether CICW was a redemptioner. RCW 6.23.010 provides:

(1) Real property sold subject to redemption... may be redeemed by the following persons, or their successors in interest:

(a) The judgment debtor....

(b) A creditor having a lien by judgment, decree, deed of trust, or mortgage, ... subsequent in time to that on which the property was sold. The persons mentioned in this subsection are termed redemptioners.

(2) As used in this chapter, the terms "judgment debtor," "redemptioner," and "purchaser," refer also to their respective successors in interest.

This statute plainly requires that a redemptioner be a creditor of the judgment debtor, as opposed to the creditor of another redemptioner or someone else. CICW was never a creditor of Piltz, so it was never a redemptioner either.

II.

The next question is whether CICW was a redemptioner's (i.e., JEA's) "successor in interest." Although the legislature did not define that phrase in Chapter 6.23 RCW, the words themselves...