Eastlake Lofts Condo. Ass'n v. Hoover

EASTLAKE LOFTS CONDOMINIUM ASSOCIATION, Plaintiff, v. KEVIN M. HOOVER and JANE DOE HOOVER, husband and wife, and their marital community;WILMINGTON TRUST, N.A., as successor trustee to CITIBANK, N.A., as Trustee for Certificate Holders of Structured Asset Mortgage Investments II Trust 2007-AR5,Mortgage Pass Through Certificates, Series 2007 AR-5, Respondents,THE CONDO GROUP, LLC; EASTLAKE LOFTS 205 LLC, a Washington limited liability company;LAKEWOOD COMMONS 234 LLC, a Washington limited liability company;UMPQUA BANK, a bank organized under the laws of Oregon; DELNA LIAN JACOBS, an individual residing in California;CHRISTINA JACOBS SPITZ, an individual residing in California and the Executor of the ESTATE OF HAROLD LIAN;MAYNARD GROSS, an individual residing in California;unknown heirs of CARL ELLING LIAN; WE TRUST COMPANY, a Washington company; Appellants.

No. 78266-5-I

c/w No. 78267-3-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

July 29, 2019

UNPUBLISHED OPINION

DWYER, J. — In 2011, Eastlake Lofts Condominium Association foreclosed on a condominium owned by Kevin Hoover without properly serving process on CitiBank, a junior lienholder. The Condo Group, LLC purchased the condominium at a sheriff's sale and, in 2013, sold it to Carl Lian, who financed his purchase with a loan from Umpqua Bank. Lian later died. In 2016, CitiBank successfully moved to vacate the original foreclosure judgment as against its interest. Wilmington Trust, N.A., the successor in interest to CitiBank, then sought to foreclose on its existing lien, adding The Condo Group, LLC, Lian's heirs, and Umpqua Bank as third party defendants. The case is before us on appeal from the trial court's grant of summary judgment to Wilmington. Because the evidence of record gives rise to competing inferences as to the applicability of equitable defenses to the foreclosure action, summary judgment was improper. Accordingly, we reverse.

I

In 2007, Kevin Hoover purchased a condominium in the Eastlake Lofts development with the aid of a $358,950 loan from CitiBank, secured by a deed of trust. JPMorgan Chase Bank was the loan's original servicer. CitiBank's interest in the property was placed into a securitized mortgage trust for which CitiBank was a beneficiary, with Quality Loan Service Corporation (QLS) as trustee. In 2010, Hoover filed for chapter 7 bankruptcy protection and ceased paying dues to the Eastlake Lofts Condominium Association (the Association).

In July 2011, the Association commenced this action to foreclose its lien on the condominium. It named CitiBank as a defendant. Personal service of thesummons and complaint was not made on CitiBank in Washington but, rather, was made at an office in Sioux Falls, South Dakota. No affidavit was sworn and filed with the trial court to the effect that service on CitiBank could not have been made within Washington, as required by RCW 4.28.185(4).¹ After neither Hoover nor CitiBank made an appearance in the action, a default judgment and foreclosure decree was entered in favor of the Association.

A foreclosure sale took place in June 2012. The highest bidder, The Condo Group, LLC (Condo Group), purchased the condominium for the amount of the judgment debt, $20,100.² After the one-year redemption period expired, the King County Sheriff issued Condo Group a deed to the condominium identifying the $20,100 purchase price. Condo Group recorded this deed with the county auditor.

In October 2013, Condo Group sold the condominium to Carl Lian for $399,000 and conveyed a statutory warranty deed to him. Lian's purchase of the condominium was partially financed with a $100,000 loan from Sterling Savings (now Umpqua) Bank.

Stewart Title acted as the closing agent and title insurer for Lian and Umpqua in this transaction. Stewart Title had constructive knowledge of CitiBank's deed of trust on the condominium. However, neither Stewart, nor Umpqua, nor Lian made an inquiry as to whether CitiBank considered the deed of trust to be an active encumbrance against the condominium.

In 2016, CitiBank, alleging improper service, moved to vacate the 2011 default judgment against it pursuant to CR 60(b)(5) for lack of personal jurisdiction. After hearing argument, the trial court granted CitiBank's motion and vacated the judgment against it. Subsequently, Wilmington acquired CitiBank's interest. Wilmington then answered the Association's 2011 complaint and asserted a foreclosure claim, naming Condo Group, Lian, and Umpqua as third party defendants. Lian died before he could be served. Wilmington's third party complaint was twice amended to designate Lian's known heirs as third party defendants. Lian's heirs, Umpqua, and Condo Group all opposed Wilmington's foreclosure request, asserting their entitlement to several equitable defenses or to bona fide purchaser protection.

The trial court granted partial summary judgment to Wilmington and entered a decree of foreclosure in its favor. This ruling also dismissed with prejudice Condo Group and Umpqua Bank's counterclaims against Wilmington. In a supplemental judgment, the trial court awarded Wilmington attorney fees and costs totaling $33,238.99. Condo Group, Lian's heirs, and Umpqua Bank appeal.³

II

"The de novo standard of review is used by an appellate court when reviewing all trial court rulings made in conjunction with a summary judgment motion." Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998). Inreviewing a summary judgment order our inquiry is the same as the trial court's. Folsom, 135 Wn.2d at 663. Summary judgment is proper when all of the pleadings, affidavits, depositions, and admissions on file show "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56(c). A material fact "'is a fact upon which the outcome of the litigation depends, in whole or in part.'" Lamon v. McDonnell Douglas Corp., 91 Wn.2d 345, 349, 588 P.2d 1346 (1979) (quoting Morris v. McNicol, 83 Wn.2d 491, 494-95, 519 P.2d 7 (1974)).

The party moving for summary judgment has the burden of showing that there is no genuine dispute as to any issue of material fact. Once that burden is met, the nonmoving party has the burden of producing evidence to show the existence of such an issue. Kahn v. Salerno, 90 Wn. App. 110, 117, 951 P.2d 321 (1998). All evidence must be considered in the light most favorable to the nonmoving party, and summary judgment may be granted only when a reasonable person could reach but one conclusion. Lamon, 91 Wn.2d at 349 (quoting Morris, 83 Wn.2d at 494-95).

As we have stated,

"The object and function of summary judgment procedure is to avoid a useless trial. A trial is not useless, but is absolutely necessary where there is a genuine issue as to any material fact." Barber v. Bankers Life & Cas. Co., 81 Wn.2d 140, 144, 500 P.2d 88 (1972). "A material fact is one upon which the outcome of the litigation depends." Balise v. Underwood, 62 Wn.2d 195, 199, 381 P.2d 966 (1963). Importantly, "even if the basic facts are not in dispute, if the facts are subject to reasonable conflicting inferences, summary judgment is improper." Southside Tabernacle v. Pentecostal Church of God, 32 Wn. App. 814, 821, 650 P.2d 231 (1982). Indeed, "[s]ummary judgment procedures are not designed to resolve inferential disputes." Sanders v. Day, 2 Wn. App. 393,398, 468 P.2d 452 (1970). "It seems obvious that in situations where, though evidentiary facts are not in dispute, different inferences may be drawn therefrom as to ultimate facts such as intent, . . . a summary judgment would not be warranted." Preston v. Duncan, 55 Wn.2d 678, 681-82, 349 P.2d 605 (1960); accordWeisert v. Univ. Hosp., 44 Wn. App. 167, 172, 721 P.2d 553 (1986).

Kelley v. Tonda, 198 Wn. App. 303, 310-11, 393 P.3d 824 (2017).

"[T]he question of whether equitable relief is appropriate is a question of law." Niemann v. Vaughn Cmty. Church, 154 Wn.2d 365, 374, 113 P.3d 463 (2005). Due to the discretionary nature of decisions made in equity, granting equitable relief on summary judgment may often be inappropriate. Cornish Coll. of the Arts v. 1000 Virginia Ltd. P'ship, 158 Wn. App. 203, 220, 242 P.3d 1 (2010). Equitable claims must be analyzed pursuant to the facts of each case to which a party seeks their application; even when a court "recognize[s] 'factors' to guide the court's determination of the equitable issues presented, these considerations are not exclusive, but are intended to reach all relevant evidence." Vasquez v. Hawthorne, 145 Wn.2d 103, 107-08, 33 P.3d 735 (2001). In other words, even when there is evidence satisfying all such "factors," equitable relief does not necessarily follow. Instead, "the focus remains on the equities involved between the parties." Vasquez, 145 Wn.2d at 107.

III

First among the sundry defenses asserted by Umpqua and Condo Group against Wilmington's efforts to foreclose is the doctrine of laches. Laches bars Wilmington's action, they assert, because Wilmington and CitiBank, collectively, unreasonably delayed the foreclosure action, and during the period of this delay,the condominium's ownership situation changed to the extent that enforcement of the deed of trust would work an injustice. For its part, Wilmington denies that any delay was unreasonable and avers that the trial court was correct to dismiss this defense on summary judgment. Because the evidence of record gives rise to competing inferences as to the propriety of the asserted defense, trial court fact-finding is necessary.

Laches is an equitable defense that is based on estoppel.⁴ Real Progress, Inc. v. City of Seattle, 91 Wn. App. 833, 843-44, 963 P.2d 890 (1998). The doctrine applies when a defendant affirmatively establishes "(1) knowledge by plaintiff of facts constituting a cause of action or a reasonable opportunity to discover such facts; (2) unreasonable delay by plaintiff in commencing an action; and (3) damage to defendant resulting...