Frontier Bank, Banking Corp. v. Bingo Invs., LLC

361 P.3d 230

FRONTIER BANK, a Washington banking corporation, Plaintiff,Union Bank, N.A., as successor-in-interest to the Federal Deposit Insurance Corporation, as receiver for Frontier Bank, Respondent,

v. BINGO INVESTMENTS, LLC, a Washington limited liability company; Scott and Kelly Bingham, husband and wife; Frances Graham, a single person; Christopher G. Bingham, a single person; David Bingham and Sharon Bingham, husband and wife, Appellants,L224–1 Bayside, LLC, a Washington limited liability company; L198–1 Sinclair Ridge, LLC, a Washington limited liability company; L31–1 Fenner, LLC, a Washington limited liability company; L150–1 Patey, LLC, a Washington limited liability company; Thomas Hazelrigg and Jane Doe Hanzelrigg, husband and wife; Scott Switzerand Jane Doe Switzer, husband and wife; and Centurion Financial Group, LLC, a Washington limited liability company, Defendants.

No. 72529–7–I.

Court of Appeals of Washington, Division 1.

Nov. 2, 2015.

R. Bruce Johnston, Attorney at Law, Emanuel Jacobowitz, Johnston Lawyers, PS, Seattle, WA, for Appellants.

Joseph Emil Shickich Jr., Riddell Williams PS, Michael David Pierson, Seattle, WA, for Respondents.

Opinion

COX, J.

¶ 1 Frances Graham, Scott Bingham, Kelly Bingham, Christopher Bingham, Cherish Bingham, David Bingham, Sharon Bingham, and Bingo Investments LLC (collectively “the guarantors”) appeal the trial court's grant of summary judgment to Union Bank. There are no genuine issues of material fact regarding either the validity or the enforceability of the guaranties they signed. Likewise, there are no genuine issues of material fact regarding the guarantors' affirmative defenses. Union Bank is entitled to judgment as a matter of law. We affirm.

¶ 2 Many of the relevant facts are undisputed. The guaranties that are central to the dispute before us were made in connection with promissory notes executed, respectively, by Bayside LLC, Sinclair Ridge LLC, Bingo Investments LLC, and Frances Graham (“the borrowers”). The loans financed the borrowers' residential developments in Kitsap County.

Bayside Loan and Guaranties

¶ 3 Bayside, LLC (Bayside) executed its promissory note dated November 15, 2006 in favor of Frontier Bank in the original principal amount of $22,050,000. By virtue of successive change in terms agreements, the principal amount of the note was reduced to $19,420,000.00, with a maturity date of March 31, 2009 (Bayside Note).

¶ 4 This note was secured by a recorded construction deed of trust that encumbered certain real property located in Kitsap County, Washington.

¶ 5 David Bingham and Sharon Bingham each executed a Commercial Guaranty dated November 15, 2006 in favor of Frontier Bank. This is an unconditional guaranty of payment of the Bayside Note.

¶ 6 Christopher Bingham also executed a Commercial Guaranty dated March 31, 2008 in favor of Frontier Bank. This is an unconditional guaranty of payment of the Bayside Note.

¶ 7 These guarantors also signed notices of final agreement in which they acknowledged that oral agreements in connection with loans are not enforceable under Washington law.¹

¶ 8 Bayside defaulted on the Bayside Note when it failed to repay it upon maturity on March 31, 2009.

¶ 9 Union Bank is the holder and in possession of the Bayside Note and the unconditional commercial guaranties of payment of the Bayside Note from David Bingham, Sharon Bingham, and Christopher Bingham.

Sinclair Loans and Guaranties

¶ 10 Sinclair Ridge, LLC (Sinclair) executed its promissory note dated November 15, 2006 in favor of Frontier Bank in the original principal amount of $12,876,500.00. By virtue of successive change in terms agreements, the principal amount of the note was reduced to $12,158,761.92, with a maturity date of March 31, 2009 (Sinclair Note # 1).

¶ 11 Sinclair Note # 1 was secured by a recorded construction deed of trust that encumbered certain real property located in Kitsap County, Washington.

¶ 12 Sinclair executed its second promissory note dated March 16, 2007 in favor of Frontier Bank in the original principal amount of $113,750. By virtue of a change in terms agreement, this note was modified (Sinclair Note # 2).

¶ 13 Sinclair Note # 2 was secured by a recorded deed of trust that encumbered certain real property located in Kitsap County, Washington.

¶ 14 Sinclair executed its third promissory note in favor of Frontier Bank in the original principal amount of $227,500. By virtue of a change in terms agreement, this note was modified (Sinclair Note # 3).

¶ 15 Sinclair Note # 3 was secured by a recorded deed of trust that encumbered real property located in Kitsap County, Washington.

¶ 16 David Bingham and Sharon Bingham each executed a November 15, 2006 Commercial Guaranty in favor of Frontier Bank unconditionally guaranteeing payment of all Sinclair notes in favor of Frontier Bank.

¶ 17 These guarantors also signed notices of final agreement in which they acknowledged that oral agreements in connection with loans are not enforceable under Washington law.

¶ 18 Sinclair defaulted on all three Sinclair notes when it failed to repay them when they matured.

¶ 19 In August 2011, the Kitsap County Superior Court appointed a general receiver to take control of Sinclair Ridge LLC, with authority to market its assets. The state receiver listed, marketed, and sold the real property subject to the deeds of trust securing the loans by Frontier. The net sales proceeds were applied to the Sinclair notes, reducing the outstanding indebtedness evidenced by these notes and the guaranties of these notes.

¶ 20 Union Bank is the holder and in possession of the Sinclair notes and the unconditional commercial guaranties of payment of the Sinclair notes from David Bingham and Sharon Bingham.

Bingo Loans and Guaranties

¶ 21 Bingo Investments, LLC (Bingo) executed its promissory note dated March 31, 2008 in favor of Frontier Bank in the original principal amount of $2,000,000. The note was modified by a change in terms agreement (Bingo Note # 1). Bingo and Frances Graham also executed a promissory note dated March 31, 2008 in favor of Frontier Bank in the original principal amount of $5,500,000 (Bingo Note # 2).

¶ 22 Christopher Bingham, Frances Graham, and Scott Bingham each executed a Commercial Guaranty dated March 31, 2008 unconditionally guaranteeing payment of all notes owed by Bingo to Frontier Bank.

¶ 23 These guarantors also signed notices of final agreement in which they acknowledged that oral agreements in connection with loans are not enforceable under Washington law.

¶ 24 Bingo defaulted on Bingo Note # 1 when it failed to repay it upon maturity on September 30, 2009. Bingo defaulted on Bingo Note # 2 when it failed to repay it upon maturity on March 31, 2009.

¶ 25 Union Bank is the holder and in possession of the Bingo notes and the commercial guaranties from Christopher Bingham, Frances Graham, and Scott Bingham unconditionally guaranteeing payment of the Bingo notes.

¶ 26 On April 30, 2010, the Washington State Department of Financial Institutions closed Frontier. The Federal Deposit Insurance Corporation (FDIC) was appointed as receiver of Frontier to liquidate the bank's assets and conclude its affairs.

¶ 27 Union Bank purchased certain assets of Frontier from the FDIC. These assets included the notes, guaranties, and other loan documents that are the subjects of this action.

¶ 28 In connection with the sale of certain assets of Frontier to Union Bank, the FDIC also granted to Union Bank the authority to assert rights under 12 U.S.C. § 1823(e).²

¶ 29 Thereafter, Union Bank became a party plaintiff in this action that Frontier previously commenced against the guarantors. Union Bank moved for summary judgment against the guarantors. After a hearing, the trial court granted this motion. The trial court subsequently denied the guarantors' motion for reconsideration.

¶ 30 This appeal followed.

THE GUARANTIES

¶ 31 The guarantors argue that the trial court erred by granting summary judgment to enforce the guaranties. They alleged that a “material dispute of fact [exists] as to whether the guarantees are void or voidable.” Because there is no such issue of material fact, we disagree.

¶ 32 Summary judgment is appropriate “if the pleadings, affidavits, and depositions establish that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.”³“A genuine issue of material fact exists if ‘reasonable minds could differ on the facts controlling the outcome of the litigation.’ ”⁴

¶ 33 The party moving for summary judgment “bears the initial burden of showing the absence of a genuine issue of material fact.”⁵If the moving party satisfies its burden, then the burden shifts to the nonmoving party.⁶“If the nonmoving party fails to make a showing sufficient to establish the existence of a genuine issue of material fact, then the trial court should grant the motion.”⁷

¶ 34 “In making this responsive showing, the nonmoving party cannot rely on the allegations made in its pleadings” because “CR 56(e)requires that the response ... ‘set forth specific facts showing that there is a genuine issue for trial.’ ”⁸“[T]he court considers the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.”⁹

¶ 35 We review de novo a trial court's grant of summary judgment.¹⁰

¶ 36 We review for abuse of discretion a trial court's denial of a motion for reconsideration.¹¹

Nature of Guaranty Obligations

¶ 37 “A guaranty ‘is a promise to answer for the debt, default, or miscarriage of another person.’ ‘A contract of guaranty, being a collateral engagement for the performance of an undertaking of another, imports the existence of two different obligations, one being that of the principal debtor and the other that of the guarantor.’ ”¹²A guaranty “ ‘is independent’ ” of the debt, “ ‘and the responsibilities which are imposed by the ... guaranty differ from those ... created by the contract to which the guaranty is...