4518 S. 256th, LLC v. Karen L. Gibbon, PS
195 Wash. App. 423
| Wash. Ct. App. | 2016Background
- Puebla and Villalovos obtained a $256,000 installment residential loan (note dated May 25, 2006) secured by a deed of trust on property in Kent, WA; maturity date June 1, 2036.
- Lender sent a notice of default (July 9, 2008) and recorded a notice of trustee's sale (Aug. 15, 2008) alleging missed monthly installments; both notices demanded cure of past-due installments and threatened sale but did not state the entire loan was declared due.
- The 2008 sale did not occur; trustee’s sale was discontinued in 2011. New default and a new notice of trustee’s sale were recorded in 2015.
- The borrowers quitclaimed the property to 4518 S. 256th LLC (the LLC) in Feb. 2015; LLC did not assume the debt. The LLC sued pre-sale in Mar. 2015 seeking quiet title, declaratory relief that the loan was time-barred by the six-year statute of limitations, and an injunction.
- Trial court granted summary judgment for Bank of New York, holding the lender had not accelerated the loan in 2008 and the statute of limitations did not bar enforcement; awarded fees to the bank. LLC appealed.
Issues
| Issue | Plaintiff's Argument (LLC) | Defendant's Argument (Bank of New York) | Held |
|---|---|---|---|
| Whether initiation of nonjudicial foreclosure (invoking power of sale) automatically accelerates an installment note | Invocation of power of sale in 2008 constituted acceleration, triggering the six-year limitations period on the entire balance | Acceleration and nonjudicial foreclosure are distinct; lender may foreclose without accelerating | Not automatic: acceleration is an independent option and must be made by clear and unequivocal notice to borrower |
| Whether the 2008 notices constituted clear, unequivocal acceleration | The language and foreclosure steps in the notices (and deed terms) effectively declared whole debt due | Notices only sought cure of past-due installments and threatened sale; no clear declaration accelerating entire debt | 2008 notices did not clearly accelerate the loan; evidence (servicer records, trustee declaration) supports no acceleration |
| Effect of no acceleration on statute of limitations | If accelerated in 2008, six-year statute would bar full-balance enforcement by 2015 | Without acceleration, limitations runs only on each installment as it becomes due; claims for recent installments (within six years) remain enforceable | Statute did not bar enforcement in 2015; limitations runs per-installment absent clear acceleration |
| Entitlement to attorney fees by LLC | LLC sought fees under the deed-of-trust attorney-fee provision and RCW 4.84.330 | Bank argued LLC was not a party to the deed and thus not entitled | LLC not entitled: it was not a signatory nor an assumor of the debt; no fees awarded to either party on appeal |
Key Cases Cited
- Glassmaker v. Ricard, 23 Wn. App. 35 (1979) (acceleration must be "clear and unequivocal" to apprise maker that holder has elected to accelerate)
- Weinberg v. Naher, 51 Wash. 591 (1909) (holder must take affirmative action to declare whole debt due; mere default does not accelerate)
- Herzog v. Herzog, 23 Wn.2d 382 (1945) (statute of limitations runs against each installment when due for installment notes)
- A.A.C. Corp. v. Reed, 73 Wn.2d 612 (1968) (mere default does not effect acceleration; limitations commence on maturity)
- Frias v. Asset Foreclosure Servs., Inc., 181 Wn.2d 412 (2014) (no independent cause for monetary damages under DTA absent completed foreclosure sale)
- Meyers Way Dev. Ltd. P'ship v. Univ. Sav. Bank, 80 Wn. App. 655 (1996) (RCW 61.24.090(1)(a) allows reinstatement and does not mandate or prohibit acceleration)
- Frizzell v. Murray, 179 Wn.2d 301 (2013) (postsale waiver doctrine: elements for waiver of postsale contest)
- State v. Beaver, 184 Wn.2d 321 (2015) (mootness and exceptions for matters of continuing public interest)