BAC Home Loans Servicing, LP v. Fulbright
180 Wash. 2d 754
| Wash. | 2014Background
- Tanglewood Condominium Association recorded its declaration in 2006; recording constitutes notice and perfection of a lien for future assessments under RCW 64.34.364.
- Jeanne Lewis obtained a mortgage from Bank of America and recorded a deed of trust in March 2007.
- Lewis defaulted on condominium assessments in 2008; the Association sued in 2009 for judicial foreclosure and obtained a default judgment that declared Bank of America’s deed of trust subordinate.
- Purchaser Fulbright bought the unit at sheriff’s sale in 2010 for roughly $14,482; Bank of America attempted to redeem under the then‑existing RCW 6.23.010, which limited redemption to creditors with liens “subsequent in time.”
- Lower courts held Bank of America could not redeem because its deed of trust was recorded before the assessments became delinquent (i.e., not “subsequent in time”); the Supreme Court granted review.
- The Supreme Court reversed, holding that the Condominium Act’s priority rules can subordinate a recorded mortgage to the association’s lien and that a subordinated mortgagee falls within the redemption statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a mortgage recorded before the condominium declaration or before assessments became due can be a valid statutory redemptioner after an association foreclosure that subordinates the mortgage | Bank of America: once subordinated by the Association’s foreclosure, its lien is "subsequent in time" for redemption purposes; redemption protects subordinated lienholders | Fulbright/Association: mortgage recorded earlier than assessments and declaration means lender is not "subsequent in time" and thus cannot redeem | Court held that when the Condominium Act and foreclosure decree reorders priorities and makes the mortgage junior, the mortgagee is eligible to redeem under RCW 6.23.010 (as it is effectively subsequent in priority) |
| How to interpret "subsequent in time" in former RCW 6.23.010 | Bank of America: interpret within statutory scheme to mean subsequent in priority (when priority is established), not literal creation date | Fulbright: literal temporal reading; mortgage recorded before assessments = not subsequent | Court held "subsequent in time" must be read in context to mean subsequent in priority as established by applicable statutes and foreclosure decree |
| Whether the Condominium Act (RCW 64.34.364) displaces the recording act for priority of future assessments | Bank of America: Condominium Act establishes association priority at declaration recording; it can alter priorities as to mortgages per statutory text | Fulbright: recording act governs; mortgage recorded earlier should retain priority over later‑accruing assessment liens | Court held Condominium Act is a limited exception to the recording act: declaration recording perfects the association’s lien for future assessments and, through its provisions and foreclosure, can subordinate mortgages recorded earlier |
| Whether the lower courts’ literal reading of statutes would render redemption unavailable to subordinated lienholders | Bank of America: literal reading would frustrate redemption’s protective purpose and allow mortgagees to lose all remedy | Fulbright: mortgagee had procedural opportunities to protect itself (e.g., pay assessments) | Court held literal reading would be unreasonable; remedial purpose of redemption requires reading "subsequent in time" to encompass liens made subordinate by operation of the Condominium Act and foreclosure |
Key Cases Cited
- Rustad Heating & Plumbing Co. v. Waldt, 91 Wn.2d 372 (1979) (deed of trust treated as a mortgage for redemption statute purposes)
- Nat’l Bank of Wash. v. Equity Investors, 81 Wn.2d 886 (1973) (recorded mortgage securing future advances has priority over subsequently recorded liens)
- Summerhill Village Homeowners Ass’n v. Roughley, 166 Wn. App. 625 (2012) (Court of Appeals’ decision interpreting recording vs. condominium lien priorities; prompted legislative amendment)
- BAC Home Loans Servicing, LP v. Fulbright, 174 Wn. App. 352 (2013) (Court of Appeals decision affirmed below, later reversed by the Supreme Court)
- G-P Gypsum Corp. v. Dep’t of Revenue, 169 Wn.2d 304 (2010) (statutory construction principle: ascertain legislative intent from plain meaning and context)