Boeing Employees' Credit Union v. Burns
272 P.3d 908
Wash. Ct. App.2012Background
- BECU held a subordinate deed of trust on the Burnses’ residence, while Wells Fargo held a senior deed of trust; the Wells Fargo lien attached to the surplus funds from a trustee’s sale after the foreclosure on Wells Fargo’s loan.
- A trustee’s sale directed by Wells Fargo occurred after defaults on the Wells Fargo loan; the sale produced surplus funds deposited in court.
- BECU sought payment of the Burnses’ delinquent debt from the surplus funds, arguing its deed of trust remained a lien; the Burnses argued the BECU lien was extinguished by the default judgment on the promissory note and that homestead exemptions applied.
- The Burnses obtained a default judgment against them on BECU’s note; BECU sought distribution of surplus funds to satisfy the judgment.
- The superior court commissioner ruled that BECU’s lien merged into the judgment and that the Burnses were entitled to the surplus funds; the trial court denied revision, and BECU appealed.
- The court ultimately held that judgment on the note did not extinguish the deed of trust lien, that RCW 61.24.100(2) allows actions on notes without extinguishing the lien, and that the homestead exemption does not apply to the BECU deed of trust; the case was remanded for distribution consistent with these rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judgment on the note extinguishes the deed of trust lien | BECU: lien remains; judgment does not extinguish security | Burnses: merger extinguishes lien | Lien not extinguished; RCW 61.24.100(2) permits later enforcement of the deed |
| Whether RCW 61.24.100(2) permits pursuing the note and then asserting the deed of trust against surplus | BECU: statute authorizes suit on note followed by claim on deed | Burnses: merger/waiver would bar later assertion | Statute supports note suit and later enforcement of deed |
| Whether the homestead exemption applies against a debt secured by a deed of trust | Burnses: homestead exemptions should reduce funds | BECU: exemption not available against its lien | Homestead exemption not available against BECU lien under RCW 6.13.080(2) |
| Whether merger or related doctrines apply to bar BECU’s claim to surplus | Burnses: merger extinguishes lien; Beal Bank limits | BECU: merger not applicable under RCW 61.24.100(2) | Merger not controlling; statute controls; merger defeated |
| Whether Beal Bank limits apply to non-foreclosing junior lienholders | Beal Bank limited to specific context | Burnses: Beal Bank supports extinguishment | Beal Bank distinguishable; not controlling here |
Key Cases Cited
- Hanna v. Kasson, 26 Wash. 568 (1901) (note and mortgage liens; judgment on note does not extinguish mortgage lien)
- American Federal Savings & Loan Ass'n v. McCaffrey, 107 Wash.2d 181 (1986) (notes and mortgages; mortgage can be foreclosed after obtaining judgment on the note)
- Beal Bank, SSB v. Sarich, 161 Wash.2d 544 (2007) (RCW 61.24.100(2) permits note suit without extinguishing lien; foreclosure effects separate)
- Seattle Sav. & Loan Ass'n v. Gardner J. Gwinn, Inc., 171 Wash. 695 (1933) (notes and mortgages; concurrent actions prohibited, but successive actions allowed)
- Sullins v. Sullins, 65 Wash.2d 283 (1964) (lien security and election to sue on note without destroying lien; merger not automatic)
- Bradley Engineering & Machinery Co. v. Muzzy, 54 Wash. 227 (1909) (old waiver language; not controlling here)