Centrum Financial Services, Inc. v. Union Bank, N.a.
75676-1
| Wash. Ct. App. | Dec 18, 2017Background
- Prium Development borrowed $1,875,000 from Frontier Bank (note) and granted a first-position deed of trust on commercial property; deed included a due-on-sale clause and successor/forbearance language.
- Centrum loaned Prium $1,610,000 in 2006, took a second-position deed of trust, and later foreclosed nonjudicially on that second trust; Centrum purchased the property at trustee's sale and received a Trustee's Deed subject to the first deed of trust.
- Frontier Bank failed; FDIC transferred Frontier’s assets (including the primary note and first deed) to Union Bank.
- Prium defaulted on the first (Frontier/Union) loan; Union Bank accelerated under the due-on-sale clause after Centrum acquired title and sought full payoff rather than allowing reinstatement or assumption.
- Centrum sued to enjoin Union Bank’s trustee’s sale, claiming under RCW 61.24.090 (the Deeds of Trust Act) it, as successor to the grantor, could cure the default and reinstate the first loan by paying delinquent amounts; trial court granted Union Bank partial summary judgment and appointed a receiver.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Centrum, as successor owner after a trustee's deed, is a "grantor" successor under RCW 61.24.005(7) with the right under RCW 61.24.090 to cure defaults and reinstate Prium's first deed-of-trust loan | Centrum: acquiring title via trustee's deed made it successor to the grantor, so DTA entitles it to pay amounts in default and reinstate the first loan | Union Bank: Centrum never executed or assumed the original note/deed obligations and is not a borrower, grantor, guarantor, subordinate beneficiary, or holder of a subordinate lien under the DTA | Held: Centrum is not a successor "grantor" for DTA purposes because it did not assume the borrower's obligations; therefore it lacked the statutory right to cure/reinstate and discontinue the foreclosure sale |
| Whether Union Bank could invoke the due-on-sale clause and demand full payoff rather than permit reinstatement/assumption by Centrum | Centrum: reinstatement by paying defaults was available under the DTA and full payoff was not required if only curing the default | Union Bank: due-on-sale clause permitted acceleration on involuntary transfer; Union Bank declined to lend to Centrum and properly demanded full payment | Held: Union Bank lawfully invoked the due-on-sale clause and could demand payment in full; reinstatement was not available to Centrum |
Key Cases Cited
- Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83 (Wash. 2012) (explains DTA framework: three‑party deed-of-trust transactions and nonjudicial foreclosure scheme)
- Beal Bank, SSB v. Sarich, 161 Wn.2d 544 (Wash. 2007) (effect of nonjudicial foreclosure on subordinate deed-of-trust and extinguishment principles)
- Fluke Capital & Mgmt. Servs. Co. v. Richmond, 106 Wn.2d 614 (Wash. 1986) (owner of land subject to mortgage not personally liable absent assumption of debt)
- One Pacific Towers Homeowners' Ass'n v. HAL Real Estate Invs., Inc., 108 Wn. App. 330 (Wash. Ct. App. 2001) (interpretation of successor language in another statutory context)