382 P.3d 20
Wash. Ct. App.2016Background
- Lake Hills Development Div. 1, LLC (LHDDI) planned a phased residential development; Azure Chelan, LLC (Azure) sold its 51% interest to LHDDI for a promissory note secured by a deed of trust encumbering Phase 2 only.
- Azure's deed included a "no-further-encumbrances" clause (Section 4.11) requiring beneficiary consent or repayment before further encumbrances.
- Despite that clause, LHDDI obtained a building loan from Horizon Bank secured by a deed of trust on the entire property (including Phase 2).
- Azure issued multiple notices of default and an April 30, 2007 notice that accelerated the note, but Azure never foreclosed; Horizon later foreclosed on its deed, Washington Federal bought at trustee sale, and recorded a deed in January 2011.
- Washington Federal sued in 2014 to quiet title under RCW 7.28.300; the trial court granted summary judgment quieting title in Washington Federal, using Horizon’s legal description, and dismissed Azure’s counterclaims.
Issues
| Issue | Plaintiff's Argument (Washington Federal) | Defendant's Argument (Azure) | Held |
|---|---|---|---|
| Standing under RCW 7.28.300 | Purchaser at foreclosure who records deed is the "record owner" and may quiet title | Washington Federal is not the owner under the statute and cannot assert LHDDI's statute-of-limitations defense | Held for Washington Federal — purchaser who records deed is a "record owner" and may use RCW 7.28.300 |
| Effect of Azure's no-further-encumbrances clause | Clause is a promissory (due-on-encumbrance) restraint; later encumbrance breached the covenant but did not void Horizon's deed | Clause is a disabling restraint rendering subsequent encumbrances void and trustee's sale invalid | Held for Washington Federal — clause interpreted as promissory restraint, not disabling; Horizon's deed not void |
| Trustee changed legal description in deed | Even if trustee improperly changed deed, Washington Federal equitably obtained the property sold and court used original deed description to quiet title | Trustee changed the legal description, making Washington Federal's deed void | Held for Washington Federal — trustee may not alter description, but Horizon’s and Azure’s descriptions matched for Phase 2 and court quieted title using original description, so no prejudice to Azure |
| Acceleration and statute of limitations | Azure accelerated on April 30, 2007 (notice listing accelerated balance), so 6-year limitations expired before 2014 suit | Azure never validly accelerated or clearly abandoned acceleration, creating factual dispute | Held for Washington Federal — April 30, 2007 notice sufficiently shows acceleration; Azure’s conclusory statements insufficient to create material fact dispute |
Key Cases Cited
- Beal Bank, SSB v. Sarich, 161 Wn.2d 544 (summary judgment standard on appeal)
- Tesoro Ref. & Mktg. Co. v. Dep't of Revenue, 164 Wn.2d 310 (statutory interpretation principles)
- State v. Engel, 166 Wn.2d 572 (statutory ambiguity standard)
- Westar Funding, Inc. v. Sorrels, 157 Wn. App. 777 (purchaser at foreclosure may quiet title under RCW 7.28.300)
- Udall v. T.D. Escrow Servs., Inc., 159 Wn.2d 903 (equitable ownership from highest bidder at trustee sale; quiet title)
- Kobza v. Tripp, 105 Wn. App. 90 (nature of quiet title as equitable proceeding)
- Matthews v. Morrison, 195 Wash. 288 (ministerial duty and limits on changing legal description in foreclosure deed)