Bac Home Loans Servicing, Lp, App. v. Michael Fulbright, Resps. ( 2013 )

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COURT OF APPEALS D1V I
STATE OF WASHINGTON
2013 APR -8 AH 10= |8
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
BAC HOME LOANS SERVICING, LP, a
foreign limited partnership, No. 67608-3-1
Appellant, DIVISION ONE
v.
MICHAEL FULBRIGHT and JANE DOE PUBLISHED OPINION
FULBRIGHT, individually and the
marital community composed thereof, FILED: April 8, 2013
Respondents.
Becker, J. — This court addressed the priority of a lien for unpaid
condominium assessments in Summerhill Vill. Homeowners Ass'n v. Rouqhlev,
Wn. App. , 289 P.3d 645 (2012). As we held in Summerhill, the
association's lien arises under RCW 64.34.364(1) "from the time the assessment
is due." The reference to the recording of the condominium declaration in RCW
64.34.364(7) does not determine when the association's lien arises. If the unit on
which the association forecloses a superpriority lien is already subject to a deed
of trust, the holder of the deed of trust is not a proper redemptioner because its
lien is not "subsequent in time" to the lien on which the property was sold. RCW
6.23.010(1 )(b). The trial court properly entered summary judgment rejecting the
lender's attempt to redeem.
No. 67608-3-1/2
The condominium in this case is Tanglewood at Klahanie in Issaquah. In
2006, the declaration of condominium was recorded. In 2007, Bank of America1
recorded a deed of trust on a unit in the Tanglewood condominium. The deed of
trust secured the bank's loan of $277,000 to Jeanne Lewis for purchase of the
unit.
In May 2008, Lewis became delinquent in paying the monthly
condominium assessments due to the Tanglewood homeowners' association.
In 2009, the association began a judicial foreclosure proceeding to collect
the delinquent assessments. The lawsuit named Lewis, her marital community,
and Bank of America as defendants. The bank was served with the summons
and complaint the following week, in early February 2009. The bank did not
respond. Lewis also failed to respond. In June 2009, the trial court entered a
default judgment, order, and foreclosure decree against all defendants.
In May 2010, the King County Sheriff's Office held a public auction.
Michael Fulbright, respondent in this appeal, bought the unit at the auction for a
high bid of $14,481.83—the total of the unpaid assessments, plus $100.00.
In June 2010, the sale was confirmed by court order.
In April 2011, within the statutory time limit for redemption, Bank of
America notified the sheriff's office of its intent to redeem the unit under the
Washington redemption law, chapter 6.23 RCW. The bank intended to redeem
1Although the caption refers to the appellant in this case as BAC Home Loans
Servicing LP, the parties' briefs reflect that this entity has merged into Bank of America
and that Bank of America is now the proper appellant.
No. 67608-3-1/3
the unit from Fulbright by paying him the purchase price he paid at the sheriff's
sale, plus Fulbright's costs and accrued interest. The sheriff's office forwarded
the notice to Fulbright. Fulbright objected that the bank was not a qualified
redemptioner. The bank sent the sheriff's office a cashier's check. The sheriff's
office refused to issue a certificate of redemption.
In May 2011, the bank sued Fulbright in superior court, seeking a
declaratory judgment that it was authorized to redeem the property. Fulbright
counterclaimed for an order quieting title in his favor. There were no disputed
issues of fact. The trial court denied the bank's motion for summary judgment
and quieted title in Fulbright. The bank then brought this appeal.
Bank of America contends the trial court erred in its interpretation of the
condominium assessment lien statute, RCW 64.34.364, as it applies to
Washington's redemption statute, RCW 6.23.010.
We considered the interaction of these statutes in our recent opinion in
Summerhill. a factually similar case. Summerhill. 289 P.3d at 647-49. We
adhere to that opinion and rely on it in affirming the trial court's decision in this
case. The only difference between this opinion and Summerhill is that here, we
have the opportunity to amplify our reasons for holding that a condominium
association's superpriority lien for unpaid assessments for common expenses
arises after the deed of trust lien on the unit, not before—notwithstanding RCW
64.34.364(7).
In Summerhill. the issue of the effect of RCW 64.34.364(7) was raised
No. 67608-3-1/4
belatedly in a motion for reconsideration by GMAC Mortgage LLC, the entity in
the position that Bank of America occupies in the present case. We issued a
substitute opinion in which we briefly addressed the new argument in a footnote.
The footnote stated:
RCW 64.34.364(7) provides that recording of a condominium
association declaration "constitutes record notice and perfection of
the lien for assessments." In a motion for reconsideration, GMAC
contends this provision means any mortgage loan made after the
filing of the declaration is subsequent in time for purposes of RCW
6.23.010(1 )(b). We reject this contention. The association's lien
does not arise until the "assessment is due." RCW 64.34.364(1).
Summerhill. 289 P.3d at 648 n.7.
In the present case, Bank of America disputes Summerhill's holding that
an association's lien for an assessment does not arise until the assessment is
due. The bank makes RCW 64.34.364(7) the centerpiece of its argument that an
association's lien arises earlier, when the declaration of condominium is
recorded. The bank thus argues that because the Tanglewood declaration of
condominium was recorded in 2006 and the bank's deed of trust was not
recorded until 2007, the bank's deed of trust was "subsequent in time" to the
assessment lien and was therefore subject to redemption under RCW 6.23.010.
The relevant provisions of the condominium assessment lien statute are
as follows:
Lien for assessments. (1) The association has a lien on a unit for
any unpaid assessments levied against a unit from the time the
assessment is due.
(7) Recording of the declaration constitutes record notice and
perfection of the lien for assessments. While no further recording
of any claim of lien for assessment under this section shall be
No. 67608-3-1/5
required to perfect the association's lien, the association may
record a notice of claim of lien for assessments under this section
in the real property records of any county in which the condominium
is located. Such recording shall not constitute the written notice of
delinquency to a mortgagee referred to in subsection (2) of this
section.
RCW 64.34.364(1), (7).
According to the bank, the only function of subsection (1) is to state the
time when the right to enforce the already existing lien begins. The bank argues
that the lien comes into existence at the time the declaration of condominium is
recorded because under subsection (7), the recording of the declaration
"constitutes record notice and perfection of the lien for assessments."
The bank fails to explain its assertion that the terms "record notice and
perfection" in subsection (7) necessarily signify the time at which a lien comes
into being. The bank argues that a lien cannot be "perfected" that does not yet
exist, but the bank does not cite authority for this proposition.
Subsection (1) speaks directly to timing. "The association has a lien on a
unit for any unpaid assessments levied against a unit from the time the
assessment is due." RCW 64.34.364(1) (emphasis added). Stated another way,
before "the time the assessment is due," the association has no lien.
The lien expressly belongs to the association. It is described in
subsection (1) as "a lien ... for any unpaidassessments levied" against a unit.
RCW 64.34.364(1) (emphasis added). An assessment against a unit cannot be
"unpaid" until a unit owner's association has been organized, the association
levies assessments against the unit, and the association receives no payment
No. 67608-3-1/6
within the allotted time. At the time the declaration of condominium is recorded,
none of these events have occurred. Therefore, a lien for unpaid assessments
cannot exist at that time.
The meaning of subsection (7) is that the recording of the condominium
declaration "constitutes record notice and perfection of the lien for assessments"
that may arise in the future as provided by subsection (1). Recording of the
declaration does not accelerate when an actual lien for any given assessment
arises or first exists. Recording of the declaration simply gives notice to the
world that assessment liens may arise in the future against units in the
condominium.
The Tanglewood condominium declaration was recorded in 2006. When
Bank of America's deed of trust against the Lewis unit was recorded in 2007, the
recording of the declaration gave the bank notice that a future assessment lien
might arise if Lewis became delinquent on her assessments. As it turned out,
Lewis did become delinquent in May 2008. From May 2008 onward, the
Tanglewood association had a lien against the Lewis unit. When the association
initiated foreclosure proceedings, the bank was made a defendant and received
notice. This was the bank's opportunity to step in and pay off the delinquent
assessments in order to avoid having its own lien eliminated. See Summerhill.
289 P.3d at 648 & n.6. The bank missed this opportunity.
The bank's deed of trust was recorded before the lien for assessments
came into existence, not afterwards. Because its lien was not "subsequent in
No. 67608-3-1/7
time" to the association's lien as required by RCW 6.23.010(2) for the bank to be
an authorized redemptioner, the redemption statute does not afford the bank a
second chance to protect its lien.
Affirmed.
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WE CONCUR:
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