Sixty-01 Ass'n of Apt. Owners v. Parsons ( 2014 )

EJJ._I!,
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IN THE SUPREME COURT OF THE STATE OF WASHINGTON
SIXTY-01 ASSOCIATION OF )
APARTMENT OWNERS, a )
Washington nonprofit corporation, ) No. 89805-7
)
Respondent, )
)
v. )
)
VIRGINIA A. PARSONS and JOHN ) ENBANC
DOE PARSONS, wife and husband, )
or state registered domestic partners; )
JOHN DOE and JANE DOE, un- )
known occupants of the subject real )
property; and also all other persons or )
parties unknown claiming any right, ) Filed AUG 2 1 2014
title, estate, lien, or interest in real )
estate described in the complaint here,)
)
Defendants, )
)
and )
)
DANIEL W. PASHNIAK, )
)
Intervenor/Petitioner. )
------------)
)
SIXTY-01 ASSOCIATION OF )
APARTMENT OWNERS, a )
Washington nonprofit corporation, )
)
Respondent, )
)
Sixty-01 v. Parsons, No. 89805-7
v. )
)
MARIA A. MALLARINO and JOHN)
DOE MALLARINO, wife and )
husband, or state registered domestic )
partners; JOHN DOE and JANE )
DOE, unknown occupants of the )
subject real property; and also all )
other persons or parties unknown )
claiming any right, title, estate, lien, )
or interest in real estate described in )
the complaint here, )
)
Defendants, )
)
and )
)
DANIEL W. PASHNIAK, )
)
Intervenor/Petitioner. )
________________________ )
FAIRHURST, J.-Daniel W. Pashniak, the purchaser oftwo condominiums
at a foreclosure sale, now wants to withdraw his bids. The judgment creditor, Sixty-
01 Association of Apartment Owners, wants to confirm the sales. RCW 6.21.110
governs the confirmation of sales of real estate. RCW 6.21.11 0(2) states, "The
judgment creditor or successful purchaser at the sheriffs sale is entitled to an order
confirming the sale." The issue is whether a successful purchaser has a right to
withdraw his or her bid prior to confirmation or if a judgment creditor is entitled to
confirmation of the sale absent substantial irregularities, even if the purchaser no
longer wishes to purchase the property. We hold that a third party purchaser does
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not have a unilateral right to withdraw a successful bid before confirmation. Either
the purchaser or the judgment creditor can move for confirmation, and the sale
should be confirmed by the court unless a debtor or a nondefaulting party who
received notice proves there were substantial irregularities in the proceedings.
Further, while a court may invalidate a sale based on equitable considerations, this
situation does not merit such a remedy. We affirm the Court of Appeals and confirm
both sales.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Virginia A. Parsons and Maria A. Mallarino each owned units in the Sixty-0 1
condominiums complex. Each property was encumbered by a mortgage from Bank
of America, evidenced by deeds of trust recorded in King County. Sixty-01 operates
the complex under a declaration of condominium that was filed and recorded in King
County. UnderRCW 64.32.200(2) and section 19.1 ofthe declaration, Sixty-01 has
a continuing statutory lien against the units that may be foreclosed on to secure
payment of assessments levied by the Sixty-0 1 board of directors. The declaration
provides that Sixty-01 's lien is subordinate to any recorded deeds of trust, whenever
recorded. 1
1
Chapter 64.34 RCW applies to condominiums created after July 1, 1990 and does not
invalidate existing, inconsistent provisions in earlier-created declarations of condominium. RCW
64.34.010(1). The Sixty-01 condominium was created in 1978, so chapter 64.32 RCW, not chapter
64.34 RCW, applies to this case.
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Both Parsons and Mallarino failed to pay association assessments for an
extended period of time, and Sixty-01 sought to separately foreclose its liens on the
units. The complaints did not name Bank of America or any deed of trust holder as
defendants, nor did the complaints seek to extinguish any deeds of trust encumbering
the units. In November 2011 the trial court entered default judgments and decrees of
foreclosure against both Parsons and Mallarino. The judgments stated that Sixty-
01 's lien was superior to any other lien or interest described in the complaint "arising
subsequent to the recording of [Sixty-0 1's] Lis Pendens in this action on May 19th,
2010." Mallarino Clerk's Papers (M-CP) at 125. 2 It further stated that all "right, title,
claim, lien, estate or interest of the Foreclosed Defendants, each and all of them, and
of all persons claiming by, through, or under them, in and to the Property or any part
thereof is inferior and subordinate to [Sixty-0 1's] lien and is hereby foreclosed." M-
CP at 126.
Notice of the sheriffs sale was sent to all interested parties, including Bank
of America. After receiving the notice, Bank of America sought extra assurances
that its interest would not be affected by the foreclosure sale, so Bank of America
and Sixty-01 entered into stipulations regarding Bank of America's rights in each of
2The Court of Appeals labeled the clerk's papers in Sixty-01 Ass 'n ofApartment Owners v.
Mallarino, No. 10-2-17742-6 (King County Super. Ct., Wash.) as "CP-B." For clarity, I abandon
this label and refer to them as "M-CP."
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the properties for sale. 3 The stipulations provided that Bank of America was not a
defendant in the foreclosure action and did not have any judgment against it, that the
properties were encumbered by Bank of America's deeds of trust recorded in 2006
and 2007 and the liens were superior and senior to Sixty-01 's interests, and that the
purchasers at the sheriffs sales would take any interest in the properties subject to
any valid interest of Banlc of America. None of these stipulations changed or altered
the rights of the parties; they simply reiterated Bank of America's lienholder status
in light of the condominium association's foreclosure. The stipulations were filed
with the court on March 7, 2012 (Parsons) and the afternoon of March 8, 2012
(Mallarino ).
On March 9, 2012, the two condominium units were auctioned separately.
Pashniak bought the units at the sheriffs sales, submitting high bids of about
$16,200 for the Parsons property and $35,400 for the Mallarino property. Pashniak
did not examine the court files or county records before he submitted his bids. On
March 16, 2012, the King County Superior Court judgment clerk mailed the notices
of return of the sheriffs sale on real property. On March 19, 2012, after Pashniak
learned that the properties were encumbered by Bank of America's interests, he
3
It is not surprising that Banlc of America requested assurances in light of the increased
number of foreclosures and litigation surrounding the rights and priorities of lienholders in
foreclosure. See, e.g., BAC Home Loans Servicing, LP v. Fulbright, 180 Wn.2d 754, 328 P.3d 895(2014); 5'ummerhi!l Vill. Homeowners Ass 'n v. Roughley, 166 Wn. App. 625, 270 P.3cl 639, 289
P.3d 645 (2012). While these cases are inapplicable to this situation, it is understandable that a
lienholder would want extra assurances that its rights would not be affected.
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asked Sixty-0 1 to allow him to withdraw his bid, stating that if he had known the
properties were encumbered, he would not have bid on them.
On March 22, 2012, Pashniak, acting prose, sent a notice of appearance and
an objection to the confirmation of the sale of the Parsons property, stating that he
found the order of sale and complaint for foreclosure confusing as to whether the
sheriffs sale was free and clear of other indebtedness. On June 6, 2012, Sixty-01
moved to confirm the Parsons sale. On June 20, 2012, the King County Superior
Court confirmed the sale, noting Pashniak's objection to confirmation but finding
that he failed to allege any substantial irregularities in the proceedings concerning
the sale, which was in all respects legally and fairly conducted.
Pashniak also objected to confirmation of the Mallarino sale for the same
reason. 4 On June 14, 2012, Sixty-01 moved to confirm the Mallarino sale. On July
12, 2012, Pashniak, then represented by counsel, filed a second objection to this
confirmation and moved to vacate the sale. The court noted that while the
stipulations that Bank of America and Sixty-0 1 had filed would have been available
4
A judgment debtor or nondefaulting party must object to confirmation within the 20 day
time period. RCW 6.21.110(2); Hazel v. VanBeek, 135 Wn.2d 45, 52, 954 P.2d 1301 (1998). The
notices were sent on March 16, 2012, but the date Pashniak filed his objection to the Mallarino
sale is unclear. The document in the clerk's papers indicates the objection was filed on April 9,
2012. But Pashniak has filed a motion to supplement the record with a copy of the objection that
bears a stamp indicating the document was received on March 22, 2012, the same day as his
objection in the Parsons case. This copy was not submitted to the trial court because the timeliness
of the objection was not raised until the Court of Appeals. But, we do not need to decide the
timeliness issue since we decide this case on the substantive question of statutory interpretation,
not on whether Pashniak missed the mandatory 20 day deadline. Accordingly, we deny Pashniak's
motion to supplement the record.
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to any citizen to review at the clerk's office when it was open, they would not have
been viewable in the electronic court record for 24 to 48 hours after filing. Exercising
its equitable authority, the court found that a reasonable citizen who bought property
at sheriff's sales would not have had inquiry notice of Bank of America's lien. The
court thus vacated the Mallarino sale and ordered the clerk to refund Pashniak' s
money.
Sixty-0 1 appealed in the Mallarino sale, and Pashniak appealed in the Parsons
sale. The Court of Appeals consolidated the cases and affirmed the trial court's
confirmation of the Parsons sale and reversed the vacation of the Mallarino sale.
Sixty-01 Ass 'n of Apartment Owners v. Parsons, 178 Wn. App. 228, 314 P.3d 1121(2013). The Court of Appeals held that unless there are irregularities in the
proceedings, the trial court is required to confirm the sale, regardless of any equitable
considerations. Bank of America's deed of trust, filed long before the foreclosures,
provided notice of Bank of America's priority interest, and thus the late-filed
stipulations did not create an irregularity or an inequity. Pashniak petitioned this
court, and we accepted review. Sixty-01 Ass 'n ofApartment Owners v. Parsons, 180
Wn.2d 1001, 321 P.3d 1207 (2014).
II. ISSUE PRESENTED
Does a third party purchaser have a right to withdraw his or her bid at a
sheriff's sale before confirmation or is a creditor entitled to confirmation unless
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substantial irregularities are proved by the judgment debtor or nondefaulting party
who received notice?
III. ANALYSIS
Confirmation of a purchase at a judicial sale is governed by RCW 6.21.11 0.
Statutory interpretation is a question of law reviewed de novo. Dep 't of Ecology v.
Campbell & Gwinn, LLC, 146 Wn.2d 1, 9, 43 P.3d 4 (2002). But "confirmation of
judicial sales rests largely within the discretion of the trial court" so is reviewed for
manifest abuse of such discretion. Braman v. Kuper, 51 Wn.2d 676,681,321 P.2d
275 (1958) (citing Williams v. Cont'l Sec. Corp., 22 Wn.2d 1, 18, 153 P.2d 847(1944)). "'Execution sales are not scrutinized by the courts with a view to defeat
them. On the contrary, every reasonable intendment will be made in their favor."'
Williams, 22 Wn.2d at 17 (quoting 21 AM. JUR. 123 Executions§ 242 (1939)). We
interpret RCW 6.21.110 de novo but examine whether the court erred in its
application of the statute for abuse of discretion.
The relevant parts ofRCW 6.21.110 read:
(2) The judgment creditor or successful purchaser at the sheriff's
sale is entitled to an order confirming the sale at any time after twenty
days have elapsed from the mailing of the notice of the filing of the
sheriff's return ... unless the judgment debtor, ... or any nondefaulting
party to whom notice was sent shall file objections to confirmation with
the clerk within twenty days after the mailing of the notice of the filing
of such return.
(3) If objections to confirmation are filed, the court shall
nevertheless allow the order confirming the sale, unless . . . it shall
satisfactorily appear that there were substantial irregularities in the
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proceedings concerning the sale, to the probable loss or injury of the
party objecting. In the latter case, the court shall disallow the motion
and direct that the property be resold.
A. A purchaser who is not the judgment creditor does not have a right to
withdraw his or her bid before confirmation
Pashniak argues that the purchaser has the right to withdraw his or her bid
before confirmation, even if the judgment creditor wants the sale confirmed. A plain
reading of RCW 6.21.11 0(2) refutes this argument. RCW 6.21.11 0(2) reads, "The
judgment creditor or successful purchaser at the sheriffs sale is entitled to an order
confirming the sale." The plain language of this statute entitles a creditor or a
purchaser to confirmation unless there is a timely objection by an appropriate
individual and proof of substantial irregularities. Nowhere does RCW 6.21.110 give
a purchaser the right to withdraw. Nor does the statute qualify the creditor's right to
confirmation by any reference to the purchaser's option to withdraw his or her bid.
Despite this plain statutory language, Pashniak relies on a Court of Appeals
case, Davies v. Davies, 48 Wn. App. 29, 31, 737 P.2d 721 (1987), to support his
argument that a purchaser has the right to withdraw before confirmation if he or she
so desires. Davies involved a judgment creditor who made a very low, successful
bid on property at a judicial sale. Id. at 30. As both the judgment creditor and the
successful purchaser, he moved to confirm. Id. Before confirmation was complete,
he discovered the judgment debtor (his ex-wife) was planning to redeem the property
and discharge the remaining debt in bankruptcy.Id. The judgment creditor/purchaser
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Sixty-01 v. Parsons, No. 89805-7
sought to withdraw his bid or to increase it to prevent redemption. Id. The court
allowed the withdrawal and ordered a resale of the property.Jd. The judgment debtor
objected. Id. The Court of Appeals affirmed, holding that "only the judgment
creditor or purchaser has standing to move for confirmation of a bid at a sheriffs
sale, and that before confirmation, the highest bidder may be permitted to withdraw."
Id. at 31.
The factual situation in Davies is significantly distinguishable from this case,
and the language "before confirmation the highest bidder may be permitted to
withdraw" is unsupported by RCW 6.21.110. Id. In Davies, the judgment creditor
and the purchaser were the same individual. The court noted that per the statute, only
the judgment creditor or the successful purchaser could move to confirm. !d. The
judgment debtor could not move to confirm, and the court could not confirm a sale
sua sponte.Jd. at 31-32. Since the purchaser/judgment creditor withdrew his motion
to confirm before confirmation, there was no other individual that could move the
court to confirm the sale and a resale of the property was the only way to resolve the
situation. I d. at 32. To the extent Davies is read to give a purchaser who is not also
the judgment creditor the unilateral right to withdraw their bid before confirmation,
we reject this reading. 5
5
Pashniak attempts to strengthen the holding of Davies and widen its applicability through
this court's reference to it in Hazel. The Hazel court wrote:
A trial court's confirmation of a sheriffs sale is not simply ministerial; the court's
confirmation is a necessary step to finalize the sale contract with the purchaser. See
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Sixty-01 v. Parsons, No. 89805-7
No provision in RCW 6.21.110 provides for the withdrawal of a bid by a
successful purchaser. A plain reading of the statute indicates that a land sale should
be confirmed after there is a successful purchaser, barring timely objection by a
proper individual and substantial irregularities. Either a purchaser or a judgment
creditor can move to confirm, but a purchaser has no right to unilaterally withdraw
his or her bid. The statute seeks to relieve creditors and to proceed efficiently with
the sale of land, not to allow a purchaser to unilaterally cancel the sale and force the
sale process to start over again.
B. No statutorily authorized person objected to the sale
RCW 6.21.11 0(2) provides that a judgment creditor or successful purchaser
is entitled to confirmation absent objections by a debtor or a nondefaulting party
who received notice. Pashniak, the successful purchaser, has filed objections to the
sale. Pashniak, however, does not have statutory authority to object to the sale
because he is not a judgment debtor or nondefaulting party to whom notice was sent.
[Davies, 48 Wn. App. at 32] (purchaser at sheriff's sale can withdraw bid prior to
confirmation of sale, the bid does not become a contract until confirmed by the
court).
135 Wn.2d at 56. Hazel involved the expiration of a judgment upon which the sheriff's sale was
based, prior to confirmation of the sale. The issue was whether confirmation was a necessary step
to finalize the contract that must have been completed prior to the expiration of a judgment, not
whether the purchaser could withdraw his bid.Jd. Similarly, In re Liquidation ofSpokane Savings
Bank, 198 Wash. 665, 672, 89 P.2d 802 (1939), which Davies relies on, addressed the fact that the
order confirming the sale is a final and conclusive judgment, necessary for completion of the sale.
Neither of these cases involve the issue of withdrawal of a bid by a purchaser; they discuss the
general idea that confirmation is necessary to the sale process. Taken out of context, the language
supports Pashniak, but these cases involve issues separate from whether a purchaser can withdraw
a bid.
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Sixty-01 v. Parsons, No. 89805-7
The plain reading of the statute clearly articulates the powers of each of the parties.
Only the judgment creditor or purchaser can move to confirm. Similarly, only the
debtor or nondefaulting party who received notice may object to the sale. Pashniak
is the purchaser and therefore does not have statutory authority to file an objection
to the sales. Since we hold that Pashniak may not file objections to the sales under
the statute, there is no need to discuss whether there were any substantial
irregularities in these proceedings.
C. A court may use its equitable power to vacate a sale, but only in limited
situations
In the Mallarino matter, the trial court "exercise[ ed] its equitable authority"
and vacated the sheriffs sale. M-CP at 348. The Court of Appeals reversed the trial
court, but Pashniak renews his equity argument, stating that even if there were no
substantial irregularities in the sales, they should still be vacated for equitable
reasons. To support his argument, Pashniak claims that Miebach v. Colasurdo, 102
Wn.2d 170, 685 P.2d 1074 (1984), stands for the proposition that a trial court may
overturn a sheriffs sale on equitable grounds even when slight circumstances
indicate unfairness. This is an oversimplified and incorrect summary of Miebach.
While Miebach overturned a sale on equitable grounds, it clearly involved a
situation where there were circumstances of inequity and a grossly inadequate price.
There, parents cosigned their daughter's $1,300 car loan. Id. at 172. After two
payments, the daughter defaulted. Id. Notice of default was served on the parents via
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Sixty-01 v. Parsons, No. 89805-7
their 15 year old foster daughter. Id. The parents never received this notice so did
not show up for the hearing, and a default judgment was entered against them in the
amount of $1, 150.24. I d. After inadequately attempting to locate personal property
from which to satisfy the debt, the creditor instituted foreclosure proceedings against
the parents' residence. I d. at 172-73. The parents never acted to prevent the sale, and
their $106,000 home with $77,000 in equity was purchased at a foreclosure sale for
$1,340.02. Id. at 173. The judgment creditor assigned its interest to a third party,
who sold their interest to another third party. Id. After the year for redemption
expired, the parents received a three day notice to vacate, the first they learned of
the sale oftheir house.Id. at 173-74. While the legal requirements for a foreclosure
sale had been satisfied, the court found the situation grossly inequitable. Id. at 179("We will not allow Valera Colasurdo's home to be taken for a pittance when
surrounded by the circumstances of inequity in this case.").
Other cases have allowed the court to vacate inequitable sales, but they
require an inadequacy of price plus a factor of unconscionable advantage or
unfairness. Mellen v. Edwards, 179 Wash. 272, 37 P.2d 203 (1934); N Sav. & Loan
Ass 'n v. Taylor, 190 Wash. 535, 69 P.2d 810 (1937). We do not have a situation here
requiring the court to use its equitable authority. Here, a third party purchaser bought
two condominiums at a foreclosure sale but did not adequately research the property
to learn they were encumbered by significant mortgages.
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While courts have been charged with the duty to examine and confirm judicial
sales, they generally are to defer to the sale absent substantial irregularities or great
inadequacies. A court should not employ its equitable powers to overturn a judicial
sale unless there is gross inadequacy or unfairness to justify equitable intervention.
"The courts must be extremely careful in exercising these extraordinary equitable
powers lest they defeat the rights of the lender in their attempts to protect the
borrower." Mellen, 179 Wash. at 284-85. The facts in this case do not support such
an equitable intervention. The trial court abused its discretion when it overturned the
Mallarino sale based on equitable considerations.
IV. CONCLUSION
RCW 6.21.110 allows either a purchaser or judgment creditor to move for
confirmation of a sheriffs sale. It does not give a purchaser the right to unilaterally
withdraw a bid. Nor does it give a purchaser the ability to file an objection to the
sale, alleging substantial irregularities in the proceedings. We affirm the Court of
Appeals and hold that both the Mallarino sale and the Parsons sale should be
confirmed.
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Sixty-01 v. Parsons, No. 89805-7
WE CONCUR:
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