[WSBARP] defending and judicial foreclosure, no debt owing by defendants

Fri Nov 14 14:56:38 PST 2014

Your recollection is correct I think, in that if property has been mortgaged, the mortgage lien can be foreclosed (if the debt is in default) even if the property is now owned by someone else.

But on your facts, it sounds like there is no lien because it was secured only by the life estate interest, which vanished with the deaths of the grantors. The property disappeared, so there is nothing to foreclose on.

And the personal liability for the debt was on the parents, both of whom are deceased, and more than 2 years ago, so the 2-year bar on claims against a decedent prevents any collection against the estates.

Both of these seem really black-letter law to me, and a plaintiff persisting in a judicial foreclosure on these facts really ought to be hit with CR 11 sanctions. Particularly if they're asking for a deficiency judgment.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Josh Grant
Sent: Friday, November 14, 2014 2:14 PM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] defending and judicial foreclosure, no debt owing by defendants

Thank you Eric and John

No,  I didn’t get any responses... very helpful.

I had not thought about “if the contract calls for attorney fees then they pay the non-party’s.” and John cites the statute 4.84.340 that so holds.  [Smile]

My main concern was a dim recollection that there is authority that a secured party can foreclose a lien even if the underlying debt is not owing.  And I have heard that if there is no debt, there is no such possibility.

I am trying to keep my fees down for the client, particularly here, where all they have to do is make the claim on their title insurance.  So I haven’t taken the time to research that.

Thanks!

Josh

Joshua F. Grant, PS
Attorney at Law
P. O. Box 619
Wilbur, WA 99185
tel 509 647 5578
fax 509 647 2734

From: Eric Nelsen<mailto:Eric at sayrelawoffices.com>
Sent: Friday, November 14, 2014 1:14 PM
To: WSBA Real Property Listserv<mailto:wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] defending and judicial foreclosure, no debt owing by defendants

Josh, did you get any responses to this? If it's true that the borrower/parents had only a life estate in the property at time of the loan, and lender's security interest therefore vanished when they died, then I think you can set up a CR 11 claim. There's case law somewhere...the CR 11 obligation is ongoing, and if the suit was filed erroneously and plaintiff is given clear information that it the suit is not proper, then their failure to dismiss immediately is a violation of CR 11--by persisting in a claim that is clearly not well-grounded in fact.

I also think that SJ is appropriate on both issues--no personal liability of defendants, no valid lien on the real property. No relevant facts seem to be in dispute. But I'd sure also ask for CR 11 sanctions or find another hook for attorney fees as well. Maybe the case law that says, if a plaintiff sues on a contract that allows for attorney fees and defendant turns out to not be a party to the contract (or defense is based on rescission or something else that renders the contract terms moot), the defendant can still ask for attorney fees based on that contract? At least I remember some case law that says something like that.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Josh Grant
Sent: Wednesday, November 12, 2014 3:29 PM
To: wsbar
Subject: [WSBARP] defending and judicial foreclosure, no debt owing by defendants

My client and his parents have been sued with a judicial foreclosure complaint of a 1998 loan.  Plaintiff is a US Bank NA “as trustee under the pooling and servicing agreement...”

The parents have been dead for well over 2 years.  My client didn’t sign on the loan.  The parents signed the loan, but they didn’t own the property when the loan was made.. as they had  previously given the house to my client.  they reserved a life estate in the gift deed which was recorded before 1998.  Obviously the life estate is now over.  I assume that the lien on the life estate is also over.  There was a lender’s policy issued to the Plaintiff for $76,500.  I have been trying to get them to claim proceeds from that lender’s policy  for years, all I got for my efforts was this judicial foreclosure of my client’s land.  They now claim the $63,041 principal owing plus interest of $18,253.46 interest so they are claiming a little more than the title insurance would pay them (about $8000). However, had they claimed the insurance proceeds a couple of years ago, when I told them about it, the title insurance proceeds would have covered all pr and interest.

Plaintiff’s attorney (appears to be a collection law firm??) has ignored my correspondence.

I have confirmed that the lender’s policy is in effect, the title company admits they goofed, and they seem ready to pay.  They denied my claim to defend the foreclosure (correctly) saying that I didn’t represent the insured  basically saying “the lender may have a claim but you don’t”.

So my question is what can I threaten to do , if the collection attorney continues to ignore common sense? I am going to send another letter that says “go grab the insurance money and drop this suit”.

Can I threaten Summary Judgment because no one they sued owes any money? and the real estate lien is invalid because there is no valid underlying debt?
CR 11 attorney fees, if they resist the summary judgment  (Given all the info I have given one collection bureau after another through the years, maybe CR 11 will apply to the filing of the judicial foreclosure complaint itself even if they don’t resist??

I think this really boils down to whether they can foreclose a lien where there is no underlying debt when they filed their complaint?  and if so, don’t they have to offset the insurance proceeds which they can claim if they would do so?

If they can foreclose their old lien, then they could get my client’s house back, and then go claim the title insurance proceeds as well?

They have asked for quiet title against everyone claiming under the decedents.

Maybe the answer and the summary judgment we file will say, “no quiet title to my client” and award CR 11 sanctions for not simply filing for the title insurance, and again, because there is no valid underlying loan.

No estate was ever filed.  My client could file their will and deny any creditors claim as not owing.  But I don’t think that will quiet title to the house.

sorry this is so long.

Joshua F. Grant, PS
Attorney at Law
P. O. Box 619
Wilbur, WA 99185
tel 509 647 5578
fax 509 647 2734
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