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<DIV>I have mentioned a client who I am assisting in defending a judicial
foreclosure in earlier posts. Some of you said “keep me posted”.
This is both a “dirt” and “estate” question.</DIV>
<DIV> </DIV>
<DIV>Client’s folks gave client (son) a home, retaining a life estate.
About a year later they borrowed on it, they made payments til they died.
Title company apparently didn’t notice the deed to the son when they did a
lender’s policy. The parents died way over 2 years ago. The statute of
limitations has therefore run on the note.</DIV>
<DIV> </DIV>
<DIV>Bank now says that </DIV>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 11pt"
color=#0000ff>“You may not realize that the majority of the proceeds from the
1998 loan were used to pay off a prior loan. The prior deed of
trust, which secured the earlier loan, was recorded on February 4, 1997, before
the quit claim deed conveying the property to son was recorded. [This was the
same bank giving the two loans. The loans were then sold to current
bank].</FONT></P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 11pt"
color=#0000ff></FONT> </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 11pt"
color=#0000ff>Under the well-established doctrine of equitable subrogation,.
Bank, as successor to lending bank, is subrogated to the first lender’s
position. Since the first loan was made at a time when parents held a fee
simple interest in the property, Bank is entitled to step into the
position of the first lender and enforce its lien against the property.
<I>See, e.g., Columbia Community Bank v. Newman Park, LLC, </I>177 Wn.2d 566,
304 P.3d 472 (2013); <I>Bank of America, N.A. v. Prestance Corp., </I>160 Wn.2d
560, 160 P.3d 17 (2007). </FONT></P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT
style="FONT-SIZE: 11pt"></FONT> </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT style="FONT-SIZE: 11pt">I
have read <EM>Bank of America, N.A. v. Prestance Corp. </EM>This is a
fight between various banks who have financed the same borrower in subsequent
loans and in which the borrower at the time of the loans held the same fee
interest in the property. The Court did hold that a subsequent filed deed
of trust would be given a priority over one that was filed in second position
reasoning that the 2nd position bank got what it bargained for, i.e. second
position.</FONT></P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt">My thought is that this may be
applicable when the party who did the borrowing continued to have some type of
fee interest when he repeatedly borrowed, however, it might not be applicable
where a borrower has lost his fee interest before the subsequent loan.</P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"> </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt">I have read <I><FONT
style="FONT-SIZE: 11pt">Columbia Community Bank v. Newman Park, LLC,
</FONT></I><FONT style="FONT-SIZE: 11pt"> This seems a closer case to
me. In this case the borrower defrauded the lender. The new loan
paid in full an earlier loan (different bank). The borrower didn’t have
the authority of the fee owner ( LLC) to take out this new loan and in fact
fraudulent changed documents when the loan was given. The court decided that the
newest lender took the security position of the 1st lender (who had been paid
off) as a matter of equity.</FONT></P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt">It seems to me that this may not
be controlling here because the son didn’t have anything to do with defrauding
the bank and again, in fact there is no evidence parents defrauded anyone (I
presume they forgot about the gift deed) when the newest loan was given, and
again the benefited borrower didn’t have the same quality of title when the
loans were made. </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"> </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt">Anyone have any thoughts?</P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"> </P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt">thanks</P>
<P class=MsoNormal style="MARGIN: 0in 0in 0pt"> </P>
<DIV style="FONT-SIZE: 12pt; FONT-FAMILY: 'Calibri'; COLOR: #000000">Joshua F.
Grant, PS<BR>Attorney at Law<BR>P. O. Box 619<BR>Wilbur, WA 99185<BR>tel 509 647
5578<BR>fax 509 647 2734<BR></DIV></DIV></DIV></BODY></HTML>