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Washington: Deed of Trust Enforceability

Posted By USFN, Monday, May 2, 2016

May 2, 2016

by Joshua Schaer
RCO Legal, P.S.
USFN Member (Alaska, Oregon, Washington)

The Washington Supreme Court issued a decision in OneWest Bank, FSB v. Erickson (Feb. 4, 2016), reversing a Court of Appeals ruling that invalidated the lender’s deed of trust because an Idaho court had appointed a conservator who encumbered Washington property. The Supreme Court applied full faith and credit to the Idaho order and found that foreclosure was proper.

Background: In 2007, Erickson’s father (McKee) executed a quitclaim deed for the subject property conveying title to Erickson. Erickson failed to record that instrument until 2011. In the interim, an Idaho court appointed a conservator to manage McKee’s property, which included facilitating a reverse mortgage that Erickson also approved. When McKee died, OneWest — as successor in interest to the originating lender — commenced a judicial foreclosure and Erickson sued to stop the process.

Erickson asserted three theories: (1) that OneWest should have known she possessed title to the property when the reverse mortgage was originated; (2) that the conservator lacked authority to encumber Washington property; and (3) that OneWest did not hold the secured note it was seeking to enforce. The trial court granted summary judgment to OneWest.

The Supreme Court agreed with this outcome and reversed the Court of Appeals, holding that Washington courts must give full faith and credit to the Idaho proceeding, and Erickson could not collaterally attack the resulting decision. The Supreme Court found that the Idaho orders at issue fell within that court’s in personam jurisdiction to adjudicate McKee’s interest in out-of-state property, and did not rise to the level of directly transferring legal title because the mortgage was not a conveyance under Washington law (which adopts a lien theory).

The Supreme Court further ruled that Erickson took title to the property subject to OneWest’s reverse mortgage because Erickson’s “secret” interest was not publicly recorded, even though the quitclaim deed had been disclosed in earlier court records.

Additional findings were made by the Supreme Court on other issues raised in the case, including admissibility of the Idaho order as a business record, proper notarization of the deed of trust, and OneWest’s status as the note holder. All matters were resolved in OneWest’s favor.

Erickson provides clear guidance that deeds of trust may still be enforced in Washington even when they were originated by virtue of extrajurisdictional authorization.

The Supreme Court’s opinion is at http://www.courts.wa.gov/opinions/pdf/912831.pdf.

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Spring 2016 USFN Report

 

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