Oral Argument Date, June 12, 2014
Appeal from Spokane Superior Court. Docket No: 12-2-00952-4. Judge signing: Honorable Tari S Eitzen. Judgment or order under review. Date filed: 08/16/2013.
Brian C. Balch (of Layman Law Firm PLLP ), for appellant.
Babak Shamsi and Joshua S. Schaer (of Routh Crabtree Olsen PS ), for respondent.
Authored by George B. Fearing. Concurring: Stephen M. Brown, Robert E. Lawrence-Berrey.
George B. Fearing, J.
[184 Wn.App. 464] [¶1] We address the unique circumstance of an Idaho court authorizing an Idaho conservator to encumber a Washington residence. Following established principles from the hoary past concerning state jurisdiction over real property, we hold that the Idaho court lacked jurisdiction and that the order authorizing the encumbrance is invalid.
[¶2] Plaintiff OneWest Bank FSB seeks to judicially foreclose on a deed of trust purportedly encumbering a Spokane home. A conservator appointed by an Idaho court signed the deed of trust on behalf of the home's owner or former owner, Bill McKee. McKee's daughter, defendant Maureen Erickson, challenges the deed of trust as invalid, and she appeals a summary judgment order enforcing and foreclosing on the instrument. We reverse the summary judgment order and grant Erickson a dismissal of the complaint.
[¶3] Bill McKee had three children: Jerome McKee, Craig McKee, and Maureen Erickson. Bill and his wife, Erickson's mother, acquired property in Canada, Idaho, and Washington. Erickson's mother died in 1994, leaving her daughter by will " all of her one-half of the community property owned by her and [Bill McKee]." Clerk's Papers (CP) at 124. Bill McKee hid the will from Maureen Erickson. McKee later explained to Erickson that he did not desire to take property from her that her mother intended she have, but he wanted to maintain control over all of the marital couple's combined estate and properties.
[¶4] In 1997, a driver rear-ended Maureen Erickson at a high speed, rupturing several discs in her back. Erickson and her three sons moved from California to Spokane later that year to be near Bill McKee. Bill McKee lived in Idaho at that time.
[¶5] Maureen Erickson underwent back surgery in 2000. With Erickson distracted by her surgery, Jerome McKee [184 Wn.App. 465] traveled from Louisiana to visit his father, Bill McKee, in Idaho. Jerome convinced his father to sell property in Canada and entrust him with the proceeds as a means of avoiding United States taxes. Under her mother's will, Maureen Erickson would have owned an interest in the property and would have been entitled to some of the sales proceeds. McKee obliged Jerome. Bill McKee later repeatedly asked Jerome to return the money, but Jerome refused.
[¶6] In 2001, with Maureen Erickson's financial assistance, Bill McKee purchased a home in Spokane, at 4702 South Pender Lane. This foreclosure action concerns the residence. McKee initially lived in the home half of the time. Erickson and her three sons lived there full time. McKee and Erickson planned for Erickson to eventually own the home, and Erickson made the mortgage payments. Erickson and her sons cared for the home.
[¶7] In 2004, Maureen Erickson underwent another back surgery after another car collision. In 2005, Erickson discovered her mother's will in Bill McKee's safety deposit box. By January 2007, Maureen Erickson's health improved. Bill McKee, who had recently turned 90 years old, began residing year round in the Spokane residence with Erickson and his three grandchildren. McKee lived with Erickson in the South Pender Lane home the rest of his life. He did
not reside even temporarily in Idaho after January 2007.
[¶8] Bill McKee anticipated undergoing heart surgery, and he sought to qualify for Medicaid payments. McKee and Maureen Erickson sought legal advice from attorney Richard Sayre. Sayre astutely advised Erickson to sue her father for failing to deliver her share of her mother's assets upon the mother's death. According to Sayre, McKee could settle the suit by transferring assets to Erickson and then qualify for Medicaid. Bill McKee was receptive to the recommendation because he knew he had wronged his daughter. Maureen Erickson sued her father in Spokane County Superior Court, and, in turn, Bill McKee transferred assets, including the Spokane residence, to Erickson [184 Wn.App. 466] to satisfy the claim. McKee transferred the Spokane home in January 2007 and completed other transfers in February 2007. After a lengthy review of the transfers, Medicaid declared them valid and qualified Bill McKee for Medicaid payments.
[¶9] In response to the transfers from Bill McKee to Maureen Erickson, McKee's son Jerome filed suit in the Shoshone County, Idaho, District Court. Jerome McKee asked that the Idaho court appoint him as his father's guardian or, in the alternative, appoint someone else as Bill's conservator. Bill McKee appeared in the suit through counsel and informed the Idaho court that he resided in Washington. Maureen Erickson may have attended one or more hearings, but the extent of her involvement is not clear. She was not a party to the conservatorship action. According to Erickson, the court viewed her negatively because of the property transfers from Bill McKee to her. Trial for the Idaho proceeding spanned three nonconsecutive days, with the first day of trial being May 31, 2007.
[¶10] Physicians scheduled Bill McKee's heart surgery for July 3, 2007. As McKee prepared for surgery, he and Maureen Erickson looked for but could not find the deed he executed in January to transfer the Spokane home. On June 28, 2007, McKee again conveyed the property to Erickson by quitclaim deed. Erickson did not immediately record this deed.
[¶11] On July 2, 2007, the Shoshone County, Idaho, District Court, at the request of Jerome McKee, signed an order enjoining Bill McKee's heart surgery. Doctors believed Bill McKee would not survive without surgery, and McKee underwent open heart surgery at Spokane's Deaconess Hospital anyway on July 3. After surgery, McKee recovered at the South Pender Lane, Spokane, residence with the care of Maureen Erickson.
[¶12] The Idaho District Court conservatorship trial resumed on July 10 and July 12, 2007. Bill McKee could not [184 Wn.App. 467] participate in the Idaho proceedings as he recovered from heart surgery. Maureen Erickson later declared:
At that time, my father was 90 years old, had recently undergone open heart surgery, was extremely hard of hearing, and occasionally had difficulties with his eyesight, but he was certainly not incompetent. His doctors wrote affidavits to the court saying he was competent. There were telephone proceedings that I vaguely recall, with my recollection being that nothing I said seemed to matter or help and that my father could not participate because he could not hear what anyone said.
CP at 130.
[¶13] On August 22, 2007, the Spokane County Superior Court dismissed, without entering a judgment, Maureen Erickson's action for fraud against Bill McKee, for his hiding Erickson's mother's will. On August 27, 2007, the Idaho District Court signed " Letters of Conservatorship" appointing Shelley Bruna, dba Idaho Fiduciary Services, as conservator for Bill McKee. CP at 18. The letters do not declare Bill McKee to be an Idaho resident.
[¶14] On September 10, 2007, Bill McKee faxed a handwritten letter to his attorney " to make sure that the judge [in Idaho] was told that [he] lived in Washington and that he had given the Property to [Maureen Erickson] for taking care of him for years and because he had hid[den] [Erickson's] mother's will." CP at 130. Jerome McKee filed the Letters of Conservatorship from the Idaho proceeding
with Spokane County on September 18, 2007. CP at 17. On September 24, 2007, the Idaho court entered an order granting Jerome's petition to appoint Shelley Bruna as Bill McKee's conservator. We do not know why the Letters of Conservatorship were issued 28 days before the signing of the appointment order. The order does not declare Bill McKee to be an Idaho resident.
[¶15] By late September 2007, Bill McKee and Maureen Erickson's Spokane home faced foreclosure. To save the [184 Wn.App. 468] home, the father and daughter sought refinancing. Shelley Bruna meanwhile sought to procure a reverse mortgage for the home. Maureen Erickson declared:
By September 2007, it became apparent that Ms. Bruna was attempting to assert control over the Property. At that time, I had been working with three different mortgage lenders to attempt to work on a mortgage for the Property. In mid-September, I was advised by one of the mortgage brokers that Ms. Bruna had instructed him not to talk to me anymore and he stopped communicating with me. I also had contact with the mortgage broker Ms. Bruna ultimately dealt with, John Tenold, mid-September. I informed him that my father had transferred the Property to me and that I held a deed. At about the same time I was informed by the other mortgage broker that I had been dealing with that Ms. Bruna instructed him not to talk to me, Mr. Tenold advised me that Ms. Bruna, as the conservator, was the only one he would deal with or allow to sign any loan. It was apparent to me she had convinced the potential mortgage lenders that my father's transfer of the Property to me was not valid. However, I am not aware of any request made to, or order issued by, any court that provided that.
I certainly did not want Ms. Bruna to be involved in getting any mortgage loan on the Property. ... Ms. Bruna's actions, and the lenders' responses, eventually eliminated any other loan possibility. At the very end of the process, after I had been shut out of negotiations, Ms. Bruna drove home the point that she was in control by threatening to stop all effort to get any mortgage and let the Property be in my name. By that time, it was too late. The Property was in foreclosure and would have been lost. In large part because of that threat, I stayed out of the dealings as Ms. Bruna and the lender obviously did not want my involvement.
CP at 129-30.
[¶16] On October 22, 2007, the Idaho district court directed conservator Shelley Bruna to " facilitate a reverse mortgage" on the property and to enter a reverse mortgage with Quick Mortgage on the Spokane home. CP at 108. The order indicates that Maureen Erickson " read and approved" [184 Wn.App. 469] it, and it seems to bear her signature. CP at 111. Erickson later declared, " I do not recall seeing or signing any court order from those proceedings." CP at 131. Bill McKee's attorneys, Jack Rose and Lloyd Herman, signed the order. The order directing Shelley Bruna to sign the reverse mortgage does not identify Bill McKee as a resident of Idaho.
[¶17] On October 24, 2007, Maureen Erickson gave Bill McKee $1,750 " to be applied toward the purchase of the property." CP at 165. The transfer of funds was memorialized in a " gift letter." CP at 165. That same day, Shelley Bruna wrote Jack Tenold of Quick Mortgage that " [a]s Conservator for Bill E. McKee, I will be delivering the sum of $1,700.00 to Gustafson and Hogan Trust Account from Mr. McKee's bank account for the closing of a reverse mortgage." CP at 166.
[¶18] On October 25, 2007, Shelley Bruna, as conservator of Bill McKee, signed a $398,587.65 mortgage adjustable rate note in favor of Financial Freedom Senior Funding Corporation, a subsidiary of IndyMac Bank FSB. The initial interest rate was 8.375 percent, but the amount would be monthly adjusted as long as the rate never exceeded 20.375 percent. Shelley Bruna, as conservator of Bill McKee, also signed a deed of trust on the Spokane residence, which deed secured the note. The deed of trust was in the nature of a reverse mortgage, and we will refer to the instrument hereafter as a " reverse mortgage." Paragraph five of the reverse mortgage included a covenant that Bill
McKee would " at all times occupy, establish, and use the" home as his " principal residence." CP at 39. Like other reverse mortgages, no amount was payable to the lender until the death of Bill McKee, unless he earlier conveyed or vacated the home. Upon closing, $255,460.44 was paid to the prior mortgage holder. Financial Freedom's vice president endorsed in blank the mortgage adjustable rate note.
[¶19] Erickson testified by affidavit:
[184 Wn.App. 470] I did not know, and still do not know, how much equity [Shelley Bruna] withdrew in cash from the Property to divert to other things, such as her expenses. The reverse mortgage option was the absolutely worst possible alternative and not what my father or I wanted. It was far ...