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Schroeder v. Haberthur

Court of Appeals of Washington, Division 3

August 15, 2017

STEVEN F. SCHROEDER, a married man dealing with his sole and separate property, Appellant,
PHILLIP J. HABERTHUR, as trustee of a deed of trust, EXCELSIOR MANAGEMENT GROUP, LLC, an Oregon limited liability company, EXCELSIOR MORTGAGE EQUITY FUND II, LLC, an Oregon limited liability company, JAMES HANEY, and CLS MORTGAGE, INC., a Washington corporation, Respondents.

          Korsmo, J.

         This is the fifth appeal to reach this court resulting from a deed of trust issued in 2009.[1] Since the trial court complied with the Washington Supreme

          Court's directives in the most recent appeal, we trust this will be the last appeal. The primary issue presented by this current appeal is whether the deed of trust act (DTA), chapter 61.24 RCW, can be construed using definitions found in the Uniform Commercial Code (UCC), Title 62A RCW. It can. Agreeing with the trial court that growing or felling timber does not constitute farming, we affirm.


         Details of the procedural history and the underlying factual dispute are necessary to place the trial court's ruling in context, although we will attempt to avoid unnecessary discussion of the previous actions. The land parcel in question, a 200 acre property near the city of Colville, was purchased by appellant Steven Schroeder's parents in 1959, and became his property in 1987 when he purchased the land from them. Mr. Schroeder also owns other large parcels of land immediately adjoining this parcel.

         Respondent Excelsior Mortgage Equity Fund (Excelsior)[2] loaned Mr. Schroeder money in June 2007 and secured the loan by a deed of trust on the 200 acre parcel. An appraisal from May 2007 described the property as 75 percent "Ag and timberland, " and valued the land at $675, 000.[3] Mr. Schroeder operated a logging business from his home office and also used the parcel for a scrap metal operation; he stored hundreds of vehicles on the property and stored valuable scrap materials in the buildings on the parcel.[4]

         Mr. Schroeder soon defaulted on the loan from Excelsior. Schroeder V, 177 Wn.2d at 99-100. Mr. Schroeder tried to contest the deed of trust on the basis that the parcel was agricultural land and that foreclosure could not be accomplished nonjudicially. Id. at 109. A new deed of trust issued and a new loan was renegotiated in early 2009 to cure the default. In that document, the parties stated that they agreed the land was not used for agriculture.

         Mr. Schroeder soon defaulted on the 2009 loan, and the matter was set for nonjudicial foreclosure. Litigation ensued, but the trial court declined to block the sale. The nonjudicial foreclosure occurred, and the trustee conveyed a deed for the parcel to Excelsior Mortgage, a related company. Additional litigation continued as Mr. Schroeder sought damages and other relief. The trial court dismissed the actions, finding that Mr. Schroeder could not contest the nature of the property given the stipulation in the 2009 deed of trust.

          The Washington Supreme Court reversed, concluding that the requirements of the statute could not be waived by the parties. Id. at 106-07, 109. Agricultural land could not be foreclosed through the DTA's nonjudicial process. Id. at 105-07, 115. The case was remanded, with the requirement that "the trial court must hold a hearing to determine whether the property was primarily agricultural at relevant times." Id. at 115. The order dismissing Schroeder's ancillary damages claims also was reversed and remanded for discovery. Id., at 114-15.

         A lengthy nonjury trial concerning the nature of the property was held over three days in February 2015 and resulted in a transcript of nearly 1, 000 pages. The court heard from a number of witnesses. Mr. Schroeder testified that he kept a handful of pigs on the property and that cattle grazed among the timber on that property as well as on adjoining lands he owned on which he grew hay or other crops. He testified that he ran his scrap business from the property and that timber production and logging were occasional income sources for him. A Stevens County deputy assessor testified that 180 acres of the parcel had been classified for tax purposes as "designated forestland" since 2001. Report of Proceedings (RP) at 691-92. The remainder of the parcel was considered "improved." The forestland designation carried a greater tax break than property in the "farm and agricultural" classification.

         Counsel for Mr. Schroeder argued that timber was a "crop" and that the contrary definition found in the current UCC did not apply to the earlier-adopted DTA. The trial court, however, distinguished between "crop" and "timber, " and ruled that the land was used "for timber, and . . . if there's an ag use, it's offset, if you will, by the storage of the cars and the, the scrapping business that was run here." RP at 953-54. In the course of its ruling, the court considered the UCC definitions argued by the parties, the tax designation, Mr. Schroeder's representation[5] on the deed of trust, and the uses Mr. Schroeder made of the property. The trial court gave primary importance to the classification of the land for tax purposes. RP at 945. The court entered formal findings of fact and conclusions of law in support of its ruling in April 2015. Mr. Schroeder appealed that ruling to this court.

         In February 2016, the trial court granted summary judgment to Excelsior on the remainder of Schroeder's claims, but then granted reconsideration so that Schroeder could obtain new counsel. After Schroeder responded to the motion, the court again granted summary judgment to Excelsior on June 1, 2016, dismissing the remaining claims. Mr. Schroeder also appealed that decision to this court.

         This court consolidated the two appeals. A panel heard the case without argument.


         The primary issue is whether timber is a "crop" so that the forest land should have been considered agricultural property under the DTA. In light of our conclusion that timber is not a "crop, " the issue we first address, we summarily consider the claim of error related to the summary judgment ruling on the damages claims.

         There are a number of general principles that have play in this action. The initial case came to this court via appeal from a nonjury trial. We review a bench trial to determine whether substantial evidence supports the trial court's findings of fact. In re Tr. 's Sale of Real Prop, of Brown,161 Wn.App. 412, 415, 250 P.3d 134 (2011). Substantial evidence is evidence sufficient to persuade a rational fair-minded person that the premise is true. Sunnyside Valley Irrig. Dist. v. Dickie, 149 Wn.2d 873, 879, 73 P.3d 369 (2003). Unchallenged findings of fact are also verities on appeal. In re Estate of Jones,152 Wn.2d 1, 8, 93 P.3d 147 (2004). This court must then determine if those findings support the trial ...

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