CENTRUM FINANCIAL SERVICES, INC., a Washington Corporation, Appellant,
UNION BANK, N.A., a California chartered commercial bank; HACKER & WILLIG, INC., P.S., a Washington Professional Services Corporation, as Trustee, Respondents.
"Deeds of Trust Act" (DTA), chapter 61.24 RCW,
defines a "grantor" as a person or its successor
"who executes a deed of trust to encumber the
person's interest in property as security for the
performance of all or part of the borrower's
obligations." The DTA gives the grantor the right to
cure the default on the obligation and discontinue a
nonjudicial foreclosure sale. Centrum Financial Services Inc.
foreclosed on property owned by Prium Development Company LLC
and obtained a "Trustee's Deed." Centrum's
title to the property was subject to the first position
"Deed of Trust" that secured the $1, 875, 000
promissory note Prium executed in favor of Frontier Bank.
Centrum claims that as the current owner of the property,
Centrum had the right to cure the default on the promissory
note between Prium and Frontier Bank, reinstate the
obligation, and discontinue the bank's nonjudicial
foreclosure sale. Because Centrum is not a party to the
promissory note and assumed no liability, we hold Centrum did
not have the right to cure the default, reinstate the
promissory note, or discontinue the nonjudicial foreclosure
sale. The undisputed record also establishes the bank had the
right to demand payment for the full amount due on the
promissory note. We affirm dismissal of Centrum's lawsuit
to enjoin the trustee's sale.
Bank First Position Deed of Trust
material facts are not in dispute. Prium Development Company
LLC owned a 43, 124 square-foot parcel of property with a
large two-story office building in Monroe. Prium leased
approximately 20, 000 square feet of office space to the
October 6, 2004, Frontier Bank loaned Prium $1, 875, 000.
Prium executed a promissory note payable to Frontier Bank for
$1, 875, 000 with interest. The promissory note identifies
Prium as the "Borrower" and Frontier Bank as the
"Lender." Prium agreed to pay monthly installments
or "119 regular payments of $12, 376.80 each"
beginning November 10, 2004 and a final payment "for all
principal and all accrued interest not yet paid" on
October 10, 2014.
October 20, 2004, Prium executed and recorded a Deed of Trust
on the Monroe property and an assignment of rents as security
for the promissory note. The Deed of Trust identifies Prium
as the "Grantor" and Frontier Bank as the
"Lender" and "Beneficiary" of the note.
Chicago Title Insurance Company is identified as the
"Trustee" for the Beneficiary. The Deed of Trust
states, in pertinent part:
CONVEYANCE AND GRANT. For valuable consideration, Grantor
conveys to Trustee in trust with power of sale, right of
entry and possession and for the benefit of Lender as
Beneficiary, all of Grantor's right, title, and interest
in and to the following described real property ... located
in SNOHOMISH county, State of Washington:
LOT 25, MAIN STREET VILLAGE, ACCORDING TO THE PLAT THEREOF,
RECORDED IN VOLUME 49 OF PLATS, PAGES 221 THROUGH 223,
INCLUSIVE, RECORDS OF SNOHOMISH COUNTY, WASHINGTON.
The Deed of Trust also states:
THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE
SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS
GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B)
PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE
RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST
IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS.
Deed of Trust includes a "Due On Sale" provision
that states if the property is sold without the written
consent of Lender Frontier Bank, the bank has the right to
"declare immediately due and payable all sums secured by
this Deed of Trust."
DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's
option, (A) declare immediately due and payable all sums
secured by this Deed of Trust or (B) increase the interest
rate provided for in the Note or other document evidencing
the indebtedness and impose such other conditions as Lender
deems appropriate, upon the sale or transfer, without
Lender's prior written consent, of all or any part of the
Real Property, or any interest in the Real Property.
Deed of Trust also states that if Prium defaults on the
promissory note, either the Lender or the Trustee has the
right to accelerate the maturity of the loan, foreclose on
the Monroe property, and collect rents.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Deed of Trust, at any time thereafter, Trustee or
Lender may exercise any one or more of the following rights
Election of Remedies. Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an
obligation of Grantor under this Deed of Trust, after
Grantor's failure to perform, shall not affect
Lender's right to declare a default and exercise its
Accelerate Indebtedness. Lender shall have the right at its
option to declare the entire indebtedness immediately due and
payable, including any prepayment penalty which Grantor would
be required to pay.
Foreclosure. With respect to all or any part of the Real
Property, the Trustee shall have the right to exercise its
power of sale and to foreclose by notice and sale, and Lender
shall have the right to foreclose by judicial foreclosure, in
either case in accordance with and to the full extent
provided by applicable law.
Collect Rents. Lender shall have the right, without notice to
Grantor to take possession of and manage the Property and
collect the Rents, including amounts past due and unpaid, and
apply the net proceeds, over and above Lender's costs,
against the indebtedness. In furtherance of this right,
Lender may require any tenant or other user of the Property
to make payments of rent or use fees directly to Lender. If
the Rents are collected by Lender, then Grantor irrevocably
designates Lender as Grantor's attorney-in-fact to
endorse instruments received in payment thereof in the name
of Grantor and to negotiate the same and collect the
proceeds. Payments by tenants or other users to Lender in
response to Lender's demand shall satisfy the obligations
for which the payments are made, whether or not any proper
grounds for the demand existed. Lender may exercise its
rights under this subparagraph either in person, by agent, or
through a receiver.'
Deed of Trust includes a successors and assigns provision
that states if the property "becomes vested in a
person" other than Prium, Frontier Bank has the
discretion to negotiate on "forbearance or
extension" without releasing Prium from the obligations
under the Deed of Trust or the promissory note.
Successors and Assigns. Subject to any limitations stated in
this Deed of Trust on transfer of Grantor's Interest,
this Deed of Trust shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
If ownership of the Property becomes vested in a person other
than Grantor, Lender, without notice to Grantor, may deal
with Grantor's successors with reference to this Deed of
Trust and the indebtedness by way of forbearance or extension
without releasing Grantor from the obligations of this Deed
of Trust or liability under the indebtedness.
Second Position Deed of Trust
Financial Services Inc. is a Washington corporation that
makes "short term commercial real estate loans, secured
by real property collateral." According to the Centrum
chief executive officer, Centrum loans "typically have
been for six months or less."
December 7, 2006, Centrum loaned Prium $1, 610, 000. Prium
signed a promissory note payable to Centrum. The promissory
note was secured by a second position Deed of Trust on the