Opinion Information Sheet

			

     IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                                      DIVISION ONE

SUMMERHILL VILLAGE HOMEOWNERS                       )      No. 66455-7-I
ASSOCIATION,                                        )
                                                    )
                             Respondent,            )
                                                    )
              v.                                    )
                                                    ) 
DAWN M. ROUGHLEY and JOHN DOE                       )
ROUGHLEY, wife and husband and their                )
marital community,    JPMORGAN CHASE                )
BANK, N.A.,                                         )
                                                    )
                             Defendants,            )
                                                    )
MORTGAGE ELECTRONIC REGISTRATION                    )
 SYSTEMS,     INC., a Delaware corporation;         )
PLUMBLINE MANAGEMENT CORPORATION)
 PROFIT SHARING PLAN,                               )
                                                    )
                             Respondents,           )
                                                    )
GMAC MORTGAGE LLC, on behalf of                     )      PUBLISHED OPINION
Deutsche Bank Trust Companies Americas as )
Trustee for RALI2007QSI,                            )      FILED: February 21, 2012
                                                    )
                             Appellant.             )
                                                    )

       Ellington, J.  --  A condominium homeowners' association enjoys a statutory 

super priority lien for certain delinquent assessments.   Where such a lien is 

foreclosed, Washington's redemption statute offers no safe haven to mortgage lenders 

who ignore the proceedings.  Here, the trial court properly ruled the lender is not a  

No. 66455-7-I/2

proper redemptioner.  We affirm. 

                                       BACKGROUND

       In November 2006, Dawn Roughley purchased a condominium in the Summerhill 

Village complex.  She financed the purchase with a loan from Homecomings Financial

LLC secured by a deed of trust in favor of Mortgage Electronic Registrations Systems 

(MERS).

       Roughley became delinquent on her condominium association assessments.  

The Summerhill Village Condominium Association filed an action to foreclose its 

statutory lien, recorded a lis pendens, and served MERS.  MERS forwarded the 

summons and complaint to Homecomings Financial's loan servicer, GMAC Mortgage 

LLC (GMAC).  GMAC did not respond.

       Summerhill obtained a default judgment on September 24, 2009 and proceeded 

with a foreclosure sale.  On December 18, 2009, Plumbline Profit Sharing Plan 

purchased Roughley's unit at a sheriff's sale for $10,302 -- the amount of the default 

judgment plus $100.

       Shortly thereafter, MERS assigned its beneficial interest in the Roughley deed of 

trust to Deutsche Bank Trust Company Americas (Deutsche Bank).  Deutsche Bank 

appointed a successor trustee, LSI Title Agency, Inc.  Both instruments were returnable 

to Executive Services LLC after recording.  Plumbline notified both LSI and Executive 

Services about the sheriff's sale and requested information about their intentions 

concerning the property.  Plumbline received no response.

       Meanwhile, Roughley was also delinquent on her loan payments.  GMAC, as 

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No. 66455-7-I/3

loan servicer and attorney-in-fact for Deutsche Bank, instituted foreclosure proceedings 

and thereby learned of Summerhill's foreclosure action in July 2010, apparently for the 

first time.

       GMAC moved to intervene in Summerhill's foreclosure action, seeking either 

vacatur of Summerhill's year-old default judgment and declaration of Deutsche's lien 

priority or confirmation of its right to redeem.  The court allowed GMAC to intervene, 

but refused to vacate the judgment and ruled that GMAC was not a qualified 

redemptioner.
       GMAC appeals.1  

                                        DISCUSSION

        As a general rule, the priority of competing lien claims depends on the order in 

which those claims attached to the encumbered property, subject to recording 
requirements.2 There are exceptions to this "first in time, first in right" rule.  One of 

those is found in the Condominium Act, chapter 64.34 RCW:

       (1)  The association has a lien on a unit for any unpaid assessments
       levied against a unit from the time the assessment is due.

              (2)  A lien under this section shall be prior to all other liens and 
       encumbrances on a unit except: (a) Liens and encumbrances recorded 
       before the recording of the declaration; (b) a mortgage on the unit 
       recorded before the date on which the assessment sought to be enforced 
       became delinquent; and (c) liens for real property taxes and other 

       1 Because Summerhill's judgment was satisfied by the sale to Plumbline, 
Plumbline is the primary respondent in this case.

       2 Homann v. Huber, 38 Wn.2d 190, 198, 228 P.2d 466 (1951) ("'in the 
absence of a statutory provision to the contrary and speaking generally, liens 
take precedence in order of time; the first in time being the first in right.'") 
(quoting Hollenbeck v. City of Seattle, 136 Wn. 508, 514, 240 P. 916 (1925)); 
Seattle Mortg. Co., Inc v. Unknown Heirs of Gray, 133 Wn. App. 479, 495, 136 
P.3d 776 (2006).

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No. 66455-7-I/4

       governmental assessments or charges against the unit.  A lien under this 
       section is not subject to the provisions of chapter 6.13 RCW.

              (3)  Except as provided in subsections (4) and (5) of this section,
       the lien shall also be prior to the mortgages described in subsection (2)(b) 
       of this section to the extent of assessments for common expenses, 
       excluding any amounts for capital improvements, based on the periodic 
       budget adopted by the association pursuant to RCW 64.34.360(1) which 
       would have become due during the six months immediately preceding the 
       date of a sheriff's sale in an action for judicial foreclosure by either the 
       association or a mortgagee, the date of a trustee's sale in a nonjudicial 
       foreclosure by a mortgagee, or the date of recording of the declaration of 
       forfeiture in a proceeding by the vendor under a real estate contract.[3]

The term "mortgage" includes a deed of trust.4  Thus, a condominium association's lien 

for common expense assessments has limited priority over deeds of trust recorded 
before the lien arises.  This is often termed "super priority."5

       The official comments to RCW 64.34.364 reveal the expectation of the 

legislature:  "As a practical matter, mortgage lenders will most likely pay the 

assessments demanded by the association which are prior to its mortgage rather than 
having the association foreclose on the unit and eliminate the lender's mortgage lien."6

       Therefore, under the statute, Summerhill's 2008 assessment lien had priority 

over the 2006 deed of trust to the extent of Summerhill's assessments for common 

expenses.  Deutsche Bank's predecessor, MERS, was included in and notified of the 

       3 RCW 64.34.364 (emphasis added).

       4 RCW 64.34.020(27).

       5 See generally Seattle Mortg., 133 Wn. App. at 495-96.

       6 2 Senate Journal, 51st Leg., Reg., 1st & 2nd Spec. Sess., at 2080 
(Wash. 1990); see also 1 Senate Journal, 51st Leg. Sess., Reg. Sess., at 376 
(Wash. 1990).  It appears the Senate adopted the Washington State Bar 
Association comments, which are substantially identical to the official 
comments to the Uniform Condominium Act concerning this section.

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No. 66455-7-I/5

foreclosure action, but GMAC, as the loan servicer, did not facilitate payment of the 

assessment lien prior to the sheriff's sale.  The sale extinguished the 2006 deed of 

trust.  The question now is whether Deutsche Bank can redeem.

       Washington's redemption statute permits a borrower or mortgage lender to 
redeem foreclosed property for the price paid at the sale.7  "Redemption is the process 

of canceling and annulling a defeasible title, such as is created by a mortgage or a tax 
sale, by paying the debt or fulfilling other conditions."8

       RCW 6.23.010 identifies qualified redemptioners:

       (1) Real property sold subject to redemption, as provided in 
       RCW 6.21.080, or any part thereof separately sold, may be redeemed by 
       the following persons, or their successors in interest:

              (a) The judgment debtor, in the whole or any part of the property 
       separately sold.

              (b) A creditor having a lien by judgment, decree, deed of trust, or 
       mortgage, on any portion of the property, or any portion of any part 
       thereof, separately sold, subsequent in time to that on which the property 
       was sold. The persons mentioned in this subsection are termed 
       redemptioners.[9]

To qualify as a redemptioner, the holder of a lien by deed of trust must have acquired 
that lien "subsequent in time" to the one being foreclosed.10 This comports with 

Washington's first in time, first in right rule of lien priority, and allows junior lienholders 

       7 RCW 6.23.010; see also 3 Wash. State Bar Ass'n, Washington Real Property 
Deskbook: Mortgages § 46.15(4), at 53-54 (3d ed. 1996).

       8 City of Tacoma v. Perkins, 42 Wn.2d 80, 85, 253 P.2d 957 (1953).

       9 (Emphasis added.)

       10 3 Wash. State Bar Ass'n, supra, § 46.15(2), at 51 ("if the lien of the 
judgment is prior to the one being foreclosed, the holder of the prior lien does 
not have a right of redemption because the prior lienholder's lien is not affected 
by the foreclosure").

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No. 66455-7-I/6

an opportunity to salvage something if their liens have been extinguished by 
foreclosure.11  

       Deutsche Bank's 2006 deed of trust was not subsequent in time to Summerhill's 

2008 super priority assessment lien, so GMAC/Deutsche Bank is not a proper 

redemptioner under the statute.  GMAC contends, however, that a literal application of 

the statute in the context of a super priority lien violates legislative intent and creates 

absurd consequences.
        Statutory interpretation is a question of law, reviewed de novo.12 If the meaning 

of a provision is plain on the face of the statute, we follow that plain meaning.13 If we 

cannot discern the plain meaning, we employ various rules for discerning the 
legislature's intent for the statute as a whole.14 We construe a statute so as to 

effectuate that intent, avoiding a literal reading if it would result in unlikely, absurd, or 
strained consequences.15

       GMAC contends the legislature actually intended to protect all junior lienholders, 

       11 Once a junior lien is extinguished by foreclosure, the holder of that 
lien may redeem the property from the foreclosing prior lienholder.  DeYoung v. 
Cenex Ltd, 100 Wn. App. 885, 895, 1 P.3d 587 (2000); see also 18 William B. 
Stoebuck & John W. Weaver, Washington Practice: Real Estate: Transactions
§19.19, at 396 (2d ed. 2004); 12 David A. Thomas, Thompson on Real 
Property § 101.07(c)(3), at 506 (2d ed. 2008); United States v. Stadium Apts., 
Inc., 425 F.2d 358, 364 (9th Cir. 1970) (describing redemption statutes in 
general and interpreting United States Code and Idaho Code).

       12 Millay v. Cam, 135 Wn.2d 193, 198, 955 P.2d 791 (1998).

       13 Dep't of Ecology v. Campbell & Gwinn LLC, 146 Wn.2d 1, 9-10, 43 
P.3d 4 (2002).

       14 Whatcom County v. Bellingham, 128 Wn.2d 537, 546, 909 P.2d 1303 
(1996).

       15 Id. (purpose of enactment should prevail over express but inept 
wording).

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No. 66455-7-I/7

and that the reference to a lien subsequent in time merely means a lien subsequent in 

priority:

              In nearly all redemption scenarios, subsequent in time is 
       understood to mean subsequent in priority or right, such that redemption 
       is allowed.  It is a logical syllogism that GMACM is a statutory 
       redemptioner:  If GMACM's lien is subsequent in right to the lien 
       Summerhill foreclosed; and if, under the common law, a lien subsequent 
       in time is a lien subsequent in right; then GMACM's lien must necessarily 
       be a lien subsequent in time as contemplated by the redemption statute. 

              The redemption statute's retention of the words "in time" after 
       "subsequent" is a historical artifact of the common law "first in time is first 
       in right" rule, which according to all relevant authority is understood to 
       refer to respective lien priority.[16]

       GMAC also contends a literal reading leads to absurd consequences such as 

those here, where a stranger to the property is allowed a windfall, the mortgage debtor 

is left with a deficiency, and the secured lender is punished.  GMAC urges this court to 

interpret the provision to grant redemption rights to a creditor having a lien junior to that 

on which the property was sold.

       The problem with this argument is that the language of the statute is 

unambiguous, and the expressed legislative intent is consistent with the language.  The 

legislature created the super priority lien and did not amend the redemption statute.  

There is no sign of legislative confusion as to the difference between a lien subsequent 

in time and a lien prior in time but junior in priority.  And it is evident from the official 

comment that the consequences of that difference were intentional:  "As a practical 

matter, mortgage lenders will most likely pay the assessments . . . rather than having 
the association foreclose on the unit and eliminate the lender's mortgage lien."17

       16 Br. of Appellant at 27.

       17 2 Senate Journal, 51st Leg., Reg., 1st & 2nd Spec. Sess., at 2080 

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No. 66455-7-I/8

       Nor does a literal reading lead to unlikely, absurd, or strained consequences.  

GMAC had both notice and opportunity to protect its interests and failed to do so.

       This is a highly technical statutory scheme, not for casual tinkering by courts.  

We will not rewrite the redemption statute because a lienholder's lack of diligence has 
had unexpected consequences.18  

       Affirmed.

WE CONCUR:

(Wash. 1990) (emphasis added).  We reject GMAC's argument that this is 
"precisely" what GMAC has tried to do by proceeding under the redemption 
statute.  Appellant's Br. at 19.  GMAC did not attempt to pay the assessments; 
it waited silently until after the super priority lien was foreclosed, and then tried 
to redeem.

       18 Plumbline asserts that if GMAC is deemed a proper redemptioner, it 
failed to adhere to the procedural requirements of the redemption statute. 
Because GMAC was not a proper redemptioner, we need not address this 
issue.

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