Opinion
No. 52660-0-I
Filed: April 4, 2005 UNPUBLISHED OPINION
Appeal from Superior Court of Whatcom County. Docket No. 01-2-01842-2. Judgment or order under review. Date filed: 06/25/2003. Judge signing: Hon. Michael E. Rickert.
Counsel for Appellant(s), Philip E. Rosellini, Attorney at Law, PO Box 728, Bellingham, WA 98227-0728.
Counsel for Defendant(s), Barbara Pyeatt (Appearing Pro Se), 2121 G Street, Bellingham, WA 98225.
Counsel for Respondent(s), Stephen John Sirianni, Sirianni Youtz Meier Spoonemore, 719 2nd Ave Ste 1100, Seattle, WA 98104-1728.
A court may order the remedy of an equitable lien where "[a] party at the request of another advances him money to be applied, and which is applied, to the discharge of a legal obligation of that other but when, owing to the disability of the person to whom the money is advanced, no valid contract is made for its repayment." "But the doctrine has its prescribed boundaries it is not a limitless remedy to be applied according to the measure of the conscience of the particular chancellor[.]" Here, Saxon Mortgage Incorporated, Meritech Mortgage Services, and Bankers Trust Company (Lenders) loaned money to Barbara Pyeatt. The loans were secured by deeds of trust that the trial court ruled were invalid because Pyeatt "took title to the collateral by forgery." There is neither any argument nor is there any basis in the record for us to conclude that "no valid contract [was] made for [the loans to be repaid]." To the contrary, promissory notes evidence Barbara Pyeatt's obligations to repay Lenders, and the trial court entered judgment based on that evidence. Moreover, there is nothing in the record before us to substantiate any argument that Barbara Pyeatt is under a "disability" for purposes of repayment of the loans, as the governing criterion states. In short, necessary elements that would support the imposition of an equitable lien against the property to which Carole Sorenson holds record title are not present in this case. We reverse.
Falconer v. Stevenson, 184 Wash. 438, 442, 51 P.2d 618 (1935).
Falconer, 184 Wash. at 442.
Conclusion of Law 3.5.
The relevant facts are either undisputed or are stated in findings of fact by the trial court that are supported by substantial evidence in the record. Sorenson and Ken Pyeatt have been close for over twenty years. Commencing in August 1983, they began a series of conveyances of a parcel of real property on Lummi Island, Whatcom County (Lummi Property) and other properties. Their scheme involved Sorenson becoming the record owner of the properties while Pyeatt retained all the beneficial incidents of ownership. For example, Ken Pyeatt retained the right to occupy and did in fact occupy the Lummi Property throughout the term of the conveyances. Sorenson agreed with Pyeatt that she would not sell or mortgage the Lummi Property or otherwise obtain or benefit from any equity in it. At all relevant times, Sorenson granted to Pyeatt all authority and responsibility for management and control of the Lummi Property. During this period of time, Pyeatt directed Sorenson to convey the Lummi Property back to him for limited periods when he was required to provide collateral for loans from Washington Mutual.
In December 1990, Ken Pyeatt again quitclaimed the Lummi Property to Sorenson for no consideration. The purpose of this and the other conveyances was to mislead Pyeatt's creditors about the true ownership of the Lummi Property and the other properties.
In 1996, Ken Pyeatt married Barbara Pyeatt. In February 1998, she forged Carole Sorenson's name on two quitclaim deeds that purported to convey title to the Lummi Property to Barbara Pyeatt. Barbara Pyeatt recorded the forged deeds and used the Lummi Property as collateral for loans from Lenders. The outstanding unpaid principal balance of the loans as of the time of trial was $524,498.
Finding of Fact 2.18.
In 2003, Sorenson sued to quiet title, naming Barbara Pyeatt, Lenders, and others. She claimed that Barbara Pyeatt forged the quit claim deeds that purported to vest title in her and that the loans allegedly secured by the property were invalid. Lenders answered the complaint, seeking to enforce the deeds of trust against the Lummi property. Alternatively, Lenders sought the remedy of an equitable mortgage against the property together with other relief.
The trial court entered judgment, quieting title to the property in Sorenson. The court further imposed an equitable lien in favor of Lenders against the property and directed that the lien be foreclosed. The court dismissed Lenders' claim against Sorenson under the Uniform Fraudulent Transfer Act and also dismissed with prejudice all other claims for affirmative relief by Lenders.
Conclusion of Law 3.5.
Sorenson appeals. Lenders do not.
EQUITABLE LIEN
Sorenson primarily argues that while the court's decision to quiet title in her name was correct, there was no basis for the court to impose an equitable lien on the Lummi Property in favor of Lenders. We agree that, on this record, there is no basis for the imposition of an equitable lien.
The seminal Washington case on the elements of and the limitations to imposing equitable liens is Falconer v. Stevenson. That was an action on a promissory note by the assignee of the note. The original holder of the note had loaned funds to the guardian of the person and estate of a ward. The funds were used to construct a house on the ward's property. The loan was secured by a mortgage, which the guardian signed, on the property. Following her emancipation, the ward moved to quash the order appointing the guardian and all subsequent orders in the guardianship proceeding. The trial court granted the motion, holding that it had not acquired jurisdiction of either the ward or the estate because of a failure to comply with certain statutory procedures. On appeal, the supreme court affirmed.
Falconer, 184 Wash. at 440.
Falconer, 184 Wash. at 439.
Falconer, 184 Wash. at 439.
Falconer, 184 Wash. at 439.
Falconer, 184 Wash. at 439.
Falconer, 184 Wash. at 439-40.
Falconer, 184 Wash. at 439-40.
Following that appeal, the assignee sued on the note and to foreclose the mortgage. Alternatively, the assignee sought an equitable lien on the ward's property. The trial court held that the assignee was not entitled to foreclose the mortgage. But the court imposed an equitable lien on the ward's property.
Falconer, 184 Wash. at 440.
Falconer, 184 Wash. at 440.
Falconer, 184 Wash. at 440.
Falconer, 184 Wash. at 440.
On appeal, the supreme court reversed.
Falconer, 184 Wash. at 442.
The court first observed that the trial court was correct in deciding that the mortgage signed by the guardian was ineffective to encumber the property. Presumably, this was based on the invalidity of the guardianship.
Falconer, 184 Wash. at 440.
The court then held that the trial court improperly granted an equitable lien. The court stated the elements of an equitable lien as follows: The right to an equitable lien arises when a party at the request of another advances him money to be applied and which is applied to the discharge of a legal obligation of that other, but when, owing to the disability of the person to whom the money is advanced, no valid contract is made for its repayment.
Falconer, 184 Wash. at 442; see also Ellenburg v. Larson Fruit Co., Inc., 66 Wn. App. 246, 835 P.2d 225 (1992) (applying these elements in rejecting an argument that an equitable lien should be imposed against certain property).
The court went on to express limitations to this remedy:
But the doctrine has its prescribed boundaries it is not a limitless remedy to be applied according to the measure of the conscience of the particular chancellor[.]
Falconer, 184 Wash. at 442.
As in Falconer, there is a security instrument in this case that is ineffective to encumber the property against which the court imposed the equitable lien. Barbara Pyeatt forged the deeds that purport to convey title to the property to her. Thus, she had no power to grant any security interest in that property.
Lewis v. Kujawa, 158 Wash. 607, 617, 291 P. 1105 (1930).
More importantly, there is no evidence here of any invalidity of the contracts for repayment — the promissory notes that Barbara Pyeatt signed. The court entered judgment on those notes, and there is nothing to suggest that those contracts were invalid.
Finally, there is nothing to suggest any "disability of [Barbara Pyeatt]" that relates to any invalidity of the contract to repay the notes. Whether the judgments on those notes will ever be satisfied because of the invalidity of the deeds of trust securing them does not appear to be a "disability" within the meaning of the rule of Falconer or an appropriate consideration on whether to impose an equitable lien. Thus, an additional missing element precludes the imposition of an equitable lien in this case. Relying on Northern Commercial Co. v. E.J. Hermann Co., Lenders argue that the court has broad equitable powers that support imposition of an equitable lien in this case. We disagree.
See Ellenburg, 66 Wn. App. at 253.
22 Wn. App. 963, 593 P.2d 1332 (1979).
Falconer imposes express limitations on the application of the remedy of an equitable lien. Lenders present no persuasive argument why an equitable lien should be imposed here where at least two of the required elements set forth in that case are not met. In fact, Falconer represents an even more compelling case for that remedy because the funds there were used to improve the ward's property. Here, it appears the majority of the funds were not used to improve the Lummi Property. Rather, they were used for the Pyeatts' living expenses. If the court refused to impose an equitable lien in Falconer, we see even less reason for imposing one in this case. But even if Lenders were able to overcome the express limitations stated in that case, their reliance on Northern Commercial is misplaced. A close reading of that case shows a more limited statement of the scope of equitable liens. Specifically, the court spoke of such liens for three purposes: to secure property settlement agreements, alimony payments, and awards of community property. None of those purposes is present here. In short, there is no authority to impose an equitable lien against Sorenson's property. The necessary elements for such a lien are not present in this case.
Northern Commercial, 22 Wn. App. at 967-68.
Lenders argue that an alternative ground stated by the trial court supports the imposition of a lien against the Lummi Property. We disagree. Conclusion of Law 3.6 is an alternative to Conclusion 3.5, which holds that the deeds of trust by Barbara Pyeatt are void, states:
In the alternative to conclusion 3.5, if the equitable mortgage described above and decreed in the accompanying judgment is set aside on appeal, this Court concludes that: (a) Ms. Sorenson never took actual (as opposed to record) title to the Lummi Property; (b) Ken Pyeatt was, until entry of the accompanying judgment, the owner of the Property in all respects, and (c) Ken Pyeatt approved, ratified and benefited from the Lenders' Deeds of Trust, which are valid and enforceable in accordance with their terms. They should be foreclosed and the Property sold by the sheriff at public auction, with Ken Pyeatt to vacate the Property.
It is unclear to us what to make of this alternative holding. There is no citation to legal authority to show that this alternative holding supports the imposition of an equitable lien, as that term is discussed in Falconer. We shall assume that in the absence of citation to such authority, that counsel has found none. Moreover, it seems to us that the deeds of trust are either void or valid — they cannot be both. For these reasons, we see no basis to impose a lien of any description against the property that the trial court quieted in Sorenson.
State v. Logan, 102 Wn. App. 907, 911 n. 1, 10 P.3d 504 (2000) (citing DeHeer v. Seattle Post-Intelligencer, 60 Wn.2d 122, 126, 372 P.2d 193 (1962)).
ASSIGNMENTS OF ERROR
Sorenson assigns error to most of the findings and conclusions of the trial court as well as to many of its evidentiary rulings. However, Sorenson's argument of evidentiary issues is limited to the denial of her motion in limine and the amount of the equitable lien against the property. Findings of fact to which no error is assigned are verities on appeal. Moreover, we do not address assignments of error or claims unsupported by argument. To sustain a finding of fact, it must be supported by substantial evidence.
Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 808, 828 P.2d 549 (1992).
RAP 10.3; In re Matter of Estate of Lint, 135 Wn.2d 518, 532, 957 P.2d 755 (1998).
Our review of the record convinces us that substantial evidence supports each of the challenged findings.
Because we have concluded that the trial court erroneously imposed an equitable lien against the property, we need not address whether the court abused its discretion either by reserving its ruling on the motion in limine until a later time at trial or by admitting the evidence challenged on appeal. Moreover, the question of the amount of the equitable lien is moot, and we need not address that question.
ADDITIONAL ALTERNATIVE GROUNDS
Lenders advance on appeal additional grounds for relief, but do so on bases the trial court rejected. Specifically, Lenders urge that the trial court improperly dismissed the Uniform Fraudulent Transfer Act claim and an equitable subordination claim. We decline to address these additional grounds.
Lenders also contend a constructive trust should be imposed against the Lummi Property.
Rule 5.1(d) of the Rules of Appellate Procedure provides:
Cross Review. Cross review means review initiated by a party already a respondent in an appeal or a discretionary review. A party seeking cross review must file a notice of appeal or a notice for discretionary review within the time allowed by rule 5.2(f).
Under RAP 5.1(d), a notice of cross appeal is essential if the respondent seeks "affirmative relief," as distinguished from urging additional grounds for affirmance.
Phillips Building Co., Inc. v. An, 81 Wn. App. 696, 700, 915 P.2d 1146 (1996).
For example, in Phillips Building Co., Inc. v. An, the trial court refused to grant the appellant's motion to modify an arbitration panel's award of attorney fees. Respondents argued that the court should order the arbitration panel to award attorney fees to them because they were the prevailing party. But the respondents did not cross appeal the trial court's ruling on the award of attorney fees. As a result, the court of appeals was precluded from granting affirmative relief to the respondents. Here, Lenders request a partial reversal of the trial court's judgment. One basis is the assertion that the trial court incorrectly decided the UFTA claim. Another basis is that the trial court incorrectly dismissed other claims for equitable relief, including equitable subordination. These are requests for affirmative relief, not additional bases to affirm the trial court's decision. Failure to cross appeal precludes this court from granting affirmative relief in the form of reversing the dismissal of the UFTA claim. Because these issues are not properly before us, we do not address them.
In re Arbitration of Doyle, 93 Wn. App. 120, 126-27, 966 P.2d 1279 (1998).
To summarize, Ken Pyeatt and Carole Sorenson schemed to hide the Lummi Property from the reach of his creditors by their conveyances and other dealings with that property. Likewise, Barbara Pyeatt forged the deeds that purported to vest title to that property in her. Nevertheless, there is no authority for either the imposition of an equitable lien or the enforcement of invalid deeds of trust against the Lummi Property.
We reverse the imposition of the equitable lien and otherwise affirm the judgment entered in this case.
SCHINDLER and BAKER, JJ., Concur.