Tacoma attorney Thomas West has appeared for Josh Powell’s uncle, Michael Craig Powell. Here’s the Notice.
Update: Josh Powell & Susan Cox-Powell Life Insurance Dispute
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Monthly Archives: March 2012
BECU v. Burns: Banks Can Sue First, Foreclose Later.
Does entry of a judgment on a promissory note extinguish the lien of a security interest in real property that secures that note? No, says Division 1 of the Washington Court of Appeals.
In BECU v. Burns, Boeing Employees’ Credit Union won judgment on a second position promissory note. When the first position lender foreclosed, there were surplus funds available after the trustee’s sale. The Superior Court said those funds belonged to the Burns. BECU appealed.
The issue in Burns was whether BECU received the surplus funds as a second position lienholder, or whether the homestead exemption allowed Burns to take the homestead amount, $125,000, ahead of BECU. In other words, by opting to sue on the note, and get judgment, did BECU give up its status as a consensual lienholder (who would be superior to the owner’s homestead exemption), and become an ordinary judgment lienholder (who is inferior to the homestead exemption)? No, says the Court of Appeals.
Burns also answers a different question, that TEP thinks is far more important. The question is this: May I obtain judgment on a promissory note, levy upon other non-secured assets (to satisfy the judgment), and then later foreclose on the deed of trust, nonjudicially? The answer is Yes!
In American Federal Savings & Loan v. McCaffrey, 107 Wn.2d 181, 728 P.2d 155 (1986), the Washington Supreme Court said:
“In transactions involving both notes and mortgages, the notes represent the debts, the mortgages security for payment of the debts. Either may be the basis of an action. The mortgagee may sue and obtain a judgment upon the notes and enforce it by levy upon any property of the debtor. If the judgment is not satisfied in this manner, the mortgagee still can foreclose on the mortgaged property to collect the balance.” (Emphasis added.)
Absent in the McCaffrey opinion is any explanation as to whether the “still can foreclose” language is limited to judicial foreclosures (a judgment holder can always judicially foreclose on his lien) or whether one can later nonjudicially foreclose on the mortgage lien.
Burns answers that question, albeit in dicta. According to the Burns case, a noteholder can sue, win judgment, levy on other assets, and then nonjudicially foreclose on the collateral.
It will be interesting to see how many banks take this route – sue first, foreclose later. If they do, we may see a lot of borrowers who can afford their mortgage thinking twice about simply letting the property go to foreclosure.
Need a Form 17 Seller’s Disclosure Statement? Here is one you can use.
In a transaction for the sale of commercial real estate, the seller shall, unless the buyer has expressly waived the right to receive the disclosure statement under RCW 64.06.010, or unless the transfer is otherwise exempt under RCW 64.06.010, deliver to the buyer a completed seller disclosure statement in the [linked here] format and that contains, at a minimum, the information set forth in the suggested form. Here’s the statute, RCW 64.06.013.
The Seller’s Disclosure Statement may be waived if “the buyer has expressly waived the receipt of the seller disclosure statement. However, if the answer to any of the questions in the section entitled “Environmental” would be “yes,” the buyer may not waive the receipt of the “Environmental” section of the seller disclosure statement.”
Were the Powells’ Life Insurance Policies Community Property?
So we’ve received questions on this, so how about some answers.
First, in Washington, a policy purchased wholly with community property funds is community property. Occidental Life Ins. Co. v. Powers, 192 Wash. 475, 74 P.2d 27 (1937).
Second, the time of acquisition of the policies matters in determining whether it is community property. In Washington State, courts apply an apportionment theory in determining the time of acquisition. Other community property law jurisdictions hold that the ownership of a life insurance policy is determined by reference to the time when the policy was purchased. So the Powells and Coxes will be looking to when the policies were purchased, and where the Powells lived at that time.
Without knowing the facts (which is what a trial is for), we think it likely these policies were purchased during the Powells’ marriage, and are thus community property under both Utah and Washington law.
One interesting question will be how Josh’s continued payment of premiums after Susan went missing will be treated. If she is presumed deceased at the time she went missing, then it is arguable that a portion of the proceeds are Josh’s separate property. See e.g., W. DeFuniak & M. Vaughn, PRINCIPLES OF COMMUNITY PROPERTY 64, 79 (2d ed. 1971).
Is a Sales Tax Really Regressive?
Washington is one of the few states that does not have an income tax. Instead, it has a hefty sales tax. Every few years politicians dust off the old state income tax playbook and try to sell it to voters as an alternative to the sales tax.
The last time this happened was 2010, when we voted on I-1098, which was a voter initiative to lower real property taxes, eliminate the B&O tax (a tax that businesses pay), and impose a state income tax. Voters resoundingly rejected it.
Proponents of I-1098 argued (among other things) that the sales tax is “regressive,” meaning that it hurts poor people more than rich people. But when measuring who is poor and who is rich across an entire population – in order to argue whether a tax is fair – it gets complicated quickly. Continue reading
Will Susan Cox Powell’s Death be Presumed?
This is one issue that will be addressed in the recent case, New York Life Insurance Company v. Powell, et al., where the Powell and Cox heirs may fight it out over Josh’s, Susan’s and the kids’ life insurance proceeds.
The answer is that death will be presumed if/when Susan has been missing for more than seven years, with no finding of her remains. That said, it could be determined that she died earlier. Two settled principles apply:
1. a person who was alive when last seen is presumed to continue living until the contrary is shown; and
2. one who disappears and remains unheard of for seven years, and whose absence is unexplained, is presumed to have passed away.
Where the proof shows that the absentee encountered some specific peril to which it may reasonably be thought he/she had succumbed, death may be inferred short of the expiration of the seven-year period. See Occidental Life Ins. Co. v. Thomas, 107 F.2d 876 (9th Cir. Idaho). If that is the case, it will be up to a judge or jury to make that determination.
If it is determined that Susan passed away before Josh, then arguably her estate should pass to Josh, her surviving spouse (assuming there are no Slayer Statute issues that prevent Josh from inheriting). And because Josh then passed away, his estate would pass to his heirs (or beneficiaries named in a will or trust, if one exists). It works in reverse order if it is determined that Susan passed away second.
It seems simple, but things get complicated quick when we consider (1) the life insurance policies, which have beneficiary designations; (2) effect of those policies being community property (Josh may only be able to control his one-half of the policies); and (3) the Slayer Statute (Josh will be treated as having predeceased his kids because he intentionally caused their deaths; he will also be treated as having predeceased Susan if it is proved he intentionally caused her death). These considerations complicate things. TEP will post more as things unfold. Stay tuned.