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Bayview Loan Servicing, LLC v. Chandler & Newville, Inc.

Court of Appeals of Oregon

July 5, 2018

BAYVIEW LOAN SERVICING, LLC, Plaintiff-Appellant,
v.
CHANDLER & NEWVILLE, INC., Defendant-Respondent.

          Argued and submitted April 26, 2017

          Multnomah County Circuit Court 14CV06507 Michael A. Greene, Judge pro tempore.

          Erick J. Haynie argued the cause for appellant. Also on the briefs were Jeffrey M. Peterson and Perkins Coie LLP.

          Terrance J. Slominski argued the cause for respondent. Also on the brief were David W. Venables and Slominski & Associates.

          Before DeVore, Presiding Judge, and Lagesen, Judge, and James, Judge [*]

         Case Summary:

         This case involves conflicting claims to property that resulted from a prior judicial foreclosure of a senior trust deed and an intervening nonjudicial foreclosure of a junior trust deed. The trial court entered a judgment declaring that Chandler & Newville, Inc., (C&N) is the owner of the property and that Bayview has no interest in the property.

         Held:

         The trial court erred both in declaring C&N the owner of the subject property free and clear of Bayview's senior lien and in dismissing Bayview's claim for strict foreclosure. Bayview's corrected judgment of foreclosure was effective as to all named parties, including the original property owner and junior lienholder. Bayview's senior lien interest survived judicial foreclosure and the subsequent sale with regard to the interest acquired in the interim by C&N. C&N's interest remained subject to Bayview's lien, and Bayview was entitled to pursue foreclosure in order to resolve C&N's interest, providing a right of redemption.

         Reversed and remanded.

         [292 Or.App. 563] DEVORE, J.

         This case involves conflicting claims to property that resulted from a prior judicial foreclosure of a senior trust deed and an intervening nonjudicial foreclosure of a junior trust deed. Plaintiff's complaint in the prior judicial foreclosure named as defendants the junior lender and borrowers, but failed to name as a defendant the successor to the purchaser at the intervening trustee's sale conducted for the junior lender. Plaintiff's prior foreclosure complaint also contained confusion in the description of the property, which was reflected in the initial judgments, but which was remedied in a corrected judgment.

         Thereafter, plaintiff Bayview Loan Servicing, LLC (Bayview) filed this action for strict foreclosure naming as a defendant Chandler & Newville, Inc. (C&N), the successor to the purchaser at the junior lender's trustee's sale. Bayview's complaint in this action alleged that Bayview was the purchaser at the sheriff's sale conducted after its corrected judgment of foreclosure. Bayview's complaint acknowledged the omission of C&N from the prior foreclosure and assumed both the priority of Bayview's senior lien and the validity of the prior judicial foreclosure as to others. Bayview sought a subsequent judgment to require C&N to redeem the property or be foreclosed from any further interest in the property.

         C&N answered with affirmative defenses, denying that Bayview had foreclosed against the same property and denying that Bayview retained any remaining lien interest. C&N counterclaimed for a declaratory judgment declaring that C&N is the owner of the property free and clear of any interest of Bayview. After cross-motions for summary judgment, the trial court granted summary judgment for defendant and dismissed plaintiff's claim. The court entered a judgment declaring that C&N is the owner of the property and that Bayview has no interest in the property at all. Bayview appeals, assigning error to the declaratory rulings and the dismissal of its complaint.

         This appeal presents a number of issues that we describe later more fully. To summarize our decision, we conclude that C&N purchased an interest in the property [292 Or.App. 564] at the trustee's sale that was subject to Bayview's senior lien right; that Bayview's judicial foreclosure was effective as to the named parties and as to the property identified in the corrected judgment; that, when Bayview purchased the property at its foreclosure sale, Bayview's senior lien right, with respect to C&N, survived without being exhausted or merged; and that, in those circumstances, strict foreclosure of C&N's surviving interest is permissible, subject to C&N's right of redemption.

         I. FACTS

         A. Prior Proceedings

         In July 2005, Catherine and Tho Pham borrowed $200, 000 from Silver Hill Financial, LLC (Silver Hill), executed a promissory note, and secured it with a trust deed for the benefit of Silver Hill. The trust deed correctly identified the property with a street address as 3552-3556 NE Sandy Blvd, Portland, Oregon, and with a legal description as "Lot 6, Block 32, Laurelhurst, in the City of Portland, County of Multnomah and State of Oregon." The trust deed was duly recorded. Silver Hill assigned its beneficial interest as the lender to Bayview, and that assignment was duly recorded in February 2006.

         In September 2007, the Phams borrowed money from JPMorgan, Chase Bank, N.A (Chase Bank) and secured their note with a second trust deed to the same property. The trust deed was duly recorded.

         In 2011, the Phams defaulted on their payments to Bayview. Bayview filed an action in July 2012 for judicial foreclosure against the Phams, Chase Bank, judgment creditors, and unknown occupants. Bayview alleged that the Phams were the owners of the subject property with a street address as 3552-3556 NE Sandy Blvd, Portland, Oregon 97232, with an assessor's parcel number R202971, and with a legal description as "Lot 16, Block 32, Laurelhurst, in the City of Portland, County of Multnomah and State of Oregon." Although the street address and assessor's parcel number were correct, the complaint identified the lot number incorrectly as Lot 16 rather than as Lot 6. The complaint attached and incorporated by reference the terms of [292 Or.App. 565] the deed of trust, which gave the property's legal description correctly as Lot 6. The complaint recited that the deed of trust had been recorded on July 13, 2005, under Recorder's File No. 2005-128832.[1]

         After an order of default, the trial court entered a limited judgment against Chase Bank on November 5, 2012. The limited judgment, like the complaint, referred to the subject property with the correct street address and assessor's parcel number but with the incorrect legal description of "Lot 16," rather than Lot 6. Resolving the priority of Bayview's interest, the limited judgment stated, in pertinent part:

"1. The defendant JPMorgan Chase Bank, NA is in default and such default is hereby entered.
"2. Plaintiffs deed of trust recorded on 07/13/2005 under Recorder's File No. 2005-128832 against real property described as 3552-3556 NE Sandy Blvd, Portland, OR 97232, parcel number R202971, and legally described as Lot 16, Block 32, Laurelhurst, in the City of Portland, County of Multnomah and State of Oregon is a valid lien against the Property and that the lien is superior to any interest, lien or claim of the Defendant JPMorgan Chase Bank, NA (or any of them), in the Property.
"3. The deed of trust is foreclosed and all interest that Defendant JPMorgan Chase Bank, NA (or any of them) has in the Property on or after 07/13/2005 in the Property shall be sold by the Sheriff of Multnomah County, in the manner provided by law and in accordance with the practice of this Court.
[292 Or.App. 566] "8. That Defendant JPMorgan Chase Bank, NA (and each of them), and all persons claiming through or under Defendants (and each of them), as purchasers, encumbrances, or otherwise, are forever foreclosed of all interest, lien, or claim in the Property and every portion thereof excepting only any statutory right of redemption as Defendants may have herein."

         No appeal was filed, nor any motion to set aside that limited judgment.

         Eight days later, on November 13, 2012, the trustee for Chase Bank conducted a trustee's sale to nonjudicially foreclose the junior trust deed of Chase Bank on the property. For $60, 383, the trustee conveyed to Chandler Newville, Inc. (C) the interest in the property of the debtors, the Phams.[2] At that time, the Phams' interest in the property had not yet been foreclosed in Bayview's judicial proceedings. On November 20, 2012, C conveyed to defendant C&N its interest in the property with a bargain and sale deed, and the deed was duly recorded.

         On September 12, 2013, the court, in Bayview's proceedings, entered a general judgment that foreclosed the Phams' interest. Like Bayview's complaint and the limited judgment against Chase Bank, the general judgment referred to the property with the correct street address (3552-3556 NE Sandy Boulevard) and assessor's parcel number (R202971) but incorrect lot number (Lot 16, rather than Lot 6), while foreclosing Bayview's trust deed, which contained the correct lot number (Lot 6), and which was recited as could be found under Recorder's File No. 2005-128832.

         On March 13, 2014, Bayview bid $267, 000 at the sheriff's sale to acquire the property ...


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