Gift Deeds With No Consideration Recited – Are They Valid?

This issue was addressed in Allison v. Bale, 173 Wn. App. 435 (Feb. 2013), reconsideration granted (Mar. 12, 2013). Here’s what happened in Bale: Bob owned a cabin.  He had two nephews (John and Robert).  Bob regularly took his nephews to the cabin.  Bob married Edna in 1971.  Edna had two adult sons (Dennis and Allen) who regularly used and made improvements to the cabin.  Edna disliked John and Bob, so from 1971 until Edna died in 1999 John and Robert stopped visiting the cabin.  In 2003 Bob executed a will, declaring his intent that the cabin be conveyed to Dennis and Allen on his death.  In 2008 Bob was diagnosed with lung cancer and invited John and Robert over for lunch.  During lunch Bob told John and Robert that he wanted them to have the cabin.  John then found a form quit claim deed online.  Bob filled it out, leaving the lines after “in consideration of” and “quit claims to” blank.  But he did put John and Robert’s names in the grantee section of the deed’s caption.  On the real estate excise tax form (and the supplemental statement, required for gift deeds) Bob also indicated there was no debt on the cabin and that he was gifting it to John and Robert.  The deed was recorded in December 2008.  Bob died in April 2009.  Dennis and Allen filed a lawsuit, contending the gift deed was unenforceable because it recited no consideration and, therefore, the will controlled.  The trial court agreed with Dennis and Allen.  The Court of Appeals reversed, concluding (1) a recital of consideration is not needed to gift real property, and (2) Bob’s will did not rebut the strong evidence of Bob’s intent, evidenced by the gift deed.  RCW 64.04.050 says “Quitclaim deeds may be in substance in the following form: …”  The statutory form includes a space to recite consideration.  But a quitclaim deed need not precisely match the statutory form to be enforceable. The Washington Supreme Court granted reconsideration in March 2013. We’ll have to wait-and-see if Washington’s top court agrees with the trial court or the Court of Appeals.

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Can A Borrower Obtain Money Damages For Violations Of WA’s Deeds of Trust Act Before A Foreclosure Sale Occurs?

The answer depends on what claim the borrower makes. In a split decision, the Washington State Supreme Court in Frias v. Asset Foreclosure Services, Inc. et al, No. 89343-8 (Wash. Sep. 18, 2014), held (1) a borrower does not have a claim for money damages for purported violations of the Deeds of Trust Act when the foreclosure sale has not taken place yet, but (2) a borrower may, under the right circumstances, have a pre-foreclosure sale claim for money damages under a Consumer Protection Act claim for violations of the Deeds of Trust Act.

Before the Frias decision, courts in Washington were split on this issue. For example, for courts that answered the question “no,” see Vawter v. Quality Loan Service Corp. of Washington, 707 F.Supp.2d 1115 (W.D. Wash. 2010) and McDonald v. OneWest Bank, FSB, 929 F.Supp.2d 1079 (W.D. Wash. March. 2013). More recently, in August 2013 Division 1 of the Washington Court of Appeals answered the question “yes.” In doing so it relied on RCW 61.24.127(1)(c), which says “The failure of the borrower or [deed of trust] grantor to bring a civil action to enjoin a foreclosure sale under this chapter may not be deemed a waiver of a claim for [money] damages asserting: [f]ailure of the trustee to materially comply with the provisions of [Chapter 61.24 RCW, WA’s Deeds of Trust Act].” See Walker v. Quality Loan Service Corp., 176 Wn.App. 294 (Div. 1, Aug. 2013). Recognizing a split in the law, in September 2013 the U.S. District Court for the Western District of Washington certified the issue to the Washington Supreme Court. Frias v. Asset Foreclosure Services, Inc., 2013 WL 6440205 (W.D. Wash, Sept. 2013).

Now that we have the answer, borrowers have even more of an uphill battle in their fight to obtain money damages for foreclosure-related violations if the foreclosure sale has not occurred. Time will tell if the legislature amends the Deeds of Trust Act to expressly provide for a cause of action under the Act for money damages before a foreclosure sale occurs.