In Re Clare House Bungalow Homes, L.L.C.

447 B.R. 617 (2011)

Facts

Clare House is a senior living facility. Residents must be 55 years old or older to occupy the individual units. Each bungalow is the subject of a Resident Agreement. Upon occupancy, the resident pays a lump sum for the right to occupy the premises and use the common areas until death or until physically unable to care for themselves. The bungalow is then marketed to another and some percentage of the lump sum paid by the prior resident, typically eighty percent (80%), is returned to that resident's estate. Ps are an association composed of 24 residents of the 28 bungalows owned and managed by Clare House. Two of the members of the association recorded their Resident Agreements. By prior summary judgment motion, the rights of those two residents to occupy have been determined to be superior to the rights of the Trust holders (D). The rights of all residents to payment of the percentage of the initial lump sum as referenced in the Resident Agreements were determined to be contract rights enforceable against Clare House, but not against Ds. The summary judgment process did not determine the superiority of the right to occupy of the residents who did not record the Resident Agreements as disputed issues of fact existed. The first lienholder is the 'Caudill Group.' The Caudill Group loaned $400,000 to Clare House and recorded a Deed of Trust to secure the loan on November 24, 2004. That Deed of Trust was re-recorded on December 22, 2004, to correct the beneficiary. An additional sum of $265,000 was loaned by the Caudill Group on April 11, 2005, with a Deed of Trust recorded on the same date. Kevin Blanchat loaned Clare House $50,000 on January 5, 2008, and another $50,000 on February 21, 2008, and those Deeds of Trust were both recorded on July 25, 2008 (hereinafter 'Blanchat liens'). Peter J. Noe loaned Clare House $50,000 on March 8, 2008, and the Deed of Trust was recorded on July 28, 2008 (hereinafter 'Noe lien'). Lloyd Ross and Bonnie Guthrie-Ross loaned Clare House $200,000 on March 13, 2008, and the Deed of Trust was recorded on July 28, 2008 (hereinafter 'Ross lien'). The first-lien is held by the Caudill Group, the second and third position liens are held by Blanchat, the fourth position lien is held by Noe, and the fifth and last position lien is held by Ross. All the parties extended credit under circumstances that would have placed a reasonable person on notice that the bungalows were rented and occupied. The legal issue is whether, under the circumstances which existed at the time the liens attached to the real property, the lienholders had a duty to inquire as to the interest held by the residents. If so, did the lienholders fulfill that duty? RCW 65.08.070 states: “A conveyance of real property, when acknowledged by the person executing the same (the acknowledgment being certified as required by law), may be recorded in the office of the recording officer of the county where the property is situated. Every such conveyance not so recorded is void as against any subsequent purchaser or mortgagee in good faith and for a valuable consideration from the same vendor, his heirs or devisees, of the same real property or any portion thereof whose conveyance is first duly recorded. An instrument is deemed recorded the minute it is filed for record.”