Washington State Lenders Beware! Is Your Mortgage Unenforceable?

William O. Kessler, Edmonds Lawyer

In its recent opinion in Wilmington Savings Fund v. Hopkins, the Washington Court of Appeals put lenders on notice: the Court might not run interference for your sloppy drafting. In Hopkins, Mr. and Mrs. Hopkins owned their home through a living trust. In the wild west lending days of 2007, Lender lent $250,000 to Mr. Hopkins, purporting to secure the loan with a deed of trust against the couples’ residence. But the deed of trust had 2 problems: (a) Lender drafted it for Mr. and Mrs. Hopkins to sign in their individual capacities, not as trustees of their living trust; and (b) Lender drafted it with a significant typo and omission in the legal description.

Fast forward to 2021. Mr. Hopkins had died. The loan went unpaid, and Lender sought to foreclose. Realizing the problems with its deed of trust, Lender sued to “reform” the deed of trust. This means Lender said, in essence: “Dear Court, we all know that everyone meant for Mr. and Mrs. Hopkins to sign as trustees of the trust, and everyone meant the legal description to encumber this particular property, so please declare that our poorly-drafted document is now fixed.”

But Mrs. Hopkins introduced evidence that her husband was a spendthrift, and she claimed her intent in forming the living trust was protecting the couples’ assets. On this basis, she claimed she actually did not intend to encumber the house with a deed of trust, despite her signature on the document in her individual capacity. On this basis, the Court of Appeals affirmed the trial court, rejecting Lender’s argument to reform the deed of trust due to a “mutual mistake.” The Court also rejected the Lender’s request to reform the legal description, even though Mrs. Hopkins only raised the issue for the first time at trial. For the coup de grace, the Court of Appeals upheld the trial court’s attorney fee award against Lender, and additionally awarded Mrs. Hopkins her attorney fees incurred conducting the appeal.

The moral? If you are a lender, draft carefully. If you are a borrower, read your documents – they may not say what the lender says they say. The lawyers at Beresford Booth have extensive experience with foreclosure and collection litigation. If we can be of service, please feel free to call us anytime.

To learn more about Is Your Mortgage Unenforceable?, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

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