Gravity Segregation, Llc v. Jerry C. Reeves

CourtCourt of Appeals of Washington
DecidedFebruary 23, 2021
Docket52425-2
StatusUnpublished

This text of Gravity Segregation, Llc v. Jerry C. Reeves (Gravity Segregation, Llc v. Jerry C. Reeves) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gravity Segregation, Llc v. Jerry C. Reeves, (Wash. Ct. App. 2021).

Opinion

Filed Washington State Court of Appeals Division Two

February 23, 2021

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II GRAVITY SEGREGATION, LLC., a Utah No. 52425-2-II Limited Liability Company,

Respondent,

v.

JERRY C. REEVES, and THE UNKNOWN UNPUBLISHED OPINION SPOUSE OF JERRY C. REEVES, and GAYLE REEVES, and STANLEY C. KENNEDY ENTERPRISE, INC., DBA KENEDY CONSTRUCTION COMPANY AND KENNEDY RESTORATION, an Oregon Corporation, and SUNTRUST BANK, and ALL OTHER PERSONS OR PARTIES UNKNOWN CLAIMING ANY RIGHT, TITLE, ESTATE, LIEN OR INTEREST IN THE REAL ESTATE DESCRIBED IN THE COMPLAINT,

Appellant.

LEE, C.J. — Jerry C. Reeves purchased property from Charles and Mary Lou Babitzke. As

part of the transaction, Reeves signed a promissory note and deed of trust. After Reeves defaulted,

the Babitzkes’ assigned their rights under the promissory note and deed of trust to Gravity

Segregation, LLC (Gravity). Gravity filed a foreclosure action against Reeves. After a bench trial,

the court entered a judgment and decree of foreclosure against Reeves.

Reeves appeals the trial court’s Findings of Fact and Conclusions of Law and Judgment

and Decree of Foreclosure. Reeves argues that the trial court erred by 1) denying Reeves’ motion

to dismiss under CR 41 and ruling that Gravity was entitled to judgment even though Gravity No. 52425-2-II

based its rights on a deed of trust that did not contain a legal description of the real property at

issue, 2) granting Gravity’s motion to amend its complaint to add a claim of replevin, 3) ruling

that the replevin claim was not barred by the statute of limitations, 4) concluding that Gravity had

the power to enforce the promissory note because the Babitzkes never had possession of the

original note, 5) finding that the obligation under the promissory note was $1,000,000 plus the

PNC Bank mortgage, and 6) denying Reeves’ request for a continuance when his counsel had

joined the case one week before trial.

We affirm the trial court’s Findings of Fact and Conclusions of Law and Judgment and

Decree of Foreclosure.

FACTS

A. BACKGROUND

In 2006, Charles and Mary Lou Babitzke (the Babitzkes) agreed to sell to Jerry Reeves two

tax parcels they owned located at 1601 Guild Road. At the time of the sale, one of the parcels was

subject to a first position deed of trust in favor of PNC Bank. Reeves agreed to assume and pay

the PNC Bank debt as part of the agreement with the Babitzkes.

On July 21, 2006, Reeves executed a promissory note (July 2006 Note) in favor of the

Babitzkes at a closing where Reeves and the Babitzkes were present. Also on July 21, the

Babitzkes and Reeves signed a Deed of Trust (July 2006 Deed of Trust), for the two tax parcels.

This deed of trust included a legal description of the two properties and was recorded on the same

day it was signed.

The July 2006 Note was amended, restated, and recorded on November 13, 2006

(November 2006 Note). The November 2006 Note states,

2 No. 52425-2-II

The undersigned promises to pay to the order of Charles and Mary Lou Babitzke the amount of $900,000.00 excluding the $100,000.00 paid on July 21, 2006. The total purchase price is $1,000,000.00. The Undersigned further agrees and promises to assume payment responsibility for the mortgage currently on the property in the amount of $194,000.00. The mortgage can be paid off at any time. If the Undersigned elects to pay off all or any portion of the Note above the monthly payments assumed herein, that payment amount shall both reduce the amount of the outstanding Note and be credited against the upcoming $100,000.00 annual payment.

Trial Ex. 3 at 1 (November 13, 2006 Promissory Note).1 At the same time, Reeves executed an

amended deed of trust (November 2006 Deed of Trust). This deed of trust did not contain a legal

description. The November 2006 Deed of Trust was recorded on November 13, 2006, along with

a “Corrected Statutory Warranty Deed Replacing ‘Deed of Trust’ dated July 31, 2006 Auditors

Number 3305063” (Corrected Statutory Warranty Deed). Trial Ex. 11 at 1 (some capitalization

omitted) (boldface omitted).

On March 30, 2007, the Corrected Statutory Warranty Deed and copies of the November

2006 Note and November 2006 Deed of Trust were all re-recorded together along with a document

titled “Exhibit A” which set forth the full legal description of the two properties that the Babitzkes

sold to Reeves.

Reeves made the $100,000 down payment in 2006 and another $100,000 payment in 2007.

Reeves failed to make any additional $100,000 payments after 2007. Reeves also stopped making

the mortgage payments to PNC Bank. As a result, PNC Bank foreclosed on the parcel with the

mortgage in 2015.

On March 17, 2016, the Babitzkes assigned, transferred, and conveyed in writing, the July

2006 Note, the November 2006 Note, and the November 2006 Deed of Trust to Gravity. Because

1 All trial exhibits are included in the Supplemental Clerk’s Papers.

3 No. 52425-2-II

the Babitzkes did not have physical possession of the original notes or deeds of trust at the time of

the assignment, the Babitzkes signed a Lost Instrument Affidavit, which stated, in relevant part:

1. The original Promissory Note dated November 13, 2006, in the stated principal amount of $900,000.00, executed by Jerry C. Reeves, P.E., and payable to the order of Charles and Mary Lou Babitzke (the “Note”), has been lost, and was lost at the time it was in my custody, care and control.

....

3. At the time the Note was lost, Charles and Mary Lou Babitzke were collectively the holder of the Note, and the Note, nor any part thereof, had not been sold, assigned, conveyed transferred, or endorsed to any other person or entity.

Trial Ex. 6 at 1 (Lost Instrument Affidavit).

B. GRAVITY’S FORECLOSURE ACTION

Gravity filed a Deed of Trust Foreclosure Complaint against Reeves on April 11, 2016.

Gravity claimed that under the promissory notes and deeds of trust, Reeves agreed to pay the

principal sum of $900,000 in annual $100,000 installments until fully paid but had defaulted.

Gravity requested a monetary judgment on the balance that Reeves owed on the promissory notes

and deeds of trust, as well as reasonable attorney fees and costs. Attached to the complaint were

copies of the July 2006 Note, the July 2006 Deed of Trust, the November 2006 Deed of Trust, the

Corrected Statutory Warranty Deed, and the Assignment of Deed of Trust/Mortgage and Notice

of Interest from 2016.

During discovery, Gravity served Reeves with Plaintiff’s First Request for Interrogatories

and Production. Reeves responded that the Babitzkes had given him the original promissory note

on their own volition, without Reeves’ request and the Babitzkes chose to no longer enforce it

sometime in 2014. Reeves further responded,

4 No. 52425-2-II

Defendant JERRY C. REEVES, in response to the Interrogatories above relies on no new documents other than the original Promissory Note. Attaching a copy of the same would be useless. Plaintiff is free to make arrangements to inspect same at the offices of Defendant JERRY C. REEVES at a later date.

Clerk’s Papers (CP) at 370.

C. BENCH TRIAL

The case was tried to the bench on March 8, 2018, almost two years after Gravity filed its

complaint.2

1. Request for Continuance

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