In Deere Credit, Inc. v. Cervantes Nurseries, LLC, the Court of Appeals recognized that a parallel bankruptcy proceeding involving multiple creditors is not the same “action” for purposes of RCW 61.12.120’s bar against a plaintiff foreclosing on a mortgage “while he is prosecuting any other action for the same debt or matter which is secured by the mortgage. 

BACKGROUND

Plaintiff, Deere Credit, Inc. (“Deere”), loaned approximately $3.8 million to Defendants, Cervantes Orchards & Vineyards LLC, Cervantes Nurseries LLC, Cervantes Packing & Storage LLC, Manchego Real LLC, and Jose and Cynthia Cervantes (collectively “the Cervantes”) pursuant to three promissory notes.  The notes were secured by various parcels of real property.  The Cervantes failed to pay the notes.  As a result, Deere and the Cervantes executed a forbearance agreement that extended the time in which the Cervantes had to repay the notes.  The Cervantes, however, failed to pay the notes off under the terms of the forbearance agreement.

Subsequently, Cervantes Orchards & Vineyards LLC, alone, filed for Chapter 11 bankruptcy protection.  A plan of reorganization was later confirmed, and Deere and the Cervantes entered into a second forbearance agreement.  In this second forbearance agreement, Deere agreed to the terms of Cervantes Orchards & Vineyards LLC’s reorganization but required Cervantes Orchards & Vineyards LLC, individually, and the Cervantes, collectively, to repay the notes.

The Cervantes failed to repay the notes under the terms of the second forbearance agreement.  Cervantes Orchards & Vineyards LLC also failed to make payments under its reorganization plan.  As a result, Deere filed this state-court suit against the Cervantes seeking to foreclose on its security interests.  Deere also moved the bankruptcy court to reopen Cervantes Orchards & Vineyards LLC’s bankruptcy and to appoint a liquidating agent.  The bankruptcy court granted Deere’s motion, and a liquidating agent subsequently auctioned off a variety of property owned by Cervantes Orchards & Vineyards LLC and distributed the proceeds to creditors.In this action, Deere filed a motion for summary judgment.  In response, the Cervantes moved to dismiss the action and argued that Deere could not pursue the state-court action because it had forced a sale of real property in the bankruptcy proceeding and, as a result, the state-court proceeding violated Washington’s single action rule, RCW 61.12.120. The Yakima County Superior Court held that the state-court proceeding did not violate the single-action rule and granted Deere’s motion.  This appeal followed.

The Court of Appeals, Division III, affirmed.

ANALYSIS

  • RCW 61.12.120’s prohibition of multiple actions to foreclose the same debt applies only in two-party actions, which the bankruptcy case was not because it involved multiple creditors.
  • Cervantes Orchards & Vineyards LLC’s reorganization plan provided the right to a liquidating agent; therefore, Deere’s request for one did not turn the bankruptcy proceeding into a foreclosure action.

Additionally, the Court of Appeals awarded Deere its attorneys’ fees and costs pursuant to RCW 4.84.330 and RAP 18.1.