HearingExaminerDecision.pdf
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121 5 Avenue North, Edmonds WA 98020
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www.edmondswa.gov
DEVELOPMENT SERVICES DEPARTMENT PLANNING DIVISION
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BEFORE THE HEARING EXAMINER FOR THE CITY OF EDMONDS
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RE: Bragin Innocent Purchaser Application
)APPEAL OF INNOCENT PURCHASER
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)DETERMINATION
Appeal
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APL2016-0001
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Summary
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ECDC 20.75.080(A).
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The appeal is sustained and the Appellants are granted innocent purchaser status subject to a
condition that they acquire a utility easement across an adjoining lot. The legal basis of this decision
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is primarily outlined in Conclusion of Law No. 3, pages 6-8.
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Testimony
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Russell Hermes, attorney for appellants, testified that the property involves a single-family
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home that has been in existence since 1943. In 2004, the Hueys sold the property to the Ryans.
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In 2007 the Ryans sold a portion of the property to TriStar Homes by statutory warranty deed
. The resulting SWD violated subdivision statutes. The result of that deed was an
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illegal division and a legal description that created the division. The Ryans subsequently
defaulted on a loan secured by the SWD property they still retained and in 2016 the Bragins
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bought the property via a trustee deed in a foreclosure sale. It is uncontested that the only
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disputed criterion to meet innocent purchaser status is ECDC 20.75.180.A.4. The legal
description for the trustee deed emanates from the 2007 Ryan to TriStar SWD. The reservation
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in the legal description creates the lot ultimately conveyed to the Bragins. The reservation
APPEAL - 1
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he Bragins was
based upon the same reservation. The Bragins were able to provide a title report to the City of
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Edmonds via Chicago Title for the lot. The legal description in the title report is identical to
the reservation in the 2007 warranty deed. In 2008 Snohomish County segregated the lot into
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the reservation for tax purposes. The metroscan report is also based upon the 2007 reservation
description and specifically references the 2007 warranty deed. The 2007 deed existed nine
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years prior to the Bragin purchase. The Trustee deed, the metroscan report, the title report and
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the tax segregation were all based upon the legal description of the reservation in the 2007
deed.
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In response to arguments made in the Edmonds staff report, Mr. Hermes noted that it was
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untrue that the 2007 deed fails to identify the Bragin property. The reservation on the deed
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clearly shows the property purchased by the Bragins in 2016. Mr. Hermes also noted that the
fact that the parties to the 2007 deed knew it was an illegal
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pertinent is that the Bragins were innocent purchasers and were unaware that the division was
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2007 division was illegal
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failed to rely upon the 2007 SWD, there is no
reliance requirement in the innocent purchaser exception. Even if there was, the title report,
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trustee deed and tax segregation all relied upon the 2007 SWD.
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Kernen Lien, Edmonds Senior Planner, acknowledged that the only innocent purchaser
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criterion in dispute is ECDC 20.75.180.A.4. He noted that the intent of the criterion is to
ensure that only purchasers who had performed some reasonable due diligence could qualify as
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an innocent purchaser. The property ultimately purchased by the Bragins was identified in a
three lot short plat that received preliminary approval in 2007, but this short plat never received
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final approval so the Bragin lot was never legally created. The 2007 TriStar SWD conveyed
lots 2 and 3 of the preliminary short plat and excepted what was ultimately sold to the Bragins.
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The Notice of Trustee sale used a legal description for all three lots of the preliminary short
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plat. The deed referenced in the Notice of Trustee sale was for a 2005 deed that covered all
three lots of the preliminary shot plat. The property information relied upon by the Bragins
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also referenced the entire property. There was no single deed for the Bragin property until the
Trustee deed was issued in 2016 after the trustee sale to the Bragins.
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ent when you consider the purpose of the criteria requiring a prior
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reference to the purchased lot. The only rational that makes sense is you only want purchasers
who have done due diligence and relied upon the prior deeds in order to qualify as an innocent
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purchaser. The innocent purchaser exemption should be construed narrowly in order to avoid
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subversion of the subdivision review process. The Notice of Trustee sale was for all three lots
of the preliminary short plats. When the Bragins were bidding on the property they thought
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they were purchasing the entire parcel (all three lots of the preliminary short plat). The Bragins
have other remedies available to them. They can go after the trustee to convey what was
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APPEAL - 2
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advertised to them. They can also pursue a short plat to legally create their lot.
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Kernen Lien noted that staff did have recommended conditions should the examiner determine
the Bragins qualified for innocent purchaser status. Those conditions require an access and
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utility easement across the lot adjoining the Bragins to the west. The applicant has recorded an
access easement, Ex. 5, which meets the requirements of staff. The record access easement
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also contains a provision for utilities, but the utilities that serve the Bragins property is not
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located within the access easement as demonstrated in utility as-builts admitted as Ex. 6. Staff
therefore still recommends that the Appellants record an easement for utilities across the lot
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depicted on the as-built, but it likely
runs the same course as the sewer lines depicted in the as-built, since both sewer and water are
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provided by the Olympic View Water and Sewer District.
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Sergei Lomakin, brother of Ms. Bragin, works as an auditor. He noted that banks are very
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good at making and protecting money. A bank loaned the Bragins money for their purchase.
The bank would also have done due diligence on the Bragins purchase before loaning money
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on it. The Bragins did everything they could in terms of due diligence. They relied upon
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drug house and the Bragins have made a better use of the property.
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In rebuttal, Mr. Hermes noted that a bank
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LLC. Mr. Hermes emphasized that the TriStar deed did exist at the time of purchase and it
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showed the Bragins lot as a separate lot sufficiently for the county and Chicago title to
recognize it as a separate lot. The 2005 preliminary short plat is irrelevant. A marketing
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document by IChoice showed that 0.24 acres was up for bid. The metroscan report
also shows 0.24 acres, not the entire parcel. KC Capital would have done its own title report
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and still found it appropriate to lend money for the purchase of the lot.
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Mr. Taraday
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have clued the appellants into the fact that there was a problem because of the difference
between the legal description of the Notice of Trustee Sale and what IChoice said
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was offered for sale.
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He noted that several parties had relied upon the TriStar deal in assessing the transaction and
concluding that the property had been validly divided.
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Exhibits
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The following exhibits were admitted during the October 27, 2016 hearing:
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APPEAL - 3
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1.Bragin Appeal
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2.PLN20160026 Staff Report and Decision
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3.Notice of Appeal
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4.Public Hearing Notice Documentation
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5.Access Easement, recorded as Sno. Co. No. 201609020270.
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6.Utility As-Built for Olympic View Water and Sewer District sewer line.
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Findings of Fact
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Procedural:
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1. Appellants. The appellants are Boris and Elena Bragin.
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2. Hearing. A hearing was held on the appeal at 3:00 pm on October 27, 2016 in the City of
Edmonds City Council Chambers.
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Substantive:
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3. Description of Appeal
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purchaseA) for a lot located at 9114 240 Street SW. It is
uncontested that the lot purchased by the Bragins was never legally divided. Since the property is
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21.75.180 prohibits the issuance of any development permits or septic tank permits for the
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A)
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purchasers e Appellants applied for innocent purchaser status
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on May 25, 2016. The City issued a decision dated September 1, 2016 that concluded that the
Appellants did not qualify as innocent purchasers. The Appellants filed a timely appeal of this
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determination on September 12, 2016. That appeal is the subject of this decision.
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4. Preliminary Short Plat Approval. The source of the problems that lead to this appeal appears
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to be a short subdivision that received preliminary approval but never advanced to final plat
approval. The Bragins lot was part of a larger parcel the received preliminary short plat approval
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for three lots in 2005. Ex. 2, att. 9. The Bragins lot was proposed Lot 1 of that preliminary short
plat. It is uncontested that the preliminary short plat never acquired final plat approval and it is
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also uncontested that Lot 1 was never validly created as a result of that preliminary short
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subdivision.
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5. Initial Creation of Invalid Lot. The Bragins lot was first created essentially via an exclusion
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by statutory warranty deed on October 29, 2007. Ex. 2, att. 7 (henceforth referred to as the
TriStar SWD). One of the applicants for the 2005 short plat used the TriStar SWD 2007 to
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transfer the entire short plat parcel excluding the property designated as Lot 1 of the preliminary
short plat. The portion conveyed went to TriStar Homes. The portion retained, Lot 1, was retained
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by the grantors, John and Lois Ryan.
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6. Transfer to Bragins. The Bragins acquired title to Lot 1 of the 2005 preliminary short plat
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from the Ryans via a deed of trust foreclosure. The Ryans defaulted on a loan secured by a deed of
trust that was recorded on May 26, 2005. Ex. 2, att. 5. The deed of trust used the entire 2005 short
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s Sale,
recorded May 27, 2015, also identified the entire 2005 short plat as subject to the foreclosure sale.
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Ex. 2, att.3. The Bragins placed the high bid on the property and their purchase was conveyed by a
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att. 6. It is uncontested that the
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preliminary short plat. The legal description is identical to the
exclusion identified in the TriStar SWD.
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7. Bragin Reliance on 2007 TriStar Deed. As part of the application for innocent purchaser
status, Elena Bragin executed an affidavit attesting to the fact that she relied upon the legal
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description in the Notice of Ex. 2, att. 3, to ascertain what property she was
purchasing.
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the entire 2005 short plat property as subject to sale. Ms. Bragin noted in the \[w\]e
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therefore had no notice that the two lots were split
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t she and her husband discovered the
creation of Lot 1 in the TriStar SWD.
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8. Third Party Reliance on TriStar Deed. Chicago Title issued a title report insuring the
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property purchased by the Bragins using the same legal description creating the Bragin lot in the
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2005 Tristar deed. The title report was issued after the foreclosure sale on June 27, 2016 for
purposes of the Bragins innocent purchaser application.
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marketing materials for the foreclosure sale identified the lot area as 0.24 acres.
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Ex. 2, att. 4.
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area of Lot 1 of 2005 preliminary short plat, not the entire short plat parcel.
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The property purchased by the Bragins was also segregated into a separate tax lot according to
Snohomish County records on January 1, 2007. The legal description for the tax lot is the same as
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the legal description exclusion in the TriStar SWD.
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KC Capital, LLC for
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security purposes only
due diligence and relied upon the TriStar SWD to find title valid for its security purposes as well.
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APPEAL - 5
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9. Access and Utility Easements. Staff have recommended an access easement across the
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remaining proposed lots of the 2005 preliminary plat as that is the only means of access to a public
road, specifically 240 St. SW. As acknowledged by staff, the applicant has recently recorded an
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access easement, Ex. 5, which meets this requirement. Staff have also recommended an easement
across the remaining proposed lots for utilities. Staff established through uncontested testimony
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and as-builts, Ex. 6
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lot are located outside the access easement recently recorded by the Bragins. As a result a separate
utility easement needs to be recorded to accommodate the existing utility lines.
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Conclusions of Law
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Procedural:
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1.Authority of Hearing Examiner. An innocent purchaser determination is a Type II-A decision
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pursuant to ECDC 20.01.003. A Type II-A decision is a staff decision with public notice which is
appealable to the Hearing Examiner.
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Substantive:
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2. Applicable Code Sections. The criteria for qualifying for innocent purchaser status is
governed by ECDC 20.75.080(A). It is uncontested that the Bragins satisfy the criteria of ECDC
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20.75.080(A)(1)-(3) and (5). The only criterion in dispute is ECDC 20.75.080(A)(4).
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Consequently, ECDC 20.75.080(A)(4) will be addressed by this decision. ECDC 20.75.080(B)
will also be addressed as it governs conditions that can be placed upon a determination that a
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person qualifies as an innocent purchaser. Both ECDC 20.75.080(A)(4) and ECDC 20.75.080(B)
are quoted below in italics and applied in corresponding conclusions of law.
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ECDC 20.75.080(A)(4):
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showing the subject parcel as a separate lot; and
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3.Criterion is met. The Bragins meet the criterion quoted above. The TriStar SWD
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qualifies as an existing deed showing the Bragins lot at the time the Bragins acquired title to
the lot via a deed of trust foreclosure sale. The Bragins successfully bid on the subject property
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on September 25, 2015 and acquired title by on February 1,
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2016. During that time period, the TriStar SWD was a matter of record, having been recorded
in 2007. The TriStar SWD conveyed Lots 2 and 3 of the 2005 preliminary short plat
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referenced in Finding of Fact No. 4 and retained Lot 1 in the grantors by operation of an
exclusion in the legal description. The legal description of the exclusion created Lot 1 and was
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and was also referenced in several other real estate documents as outlined in Finding of Fact
No. 8. Given these circumstances, it is clear that the exclusion in the TriStar deed was
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s lot as a separate lot at the time of the foreclosure purchase.
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APPEAL - 6
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It is acknowledged that the 2005 TriStar deed created the Bragins lot by exclusion as opposed
to carving out a portion of a lot for conveyance. However, there is no logical reason to assign
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innocent purchaser status to combined lots 2 and 3 that were actually conveyed by the TriStar
SWD but denying that status to the property that was retained by exclusion. Two lots were
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created by the 2005 TriStar deed the portion conveyed (combined lots 2 and 3) and the
portion retained (lot 1). The TriStar SWD grantors,
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the Ryans, as a separate lot, as required by ECDC 20.75.080(A)(4).
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The City takes the position that the TriStar SWD does not qualify as an existing deed that
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shows TriStar SWD to purchase their
lot. As determined in Finding of Fact No. 8, the Braginshe existence of the
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TriStar SWD until after they had purchased their lot. Of course, ECDC 20.75.080(A)(4) makes
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no mention of reliance as an element for qualifying as an innocent purchaser. The City argues
that reliance must be read into ECDC 20.75.080(A)(4) because innocent purchaser status
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should only be granted to buyers who have exercised due diligence in researching the validity
of title. That is one logical interpretation of the purpose of ECDC 20.75.080(A)(4). However,
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equally logical is an intent to ensure an arms-length transaction. Most of the five criteria of
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ECDC 20.75.080(A) are geared towards ensuring that the person who creates an illegal
subdivision One of the greatest abuses of the innocent
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purchaser qualification would be persons intentionally creating illegal subdivision and then
immediately selling those lots off to partners in crime in order to validate the lots through
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innocent purchaser status. In order to prevent this from happening, the ECDC 20.75.080(A)
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criteria requires separation between the divider and the purchaser
knowledge of the illegal division, the purchaser cant be related to the seller, the purchase price
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must have a semblance to fair market value and the property must have been around long
enough to qualify for a separate tax lot status. The ECDC 20.75.080(A)(4) requirement for an
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existing deed showing the separate lot ensures added separation through this requirement the
person dividing the property cannot create the new lot by a direct conveyance to the innocent
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purchaser. The divider will have to first record an illegal subdivision (which is likely to get
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) or the divider will have to convey to an intermediate party
was to themselves by operation of the
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exclusion that created Lot 1ECDC 20.75.080(A)(4) can serve
as a significant impediment to collusion between a buyer and seller trying to intentionally
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legitimize illegal subdivisions through innocent purchaser status. Given how well ECDC
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20.75.080(A)(4) works as an objective and fairly straight-forward standard to apply, it is
pushing it to argue that the standard must be infused with the added requirement that the
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innocent purchaser applicant must also prove that they relied upon a deed showing lot to make
their purpose.
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Even if reliance could be read into ECDC 20.75.080(A)(4), the Bragins have met that standard
anyway.
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the trustee. Giving the trustee the smallest benefit of the doubt, it is fairly clear that the trustee
did not base the legal description of the upon the legal description
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APPEAL - 7
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for the tax segregation approved by Snohomish County. The only remaining document the
trustee could have relied upon was the TriStar SWD. The reliance of the Braga third
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party is similar to the reliance that buyers usually place upon a title company. Purchasers of
single-family homes rarely do their own due diligence for validity of title, they have a title
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company do that for them. It would be unlikely and absurd for the City to argue that innocent
purchasers need to rely upon their own title searches as opposed to their title companies.
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Reliance upon third parties to do due diligence will be the norm for most single-family
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residential purchases. Of course, a trustee expressly makes no warranties as to title while a title
company does the exact opposite, but ECDC 20.75.080(A)
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ECDC
20.75.080(A)(4) requires reliance upon a deed or other recorded document that created the lot
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in question and was in existence at the time of purchase. The Bragins relied upon the due
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based upon the TriStar SWD. The Bragins relied upon their bank, which granted financing
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upon their own assessment that title to the property was valid. Further, the Bragins were able
to get title insurance after the purchase in any event, establishing that they could have acquired
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title insurance prior to closing if they needed to, putting them in the same position as most
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other qualifying innocent purchasers who were purchasing outside of a foreclosure process.
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ECDC 20.75.080(B):
The innocent purchaser status may be approved subject to conditions of
approval requiring the applicant to make improvements to the property that would likely have
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been required by the city had the property been properly subdivided, unless it is determined
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that such improvements have already been constructed.
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4. As determined in Finding of Fact No. 9, a utility easement needs to be record across the
remaining lots of the 2005 preliminary short plat to accommodate existing water and sewer
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lines that serve the Bragin
requirement for short subdivision approval. Pursuant to ECDC 20.75.080(B) a utility
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easement will be required across the remaining lots of the 2005 preliminary short plat.
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DECISION
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The BECDC
20.75.080(A), subject to the following condition:
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1. A utility easement across tax parcel number 00463302000402 must be provided for the
benefit of tax parcel number 00463302000400 that accommodates the existing sewer and water
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lines serving tax parcel number 00463302000400.
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Dated this 10 day of November 2016.
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APPEAL - 8
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City of Edmonds Hearing Examiner
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Appeal Right and Valuation Notices
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This decision is final and only subject to appeal to superior court as governed by Chapter 36.70C
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RCW. Appeal deadlines are short (21 days from issuance of the decision) and the courts strictly
apply the procedural requirements for filing an appeal.
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Affected property owners may request a change in valuation for property tax purposes
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notwithstanding any program of revaluation.
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APPEAL - 9