On February 23, 2022, the Washington Court of Appeals applied the “declared account” doctrine to shield a lender from liability. South Sound RV Park secured funding from Niwara to purchase an RV park. South Sound defaulted on the loan and sought refinancing with Cascade Properties. As part of the transaction, Cascade purchased Niwara’s promissory note and provided an additional loan to South Sound. South Sound defaulted on both loans and decided to sell the property to settle its debts. On the day the transaction closed, South Sound received a payment statement from the lender, Cascade, which contained compound interest and late fees. South Sound closed the transaction but then sued Cascade to recover a refund for the overpayments under the “inflated” payment statement.
After a trial run, the trial court found that the lender violated state consumer protection law. The Court of Appeal reversed, finding that the borrower’s conduct in signing escrow documents without protest and saying he had “READ, REVIEWED AND APPROVED” the payment request resulted in a “declared account” , a doctrine that applies when the debtor and creditor agree that a specified amount is due. Payment of a statement may also establish a stated account if coupled with a failure to protest or otherwise express an intention to negotiate the sum at a later time. Accordingly, the court found that the lender had not engaged in an unfair or deceptive act or practice and ordered that a judgment in favor of the lender be entered as a matter of law.
The case is South Sound RV Park LLC v. Cascade Properties PH LLC, no. 54462-8-II (Wash. Ct. App. February 23, 2022). South Sound is represented by Burns Law, PLLC. Cascade is represented by Foster Garvey PC. Order is available here.