Court Opinion

ID: 9632596
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:20:08.32997+00
Date Added: 2024-06-11T18:08:19.529343
License: Public Domain

McInturff, J.
(dissenting)—My colleagues have held Lincoln's due-on-sale (DOS) clause to be an unreasonable restraint on alienation because of Bellingham First Fed. Sav. & Loan Ass'n v. Garrison, 87 Wn.2d 437, 553 P.2d 1090 (1976). I join Judge Green in the reasons for his request that our Supreme Court reconsider Bellingham, but the dramatic changes in economic circumstances which have occurred since 1976 mandate my dissent.5 In my view, the instant DOS clause is not an unreasonable restraint on alienation.6
In 1977, the Magneys entered into a contract with Lincoln which provided that if the property was sold, the interest rate would be readjusted or the loan would be paid off. This agreement was at arm's length and there has been no claim of overreaching. Lincoln now asks this court to enforce the terms of its contract.
*62Historically, banks have made long-term loans with the reasonable expectation, based on their past experience, that the loans would be repaid prior to their maturity date. A DOS clause allows lenders to loan mortgage money at lower rates than would otherwise be possible. The enforcement of DOS clauses offers substantial benefits to lending institution depositors and future borrowers.
In his concurrence, Judge Green succinctly points out the relationship between DOS clauses and the absence of prepayment penalties. I heartily agree with his analysis. The enforcement of a DOS clause is the counterpart to the borrower's right to prepay a loan without penalty. Both the right to prepay and the right to enforce a DOS clause are protective devices relied upon by the community to moderate gains and losses in an uncertain economy. See Dunham v. Ware Sav. Bank, _ Mass. --, 423 N.E.2d 998 (1981).
Lincoln's actions toward the Magneys were reasonable. Lincoln was only enforcing the terms of a contract that had been mutually agreed upon. Although I would rule the DOS clause in the present case is enforceable, I would do so being mindful that a court sitting in equity may refuse to allow a mortgage to be foreclosed when acceleration of the due date would amount to unconscionable or inequitable conduct by the lender. See Mills v. Nashua Fed. Sav. & Loan Ass'n, 121 N.H. 722, 433 A.2d 1312 (1981).
The enforceability of DOS clauses poses a fundamental public policy question. Both sides present compelling philosophical arguments. But today, our lending institutions are on unstable ground not experienced for over 50 years. Is this a time when we should insist that an agreement with the bank not be enforced, thus forcing the bank to continue with a relatively low interest not reasonably contemplated, but allow the borrower to pay off (and refinance) loans with no penalty? Is this fair?
I discern no compelling reason for not enforcing this DOS clause which was entered into in good faith with no subsequent showing of unreasonable conduct on Lincoln's part.
*63I would allow Lincoln to enforce the present clause.
Reconsideration denied March 15, 1983.
Review denied by Supreme Court June 21, 1983.

I do not dissent without thought given to the doctrine of stare decisis. This doctrine was discussed in In re Stranger Creek, 77 Wn.2d 649, 466 P.2d 508 (1970), where it was stated at page 653:
Stare decisis is a doctrine developed by courts to accomplish the requisite element of stability in court-made law, but is not an absolute impediment to change. Without the stabilizing effect of this doctrine, law could become subject to incautious action or the whims of current holders of judicial office. But we also recognize that stability should not to be confused with perpetuity. If the law is to have a current relevance, courts must have and exert the capacity to change a rule of law when reason so requires. The true doctrine of stare decisis is compatible with this function of the courts. The doctrine requires a clear showing that an established rule is incorrect and harmful before it is abandoned.
It was further amplified in the dissent in Wyman v. Wallace, 91 Wn.2d 317, 588 P.2d 1133 (1979), at page 322:
" [Flexibility is necessary to enable the law to adapt itself to social change. As a society alters, so do its needs, and a serviceable legal system must be able in its development to take account of new social, political and economic requirements.” . . . J. Salmond, Jurisprudence 65 (12th ed. 1966).
(Italics mine.)

The reasoning and citations for this view are stated in Judge Green's concurring opinion. To restate those reasons and citations would only be duplicative.