On February 23, 2022, the Washington Court of Appeals applied the doctrine of “account stated” to shield a lender from liability. South Sound RV Park obtained financing from Niwara to purchase a recreational vehicle park. South Sound defaulted on the loan and sought to refinance with Cascade Properties. As part of the transaction, Cascade purchased the Niwara promissory note and extended an additional loan to South Sound. South Sound defaulted on both loans and decided to sell the property to satisfy its debts. On the transaction closing day, South Sound received a payoff statement from the lender, Cascade, that contained compound interest and late fees. South Sound closed the transaction but later sued Cascade to recover a refund for overpayments under the “inflated” payoff statement.

After a bench trial, the trial court found that the lender violated the state consumer protection act. The Court of Appeals reversed, finding that the borrower’s conduct in signing escrow documents without protest and affirming that it “READ, REVIEWED AND APPROVED” the payoff demand resulted in an “account stated,” a doctrine that applies when both the debtor and creditor agree that a specific sum is due. Payment of a statement can also establish an account stated if paired with a failure to protest or otherwise express an intent to negotiate the sum at some future time. Accordingly, the court found that the lender did not engage in an unfair or deceptive act or practice and directed that judgment for 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. Feb. 23, 2022). South Sound is represented by Burns Law, PLLC. Cascade is represented by Foster Garvey PC.The order is available here.