IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DEBORAH MCCALLUM, an individual, Appellant,

v. GOLF ESCROW CORPORATION, a 

### Washington corporation; STERLING FINANCIAL CORPORATION, a 

### Washington corporation; TRUSTEE SERVICES, INC., a Washington corporation; PAMELA J. LANE, an individual; Respondents, PHILIP D. HINGSTON and DEBBIE HINGSTON, husband and wife, HYPERION CAPITAL GROUP, LLC, an 

### Oregon limited liabilitycompany; BANK OF AMERICA, N.A.; and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware corporation; and FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendants. No. 71137-7-1 DIVISION ONE

UNPUBLISHED OPINION FILED: December 15, 2014

Becker, J. — This appeal involves an unsecured creditor's attemptto 

### impose liability upon third parties forthe balance owing when herdebtor defaulted. The debtor paid offpart ofthe debt by making the creditorthe o

\~) V?No. 71137-7-1/2 beneficiary of a deed oftrust without her knowledge. We affirm the summary judgment dismissal of her claims against the entities that handled that deed of

trust transaction. This court reviews an ordergranting summaryjudgment de novo, performing the same inquiry as the trial court. Wilson Court Ltd. P'ship v. Tony Maroni's. Inc., 134 Wn.2d 692, 698, 952 P.2d 590 (1998). Summaryjudgment is 

### properly granted when the pleadings, affidavits, depositions, and admissions on filedemonstrate that there is no genuine issue ofmaterial fact. CR 56(c). All facts and reasonable inferences are considered in a light mostfavorable to the 

### nonmoving party, and all questions of law are reviewed de novo. Wilson Court Ltd.. 134Wn.2dat698. The record reflects that the appellant, Deborah McCallum, is an 

### experienced real estate agentwho specialized in locating and marketing properties for residential development inEdmonds. Her neighbor and friend, Craig Reimer, worked as a contractorand developer in the Edmonds area. In 2004, McCallum began to loan money to Reimerto be used in his real estate 

### business, Eaglewood-Homes, Inc. Perthe terms of their oral agreement, (1) the loan was due on demand, (2) Reimerwould give a deed oftrust against one of 

### his properties whenever McCallum requested it, (3) the deed would secure the entire loan balance, and (4) interestwould accrue at 1.75 percent over prime per 

### year. Between 2004 and 2008, McCallum loaned Reimer a total of$800,000. Reimer periodically made payments of both principal and interest. InspringNo. 71137-7-1/3 

### 2008, the balance owing was $550,000. McCallum asked Reimerto pay offthe loan. In July 2008, Reimer refinanced an existing construction loan from Sterling Savings Bank, a wholly owned subsidiary of respondent Sterling Financial 

### Corporation, and obtained $890,000.1 Reimer intended to use part ofthese proceeds to pay offpart ofthe balance of his debtto McCallum. For reasons undisclosed in the record, the bank required Reimerto execute a deed oftrust naming McCallum as a beneficiary. Reimer did so, and the deed oftrust was 

### recorded against a Reimer property located at 915 Cedar Street in Edmonds. The deed oftrust designated McCallum as beneficiary and stated that itsecured payment of $320,000. RespondentTrustee Services Inc. was the named trustee. Laterthat month, the bank placed the $890,000 in loan proceeds inescrow with respondent Golf Escrow Corporation. Atthe bank's request, Golf Escrow issued

a checkfor $320,000 to McCallum to satisfy the deed oftrust in full. 

### Reimer gave McCallum the checkfor $320,000 on July 31, 2008, without informing herthat itwas in satisfaction of a deed oftrust. McCallum demanded 

### that Reimer pay the remaining $230,000. Reimer assured herthat he would pay iteventually. McCallum cashed the check the next day. The checkwas drawn

on an account belonging to GolfEscrow, and itlisted an escrow number. Nevertheless, McCallum remained unaware that she had been, however briefly,

a beneficiary of a deed oftrust.

1See Clerk's Papers at 205-06 (Debbie Hingston's declaration). 3No. 71137-7-1/4 

### On August 12, 2008, GolfEscrow, through its principal Pamela Lane, asked Trustee Services to record a reconveyance ofthe deed oftrust. On September 30, 2008, Trustee Services asked Golf Escrow for a written request for reconveyance signed by the beneficiary, McCallum. Golf Escrow forwarded this request to Reimer. On October 28, 2008, Trustee Services received a requestfor reconveyance form purportedly signed by McCallum. On October 31, 2008, Trustee Services recorded a full reconveyance. According to McCallum, her signature on this document was forged and she was never asked to sign a requestfor reconveyance. In December 2008, McCallum asked Reimerto sign a promissory note and deeds oftrustthat her lawyers had drafted to secure the balance of $230,000. Reimer refused to sign, but he again assured McCallum that he would continue making payments. In fall 2009, Reimer asked McCallum to take a reduction of her loan. She refused. In December 2009, Reimer stopped making payments. During this 

### time, the property at 915 Cedar Streetwas listed for sale at $890,000—the amountthe bank had loaned Reimer. InJanuary 2010, Debbie and Philip 

### Hingston offered to buy it for $845,000. Withthe bank's approval ofthe short sale, Reimer accepted the offer and the sale closed in May 2010. On May 10, 2010, McCallum filed suit against Reimer and Eaglewood. 

### During discovery, McCallum learned forthe first time about the deed oftrust Reimer had executed for her benefit in July 2008.No. 71137-7-1/5 

### McCallum obtained ajudgmentforthe $230,000 balance plus interest, but she was unable to collect it. Reimer and his wife received a discharge in bankruptcy inAugust 2011. On October29, 2012, McCallum filed the present lawsuit. All defendants 

### obtained dismissal on summaryjudgment, and McCallum filed this appeal. After


### a stipulated dismissal ofseveral other respondents, the remaining respondents

are Trustee Services, Golf Escrow, Pamela Lane, and Sterling Financial. 

### McCallum asserts that these respondents breached fiduciary, statutory, and 

### contractual duties byfailing to contact her directly to verifythe terms of her loan to Reimer and failing to obtain from her a valid, unforged requestfor
reconveyance. 

### For purposes ofsummaryjudgment, we will assume thatthe respondents did breach various duties inthe manner alleged. Proximate causation and 

### damages are elements of McCallum's claims of negligence, breach offiduciary duty, and consumer protection violations. Below, the respondents' motions for summaryjudgment argued that McCallum suffered no damages because she
was paid infull for the amount secured. Thus, the issue on appeal iswhether their actions damaged McCallum. 

### In opposition to summaryjudgment, McCallum argued that the deed of trustwas given to secure the total debt of$550,000—an argument she does not 

### make on appeal. She also made what we will refer to as the "allocation" 

### argument—that even ifthe deed of trust was given to secure only $320,000, the check she received in that amount was or should have been allocated to theNo. 71137-7-1/6 

### unsecured portion ofthe total debt, leaving the deed oftrust to secure the remaining $230,000. She asserted that ifshe had known there was a deed of trust securing the remaining $230,000, she could have simply foreclosed on it before itwas reconveyed. On appeal, McCallum repeats the allocation argument, but she initially makes a new argument that we shall referto as the "lost opportunity" argument. She alleges that she lost the opportunity to protect herselfagainst Reimer's eventual default because the respondents did not make her aware ofthe deed of trust. She contends that ifshe had known about the deed oftrust transaction, 

### she would have immediately demanded and obtained full security from Reimer for the remaining loan balance: Further, presented with Reimer's dishonesty, McCallum would not have relied on his promise to pay the remaining balance, but would have immediately demanded that Reimer execute a 

### Deed ofTrust securing the remaining loan balance as required by 

### their agreement. (CP 119-20). McCallum could have also availed herselfofother remedies, including immediately filing suit against 

### Reimer and filing lis pendens againstthe development properties that Reimer had agreed would serve as security for McCallum's loan upon her demand. Brief ofAppellant at 19. 

### Generally, failure to raise an issue before the trial court precludes a party from raising it on appeal. RAP 2.5. McCallum acknowledges this rule but asserts that, at a minimum, her "lost opportunity" argument on appeal is so 

### closely related to the "allocation" argument she raised below that itdeserves to be addressed on the merits. Reply Br. ofAppellant at 8 n.5, citing Lunsford v. Saberhaqen Holdings. Inc.. 139 Wn. App. 334, 338, 160 P.3d 1089 (2007) (anNo. 71137-7-1/7 

### appellate court may exercise its discretion to consider new arguments that are "arguably related" to arguments made below), aff'd. 166 Wn.2d 264, 208 P.3d 1092(2009). 

### The allocation argument asks the courtto presume that McCallumwas secured for the balance of $230,000 until the respondents wrongfully eliminated 

### her security. The lost opportunity argument does not presume that McCallum
ever had security for the balance of$230,000; rather, itpresumes that she could 

### have forced Reimerto give her security forthe balance of$230,000 at the time of the deed oftrust transaction ifshe had known about it. Respondents might have 

### developed the record differently if McCallum had made the lost opportunity argument below. The two arguments are not so closely related that respondents should have seen itcoming. We decline to considerthe lost opportunity argumentforthe first time on appeal. RAP 2.5. We now address the allocation argument. This is the claim that Reimer's 

### partialpayment of$320,000 was or should have been allocated to the unsecured portion of his debt. McCallum draws her argumentfrom a general rule that applies when a creditor is owed two differentdebts by the same debtor. Ifthe creditor receives a paymentwithout direction as to how it should be applied, the 

### creditor may apply the paymentto either debt. Ellinqsen v.W. Farmers Ass'n. 12 Wn. App. 423, 426, 529 P.2d 1163 (1974). Acreditorwho is secured as to one debt but not the otherwill normally apply the paymentto the unsecured debtfirst in orderto retain maximum security.No. 71137-7-1/8 McCallum declares, "When I received the check, Iunderstood the 

### $320,000 was simply a payment againstthe aggregate debt owed. Infact, I necessarily associated the funds only with unsecured debt because Idid not yet 

### know any portion had been secured." According to McCallum, after she discovered the documents reflecting there had been a deed oftrust, on advice of counsel she "more specifically applied the checkfirst to any loan balance which might be deemed unsecured." She concludes that had the respondents not 

### wrongfully reconveyed the deed oftrust, she would have remained secured with 

### a first position deed oftrustfor the balance of$230,000. "The damages flowing from respondents' wrongful release ofMcCallum's security interest are thus easily calculable as the remaining amount of Reimer's loan thatwas stillsecured 

### bythe Deed ofTrust—$230,000." Br. ofAppellant at 22. The respondents invoke an exception to the general rule known as the "particular source" rule. When money received for payment of a debt is known to the creditorto have been derived from a particular source, the creditor may not 

### unilaterally apply the proceeds to a debt unrelated to the source from which such proceeds were generated. Ellinqsen. 12 Wn. App. at426, citing Cummings v. Erickson. 116 Wash. 347, 199 P. 736 (1921). The respondents argue that 

### Reimer's payment of$320,000 necessarily had to be applied to exonerate the deed of trust because the deed oftrust was the source of that payment. They conclude that the balance of$230,000 remained unsecured, and therefore the reconveyance ofthe deed oftrust did not damage McCallum.

8No. 71137-7-1/9 The general rule is typically applied in circumstances where there are two distinct debts, and the creditor knows one is secured and the other is unsecured. See, e.g.. Ellinqsen. 12 Wn. App. at 425-26. That is not what happened here. McCallum did not request security for the loan and did not expectto be the 

### beneficiary of a deed of trust. When she received the payment of$320,000, she did not know itwas given to satisfy a deed oftrust. She thoughtthe total debt

was unsecured. 

### The particular source exception to the general rule is applied when the 

### money with which the payment is made is known to the creditorto have been derived from a particular source or fund. Cummings, 116 Wash, at 351. That is not what happened here, either. Atthe time McCallum received the payment of $320,000, she did not know itwas in satisfaction ofthe deed oftrust. Because McCallum did not know there was a deed oftrust, she did not 

### allocate the payment of$320,000 at the time she received it. And Reimerdid not give her any direction as to how itshould be allocated. Where neitherthe creditor nor the debtor directs application ofthe paymentto any particular debt, 

### the court will apply the payment according to its own notion of the intrinsic equity 

### and justice of the case. Oakes Logging. Inc. v. Green Crow. Inc.. 66 Wn. App. 598, 602, 832 P.2d 894 (1992). McCallum cites Oakes Logging and argues that 

### equity calls for allocating the $320,000 in a mannerthat provides her, as the creditor, with the greatest security on the remaining balance. The Restatement ofContracts, an authority not cited by the parties, also 

### supports resort to equity when no allocation has been made, but itstates thatNo. 71137-7-1/10 

### consideration must also be given to the interests of third parties. "Ifneitherthe debtor northe creditor has exercised his powerwith respect to the application of

a payment as between two or more matured debts, the payment is applied to 

### debts to which the creditor could have applied itwithjustregard to the interests ofthirdpersons, the debtorand the creditor." Restatement (Second) of Contracts § 260 (1981) (emphasis added). Inthis atypical case, equity does notfavor McCallum's interest overthird party interests. McCallum loaned money to Reimerwithout obtaining security. Atthe time Reimer made her a beneficiary of a deed oftrust, she was at risk of losing the total debt of $550,000. As a result ofbecoming the beneficiary of a 

### deed oftrust securing $320,000, her risk ofloss was reduced to $230,000. McCallum is in no worse position than ifshe had never been a beneficiary ofthe deed oftrust. In fact, itappears her position was improved by the deed oftrust transaction even though she was not informed ofit. It would be inequitable to shift the risk of loss from McCallum to the entities that facilitated the deed oftrust transaction. We conclude these are not appropriate circumstances for an equitable 

### allocation ofthe $320,000 paymentto unsecured debt. Even assuming that the respondents wrongfully failed to contact McCallum before releasing the security, she was unsecured as to the balance of $230,000 and therefore she cannot show that she was damaged by their conduct. The orders granting summaryjudgment are affirmed.

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WE CONCUR:



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