IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON

CENTRALBANC MORTGAGE CORPORATION, a California Corporation, Appellant,

v. SOLUTIONS FINANCIAL GROUP, INC.; a Washington corporation; NORTH AMERICAN SPECIALTY INSURANCE COMPANY MORTGAGE BROKER BOND NO. SUR 202179; CHOICE ESCROW, INC., a Washington corporation; and JULIE A. DEKMAN AND SLAVA DEKMAN, husband and wife, and the marital community composed thereof, ALLA PYATETSKAY and DAVID SOBOL, husband and wife and the marital community composed thereof, Respondents. 

### Spearman, C.J.

— CentralBanc Mortgage Corporation (CMC), a mortgage 

### lender, claims itsuffered damages as a result ofacts or omissions by Choice Escrow, Inc. (Choice) and Julie A. Dekman (Dekman), escrow agents, in 

### conjunctionwith a fraudulent mortgage application. CMC appeals the trial court's 

### ordergranting summaryjudgmentdismissal toChoice andDekman.1 Itcontends that a genuine issue of material fact exists as to each elementof its claims, that it No. 69746-3-I

DIVISION ONE ^ f/.: C") rr-'.;:' r-j •--:"- -

—-, c •: - • • 

### UNPUBLISHED OPINION

FILED: December 22. 2014

1CMC also appealed the order granting summary judgment to North American Specialty Insurance Company but the parties settled before oralargument. We granted their request to dismiss the appeal.No. 69746-3-1/2 

### isentitled to reliefunder the doctrine of equitable subrogation, and that thetrial
court committed reversible error when itfailed to allow CMC time to amend its complaint to add the true plaintiff in interest. We affirm. FACTS Background 

### This action arises from a residential real estate purchase and sale transaction that closed on February 16, 2006. A buyer, Andrey Stukov, worked 

### with Solutions Financial Group, Inc. (Solutions Financial), a licensedmortgage broker, to obtain financing for a home located at 2106 FairmountAvenue 

### Southwest, Seattle, Washington (the Fairmountproperty). Solutions Financial brought the Stukov loanpackage to CMC, a mortgage lender, forunderwriting and approval of a $900,000 home loan. CMC approved twopurchase money mortgages, which totaled $845,000 ($720,000 on the first loan and $125,000 on 

### the second). The transaction was closed by Julie Dekman, an employee of Choice. Immediately after closing the two Stukov loans, CMC sold them on the secondary market to American Home Mortgage Corporation (AHMC)pursuantto a written purchase agreement. The agreement contained a provision underwhich a first payment default by the borrower, Stukov, constituted fraud per se and legal grounds for AHMC to "deem" the Stukov loans "deficient" and to demand immediate repurchase ofthe Stukov loans by CMC (the buy-back clause). Clerk's Papers (CP) at 69, 963 fl 3.No. 69746-3-1/3 Infunding the two Stukov loans, CMC claims itrelied on Stukov and 

### Solutions Financial's representations inthe loan application, as wellas the 

### disclosures and Settlement Statementprovided byChoice at closing.2 However, shortly after closing CMClearned that, contrary to these representations, 

### Stukov's pre-existing home loan had been delinquent forthree months prior to closing, his business had suffered substantial reversals, the income he reported 

### inthe loan application was false, and he had never actually occupied the Fairmount property. CMC also discovered that Choice's disclosures and settlement statement had been incomplete or incorrect and did not reflectthe actual details ofthe transaction. 

### CMC also learned that its own employee, AliaPyatetskay, had participated actively in Stukov's scheme to submit fraudulent loan documents. 

### Pyatetskay had ratified and retransmitted the false documents submitted by Choice, causing CMC to fund loans that it would not have approved had itbeen

2Aside from the "Program Disclosure" referenced inCMC's closing instructions (CP at 1001), it is unclearfrom the record exactly which "disclosures" CMC allegedly relied upon. In its Second Amended Complaint, CMC bases its breach ofcontract action on Choice and Dekman's failure "to fully inform CentralBanc regarding the escrow and its closing, by failing to properly complete the HUD-1 Settlement Statement and by disbursing loan proceeds to individuals and/or entities not identified on the HUD-1 Settlement Statement." CP at 12. CentralBanc bases its breach of fiduciary duty claim on Choice and Dekman's failure "to disclose and detail the particulars ofthe escrow closing they conducted and made disbursements of loan proceeds from escrow to third parties without reflecting those disbursements on the HUD-1 Settlement Statement." CP at 13. The copy of Choice's Settlement Statement included in our record is nearly illegible, though it is marked "BEST AVAILABLE IMAGE POSSIBLE." CP at 1004. There is no Program Disclosure or other "disclosures" from Choice in the record.No. 69746-3-1/4 

### fully informed ofthe material facts surrounding the sale, escrow,closing, and structuring ofthe loans to Stukov. 

### Stukov failed to make the firstpaymentdue on the loans, which constituted fraud per se underthe purchase agreement between CMCand 

### AHMC. In response, on or aboutApril 2006, John Delaney, the principal ofCMC, submitted a demand letter to Solutions Financial, alleging fraudulent conductthat created liability on the part ofSolutions Financial and demanding that it repurchase the Stukov loans as a remedy. 

### BySeptember2006, AHMC had instituted non-judicialforeclosure proceedings. Later, in a letter dated January 17, 2007, AHMCdemanded that 

### CMCrepurchase "Loan # 1191795" for $806,438.99, plus per diem, pursuantto the buy-back clause. CP at 801-02. The demand letter did not mention two loans and the amount requested did not correspond with the amount ofeither Stukov 

### loan at the time offunding.3 CMC took no immediate action on this demand. On January 26, 2007, a nonjudicial foreclosure sale ofthe Fairmount property occurred. AHMC submitted a winning bid of $779,877.23 and obtained title to the property. On June 8, 2007, overfour months afterAHMC acquired title to the Fairmount property in the foreclosure sale, Delaney bought the Fairmount property from AHMC in his personal capacity for $813,478. Atthe time of summaryjudgment, Delaney still owned the Fairmount property. CMC claims that

3 One Stukov loan was for $720,000 and the other for $125,000.No. 69746-3-1/5 

### it has made and continues to make monthly payments to Delaney as reimbursement for the amount he paid to purchase the property. CMC also 

### claims thatin response toAHMC's demand, itrepurchased the second loan by direct paymentto AHMC inthe amount of$145,249.97. Procedural History On November 17, 2006, two months before AHMC made its demand for 

### repurchase, CMC initiated this lawsuit, asserting tort and contractclaims against 

### Solutions Financial and its bonding company, North American Specialty Insurance Company (NASIC). On August 6, 2007, CMC filed its first amended 

### complaintwhich added claims against Stukov, Choice and its employee, Dekman and her husband, Slava Dekman. CMCdismissed its claims against Stukov on October22, 2007. On August 1, 2008, CMC filed a second amended complaint which added Alia Pyatetskay and her husband, David Sobol, as defendants. With respectto Choice and Dekman, CMC alleged breach ofcontract, 

### breach of fiduciary duty, fraudulent misrepresentation, negligent misrepresentation, and violation ofthe Consumer Protection Act (chapter 19.86 RCW), all arising from Choice's allegedly false disclosures ofthe details related to closing. CMC claimed that ithas suffered over $500,000 in damages, comprised ofreimbursement of mortgage payments made by Delaney on his note for the Fairmount property, property taxes and insurance, the direct payment CMC claims itmade to AHMC to repurchase the second Stukov loan, and attorney fees.No. 69746-3-1/6 

### On October4, 2012, Choice and Dekman moved forsummaryjudgment, arguing that CMC had sustained no damages as a result of their actions and any claims which Delaney might have asserted in his personal capacity were barred bythe statute of limitations. The trial court entered summaryjudgment in favor of 

### Choice and Dekman on November 2, 2012. Because entry ofjudgmentdid not resolve the claims against Solutions Financial, Pyatetskay and Sobol, on November 15, 2012, Choice and Dekman moved the trial courtfor entry of final judgment as to them pursuantto CR 54(b).4 The motion was setto be heard on the same date the trial was scheduled to commence, November 19, 2012. When 

### CMC failed to appear on that date the court granted the CR 54(b) motion. On November 27, 2012, the trial court issued an order directing entry of a final judgment as to Choice and Dekman, on which itnoted "[t]the trial date of Nov. 19, 2012 came and no one appeared for trial &the Ct. has received no objection to this motion." CP at 202. Final judgment in Choice and Dekman's favor was entered on November 27, 2012. CMC appeals. DISCUSSION Summary Judgment We review summaryjudgmentdecisions de novo. Ranger Ins. Co. v. Pierce County, 164 Wn.2d 545, 552, 192 P.3d 886 (2008). Summaryjudgment is proper ifthere is no genuine issue of material fact and the moving party is 

### entitled tojudgment as a matter of law. CR 56(c). Agenuine issue ofmaterial fact

4The claims against Solutions Financial were dismissed on March 22, 2013, nunc pro tunc to November 19, 2012, the trial date atwhich CMC failed to appear.No. 69746-3-1/7 

### exists if"reasonable minds coulddifferon the facts controlling the outcome of the litigation." Ranger Ins. Co.. 164 Wn.2d at 552 (citing Wilson v. Steinbach. 98 Wn.2d434, 437, 656 P.2d 1030 (1982)). When determining whether an issue of material fact exists, the court must construe all facts and inferences infavor of 

### the nonmoving party. Id. 

### Summaryjudgment is subjectto a burden-shifting scheme. ]d. The initial burden to showthe nonexistence of a genuine issue of material fact is on the moving party. ]dj.see also, Vallandigham v. Clover Park School Dist. No. 400. 

### 154Wn.2d 16, 26, 109 P.3d 805 (2005). For example, a defendant may move for summaryjudgmentby showing thatthere is an absence ofevidence to support
an essential element ofthe plaintiffs claim. Sligarv. Odell. 156 Wn. App. 720, 725, 233 P.3d 914 (2010) (citing Young v. Key Pharm., Inc.. 112 Wn.2d 216, 225 n.1, 770 P.2d 182 (1989) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 

### S.Ct. 2548, 91 LEd.2d 265 (1986)). Once this initial showing is made, the inquiry shifts to the plaintiff to make a showing offacts sufficientto establish the existence of all essential elements of its case. Odell at 725 (citing Celotex, 477 U.S. at 322). "The 'facts' required by CR 56(e) to defeat a summaryjudgment motion

are evidentiary in nature. Ultimate facts or conclusions offact are insufficient. Likewise, conclusory statements offact willnot suffice.'" Overton v. Consol. Ins. Co.. 145 Wn.2d 417, 430-31, 38 P.3d 322 (2002) (quoting Grimwood v. Univ. of Puget Sound. 110 Wn.2d 355, 359, 753 P.2d 517 (1988) (citation omitted).No. 69746-3-1/8 Intheir motions for summaryjudgment Choice and Dekman contended that, as to the first loan for $720,000, CMC failed to present sufficient evidence to create a disputed issue ofmaterial fact as to whether CMC suffered any 

### damages caused by an act or omission ofeither Choice or Dekman.5 As to the second loan for $125,000, Choice and Dekman argued that CMC failed to produce any admissible evidence that ithad been damaged at all. The trial court agreed and dismissed CMC's claims. On appeal, CMC argues the trial court erred. We disagree. Causation consists of two elements: cause infact and legal causation. City of Seattle v. Blumes. 134 Wn.2d 243, 251-52, 947 P.2d 223 (1997). Cause infact refers to the "butfor" consequences of an act that is the immediate connection between and act and an injury, id. Legal causation rests on policy considerations determining how far the consequences of a defendant's act should extend. Itinvolves the question ofwhether liability should attach as a matter of law, even ifthe proof establishes cause in fact. Id. at 252. The legal

cause ofan injury is a cause that, in a direct sequence, unbroken by any new, 

### independent cause, produces the injurycomplained ofand without which the 

### injury would not have occurred. Stoneman v. WickConstr.. Co.. 55 Wn.2d 639, 349 P.2d 215 (1960); Fabrigue v. Choice Hotels Int'l. Inc.. 144 Wn. App. 675, 183 P.3d 1118 (2008).

5CMCdoes not dispute that causation is a material elementto each of its claims against Choice and Dekman.No. 69746-3-1/9 

### Regarding the first loan, CMC argues that but forthe failure ofChoice and 

### Dekman to disclose certain details regarding the Stukov loanapplication, itwould not have incurred the expense ofreimbursing itsprincipal, Delaney, for the cost of purchasing the Stukov propertyfrom AHMC. Viewing the evidence in the light most favorable to CMC, as we must, we assume its allegations ofmalfeasance by Choice and Dekman are true. We also assume that, butfor the conduct of 

### Choice and Dekman, CMC would not have incurred the obligation to repurchase the Stukov loan because itwould not have made the loan or sold it to AHMC. There is also evidence that at least as to one ofthe loans, AHMC did, in fact, demand that CMC fulfill this obligation. But here, the direct sequence ofevents 

### proceeding from the conduct ofChoice and Dekman to CMC's alleged injuries ends. Because there is no evidence that CMC ever complied with AHMC's demand, CMC cannot show that itwas injured by Choice and Dekman's conduct. CMC contends that the direct sequence ofevents remains unbroken because Delaney's purchase ofthe Stukov property from AHMC was in satisfaction of CMC's obligation to repurchase the Stukov loan and that CMC, in turn, was obliged to reimburse Delaney for this expenditure. The contention is without merit. First, under its contractwith AHMC, CMC was obligated to repurchase the Stukov loan, not the Stukov property. CMC has not identified any provision inthe contract that obligated itpurchase the property from AHMC. Second, because the foreclosure sale extinguished AHMC's right to


### recover a deficiency on the loan and satisfied all obligations on the loan, italsoNo. 69746-3-1/10 

### extinguished CMC's legal obligation to repurchase the loan.6 CMCcites no provision inthe contractwith AHMC or any other legal basis under which the obligation to repurchase the loan survived the foreclosure sale. Thus, Delaney's purchase ofthe Stukov property was more the act of a volunteer and not in 

### satisfaction of a legal obligation CMC owed to AHMC.7 Third, CMC's claim that Delaney's purchase ofthe Stukov property legally obligated it to repay him is unpersuasive. Even ifDelaney was personally 

### obligated to purchase the property, itdoes not followthat CMC was legally obligated to reimburse him. CMC argues that such a legal obligation exists because itpassed a corporate resolution agreeing to repay Delaney. Buteven assuming the resolution was sufficientto legally oblige CMC, the issue is whether 

### the obligation was imposed upon CMC as a direct result of the conduct of Choice and Dekman. By its own argument, CMC's obligation to reimburse Delaney arises out of itscorporate resolution. Had the obligationarisen directlyfrom the conduct ofChoice and Dekman, no resolution would have been necessary to establish it. Because CMC failed to establish a sequence ofevents by which the 

### conduct ofChoice and Dekman triggered a legal obligation for CMC to reimburse Delaney, the trial court properly dismissed this claim.

6See RCW 61.24.100; 27: majorie dick rombauer, Washington practice: creditors' remedies—debtors' relief§ 3.37 at 175 (1998). ("Foryears the rulehas been that no deficiency may be recovered after a nonjudicial foreclosure" notinvolving a commercial loan). 7CMC pointed out at oral argument that themotivation for Delaney's paymentwas to 

### maintain good relations withAHMC, its primary customer. "There's arelationship between [CMC andAHMC]. In order to continuemaking loans and continuethe business relationship, itwas absolutely required that[CMC] make [AHMC] whole in every single way." Wash. CourtofAppeals 

### oral argument, CentralBanc Mortgagev. Solutions Financial, No. 69746-3-I, (September 18, 2014) at 40 min., (on file with the court).
10No. 69746-3-1/11 CMC claims that itrepurchased the second loan from AHMC pursuant to the buy-back clause and a demand from AHMC. Itclaims damages in the amount ofthe repurchase price-$145,249.97. But the only evidence offered in support ofthese damages consists ofconclusory statements of ultimate facts, which are insufficient to raise a fact issue on summaryjudgment. Baldwin v. Silver. 165 Wn. App. 463, 269 P.3d 284 (2011), is instructive. The case involved a dispute between homeowners, the Silvers, and the carrier of their homeowner's insurance policy for amounts allegedly due on a claim for fire damage. The insurer moved for summaryjudgment, arguing thatthe homeowners had produced no evidence ofdamages because the insurer had 

### overpaid the total claims made, as evidenced by the various estimates and 

### receipts submitted to the insurer bythe homeowners during the course of repairs. Inresponse, the homeowners submitted the affidavit of Ms. Silver, in which she claimed that the insurer owed the homeowners an additional $10,000 because,

as a result of a fire, their deck had been destroyed, ithad not been repaired yet, 

### and the damage necessitated removal and replacement of the deck. The homeowners submitted no estimates, receipts, or otherevidence in support of 

### the claimed damage to the deck. Inreply, the insurance company argued that Ms. Silver's affidavitwas insufficient to avoid summary dismissal because it 

### amounted to nothing more than conclusory, unsupported statements with no proofofactual damages. Id. at469-70. The trial court refused to considerthe affidavit as proofofdamages. On review, we affirmed, reasoning:
11No. 69746-3-1/12 The trialjudge's refusal to consider Ms. Silver's affidavit as proofofdamages was also reasonable and proper. Whatthe 

### judge did here was refuse to considerthe conclusory, unsupported statements set out in the affidavits. Though the trial court may be lenientto a nonmoving party's affidavits presented in response to a motion for summaryjudgment, itmay not consider conclusory statements contained inthe nonmoving party's affidavits. Pub. Util. Dist. No. 1 of Lewis County v. WashPub. Power Supply Svs.. 104 Wn.2d 353, 361, 705 P.2d 1195, 713 P.2d 1109 (1985). A nonmoving party cannot defeat a motion for summaryjudgmentwith conclusory statements of fact. Overton v. Consol. Ins. Co.. 145 Wn.2d 417, 430-31, 38 P.3d 322 (2002). In her affidavit, Ms. Silver claimed that the damage to her deck was worth $10,000. But no receipt, quote, or any other piece of evidence supports her statement. The statement, then, is nothing more than an unfounded, conclusory statement of damages. Baldwin at 471. In this case, as in Baldwin, one ofthe ultimate facts to be proven was 

### damages, specifically that CMC incurred damages of$145,249.97 when it repurchased the second loan fromAHMC. Inresponse to the defense motion for summaryjudgment, which asserted that there was no fact issue withrespectto 

### damages, CMC offered three declarations from its principal, Delaney. Neither the first northe third declaration even mentions CMC's claimed repurchase ofthe
second loan. 

### In his second declaration (dated October 2, 2012 and filed October4, 

### 2012). Delaney mentioned the second loan specifically. He stated: Irevised and update my damage statement made in my 

### principaldeclaration. After reviewing and including the loan payoff of the Stukov second mortgage and tabulating all expenditures related to the repurchase ofthe Stukovfirstand second loan, Iprovide the following summary. . . .

12No. 69746-3-1/13 

### CP at 937. The summary provided revised the previously submitted "Schedule ofDamages," adding a line item for "Second Loan Payoff' as a $145,249.97 liability on CMC's books. This conclusory assertion that CMC incurred a loss is analogous to those in Baldwin, which we deemed insufficientto raise a fact issue on damages. 

### An exhibit attached to Delaney's second declaration, Exhibit A, purports to substantiate Delaney's conclusory statements. The exhibit includes two 

### purported CMC accounting records: a spreadsheetentitled "Register QuickReport" (CP at 941), which has one line item entitled "Total 2nd loan 

### expense," which it lists as $145,249.97; and a list ofCMC's alleged reimbursements to Delaney for payments he made on the note for the Fairmount property. At first glance, Exhibit A appears to support Delaney's assertions but on close inspection, the exhibit consists of nothing more than additional conclusory statements. It is unclearfrom the record what the source and purpose ofthese records are, but, based on Delaney's statements, itappears that they exist only for purposes ofthis litigation. "I provide the following summary ofexpenses and assets derived from 1206 Fairmount, Seattle[,] WA. Please refer to ExhibitA, to my Supplemental Declaration." CP at 937. Otherthan these unsupported and self-serving assertions, CMC provided no documentation of a transaction with AHMC, in which itpurportedly transferred over $145,000. We conclude the trial 

### court properly granted summaryjudgment as to this claim because the records submitted by CMC insupport of itclaimed damages are insufficient to create a material factual dispute on that issue.
13No. 69746-3-1/14 Failure to Add Delaney as a Plaintiff 

### CMC argues at length in its briefs that Delaney is the true party in interest in this case and assigns errorto the trialcourt's alleged failure to allow sufficient time to amend its complaint adding Delaney as a plaintiff. Because CMCnever moved the trial court to amend, we find no basis for this claimed error. The decision to grant leave to amend the pleadings is within the discretion 

### ofthe trial court. Wilson v. Horslev. 137 Wn.2d 500, 505, 974 P.2d 316 (1999). Therefore, when reviewing the court's decision to grant or deny leave to amend,

we apply a manifest abuse ofdiscretion test. id. The trial court's decision "'will not be disturbed on review except on a clear showing ofabuse ofdiscretion, that is, discretion manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.'" jd. (quoting State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971)). A party's failure to timely name a necessary party cannot be remedied if the failure resulted from inexcusable neglect. Teller v. APM Terminals Pac. Ltd., 134Wn. App. 696, 142 P.3d 179 (2006). "Generally, inexcusable neglect exists when no reason for the initialfailure to name the party appears inthe record." Id. at 706. The failure to name a party who is apparent or ascertainable upon reasonable investigation, is inexcusable. Id. The inexcusable neglect standard of CR 15(c) has been applied where a 

### change in plaintiffs is made. Beal for Martinez v. City ofSeattle. 134 Wn.2d 769, 954 P.2d 237 (1998). When the change in plaintiff is only inthe representative 

### capacity in which the suit is brought, i.e., a personal representative substituted

14No. 69746-3-1/15 for a guardian, or a bankruptcy trustee for the debtor, then the courts have relaxed the inexcusable neglect standard. Id.; Miller v. Campbell, 164 Wn.2d 529, 192 P.3d 352 (2008). In this case, Choice and Dekman filed their answer to the Second Amended Complaint and raised as affirmative defenses that "Plaintiff did not buy 

### back the loans inquestion, is notthe real party in interestand suffered no 

### damages" on October4, 2012. CP at 402 (emphasis added). That same day, Choice's and Dekman's motion for summaryjudgmentwas also filed. The 

### hearing on the motion did not occur until November 2, 2012. Thus, CMC had nearly a month tofile a motion to amend to add Delaney as a plaintiff. Moreover, 

### when argument on the summary judgmentmotion was heard on November2, the
case had been pending for sixyears and CMC had twiceamended its complaint to add additional parties. 

### Given the long pendency of this lawsuit, CMC's notice that Choice and Dekman intended to challenge its status as the real party in interest, and 

### Delaney's active participation in thelawsuit, there is nojustifiable reasonfor CMC's failure to move the court to add Delaney as a plaintiff. Moreover, adding 

### Delaney as a plaintiffwould not have been the type ofchangein representative 

### capacitywarranting relaxation oftheinexcusable neglectstandard. CMC'sfailure tofile a motion to amend to add Delaney as a plaintiffwas inexcusable neglect, not subjectto remedy on appeal.

15No. 69746-3-1/16 Eguitable Subrogation 

### CMC also argues for the first time on appeal that this court should grant it reliefunder the doctrine of equitable subrogation. "On review of an order granting or denying a motion forsummaryjudgmentthe appellate courtwill consideronly evidence and issues called to the attention of the trial court." RAP 9.12. A party may not propose new theories ofthe case that could have been raised before 

### entry of an adverse decision. Wilcox v. Lexington Eve Institute, 130 Wn. App. 

### 234, 122 P.3d 729 (2005). Because CMC failed to raise this argument below, we decline to consider it. Affirm.

WE CONCUR: 

### ^fjLJt^C^ 

# CL

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