Opinion ID: 987128
Heading Depth: 2
Heading Rank: 3

Heading: Other Equitable Doctrines

Text: In the alternative, Excelsior and Haberthur argue that Schroeder is barred from raising RCW 61.24.030(2) on the ground of res judicata, collateral estoppel, and equitable estoppel. In Washington res judicata occurs when a prior judgment has a concurrence of identity in four respects with a subsequent action. There must be identity of (1) subject matter; (2) cause of action; (3) persons and parties; and (4) the quality of the persons for or against whom the claim is made. Mellor v. Chamberlin, 100 Wn.2d 643, 645-46, 673 P.2d 610 (1983) (citing Seattle-First Nat'l Bank v. Kawachi, 91 Wn.2d 223, 588 P.2d 725 (1978)). These elements have not been met. The subject matter of the 2009 litigation was the 2007 deed of 7 There may be technical procedural details that the parties may, by agreement, modify or waive but strict compliance with mandated requisites is required. 13 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 trust. The subject matter ofthe 2010 litigation was the foreclosure of the 2009 deed of trust. Further, under our plain reading of the statute, it is questionable whether the trial court had authority to enter an order declaring whether the land would be used for agricultural purposes at the time of a future sale. Collateral estoppel requires: (1) identical issues; (2) a final judgment on the merits; (3) the party against whom the plea is asserted must have been a party to or in privity with a party to the prior adjudication; and (4) application of the doctrine must not work an injustice on the party against whom the doctrine is to be applied. Hadley v. Maxwell, 144 Wn.2d 306, 311-12, 27 P.3d 600 (2001) (internal quotation marks omitted) (quoting Southcenter Joint Venture v. Nat'! Democratic Policy Comm., 113 Wn.2d 413, 418, 780 P.2d 1282 (1989)). Unfortunately, the defendants do not analyze these elements, and we decline to reach the issue. We note in passing that the issues in the two cases do not appear to be identical. Equitable estoppel requires proof of( 1) an admission, statement or act inconsistent with a claim later asserted; (2) reasonable reliance on that admission, statement, or act by the other party; and (3) injury to the relying party if the court permits the first party to contradict or repudiate the admission, statement or act. Dep 't ofEcology v. Theodoratus, 135 Wn.2d 582, 599, 957 P.2d 1241 (1998) (citing Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wn.2d 816, 831,881 P.2d 986 (1994)). The second element is not met on the record before us. We have already held the agricultural land condition cannot be waived and the record strongly suggests that the Excelsior group was aware of the agricultural 14 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 character of the property at the time of the first settlement. Therefore, any reliance would not have been reasonable. Schroeder's first attorney attempted to stop the 2009 nonjudicial foreclosure by establishing that the land was agricultural. He alleged in his complaint against Excelsior and the original trustee, The real property above described and secured by the subject deed of trust is agricultural property. It was agricultural property when the deed of trust was executed and will still be agricultural property [on the date ofthe trustee's sale]. ECP at 4. Attached to the complaint were supporting photographs and tax documents. We need not reach the third element as equitable estoppel cannot be established on this record. Excelsior makes a public policy argument that by signing a deed with a statement warranting the property was not agricultural, Schroeder has perpetuated a fraud on both Excelsior and the Court. Suppl. Br. ofResp'ts (Excelsior) at 10. 8 This is a remarkable statement since Excelsior prepared the documents to be signed and if the land was in fact agricultural, Excelsior had adequate notice and 8 Fraud has not been formally alleged in this case, though Haburthur uses the term regularly in his briefing to this court. Suppl. Br. ofResp'ts (Excelsior) at 1, 2, 9, 10, 12, 13, 15 (fraudulently). Certainly, in a case of, as Haberthur suggested, unscrupulous borrowers ... temporarily hiding cattle, id. at 11, law and equity might require a remedy. But it is highly unlikely that remedy would be nonjudicial foreclosure, as it is difficult to imagine a case where unscrupulously hidden cattle would not be a matter for a trier of fact. Further, Excelsior's statement that there are no allegations that Excelsior was privy to any such trickery or was attempting to undermine the statute, id. at 11, lacks credibility because that appears to be exactly what Schroeder is alleging. 15 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 therefore was complicit in any fraud. 9 We do not find the public policy argument helpful. F AlLURE To RESTRAIN THE SALE The respondents contend that because Schroeder failed to bring a timely action to restrain the sale, his claims must be dismissed. Suppl. Br. of Resp'ts (Excelsior) at 3, 14. The deed of trust act provides: (1) Nothing contained in this chapter shall prejudice the right of the borrower, grantor, any guarantor, or any person who has an interest in, lien, or claim of lien against the property or some part thereof, to restrain, on any proper legal or equitable ground, a trustee's sale. The court shall require as a condition of granting the restraining order or injunction that the applicant pay to the clerk of the court the sums that would be due on the obligation secured by the deed of trust if the deed of trust was not being foreclosed: (2) No court may grant a restraining order or injunction to restrain a trustee's sale unless the person seeking the restraint gives five days notice to the trustee of the time when, place where, and the judge before whom the application for the restraining order or injunction is to be made. RCW 61.24.130. 10 The failure to take advantage ofthe presale remedies under the deed of trust act may result in waiver of the right to object to the sale. Plein v. 9 Schroeder could have warranted his property had lemonade springs, chocolate lakes, and a house made of gingerbread; if the lender had reason to believe these warrants untrue, it could not rely on such a warrant and it would not be fraud. 10 Schroeder has not paid the amounts owing into the court registry. The parties allude to this in their briefs, but it is not clear whether, given that the temporary restraining order was dissolved and the sale went forward, it is germane. 16 Schroeder (Steven F.) v. Excelsior Mgmt. Group} LLC et al., No. 86433-1 Lackey, 149 Wn.2d 214, 227, 67 P.3d 1061 (2003). The respondents contend that under Plein} Schroeder's appeal was rendered moot when [he] failed to challenge the sale by availing himself ofpresale remedies. Suppl. Br. ofResp'ts (Excelsior) at 14. In Plein} a corporation purchased a piece of property secured by a deed of trust. The property was used to secure multiple loans, including loans from corporate officers. Later, the corporation fell into strife. One corporate officer and junior lienholder, Cameron, paid the obligation owed to the senior lienholder in return for being assigned the beneficial interest in that senior deed of trust. Plein} 149 Wn.2d at 219. Cameron then brought a nonjudicial foreclosure action. Plein sought a permanent injunction barring the trustee's sale on the theory that since the debt on the senior lien had been extinguished, Cameron did not hold an instrument that allowed foreclosure. Id. at 220. 11 Unfortunately for Plein, [s]imply bringing an action to obtain a permanent injunction will not forestall a trustee's sale that occurs before the end of the action is reached. Id. at 227 (citing Hoffmann, supra} at 334). For whatever reason, Plein did not seek to temporarily restrain the trustee's sale and the sale proceeded as scheduled. Id. at 220. We found that failure to restrain the sale waived his challenge. Id. at 229 (Plein received notice of his right to enjoin the sale, had knowledge of his asserted defense before the sale ... , and failed to obtain a preliminary injunction or other order restraining the sale.). 11 This summary is a gross oversimplification of the complex facts in Plein. 17 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 Based on Plein, the defendants argue that Schroeder failed to give the statutory five-day notice required by RCW 61.24.130(2), failed to successfully enjoin thesale, and thereby waived his right to contest the sale. We emphasize the obvious. If Schroeder's land was agricultural, then not only did the trustee not have authority to proceed with an nonjudicial foreclosure, but the very statute upon which the trustee relies to support its five-day notice requirement, RCW 61.24.130(2), is inapplicable. We conclude that the respondents' reliance on Plein is misplaced. It is well settled that the trustee in foreclosure must strictly comply with the statutory requirements. Albice, 174 Wn.2d at 568 (citing Udall, 159 Wn.2d at 915-16). A trustee in a nonjudicial foreclosure may not exceed the authority vested by that statute. ld. As we have recently held, the borrower may not grant a trustee powers the trustee does not have by contracting around provisions in the deed of trust statute. Bain, 175 Wn.2d at 100. Further, in Plein the primary issue was whether Cameron, who had paid off a debt secured by a deed of trust on a piece of property, could proceed with a foreclosure under that deed of trust since the underlying debt had been paid. Plein, 149 Wn.2d at 225. We found that Cameron had become an accommodation party entitled to invoke the rights secured by the deed of trust. I d. While we disposed of the case on its merits, we also considered the alternate grounds pleaded by the trustee to uphold the sale: that the challenger had waived his challenge by not seeking a temporary injunction blocking the sale. I d. Under the facts of that case, 18 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 we concluded he had. !d. at 229. Nothing in Plein suggests that waiver might cause the deed of trust act to apply to transactions to which the deed of trust act does not apply. If Schroeder's 200 acres were used primarily for agricultural purposes, Plein is inapplicable. Again, the simple fact is that if Schroeder's property was primarily agricultural, then the trustee lacked the statutory power to foreclose nonjudicially. RCW 61.24.020, .030(2). Schroeder could not vest the trustee with authority the statute did not. Nor could the trial court. RCW 61.24.020, .030. 12 The procedural posture of this case is somewhat convoluted but a review of the record reveals that Schroeder, through his counsel Pfefer, alerted both the
trustee and the court that the land was agricultural prior to the sale. The record suggests that the trial judge believed, mistakenly, that the character of the property was a fact that could be waived and that the time limits in RCW 61.24.130(2) applied. We are loath to reverse a trial court's exercise of discretion, but will if the discretion was exercised on untenable grounds or untenable reasons, such as a misunderstanding of the meaning of a statute as happened here. State v. Downing, 151 Wn.2d 265,272-273, 87 P.3d 1169 (2004) (citing State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971)). Schroeder adequately raised the issue of whether his 200 acres was primarily agricultural in nature and at the very 12 ln April 2009, the trial judge entered a stipulated motion and order of dismissal of prejudice of the previous litigation. ECP at 35. That order contained a stipulation from Schroeder that he would not allege that the property was agricultural and that he waived any rights that might accrue from the agricultural nature of the property. Id. In February 2010, Schroeder moved to vacate his stipulation. ECP at 38-39; 239. While the record is not clear, it appears the trial court declined to vacate the stipulation. 19 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 least, the trial court was required to make specific factual findings on whether in fact the land was agricultural as meant by the deed of trust act. 13 We vacate the trial court's order dissolving the temporary injunction. CLAIMS FOR DAMAGES Schroeder brought a complaint for damages and injunctive relief under the Washington Mortgage Broker Practices Act, the CPA, the Real Estate Settlement Practices Act, and claimed unconscionability and civil conspiracy. 14 Again, the respondents appear to claim Schroeder's failure to successfully avail himself of presale remedies extinguish or render moot all his claims for damages. We find no support in the law for the idea that the failure to enjoin a sale somehow extinguishes other claims, causes of actions, or remedies available to parties to a real estate transaction or deed of trust. As we noted recently, waiver only applies to actions to vacate the sale and not to damages actions. Klem, slip op. at 27. Schroeder's claims for damages, including his claims of volitions of Washington's CPA, were dismissed on a motion for summary judgment. We review summary judgments de novo. To prevail on a CPA action, the plaintiff must show an (1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public 13 We note that the parties disagree whether a hearing under RCW 61.24.130 is the only way to seek an order restraining a nonjudicial foreclosure sale. Given our disposition, we need not resolve their specific contentions, but we note that an action to challenge a foreclosure sale may sound in equity and superior courts have original, concurrent jurisdiction over all cases in equity. See WASH. CONST. art. IV,§ 6; 15 KARL B. TEGLAND, WASHINGTON PRACTICE: CIVIL PROCEDURE§ 44:6, at 239 (2009). 14 While the damages claims were only raised indirectly to this court, we find they must be addressed for a full and fair disposition of the case. While the complaint provided no citation, we assume without deciding that the claims under the Real Estate Settlement Practices Act were brought under 12 U.S.C. §§ 2601-2617. 20 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 interest impact; (4) injury to plaintiff in his or her business or property; (5) causation. Hangman Ridge Training Stables, Inc. v. Safe co Title Ins. Co., 105 Wn.2d 778, 780, 719 P.2d 531 (1986). In Bain, answering a certified question, we held the act of a party that does not hold the note or other instrument of indebtedness as a beneficiary in a nonjudicial foreclosure 'when it knows or should know that under Washington law it must hold the note to be the beneficiary' has the capacity to be a deceptive act under the CPA. Bain, 175 Wn.2d at 116 (quoting Br. of Amicus Att'y General). Similarly, the act of a loan servicer or other beneficiary to proceed with a nonjudicial foreclosure on land it knows or should know to be agricultural land in clear violation of the statute has the capacity to be unfair or deceptive. However, it remains for Schroeder to prove that this was actually unfair or deceptive under the facts of this case. The other elements of a CPA action must also be proved by Schroeder. It was error to dismiss Schroeder's CPA claim on summary judgment. Schroeder moved to continue the summary judgment motion to allow him time for further discovery. He was entitled to the continuance to allow adequate time to develop his other claims. It was error for the trial court to deny Schroeder's motion for a continuance and to dismiss Schroeder's other claims for damages on summary judgment at that stage of the proceedings. 15 Denial of Schroeder's motion to vacate portions of the prior order of dismissal purporting to 15 Excelsior and Haberthur have moved for prevailing party attorney fees under the promissory note and the deed of trust. The motion is denied, with leave to renew to the trial court upon resolution of the outstanding issues. 21 Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1 prevent the raising of the issue of whether the land was used principally for agricultural purposes in future nonjudicial foreclosures was also premature.