Court Opinion

ID: 987128
Source: CourtListenerOpinion
Date Created: 2013-07-02 21:58:24.702586+00
Date Added: 2024-06-11T12:41:41.499599
License: Public Domain

FILE,
       IN CLERK8 OF,.CE
IUPREME COURT, STATE OF WASHNmlH
               FEB 2 B 2013

     IN THE SUPREME COURT OF THE STATE OF WASHINGTON

  STEVEN F. SCHROEDER,                              )
                                                    )
                                   Petitioner,      )     No. 86433-1
                                                    )     (consolidated with No. 86710-1)
          v.                                        )
                                                    )
 EXCELSIOR MANAGEMENT GROUP,                        )    En Bane
 LLC, and CRAIG G. RUSSILLO, trustee,               )
                                                    )
                                   Respondents.     )
  _____________                                     )
                                               )
  STEVEN F. SCHROEDER, a married man )
  dealing with his sole and separate property, )
                                               )
                            Petitioner,        )
                                               )
          v.                                        )
                                           )
  PHILLIP J. HABERTHUR, as trustee of a )
  trustee of a deed of trust, EXCELSIOR    )
  MANAGEMENT GROUP, LLC, an Oregon)
  limited liability company; EXCELSIOR     )
  MORTGAGE EQUITY FUND II, LLC, an )
  Oregon limited liability company, JAMES )
  HANEY, and CLS MORTGAGE, INC., a )
  Washington corporation,                  )
                                           )
                              Respondents. )
                                                                           FEB 2 8 2013
                                                            Filed - - - - - - - -
    --------------- )
           CHAMBERS, J.*-- For nonagricultural land, Washington's deed of trust

  act provides a comparatively inexpensive and fast mechanism for the lending
  *Justice Tom Chambers is serving as a justice pro tempore of the Supreme Court pursuant to
  Washington Constitution article IV, section 2(a).
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

industry to foreclose on property pledged as security for a debt through a
nonjudicial foreclosure action. In a nonjudicial foreclosure, a properly appointed
trustee is empowered by the act to hold a foreclosure sale without judicial
supervision. However, the act does not allow nonjudicial foreclosure of
agricultural land. Agricultural land must be foreclosed judicially. RCW

61.24.020, .030(2).
      In 2009, Phillip J. Haberthur (who was both the trustee and the attorney for
the lender) nonjudicially foreclosed on Steven Schroeder's property. Schroeder
attempted to restrain the sale on the grounds that his land was agricultural and not
subject to nonjudicial foreclosure. He has also filed claims for damages. The
primary question before the court is whether the parties to a deed of trust may
waive the statutory requirement that agricultural land must be foreclosed judicially.
We hold agricultural land must be foreclosed judicially based on the plain
language ofRCW 61.24.030(2). Parties may not waive the statute.
      We must also determine whether the trial court abused its discretion by
permitting a trustee to proceed with a nonjudicial sale under the facts of this case
without first determining whether the land was agricultural in nature. Although the
procedure here was admittedly convoluted, we hold the trial court abused its
discretion in failing to restrain the sale without first determining whether the land

was agricultural and also erred in dismissing Schroeder's other claims on summary
judgment. We reverse the courts below and remand to the trial court for further
proceedings consistent with this opinion.

                                            2
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

                      FACTS AND PROCEDURAL HISTORY

      In 1959, the year Schroeder was born, his parents bought a 200 acre farm

near the city of Colville, Stevens County, Washington. Schroeder testified by
deposition that he has been a farmer on that land all his life. The record suggests

he raised cattle and timber. An appraisal obtained on May 30, 2007, and allegedly

relied upon by the lender, describes the property as 75 percent "Ag and

Timberland" and valued at $675,000. 1 Schroeder also contends he provided copies

of his tax returns in which he declared his occupation to be "Farm/Logging" and

included as "Schedule F" "Profit or Loss from Farming" statements. Excelsior

Clerk's Papers (ECP) at 13-15.

      Around June 12, 2007, Schroeder borrowed money from Excelsior
Management Group LLC, or one of its corporate affiliates, secured by a deed of

trust on the 200 acres. It appears he fell behind on the payments and the next year,
a successor trustee began nonjudicial foreclosure proceedings. The notice of

trustee's sale said the principle balance was $317,250 (and after interest and fees

were added, the amount estimated for reinstatement was $385,517.73).

       A long-time attorney for Schroeder rose to his defense, later saying he
 worked without being paid because he believed that keeping the farm "was very

important to Mr. Schroeder." Excelsior Clerk's Papers (ECP) at 157. By April

1
  The appraisal describes the property as "gently sloping meadows mixed with timberland. There
is an average amount of merchantable timber on the property along with 5 springs and 3 ponds.
There are 4 barns, 3 sheds, and an older vacant farm house not valued in this appraisal."
Excelsior Clerk's Papers (ECP) at 264.

                                              3
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

2009, Schroeder's lawyer and his counterpart negotiated a settlement, struck the
foreclosure sale, and dismissed the case. While the record is not entirely clear, it
suggests Excelsior Management Group LLC, through a corporate partner, "agreed
to loan $425,700 to Steven Schroeder" in return for a new deed of trust on the land

and an agreement that the property was not agricultural for purposes of nonjudicial
foreclosure. ECP at 168. The record is also unclear as to whether Schroeder
actually received any money beyond that deemed necessary to refinance the 2007
loan. The new deed of trust names Excelsior Mortgage Equity Fund II LLC as
both the lender and the beneficiary, suggesting a close relationship between the
Excelsior management group and the Excelsior equity fund. This settlement was
partially memorialized in the stipulated trial court's order dismissing the case,
which says:

             For valuable consideration, the receipt of which is hereby
      acknowledged, Schroeder, through his attorney, knowingly waives his
      right, pursuant to RCW 61.24.030(2) to judicial foreclosure on the
      subject property on the grounds it is used for agricultural purposes.

             1.      Schroeder has knowingly waived any and all right he
       may have to judicial foreclosure of the subject property on the
       grounds it is used for agricultural purposes,

             2.     Schroeder shall not be allowed to again allege that the
       subject property is used for agricultural purposes,

             3.    Any future deed of trust executed by Schroeder to the
       defendant, an associated company or assigns, need not be judicially

                                           4
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

      foreclosed but may be foreclosed nonjudicially in accordance with
      RCW Chapter 61.24.
ECP at 36.
       Schroeder testified he understood he had a year's forbearance before any
payments would be due. Instead, the note he signed had monthly payments from
the beginning and was due in full in a year. Schroeder also testified that he did not
understand that he agreed that his farm was not agricultural, both for purposes of

settlement and in the deed of trust?
       In November 2009, Haberthur, as the successor trustee, began nonjudicial
foreclosure proceedings. Haberthur described himself in a sworn declaration as
"one of the attorneys" for both the Excelsior management group and the Excelsior
equity fund. ECP at 123. The nonjudicial foreclosure sale was initially set for
February 19, 2010. The record suggests that Schroeder had difficulty finding
counsel to represent him. He did not retain his new attorney, Matthew Pfefer, until
early 2010. On February 8, mere days after being hired, Pfefer served the trustee
with a summons and complaint seeking to block the sale on several grounds,
including the assertion that the land was agricultural. Pfefer set the hearing to
enjoin the sale for February 16, 2010, which gave the trustee the five days' notice
required by RCW 61.24.130(2). Haberthur responded by e-mailing Pfefer a copy
of the 2009 stipulation and order of dismissal, characterizing it as forbidding

2
  Schroeder expressed shock at his deposition, saying, "I only owed 140,000 in 2007, and here it
is 2010 and I got a bill of 435,000. Something's wrong." ECP at 148. Stating that he did not
read or write well and relied upon his attorney's explanation, Schroeder testified he had not read
the documents associated with the settlement and the new loan.
                                                 5
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

Schroeder from raising the agricultural character of his property. Based on that

order, Haberthur asked Pfefer to dismiss his complaint with prejudice and
informed him Haberthur would be seeking his attorney fees for having to appear.
Pfefer asked Haberthur to delay the sale and give him more time to investigate.
According to Pfefer' s declaration, Haberthur declined to postpone the foreclosure

sale, "insisting that he would not subject his client to a fishing expedition by the
Plaintiff." Haberthur Clerk's Papers (HCP) at 87. 3 Pfefer voluntarily dismissed

the complaint and struck the February 16 hearing, blaming what he later described

as "the Trustee's intransigence." HCP at 59, 87.
       Late on February 15, with the February 19 sale date looming ever closer,

Pfefer filed a new complaint for damages and injunctive relief under the

3
  The issue has not been briefed. It is not before us, and we do not mean to imply any finding of
improper action by the trustee. However, we are uncomfortable reciting these facts without
making an observation concerning the multiple roles played by Haberthur lest we seem to be
tacitly approving of an attorney for a party acting as the trustee. The deed of trust act does not
specifically permit or prohibit an attorney for a party acting as a trustee but imposes a duty of
good faith on the trustee that may, at least in contested foreclosure actions, be difficult for a
party's attorney to execute. RCW 61.24.010(4). We note the act specifically states that the
trustee "shall have no fiduciary duty or fiduciary obligation to the grantor or other persons
having an interest in the property subject to the deed oftrust." RCW 61.24.010(3). However,
we also note this court has stated that to prevent property from being wrongfully appropriated
though nonjudicial means and to avoid constitutional and equitable concerns, at a minimum, a
foreclosure trustee must be independent and "owes a duty to act in good faith to exercise a
fiduciary duty to act impartially to fairly respect the interests of both the lender and debtor."
Klem v. Wash. Mutual Bank, No. 87105-1, slip op. at 20 (Wash. Feb. 28, 2013). "The
relationship between lawyer and client is a fiduciary one in which the lawyer occupies the
highest position of trust and confidence." RPC 1.8 cmt 17. "[A]ttorneys owe an undivided duty
ofloyalty to the client." Mazon v. Krafchick, 158 Wash. 2d 440, 448-49, 144 P.3d 1168 (2006).
At the very least, on review, it makes it difficult to determine which ofHaberthur's acts were
made in his capacity as trustee and which as counsel for the beneficiary. Thus, we often simply
 say Haberthur instead of trustee or counsel.
                                              ' 6
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

 Washington Mortgage Broker Practices Act (ch. 19.146 RCW), the Consumer

 Protection Act (CPA) (ch. 19.86 RCW), the Real Estate Settlement Practices Act

 (12 U.S.C. § 2601), and claimed unconscionability and civil conspiracy. ECP at

 248-51. Among other things, Pfefer argued that Excelsior and its associated

 companies had "predatory lending practices"; that they had offered Schroeder a

 loan on favorable terms and then switched it out for a far less favorable one; that

 they had offered Schroeder a loan that had no payments for 12 months and

 changed it to one that became due in full in 12 months; that they had stripped

 Schroeder's equity by driving up their fees and expenses; that they had

 "surprise[ d]" Schroeder by inserting a security interest in the timber on

· Schroeder's land into the deed of trust, preventing him from being able to harvest it

 and make payments on the note; and that they had failed to inquire into

 Schroeder's ability to pay before making the loan. ECP at 239-44. Pfefer e-mailed

 Haberthur a motion for an ex parte temporary restraining order. Pfefer also moved

 to set aside Schroeder's 2009 stipulation and order and order of dismissal, stating

 the property was not agricultural and that the deed of trust act did not allow the

 parties to agree to waive RCW 61.24.030, that his attorney was without authority

 to make that stipulation, and that enforcing the stipulation would violate his free

 speech rights.

        The judge initially granted the temporary restraining order. A few days

 later, Haberthur moved to dissolve the temporary restraining order on the ground

 that Schroeder had not given the trustee the requisite five days' notice of the

                                            7
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

hearing and because the late notice was unfair to the trustee. The trial judge
granted the motion. The nonjudicial foreclosure sale proceeded and Haberthur
executed a trustee's deed conveying the Schroeder property to his client, Excelsior
Mortgage Equity Fund II LLC.
      Around this time, the defendants moved for summary judgment dismissing
the case. The motion is not in the record, but the responsive documents suggest the

defendants argued that the 2009 dismissal order prevented Schroeder from
asserting the agricultural character of his farm, that the failure to give five days'
notice of the hearing was fatal, and that the completed foreclosure sale mooted
Schroeder's claims. Signing an order drafted by counsel/trustee Haberthur, the
trial judge granted summary judgment and dismissed all of Schroeder's claims.
The Court of Appeals affirmed. We granted review and reverse.
                                      ANALYSIS
      Among other things, Schroeder assigned error to the trial judge's refusal to
partially vacate the order dismissing the first foreclosure case, his decision to
dissolve the temporary restraining order, and his grant of summary judgment to the
defendants. We review a trial court's ruling on whether to vacate a final judgment
for abuse of discretion. Haller v. Wallis, 89 Wash. 2d 539, 543, 573 P.2d 1302
(1978) (citing Martin v. Pickering, 85 Wash. 2d 241, 533 P.2d 380 (1975)). We have
not previously had an occasion to decide the standard of review of an order
dissolving a temporary restraining order, but we note that most courts review them
for abuse of discretion. See, e.g., In reMarriage of Skelton, 352 Ill. App. 3d 348,

                                            8
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

350, 815 N.E.2d 1176, 287 Ill. Dec. 373 (2004) (citing C.D. Peters Constr. Co. v.

Tri-City Reg'l Port Dist., 281 Ill. App. 3d 41, 46-47, 666 N.E.2d 44, 216 Ill. Dec.
876 (1996)); Upland Police Officers Ass 'n v. City of Upland, 111 Cal. App. 4th
1294, 1300, 4 Cal. Rptr. 3d 629 (2003) (citing People ex rel. Gallo v. Acuna, 14
Cal. 4th 1090, 1109, 929 P.2d 596, 60 Cal. Rptr. 2d 277 (1997)). For the purposes

of this case, we will follow their lead. 4 We review questions of law, and summary

judgment rulings, de novo, taking all the inferences in favor of the nonmoving

party. Dreilingv. Jain, 151 Wn.2d 900,908,93 P.3d 861 (2004) (citingRivettv.

City ofTacoma, 123 Wash. 2d 573, 578, 870 P.2d 299 (1994)); Hauber v. Yakima

County, 147 Wash. 2d 655, 659, 56 P.3d 559 (2002) (citing Reid v. Pierce County,

136 Wash. 2d 195, 201, 961 P.2d 333 (1998)). Summary judgment is only

appropriate if there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law. Herring v. Texaco, Inc., 161 Wash. 2d 189,
194, 165 P.3d 4 (2007) (citing Reynolds v. Hicks, 134 Wn.2d 491,495,951 P.2d

761 (1998)).
       "Washington's deed of trust act should be construed to further three basic

objectives." Cox v. 1-felenius, 103 Wash. 2d 383, 387, 693 P.2d 683 (1985) (citing

Joseph L. Hoffmann, Comment, Court Actions Contesting the Nonjudicial
Foreclosure of Deeds of Trust in Washington, 59 WASH. L. REV. 323, 330 (1984)).

"First, the nonjudicial foreclosure process should remain efficient and inexpensive.

Second, the process should provide an adequate opportunity for interested parties

4
 We do not mean to discourage parties from raising and properly briefing the standard of review
for dissolving a temporary restraining order in the future.
                                               9
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

to prevent wrongful foreclosure. Third, the process should promote the stability of
land titles." Id. (citing Peoples Nat'! Bankv. Ostrander, 6 Wn. App. 28,491 P.2d
1058 (1971)). We recently reaffirmed that the deed of trust act "must be construed
in favor of borrowers because of the relative ease with which lenders can forfeit
borrowers' interests and the lack of judicial oversight in conducting nonjudicial

foreclosure sales." Udall v. T.D. Escrow Servs., Inc., 159 Wash. 2d 903, 915-16, 154
P.3d 882 (2007) (citing Queen City Sav. & Loan Ass 'n v. Mannhalt, 111 Wash. 2d
503, 514, 760 P.2d 350 (1988) (Dore, J., dissenting)).
                AGRICULTURAL LAND AND THE DEED OF TRUST ACT

      A.     Plain Language

      Washington State's deed of trust act permits trustees to foreclose on some,
but not all, deeds of trust without judicial supervision. Among other things, the act
provides additional protection for land that is primarily used for agricultural
purposes:

      It shall be requisite to a trustee's sale:

             (2) That the deed of trust contains a statement that the real
      property conveyed is not used principally for agricultural purposes;
      provided, if the statement is false on the date the deed of trust was
      granted or amended to include that statement, and false on the date of
      the trustee's sale, then the deed of trust must be foreclosed judicially.
RCW 61.24.030.

                                            10
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

      The statutory language is quite plain on its face. "It shall be requisite to a
trustee's sale" that if the land is used principally for agricultural purposes on both
the day the deed is granted or amended and the day of the trustee's sale, "the deed
of trust must be foreclosed judicially." Id. The deed of trust at issue here, at page
9 of a 24 page document, stated the land was not used principally for agricultural
purposes. But the record strongly suggests, and for purposes of review we will

assume, the statement was false on the day the deed was granted and false on the
day of the trustee sale. 5 Accordingly, one of the requisites for a trustee's sale was
not met. "As we have already mentioned and held, under this statute, strict
compliance is required." Albice v. Premier Mortg. Servs. of Wash., Inc., 174
Wash. 2d 560, 568, 276 P.3d 1277 (2012) (citing Udall, 159 Wn.2d at 915-16).
       B.     Waiver
       Haberthur and Excelsior do not dispute that the statute is plain on its face or
that it makes it a requisite for the trustee's sale that the land not be used principally
for agriculture. Instead, they argue that Schroeder waived the right to raise this
argument by signing a deed that stated that " [t ]he Property has not been used, and
will not be used, for agricultural purposes," ECP at 182, and by settling the first
lawsuit in part by "knowingly waiv[ing] any and all right he may have to judicial
foreclosure of the subject property on the grounds it is used for agricultural
purposes," ECP at 36. Most rights can be waived by contract or conduct. Bowman
v. Webster, 44 Wash. 2d 667, 669, 269 P.2d 960 (1954). "The doctrine of waiver

5
 We note that Excelsior and Haberthur have not contested the assertion that the land was
agriculture or averred that they were unaware of the fact at the critical times.
                                              11
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

ordinarily applies to all rights or privileges to which a person is legally entitled. A

waiver is the intentional and voluntary relinquishment of a known right, or such
conduct as warrants an inference of the relinquishment of such right." 6 !d.
       The difficulty with the defendants' waiver argument is that RCW 61.24.030
is not a rights-or-privileges-creating statute. Instead, it sets up a list of "requisite[ s]

to a trustee's sale." Among other things, it is a requisite to a trustee's sale that the
deed contain the power of sale, .030(1 ); that the property not be used primarily for
agricultural purposes, .030(2); that a default has occurred, .030(3); that there is no
other pending action by the beneficiary to seek satisfaction of the obligation,
.030(4); that the deed has been recorded in the relevant counties, .030(5); that the
trustee maintain an address for service of process, .030(6); that the trustee have
proof that the beneficiary is the owner of the obligation secured by the deed of
trust, .030(7); and that the beneficiary has given written notice of the default to the
debtor containing specific statutory language advising the debtors of their rights,
.030(8). These are not, properly speaking, rights held by the debtor; instead, they
are limits on the truste:e' s power to foreclose without judicial supervision.
       This is not the first time we have confronted the argument that statutory
requirements of the deeds of trust act may be waived contractually. In Bain v.
Metropolitan Mortgage Group, 175 Wash. 2d 83, 285 P.3d 34 (2012), we held the
statutory requirement that the beneficiary hold the note or other instrument of

6
 Schroeder has framed his argument as whether the statute is "immune to waiver" and whether
the trustee's sale of the property is ultra vires. Pet. for Review (Excelsior) at 8, 13.
Substantively, though, he is essentially claiming that under the plain language of the statute, the
land was not subject to nonjudicial foreclosure.
                                                 12
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

indebtedness could not be waived. I d. at 108. In Bain, we followed the reasoning

of other cases in which we have held other statutory requirements could not be

contractually waived. Id. at 107-08 (citing Godfrey v. Hartford Cas. Ins. Co., 142
Wash. 2d 885, 16 P.3d 617 (2001); Nat'! Union Ins. Co. ofPittsburgh v. Puget Sound

Power & Light, 94 Wash. App. 163, 177, 972 P.2d 481 (1999); State ex rel. Standard

Optical Co. v. Superior Court, 17 Wash. 2d 323, 329, 135 P.2d 839 (1943)). As we

said in Bain, "The legislature has set forth in great detail how nonjudicial

foreclosures may proceed. We find no indication the legislature intended to allow

the parties to vary these procedures by contract. We will not allow waiver of

statutory protections lightly." I d., at 108. 7

       C.     Other Equitable Doctrines

       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 Wash. 2d 643, 645-46, 673 P.2d 610 (1983) (citing Seattle-First

Nat'l Bank v. Kawachi, 91 Wash. 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 Wash. 2d 306, 311-12, 27 P.3d 600 (2001) (internal

quotation marks omitted) (quoting Southcenter Joint Venture v. Nat'! Democratic
Policy Comm., 113 Wash. 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 Wash. 2d 582, 599, 957 P.2d 1241 (1998)

(citing Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wash. 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 Wash. 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 the"sale, 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
                                                          I

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 Wash. 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
Wash. 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.

                                  CONCLUSION
      Under Washington's deed of trust act, agricultural land may only be

foreclosed judicially. This requirement of the act may not be waived by the parties

and agricultural land may not be foreclosed nonjudicially. If the property in

question was primarily agricultural at relevant times then the property must be

foreclosed judicially and statutory provisions relating to enjoining a nonjudicial

foreclosure sale are inapplicable. We reverse the courts below and remand for

further proceedings consistent with this opinion. Among other things, Schroeder's

claims for damages must be reinstated and the trial court must hold a hearing to

determine whether the property was primarily agricultural at relevant times; if it
was, the nonjudicial foreclosure sale shall be vacated.

                                          22
Schroeder (Steven F.) v. Excelsior Mgmt. Group, LLC, et al., No. 86433-1

WE CONCUR:

                                        23