Court Opinion

ID: 2791606
Source: CourtListenerOpinion
Date Created: 2015-04-06 21:08:05.264417+00
Date Added: 2024-06-11T12:25:18.382084
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

SANDRA SHELLEY JACKSON, a
single woman,                                     No. 72016-3-1

                                                                                r*3      f ,o c~-
                     Appellant,                   DIVISION ONE

                                                  PUBLISHED OPINION              -?3      O"

                                                                                  I

QUALITY LOAN SERVICE
CORPORATION OF WASHINGTON, a
Washington Corporation, MORTGAGE
ELECTRONIC REGISTRATION                                                           to

SYSTEM INC., MCCARTHY &
HOLTHUS, LLP, a Washington
Limited Liability Partnership, U.S. BANK,
NATIONAL ASSOCIATION as trustee
forWAMU MORTGAGE PASS
THROUGH CERTIFICATE FOR
WMALT 2006-AR4 TRUST
INVESTORS IN WMALT 2006-AR4
TRUST c/o J.P. MORGAN BANK, NA,                   FILED: April 6, 2015

                     Respondents.

       Trickey, J. — Notification to the state attorney general is a mandatory

prerequisite to challenge a statute's constitutionality. Here, the plaintiff sought to

have Washington's deeds of trust act (DTA), chapter 61.24 RCW, declared

unconstitutional but failed to notify the attorney general as required by statute.

Even ifthe plaintiff in this case were able to pass the procedural bar to her action,

we conclude that the DTA is constitutional.

       Any remaining claims that the plaintiff might have under the DTA, have been

addressed and disposed of by recent Supreme Court decisions. Accordingly, we

affirm the trial court's CR 12(b)(6) dismissal.
No. 72016-3-1/2

                                         FACTS

      In March 2006, Sandra Shelley Jackson refinanced her home with a

$715,000 loan from Cameron Financial Group, Inc., dba 1st Choice Mortgage. The

loan was evidenced by a promissory note and secured by a deed of trust

encumbering Jackson's home located in Seattle. In the deed of trust, 1st Choice

Mortgage was identified as "lender," Fidelity National Title as "trustee," and
Mortgage Electronic Registration Systems, Inc. (MERS) as a "nominee for Lender
and Lender's successors and assigns," where MERS is the "beneficiary under this

Security Instrument."1 The deed of trust is recorded under King County Recorder's
No. 20060331001860.         The note and deed of trust provide for a nonjudicial

foreclosure ofthe property in the event of default, pursuant to the DTA.
      The loan was subsequently sold to a securitized trust known as the "WAMU
Mortgage Pass Through Certificate For WMALT 2006-AR4."2 In her complaint,
Jackson recognizes that under the terms of the note WMALT 2006-AR4 trust is a
"note holder." U.S. Bank, National Association is the trustee for WMALT 2006-

AR4 trust and possesses the note.

       In January 2011, Jackson defaulted on her loan payments. On September
20, 2012, MERS, acting as the nominee for U.S. Bank as trustee for WMALT 2006-
AR4 trust, terminated its agency interest when it assigned its nominee interest in
the deed of trust back to its principal, U.S. Bank as trustee.

       In November 2012, Jackson received a notice advising her that her loan

was in default. The notice disclosed that her loan had been sold to U.S. Bank as

1 Clerk's Papers (CP) at 88; Exhibit (Ex.) 3.
2 CP at 85-86.
No. 72016-3-1/3

trustee for the WMALT 2006-AR4 trust, J.P. Morgan Chase Bank, N.A. was her

loan servicer, and her arrears were approximately $127,000. The notice also

informed her that a foreclosure sale might be scheduled if she did not cure her

default, but "ha[d] recourse to the courts pursuant to RCW 61.24.130 to contest

the alleged default on any proper ground."3
       On November 13, 2012, U.S. Bank, the note holder, recorded an

appointment of successor trustee appointing Quality Loan Service Corporation of
Washington as the new trustee under the deed of trust. On December 21, 2012,

when Jackson failed to cure her default, Quality Loan Service recorded a notice of

trustee's sale, scheduling the sale for April 26, 2013. The notice of trustee's sale

referenced the notice of default, identifying the original parties to the deed of trust,

in order to permit the recorder's office to link to the deed of trust. The notice
identified U.S. Bank as successor in interest to Jackson's loan.

       Shortly before the scheduled foreclosure, Jackson filed a complaint
asserting claims against U.S. Bank, Chase Bank, MERS, Quality Loan Services,
and its legal counsel, McCarthy &Holthus, LLP. Jackson amended her complaint
to include claims asserting that the deed of trust is unenforceable, violates the
DTA, violates the Washington Constitution, violates the Consumer Protection Act
(CPA),4 and for breach of contract, unconscionability, negligence, and quiet title.
The trial court dismissed the complaint under CR 12(b)(6). Jackson appeals.

3 CP 55-57; Ex. 4.
4Ch. 19.86 RCW.
No. 72016-3-1/4

                                      ANALYSIS
Standard of Review

       This court reviews de novo an order granting a motion to dismiss under CR

12(b)(6). FutureSelect Portfolio Mqmt., Inc. v. Tremont Grp. Holdings. Inc., 180

Wn.2d 954, 962, 331 P.3d 29 (2014); Kinnev v. Cook, 159 Wn.2d 837, 842, 154

P.3d 206 (2007). Dismissal under CR 12(b)(6) is appropriate in those cases where

the plaintiff cannot prove any set offacts consistent with the complaint that would

entitled the plaintiff to relief. Bravo v. Dolsen Cos., 125 Wn.2d 745, 750, 888 P.2d

147 (1995). "[A]ny hypothetical situation conceivably raised by the complaint
defeatsa CR 12(b)(6) motion if it is legally sufficient to support the plaintiff's claim."
Bravo. 125 Wn.2d at 756 (alteration in original) (quoting Halvorson v. Dahl. 89

Wn.2d 673, 674, 574 P.2d 1190(1978)). All facts alleged in the plaintiff's complaint

are presumed true. Tenore v. AT&T Wireless Servs., 136 Wn.2d 322, 330, 962
P.2d 104 (1998). However, the complaint's legal conclusions are not required to
be accepted on appeal. Haberman v. Washington Pub. Power Supply Svs.. 109
Wn.2d 107, 120, 744 P.2d 1032 (1987). "If a plaintiff's claim remains legally
insufficient even under his or her proffered hypothetical facts, dismissal pursuant

toCR 12(b)(6) is appropriate." Gorman v. Garlock. Inc., 155Wn.2d 198, 215,118
P.3d311 (2005).

        Issues ofstatutory constitutionality are reviewed de novo. HomeStreet. Inc.
v. Deo't of Revenue. 166Wn.2d444, 451, 210 P.3d 297 (2009).

Judicial Notice

        Jackson argues that the trial court improperly took judicial notice of
documents attached to defendants U.S. Bank, MERS, and Chase Bank's motion
No. 72016-3-1/5

to dismiss. In general, when ruling on a CR 12(b)(6) motion to dismiss, the trial
court may only consider the allegations contained in the complaint and may not go

beyond the face of the pleadings. Brown v. MacPherson's. Inc.. 86 Wn.2d 293,
297, 545 P.2d 13 (1975). But the trial court may take judicial notice of public
documents if the authenticity of those documents cannot be reasonably disputed.
Berne v. Gorton. 88 Wn.2d 756, 763, 567 P.2d 187 (1977).               ER 201(b)(2)

authorizes the court to takejudicial notice ofa fact that is"not subject to reasonable
dispute in that it is . . . capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned."
       Additionally, where a plaintiff asserts allegations in a complaint on specific
documents, but does not physically attach those documents, the documents may
be considered in ruling on a CR 12(b)(6) motion for judgment on the pleadings.
Rodriguez v. Loudeve Corp.. 144 Wn. App. 709, 189 P.3d 168 (2008); see, e^,

In re Stac Elecs. Sec. Litig, 89 F.3d 1399, 1405 n.4 (9th Cir. 1996) (appropriate
for trial court to consider other portions of document referenced in complaint in a
motion to dismiss and doing so does not convert the motion into one for summary

judgment).

       U.S. Bank sought to have the trial court take judicial notice of the adjustable
 rate note, prepayment penalty addendum, and an allonge to the note for the loan,
which were repeatedly referenced in Jackson's complaint.              The other two
 documents that U.S. Bank sought to introduce were publicly recorded property
 records easily accessed through the King County Recorder's Office—a recorded
No. 72016-3-1/6

corporate assignment of the deed of trust and a recorded appointment of

successor trustee, Quality Loan Service Corporation.

      Although the record does not indicate whetherthe trial courtdid in fact take

judicial notice ofthese documents, the court's consideration ofthe documentswas
appropriate in this CR 12(b)(6) motion. Jackson's complaint was based on the
alleged breach of the DTA, which was based in part on the documents presented
to the court. Because Jackson cannot challenge the authenticity of these readily

available public documents, the trial court did not err in taking judicial notice of
these documents.

Nonconstitutional Claims

       Jackson failed to address her claims for violation of the CPA, breach of

contract, unconscionability, negligence, and quiet title in her opening appellate
brief. An appellant's brief must contain "argument in support of the issues
presented for review, together with citations to legal authority and references to
relevant parts of the record." RAP 10.3(a)(6).
       An appellate court will not consider a claim of error that a party fails to
support with legal argument in her opening brief. Mellon v. Req'l Tr. Servs. Corp.,
182 Wn. App. 476, 486, 334 P.3d 1120 (2014) (citing Howell v. Spokane &Inland
Empire Blood Bank. 117Wn.2d 619, 624, 818 P.2d 1056 (1991); Fosbre v. State,
70 Wn.2d 578, 583, 424 P.2d 901 (1967); RAP 10.3.(a)(6)). "While an appellate
 court retains the discretion to consider an issue raised for the first time on appeal,
 such discretion is rarely exercised." Karlbero v. Often, 167 Wn. App. 522, 531,
No. 72016-3-1/7

280 P.3d 1123 (2012) (citing Smith v. Shannon. 100 Wn.2d 26, 38, 666 P.2d 351

(1983)).

       Jackson's failure to assign error to and argue against the court's decision

for failure to state a claim on these issues, waives any argument as to those claims.

Constitutionality of the DTA

       Jackson's complaint sought a declaratory judgment regarding the

constitutionality of the DTA.     In her argument before the trial court, Jackson

specifically asserted that she was making arguments under the constitution and

not the DTA.5

       RCW 7.24.110 requires notification to the state attorney general when there

is a constitutional challenge to state legislation. Jackson failed to notify the state

attorney general.     Dismissal of constitutional claims challenging the facial
constitutionality of a state statute is appropriate where the state attorney general
has not been notified. See Kendall v. Douglas. Grant. Lincoln, and Okanogan

Counties Pub. Hosp. Dist. No. 6.118 Wn.2d 1,11 -12, 820 P.2d 497 (1991) (service

on the attorney general is mandatory and a prerequisite); Camp Fin.. LLC v.
Brazington. 133 Wn. App. 156, 160, 135 P.3d 946 (2006) (attorney general must
be served when a party challenges the constitutionality of a statute). Jackson's
attack on the constitutionality of the DTA is procedurally deficient, and thus,

dismissal on that ground alone was appropriate.

5"We're not coming before you under the Deed of Trust Act. We're coming before you
directly under the Constitution. We're saying the statute is unconstitutional. And even if
it isn't unconstitutional, these folks can't bring an action because they haven't complied
with those acts that are a necessary condition predicate to bringing an action under the
DTA." Report of Proceedings (RP) (July 19, 2013) at 27-28.
No. 72016-3-1/8

       Even if we were to consider the substance of Jackson's arguments, we

disagree that the DTA is unconstitutional. Jackson argues that the DTA violates
several Washington State constitutional provisions by "creating a trustee to

exercise exclusive judicial power reserved to the superior court."6 In particular,
Jackson bases herarguments on article IV, section 6 and article II, section 1 of the
Washington State Constitution. Those articles set forth the legislative powers and
the jurisdiction of the superior courts.

       Article IV, section 6 provides that "[t]he superior court shall have original
jurisdiction in all cases at law which involve the title or possession of real property."
Jackson relies on Klem v. Washington Mutual Bank. 176 Wn.2d 771, 295 P.3d
1179 (2013) as support for her theory that the nonjudicial foreclosure process
involves a judicial inquiry. But Klem merely addressed the duties of a trustee and
drew an analogy between judicial and nonjudicial foreclosure. Klem did not, as
Jackson contends, elevate the DTA's process into a judicial one. Klem recognized
the authority of a trustee when it noted that a "trustee in a nonjudicial foreclosure
action has been vested with incredible power. Concomitant with that power is an
obligation to both sides to do more than merely follow an unread statute and the
beneficiary's directions." Klem. 176 Wn.2d at 791.
        Moreover, a nonjudicial foreclosure is not made pursuant to a judgment but
 rather is one conducted under a power contained in a mortgage or a degree of
 foreclosure.7 As such, it is made through an agreement between the grantor and

 6Appellant's Opening Br. at 11 (emphasis omitted).
 7"In short a nonjudicial trustee sale is not aforced sale, because of its consensual nature.
 The nonjudicial trustee sale is not an execution sale, because there is no judgment
 involved. Thus, a homestead is not exempted from such a sale by RCW 6.12.090." Felton

                                              8
No. 72016-3-1/9

the beneficiary of the deed of trust. The DTA does not divest the superiorcourt of

jurisdiction. Indeed, the superior court's constitutional grant of jurisdiction is

preserved in specific portions ofthe DTA.8 Until a party challenges the foreclosure,

there is no judicial involvement. It is at that point that the superior's court's

jurisdiction is invoked. See Felton. 101 Wn.2d at 422-23.
       Jackson's argument that the legislature does nothave the power to legislate
regarding title and possession of real property is entwined with herargument that
the constitution granted exclusive jurisdiction to the courts for all property
concerns.9 The DTA creates a method of mortgaging real property involving three

parties: a grantor (borrower), a beneficiary (lender), and a trustee. See Bain v.
Metro Morto. Grp.. Inc.. 175 Wn.2d 83, 92-93, 285 P.3d 34 (2012); RCW

61.24.005.

           The DTA was enacted by the legislature to further three objectives for the
nonjudicial foreclosure process. It requires that the process (1) be efficient and
inexpensive, (2) provide an adequate opportunity for interested parties to prevent
wrongful foreclosure, and (3) promote the stability of land titles. Cox v. Helenius,
103 Wn.2d 383, 387, 693 P.2d 683 (1985). In Morrell v. Arctic Trading Co.. Inc..
21 Wn. App. 302, 304, 584 P.2d 983 (1978), the court held that a trustee attempting

v. Citizens Fed. Sav. &Loan Ass'n of Seattle. 101 Wn.2d 416, 420, 424, 679 P.2d 928
 (1984).
8See, e^, RCW 61.24.130(1) (buyer has right to file action in superior court to restrain a
trustee's sale); RCW 61.24.130(8)(j) (granting borrower power to initiate court action);
RCW 61.24.040(2); RCW 61.24.090(2) (granting borrower right to request any court to
 determine reasonableness of fees).
 9Several recent federal district courts have addressed and rejected Jackson's claims that
 the DTA is unconstitutional. Knecht v. Fidelity Nat'l Title Ins. Co.. No. C12-1575RAJ, 2014
 WL 4057148 (W.D. Wash. Aug. 14, 2014); Galvean v. Nw. Tr. Servs.. Inc., No. C13-1359
 MJP, 2014 WL 3360241 (W.D. Wash. July 9, 2014).
No. 72016-3-1/10

to notify an interested party of an impending foreclosure sale, was not obligated to

search for an address when no address was found in the deed of trust documents.

The purpose of strict notice requirements in a nonjudicial sale of property secured

by trust deed is to inform persons with an interest in the property of the pending

sale of the property, so that they may act to protect those interests. See also

Kennebec. Inc. v. Bank of the West. 88 Wn.2d 718, 726, 565 P.2d 812 (1977)

(holding that chapter 61.24 RCW as it existed prior to the 1975 amendments was

passive state involvement and did not violate the due process clause of the
Fourteenth Amendment or article I, section 3 of the Washington State

Constitution). Here, there is no dispute that Jackson received notice.

       The legislature had authority to enact the DTA and its enactment did not
encroach upon the jurisdiction of the superior court.

Allegations of DTA Violations

       Jackson asserts that the nonjudicial foreclosure violated the DTA. She

argues that the trustee failed to comply with RCW 61.24.030(7)(a) because there
was "[injsufficient proof identifying the beneficiary and note owner prior to
instigating this private sale."10
        RCW 61.24.030(7)(a) provides that a "declaration by the beneficiary made
under the penalty of perjury stating the beneficiary is the actual holder of the
promissory note or other obligation secured by the deed of trust shall be sufficient
proof as required under this subsection."

 10 CP at 94 (emphasis omitted).

                                         10
No. 72016-3-1/11

      Jackson's complaint asserts that the investors are the note holders and

entitled to her payments. But see Cashmere Valley Bank v. State. Dep't of

Revenue. 181 Wn.2d 622, 634, 334 P.3d 1100, 1106 (2014) (investor has no

interestin underlying mortgagesand deeds oftrust and is nota beneficiary ofthose

instruments).

       Furthermore, this court has recently addressed this particular issue in

Truiillo v. Trustee Services. Inc., 181 Wn. App. 484, 496, 326 P.3d 768 (2014).

There, we held that the beneficiary is the holder of the note and, further, a trustee

may rely on a beneficiary's declaration as proof of the beneficiary's right to
foreclose. In Lvons v. U.S. Bank National Ass'n. 181 Wn.2d 775, 789-90, 336 P.3d

1142 (2014), the Supreme Court held that the trustee was entitled to rely on the
beneficiary declaration unless it has violated its duty of good faith. Since there
was no allegation of bad faith here, the beneficiary declaration is sufficient.
       Moreover, the Supreme Court recently held that in the absence of a
foreclosure, no viable DTA claims remain. Frias v. Asset Foreclosure Servs., Inc.
181 Wn.2d 412, 428-30, 334 P.3d 529 (2014). Because there has been no
foreclosure, Jackson has no claims for violations of the DTA. As discussed above,
no remaining claims have been preserved for appeal.

       The trial court is affirmed.

WE CONCUR:

                                          11