Court Opinion

ID: 4413043
Source: CourtListenerOpinion
Date Created: 2019-07-01 20:52:04.428318+00
Date Added: 2024-06-11T13:42:41.385408
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

PETER SCHAUB, an individual,          )
CLOUDY SKIES PROPERTIES, LLC, a)                No. 78439-1-1
Washington limited liability company, )
                                      )         DIVISION ONE
                    Appellants,       )
                                      )
            v.                        )
                                      )
JPMORGAN CHASE BANK N.A.;             )
BAYVIEW LOAN SERVICING, LLC;          )
NORTHWEST TRUSTEE SERVICES, )
INC.,                                 )
                                      )
                    Respondents,      )         UNPUBLISHED OPINION
                                      )
            and                       )         FILED: July 1, 2019
                                      )
DOE DEFENDANTS 1-10,                  )
                                      )
                    Defendants.       )
                                      )

      SMITH, J. — Peter Schaub and his closely held limited liability company,

Cloudy Skies Properties LLC (collectively Schaub), lost a rental property in a

nonjudicial foreclosure. Schaub brought various statutory and estoppel claims

against JPMorgan Chase Bank N.A.(JPMorgan), Bayview Loan Servicing LLC

(Bayview), and Northwest Trustee Services Inc.(NWTS)(collectively

Respondents) related to the foreclosure. The trial court dismissed all of

Schaub's claims under CR 12(b)(6). Because Schaub did not state any claims
No. 78439-1-1/2

on which relief can be granted, even if we presume that the facts alleged in his

complaint are true, we affirm.

                                      FACTS

      Schaub executed a promissory note and deed of trust in favor of

JPMorgan in October 2007, related to a rental property in Seattle. In December

2013, JPMorgan assigned the deed of trust to Bayview and the assignment was

recorded the next month. In June 2014, Bayview executed and recorded an

Appointment of Successor Trustee, naming NVVTS as a successor trustee.

      In January 2015, NVVTS executed a Notice of Trustee's Sale of the

Property scheduled for May 22, 2015. Schaub alleges in his complaint that the

notice wrongfully identified Bayview as the beneficiary of the deed of trust

because JPMorgan was still the holder of the note and therefore the actual

beneficiary under the deed of trust. For this reason, Schaub alleges that

Bayview had no right to foreclose the property.

      On April 14, 2015, 38 days before the scheduled sale, Brian Carl, a

housing counselor approved by the United States Department of Housing and

Urban Development\submitted a loss mitigation application to Bayview on

Schaub's behalf. Schaub alleges that the application was complete.

      Shortly thereafter, Bayview sent Schaub a letter dated April 21, 2015,

which stated that Bayview was "unsuccessful in obtaining from [Schaub]the

following documents," followed by a blank line with no documents identified. The

letter explained that Bayview was "unable to complete [its] review of[Schaub's]

loan workout request without this information." The letter goes on to state,

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No. 78439-1-1/3

"Incomplete Information Final Notice — Your request for a Home Affordable

Modification cannot be completed as of April 21, 2015 because we have not yet

received all of the requested documentation." (Boldface omitted.) In a separate

section, the letter states, "After we receive all required documentation, we will

process your request as quickly as possible. While we consider your request,

your home will not be referred to foreclosure. Any scheduled foreclosure sale will

not occur pending our determination." (Boldface omitted.) Schaub alleges that

based on this letter, he "reasonably believed that his loss mitigation application

was complete. . . and the scheduled foreclosure. . . would be stopped."

       On May 13, 2015, eight days before the scheduled sale, Bayview

contacted Carl and requested "a substantial amount of additional documentation

related to the loss mitigation application." Schaub alleges that Bayview e-mailed

Carl a list of requested documents, but his complaint does not state whether or

not he provided those documents to Bayview.

       On May 22, 2015, NVVTS sold the Property to a third party. Schaub

alleges that the trustee's deed falsely asserted that Bayview complied with all

legal requirements and held the note secured by the deed of trust. Carl learned

about the sale on May 29, 2015, and requested that NVVTS rescind the sale

because, among other reasons, Bayview had received a "facially complete loss

mitigation application." NVVTS refused to rescind the sale.

       Schaub initiated this action against JPMorgan, Bayview, NWTS, and Doe

Defendants 1-10 in May 2017. His complaint alleges actions for unjust

enrichment and violation of chapter X, 12 C.F.R. § 1024, which implements the

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No. 78439-1-1/4

Real Estate Settlement Procedures Act(RESPA), 12 U.S.C. § 2601 to 2617; the

deeds of trust act(DTA), chapter 61.24 RCW;the Consumer Loan Act (CLA),

chapter 31.04 RCW; and the Consumer Protection Act(CPA), chapter 19.86

RCW. No declarations related to these claims were filed by any party.

JPMorgan moved to dismiss Schaub's claims against it under CR 12(b)(6),

arguing that it had no liability to Schaub after it transferred its interest in the note

and the deed of trust to Bayview. The trial court granted JPMorgan's motion.

       Bayview and NWTS also moved to dismiss Schaub's claims under

CR 12(b)(6), arguing that Schaub's claims failed because they were predicated

on a violation of RESPA, which applies to owner-occupied properties, not rental

properties. The trial court dismissed Schaub's RESPA, DTA, CLA, and CPA '

claims against Bayview and NWTS but granted Schaub leave to amend his

complaint to allege promissory or equitable estoppel claims "with particularity."

       Schaub then filed an amended complaint, which mirrored the original

complaint but included a new claim against all parties for promissory and

equitable estoppel. Bayview and NWTS moved for dismissal of the new claim

under CR 12(b)(6), arguing that there was no promise or reliance. The trial court

granted the motion. Schaub appeals.

                                      ANALYSIS

       Schaub argues that the trial court erred when it dismissed his RESPA,

promissory estoppel, DTA, CLA, and CPA claims under CR 12(b)(6). We

disagree.

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No. 78439-1-1/5

       Under CR 12(b)(6), the court may dismiss claims for "failure to state a

claim upon which reliercan be granted." Courts grant CR 12(b)(6) motions to

dismiss "only in the unusual case in which plaintiff includes allegations that show

on the face of the complaint that there is some insuperable bar to relief." Kinney

v. Cook, 159,Wn.2d 837, 842, 154 P.3d 206(2007)(internal quotation marks

omitted)(quoting Hoffer v. State, 110 Wash. 2d 415, 420, 755 P.2d 781 (1988),

adhered to on recons., 113 Wash. 2d 148, 776 P.2d 963(1989)). "The court

presumes all facts alleged in the plaintiff's complaint are true and may consider

hypothetical facts supporting the plaintiff's claims." Kinney, 159 Wash. 2d at 842.

We review a trial court's ruling to dismiss a claim under CR 12(b)(6) de novo.

Kinney, 159 Wash. 2d at 842.

                  Bayview and NVVTS as Agents of JPMorgan

      Schaub argues that the trial court erred in dismissing his claims against

JPMorgan because he alleged that JPMorgan was the true holder of the note

and Bayview and NVVTS acted as agents for JPMorgan. Because we must

presume the allegations in Schaub's complaint are true, we agree that dismissal

of JPMorgan was not proper.

      Here, the note is not part of the record, but Schaub alleges in his

complaint that NWTS wrongfully identified Bayview as the beneficiary of the deed

of trust in the Notice of Trustee's Sale and that JPMorgan retained the note "as

owner and holder of the obligation." We presume that this allegation is true.

Therefore, dismissal of Schaub's claims against JPMorgan on a theory that

Bayview held the note, without proof of that fact, was error.

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No. 78439-1-1/6

       Furthermore, "Washington's deed of trust act contemplates that the

security instrument will follow the note, not the other way around." Bain v. Metro.

Mortg. Gm., Inc., 175 Wash. 2d 83, 104, 285 P.3d 34 (2012). Therefore, we are not

persuaded by JPMorgan's claim that it was no longer the holder of the note

simply because it assigned its interest in the deed of trust to Bayview.

       JPMorgan argues that the Notices of Trustee's Sale filed with Schaub's

complaint show that Bayview was the holder of the note because they identify

Bayview as the beneficiary of the deed of trust and RCW 61.24.030(7)(a)

requires the trustee to verify that the beneficiary is the holder of the note before a

sale. JPMorgan also argues that the language in the trustee's deed identifying

Bayview as the assigned beneficiary is presumptively true because

RCW 61.24.040(7) requires the trustee to verify a successor-in-interest's

ownership. Again, because Schaub alleges that NWTS wrongfully identified

Bayview as the beneficiary and we must presume that this allegation is true,

JPMorgan's reliance on these documents is misplaced.

       In short, the trial court erred by dismissing JPMorgan based solely on

JPMorgan's assignment of the deed of trust. That said, for the reasons

described below, the trial court did not err in dismissing Schaub's claims on their

merits. Therefore, the ultimate dismissal of Schaub's claims against JPMorgan

was proper.

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No. 78439-1-1/7

                      Equitable Estoppel and RESPA Claim

      Schaub argues that the trial court erred in dismissing his RESPA claim

because the Respondents should be equitably estopped from arguing that

Bayview had no duties to him under that statute. We disagree.

      As an initial matter, Schaub does not dispute that the RESPA loss

mitigation procedures apply to only owner-occupied properties. 12 C.F.R. §

1024.30(c)(2)("The procedures set forth in §§1024.39 through 1024.41 of this

subpart only apply to a mortgage loan that is secured by a property that is a

borrower's principal residence."). For this reason, he cannot maintain a RESPA

claim against Respondents.

      To avoid the inapplicability of RESPA, Schaub relies on the doctrine of

equitable estoppel and alleges that Bayview induced him to submit a loss

mitigation application and then led him to believe that his application was facially

complete and foreclosure would be prohibited in accordance with RESPA's loss

mitigation procedures. Specifically, he alleges that foreclosure was not proper

because he submitted a facially complete application more than 37 days before

the sale, as required to stop foreclosure:

      Prohibition on foreclosure sale. If a borrower submits a complete
      loss mitigation application after a servicer has made the first notice
      or filing required by applicable law for any judicial or non-judicial
      foreclosure process but more than 37 days before a foreclosure
      sale, a servicer shall not move for foreclosure judgment or order of
      sale, or conduct a foreclosure sale. . .

12 C.F.R.§ 1024.41(g).

       But equitable estoppel is not available for offensive use by plaintiffs.

Greaves v. Med. Imaging Sys., Inc., 124 Wash. 2d 389, 397-98, 879 P.2d 276

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No. 78439-1-1/8

(1994). As such, Schaub cannot rely on that doctrine to make an inapplicable

statute suddenly applicable. Promissory estoppel is the proper doctrine for

asserting such a claim. Greaves, 124 Wash. 2d at 397-98. Therefore, the trial court

properly dismissed Schaub's RESPA and equitable estoppel claims.

                               Promissoty Estoppel

       Schaub argues that the trial court erred in dismissing his claims of

promissory estoppel. We disagree.

      To prevail on a promissory estoppel claim, the plaintiff must prove:

      (1) a promise,(2) that promisor should reasonably expect to cause
      the promisee to change his position, and (3) actually causes the
      promisee to change position,(4)justifiably relying on the promise,
      (5) in such a manner that injustice can be avoided only by
      enforcement of the promise.

McCormick v. Lake Wash. Sch. Dist., 99 Wash. App. 107, 117, 992 P.2d 511

(1999).

       Here, the first element of estoppel is not met because Bayview did not

make a promise not to foreclose. Schaub alleges that Bayview's April 21, 2015,

letter indicated that Schaub filed a complete application and that it would

therefore forebear all foreclosure efforts. But contrary to Schaub's claim, the

letter did not state that his application was complete. Although the letter did not

explain what specific documentation was missing from Schaub's application, it

did inform him that Bayview could not complete its review because it had not

received all requested documentation. And, it warned him that foreclosure may

proceed if he failed to make his loan payments:

       We have been unsuccessful in obtaining from you the following
       documents:

                                         8
No. 78439-1-1/9

      [blank]

      We are unable to complete our review of your loan workout request
      without this information.

      If your loan is delinquent, collection/foreclosure activity currently in
      progress will continue to proceed during the review process of your
      request for a workout. This letter and the loan workout review
      process shall not waive any of our rights or your obligations under
      the note and other loan documents. In other words, you are
      responsible to continue making your loan payments.

      . . . Even if we are able to approve you for a foreclosure alternative
      prior to a sale, a court with jurisdiction over the foreclosure
      proceeding (if any) or public official charged with carrying out the
      sale may not halt the scheduled sale.

      Incomplete Information Final Notice — Your request for a Home
      Affordable Modification cannot be completed as of April 21, 2015
      because we have not received all of the requested documentation.

(Boldface omitted.) The letter then went on to explain the process that would

occur going forward:

      After we receive all required documentation, we will process your
      request as quickly as possible. While we consider your request,
      your home will not be referred to foreclosure. Any scheduled
      foreclosure sale will not occur pending our determination.

(Boldface omitted.) Arguably, the language that "[a]ny scheduled foreclosure

sale will not occur pending our determination" was a conditional promise not to

foreclose. But as explained in that paragraph, foreclosure is postponed once the

lender "receive[s] all required documentation." Furthermore, the letter stated that

required documents were still missing from Schaub's application, so the

conditional promise was not triggered. Therefore, Schaub has not satisfied the

first element of estoppel.

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No. 78439-1-1/10

       Furthermore, Schaub has not alleged facts that satisfy the fourth element

of estoppel: justifiable reliance. Specifically, Schaub states in his complaint that

Bayview requested "a substantial amount" of additional documentation eight days

before the scheduled foreclosure sale. This request for additional

documentation, in combination with the letter stating that Bayview could not

complete Schaub's loss mitigation application, should have put Schaub on notice

that Bayview had not received "all required documentation" and that the

foreclosure sale could proceed as scheduled. Therefore, he could no longer

justifiably rely on any promise not to foreclose, especially given the fact that he

still had time to enjoin the foreclosure sale under the DTA. RCW 61.24.130(2)

(requiring a lawsuit to enjoin foreclosure be brought within five days of the sale).

       Schaub argues that Bayview's conditional promise was triggered by his

submission of a "facially" complete application. But nothing in the letter promises

to stop foreclosure based on the receipt of a facially complete application.

Additionally, Schaub does not explain what a "facially" complete application

includes or how it differs from a complete application. Therefore, this argument

is not persuasive.

       Schaub next argues, for the first time in his reply brief, that it is not known

whether the additional information requested by Bayview was necessary to

complete the application or was simply "miscellaneous information to clarify

information already received or replacement of information that had become

stale." But "[am n issue raised and argued for the first time in a reply brief is too

late to warrant consideration." Cowiche Canyon Conservancy v. Bosley, 118

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No. 78439-1-1/1 1
Wash. 2d 801, 809, 828 P.2d 549 (1992). Therefore, we do not consider this

argument.

                                        DTA

       Schaub argues that the trial court erred in dismissing his DTA claims. We

disagree.

       The DTA "creates a three-party mortgage system allowing lenders, when

payment default occurs, to nonjudicially foreclose by trustee's sale." Albice v.

Premier Mortq. Servs. of Wash., Inc., 174 Wash. 2d 560, 567, 276 P.3d 1277

(2012). "The act furthers three goals:(1) that the nonjudicial foreclosure process

should be efficient and inexpensive,(2) that the process should result in

interested parties having an adequate opportunity to prevent wrongful

foreclosure, and (3) that the process should promote stability of land titles."

Albice, 174 Wash. 2d at 567.

       The DTA provides that "[a]nyone having any objection to the sale on any

grounds whatsoever will be afforded an opportunity to be heard as to those

objections if they bring a lawsuit to restrain the sale pursuant to RCW 61.24.130."

Former RCW 61.24.040(1)(f)(IX)(2012). The lawsuit must be brought within five

days of the sale. RCW 61.24.130(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."). The DTA also provides that "fflailure to bring such a lawsuit may result

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No. 78439-1-1/12

in a waiver of any proper grounds for invalidating the Trustee's sale." Former

RCW 61.24.040(1)(f)(IX).

       In Albice, the Supreme Court held that "[t]he word 'may' indicates the

legislature neither requires nor intends for courts to strictly apply waiver." Albice,
174 Wash. 2d at 570. Therefore, waiver should be applied "only where it is

equitable under the circumstances and where it serves the goals of the act."

Albice, 174 Wash. 2d at 570. Waiver is appropriate "where a party (1) received

notice of the right to enjoin the sale,(2) had actual or constructive knowledge of a

defense to foreclosure prior to the sale, and (3)failed to bring an action to obtain

a court order enjoining the sale." Albice 174 Wash. 2d at 569. Tin determining

whether waiver applies, the second goal [of the DTA]—that the nonjudicial

foreclosure process should result in is interested parties having an adequate

opportunity to prevent wrongful foreclosure—becomes particularly important."

Albice, 174 Wash. 2d at 571. Allowing a borrower to delay asserting a defense until

after a sale defeats the spirit and intent of the DTA. Albice, 174 Wash. 2d at 570.

       Here, Schaub's complaint alleges that he is entitled to remedies under the

DTA because "[t]he misconduct alleged herein against Defendants constitutes:

(1)fraud and misrepresentation; and (2)failure of NWTS to materially comply

with the provisions of the DTA,for which Mr. Schaub is entitled to relief under

RCW 61.24.127." On appeal, Schaub specifies that Bayview and NWTS violated

the DTA in the following ways: the Assignment of Deed of Trust and Appointment

of Successor Trustee in 2010 were improperly executed, the Notices of Trustee's

Sales were improperly signed and notarized on different dates, the location of the

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No. 78439-1-1/13

trustee's sale was not public, and the marketing of the Property was improper.

But these alleged violations were all discoverable prior to the trustee's sale and

Schaub does not allege that he did not have notice of them. Therefore, because

Schaub "had actual or constructive knowledge of a defense to foreclosure prior to

the sale" and he failed to use available presale remedies to enjoin the foreclosure

sale, he waived his right to assert these defenses. Albice, 174 Wash. 2d at 569.

       Schaub argues that he "reasonably believed his remedies under the DTA

would remain preserved" based on Bayview's alleged promise not to foreclose.

But this is an estoppel argument. As described above, equitable estoppel is not

available for offensive use by plaintiffs. Greaves, 124 Wash. 2d at 397-98.

Furthermore, his promissory estoppel claim fails because Schaub cannot show

that Bayview promised not to foreclose or that he justifiably relied on that

promise. Therefore, dismissal of his DTA claim was proper.

                                         CLA

       For the first time in his reply brief, Schaub argues that the trial court erred

in dismissing his CLA claim. Although Schaub alleges that the claim was

"thoroughly" addressed in his opening brief, the pages cited reference the CLA

only in passing and include no argument as to how Respondents violated the

CLA. Therefore, his argument is not persuasive and we hold that Schaub waived

the right to challenge the dismissal of his CLA claim on appeal. See Hall v.

Feigenbaum, 178 Wash. App. 811, 817, 319 P.3d 61(2014)("We deem an issue

not briefed to be waived."); Cowiche Canyon Conservancy, 118 Wash. 2d at 809

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No. 78439-1-1/14

("An issue raised and argued for the first time in a reply brief is too late to warrant

consideration.").

                                         CPA

       Schaub argues that the trial court erred in dismissing his CPA claims. We

disagree.

       To prevail on a CPA action, the plaintiff must prove the following elements:

"(1)[an] unfair or deceptive act or practice;(2) occurring in trade or commerce;

(3) public interest impact;(4) injury to plaintiff in his or her business or property;

[and](5) causation." Klem v. Wash. Mut. Bank, 176 Wash. 2d 771, 782, 295 P.3d

1179(2013)(first alteration in original)(quoting Hangman Ridge Training

Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778, 780, 719 P.2d 531 (1986)).

A claim "may be predicated upon a per se violation of statute, an act or practice

that has the capacity to deceive substantial portions of the public, or an unfair or

deceptive act or practice not regulated by statute but in violation of public

interest." Klem, 176 Wash. 2d at 787.

       Similar to the claims addressed above, both of Schaub's per se and unfair

practice CPA theories are based on the premise that Respondents violated their

duty of good faith and committed an unfair practice by continuing the foreclosure

of his property despite his submission of a facially complete loss mitigation

application. Schaub's appellate briefing does not directly address the element of

causation. Even so, under the facts alleged in his complaint, he cannot prove

causation. Schaub received notice that Bayview needed more documents for his

loss mitigation application eight days before the sale, which is within the time

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No. 78439-1-1/15

required to enjoin the foreclosure under the DTA. Nevertheless, he did not

pursue that available legal remedy to stop the sale. Therefore, Schaub's own

conduct in failing to pursue a lawsuit under the DTA broke the chain of causation

and caused his loss. Schaub cannot show that any alleged unfair practices by

Respondents caused his damages and his CPA claim was properly dismissed.

                                      Attorney Fees

       All parties request attorney fees and costs on appeal based on RAP 18.1

and the attorney fee clause in the deed of trust. We grant Bayview's request for

fees and costs and deny all other parties' requests for fees and costs.

      Attorney fees may only be awarded at the appellate level when authorized

by a contract, a statute, or a recognized ground of equity. Labriola v. Pollard

Grp., Inc., 152 Wash. 2d 828, 839, 100 P.3d 791 (2004). Here, the deed of trust

states:

      26. Attorneys' Fees. Lender shall be entitled to recover its
      reasonable attorneys' fees and costs in any action or proceeding to
      construe or enforce any term of this Security Instrument. The term
      "attorneys' fees," whenever used in this Security Instrument, shall
      include without limitation attorneys' fees incurred by Lender in any
      bankruptcy proceedings or on appeal.

(Boldface omitted.) Additionally, RCW 4.84.330 provides for prevailing party

attorney fees where a contract has a one-sided attorney fee clause.

          Here, Schaub is not the prevailing party and, therefore, is not entitled to

attorney fees under RCW 4.84.330. Furthermore, although the deed of trust

specifies JPMorgan as the "Lender," Bayview took the deed of trust by

assignment from JPMorgan and acquired all of JPMorgan's rights and

obligations, including the right to attorney fees. Therefore, JPMorgan is not

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No. 78439-1-1/16

entitled to fees but Bayview is because JPMorgan assigned its interest in the

deed of trust to Bayview. Finally, NVVTS is not entitled to fees because the deed

of trust provides fees to the lender only, not the trustee.

       Citing Stryken v. PaneII, 66 Wash. App. 566, 572, 832 P.2d 890 (1992),

JPMorgan argues that it is entitled to attorney fees even though it is no longer a

party to the deed of trust. But Stryken involved attorney fees in an action where

a contract was found to be void, not where there was an assignment of the

contract. Here, JPMorgan assigned its interest in the deed of trust to Bayview.

For that reason, Stryken is not controlling.

       We affirm and grant Bayview attorney fees and costs on appeal, subject to

its compliance with RAP 18.1.

                                                   in4ANA.p/
WE CONCUR:

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