Arneson v. Nordlund

• Decision Date: 25 July 2022
• Docket Number: 83234-4-I
• Parties: PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of herself personally, Plaintiff, PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of the 6708 Tolt Highlands Personal Residence Trust, Appellant, v. GARY NORDLUND, Respondent, MFE, LLC; COLUMBIA NORTH WEST MORTGAGE; MARK D. FLYNN; L80 COLLECTIONS, LLC; ALDENTE, LLC, ROGER MAY and "JANE DOE" MAY; McGAVICK GRAVES, P.S., and DOE DEFENDANTS 1 through 20, inclusive, Defendants.
• Court: Washington Court of Appeals

PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of herself personally, Plaintiff, PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of the 6708 Tolt Highlands Personal Residence Trust, Appellant,
v.
GARY NORDLUND, Respondent,

MFE, LLC; COLUMBIA NORTH WEST MORTGAGE; MARK D. FLYNN; L80 COLLECTIONS, LLC; ALDENTE, LLC, ROGER MAY and "JANE DOE" MAY; McGAVICK GRAVES, P.S., and DOE DEFENDANTS 1 through 20, inclusive, Defendants.

No. 83234-4-I

Court of Appeals of Washington, Division 1

July 25, 2022

UNPUBLISHED OPINION

DWYER, J.

This is the third appeal in a lawsuit involving a loan that Gary Nordlund extended to the 6708 Tolt Highlands Personal Residence Trust (Trust). The Trust challenges the trial court's determination, following a bench trial, that the Trust failed to prove that certain loan disbursements constituted usurious interest. The Trust also seeks reversal of certain pretrial rulings. Because the Trust does not establish an entitlement to relief, we affirm.

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I

The underlying facts are set forth in further detail in our opinions in Arneson v. Nordlund (Arneson I), No. 71148-2-I (Wash.Ct.App. March 30, 2015) (unpublished), https://www.courts.wa.gov/opinions/pdf/711482.pdf, and Arneson v. Nordlund (Arneson II), No. 78053-1-I (Wash.Ct.App. Sept. 3, 2019) (unpublished), https://www.courts.wa.gov/opinions/pdf/780531 .pdf. We summarize them here.

The Trust was established in 2006, with Penny Arneson and her then-husband, Kenneth Sweet, as co-trustees. The Trust held title to Arneson and Sweet's family home, located at 6708 Tolt Highlands Road NE in Carnation, Washington (the Property).

In 2009, Arneson and Sweet were in the process of dissolving their marriage, and the family court authorized Sweet to borrow against the equity in the Property to satisfy an existing Trust debt and to pay certain of Sweet's expenses. Sweet, as a co-trustee of the Trust, arranged for a $375,000 loan from Nordlund. The loan was brokered by an individual named Mark Flynn. Although the record does not reflect how Sweet and Flynn initially came into contact, it does establish that Nordlund was acquainted with Flynn because their children attended the same school. Flynn approached Nordlund, who had not had contact with Sweet or Arneson before, about making the loan.

The loan closed on January 15, 2010, and was evidenced by a promissory note (Note). The Trust's obligations under the Note were secured by a deed of trust encumbering the Property. The Note became due and payable on January 15, 2011.

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After the Trust failed to timely pay the balance on the Note, Nordlund initiated a nonjudicial foreclosure under the deed of trust. Arneson, both individually and on behalf of the Trust, filed this lawsuit against Nordlund,^[1]alleging breach of the deed of trust act,^[2] intentional and negligent misrepresentation, and violation of the Consumer Protection Act (CPA),^[3]premised on violations of the Consumer Loan Act,^[4] and the usury act.^[5]

In January 2012, the trial court granted the Trust's request to enjoin the foreclosure of the Property but ordered the Trust to sell the Property and deposit the proceeds in the court registry, which the Trust did.

In November 2013, the trial court dismissed all of Arneson's and the Trust's claims against Nordlund on summary judgment. The Trust appealed and, in Arneson I, we affirmed dismissal of Arneson's individual claims against Nordlund because Arneson lacked standing to sue Nordlund in her individual capacity. Arneson I, slip op. at 20. However, we reversed the dismissal of the Trust's CPA claim, holding that genuine issues of material fact remained as to the underlying Consumer Loan Act and statutory usury claims. Arneson I, slip op. at 14, 17-18.

On remand, Nordlund asserted a counterclaim against the Trust for breach of its obligations under the Note. Nordlund also moved for summary judgment on the Trust's statutory usury claim. The trial court granted the motion

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on the basis that "[t]he Trust, as the debtor who is not a natural person, does not have standing to pursue a [statutory usury] claim."

In November 2016, the Trust filed its operative, second amended complaint herein and added a common law action in assumpsit for recovery of allegedly usurious interest paid under the loan.

In September 2017, Nordlund filed a motion for summary judgment on the Trust's remaining claims against him and on the Trust's liability under the Note. The trial court initially denied Nordlund's motion, indicating that genuine issues of material fact remained as to whether Nordlund "was in the business of making loans" such that the Consumer Loan Act applied. However, the trial court's order did not address Nordlund's motion for summary judgment as to the Trust's assumpsit claim or as to the Trust's liability under the Note. Accordingly, Nordlund moved for clarification.

In response, the Trust argued that it owed Nordlund "nothing" because Arneson had rescinded the Note in compliance with the federal Truth In Lending Act (TILA)^[6] and its implementing regulations by delivering a rescission notice to Barbara Koval, the escrow agent who closed the loan on January 20, 2010. In a subsequent order, the trial court granted Nordlund's motion for clarification and determined "that the Trust is liable to Mr. Nordlund on [the Note] as a matter of law." The trial court also dismissed the Trust's assumpsit claim.

In November 2017, a jury trial was held on the Trust's Consumer Loan Act claim. See Arneson II, slip op. at 5. The jury found by special verdict that

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Nordlund was not "engaged in the business of making qualified secured or unsecured loans of money in January 2010," thus vitiating the Trust's Consumer Loan Act claim and, consequently, its CPA claim. Arneson II, slip op. at 6. The trial court entered judgment on the verdict and dismissed the Trust's claims against Nordlund with prejudice.

The Trust again appealed. It assigned error to (1) the trial court's dismissal of the Trust's statutory usury claim, (2) the trial court's dismissal of the Trust's assumpsit claim, and (3) a jury instruction related to the Trust's Consumer Loan Act claim. The Trust did not, however, assign error to the trial court's determination that the Trust was liable on the Note as a matter of law. Additionally, the Trust asserted that it "never disputed the existence of a debt" and, in response to apparent confusion on Nordlund's part as to the Trust's position with regard to the existence of a debt, the Trust represented that, although it had relied below on federal law to argue that the Note had been rescinded, "the issue was not plead[ed]."

In Arneson II, we held that the trial court did not err in instructing the jury and thus affirmed the dismissal of the Trust's Consumer Loan Act and CPA claims. Slip op. at 17-18. However, we reversed the trial court's dismissal of the Trust's assumpsit and statutory usury claims. Arneson II, slip op. at 11-13.

On remand from Arneson II, the Trust moved for summary judgment on its assumpsit claim, arguing that it had established each element of assumpsit as a matter of law. The Trust argued, with regard to the first element, i.e., the

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existence of a loan or forbearance,^[7] that "there is no credible evidence adduced to date - either through discovery or trial - to dispute the existence of a 'loan or forbearance.'" Nordlund, for his part, moved for summary judgment dismissal of the Trust's statutory usury claim, renewing an earlier argument-which the trial court did not reach in initially dismissing this claim-that the claim was time barred.

In response to Nordlund's motion, the Trust filed a "Motion for Summary Judgment (Rescission) and Memorandum in Opposition to Gary Nordlund's Motion for Partial Summary Judgment (Statute of Limitations)"^[8] (Rescission Motion), arguing that it had no liability whatsoever under the Note because it had rescinded the loan pursuant to TILA. Nordlund moved to strike the Rescission Motion and for CR 11 sanctions, arguing that the "the Trust has already been found liable under the . . . Note as a matter of law," and "[t]he opportunity to claim that the Trust is not liable under the loan passed when the Trust failed to appeal this legal determination." Nordlund also argued that the Trust was judicially estopped from raising a rescission claim given its earlier representations that it never disputed the existence of a debt, that it did not plead rescission, and that no credible evidence had been adduced to dispute the existence of a loan.

The trial court declined to strike the Rescission Motion but, relying on judicial estoppel, declined to reach the merits of the Trust's rescission claim. The trial court also granted Nordlund's motion for sanctions and ordered the Trust

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and its counsel, jointly and severally, to pay Nordlund's reasonable attorney fees and costs incurred in responding to the Rescission Motion.^[9] Meanwhile, the trial court granted Nordlund's motion for summary judgment on the Trust's statutory usury claim. The trial court also partially granted the Trust's motion for summary judgment as to its assumpsit claim. As a result of these orders, the only issues left for trial were whether Nordlund exacted more under the loan than was allowed by law, and if so, the amount due to the Trust in assumpsit.

Before trial, Nordlund moved in limine to exclude any evidence of consequential damages allegedly resulting from the court-ordered sale of the Property. Nordlund pointed out that, in its trial brief, the Trust asserted it was entitled to all damages proximately resulting from "Nordlund's unlawful lending behavior," including damages that the Trust allegedly incurred by selling the Property at a substantial loss. The trial court granted Nordlund's motion and a bench trial was held in June 2021. The only witnesses were Nordlund, Arneson, Koval, and Arneson's current...