Frias v. Asset Foreclosure Servs., Inc.
| Decision Date | 18 September 2014 |
| Docket Number | No. 89343–8.,89343–8. |
| Citation | 334 P.3d 529,181 Wash.2d 412 |
| Parties | Certification from the United States District Court for the Western District of Washington in Florence R. FRIAS, Plaintiff, v. ASSET FORECLOSURE SERVICES, INC.; LSI Title Agency, Inc.; U.S. Bank, N.A. ; Mortgage Electronic Registration Systems, Inc.; and Doe Defendants 1–20, Defendants. |
| Court | Washington Supreme Court |
Melissa Ann Huelsman, Law Offices of Melissa A. Huelsman, Seattle, WA, for Plaintiff.
Katrina Eve Glogowski, Glogowski Law Firm, PLLC, Kimberly M. Hood, Attorney at Law, Brian L. Lewis, Ryan, Swanson & Cleveland PLLC, Lauren E. Sancken, David John Lenci, K & L Gates LLP, Stephen Michael Rummage, Davis Wright Tremaine LLP, Fred B. Burnside, Rebecca J. Francis, Davis Wright Tremaine LLP, Seattle, WA, Andrew H. Salter, Teton Law Group LLC, Jackson, WY, Lisa Franklin, The Franklin Law Office LLC, Redmond, WA, for Defendants.
Richard Llewelyn Jones, Kovac & Jones, PLLC, Bellevue, WA, Ha Thu Dao, Grand Central Law, PLLC, Seattle, WA, Amicus Curiae on behalf of COAlition for Civil Justice.
Kathleen M. O'Sullivan, Frederick Brian Rivera, Catherine Susan Simonsen, Perkins Coie LLP, Seattle, WA, Amicus Curiae on behalf of Washington Bankers Association.
Benjamin Jerauld Roesch, Attorney General of Washington, Seattle, WA, Amicus Curiae on behalf of Attorney General of Washington.
John Matthew Geyman, Columbia Legal Services, Seattle, WA, Amicus Curiae on behalf of Columbia Legal Services.
Sheila M. O'Sullivan, Northwest Consumer Law Center, Seattle, WA, Amicus Curiae on behalf of Northwest Consumer Law Center.
Eulalia Sotelo, Attorney at Law, Seattle, WA, Lisa Marie Von Biela, Lisa M. von Biela, Issaquah, WA, Amicus Curiae on behalf of Northwest Justice Project.
¶ 1 We have been asked by the United States District Court for the Western District of Washington to determine whether state law recognizes a cause of action for monetary damages where a plaintiff alleges violations of the deeds of trust act (DTA), chapter 61.24 RCW, but no foreclosure sale has been completed. We are also asked to articulate the principles that would apply to such a claim under the DTA and the Consumer Protection Act (CPA), chapter 19.86 RCW.
¶ 2 We hold that the DTA does not create an independent cause of action for monetary damages based on alleged violations of its provisions where no foreclosure sale has been completed. The answer to the first certified question is no—at least not pursuant to the DTA itself. We further hold that under appropriate factual circumstances, DTA violations may be actionable under the CPA, even where no foreclosure sale has been completed. The answer to the second certified question is that the same principles that govern CPA claims generally apply to CPA claims based on alleged DTA violations.
¶ 3 In September 2008, plaintiff Florence R. Frias entered a promissory note secured by a deed of trust encumbering real property in Marysville, Washington. Defendant U.S. Bank National Association was identified on the note and deed of trust as the lender, and defendant Mortgage Electronic Registration Systems Inc. was identified as the beneficiary on the deed of trust. Frias eventually defaulted on her payments and attempted to contact representatives from U.S. Bank to obtain a loan modification. While Frias was waiting for a response from U.S. Bank, she received a notice of default followed by a notice of trustee's sale. Frias continued working towards a loan modification, and the trustee's foreclosure sale was voluntarily discontinued.
¶ 4 Frias received another notice of trustee's sale in May 2011, which relied on the prior notice of default. The notice of trustee's sale included an itemization of the fees Frias needed to pay to stop the sale, including an auctioneer fee, a bankruptcy check fee, an assignment recording fee, and a fee for the anticipated cost of recording a trustee's deed following the trustee's sale, all of which Frias alleges are, at best, unreasonable in amount and, at worst, simply illegal.
¶ 5 Approximately 90 days later, in July 2011, Frias received a loan modification offer from U.S. Bank. Frias alleges the modification offer was unworkable because it required her to devote more than half of her gross income to her monthly mortgage payments. The May 2011 notice of trustee's sale did not indicate the sale would be delayed to accommodate Frias' efforts at loan modification, and the sale was not discontinued or postponed after U.S. Bank made its July 2011 modification offer.
¶ 6 In August 2011, Frias contacted a housing counselor in an attempt to participate in mediation pursuant to the Washington foreclosure fairness act. LAWS OF 2011, ch. 58. Frias' case was referred to the appropriate agency and a mediator was appointed. At the scheduled mediation session, Frias appeared, but no one appeared on behalf of the beneficiary. The mediation was rescheduled and U.S. Bank's attorney confirmed the foreclosure sale would be stayed pending mediation.
¶ 7 At the second scheduled mediation session, Frias learned the sale had gone forward as originally scheduled—after the first scheduled mediation session but before the second. U.S. Bank was the successful bidder, but the sale was not completed because the deed to the property was not issued. A third mediation session was scheduled to give U.S. Bank time to reverse the wrongful foreclosure sale and produce the required documentation. At that third session, U.S. Bank still did not have all its required documentation and refused to consider modifying Frias' loan. The mediator determined U.S. Bank had not participated in mediation in good faith.
¶ 8 Frias claims she is now uncertain of her status—she still has title to her home but has not entered a loan modification agreement and has not made any payments on her promissory note since mediation, though she would like to. Frias alleges this uncertainty has caused her emotional distress accompanied by physical symptoms.
¶ 9 Frias filed a summons and complaint in Snohomish County Superior Court. She named a cause of action against all defendants under the CPA, alleging that U.S. Bank refused to mediate in good faith in violation of the DTA, that various defendants made numerous misrepresentations to her, that defendants Asset Foreclosure Services Inc. and LSI Title Agency Inc. do not have legal authority to act as foreclosing trustees in Washington, and that the defendants falsely inflated the costs of the improper foreclosure sale for their own profit. Frias also named a cause of action for violations of the DTA against Asset Foreclosure and LSI as purported trustees. Frias alleges these defendants violated their duties of good faith by initiating the foreclosure sale when they did not have legal authority to act as trustees and when they made demands for unreasonable payments not permitted by the DTA.
¶ 10 The matter was removed to the United States District Court for the Western District of Washington, and all defendants successfully moved for dismissal under Fed.R.Civ.P. 12(b)(6). As to the CPA claim, the federal court held Frias failed to allege any compensable injury because her property had not been sold and she had not paid any foreclosure fees. As to the DTA claim, the federal court held Frias could not state a cause of action under the DTA because no foreclosure sale had occurred. These holdings are consistent with prior western district decisions. E.g., Vawter v. Quality Loan Serv. Corp. of Wash., 707 F.Supp.2d 1115, 1123–24, 1129–30 (W.D.Wash.2010).
¶ 11 Frias moved for reconsideration. While her motion was pending, Division One of the Court of Appeals held in a published opinion that Washington law recognizes a cause of action for monetary damages under both the DTA and CPA for alleged DTA violations, even if no foreclosure sale has been completed. Walker v. Quality Loan Serv. Corp.,
176 Wash.App. 294, 313, 320, 308 P.3d 716 (2013). In light of Walker, the federal court refrained from ruling on Frias' motion for reconsideration and instead certified two questions to this court.
¶ 12 Certified questions are matters of law we review de novo. Carlsen v. Global Client Solutions, LLC, 171 Wash.2d 486, 493, 256 P.3d 321 (2011). We consider the questions presented in light of the record certified by the federal court. Id. Because the federal court certified these questions in connection with a motion for dismissal for failure to state a claim on which relief may be granted pursuant to Fed.R.Civ.P. 12(b)(6), all facts alleged in the complaint are accepted as true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
¶ 13 In light of the submissions made in this case, we must first specify the scope and nature of our analysis. We then analyze whether the DTA implies a cause of action for damages premised on DTA violations absent a completed foreclosure sale, and we conclude it does not. Finally, we hold that the ordinary principles governing CPA claims generally apply to CPA claims premised on alleged DTA violations.
¶ 14 As a preliminary matter, we must address submissions by some parties and amici that make factual assertions and policy arguments. In matters of statutory construction, we are tasked with...
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