Ten Bridges, LLC v. Asano

• Decision Date: 26 October 2020
• Docket Number: No. 80456-1-I,No. 80084-1-I,80084-1-I
• Citation: 474 P.3d 1060,15 Wash.App.2d 223
• Court: Washington Court of Appeals
• Parties: TEN BRIDGES, LLC, Appellant/Cross Respondent, Teresia GUANDAI, Respondent/Cross Appellant, Midas Mulligan, LLC, Respondent. Ten Bridges LLC ; Carlyle Condominium Owners Association, Appellants, v. Yukiko Asano, Respondent.

15 Wash.App.2d 223

474 P.3d 1060

TEN BRIDGES, LLC, Appellant/Cross Respondent,

Teresia GUANDAI, Respondent/Cross Appellant,

Midas Mulligan, LLC, Respondent.

Ten Bridges LLC ; Carlyle Condominium Owners Association, Appellants,

v.Yukiko Asano, Respondent.

No. 80084-1-I

No. 80456-1-I

Court of Appeals of Washington, Division 1.

FILED October 26, 2020

Guy William Beckett, Berry & Beckett, PLLP, 1708 Bellevue Ave., Seattle, WA, 98122-2017, for Respondent and Respondent/Cross-Appellant.

Alexander Sether Kleinberg, Eisenhower & Carlson PLLC, 1201 Pacific Ave. Ste. 1200, Tacoma, WA, 98402-4395, for Appellant/Cross-Respondent.

Chelsea Christine Hicks, Scott Crain, Northwest Justice Project, Thomas William Mckay, Attorney at Law, 401 2nd Ave. S Ste. 407, Seattle, WA, 98104-3811, for Amicus Curiae Northwest Justice Project.

Heidi Anderson, Washington State Attorney General, 800 Fifth Ave. Ste. 2000, Seattle, WA, 98104-3188, for Amicus Curiae Attorney General's Office.

Amanda Nicole Martin, Northwest Consumer Law Center, 936 N 34th St. Ste. 300, Seattle, WA, 98103-8869, for Amicus Curiae Northwest Consumer Law Center.

Benjamin Jerauld Roesch, Jensen Morse Baker PLLC, 1809 7th Ave. Ste. 410, Seattle, WA, 98101-4403, for Amici Curiae Washington Homeownership Resource Center, and Financial Empowerment Network.

Patricia Army, Law Office of Patricia Army, P.O. Box 1349, North Bend, WA, 98045-1349, for Other Parties.

PUBLISHED OPINION

Verellen, J. ¶ 1 To protect consumers, RCW 63.29.350 caps the fees a fund-finder can claim as compensation for locating surplus proceeds deposited with a superior court clerk following foreclosure of a lien on a property. Ten Bridges, LLC argues the quitclaim deeds it convinced Yukiko Asano and Teresia Guandai to sign were ordinary real estate transactions and not an equity-stripping scheme violating the statutory cap on excessive fees. But the form of a transaction cannot be used to evade a statute. Because the substance of the quitclaim deeds reveals Ten Bridges sought more than five percent of the surplus proceeds for itself as compensation for having located the surplus proceeds for their rightful owners, the quitclaim deeds violated RCW 63.29.350 and were void.

¶ 2 Regarding Guandai's cross appeal, the court did not abuse its discretion by returning the parties to their respective positions prior to signing the void quitclaim deed.

¶ 3 Therefore, we affirm.

FACTS

¶ 4 Appellant Ten Bridges describes itself as a national business that works to locate surplus proceeds from foreclosure sales and to identify the individuals who have a right to assert a claim to them but have not done so due to a lack of awareness, desire, or ability to pursue the funds for themselves. Ten Bridges culls thousands of foreclosure and public auction records to locate the proceeds and the person with a right to claim them before acquiring the right to claim the funds. Amici, including the Northwest Justice Project and Northwest Consumer Law Center, assert Ten Bridges is running a predatory equity-stripping scheme that causes both immediate and lasting harms to its customers because "post-foreclosure equity-stripping schemes prevent homeowners from stabilizing their lives following foreclosure, rebuilding wealth, and transmitting wealth to their children and grandchildren."¹ As part of the foreclosure of liens against their condominiums, the King County Sheriff sold Yukiko Asano and Teresia Guandai's condominiums at auction to Madrona Lisa, LLC and Midas Mulligan, LLC, respectively. Asano and Guandai then sold Ten Bridges their rights to claim surplus proceeds. Both sales to Ten Bridges were voided for violating RCW 63.29.350.

Yukiko Asano

¶ 5 In March 2019, Asano's condominium was sold at public auction to Madrona Lisa after the court foreclosed on a lien held by Asano's condominium owners association for just over $14,000 of unpaid assessments. The sheriff returned $346,902.95 in surplus proceeds to the King County Superior Court clerk's office after paying off the lien and other expenses. A few weeks later, Matt Cox of Ten Bridges e-mailed Asano, a resident of Tokyo, to convince her to quitclaim her remaining interest in the condominium, including the right to the surplus funds and the right to redeem, in exchange for $172,000 it would obtain from the surplus funds and transfer to her. Asano was surprised because she had not known about the foreclosure, sale, or surplus funds. Asano signed a quitclaim deed in May.

¶ 6 In July, Ten Bridges tendered a check for $375,556.41 to the sheriff to redeem the condominium, despite knowing the declared redemption price was $413,361.61. The sheriff refused the tender. Ten Bridges filed a motion to set the redemption price at $375,556.41 and relied upon the quitclaim deed as proof of its right to redeem. Madrona Lisa opposed the motion, arguing Ten Bridges had no right to redeem the property because the quitclaim deed violated RCW 63.29.350. On August 8, the court concluded Ten Bridges had no right to redeem the property because the quitclaim deed was void for violating RCW 63.29.350.

¶ 7 On August 10, Cox asked Asano to sign a second quitclaim deed, explaining "the additional form I sent you may save us time" and would have "no effect whatsoever on our existing agreement."² Cox did not tell her the court had voided the first quitclaim deed. Asano signed the second deed. After learning the first quitclaim deed had been declared illegal and void, she hired Madrona Lisa's attorney to represent her in opposing Ten Bridges’ efforts.

¶ 8 In October, Ten Bridges filed another motion to set the redemption price of the property, this time at $375,506.03, and relied upon the second quitclaim deed as proof of its right to redeem. Madrona Lisa opposed the motion, noted the redemption price had increased to $430,937.91 due to accruing interest, and argued the second quitclaim deed was also void for violating RCW 63.29.350. The court concluded that Ten Bridges had no right to redeem the property because the second quitclaim deed was also void for violating RCW 63.29.350.

¶ 9 Ten Bridges appeals both orders voiding the quitclaim deeds.

Teresia Guandai

¶ 10 Guandai's condominium was sold to Midas Mulligan for $116,000 at public auction. Guandai's condominium owners association had filed for and successfully foreclosed on a lien for unpaid assessments. By the time of the sale, Guandai owed almost $27,000. After paying off the lien and other expenses, the sheriff deposited just under $90,000 in surplus proceeds with the King County Superior Court clerk's office.

¶ 11 Guandai had one year to redeem. Matt Cox of Ten Bridges soon called Guandai and told her she "might" be able to receive the surplus funds, but it would be "nearly impossible."³ Guandai had not known about the funds before his call. Cox called repeatedly, offering $15,000 for her remaining interest in her home and her right to claim the surplus proceeds. When the year was almost over, Guandai faced losing her home and needed money. She spoke with Cox again and agreed to sell. Guandai signed a quitclaim deed transferring her interest in the condo, including any right to surplus proceeds from its sale, to Ten Bridges. Ten Bridges wired her $15,000.

¶ 12 A few weeks later, Ten Bridges filed a motion to have the surplus funds disbursed to it. It sent notice of its motion to Midas Mulligan and to Guandai at her now-vacant condominium. Guandai did not appear at the May 15, 2019 hearing. Midas Mulligan opposed the motion and argued either Guandai was entitled to the money or, if she did not assert a claim, then it was entitled to the surplus funds as the property owner. It requested an evidentiary hearing to determine whether Ten Bridges’ agreement with Guandai violated RCW 63.29.350.

¶ 13 At the next hearing, Guandai appeared pro se with Midas Mulligan and Ten Bridges. The court concluded RCW 63.29.350 applied, voided Ten Bridges’ agreement with Guandai, and awarded her the surplus proceeds, except for the $15,000 Ten Bridges already paid her.

¶ 14 Ten Bridges appeals, and Guandai cross appeals the ruling disbursing $15,000 of the surplus proceeds to Ten Bridges.

ANALYSIS

I. Standing

¶ 15 As a threshold matter, we address Ten Bridges’ challenge to Madrona Lisa's standing to oppose its attempts to set the price of and redeem the condominium Asano used to own.

¶ 16 "We review de novo whether a party has standing."⁴ A party "whose rights and interests are at stake" has standing to defend against an action.⁵ A party has standing when it can demonstrate, first, an injury "fairly traceable to the challenged conduct and likely to be redressed by the requested relief," and, second, a cognizable interest within the " ‘zone of interests protected by the statute’ " at issue.⁶

¶ 17 Ten Bridges specifically argues the second requirement is not met because it has an "unequivocal right to redeem" and Madrona Lisa has an "unequivocal right" to receive the proper redemption price from Ten Bridges.⁷ Ten Bridges misunderstands Madrona Lisa's rights and its own.

¶ 18 The purchaser of a foreclosed property has an inchoate ownership interest in the property.⁸ This interest vests once no one has the right to redeem.⁹ Only a person with a valid interest in the foreclosed property, or their successor, may attempt to redeem the property.¹⁰ If a prospective redemptioner attempts to redeem, then they take on a statutory duty to pay the purchaser the proper price, and the purchaser has a corresponding statutory right to payment.¹¹ Thus, Ten Bridges had a right to redeem provided it held a valid interest in the property and tendered the proper amount. Madrona Lisa had an inchoate interest in the condominium and a right to receive the proper amount of payment from Ten Bridges upon proof of a valid interest.

¶ 19 Ten Bridges relied on the first quitclaim deed to show its right to redeem. The posted redemption price at the time was $413,361.61. Ten Bridges disagreed with Madrona Lisa's...