IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DOUG WALKER, an individual, NO. 65975-8-1
Appellant, DIVISION ONE
ORDER CHANGING AND
QUALITY LOAN SERVICE CORP. REPLACING OPINION
OF WASHINGTON, a Washington
corporation; SELECT PORTFOLIO
SERVICING, INC., a Utah
corporation,
Respondents,
CREDIT SUISSE FINANCIAL
CORPORATION, a Delaware
corporation; TICOR TITLE COMPANY,
a Washington corporation; REGIONAL
TRUSTEE SERVICES
CORPORATION, a Washington
corporation; AMERICAN BROKERS
CONDUIT; and MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware
corporation,
Defendants.
The court, having determined a need to modify its opinion filed August 5, 2013,
now, therefore, it is hereby
ORDERED that the opinion be changed as follows:
The final sentence at page 21 of the opinion shall be reworded to provide:
If Walker is able to prove these underlying DTA violations, he may also be
able to show that Quality and Select violated § 1692f(6) by threatening
nonjudicial foreclosure.
It is further ORDERED that the amended opinion shall replace the original
opinion filed herein. n.
DATED this dW^tey of M\ hJM / U 2013.
/U^r^i 2L
CO
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DOUG WALKER, an individual, NO. 65975-8-1
Appellant, DIVISION ONE
v.
AMENDED PUBLISHED
QUALITY LOAN SERVICE CORP. OPINION
OF WASHINGTON, a Washington
corporation; SELECT PORTFOLIO
SERVICING, INC., a Utah
corporation,
Respondents, FILED: August 26, 2013
CREDIT SUISSE FINANCIAL
CORPORATION, a Delaware
corporation; TICOR TITLE COMPANY,
CD
a Washington corporation; REGIONAL
TRUSTEE SERVICES
CORPORATION, a Washington
corporation; AMERICAN BROKERS
CONDUIT; and MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware
corporation,
Defendants.
Leach, C.J. — In this case we consider whether a property owner's
preforeclosure sale remedies for alleged violations of the deeds of trust act,
chapter 61.24 RCW (DTA), the Consumer Protection Act, chapter 19.86 RCW
(CPA), and the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692
NO. 65975-8-1 / 2
(FDCPA), include recovery of monetary damages. We hold that a property
owner may recover damages in this circumstance, depending upon the specific
facts of the case.
Doug Walker appeals a trial court order granting the CR 12(c) dismissal
motion of Quality Loan Service Corporation of Washington (Quality) and Select
Portfolio Servicing Inc. (Select).1 After Quality initiated nonjudicial proceedings to
foreclose Walker's deed of trust, he sued to enjoin the trustee's sale and also
sought damages for violations of the DTA, CPA, and FDCPA. Additionally,
Walker sought to quiet title to his property. Because Walker's amended
complaint alleges facts that, if proved, would entitle him to some relief, we
reverse in part and remand for further proceedings.
FACTS
In February 2007, Credit Suisse Financial Corporation (Credit Suisse)
loaned Doug Walker $280,000. He signed a promissory note memorializing his
debt and a deed of trust to secure the note. The deed of trust named Ticor Title
Company as the trustee, Credit Suisse as the lender, and Mortgage Electronic
Registration Systems Inc. (MERS) as "a separate corporation that is acting solely
1 The trial court entered an order of default against defendants Credit
Suisse Financial Corporation, Ticor Title Company, and American Brokers
Conduit.
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NO. 65975-8-1 / 3
as a nominee for Lender and Lender's successors and assigns. MERS is the
beneficiary under this Security Instrument."
The deed of trust also contained a number of other statements about
MERS's status, including,
The beneficiary of this Security Instrument is MERS (solely as
nominee for Lender and Lender's successors and assigns) and the
successors and assigns of MERS. This Security Instrument
secures to Lender (i) the repayment of the Loan, and all renewals,
extensions and modifications of the Note, and (ii) the performance
of Borrower's covenants and agreements under this Security
Instrument and the Note. For this purpose, Borrower irrevocably
grants and conveys to Trustee, in trust, with power of sale, the
following described property.
and
Borrower understands and agrees that MERS holds only legal title
to the interests granted by Borrower in this Security Instrument, but,
if necessary to comply with law or custom, MERS (as nominee for
Lender and Lender's successors and assigns) has the right to
exercise any or all of those interests, including, but not limited to,
the right to foreclose and sell the Property.
Walker defaulted on the note. On May 22, 2009, a notice of default was
mailed to Walker.2 On May 28, 2009, Select, acting as "the Beneficiary,"
recorded an instrument naming Quality as successor trustee under the deed of
trust. Over a month later, on July 6, 2009, MERS executed a corporate
2 The record does not contain a copy of this notice, and it is unclear from
the record which party mailed the notice to Walker.
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NO. 65975-8-1/4
assignment of deed of trust "as nominee for Credit Suisse," assigning its interest
in the deed of trust and the promissory note to Select.
On July 21, 2009, Quality recorded a notice of trustee's sale for Walker's
property. The notice recited that Walker granted the deed of trust to "secure an
obligation in favor of [MERS], as Beneficiary, the beneficial interest in which was
assigned by [MERS], as nominee for [Credit Suisse] to [Select]." It also identified
Quality as the successor trustee.
On October 28, 2009, Walker filed an amended complaint in Snohomish
County Superior Court, seeking to enjoin the trustee's sale, to recover damages
on a variety of theories, and to quiet title. The trial court entered a temporary
restraining order enjoining the trustee's sale while the action was pending,
conditioned on Walker making note payments into the court registry.
Later, the trial court granted Quality and Select's CR 12(c) motion for
judgment on the pleadings. Walker appeals.
STANDARD OF REVIEW
We review de novo a trial court's order for judgment on the pleadings.3
"'[W]e examine the pleadings to determine whether the claimant can prove any
set of facts, consistent with the complaint, which would entitle the claimant to
3 Pasado's Safe Haven v. State. 162 Wn. App. 746, 752, 259 P.3d 280
(2011) (citing N. Coast Enters., Inc. v. Factoria P'ship, 94 Wn. App. 855, 858,
974P.2d 1257(1999)).
NO. 65975-8-1 / 5
relief.'"4 In making this determination, we presume the plaintiff's allegations are
true and may consider hypothetical facts not included in the record.5
ANALYSIS
Walker alleges that Quality and Select violated the DTA, FDCPA, and
CPA. He also asserts a claim to quiet title to his property. We reverse the trial
court's order dismissing his complaint and remand for further proceedings on all
claims except his request to quiet title.
Deeds of Trust Act
We first consider Walker's DTA claim, based primarily upon the
designation of MERS as beneficiary in the deed of trust. Asserting that MERS
could not be a lawful deed of trust beneficiary, Walker alleges "all subsequent
actions taken by any party in reliance on MERS' actions is [sic] also unlawful."
Stated more plainly, Walker claims that MERS was not a lawful beneficiary and
therefore lacked the authority to assign the deed of trust and note to Select.
Because the assignment to Select was ineffective, Select's designation of Quality
as successor trustee was also ineffective, meaning that Quality lacked authority
to initiate nonjudicial foreclosure proceedings. Although no foreclosure sale
4 Pasado's Safe Haven, 162 Wn. App. at 752 (quoting N. Coast Enters.,
94 Wn. App. at 859).
5 M.H. v. Corp. of Catholic Archbishop of Seattle, 162 Wn. App. 183, 189,
252 P.3d 914 (quoting Tenore v. AT&T Wireless Servs., 136 Wn.2d 322, 330,
962 P 2d 104 (1998)), review denied, 173 Wn.2d 1006 (2011).
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NO. 65975-8-1 / 6
occurred, Walker labels this a "wrongful foreclosure" claim. We consider it more
accurate to characterize this as a claim for damages arising from DTA violations.
Select and Quality respond that Washington does not recognize a claim
for "wrongful initiation of foreclosure when, as here, the foreclosure sale has
been discontinued." We disagree.
The DTA regulates transactions in which a borrower secures a promissory
note or other debt instrument with a deed of trust. Although a statutory deed of
trust conveys title to a trustee, because the borrower does this to secure credit or
a loan from the lender, it is essentially an equitable mortgage.6 The beneficiary
is "the holder of the instrument or document evidencing the obligations secured
by the deed of trust, excluding persons holding the same as security for a
different obligation."7 The trustee is "the person designated as the trustee in the
deed of trust or appointed under RCW 61.24.010(2)."8 Former RCW
61.24.010(2) (2008) states,
The trustee may resign at its own election or be replaced by the
beneficiary .... [U]pon the resignation, ... or the election of the
beneficiary to replace the trustee, the beneficiary shall appoint a
trustee or a successor trustee. Upon recording the appointment of
a successor trustee . . . , the successor trustee shall be vested with
all powers of an original trustee.
6 18 William B. Stoebuck & John W. Weaver, Washington Practice:
Real Estate: Transactions § 17.3, at 260 (2d ed. 2004).
7 RCW 61.24.005(2).
8 Former RCW 61.24.005(4) (1998).
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NO. 65975-8-1 / 7
Under the DTA, if a deed of trust contains the power of sale, the trustee
may usually foreclose the deed of trust and sell the property without judicial
supervision.9 Only a lawful beneficiary has the power to appoint a successor
trustee,10 and only a lawfully appointed successor trustee has the authority to
issue a notice of trustee's sale.11 Accordingly, when an unlawful beneficiary
appoints a successor trustee, the putative trustee lacks the legal authority to
record and serve a notice of trustee's sale.
While the current version of RCW 61.24.030 requires that the trustee
"have proof that the beneficiary is the owner of any promissory note or other
obligation secured by the deed of trust" before issuing a notice of trustee's sale,12
the version in effect on July 21, 2009, when Quality filed a notice of trustee's sale
regarding Walker's property, did not include this requirement.13
Because the DTA "dispenses with many protections commonly enjoyed by
borrowers under judicial foreclosures, lenders must strictly comply with the
statutes, and courts must strictly construe the statutes in the borrower's favor."14
9Bain, 175 Wn.2d at 93 (citing 18 Stoebuck &Weaver, § 17.3, at 260-61);
RCW 61.24.020; RCW 61.12.090; RCW 7.28.230(1).
10 Bain, 175 Wn.2d at 89; former RCW 61.24.010(2).
11 Former RCW 61.24.010(2), .040(2008).
12RCW61.24.030(7)(a).
13 See former RCW 61.24.030 (2008).
14 Albice v. Premier Mortq. Servs. of Wash, Inc., 174 Wn.2d 560, 567, 276
P.3d 1277 (2012) (citing Udall v. T.D. Escrow Servs., Inc., 159 Wn.2d 903, 915-
16, 154 P.3d 882 (2007)).
-7-
NO. 65975-8-1 / 8
The Washington Supreme Court "has frequently emphasized that the deed of
trust act 'must be construed in favor of borrowers because of the relative ease
with which lenders can forfeit borrowers' interests and the lack of judicial
oversight in conducting nonjudicial foreclosure sales.'"15 Courts also construe
the DTA to further three objectives: "'First, the nonjudicial foreclosure process
should remain efficient and inexpensive. Second, the process should provide an
adequate opportunity for interested parties to prevent wrongful foreclosure.
Third, the process should promote the stability of land titles.'"16
The DTA permits a borrower or grantor, among others, "to restrain, on any
proper legal or equitable ground, a trustee's sale."17 But, as Walker correctly
observes, the DTA includes "no specific remedies for violation of the statute in
the context of pre-sale actions meant to prevent the wrongful foreclosure from
occurring." However, in response to a decision of this court,18 in 2009 the
legislature explicitly recognized a cause of action for damages for failure to
comply with the DTA.19 It did so by amending the DTA to include RCW
15 Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 789, 295 P.3d 1179 (2013)
(emphasis added) (quoting Udall, 159 Wn.2d at 915-16).
16 Bain, 175 Wn.2d at 94 (quoting Cox v. Helenius, 103 Wn.2d 383, 387,
693 P.2d 683 (1985)).
17 RCW 61.24.130(1).
18 Brown v. Household Realty Corp., 146 Wn. App. 157, 189 P.3d 233
(2008); see Final B. Rep. on Engrossed S.B. 5810, at 3, 61st Leg., Reg. Sess.
(Wash. 2009); Judiciary Comm., H.B. Analysis on Engrossed S.B. 5810, at 2-3,
61st Leg., Reg. Sess. (Wash. 2009).
19 RCW 61.24.127; Laws of 2009, ch. 292, § 6.
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NO. 65975-8-1 / 9
61.24.127, which provides that a borrower or grantor does not waive certain
claims for damages by failing to bring a civil action to enjoin a foreclosure sale.
The claims not waived include the "[fjailure of the trustee to materially comply
with the provisions of this chapter."20 Nothing in the 2009 amendment requires
that the violation resulted in the wrongful sale of the property. This provision
preserves a cause of action existing at the time a sale could be restrained—in
other words, a claim existing before a foreclosure sale. It reflects the
legislature's understanding of existing law—that a cause of action for damages
existed based upon a trustee's presale failure to comply with the DTA, causing
damage to the borrower.
Klem v. Washington Mutual Bank21 supports our conclusion that the
specific remedies provided in the DTA are not exclusive. There, the court
considered whether the violations of the DTA that the legislature identified in
RCW 61.24.135 as unfair or deceptive acts for purposes of the CPA were the
only DTA violations that were unfair for CPA purposes. The Klem court held that
the legislature's list was not exclusive, observing, "Given that there is 'no limit to
human inventiveness,' courts, as well as legislatures, must be able to determine
20 RCW 61.24.127(1 )(c).
21 176Wn.2d771.295P.3d 1179(2013).
NO. 65975-8-1/10
whether an act or practice is unfair or deceptive to fulfill the protective purposes
of the CPA."22
Walker alleges that MERS never held his note and, therefore, never had
authority to act as beneficiary under the DTA. He further alleges that Select
derived its authority to act from MERS's assignment and Quality derived its
authority to foreclose from Select. Thus, he argues that Select had no authority
to proceed with a nonjudicial foreclosure and violated the DTA by starting one.
He also claims that Select violated the DTA by appointing Quality as successor
trustee and by recording an appointment before MERS purported to assign his
note to Select. For purposes of this appeal, we must accept Walker's factual
allegations as true. If proved, these allegations would establish material
violations of the DTA.
In Bain v. Metropolitan Mortgage Group. Inc.,23 our Supreme Court held
that if MERS never held the promissory note or other debt instrument, it was not
a lawful beneficiary and could not appoint a successor trustee. The court also
found deed of trust language identifying MERS as "acting solely as a nominee for
Lender and Lender's successors and assigns" insufficient to establish MERS as
the note holder's agent.24 The Supreme Court in Bain also rejected the argument
22 Klem, 176 Wn.2d at 785-86.
23 175 Wn.2d 83, 110, 285 P.3d 34 (2012).
24 Bajn, 175 Wn.2d at 106-07.
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NO. 65975-8-1/11
that MERS could become a beneficiary by contract, explaining, "The legislature
has set forth in great detail how nonjudicial foreclosures may proceed. We find
no indication the legislature intended to allow the parties to vary these
procedures by contract. We will not allow waiver of statutory protections
lightly."25 Thus, Walker has pleaded facts sufficient to show that MERS lacked
the authority to assign his deed of trust and note to Select and, as a
consequence, that Select similarly lacked authority to appoint Quality successor
trustee. Additionally, Walker alleges Select did not hold the note before MERS
purportedly appointed Select as the beneficiary in July 2009. As such, Select
lacked authority to appoint Quality when it signed the appointment of successor
trustee in May 2009. Thus, Walker pleads facts sufficient to show that Quality
and Select violated RCW 61.24.005(2) and former RCW 61.24.010(2) because
Select was not a lawful beneficiary at the time it appointed Quality. Walker also
pleads facts sufficient to establish a violation of former RCW 61.24.040 because
he alleges that an unlawful trustee recorded and transmitted the notice of sale.
In addition to these procedural violations, Walker alleges that Quality
breached its statutory duty of good faith to him imposed by the DTA.26 He
contends, "If [Quality] intends to foreclose a property non-judicially it is obligated
to have evidence that it is doing so on a legitimate and legal basis and not simply
25 Bain, 175 Wn.2d at 108.
26 RCW 61.24.010(4).
•11-
NO. 65975-8-1 /12
acting at the behest of a party that may or may not have the legal right to conduct
such an action." He asserts that a "cursory investigation" would have revealed
that Quality did not have proper authority to act and that Quality "recorded and
relied upon documents it knew, or should have known, to be false and
misleading." These allegations, if proved, would show that Quality failed to act in
good faith by failing to adequately inform itself about its authority to foreclose.
Therefore, Walker pleads facts entitling him to relief for Quality's violations of its
duties under RCW 61.24.010(4).
We recognize our disagreement with Vawter v. Quality Loan Service Corp.
of Washington,27 where the United States District Court for the Western District of
Washington reached a contrary result, holding that "the DTA does not authorize a
cause of action for damages for the wrongful institution of nonjudicial foreclosure
proceedings where no trustee's sale occurs." To reach this conclusion, the court
relied upon Pfau v. Washington Mutual, Inc.28 and Krienke v. Chase Home
Finance, LLC,29 which were decided before the legislature enacted RCW
61.24.127. Further, the court decided Vawter before our Supreme Court decided
Bain. We also disagree with the reasons that the court identified to support its
decision.
27 707 F. Supp. 2d 1115, 1123 (W.D. Wash 2010).
28 No. CV-08-00142, 2009 WL 484448 (E.D. Wash. Feb. 24, 2009).
29 Noted at 140 Wn. App. 1032 (2007).
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NO. 65975-8-1/13
The court in Vawter stated four reasons for its holding. First, it explained,
"The Vawters have not identified any statutory provision of the DTA that permits
a cause of action for wrongful institution offoreclosure proceedings."30 The court
did not address the effect of the 2009 amendments to RCW 61.24.127 because
the savings clause did not apply in the case before it.31 But, construing RCW
61.24.127(1)(c) in a borrower's favor, this statute demonstrates that the
legislature recognized a cause of action for damages for DTA violations. As
previously noted, nothing in the statute requires that the violation resulted in the
wrongful sale of the property.
Second, the court in Vawter explained that the legislature "established a
comprehensive scheme for the nonjudicial foreclosure process" and that "to the
extent the legislature intended to permit a cause of action for damages, it could
have said so."32 But, the legislature has spoken and, with RCW 61.24.127(1)(c),
recognized a cause of action for damages caused by violations of the DTA.
30 Vawter, 707 F. Supp. 2d at 1123.
31 Although the court recognized that "the Washington legislature
amended the DTA to add a handful of new protections and safeguards for
borrowers and grantors," the homeowners acknowledged that the amendments
did not govern the nonjudicial foreclosure proceedings at issue in their case.
Accordingly, the court determined that it "need not consider the effect of these
amendments for purposes of the present motion." Vawter, 707 F. Supp. 2d at
1122 n.9.
32 Vawter, 707 F. Supp. 2d at 1123.
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NO. 65975-8-1 /14
Third, the court reasoned that allowing a presale cause of action for
damages would "spawn litigation under the DTA for damages, thereby interfering
with the efficient and inexpensive nature of the nonjudicial foreclosure process,
while at the same time failing to address directly the propriety of foreclosure or
advancing the opportunity of interested parties to prevent wrongful foreclosure."33
Bain observed that the lending industry has institutionalized a series of deceptive
practices,34 that MERS has been involved with "an enormous number of
mortgages in the country (and our state), perhaps as many as half nationwide,"35
and that MERS "often issue[s] assignments without verifying the underlying
information."36 Thus, the lending industry and MERS have already spawned the
feared litigation with their institutionalized practices. Holding the lending industry
liable for damages caused by its DTA violations should produce greater
compliance and a reduction in future litigation. Thus, the availability of a presale
cause of action for damages could significantly reduce the long-term system-
wide expenses of nonjudicial foreclosures under the DTA.
Finally, the court in Vawter stated that even if it were to recognize a
presale cause of action for damages under the DTA, "the court is not persuaded
33 Vawter, 707 F. Supp. 2d at 1124.
34 Bain, 175 Wn.2d at 117.
35 Bain, 175 Wn.2d at 118.
36 Bain, 175 Wn.2d at 118 n.18.
-14-
NO. 65975-8-1/15
that it could be maintained without a showing of prejudice."37 There, the plaintiffs
could not show prejudice because they conceded that the trustee's sale was
discontinued and that one of the defendants possessed the note.38 Additionally,
the court determined that prematurely appointing a successor trustee, before
authority to make such an appointment, was a "non-prejudicial timing mistake"
because the trustee reappointed the successor after it was assigned a beneficial
interest in the deed of trust.39 Further, pre-Bain, the court explained, "Even
accepting the Vawters' factual allegation that MERS exists to maintain records
regarding the ownership of mortgages, this does not mean that MERS cannot
hold a beneficial interest under the Deed of Trust."40
Here, Walker alleges that MERS never had a beneficial interest because it
never held the note. Under Bain, it could never be a lawful beneficiary. Walker
also alleges damages caused by Select's and Quality's unlawful actions taken in
violation of the DTA. Walker's allegations strongly support recognizing a presale
cause of action for damages under the DTA because he pleads facts showing he
has suffered prejudice from Select's and Quality's unlawful conduct.
37 Vawter, 707 F. Supp. 2d at 1124.
38 Vawter, 707 F. Supp. 2d at 1122-23, 1124.
39 Vawter, 707 F. Supp. 2d at 1127.
40 Vawter, 707 F. Supp. 2d at 1126.
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NO. 65975-8-1/16
Quality and Select cite Massev v. BAC Home Loans Servicing LP41 to
support their argument that there is "no cause of action for damages for violation
of the DTA where the trustee's sale is discontinued." But, in Massev, as in
Vawter, the court followed Pfau and Krienke and did not consider the 2009
amendments to the DTA.42
MERS never held the note and, based on Walker's amended complaint,
we can hypothesize that MERS never had independent authority to appoint a
beneficiary. We can further hypothesize that Select did not hold Walker's note at
the time it appointed Quality. No Washington case law relieves from liability a
party causing damage by purporting to act under the DTA without lawful authority
to act or failing to comply with the DTA's requirements.
Notably, the language of RCW 61.24.127(1 )(c) refers only to "[fjailure of
the trustee to materially comply with the provisions of this chapter." (Emphasis
added.) We need not decide if this may prevent a borrower from suing a
beneficiary under some circumstances. Our Supreme Court has recognized, in
the context of a CPA claim, "Where the beneficiary so controls the trustee so as
to make the trustee a mere agent of the beneficiary, then as principle [sic], the
41 No. C12-1314, 2012 WL 5295146 (W.D. Wash. Oct. 26, 2012).
42 Massev, 2012 WL 5295146, at *4.
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NO. 65975-8-1/17
beneficiary may be liable for the acts of its agent."43 Here, we can plausibly
hypothesize Select controlling Quality's actions violating the DTA.
Because the legislature recognized a presale cause of action for damages
in RCW 61.24.127(1 )(c), we hold that a borrower has an actionable claim against
a trustee who, by acting without lawful authority or in material violation of the
DTA, injures the borrower, even if no foreclosure sale occurred. Additionally,
where a beneficiary, lawful or otherwise, so controls the trustee so as to make
the trustee a mere agent of the beneficiary, then, as principal, it may have
vicarious liability.
Fair Debt Collection Practices Act
Walker also asserts that Quality and Select violated the FDCPA. He
alleges that Select meets the "debt collector" definition of
15 U.S.C. § 1692a(6)(F)(iii) because he defaulted on his debt before MERS
purported to assign it to Select. Additionally, "if SELECT was a 'debt collector'
within the terms of the FDCPA at the time of its assignment of the debt, its agent,
[Quality], would certainly be one." Walker argues that Quality violated
15 U.S.C. § 1692e "through the use of false and misleading representations" and
violated 15 U.S.C. § 1692f with a "threat to take nonjudicial action to dispossess
the Plaintiff of his residence without a present right to possession." He claims
43 Klem, 176 Wn.2d at 791 n.12.
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NO. 65975-8-1/18
that Select violated these provisions of the FDCPA with its "representations" and
"actions" "made in connection with the purported collection of a debt," as well as
its "misstatements of fact regarding a debt owed to SELECT."
The FDCPA "applies only to 'debt collectors,' which are entities who
regularly collect debts for others, not to 'creditors,' who are collecting on their
own behalf."44 The statute defines a "debt collector" as
any person who uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of which is the
collection of any debts, or who regularly collects or attempts to
collect, directly or indirectly, debts owed or due or asserted to be
owed or due another.... For the purpose of section 1692f(6) of
this title, such term also includes any person who uses any
instrumentality of interstate commerce or the mails in any business
the principal purpose of which is the enforcement of security
interests.1451
A debt is "any obligation or alleged obligation of a consumer to pay money
arising out of a transaction in which the money, property, insurance, or services
which are the subject of the transaction are primarily for personal, family, or
household purposes, whether or not such obligation has been reduced to
judgment."46
44 Am. Express Centurion Bank v. Stratman, 172 Wn. App. 667, 676, 292
P.3d 128 (2012) (citing 15 U.S.C. § 1692a(6); Discover Bank v. Ray, 139 Wn.
App. 723, 727, 162 P.3d 1131 (2007)).
45 15 U.S.C. §1692a(6).
46 15 U.S.C. §1692a(5).
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NO. 65975-8-1/19
Section 1692e of the FDCPA prohibits a debt collector from using a "false,
deceptive, or misleading representation or means in connection with the
collection of any debt." Section 1692f prohibits a debt collector from using "unfair
or unconscionable means to collect or attempt to collect any debt." A debt
collector violates that section by "[t]aking or threatening to take any nonjudicial
action to effect dispossession or disablement of property if there is no present
right to possession of the property claimed as collateral through an enforceable
security interest."47
Here, Quality makes no claim that it is a creditor collecting on its own
behalf. Instead, Quality argues that it is not a statutory debt collector because it
does not regularly collect consumer debts owed to another. Quality also states
that pursuing nonjudicial foreclosure under a deed of trust does not constitute
debt collection.
"'[M]ortgage servicer companies and others who service outstanding debts
for others, [are not debt collectors] so long as the debts were not in default when
taken for servicing.'"48 Thus, "'[although there is no statutory definition of 'loan
servicer' under the Act, a loan servicer will become a debt collector under
47 15 U.S.C. § 1692f(6)(A).
48 Oliver v. Ocwen Loan Servs., LLC, No. C12-5374, 2013 WL 210619, at
*3 (W.D. Wash. Jan. 18, 2013) (second alteration in original) (quoting Mansour v.
Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1182 (D. Ariz. 2009)).
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NO. 65975-8-1 / 20
§ 1692a(6)(F)(iii) if the debt was in default or treated as such when it was
acquired."'49
In Jara v. Aurora Loan Services, LLC,50 the United States District Court for
the Northern District of California recognized that most district courts within the
Ninth Circuit Court of Appeals have concluded that foreclosure proceedings do
not constitute "debt collection" within the meaning of the FDCPA. The court
noted, however, that "acts taken in furtherance of a foreclosure proceeding can
be the basis of a FDCPA claim, but only if they are alleged as violations of 15
U.S.C. § 1692f(6)."51 The court adopted the District of Idaho's reasoning:
[l]f "debt collection" generally included the enforcement ofa security
interest, the language specifying so for the purposes of § 1692f(6)
would be surplusage, and such a construction would violate a "long
standing canon of statutory construction that terms in a statute
should not be construed so as to render any provision of that
statute meaningless orsuperfluous."[52]
Although the Ninth Circuit has not ruled on this issue, "[t]he current trend among
district courts in the Ninth Circuit is to find that, at least insofar as defendant
confines itself to actions necessary to effectuate a nonjudicial foreclosure, only
49 Oliver, 2013 WL 210619, at *4 (quoting Bridge v. Ocwen Fed. Bank,
FSB, 681 F.3d 355, 360 n.4 (6th Cir. 2012)).
50 No. C 11-00419,2011 WL 6217308, at *4 (N.D. Cal. Dec. 14,2011).
51 Jara, 2011 WL 6217308, at *5.
52 Jara, 2011 WL 6217308, at *5 (quoting Armacost v. HSBC Bank USA,
No. 10-CV-274, 2011 WL 825151, at *5 (D. Idaho Feb. 9, 2011)).
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§ 1692f(6) of the FDCPA applies."53 We join this trend in recognizing a claim
under § 1692f, which is consistent with the statutory language.
Here, the trial court properly dismissed Walker's claims under 15
U.S.C. § 1692e. Nothing in the record indicates that Quality or Select engaged in
any activities beyond those necessary to institute foreclosure proceedings. "Acts
required to institute foreclosure proceedings, such as the recording of a notice of
default, alone, are not debt collection activities for purposes of the FDCPA unless
alleged in relation to a claim for violation of 15 U.S.C. § 1692f(6)."54 Therefore,
Walker's claim under 15 U.S.C. § 1692e fails.
The trial court erred, however, by dismissing Walker's claim under
15 U.S.C. § 1692f. Because his arguments concern Quality's and Select's
actions to enforce a security interest, these parties may constitute "debt
collectors" within the statute's meaning. Assuming that Walker's allegations are
true, neither Quality nor Select had a present right to possess the property
through nonjudicial foreclosure because they never held the note or the
underlying debt and were not lawfully appointed under the DTA. If Walker is able
to prove these underlying DTA violations, he may also be able to show that
Quality and Select violated § 1692f(6) by threatening nonjudicial foreclosure.
53 McDonald v. OneWest Bank, FSB, No. C10-1952, 2012 WL 555147, at
*4 n.6 (W.D. Wash. Feb. 21, 2012).
54 Jara, 2011 WL 6217308, at *5.
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NO. 65975-8-1 / 22
Presuming that the facts stated in Walker's amended complaint are true,
the trial court could potentially grant relief under 15 U.S.C. § 1692f. Accordingly,
the trial court erred by dismissing his FDCPA claim.
Consumer Protection Act
Walker next claims that Quality and Select violated the CPA. The CPA
declares unlawful unfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce.55 Generally, to prevail in a
private CPA claim, the plaintiff must prove (1) an unfair or deceptive act or
practice (2) occurring in trade or commerce (3) affecting the public interest, (4)
injury to a person's business or property, and (5) causation.56 The failure to
establish any of these elements is fatal to a CPA claim.57 Here, in light of our
Supreme Court's recent decisions in Bain58 and Klem,59 Quality and Select
contend only thatWalker fails to meet the fourth and fifth elements.
55 RCW 19.86.020.
56 Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105
Wn.2d 778, 784-85, 719 P.2d 531 (1986).
57 Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., 162 Wn.2d
59,74, 170 P.3d 10 (2007).
58 In Bajn, a case against MERS, the court recognized that the plaintiff
presumptively met the first element because "characterizing MERS as the
beneficiary has the capacity to deceive." 175 Wn.2d at 117. The plaintiff also
presumptively met the second element based upon "considerable evidence that
MERS is involved with an enormous number of mortgages in the country (and
our state), perhaps as many as half nationwide." 175 Wn.2d at 118. Third, the
court opined that "there certainly could be injury under the CPA" if the
homeowner borrower could not determine the noteholder, if there were incorrect
or fraudulent transfers of the note, or if concealing loan transfers deprived the
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NO. 65975-8-1 / 23
The CPA does not define an "unfair or deceptive act or practice." Whether
an alleged act is unfair or deceptive presents a question of law.60 A consumer
may establish an unfair or deceptive act by showing "either that an act or practice
'has a capacity to deceive a substantial portion of the public,' or that 'the alleged
act constitutes a per se unfair trade practice.'"61 "Implicit in the definition of
'deceptive' under the CPA is the understanding that the practice misleads or
misrepresents something of material importance."62 Whether an unfair act has
the capacity to deceive a substantial portion of the public is a question of fact.63
To establish a per se violation, a plaintiff must show "that a statute has been
violated which contains a specific legislative declaration of public interest
impact."64
homeowner of rights that require the homeowner to sue or to negotiate with the
actual noteholder. 175 Wn.2d at 118-19.
59 In Klem, the court held that "a claim under the Washington CPA 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." 176
Wn.2d at 787. The court determined that a trustee's failure to fulfill its duty to the
borrower constituted a "deceptive act" under the CPA. 176 Wn.2d at 787.
60 Holiday Resort Cmtv. Ass'n v. Echo Lake Assocs., LLC, 134 Wn. App.
210, 226, 135 P.3d 499 (2006).
61 Saunders v. Lloyd's of London, 113 Wn.2d 330, 344, 779 P.2d 249
(1989) (quoting Hangman Ridge, 105 Wn.2d at 785-86).
62 Holiday Resort, 134 Wn. App. at 226.
63 Holiday Resort, 134 Wn. App. at 226-27.
64 Hangman Ridge, 105 Wn.2d at 791.
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NO. 65975-8-1 / 24
Walker asserts that his allegations describe a per se violation of the CPA,
thereby satisfying the first two elements,65 because Quality and Select violated
"statutes related to the collection of a debt."66 Alternatively, Walker lists four acts
that he contends were deceptive: (1) Quality sent a notice of default to Walker
"despite not meeting the requirements of a successor trustee under RCW
61.24.010(2) which [Quality] and SELECT knew or should have known at the
time the Notice of Default was issued"; (2) Quality and Select "facilitated a
deceptive and misleading effort to wrongfully execute and record documents
[Quality] and SELECT knew or should have known contained false statements
related to the Appointment of Successor Trustee and Assignment of Deed of
Trust"; (3) Quality and Select sent, executed, and recorded a notice of trustee's
sale that they "knew contained false statements in that no obligation of the
Plaintiff was ever owed to SELECT, the purported 'beneficiary'"; and (4) "that as
a result of this conduct, [Quality] and SELECT knew that its conduct amounted to
wrongful foreclosure and was further in violation of the FDCPA."
To meet the fourth and fifth elements, Walker must allege facts
demonstrating that Quality's and Select's deceptive acts caused him harm. To
65 Hangman Ridge. 105 Wn.2d at 786.
66 See Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 53, 204 P.3d
885 (2009) ("When a violation of debt collection regulations occurs, it constitutes
a per se violation of the CPA . . . under state and federal law, reflecting the public
policy significance of this industry.").
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NO. 65975-8-1 / 25
prove causation, the "plaintiff must establish that, but for the defendant's unfair or
deceptive practice, the plaintiff would not have suffered an injury."67
Walker alleges as his injuries "the distraction and loss of time to pursue
business and personal activities due to the necessity of addressing the wrongful
conduct through this and other actions" and "the necessity for investigation and
consulting with professionals to address Respondents' wrongful foreclosure and
collection practices and violation of RCW 61.24, et seq." Additionally, he "had to
take time off from work and incurred travel expenses to consult with an attorney
to address the misconduct of the Defendants."
In Panag v. Farmers Insurance Co. of Washington,68 our Supreme Court
held, "[T]he injury requirement is met upon proof the plaintiff's 'property interest
or money is diminished because of the unlawful conduct even if the expenses
caused by the statutory violation are minimal.'" Investigative expenses, taking
time off from work, travel expenses, and attorney fees are sufficient to establish
injury under the CPA.69
Walker also alleges that but for Quality's and Select's deceptive acts, he
would not have suffered these same injuries. Walker asserts that the deceptive
documents induced him to incur expenses to investigate whether Select and
67 Indoor Billboard, 162 Wn.2d at 84.
68 166 Wn.2d 27, 57, 204 P.3d 885 (2009) (quoting Mason v. Mortg. Am.,
Inc., 114 Wn.2d 842, 854, 792 P.2d 142 (1990)).
69 See Panag, 166 Wn.2d at 62.
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NO. 65975-8-1 / 26
Quality had authority to act against him and to address their allegedly improper
deceptive acts. Thus, he pleads facts sufficient to establish causation. Because
Walker pleads facts that, if proved, could satisfy all five elements, we conclude
that the trial court erred by dismissing his CPA claim.
Quiet Title
Finally, Walker claims that the court erred by dismissing his action to quiet
title to his property. He alleges, "As MERS was never a legitimate beneficiary
under RCW 61.24.005 and the interest in the Deed of Trust has been effectively
segregated from the interest in the Note, the Deed of Trust is no longer a valid
lien upon Mr. Walker's property."
To support his argument, Walker cites the Restatement (Third) of
Property: Mortgages, which states, in a comment, that "in general a mortgage is
unenforceable if it is held by one who has no right to enforce the secured
obligation."70 He also cites numerous cases outside this jurisdiction for the notion
that "the segregation of the Note from the Deed of Trust through the assignment
of the Deed of Trust from MERS to SELECT without a valid assignment of the
Note renders the subject Deed of Trust a nullity and an improper lien against Mr.
Walker's property." He requests that the court clear the "improper cloud" on his
70 Restatement (Third) of Prop.: Mortgages § 5.4 cmt. e (1997).
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NO. 65975-8-1 / 27
property and quiet his title, although he cites no authority recognizing such a
cause of action based upon the facts in this case.
In response, Quality and Select assert that Walker has not alleged any
facts demonstrating that he holds title superior to the deed of trust. They also
claim that he must allege payment of his loan to sufficiently plead a claim to quiet
title. For this proposition they cite Evans v. BAC Home Loans Servicing LP,71
holding that a plaintiff seeking to quiet title against a purported lender or other
holder of a debt secured by a deed of trust must allege satisfaction of the
secured obligation.
The logic of such a rule is overwhelming. Under a deed of trust, a
borrower's lender is entitled to invoke a power of sale if the
borrower defaults on its loan obligations. As a result, the
borrower's right to the subject property is contingent upon the
borrower's satisfaction of loan obligations. Under these
circumstances, it would be unreasonable to allow a borrower to
bring an action to quiet title against its lender without alleging
satisfaction of those loan obligations. Plaintiffs have not provided
any rationale that would support an alternate rule.[72]
An action to quiet title is an equitable proceeding "designed to resolve
competing claims of ownership."73 RCW 7.28.010 requires Walker to bring an
action to quiet title against "the person claiming the title or some interest" in real
property in which he has a valid interest. "A 'plaintiff in an action to quiet title
71 No. C10-0656, 2010 WL 5138394 (W.D. Wash. 2010).
72 Evans, 2010 WL 5138394, at *4.
73 Kobza v. Tripp, 105 Wn. App. 90, 95, 18 P.3d 621 (2001).
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NO. 65975-8-1 / 28
must prevail, if he prevails at all, on the strength of his own title, and not on the
weakness of the title of his adversary.'"74
In Bain, the Supreme Court declined to decide the legal effect of MERS
acting as an unlawful beneficiary under the DTA. However, the court stated its
inclination to agree with MERS's assertion that any violation of the DTA "'should
not result in a void deed of trust, both legally and from a public policy
standpoint.'"75 The court also noted, "[l]f in fact MERS is not the beneficiary, then
the equities of the situation would likely (though not necessarily in every case)
require the court to deem that the real beneficiary is the lender whose interests
were secured by the deed of trust or that lender's successors."76 While dicta,
these statements identify critical problems with Walker's argument.
Here Walker does not allege a claim to quiet title based upon the strength
of his own title. Instead, he asks the court to void a consensual lien against his
property because of a defect in the instrument creating that lien, the designation
of an ineligible entity as beneficiary of the deed of trust. As previously noted, he
cites no authority recognizing this defect as a basis to void a deed of trust and
offers no equitable reason why a court should recognize his claim. As a matter of
74 Wash. State Grange v. Brandt, 136 Wn. App. 138, 153, 148 P.3d 1069
(2006) (quoting City of Centralia v. Miller, 31 Wn.2d 417, 422, 197 P.2d 244
(1948)).
75 Bain, 175 Wn.2d at 114.
76 Bain, 175 Wn.2d at 111.
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NO. 65975-8-1 / 29
first impression, we decline to do so. We reject the argument that this defect in a
deed of trust, standing alone, renders it void and note that Washington courts
have repeatedly enforced between the parties a deed or mortgage that failed to
comply with the statutory requirement of an acknowledgement.77 The trial court
properly dismissed Walker's action to quiet title.
Attorney Fees
Walker requests costs and reasonable attorney fees incurred on this
appeal under RAP 18.1 and the deed of trust. RAP 18.1 permits a prevailing
party to recover fees incurred on appeal if the party can recover such fees at
trial.78 "A party must prevail on the merits before being considered a prevailing
party."79 Because Walker, at least at this point, does not prevail on the merits, he
is not entitled to costs and attorney fees incurred on appeal.
CONCLUSION
Because Walker alleges facts that, if proved, would entitle him to relief, we
reverse the trial court's order dismissing his claims under CR 12(c) for violations
77 Bremner v. Shafer, 181 Wash. 376, 384, 43 P.2d 27 (1935).
78 Landberg v. Carlson, 108 Wn. App. 749, 758, 33 P.3d 406 (2001).
79 Ryan v. Dep't of Soc. & Health Servs., 171 Wn. App. 454, 476, 287 P.3d
629 (2012).
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NO. 65975-8-1 / 30
of the DTA, the FDCPA, and the CPA and remand for further proceedings
consistent with this opinion. We affirm the court's dismissal of his action to quiet
title.
WE CONCUR:
J
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