Conception Hermosillo v. New York Community Bank

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON

CONCEPCION HERMOSILLO,
No. 75020-8-1
Appellant,
V. DIVISION ONE

QUALITY LOAN SERVICE CORP. OF UNPUBLISHED OPINION
WASHINGTON, a Washington
corporation; NEW YORK COMMUNITY FILED: April 24, 2017
BANK,

Respondents,

ERNST, INC.; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware
corporation; and JOHN DOES 1-10,

Defendants.

LEACH, J. — Concepcion Hermosillo appeals the summary dismissal of her

Consumer Protection Act (CPA)1 claim against New York Community Bank

(NYCB)and Quality Loan Service Corp. of Washington. After Hermosillo defaulted

on a loan, NYCB foreclosed on her property. The property was later sold at public

auction. Hermosillo sued NYCB and Quality, the trustee that conducted the sale.

She claims their actions in connection with the foreclosure violated the CPA.

Because no evidence shows that the respondents' conduct was unfair or

deceptive, we affirm dismissal of her CPA claim.

1 Ch. 19.86 RCW.
No. 75020-8-1/ 2

FACTS

In 2005, Hermosillo borrowed $212,000 from Ernst Inc. to purchase real

property. Hermosillo delivered to Ernst a promissory note and deed of trust against

the property to secure payment of the note. Ernst later transferred the note to

AmTrust Bank (formerly Ohio Savings Bank). The deed of trust identified

Mortgage Electronic Registration Systems Inc.(MERS) as beneficiary. AmTrust

failed in 2009, and NYCB acquired the note from the Federal Deposit Insurance

Corporation (FDIC), which had been appointed as receiver of AmTrust. The FDIC

endorsed the note to NYCB, and NYCB took possession of the original note.

In April 2012, Hermosillo and NYCB entered into a loan modification

agreement. Still, in June 2012, Hermosillo stopped making mortgage payments,

defaulting on her loan.

MERS purported to assign its beneficial interest in the deed of trust to NYCB

in an assignment of deed of trust that it recorded in October 2012.

In March 2013, NYCB gave Quality a beneficiary declaration stating that

NYCB was the actual holder of the note and recorded Quality's appointment as

successor trustee.

As required by the deeds of trust act (DTA),2 Quality sent Hermosillo a

notice of default and, 30 days later, issued and recorded a notice of trustee's sale.

2 Ch. 61.24 RCW.

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Quality scheduled a foreclosure sale for August 16, 2013. But this sale did not

take place. On August 19, 2013, Quality discontinued the trustee's sale.3

In April 2015, Hermosillo was still in default, and Quality issued and

recorded a second notice of trustee's sale. But it did not send a new notice of

default. On December 1, 2015,the trial court denied Hermosillo's motion to enjoin

the sale. Facts about the ensuing sale are set forth in the companion case, Havdari

v. Hermosillo, No. 74871-8-1.

After the foreclosure sale, Hermosillo sued NYCB, Quality, MERS, and

Ernst for violating the CPA. NYCB and Quality moved for summary judgment. The

trial court granted the motion, dismissing the case as to those parties. Hermosillo

appeals.4

ANALYSIS

We review summary judgment orders de novo.5 A trial court may grant

summary judgment only when no genuine issues of material fact exist and the

moving party is entitled to judgment as a matter of law.6 When reviewing a

summary judgment order, we engage in the same inquiry as the trial court,

considering the facts and all reasonable inferences from the facts in the light most

3 The parties claim that Quality discontinued the sale because it had been
automatically stayed as a result of bankruptcy proceedings that Hermosillo filed on
August 14, 2013. But beyond the pleadings and briefing, the record contains no
information about the stay or bankruptcy proceeding.
4 On June 8, 2016, the superior court dismissed Ernst & MERS. Hermosillo
did not appeal any final orders as to MERS or Ernst. We do not consider the merits
of any claims Hermosillo has made against these entities.
5 Hadley v. Maxwell, 144 Wn.2d 306, 310-11, 27 P.3d 600(2001).
6 CR 56(c).

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No. 75020-8-1 /4

favorable to the nonmoving party! We may affirm a trial court's grant of summary

judgment on any basis supported by the record.8

To prevail on a CPA claim, a plaintiff must show (1) an unfair or deceptive

act or practice, (2) occurring in trade or commerce,(3) a public interest impact,

(4) injury to the plaintiff in his or her business or property, and (5) a causal link

between the unfair or deceptive act and the injury.8 "[Al 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."10 An appellate court reviews whether a particular action gives rise to a

CPA violation as a question of law.11

Hermosillo bases her CPA claim on alleged wrongful foreclosure and

violations of the DTA. Violations of the DTA can support all five elements of a CPA

claim.12 But "[a] claim under the CPA based on violations of the DTA must meet

the same requirements applicable to any other CPA claim."13 Here, because

7 Right-PriceRecreation, LLC v. Connells Prairie Cmty. Council, 146 Wn.2d
370, 381,46 P.3d 789 (2002).
8 Steinbock v. Ferry County Pub. Util. Dist. No. 1, 165 Wn. App. 479, 485,
269 P.3d 275 (2011).
9 Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d
778, 780, 719 P.2d 531 (1986).
19 Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787, 295 P.3d 1179(2013).
11 Leingang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 150, 930
P.2d 288(1997).
12 Lyons v. U.S. Bank Nat'l Ass'n, 181 Wn.2d 775, 785, 336 P.3d 1142
(2014).
13 Lyons, 181 Wn.2d at 785.

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No. 75020-8-1/ 5

Hermosillo does not show NYCB or Quality committed an unfair or deceptive act,

the trial court correctly granted summary judgment to respondents.

First Hermosillo claims that NYCB did not have authority to pursue

foreclosure. We disagree. Hermosillo does not dispute that NYCB was the holder

of the note. As the note holder, NYCB had authority to foreclose.14

Hermosillo claims that the security—the deed of trust—does not

automatically follow the note but instead follows ownership of the note. Hermosillo

also asserts that a deed of trust does not secure repayment of a promissory note

because the promissory note is itself repayment. But our Supreme Court held in

Brown v. Department of Commerce15 that possession of a promissory note

determines the right to foreclose. Hermosillo admits that under Brown, her CPA

claim lacks merit. She challenges the Brown decision, asserting that it conflicts

with the provisions of RCW 62A.9A-203 about the enforceability of security

interests. As a result, she claims that Brown unconstitutionally encroaches on the

legislature's plenary authority to enact the laws of the State of Washington. But

"[w]e are bound by the decisions of our state Supreme Court and err when we fail

to follow them.16 We reject Hermosillo's challenge to Brown.

In addition to being contrary to our Supreme Court's decisions, her claim

that the deed of trust does not secure the note is contradicted by the actual

14 Brown v. Dep't of Commerce, 184 Wn.2d 509, 524-25, 359 P.3d 771
(2015).
15 184 Wn.2d 509, 524-25, 359 P.3d 771 (2015).
16 MP Med. Inc. v. Wegman, 151 Wn. App. 409, 417, 213 P.3d 931 (2009)
(citing 1000 Virginia Ltd. P'ship v. Vertecs Corp., 158 Wn.2d 566, 578, 146 P.3d
423(2006)).

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No. 75020-8-1/6

language of the deed of trust. The deed specifically states that "[t]his Security

Instrument secures to Lender (i) the repayment of the Loan" and defines "Loan" to

mean "the debt evidenced by the Note."

Hermosillo claims that the MERS assignment of the deed of trust was

ineffective because MERS never had a beneficial interest in the note so no

beneficial interest ever transferred. But the invalidity of the MERS assignment

does not affect NYCB's ability to enforce the deed of trust in this case. As the

holder of the note, NYCB had the power to enforce the deed of trust because the

deed of trust follows the note by operation of law.17 NYCB possessed the note. It

did not need an assignment of an interest in the deed of trust. Thus, the

assignment's invalidity did not affect NYCB's authority to foreclose.

Hermosillo does not show that a question of fact exists about NYCB's right

to foreclose. For this reason, Hermosillo does not show that NYCB committed an

unfair or deceptive act when it pursued foreclosure.

Next, Hermosillo asserts that the sale was improper because Quality did not

comply with the DTA's notification requirements. RCW 61.24.030 details the

procedures for a trustee's sale. At least 30 days before a trustee schedules a sale,

the trustee must send the borrower a written notice of default.18 Only then can the

trustee record a notice of trustee's sale.18 The notice of sale must contain the date

17 Bain v. Metro. Mortq. Grp. Inc., 175 Wn.2d 83, 104, 285 P.3d 34(2012)
("Washington's deed of trust act contemplates that the security instrument will
follow the note, not the other way around.").
18 RCW 61.24.030(8).
19 RCW 61.24.030(8).

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No. 75020-8-1 /7

of the sale.2° If the sale is not held within 120 days of that date, the trustee must

issue a new notice of sale.21

Hermosillo asserts that because Quality did not send a new notice of default

after it discontinued the first sale, it could not properly issue a second notice of

trustee's sale without first sending a new notice of default. She relies on our

Supreme Court's decision in Albice v. Premier Mortgage Services of Washington,

Inc.22 Albice held that the DTA requires a new notice of trustee's sale if the sale

date stated in the original notice of trustee's sale expires.23 But in Leahy v. Quality

Loan Service Corp.,24 we clarified that this does not require the trustee to send a

new notice of default. We held that the plain language of the statute requires only

a new notice of trustee's sale.25

Hermosillo asserts that because Quality terminated the sale, rather than

merely postponed it, the DTA requires a new notice of default. In Leahy, we

rejected the argument that when a trustee's sale is continued for more than 120

days from the date provided in the notice of trustee's sale, the trustee must issue

a new notice of default.26 We explained that the notice of default serves a different

purpose than the notice of trustee's sale.27 The notice of default notifies the debtor

20RCW 61.24.040(1)(f).
21 RCW 61.24.040(6); Albice v. Premier Mortg. Servs. of Wash., Inc., 174
Wn.2d 560, 568, 276 P.3d 1277(2012).
22 174 Wn.2d 560, 276 P.3d 1277 (2012).
23 Albice, 174 Wn.2d at 568.
24 190 Wn. App. 1, 6-7, 359 P.3d 805 (2015), review denied, 185 Wn.2d
1011 (2016).
25 Leahy, 190 Wn. App. at 6-7.
26 Leahy, 190 Wn. App. at 6-7.
27 Leahy, 190 Wn. App. at 7.

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No. 75020-8-1 /8

of the amount she owes and that she is in default.28 By contrast, the notice of

trustee's sale notifies the world of the foreclosure sale.29 "In light of the function

served by the notice of default as compared to the notice of trustee's sale, it would

not make sense to interpret the act as requiring reissuance of the notice of

default."3° Hermosillo cites no authority for her argument that a discontinued sale

differs significantly from a continued sale. And in light of the different purposes the

notices serve, we see no reason to depart from our decision in Leahy.

Here, under Leahy, the statutory requirements for notice were met. Quality

properly recorded a new notice of trustee's sale after the original expired. And

Hermosillo does not show that she ever cured the default described in the 2012

notice that she received. Thus, the original notice of default was still in effect.

Because NYCB had authority to foreclose and Quality complied with the

notification requirements of the DTA, their conduct was not unfair or deceptive.

Hermosillo fails to show an issue of fact about an essential element of her CPA

claim. Her claim fails, and we need not address any of its other elements.

28 Leahy, 190 Wn. App. at 7.
29 Leahy, 190 Wn. App. at 7.
3° Leahy, 190 Wn. App. at 7.

-8-
 FILED
COURT OF APPEALS DIV I
STATE OF WASHINGTOH

2011 APR 24 Ali 929

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