FILED
COURT OF APPEALS WY I
STATE OF WASHINGTON
2018 AUG 13 AM 9:55
IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
TED A. THOMAS and DEBRA A. )
THOMAS, )
) No. 76644-9-1
Appellants, )
) DIVISION ONE
v. )
)
SPECIALIZED LOAN SERVICING, ) UNPUBLISHED OPINION
LLC; RTS PACIFIC, INC., a )
Washington Corporation (now in )
receivership); RMS MORTGAGE )
ASSET TRUST 2012-1, U.S. BANK )
as Trustee; RMS RESIDENTIAL )
PROPERTIES, LLC; RESIDENTIAL )
MORTGAGE SOLUTION, LLC; PRIME )
ASSET FUND, LLC, )
)
Respondents. ) FILED: August 13, 2018
)
ANDRUS, J. — Ted and Debra Thomas (Thomas) appeal the summary
judgment dismissal of their claim to set aside a trustee's sale as well as their
claims for intentional and negligent misrepresentation and violations of the
Consumer Protection Act(CPA). We affirm.
FACTS
Thomas defaulted on his mortgage and his home was sold at a
foreclosure sale in July 2014. In December 2015, Thomas filed the complaint,
No. 76644-9-1/2
naming as defendants three related entities and alleged noteholders: Residential
Mortgage Solutions (RMS), RMS Residential Properties, and RMS Mortgage
Asset Trust (collectively RMS Entities). Thomas also named the loan servicer,
Specialized Loan Servicing (SLS).1
Thomas's complaint asked the court to set aside the trustee's sale based
on alleged violations of the deeds of trust act (DTA), chapter 61.24 RCW.
Thomas alleged that his note had been improperly assigned and it was unclear if
the purported beneficiary was the actual noteholder. He also asserted that
beneficiary declarations and appointments of successor trustees associated with
the foreclosure were invalid. Thomas further claimed that the beneficiary and
servicer committed intentional and negligent misrepresentation and violated the
Consumer Protection Act(CPA), chapter 19.86 RCW.
After filing the complaint in December 2015, Thomas did not conduct any
discovery for nearly a year. On November 28, 2016, the RMS Entities and SLS
jointly noted a hearing on a motion for summary judgment and set argument on
the motion for February 3, 2017. The following week, on December 6, 2017,
Thomas propounded his first discovery requests. The RMS Entities and SLS
filed their motion for summary judgment with supporting documentation on
January 6, 2017. They answered Thomas's discovery requests on January 9
and January 13, 2017.2
1 Thomas also named the trustee, Regional Trustee Services (in receivership), and a
third party, Prime Asset Fund, in the complaint. These parties have apparently not participated in
the action. Thomas appears to concede that he never served Prime Asset Fund.
2 Thomas granted the defendants' request for a one-week extension to respond to his
discovery requests.
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No. 76644-9-1/3
In support of their motion for summary judgment, Michael Ward, an SLS
vice president, testified by declaration that Thomas's note had been assigned
three times. The original lender, Imperial Lending, LLC, transferred the note to
RMS in 2007. RMS assigned the note to a subsidiary, RMS Properties, in 2008.
RMS Properties then transferred the note to RMS Trust in 2012. SLS serviced
the loan throughout its life and held limited powers of attorney to act for RMS
Properties and RMS Trust. Ward explained that SLS, as agent for the
noteholder, appointed the trustee who obtained a beneficiary declaration before
recording a notice of sale. The RMS Entities and SLS submitted numerous
supporting documents, including a copy of the note, which was endorsed in
blank, copies of the deed of trust, power of attorney agreements, the beneficiary
declarations, a 2011 appointment of successor trustee, and the servicing
records.
At the hearing on the summary judgment motion, the RMS Entities and
SLS relied on this record to argue that Thomas failed to establish a question of
material fact as to any of his claims. Thomas asserted that the RMS Entities and
SLS provided insufficient and contradictory responses to discovery and their
documentation was not credible. The trial court granted summary judgment to
the RMS Entities and SLS and denied Thomas's motion for reconsideration.
Thomas appeals.
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No. 76644-9-1/4
ANALYSIS
We review an order on summary judgment de novo, viewing the evidence
in the light most favorable to the non-moving party. Jackowski v. Borchelt, 174
Wn.2d 720, 729, 278 P.3d 1100 (2012). In a summary judgment motion, the
moving party bears the initial burden of showing that there is no genuine issue of
material fact. Young v. Key Pharm., Inc., 112 Wn.2d 216, 225, 770 P.2d 182
(1989). If the moving party meets this initial showing, the burden shifts to the
nonmoving party to produce specific facts showing that there is a genuine issue
for trial. Id. at 225-26. Summary judgment is only appropriate where there is no
genuine issue as to any material fact and the moving party is entitled to judgment
as a matter of law. CR 56(c).
Thomas asserts several theories to argue that the trial court erred in
dismissing his claims. As to his DTA claim, his primary argument appears to be
that the RMS Entities and SLS provided insufficient documentation to establish
that the RMS Entities actually held the note.3
Under the DTA, the beneficiary is the entity that holds the note. RCW
61.24.005(2); see also Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83, 89, 285
P.3d 34 (2012). Before conducting a foreclosure sale, a trustee must have proof
that the beneficiary actually holds the note on which the trustee is foreclosing.
Bain, 175 Wn.2d at 102. "A declaration by the beneficiary made under the
3 Thomas alleges that the RMS Entities and SLS have not been truthful about the loan
and have falsified documents since the loan's inception. He claims that SLS and the trustee
demanded excessive monthly payments, MERS (Mortgage Electronic Registration Systems)
improperly appointed a successor trustee and assigned the note, and SLS made the process of
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No. 76644-9-1/5
penalty of perjury stating that the beneficiary is the actual holder of the
promissory note. . . shall be sufficient proof." Former RCW 61.24.030(7)(a)
(2009).
Ward testified that RMS acquired the loan from the original lender in 2007.
The note was subsequently transferred to RMS Properties and later to RMS
Trust. Ward declared that, as servicer for the RMS Entities, SLS received the
"wet ink" note from them. In response to an interrogatory seeking information on
the whereabouts of the original note, the RMS Entities stated that the original
note was in possession of U.S. Bank per a custodial agreement with that entity.
Documents in the record support Ward's testimony. The note was
indorsed in blank by Imperial Lending, making it payable to the bearer. See
RCW 62A.1-201(21)(a); RCW 62A.3-205(b). A sworn declaration executed
February 11, 2011, identifies RMS Properties as the holder of the note. A
declaration executed on August 21, 2013, identifies RMS Trust as the noteholder
on that date. A custodial agreement between RMS and Wachovia Bank,
predecessor in interest to U.S. Bank, authorizes the bank to hold physical
possession of RMS's residential mortgage loans. Thomas points to nothing in
the record that contradicts this evidence and thus fails to raise a question of
material fact on this point.
applying for a loan modification unnecessarily difficult. Thomas presents no legal argument as to
these allegations, as required by RAP 10.3(a)(6). We decline to consider them.
4 The legislature made minor changes to RCW 61.24.030(7) in 2018. See LAWS OF 2018,
ch. 306,§ 1. The amendment is not at issue here.
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No. 76644-9-1/6
Thomas also challenges the validity of the beneficiary declarations and
appointment of successor trustee. RMS Properties appointed a successor
trustee and executed a beneficiary declaration in February 2011. These
documents were signed by an SLS employee as attorney in fact for RMS
Properties. In August 2013, RMS Trust executed a new beneficiary declaration.
This document was also signed by an SLS employee.
Thomas asserts that the 2011 appointment of successor trustee and the
2011 and 2013 beneficiary declarations are invalid because they were signed by
an SLS employee rather than an employee of any RMS Entity. The argument
fails because SLS was acting as an agent of RMS Properties and RMS Trust
when its employees executed these documents, permissible actions under the
DTA.
An agent may act on behalf of a noteholder. Bain, 175 Wn.2d at 106.
"[A]n agency relationship results from the manifestation of consent by one person
that another shall act on his behalf and subject to his control, with a correlative
manifestation of consent by the other party to act on his behalf and subject to his
control." Id. (internal quotation marks omitted) (quoting Moss v. Vadman, 77
Wn.2d 396, 402-03, 463 P.2d 159(1970)).
Here, it is undisputed on this record that RMS Properties appointed SLS to
act as its attorney in fact in March 2009 and RMS Trust did the same in July
2012. The principal-agent relationship was memorialized in written contracts
granting SLS limited power of attorney to act for the RMS Entities in foreclosure
matters. The 2009 limited power of attorney authorized SLS to act as attorney in
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No. 76644-9-1/7
fact "in any manner necessary and proper to exercise the servicing and
administrative powers set forth in the Servicing Agreement." The servicing
agreement authorized SLS to institute foreclosure proceedings, and to execute
instruments on behalf of the owner to settle mortgage loans. The 2012 limited
power of attorney authorized SLS to prepare all documents necessary under
state law to complete a nonjudicial foreclosure. The written power of attorney
agreements are clear manifestations of the RMS Entities' consent that SLS
would act on their behalf in executing all required documentation to complete
nonjudicial foreclosure sales.
The RMS Entities produced prima facie evidence that they held the note at
the relevant times and SLS, as their agent, executed foreclosure documents on
their behalf. Because Thomas failed to rebut this evidence, he did not establish
a question of material fact as to the identity of the noteholder or the validity of the
challenged documents. The trial court did not err in dismissing Thomas's claim
to set aside the trustee's sale.5
Thomas also challenges the dismissal of his claim for negligent and
intentional misrepresentation. He argues that the RMS Entities and SLS
misrepresented the identity of the noteholder, the existence of SLS's agency
relationship, and their authority to foreclose. But Thomas's failure to establish
any DTA violation is fatal to this claim.
5 Because of our resolution of this issue, we do not reach the parties' further arguments
that Thomas's DTA claim was barred by waiver or was properly dismissed for failure to join the
current property owner as an indispensable party.
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No. 76644-9-1/8
Thomas next alleges that SLS misrepresented the date the foreclosure
sale would occur.6 The foreclosure sale was initially set for April 11, 2014.
Thomas filed for bankruptcy and, as a result, the sale was continued to July 25,
2014. When Thomas's bankruptcy petition was dismissed on July 16, he
submitted a new application for a loan modification to SLS. Thomas asserts that
he called SLS on July 21 to check on the status of his application. According to
Thomas, a representative told him SLS had received his application and had
continued the foreclosure sale to September 19. SLS disputes that it told
Thomas the sale had been continued. Assuming the alleged misrepresentation
occurred, SLS argues that Thomas fails to show reliance.
To establish a claim for negligent or intentional misrepresentation, the
plaintiff must show, among other elements, that the defendant made a false
representation and, because the plaintiff reasonably relied on the false
information, the plaintiff suffered damages. See Lawyers Title Ins. Corp. v. Balk,
147 Wn.2d 536, 545, 55 P.3d 619(2002)(negligent misrepresentation); Carlile v.
Harbour Homes, Inc., 147 Wn. App. 193, 204-05, 194 P.3d 280 (2008)
(intentional misrepresentation). Thomas contends that because he relied on
SLS's alleged statement that the sale had been continued until September, he
took no action to restrain the sale in July. Thomas provides no specifics as to
6 Thomas also asserts that SLS and the RMS Entities engaged in a pattern of
misrepresentation dating back to 2008. He does not expressly rely on these older events as a
basis for his misrepresentation claim or make any argument as to the timeliness of such a claim.
An action for misrepresentation must be brought within three years of discovery of the
misrepresentation. Davidheiser v. Pierce County, 92 Wn. App. 146, 156 n.5, 960 P.2d 998(1998)
(citing RCW 4.16.080(4)). We decline to consider alleged misrepresentations that occurred more
than three years before Thomas filed his complaint.
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No. 76644-9-1/9
what action he would have taken had he been aware of the July sale date and he
points to no evidence that he made efforts to restrain the sale in September. Nor
did Thomas bring a prompt post-sale challenge; although the sale took place in
July 2014, Thomas did not commence this action until December 2015. Because
Thomas fails to show how he relied on any alleged misrepresentation relating to
the date of the foreclosure sale, the trial court did not err in dismissing his claim
for misrepresentation.
Next, Thomas challenges the dismissal of his CPA claim. To establish a
claim under the CPA, a plaintiff must show five elements: (1) an unfair or
deceptive act or practice (2) that occurs in trade or commerce, (3) a public
interest impact,(4) an injury to plaintiff in his or her business or property, and (5)
causation. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105
Wn.2d 778, 780, 719 P.2d 531, 533 (1986). Thomas alleges that the
respondents engaged in unfair or deceptive practices by executing the
beneficiary declarations and appointment of successor trustee through an
attorney-in-fact and failing to prove that the RMS Entities actually held the note.
But, as discussed above, Thomas fails to raise a material question of fact as to
these points.
Thomas also asserts that the respondents engaged in an unfair or
deceptive practice by misrepresenting the date of the foreclosure sale. A
misrepresentation of fact may be an unfair or deceptive practice for purposes of a
CPA claim. Indoor Billboard/Wash., Inc., v. Integra Telecom of Wash., Inc., 162
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No. 76644-9-1/10
Wn.2d 59, 83, 170 P.3d 10 (2007). The plaintiff must show that but for the
misrepresentation, the plaintiffs injury would not have occurred. Id.
Here, even if, as Thomas asserts, SLS misrepresented the date of the
foreclosure sale, Thomas fails to show a causal link between the
misrepresentation and his injury. Thomas alleges two injuries: the loss of his
home and the attorney fees he has incurred to bring the present action. But
Thomas does not contest that he defaulted on the loan payments and did not
cure the default. The trial court correctly concluded that Thomas's default, and
not any misrepresentation as to the sale date, was the "but for" cause of the loss
of Thomas's home.
Nor do Thomas's attorney fees support his CPA claim. Attorney fees
necessary to investigate a deceptive business practice may constitute injury
within the meaning of the CPA. Panaq v. Farmers Ins. Co. of Wash., 166 Wn.2d
27, 62, 204 P.3d 885 (2009). Here, however, Thomas has not established a
question of material fact as to any unfair or deceptive practice that required
investigation. Attorney fees divorced from a deceptive business practices do not
constitute injury under the CPA. See id. at 62-63.
We hold that Thomas has not established an issue of material fact as to
any of his claims. The trial court did not err in dismissing Thomas's claim under
the DTA, his claims for intentional and negligent misrepresentation, and his CPA
claim.
Thomas contends the trial court erred in denying his motion for
reconsideration. He argues that SLS and the RMS Entities provided late and
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No. 76644-9-1/11
incomplete responses to discovery, thereby preventing him from establishing his
claim. We review the denial of a motion for reconsideration for abuse of
discretion. West v. Dep't of Licensing, 182 Wn. App. 500, 516, 331 P.3d 72
(2014). The trial court abuses its discretion if its decision is manifestly
unreasonable or based on untenable grounds. Id. A decision is manifestly
unreasonable if it is outside the range of acceptable choices. Id.
Thomas raised the lack of adequate discovery responses during the
summary judgment hearing, and the trial court rejected it. The court stated that
the case had been pending for over a year and nothing prevented Thomas from
conducting further discovery. The court noted that Thomas had not filed a
motion to compel or a motion to continue the summary judgment hearing. And
Thomas provided only speculation that further discovery would uncover a
genuine question of material fact. In his motion for reconsideration, Thomas
reasserted his argument concerning late and incomplete discovery responses
and asked the court for leave to file a motion to compel. The court denied the
motion without comment.
In this case, the trial court's decision was not manifestly unreasonable. As
the trial court stated, nothing prevented Thomas from timely conducting further
discovery, moving to compel, or moving to continue the hearing on summary
judgment.
The respondents request attorney fees on appeal based on the attorney
fee provision in the deed of trust. Attorney fees may be awarded where
authorized by statute or contract. Aiken v. Aiken, 187 Wn.2d 491, 506, 387 P.3d
No. 76644-9-1/12
680 (2017). In this case, the deed provides that the lender is entitled to recover
reasonable attorney fees "in any action or proceeding to construe or enforce any
term" of the deed. The present appeal is an action to enforce the deed, as it
stems from Thomas's complaint that the respondents had no authority to
foreclose against him. See Podbielancik v. LPP Mortg. Ltd., 191 Wn. App. 662,
673, 362 P.3d 1287(2015). We grant attorney fees to the respondents based on
the deed.
Affirmed.
LAIXCIA-i°14 / t k •
WE CONCUR:
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