Opinion
No. 65004-1-I.
Filed: May 9, 2011.
Appeal from a judgment of the Superior Court for King County, No. 09-2-28305-2, Regina S. Cahan, J, entered January 22, 2010.
Reversed and remanded with instructions by unpublished opinion per Lau, J, concurred in by Leach, A.C.J., and Spearman, J.
UNPUBLISHED OPINION
In this quiet title action following the trustee's refusal to deliver the deed of trust to the purchaser after a nonjudicial foreclosure sale, the beneficiary's unilateral mistake in the bid price and relaying the erroneous bid price to the trustee does not constitute "defective" bidding under the deed of trust act's consumer protection provision, RCW 61.24.135. We reverse the trial court's order granting summary judgment in Citibank's favor and remand with instructions to enter summary judgment quieting title in Breiwick's favor.
First American, CitiMortgage, and Citibank moved collectively for summary judgment. We refer to these parties as "Citi" unless otherwise necessary for clarity.
FACTS
The material facts are undisputed. On March 24, 2009, First American Title Insurance Company ("First American") through its agent CR Title Services, Inc. (trustee) recorded a notice of trustee's sale for a property then owned by Kyle Webster. First American was acting on the instruction of CitiMortgage, Inc., which held a note secured by a deed of trust on the property. The notice of sale indicated that "the sum owing on the obligation secured by the Deed of Trust" was "$487,915.97, together with interest. . . . and . . . costs and fees." The trustee posted on its website an opening bid of $44,837.50. On June 24, Shauna Ferrey, an employee of Vestus, LLC, a foreclosure research company, contacted the trustee to confirm the opening bid amount. Ferrey "pointed out to the person with whom [she] spoke at CR Title that [she] though[t] the bid seemed low," but the trustee confirmed that the bid was correct. The next day, Ferrey contacted the trustee again, who again confirmed that the bid amount was $44,837.50.
On June 26, Randy Breiwick, a Vestus client, and Vestus employee Chris DiJulio attended the foreclosure sale. When the trustee announced the beginning of the sale DiJulio asked that he confirm the opening bid. The trustee confirmed the bid again to be $44,837.50. But as the trustee began the recitation for the sale, he suspended the sale, stating he was going to make a phone call to confirm the opening bid. The trustee went into an adjacent building and, when he returned, confirmed the opening bid. DiJulio bid $45,000 on behalf of Breiwick, which was the only bid.
Citi intended the opening bid to be $442,837.50. As a result of a "keystroke error," a Citi employee dropped the "2" and miscommunicated the bid to the trustee. Upon discovery of the error, Citi instructed First American, who instructed the trustee, not to deliver the deed to Breiwick. On July 14, the trustee contacted Breiwick, stating that the bidding was defective and "the sale would be deemed a nullity." On July 17, Breiwick's counsel sent a letter to the trustee demanding the issuance of the deed. On July 29, the trustee advised Breiwick that it would not deliver the deed due to defective bidding under RCW 61.24.135 and it attempted to refund the bid amount to Breiwick.
The same day, Breiwick filed a complaint seeking to quiet title to the property in himself and damages. The parties cross moved for summary judgment. Citi's motion was supported by the affidavit of David Leen, who testified as a fact witness that "[i]t is my belief that the Legislature's intent in enacting the 2008 amendment was to overturn the holding in Udall." Breiwick's response to Citi's motion for summary judgment moved to strike the affidavit. The trial court denied the motion to strike and granted summary judgment in Citi's favor.
ANALYSIS
Defective Bid
Breiwick argues that the summary judgment order should be reversed and summary judgment entered in his favor because under Udall v. T.D. Escrow Servs., Inc., 159 Wn.2d 903, 154 P.3d 882 (2007), a trustee can refuse to deliver a deed only in the case of procedural irregularities. Citi counters that recent amendments to RCW 61.24.135 overrule Udall and allow a trustee to refuse to deliver a deed where the "bidding has been . . . defective." RCW 61.24.135.
When reviewing a summary judgment order, we engage in the same inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002). Summary judgment is appropriate only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Jones, 146 Wn.2d at 300-01. Statutory construction is a question of law reviewed de novo. Plemmons v. Pierce County, 134 Wn. App. 449, 140 P.3d 601 (2006).
In Udall, after the borrowers defaulted on their home mortgage payments, lender US Bancorp directed T.D. Escrow Services to begin nonjudicial foreclosure proceedings on the property. T.D. communicated the $159,421.20 opening bid to ABC Legal Services, the agent handling its foreclosure sale. ABC mistakenly listed the opening bid at the foreclosure sale as $59,421.20. Udall, who bid $59,422.20, was the successful and only bidder. Udall tendered full payment at the foreclosure sale. After T.D. discovered the discrepancy in the opening bid, it returned Udall's payment and refused to issue the deed of trust to Udall. Udall rejected the refund and brought a quiet title action. Udall, 159 Wn.2d at 907.
In Udall, the court premised its analysis on the plain meaning of RCW 61.24.050 in holding that insufficiency of price is not a procedural irregularity that voids the sale, it is merely a mistake. And the deed of trust act requires a trustee to deliver a trustee's deed to the purchaser following a nonjudicial foreclosure sale, absent a procedural irregularity.
The first clause of RCW 61.24.050, "[w]hen delivered to the purchaser, the trustee's deed shall convey," read in conjunction with RCW 61.24.040 (4) and (7), [describing the nonjudicial foreclosure procedure] describes the ministerial act of delivering the deed of trust to the purchaser. The second sentence of RCW 61.24.050 acknowledges that the trustee retains the right to refuse bids until the close of the sale, but the trustee's power of acceptance is exercised by the auctioneer when the auctioneer announces "sold," unless the trustee has expressly reserved otherwise. The plain meaning of RCW 61.24.050 thus mandates that a trustee deliver the deed of trust to the purchaser following a nonjudicial foreclosure sale, absent procedural irregularity that voids the sale. In this case, no such irregularity occurred, so T.D. must deliver the deed to Udall.
RCW 61.24.040(4) and (7) detail a sequence of events in the nonjudicial foreclosure procedure. First, "the trustee or its authorized agent shall sell the property at public auction to the highest bidder." RCW 61.24.040(4) (emphasis added). Then [t]he purchaser "shall forthwith pay the price bid and on payment the trustee shall execute to the purchaser its deed." RCW 61.24.040(7) (emphasis added). "'[T]his statutory language imposes on the trustee, or its authorized agent, an obligation to sell the property to the highest bidder and to execute the deed to the highest bidder.'" Udall, 159 Wn.2d at 911 (quoting Udall v. T.D. Escrow Servs. Inc., 132 Wn. App. 290, 300, 130 P.3d 908 (2006)).
Udall, 159 Wn.2d at 912 (emphasis added).
In describing the trustee's delivery of the deed to the purchaser as a "ministerial act, symbolizing conveyance of property rights to the purchaser," the court made clear that "[t]he trustee cannot withhold delivery unless the sale itself was void due to a procedural irregularity that defeated the trustee's authority to sell the property." Udall, 159 Wn.2d at 911 (emphasis added).
The court provided two examples of procedural irregularities: "the borrower's presale bankruptcy filing" and "a pending action on the obligation secured by the deed of trust." Udall, 159 Wn.2d at 911.
Citi does not dispute Udall's holding. Rather, it relies on a post-Udall 2008 amendment to the deed of trust act's consumer protection provision, RCW 61.24.135 (emphasized below).
Consumer protection act — Unfair or deceptive acts or practices. It is an unfair or deceptive act or practice under the consumer protection act, chapter 19.86 RCW, for any person, acting alone or in concert with others, to offer, or offer to accept or accept from another, any consideration of any type not to bid, or to reduce a bid, at a sale of property conducted pursuant to a power of sale in a deed of trust. The trustee may decline to complete a sale or deliver the trustee's deed and refund the purchase price, if it appears that the bidding has been collusive or defective, or that the sale might have been void. However, it is not an unfair or deceptive act or practice for any person, including a trustee, to state that a property subject to a recorded notice of trustee's sale or subject to a sale conducted pursuant to this chapter is being sold in an "as-is" condition, or for the beneficiary to arrange to provide financing for a particular bidder or to reach any good faith agreement with the borrower, grantor, any guarantor, or any junior lienholder.
(Emphasis added.)
Specifically, Citi maintains that a clerical key stroke error in a document it created and communicated to the trustee constitutes a "defective bid" under the foregoing provision. Here, the trustee refused to deliver a deed to Breiwick predicated on RCW 61.24.135 because "[t]he trustee has discovered a defect in a bid. . . ." (Emphasis added.)
Our purpose when interpreting a statute is "'to discern and implement the intent of the legislature.'" City of Olympia v. Drebick, 156 Wn.2d 289, 295, 126 P.3d 802 (2006) (quoting State v. J.P., 149 Wn.2d 444, 450, 69 P.3d 318 (2003)). When interpreting a statute, we look first to its plain language. Estate of Haselwood v. Bremerton Ice Arena, Inc., 166 Wn.2d 489, 498, 210 P.3d 308 (2009). "'[I]f the statute's meaning is plain on its face, then the court must give effect to that plain meaning as an expression of legislative intent.'" Udall, 159 Wn.2d at 909 (alteration in original) (quoting State v. Jacobs, 154 Wn.2d 596, 600, 115 P.3d 281 (2005). "Plain meaning is 'discerned from the ordinary meaning of the language at issue, the context of the statute in which that provision is found, related provisions, and the statutory scheme as a whole.'" Udall, 159 Wn.2d at 909 (quoting Jacobs, 154 Wn.2d at 600).
"We are required to read legislation as a whole, and to determine intent from more than a single sentence. Effect should be given to all of the language used, and the provisions must be considered in relation to each other, and harmonized to ensure proper construction."
King County v. Cent. Puget Sound Growth Mgmt. Hearings Bd., 142 Wn.2d 543, 560, 14 P.3d 133 (2000) (quoting King County v. Cent. Puget Sound Growth Mgmt. Hearings Bd., 91 Wn. App. 1, 16, 951 P.2d 1151 (1998)) (emphasis added).
Breiwick asserts that read in context, "defective" bidding does not cover unilateral mistakes in communicating an opening bid. In particular, Breiwick argues that because
[t]he legislature chose to amend a portion of the Deed of Trust Act dealing with unfair and deceptive acts . . . [t]he Trustee's discretion to withhold a deed in the face of collusive or defective bidding should be limited to address a sale tainted by misconduct of the type countenanced by the statute as a whole, conduct that undermines the process.
Br. of Appellant at 8, 10 (emphasis added). Thus, Breiwick argues that because "there was no unfair or deceptive conduct, no bid rigging or conduct inconsistent with the process contemplated by the act," the trustee was not entitled to refuse to deliver the deed under RCW 61.24.135. Br. of Appellant at 10-11.
We agree. The amendment to RCW 61.24.135 does not allow a trustee to refuse to deliver a deed where the beneficiary makes a unilateral mistake on the amount of the opening bid. The legislature added the sentence at issue to a provision dealing entirely with Consumer Protection Act (CPA) violations. This sentence appears immediately following a definition of unfair or deceptive practices. "It is an unfair or deceptive act or practice . . . for any person, acting alone or in concert with others, to offer, or offer to accept or accept from another, any consideration of any type not to bid, or to reduce a bid, at a sale of property conducted pursuant to a power of sale in a deed of trust." RCW 61.24.135. A plain and logical reading of RCW 61.24.135 shows that the legislature amended a portion of the deed of trust act dealing with unfair and deceptive acts, culpable conduct that undermines the integrity of the process, to provide the trustee with a remedy to address such conduct.
Citi offers no rationale why its unilateral mistake in communicating a bid is an unfair or deceptive act or practice contemplated by the CPA, chapter 19.86 RCW, and codified in the deed of trust act's CPA provision RCW 61.24.135. We question whether by adding "defective" bidding to this provision, the legislature intended to create a CPA violation premised on a unilateral clerical mistake by the beneficiary of an opening bid. The Consumer Protection Act, declares unlawful, "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. . . ." RCW 19.86.020. To establish a CPA violation, the elements necessary are (1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury; (5) causation. Ambach v. French, 167 Wn.2d 167, 170, 216 P.3d 405 (2009).
Citi counters that because the legislature intended to overturn Udall when it amended the statute, a unilateral mistake that results in an erroneous bid is necessarily a "defective" bid under RCW 61.24.135. The trustee, therefore, was justified in declining to deliver the deed. But other than the Leen affidavit, which we address below, Citi offers nothing to support its contention that the amendment overturns Udall. We reject this contention. "The legislature is presumed to know the law in the area in which it is legislating, and statutes will not be construed in derogation of the common law absent express legislative intent to change the law." Wynn v. Earwin, 163 Wn.2d 361, 371, 181 P.3d 806 (2008).
However, we are hesitant to recognize an abrogation or derogation from the common law absent clear evidence of the legislature's intent to deviate from the common law. "It is a well-established principle of statutory construction that the common law . . . ought not to be deemed repealed, unless the language of a statute be clear and explicit for this purpose."
Potter v. Wash. State Patrol, 165 Wn.2d 67, 76-77, 196 P.3d 691 (2008) (internal quotation marks omitted) (quoting Norfolk Redevelopment Hous. Auth. v. Chesapeake Potomac Te. Co. of Va., 464 U.S. 30, 35-36, 104 S. Ct. 304, 78 L. Ed. 2d 29 (1983). "Absent an indication that the Legislature intended to overrule the common law, new legislation will be presumed to be consistent with prior judicial decisions." In re Marriage of Williams, 115 Wn.2d 202, 208, 796 P.2d 421 (1990).
In addition, if the legislature intended to overturn Udall, it could have simply amended the two sections of the deed of trust act on which the Udall court relied — RCW 61.24.040 and .050. Instead, it left these provisions intact. Citi fails to explain this obvious discrepancy. Given the section the legislature chose to amend — RCW 61.24.135 — and conversely the sections interpreted by Udall — RCW 61.24.040 and .050 — which the legislature left intact, it necessarily follows that RCW 61.24.135 allows a trustee to refuse to deliver a deed only where the bidding is tainted by some misconduct. But this authority does not extend to relieve any bidder, whether beneficiary or third party, from the consequences of the bidder's own unilateral mistake in the course of a procedurally regular sale.
And we acknowledged that "[c]ourts have universally recognized that the mere inadequacy of price alone of property obtained at an execution sale provides insufficient reason for setting aside a sale." Steward v. Good, 51 Wn. App. 509, 754 P.2d 150 (1988). Citi offers no controlling or persuasive authority to depart from this longstanding rule.
The trustee's discretion to withhold a deed whenever collusion or defective bidding occurs is triggered by a sale tainted by misconduct that undermines the sale process. This is a sensible reading that gives effect to the statute viewed in its entirety and consistent with the nonjudicial foreclosure statute goals.
There are three goals of the nonjudicial foreclosure statute: "'(1) that the . . . process should be efficient and inexpensive, (2) that the process should result in interested parties having an adequate opportunity to prevent wrongful foreclosure, and (3) that the process should promote stability of land titles.'" Udall, 159 Wn.2d at 916 n. 9 (quoting Plein v. Lackey, 149 Wn.2d 214, 225, 67 P.3d 1061 (2003).
Giving a trustee the broad authority to invalidate a sale premised on the only "defect" asserted by Citi — a typographical error in the document it created that communicated its bid to the trustee — undermines two primary goals of the nonjudicial foreclosure statute: efficiency and stability. Adoption of Citi's rule renders the finality of every sale subject to a claim of mistake by a bidder and subjects the trustee's discretionary acts to challenge. Litigation to enjoin or compel the issuance of a deed or to set aside a sale after issuance of a deed is fostered by giving effect to Citi's view of RCW 61.24.135. This view is at odds with the goals of the nonjudicial foreclosure statute.
Because RCW 61.24.135 does not apply to a unilateral mistake by the beneficiary in communicating its bid to the trustee, Udall controls. Under Udall, [t]he trustee cannot withhold delivery unless the sale itself was void due to a procedural irregularity that defeated the trustee's authority to sell the property. . . . Insufficiency of price, as in this sale, is not a procedural irregularity that voids the sale, it is merely a mistake." Udall, 159 Wn.2d at 911.
Citi next asserts, "Even if Udall is controlling, the Udall holding supports Defendants' position as Udall held that delivery may be withheld when there is a grossly inadequate price plus some additional unfairness." Br. of Resp't at 16. The Udall court observed that "[g]rossly inadequate price together with circumstances indicating some additional unfairness may provide sufficient equitable grounds to set aside a nonjudical foreclosure sale." Udall, 159 Wn.2d at 914. Citi argues that "an innocent mistake result[ing] in a loss of $400,000.00" indicates "additional unfairness." Br. of Resp't at 17. We disagree. Udall requires more. The Udall court cited two examples of "additional unfairness" — a trustee who proceeds with a sale "[knowing] that the borrowers believed that their pending action against the lender had halted foreclosure proceedings" and "buyer's 'constructive if not actual notice of the [borrowers'] claim of right to . . . their residence before he acquired title. . . .'" Udall, 159 Wn.2d at 914-15 n. 7 (second alteration in original) (citing Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 683 (1985) and quoting Miebach v. Colasurdo, 102 Wn.2d 170, 177, 685 P.2d 1074 (1984)). The mere insufficiency of price that Citi demonstrated here is insufficient to invoke the equitable relief envisioned in Udall.
The record establishes no inequity here. Ferrey thought the bid seemed low, but the trustee confirmed its accuracy. The next day Ferrey contacted the trustee again, who reconfirmed the bid amount. At the sale, DiJulio asked the trustee to confirm the opening bid. The trustee reconfirmed the erroneous bid. The trustee temporarily suspended the sale to recheck the bid. He reconfirmed the erroneous bid and proceeded with the sale.
RCW 61.24.135's provision for defective bidding does not cover Citi's unilateral mistake in communicating the opening bid amount to the trustee. Accordingly, under Udall, the trustee was not entitled to withhold the deed, and title to the property should be quieted in Breiwick.
Affidavit of David Leen
Breiwick next argues that the trial court abused its discretion by admitting the affidavit of David Leen as expert opinion. Citi responds that the trial court properly considered the Leen affidavit as lay opinion testimony under ER 701. Citi is correct that the court allowed the affidavit as fact witness testimony. The court stated, "Frankly, I was thinking of it more as he was involved in the case, he called the legislature, you know. . . . I thought that was more fact witness." Verbatim Report of Proceedings (Dec. 18, 2009) at 36.
Leen testified in part:
2. Affiant represented T.D. Escrow Services, Inc., d/b/a T.D. Service company in Udall v. T.D. Escrow Services, Inc., reported at 159 Wn.2d 903, 154 P.3d 882 (2007).
3. Following the court decision of the case, I contacted a member of the Washington State Legislature and proposed that a statutory amendment be enacted to reflect the notion that a Trustee may decline to deliver the Trustee's deed at its discretion when a defect in bidding is discovered.
4. After this contact, and during that session of the Washington State Legislature, RCW 61.24.135 was amended to read in relevant part, "The trustee may decline to complete a sale or deliver the trustee's deed and refund the purchase price, if it appears that the bidding has been collusive or defective, or that the sale might have been void."
5. It is my belief that the Legislature's intent in enacting the 2008 amendment was to overturn the holding in Udall.
(Emphasis added.) Breiwick challenges the portion of the affidavit purporting to offer an opinion about the legislature's intent when it passed the 2008 amendment. We conclude the court erred when it relied on this testimony because it expresses an opinion on a conclusion of law. "No witness is permitted to express an opinion that is a conclusion of law. . . ." 5B Karl B. Tegland, Washington Practice: Evidence § 704.5, at 267 (5th ed. 2007). Lay witness testimony on a conclusion of law is barred under Rule 701 because it is not "helpful to a clear understanding of the witness' testimony or of a fact in issue." ER 701(b); see also 5B Tegland, supra, at 267. Legislative intent is a question of law. "'This court has the ultimate authority to determine the meaning and purpose of a statute.'" Lindeman v. Kelso Sch. Dist. 458, 162 Wn.2d 196, 201, 172 P.3d 329 (2007) (quoting State v. Sullivan, 143 Wn.2d 162, 174, 19 P.3d 1012 (2001)). Accordingly, the trial court abused its discretion in allowing the opinion testimony on legislative intent.
For the reasons discussed above, we reverse and remand with instructions for the trial court to enter summary judgment quieting title in Breiwick's favor.
WE CONCUR: