Opinion
No. 56071-9-I.
December 11, 2006.
Appeal from a judgment of the Superior Court for King County, No. 04-2-36051-0, Jay V. White, J., entered June 3, 2006.
Counsel for Respondent/Cross-Appellant, Charles C. Huber, Lane Powell PC, WA.
Robert James Guite, Lane Powell PC, WA.
Reversed and remanded by unpublished opinion per Schindler, A.C.J., concurred in by Agid and Becker, JJ.
Ian Gunsul contends the trial court erred in granting summary judgment and dismissing his lawsuit against Countrywide Home Loans and Mortgage Electronic Registration Systems to quiet title and for damages. There is no dispute that under RCW 61.24.090(1) Gunsul did not cure the default on his loan by the eleventh day before the foreclosure sale. But there is also no dispute that Gunsul could still stop the foreclosure by paying off the principal balance before the foreclosure sale date. Because there is a genuine issue of material fact about whether Countrywide's failure to timely provide the exact principal balance prevented Gunsul from tendering payment and stopping the foreclosure, we reverse and remand for trial.
FACTS
On December 18, 2002, Ian Brooks Davis Gunsul (Gunsul) obtained a residential loan from Countrywide Home Loans (Countrywide) for $150,574. Gunsul secured the loan with a deed of trust on the residence. The deed of trust identifies Gunsul as the borrower, Countrywide as the lender, and Landsafe Title of Washington (Landsafe Title) as the trustee. The deed of trust states that Mortgage Electronic Registration Services (MERS), "acting solely as a nominee for Lender and Lender's successors and assigns," is "the beneficiary under this Security Instrument." Also under the deed of trust, the lender "may from time to time appoint a successor trustee."
The deed of trust was recorded on December 24, 2002.
By October 2003, Gunsul was in default on the loan. At the request of Countrywide and MERS, Northwest Trustee Services (NTS) sent a notice of default to Gunsul by certified mail and posted the notice of default on his property. The January 29, 2004 notice of default stated that the amount owing was $153,222.53 "and that the amount required to payment default cure before a notice of sale [was] recorded" was $7,094.55.
CP 156-157.
On February 10, 2004, MERS, acting as the nominee for Countrywide, appointed NTS as the successor trustee. On March 3, 2004, NTS issued a notice of trustee's sale, scheduling the nonjudicial foreclosure sale for June 4, 2004 at 10:00 a.m. The notice stated the total amount due to cure the default was $8,639.17 plus any additional defaults and Gunsul could reinstate the loan and avoid foreclosure if he paid the amount due eleven days before the foreclosure sale. The notice also stated that the principal balance was $149,281.92 plus interest and other costs and fees as provided by statute.
The appointment of successor trustee was recorded in the King County real property records on February 13, 2004.
Two days before the June 4 foreclosure sale, Gunsul filed a petition for bankruptcy. NTS postponed the foreclosure sale to July 9, 2004. On July 9, 2004, NTS again postponed the foreclosure to August 6, 2004. On July 14, 2004, the court dismissed Gunsul's bankruptcy petition. Gunsul filed a second bankruptcy petition on August 4, 2004. NTS again postponed foreclosure until September 17, 2004. On September 17, 2004, the court dismissed Gunsul's second bankruptcy petition.
On October 4, 2004, NTS served Gunsul with an amended notice of foreclosure and an amended notice of trustee's sale scheduling the foreclosure sale for November 5, 2004, at 10:00 a.m. The amended notice stated that the total amount due to cure the default at that time was $19,537.71. According to the amended notice of foreclosure, if Gunsul failed to cure by October 25, he could still stop the foreclosure by paying the total principal balance of $149,281.92 plus accrued interest, costs, fees, and advances. The notice also said that the estimated amount due to reinstate his deed of trust and loan by October 25, 2004, the last day to cure the default, was $20,037.71. Because the amount in the notice was an estimate and the exact amount was necessary in order to pay off the loan, the amended notice of foreclosure told Gunsul to contact the trustee for the exact amount required before tendering payment. Finally, the amended notice also advised Gunsul that he had a right to contest the default or to take legal action to restrain the foreclosure sale.
This amended notice of sale also provided this information.
On October 7, 2004, Gunsul called Countrywide about how to stop the foreclosure sale. Countrywide told him he could stop the foreclosure sale by reinstating his loan and making regular payments, paying off the full loan amount, or entering a forbearance agreement plan. On October 14, 2004, Gunsul applied for a loan with Ameriquest Mortgage Company ("Ameriquest") to pay off the full amount of the Countrywide loan.
On October 24, 2004, Gunsul obtained a loan from Ameriquest for $168,000, to pay off the amount owing to Countrywide. Gunsul executed a deed of trust to secure the loan. In the deed of trust, Ameriquest is identified as the lender and Blackstone National Title, LLC (Blackstone), as the trustee. According to Gunsul, he understood Ameriquest was going to "seek an accurate pay-off from Countrywide." In mid-October to early November, Gunsul called Countrywide several times requesting an exact payoff amount. Gunsul also said he told Countrywide he was refinancing the property to prevent foreclosure.
According to Countrywide's records, two payoff amounts were requested on Gunsul's loan in October. The first request was on October 18, 2004 and Countrywide faxed a total payoff amount of $167,940.50. A second request was on October 19, 2004, and Countrywide faxed a payoff amount of $167,840.39.
The record also shows Countrywide's website was accessed and payoff information was viewed and requested on October 22, 2004.
On November 4, 2004, Countrywide faxed a payoff demand statement to Ameriquest listing the total payoff amount as $167,966.78. Ameriquest received the fax at 3:08 p.m. The statement said that it was void after November 4, 2004, that payoff funds must be made payable to Countrywide by wire or certified funds only, and that any funds received after 3:00 p.m. Pacific Time "may be posted the following business day." Ameriquest immediately faxed the payoff statement to the escrow agent, Blackstone. On November 5, 2004, Blackstone paid the full amount owed to Countrywide by FedEx.
On November 5, 2004, at 10:00 a.m., NTS sold Gunsul's residence to Joanne and Michael Rocheford at the nonjudicial foreclosure sale for $188,500.00. That afternoon, Gunsul called NTS and informed a foreclosure analyst, Vonnie Nave, that the property had been refinanced. When Nave contacted Countrywide to inquire whether it had received a payoff, Countrywide told her it had no knowledge of Gunsul's refinancing. NTS issued a trustee's deed to Joanne and Michael Rocheford on November 12, 2004.
Gunsul sued Countrywide, MERS, NTS, and the Rochefords, seeking to quiet title and for damages. Gunsul alleged negligent foreclosure, breach of contract, and violation of RCW 19.86, the Consumer Protection Act (CPA).
On December 1, 2004, Gunsul filed an amended complaint seeking to quiet title and for damages.
On summary judgment, the court dismissed Gunsul's lawsuit. Gunsul appeals the trial court's decision to grant summary judgment in favor of Countrywide and MERS.
ANALYSIS
Gunsul contends the trial court erred in ruling the foreclosure sale was valid because there is a genuine issue of material fact about whether Countrywide's failure to timely provide exact payoff information prevented him from successfully curing the default and stopping the foreclosure sale. Gunsul asserts Countrywide has a duty under the Deed of Trust Act to provide exact payoff information and that Countrywide breached this duty.
To establish a claim for negligence, Gunsul must demonstrate the existence of four elements: (1) duty, (2) breach, (3) causation, and (4) damages. Pedroza v. Bryant, 101 Wn.2d 226, 228, 677 P.2d 166 (1984).
We grant Countrywide's motion to strike pages 14-17 of Gunsul's reply brief. In his reply brief, Gunsul argues for the first time that MERS does not have legal standing to bring a judicial foreclosure action and therefore does not have standing to initiate a foreclosure sale. This court does not consider issues not raised below. RAP 2.5(a); Smith v. Shannon, 100 Wn.2d 26, 37, 666 P.2d 351 (1983).
Our review of the decision to grant summary judgment is de novo. Reynolds v. Hicks, 134 Wn.2d 491, 495, 951 P.2d 761 (1998). Summary judgment is proper if viewing the evidence in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). A material fact is one upon which the outcome of the litigation depends. Clement v. Travelers Indem. Co., 121 Wn.2d 243, 249, 850 P.2d 1298 (1993). Only when reasonable minds could reach one conclusion on the evidence, should the court grant summary judgment. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 485, 78 P.3d 1274 (2003).
Washington's Deed of Trust Act, RCW 61.24, allows a trustee to sell property through a nonjudicial foreclosure process. Amresco v. SPS Props., 129 Wn. App. 532, 536, 119 P.3d 884 (2005). RCW 61.24.020 provides, a "deed conveying real property to a trustee in trust to secure the performance of an obligation of the grantor or another to the beneficiary may be foreclosed by trustee's sale." Washington courts have recognized three objectives underlying the deed of trust act: the nonjudicial foreclosure process should remain efficient and inexpensive; the process should provide an adequate opportunity for interested parties to prevent wrongful foreclosure; and the process should promote the stability of land titles. Cox v. Helenius, 103 Wn.2d 383, 387, 693 P.2d 683 (1985). In general, courts disfavor post-sale challenges as undermining land title stability. See Amresco, 129 Wn. App. at 538. But because the Act removes protections borrowers have under a mortgage, "lenders must strictly comply with the statutes, and courts must strictly construe the statutes in the borrower's favor." Id. at 536-537.
Mortgages "generally may be foreclosed only by filing a civil action." Koegel v. Prudential Mut. Sav. Bank, 51 Wn. App. 108, 111, 752 P.2d 385 (1988) (quoting Patton v. First Fed. Sav. Loan Ass'n, 118 Ariz. 473, 477, 578 P.2d 152 (1978)).
To initiate foreclosure proceedings under RCW 61.24.040(1)(a), a notice of trustee's sale and a notice of foreclosure must be served and recorded at least 90 days before the foreclosure sale date. These notices must include the amount due to cure and the date by which the grantor must cure. See RCW 61.24.040(1)(f)(I)-(IX). The statutory notice requirement in RCW 61.24.040(1)(f)(IX) also states that the notice of foreclosure must include "the total principal balance plus accrued interest, costs and advancements."
The grantor must have the opportunity to cure and prevent foreclosure. See Cox, 103 Wn.2d at 387. Countrywide acknowledges there are three ways to prevent foreclosure: (1) under RCW 61.24.090(1)(a), the grantor may cure the default any time prior to the eleventh day before the foreclosure sale date, by paying the "entire amount then due under the terms of the deed of trust," as well as additional expenses; (2) under RCW 61.24.040(1)(f)(IX), if the grantor does not cure by the eleventh day before the foreclosure sale the grantor can "stop the sale by paying, before the sale, the total principal balance plus accrued interest, costs and advances" and (3) under RCW 61.24.130(1), the grantor may file suit to restrain the trustee's sale "on any proper ground."
Additional expenses include those "actually incurred by the trustee enforcing the terms of the note and deed of trust, including a reasonable trustee's fee, together with the trustee's reasonable attorney's fees, together with costs of recording the notice of discontinuance of notice of trustee's sale." RCW 61.24.090(1)(b).
Here, it is undisputed Gunsul received an amended notice of sale and an amended notice of foreclosure on October 4, 2004. The amended notice of foreclosure provided the total principal balance owed of $149,281.92, the amount due to cure — $19,537.71 — and the date by which Gunsul needed to cure — October 25. The parties do not dispute that the notices complied with the Act's statutory requirements. It is also undisputed that Gunsul did not cure by the eleventh day before the foreclosure sale. But as Countrywide admits, Gunsul could still stop the foreclosure sale by paying the total principal balance before the foreclosure sale date. RCW 61.24.040(1)(f)(IX).
Gunsul claims Countrywide prevented him from timely stopping the foreclosure sale by not sending the exact payoff information as requested. Countrywide argues it does not have a duty to provide the exact payoff information other than that included in the notice of foreclosure. In arguing it has no duty to provide exact payoff information beyond that included in the notice of foreclosure, Countrywide relies on the language in the statutory form for notice of foreclosure that: "it will be necessary for you [the grantor] to contact the Trustee before the time you tender reinstatement so that you may be advised of the exact amount you will be required to pay." RCW 61.24.040(1)(f)(IX). Countrywide's argument is unpersuasive for two reasons. First, the language Countrywide relies on appears in the context of curing the default by the eleventh day before the foreclosure sale, not in the context of stopping the foreclosure sale by paying the total principal balance plus accrued interests, costs, and advances. Second, Countrywide admits the statutory form unambiguously allows Gunsul to stop the foreclosure sale by paying the total principal before the foreclosure sale, requiring accurate payoff information. The amended notice of foreclosure tells Gunsul it is necessary to obtain the exact amount before paying off the amount owed.
You may reinstate your Deed of Trust and the obligation secured thereby at any time up to and including 10/15/04 (11 days before the sale date), by paying the amount set forth or estimated above and by curing any other defaults described above. Of course, as time passes other payments may become due, and any further payments coming due and any additional late charges must be added to your reinstating payment. Any new defaults not involving payment of money that occur after the date of this notice must also be cured in order to effect reinstatement. In addition, because some of the charges can only be estimated at this time, and because the amount necessary to reinstate may include presently unknown expenditures required to preserve the property or to comply with state or local law, it will be necessary for you to contact the Trustee before the time you tender reinstatement so that you may be advised of the exact amount you will be required to pay. In addition, the Trustee's fees may increase as more time is allowed to pass before reinstatement is made.
Even if Countrywide had a duty to provide the exact payoff amount, Countrywide contends Gunsul relies on inadmissible hearsay in his attempt to create a material issue of fact about whether Countrywide failed to do so. Below, and on appeal, Gunsul relies on the records produced by Countrywide and Ameriquest in discovery and on his testimony to argue there is a material issue of fact. Contrary to Countrywide's assertion, Gunsul's statements in his declarations are based on personal knowledge and do not rely on inadmissible hearsay. ER 801.
The October 4, 2004 amended notice of sale and amended notice of foreclosure state the principal balance was $149,281.92, plus additional interest, costs, and fees.
In his declaration, Gunsul states he "made several requests for a pay-off [sic] statement from Countrywide by calling their toll free telephone number." He further states, "From mid-October 2004 through to November 4, 2004 I repeatedly called Ameriquest's office to determine whether Countrywide was providing the pay-off [sic] information." After learning that Ameriquest had not received the payoff statement, Gunsul said "I would therefore call again myself to Countrywide to get the information." Gunsul also says he "had several conversations with persons at Countrywide's customer service telephone number advising that I was refinancing the property in order to prevent the foreclosure."
CP 183.
Id.
According to the business records Countrywide produced in discovery, a payoff amount was requested and faxed on October 18, 2004, and again on October 19, 2004. These records indicate the total principal balance was $167,940.59 on October 18 and $167,840.39 on October 19. Though Countrywide's records show these payoff amounts were sent by fax, they do not state to whom the payoff amounts were sent and they do not provide confirmation of receipt.
By contrast, the payoff demand statement Countrywide faxed on November 4, 2004, the day before foreclosure, clearly states it is sent to Ameriquest and shows a confirmation of receipt at 3:08 p.m. But even though Ameriquest's trustee, Blackstone, sent Gunsul's $168,000 loan to Countrywide via FedEx on November 5, 2004, the day of foreclosure, Countrywide did not receive the funds until November 8, 2004. The declaration of Gunsul's counsel also states that the only copy of a payoff statement in the files produced during discovery by either Countrywide or Ameriquest is the November 4 statement. Viewing the evidence in the light most favorable to Gunsul, we conclude there is a genuine issue of material fact as to whether Countrywide faxed the requested payoff information to either Gunsul or Ameriquest before November 4, 2004. If the payoff information was received before the November 4 payoff statement, Gunsul may have been able to stop the foreclosure sale by paying the exact total principal balance before the foreclosure sale date.
Gunsul relies on United States Nat'l Bank v. Boge, 311 Or. 550, 814 P.2d 1082 (Or. 1991), to argue there is a genuine issue of material fact about whether Countrywide's failure to provide payoff information when requested proximately caused Gunsul to lose his property. Because there is a genuine issue of material fact over whether Countrywide provided the payoff information, we need not address this argument.
Gunsul also contends Countrywide violated the Consumer Protection Act under RCW.
§§ 19.86.010-.920. by engaging in an "unfair and deceptive act." But, Gunsul admits he "does not yet have the evidence to prove" the elements necessary to establish a claim under the CPA.
Last, relying on Plein v. Lackey, 149 Wn.2d 214, 227, 67 P.3d 1061 (2003), Countrywide claims that because Gunsul only pursued the statutory remedy of paying off the amount owed, he waived his right to challenge the validity of the foreclosure sale. Plein is distinguishable. In Plein, the grantor filed suit seeking a permanent injunction barring the trustee's sale and contesting the default. Id. at 220. The Court held the grantor had waived the ability to bring a post-sale challenge where the grantor received notice of the right to enjoin the foreclosure sale, had knowledge of the defense it asserted before the foreclosure sale, and failed to obtain a preliminary injunction or other order restraining the foreclosure sale. Id. at 229. Central to the Court's holding was the fact the grantor sought a permanent injunction but failed to obtain a preliminary injunction or other restraining order. Id.
Here, Gunsul did not file suit to enjoin the foreclosure sale and did not contest the default. Instead, Gunsul only pursued stopping the foreclosure sale by refinancing the property and paying the total amount of the principal as allowed under RCW 61.24.040(1)(f)(IX). Because Gunsul tried to refinance the property to pay the total principal balance and stop the foreclosure sale, we conclude Gunsul did not waive his ability to bring a post-sale challenge.
CONCLUSION
Because there is a material issue of fact about whether Countrywide failed to timely provide the exact payoff information required to stop the foreclosure, we reverse and remand for trial.
Because we remand for trial, we need not reach the issue of whether MERS had the statutory authority to appoint a successor trustee under RCW 61.24.010(2).
WE CON CUR:
Mary Kay Becker, Susan Agid, Concurring.