Peter Schaub v. Jp Morgan Chase Bank N.a. ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PETER SCHAUB, an individual, )
CLOUDY SKIES PROPERTIES, LLC, a) No. 78439-1-1
Washington limited liability company, )
) DIVISION ONE
Appellants, )
)
v. )
)
JPMORGAN CHASE BANK N.A.; )
BAYVIEW LOAN SERVICING, LLC; )
NORTHWEST TRUSTEE SERVICES, )
INC., )
)
Respondents, ) UNPUBLISHED OPINION
)
and ) FILED: July 1, 2019
)
DOE DEFENDANTS 1-10, )
)
Defendants. )
)
SMITH, J. — Peter Schaub and his closely held limited liability company,
Cloudy Skies Properties LLC (collectively Schaub), lost a rental property in a
nonjudicial foreclosure. Schaub brought various statutory and estoppel claims
against JPMorgan Chase Bank N.A.(JPMorgan), Bayview Loan Servicing LLC
(Bayview), and Northwest Trustee Services Inc.(NWTS)(collectively
Respondents) related to the foreclosure. The trial court dismissed all of
Schaub's claims under CR 12(b)(6). Because Schaub did not state any claims
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on which relief can be granted, even if we presume that the facts alleged in his
complaint are true, we affirm.
FACTS
Schaub executed a promissory note and deed of trust in favor of
JPMorgan in October 2007, related to a rental property in Seattle. In December
2013, JPMorgan assigned the deed of trust to Bayview and the assignment was
recorded the next month. In June 2014, Bayview executed and recorded an
Appointment of Successor Trustee, naming NVVTS as a successor trustee.
In January 2015, NVVTS executed a Notice of Trustee's Sale of the
Property scheduled for May 22, 2015. Schaub alleges in his complaint that the
notice wrongfully identified Bayview as the beneficiary of the deed of trust
because JPMorgan was still the holder of the note and therefore the actual
beneficiary under the deed of trust. For this reason, Schaub alleges that
Bayview had no right to foreclose the property.
On April 14, 2015, 38 days before the scheduled sale, Brian Carl, a
housing counselor approved by the United States Department of Housing and
Urban Development\submitted a loss mitigation application to Bayview on
Schaub's behalf. Schaub alleges that the application was complete.
Shortly thereafter, Bayview sent Schaub a letter dated April 21, 2015,
which stated that Bayview was "unsuccessful in obtaining from [Schaub]the
following documents," followed by a blank line with no documents identified. The
letter explained that Bayview was "unable to complete [its] review of[Schaub's]
loan workout request without this information." The letter goes on to state,
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"Incomplete Information Final Notice — Your request for a Home Affordable
Modification cannot be completed as of April 21, 2015 because we have not yet
received all of the requested documentation." (Boldface omitted.) In a separate
section, the letter states, "After we receive all required documentation, we will
process your request as quickly as possible. While we consider your request,
your home will not be referred to foreclosure. Any scheduled foreclosure sale will
not occur pending our determination." (Boldface omitted.) Schaub alleges that
based on this letter, he "reasonably believed that his loss mitigation application
was complete. . . and the scheduled foreclosure. . . would be stopped."
On May 13, 2015, eight days before the scheduled sale, Bayview
contacted Carl and requested "a substantial amount of additional documentation
related to the loss mitigation application." Schaub alleges that Bayview e-mailed
Carl a list of requested documents, but his complaint does not state whether or
not he provided those documents to Bayview.
On May 22, 2015, NVVTS sold the Property to a third party. Schaub
alleges that the trustee's deed falsely asserted that Bayview complied with all
legal requirements and held the note secured by the deed of trust. Carl learned
about the sale on May 29, 2015, and requested that NVVTS rescind the sale
because, among other reasons, Bayview had received a "facially complete loss
mitigation application." NVVTS refused to rescind the sale.
Schaub initiated this action against JPMorgan, Bayview, NWTS, and Doe
Defendants 1-10 in May 2017. His complaint alleges actions for unjust
enrichment and violation of chapter X, 12 C.F.R. § 1024, which implements the
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Real Estate Settlement Procedures Act(RESPA), 12 U.S.C. § 2601 to 2617; the
deeds of trust act(DTA), chapter 61.24 RCW;the Consumer Loan Act (CLA),
chapter 31.04 RCW; and the Consumer Protection Act(CPA), chapter 19.86
RCW. No declarations related to these claims were filed by any party.
JPMorgan moved to dismiss Schaub's claims against it under CR 12(b)(6),
arguing that it had no liability to Schaub after it transferred its interest in the note
and the deed of trust to Bayview. The trial court granted JPMorgan's motion.
Bayview and NWTS also moved to dismiss Schaub's claims under
CR 12(b)(6), arguing that Schaub's claims failed because they were predicated
on a violation of RESPA, which applies to owner-occupied properties, not rental
properties. The trial court dismissed Schaub's RESPA, DTA, CLA, and CPA '
claims against Bayview and NWTS but granted Schaub leave to amend his
complaint to allege promissory or equitable estoppel claims "with particularity."
Schaub then filed an amended complaint, which mirrored the original
complaint but included a new claim against all parties for promissory and
equitable estoppel. Bayview and NWTS moved for dismissal of the new claim
under CR 12(b)(6), arguing that there was no promise or reliance. The trial court
granted the motion. Schaub appeals.
ANALYSIS
Schaub argues that the trial court erred when it dismissed his RESPA,
promissory estoppel, DTA, CLA, and CPA claims under CR 12(b)(6). We
disagree.
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Under CR 12(b)(6), the court may dismiss claims for "failure to state a
claim upon which reliercan be granted." Courts grant CR 12(b)(6) motions to
dismiss "only in the unusual case in which plaintiff includes allegations that show
on the face of the complaint that there is some insuperable bar to relief." Kinney
v. Cook, 159,Wn.2d 837, 842, 154 P.3d 206(2007)(internal quotation marks
omitted)(quoting Hoffer v. State, 110 Wash. 2d 415, 420, 755 P.2d 781 (1988),
adhered to on recons., 113 Wash. 2d 148, 776 P.2d 963(1989)). "The court
presumes all facts alleged in the plaintiff's complaint are true and may consider
hypothetical facts supporting the plaintiff's claims." Kinney, 159 Wash. 2d at 842.
We review a trial court's ruling to dismiss a claim under CR 12(b)(6) de novo.
Kinney, 159 Wash. 2d at 842.
Bayview and NVVTS as Agents of JPMorgan
Schaub argues that the trial court erred in dismissing his claims against
JPMorgan because he alleged that JPMorgan was the true holder of the note
and Bayview and NVVTS acted as agents for JPMorgan. Because we must
presume the allegations in Schaub's complaint are true, we agree that dismissal
of JPMorgan was not proper.
Here, the note is not part of the record, but Schaub alleges in his
complaint that NWTS wrongfully identified Bayview as the beneficiary of the deed
of trust in the Notice of Trustee's Sale and that JPMorgan retained the note "as
owner and holder of the obligation." We presume that this allegation is true.
Therefore, dismissal of Schaub's claims against JPMorgan on a theory that
Bayview held the note, without proof of that fact, was error.
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Furthermore, "Washington's deed of trust act contemplates that the
security instrument will follow the note, not the other way around." Bain v. Metro.
Mortg. Gm., Inc., 175 Wash. 2d 83, 104, 285 P.3d 34 (2012). Therefore, we are not
persuaded by JPMorgan's claim that it was no longer the holder of the note
simply because it assigned its interest in the deed of trust to Bayview.
JPMorgan argues that the Notices of Trustee's Sale filed with Schaub's
complaint show that Bayview was the holder of the note because they identify
Bayview as the beneficiary of the deed of trust and RCW 61.24.030(7)(a)
requires the trustee to verify that the beneficiary is the holder of the note before a
sale. JPMorgan also argues that the language in the trustee's deed identifying
Bayview as the assigned beneficiary is presumptively true because
RCW 61.24.040(7) requires the trustee to verify a successor-in-interest's
ownership. Again, because Schaub alleges that NWTS wrongfully identified
Bayview as the beneficiary and we must presume that this allegation is true,
JPMorgan's reliance on these documents is misplaced.
In short, the trial court erred by dismissing JPMorgan based solely on
JPMorgan's assignment of the deed of trust. That said, for the reasons
described below, the trial court did not err in dismissing Schaub's claims on their
merits. Therefore, the ultimate dismissal of Schaub's claims against JPMorgan
was proper.
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Equitable Estoppel and RESPA Claim
Schaub argues that the trial court erred in dismissing his RESPA claim
because the Respondents should be equitably estopped from arguing that
Bayview had no duties to him under that statute. We disagree.
As an initial matter, Schaub does not dispute that the RESPA loss
mitigation procedures apply to only owner-occupied properties. 12 C.F.R. §
1024.30(c)(2)("The procedures set forth in §§1024.39 through 1024.41 of this
subpart only apply to a mortgage loan that is secured by a property that is a
borrower's principal residence."). For this reason, he cannot maintain a RESPA
claim against Respondents.
To avoid the inapplicability of RESPA, Schaub relies on the doctrine of
equitable estoppel and alleges that Bayview induced him to submit a loss
mitigation application and then led him to believe that his application was facially
complete and foreclosure would be prohibited in accordance with RESPA's loss
mitigation procedures. Specifically, he alleges that foreclosure was not proper
because he submitted a facially complete application more than 37 days before
the sale, as required to stop foreclosure:
Prohibition on foreclosure sale. If a borrower submits a complete
loss mitigation application after a servicer has made the first notice
or filing required by applicable law for any judicial or non-judicial
foreclosure process but more than 37 days before a foreclosure
sale, a servicer shall not move for foreclosure judgment or order of
sale, or conduct a foreclosure sale. . .
12 C.F.R.§ 1024.41(g).
But equitable estoppel is not available for offensive use by plaintiffs.
Greaves v. Med. Imaging Sys., Inc., 124 Wash. 2d 389, 397-98, 879 P.2d 276
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No. 78439-1-1/8
(1994). As such, Schaub cannot rely on that doctrine to make an inapplicable
statute suddenly applicable. Promissory estoppel is the proper doctrine for
asserting such a claim. Greaves, 124 Wash. 2d at 397-98. Therefore, the trial court
properly dismissed Schaub's RESPA and equitable estoppel claims.
Promissoty Estoppel
Schaub argues that the trial court erred in dismissing his claims of
promissory estoppel. We disagree.
To prevail on a promissory estoppel claim, the plaintiff must prove:
(1) a promise,(2) that promisor should reasonably expect to cause
the promisee to change his position, and (3) actually causes the
promisee to change position,(4)justifiably relying on the promise,
(5) in such a manner that injustice can be avoided only by
enforcement of the promise.
McCormick v. Lake Wash. Sch. Dist., 99 Wash. App. 107, 117, 992 P.2d 511
(1999).
Here, the first element of estoppel is not met because Bayview did not
make a promise not to foreclose. Schaub alleges that Bayview's April 21, 2015,
letter indicated that Schaub filed a complete application and that it would
therefore forebear all foreclosure efforts. But contrary to Schaub's claim, the
letter did not state that his application was complete. Although the letter did not
explain what specific documentation was missing from Schaub's application, it
did inform him that Bayview could not complete its review because it had not
received all requested documentation. And, it warned him that foreclosure may
proceed if he failed to make his loan payments:
We have been unsuccessful in obtaining from you the following
documents:
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[blank]
We are unable to complete our review of your loan workout request
without this information.
If your loan is delinquent, collection/foreclosure activity currently in
progress will continue to proceed during the review process of your
request for a workout. This letter and the loan workout review
process shall not waive any of our rights or your obligations under
the note and other loan documents. In other words, you are
responsible to continue making your loan payments.
. . . Even if we are able to approve you for a foreclosure alternative
prior to a sale, a court with jurisdiction over the foreclosure
proceeding (if any) or public official charged with carrying out the
sale may not halt the scheduled sale.
Incomplete Information Final Notice — Your request for a Home
Affordable Modification cannot be completed as of April 21, 2015
because we have not received all of the requested documentation.
(Boldface omitted.) The letter then went on to explain the process that would
occur going forward:
After we receive all required documentation, we will process your
request as quickly as possible. While we consider your request,
your home will not be referred to foreclosure. Any scheduled
foreclosure sale will not occur pending our determination.
(Boldface omitted.) Arguably, the language that "[a]ny scheduled foreclosure
sale will not occur pending our determination" was a conditional promise not to
foreclose. But as explained in that paragraph, foreclosure is postponed once the
lender "receive[s] all required documentation." Furthermore, the letter stated that
required documents were still missing from Schaub's application, so the
conditional promise was not triggered. Therefore, Schaub has not satisfied the
first element of estoppel.
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Furthermore, Schaub has not alleged facts that satisfy the fourth element
of estoppel: justifiable reliance. Specifically, Schaub states in his complaint that
Bayview requested "a substantial amount" of additional documentation eight days
before the scheduled foreclosure sale. This request for additional
documentation, in combination with the letter stating that Bayview could not
complete Schaub's loss mitigation application, should have put Schaub on notice
that Bayview had not received "all required documentation" and that the
foreclosure sale could proceed as scheduled. Therefore, he could no longer
justifiably rely on any promise not to foreclose, especially given the fact that he
still had time to enjoin the foreclosure sale under the DTA. RCW 61.24.130(2)
(requiring a lawsuit to enjoin foreclosure be brought within five days of the sale).
Schaub argues that Bayview's conditional promise was triggered by his
submission of a "facially" complete application. But nothing in the letter promises
to stop foreclosure based on the receipt of a facially complete application.
Additionally, Schaub does not explain what a "facially" complete application
includes or how it differs from a complete application. Therefore, this argument
is not persuasive.
Schaub next argues, for the first time in his reply brief, that it is not known
whether the additional information requested by Bayview was necessary to
complete the application or was simply "miscellaneous information to clarify
information already received or replacement of information that had become
stale." But "[am n issue raised and argued for the first time in a reply brief is too
late to warrant consideration." Cowiche Canyon Conservancy v. Bosley, 118
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Wash. 2d 801, 809, 828 P.2d 549 (1992). Therefore, we do not consider this
argument.
DTA
Schaub argues that the trial court erred in dismissing his DTA claims. We
disagree.
The DTA "creates a three-party mortgage system allowing lenders, when
payment default occurs, to nonjudicially foreclose by trustee's sale." Albice v.
Premier Mortq. Servs. of Wash., Inc., 174 Wash. 2d 560, 567, 276 P.3d 1277
(2012). "The act furthers three goals:(1) that the nonjudicial foreclosure 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."
Albice, 174 Wash. 2d at 567.
The DTA provides that "[a]nyone having any objection to the sale on any
grounds whatsoever will be afforded an opportunity to be heard as to those
objections if they bring a lawsuit to restrain the sale pursuant to RCW 61.24.130."
Former RCW 61.24.040(1)(f)(IX)(2012). The lawsuit must be brought within five
days of the sale. RCW 61.24.130(2)("No court may grant a restraining order or
injunction to restrain a trustee's sale unless the person seeking the restraint
gives five days notice to the trustee of the time when, place where, and the judge
before whom the application for the restraining order or injunction is to be
made."). The DTA also provides that "fflailure to bring such a lawsuit may result
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in a waiver of any proper grounds for invalidating the Trustee's sale." Former
RCW 61.24.040(1)(f)(IX).
In Albice, the Supreme Court held that "[t]he word 'may' indicates the
legislature neither requires nor intends for courts to strictly apply waiver." Albice,
174 Wash. 2d at 570. Therefore, waiver should be applied "only where it is
equitable under the circumstances and where it serves the goals of the act."
Albice, 174 Wash. 2d at 570. Waiver is appropriate "where a party (1) received
notice of the right to enjoin the sale,(2) had actual or constructive knowledge of a
defense to foreclosure prior to the sale, and (3)failed to bring an action to obtain
a court order enjoining the sale." Albice 174 Wash. 2d at 569. Tin determining
whether waiver applies, the second goal [of the DTA]—that the nonjudicial
foreclosure process should result in is interested parties having an adequate
opportunity to prevent wrongful foreclosure—becomes particularly important."
Albice, 174 Wash. 2d at 571. Allowing a borrower to delay asserting a defense until
after a sale defeats the spirit and intent of the DTA. Albice, 174 Wash. 2d at 570.
Here, Schaub's complaint alleges that he is entitled to remedies under the
DTA because "[t]he misconduct alleged herein against Defendants constitutes:
(1)fraud and misrepresentation; and (2)failure of NWTS to materially comply
with the provisions of the DTA,for which Mr. Schaub is entitled to relief under
RCW 61.24.127." On appeal, Schaub specifies that Bayview and NWTS violated
the DTA in the following ways: the Assignment of Deed of Trust and Appointment
of Successor Trustee in 2010 were improperly executed, the Notices of Trustee's
Sales were improperly signed and notarized on different dates, the location of the
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No. 78439-1-1/13
trustee's sale was not public, and the marketing of the Property was improper.
But these alleged violations were all discoverable prior to the trustee's sale and
Schaub does not allege that he did not have notice of them. Therefore, because
Schaub "had actual or constructive knowledge of a defense to foreclosure prior to
the sale" and he failed to use available presale remedies to enjoin the foreclosure
sale, he waived his right to assert these defenses. Albice, 174 Wash. 2d at 569.
Schaub argues that he "reasonably believed his remedies under the DTA
would remain preserved" based on Bayview's alleged promise not to foreclose.
But this is an estoppel argument. As described above, equitable estoppel is not
available for offensive use by plaintiffs. Greaves, 124 Wash. 2d at 397-98.
Furthermore, his promissory estoppel claim fails because Schaub cannot show
that Bayview promised not to foreclose or that he justifiably relied on that
promise. Therefore, dismissal of his DTA claim was proper.
CLA
For the first time in his reply brief, Schaub argues that the trial court erred
in dismissing his CLA claim. Although Schaub alleges that the claim was
"thoroughly" addressed in his opening brief, the pages cited reference the CLA
only in passing and include no argument as to how Respondents violated the
CLA. Therefore, his argument is not persuasive and we hold that Schaub waived
the right to challenge the dismissal of his CLA claim on appeal. See Hall v.
Feigenbaum, 178 Wash. App. 811, 817, 319 P.3d 61(2014)("We deem an issue
not briefed to be waived."); Cowiche Canyon Conservancy, 118 Wash. 2d at 809
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("An issue raised and argued for the first time in a reply brief is too late to warrant
consideration.").
CPA
Schaub argues that the trial court erred in dismissing his CPA claims. We
disagree.
To prevail on a CPA action, the plaintiff must prove the following elements:
"(1)[an] unfair or deceptive act or practice;(2) occurring in trade or commerce;
(3) public interest impact;(4) injury to plaintiff in his or her business or property;
[and](5) causation." Klem v. Wash. Mut. Bank, 176 Wash. 2d 771, 782, 295 P.3d
1179(2013)(first alteration in original)(quoting Hangman Ridge Training
Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778, 780, 719 P.2d 531 (1986)).
A claim "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." Klem, 176 Wash. 2d at 787.
Similar to the claims addressed above, both of Schaub's per se and unfair
practice CPA theories are based on the premise that Respondents violated their
duty of good faith and committed an unfair practice by continuing the foreclosure
of his property despite his submission of a facially complete loss mitigation
application. Schaub's appellate briefing does not directly address the element of
causation. Even so, under the facts alleged in his complaint, he cannot prove
causation. Schaub received notice that Bayview needed more documents for his
loss mitigation application eight days before the sale, which is within the time
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No. 78439-1-1/15
required to enjoin the foreclosure under the DTA. Nevertheless, he did not
pursue that available legal remedy to stop the sale. Therefore, Schaub's own
conduct in failing to pursue a lawsuit under the DTA broke the chain of causation
and caused his loss. Schaub cannot show that any alleged unfair practices by
Respondents caused his damages and his CPA claim was properly dismissed.
Attorney Fees
All parties request attorney fees and costs on appeal based on RAP 18.1
and the attorney fee clause in the deed of trust. We grant Bayview's request for
fees and costs and deny all other parties' requests for fees and costs.
Attorney fees may only be awarded at the appellate level when authorized
by a contract, a statute, or a recognized ground of equity. Labriola v. Pollard
Grp., Inc., 152 Wash. 2d 828, 839, 100 P.3d 791 (2004). Here, the deed of trust
states:
26. Attorneys' Fees. Lender shall be entitled to recover its
reasonable attorneys' fees and costs in any action or proceeding to
construe or enforce any term of this Security Instrument. The term
"attorneys' fees," whenever used in this Security Instrument, shall
include without limitation attorneys' fees incurred by Lender in any
bankruptcy proceedings or on appeal.
(Boldface omitted.) Additionally, RCW 4.84.330 provides for prevailing party
attorney fees where a contract has a one-sided attorney fee clause.
Here, Schaub is not the prevailing party and, therefore, is not entitled to
attorney fees under RCW 4.84.330. Furthermore, although the deed of trust
specifies JPMorgan as the "Lender," Bayview took the deed of trust by
assignment from JPMorgan and acquired all of JPMorgan's rights and
obligations, including the right to attorney fees. Therefore, JPMorgan is not
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No. 78439-1-1/16
entitled to fees but Bayview is because JPMorgan assigned its interest in the
deed of trust to Bayview. Finally, NVVTS is not entitled to fees because the deed
of trust provides fees to the lender only, not the trustee.
Citing Stryken v. PaneII, 66 Wash. App. 566, 572, 832 P.2d 890 (1992),
JPMorgan argues that it is entitled to attorney fees even though it is no longer a
party to the deed of trust. But Stryken involved attorney fees in an action where
a contract was found to be void, not where there was an assignment of the
contract. Here, JPMorgan assigned its interest in the deed of trust to Bayview.
For that reason, Stryken is not controlling.
We affirm and grant Bayview attorney fees and costs on appeal, subject to
its compliance with RAP 18.1.
in4ANA.p/
WE CONCUR:
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