Christopher Leclaire v. Russell Henry ( 2020 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
LINDA LECLAIRE and ) No. 79678-0-I
CHRISTOPHER LECLAIRE, husband )
and wife, ) DIVISION ONE
)
Appellants, ) UNPUBLISHED OPINION
)
v. )
)
RUSSEL ROGER HENRY dba HOME )
FINANCE, a Washington corporation, )
)
Respondent. )
)
HAZELRIGG, J. — Linda and Christopher LeClaire appear pro se, seeking
reversal of an order finding that they had not proven alleged violations of the
Mortgage Broker Practices Act (MBPA)1 and the Consumer Protection Act (CPA)2.
Because substantial evidence supports the majority of the trial court’s findings of
fact and those findings support the court’s conclusions of law, we agree that the
LeClaires did not meet their burden. We affirm.
FACTS
In 2015, Linda and Christopher3 LeClaire (the LeClaires) approached
Russel Roger Henry, seeking financing to purchase a Gig Harbor short sale
1 Chap. 19.146, RCW.
2 Chap. 19.86, RCW.
3 For clarity, the LeClaires will be referred to individually by their first names. We intend
no disrespect
Citation and pinpoint citations are based on the Westlaw online version of the cited material.
No. 79678-0-I/2
property. Henry, doing business as Home Finance, was a licensed mortgage
broker. He presented a loan application on the LeClaires’ behalf to Carrington
Mortgage Services (CMS). The LeClaires performed some repairs on the property
before closing the sale because they wanted the lender to fund the loan. However,
they did not complete all repairs necessary for the lender to fund the loan. They
were then given the option of signing an escrow holdback agreement to secure
funding for the loan, but they did not agree to its terms. They did not receive the
loan and rescinded their offer to purchase the house.
The LeClaires filed suit, alleging that Henry had violated the MBPA by
ordering the wrong appraisal, failing to order a required inspection,
misrepresenting the nature of repairs to the property, and failing to make timely
required disclosures. They also alleged violation of the CPA and negligent
infliction of emotional distress.
In February 2019, the parties each represented themselves at a bench trial.
Christopher LeClaire testified to the following facts. On August 20, 2015, the
LeClaires initially viewed the property and were given a list of nearly $70,000 worth
of repairs that needed to be made as “part of the discounting system for the broker
price opinion.” The realtor advised them that “the best route for [them] is a 203(k)
loan to get them repaired.”
Henry presented a loan submission form to Carrington Mortgage on behalf
of the LeClaires. The boxes for two types of loans were checked on the form: a
“FHA 203k Full” loan and a “FHA 203(b) REO Repair Escrow” loan. Christopher
testified that he did not sign an application for an REO 203(b) loan and Henry did
-2-
No. 79678-0-I/3
not disclose to him that he was submitting an application for the 203(b) loan at the
same time as the 203(k) loan. Later, Christopher testified that, although he did not
tell Henry that he wanted the 203(b) loan, he agreed to move forward with it
because it was the only way to purchase the property. He clarified that he was not
sure whether the later 203(b) escrow holdback loan was the same loan as the one
indicated on the initial application.
Christopher stated that the appraisal “did not have the correct verbiage” to
support the 203(b) loan. He testified that they received a good faith estimate from
Henry but that it was not legible and that they never received any updates. He
stated that they received the “Truth in Lending Act” disclosure in the “loan package
that [they] signed at escrow.” Christopher testified that the first time he had any
indication that the exposed wood on the deck could be an issue was the day he
“went to escrow to sign.”
On November 10, 2015, five days after they signed at escrow, Christopher
emailed Shawnita Rhodes, an account manager for Carrington Mortgage, asking
the reason for the delay in the loan and seeking clarification of the painting that
needed to be done on the deck. She responded that, in order for the loan to fund,
the entire deck would need to be painted, including stairs, rails, deck boards, and
fascia. Christopher testified that he believed it was not possible to paint the deck
at that time of year because of the weather.
The escrow holdback agreement was presented to Christopher that day.
The terms of the escrow holdback required the LeClaires to submit $5,000 to be
held in escrow, which would be released on performance of certain terms. They
-3-
No. 79678-0-I/4
did not accept the escrow holdback loan because they believed that the loan would
have put them over the maximum “cash to close” specified in their original loan
approval. Christopher believed that this would prevent the loan from funding
because it would not pass final underwriting review. He also found the terms of
the escrow holdback to be unacceptable because he believed it required the work
on the deck to be done by a Carrington contractor and he thought it would cost
more than $5,000. Christopher estimated that it would have cost $10,000 to
$15,000 to complete the painting of the deck and the repairs necessary to prepare
the deck for painting.
The loan did not fund. The LeClaires requested the loan file from Henry
immediately after the loan failed because they were interested in trying to purchase
the house again. Christopher testified that Henry refused to give them the file.
They rescinded their offer to purchase the house.
The LeClaires elicited testimony that they later filed a complaint against
Henry with the Department of Financial Institutions (DFI), which regulates
mortgage loan originators and residential lenders in the State of Washington. After
an investigation, examiners from DFI found that Henry had failed to timely provide
loan applicants with full written disclosures containing an itemized explanation of
all fees and costs in five different loan files, including the LeClaires’. Henry and
DFI entered into a consent order to resolve the charges.
Henry testified to the following series of events. The LeClaires had
approached him in August of 2015 and were interested in buying the Gig Harbor
property. He had not seen the property but relied on their experience as a builder
-4-
No. 79678-0-I/5
and a realtor when they told him they thought the deck and roof would need to be
replaced before the house would “meet marketable condition.” The LeClaires
estimated that they would need about $35,000 to replace the deck, so they
“submitted the loan as a 203(k) light.” Henry stated that a 203(k) light would allow
them to close the loan without the work being done, so the LeClaires would have
received the loan at closing and then could complete the work at their convenience.
Henry submitted the application for the 203(k) loan and ordered “a 203(k) light
appraisal.” The appraiser required “some end cap[s] and some railings [on the
deck] replaced, CO2 [sic] detectors installed, and a roof inspection,” but did not
require the entire deck to be replaced.
Henry testified that he presented the LeClaires with the option to switch to
a different type of loan because they would not need as much money for the deck
and roof as they had originally estimated. They decided that they could do some
of the work themselves and signed the paperwork to switch to a 203(b). The loan
approval for the 203(b) specified that the “[c]ash to close may not exceed
[$]14,392,” which Henry took to refer to the “minimum down[]payment of 3½% for
FHA.”
Christopher replaced the railings on the deck and authorized Henry to order
the roof inspection. The roof was certified for two years. Henry also testified that
the appraiser had identified a small section of wood on the deck that was not
covered or treated. The underwriter saw the appraisal, noted that all exposed
wood needed to be covered or treated, and required the LeClaires to paint or stain
the exposed wood on the deck. The LeClaires did not complete this work.
-5-
No. 79678-0-I/6
Henry testified that he had forgotten to include the good faith estimate and
truth in lending disclosures in the packet that he sent to DFI for the investigation.
He asserted that the LeClaires had signed the truth in lending disclosures and that
he had made all required disclosures to them. He also stated that, whenever he
submits a loan to a wholesale lender, the lender has three days to make required
disclosures to the borrower, which the borrower must acknowledge or else the loan
will not proceed. He testified that the LeClaires must have signed a “revised good
faith and Truth in Lending” in early October after they switched to the 203(b) loan
or else the loan process would not have proceeded.
On cross-examination, Henry acknowledged that the terms of the escrow
holdback agreement required the LeClaires to pay the cost of having the exposed
wood on the deck painted. Although he agreed that the terms seemed to state
that a “Carrington Mortgage Services representative will do it,” he maintained that
the LeClaires could have performed the work themselves. He testified that the
$5,000 would have been put into an escrow account “to make sure you go do the
work and get it done so they can close the loan.”
After the conclusion of the trial, the court entered written findings of fact and
conclusions of law. The court ruled that the LeClaires had not met their burden of
demonstrating that Henry had violated the MBPA or the CPA or that he had
negligently inflicted emotional distress on them.
The LeClaires appealed. Henry did not file a responsive brief to this court.
-6-
No. 79678-0-I/7
ANALYSIS
The LeClaires appear pro se, arguing that the trial court erred in determining
that Henry had not violated the MBPA or the CPA. They identify six assignments
of error:
1. The trial court erred when it concluded that the submission
of the LeClaires[’] loan application by Henry would be good for two
different loan programs.
2. The trial court erred when it determined that a Good Faith
Estimate and a Truth in Lending Disclosure were properly delivered
to the LeClaires.
3. The trial court erred when it accepted the results of the
appraisal that was performed on the subject property. The appraisal
that was done did not satisfy the requirements of the FHA 203k loan
program.
4. The trial court erred when it determined that the LeClaires
were given an opportunity to remediate the issue of exposed wood
on the deck in order to fund their mortgage loan.
5. The trial court erred when it determined that the LeClaires
would receive a full refund of the $5000 placed into an escrow
account in order to secure the funding for their mortgage loan.
6. The trial court erred when it allowed inaccurate and false
statements of testimony to be given by Henry in contrast to the FHA
Guidelines that were in effect at the time of the LeClaires[’] loan
processing.
We interpret the first five assignments of error as challenges to the trial court’s
findings of fact. The sixth assignment of error appears to be an evidentiary issue.
We review challenged factual findings for substantial evidence. Sunnyside
Valley Irr. Dist. v. Dickie, 149 Wn.2d 873, 879, 73 P.3d 369 (2003). Substantial
evidence is that which is “sufficient to persuade a rational fair-minded person the
premise is true.” Id. “Even if there are several reasonable interpretations of the
evidence, it is substantial if it reasonably supports the finding.” Rogers Potato
Serv., LLC v. Countrywide Potato, LLC, 152 Wn.2d 387, 391, 97 P.3d 745 (2004).
We cannot review a fact-finder’s credibility determination. Morse v. Antonellis, 149
-7-
No. 79678-0-I/8
Wn.2d 572, 574, 70 P.3d 125 (2003). Unchallenged findings of fact are accepted
as true on appeal. Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 808,
828 P.2d 549 (1992). After determining whether substantial evidence supports the
factual findings, we consider de novo whether the supported findings are sufficient
to support the trial court’s decision. Bartlett v. Betlach, 136 Wn. App. 8, 18, 146
P.3d 1235 (2006).
I. Challenged Findings of Fact
The first assignment of error appears to challenge finding of fact 5, which
states: “Defendant submitted a loan application to Carrington Mortgage Services
on behalf of Plaintiffs, seeking a ‘FHA 203k Full’ loan and a ‘FHA 203(b) REO
Repair Escrow’ loan. Plaintiff’s Ex. 5.” The parties agreed that Henry submitted a
loan submission to Carrington Mortgage Services on the LeClaires’ behalf. The
boxes indicating the two different types of loans were checked on the submission.
Substantial evidence supports this finding.
The second assignment of error challenges the court’s finding that the
LeClaires received required disclosures from Henry. The full finding stated:
7. Though Department of Financial Institutions Program
Manager and Enforcement Chief Steve Sherman testified that he
found that Defendant had failed to provide Plaintiffs with a good-faith
estimate and a Truth in Lending Act document, Christopher LeClaire
testified that: (1) Plaintiffs did receive a good-faith estimate from
Defendant, though it was difficult to read; and (2) Plaintiffs did receive
a Truth in Lending Act document from Defendant.
This testimony is reflected in the trial record. We cannot review any credibility
determination or weighing of this evidence performed by the trial court. Substantial
evidence supports this finding.
-8-
No. 79678-0-I/9
Third, the LeClaires contend that the court erred in accepting the results of
the appraisal because it did not satisfy the requirements of the FHA 203k loan
program. The court addressed the results of the appraisal in finding of fact 10: “An
appraiser concluded that, rather than replacing the entire deck on the Property, the
following items needed to be addressed: ‘The 3rd Floor deck end railings being
installed, Carbon monoxide sensors being installed and the composition roof
inspected for life expectancy.’ Plaintiff’s Ex. 10.” Henry testified to the results of
the appraisal, and the exhibit showing the appraiser’s conclusions was admitted
into evidence. Substantial evidence supports this finding.
The fourth assignment of error challenges finding of fact 16, which finds that
“Plaintiffs were given an opportunity to seek the necessary repairs to the exposed
wood at the Property in order for the lender to fund the loan.” The LeClaires
discovered that the exposed wood needed to be covered at escrow, at the latest.
The lender appeared to indicate that it would fund the loan if the LeClaires
accomplished the repairs. Although the LeClaires did not approve of the terms of
the escrow holdback agreement and did not accept it, substantial evidence
supports the finding that they had an opportunity to seek the necessary repairs to
obtain the loan.
The LeClaires’ fifth assignment of error appears to challenge a portion of
finding of fact 18, which states: “Plaintiffs were also given the option of signing an
‘Escrow Holdback Agreement’ in order to secure funding for the loan, Plaintiff’s Ex.
17, which would have required Plaintiffs to deposit $5,000 in an escrow account,
-9-
No. 79678-0-I/10
which would be returned to them upon proof of completion of the necessary
repairs.”
The proposed agreement states that the escrow company would hold
$5,000 in escrow “for completion of the Work and payment of inspection fees.”
The funds would be released after the deck was painted and inspected. The
document states that “[t]he Work shall be completed and inspected by CMS or its
agents no later than ____ (the ‘Completion Date’).” A completion date was not
specified in the unsigned agreement. Regardless of whether this term required
that CMS or its agents perform the work, the proposed agreement specified that
“[t]he costs for inspections performed pursuant to this Agreement shall be paid
from the Escrow Fund.” Also, CMS would have had the discretion to “apply the
balance of the Escrow Funds, or any portion thereof, to the principal of the
Mortgage Loan,” even without the LeClaires’ agreement.
Although there was conflicting evidence on this point and we cannot review
the trial court’s decision to credit Henry’s testimony, the language of the proposed
agreement cannot be reasonably interpreted as guaranteeing that the $5,000 in
escrow funds would have been returned to the LeClaires after the deck was
painted. Substantial evidence does not support the challenged portion of this
finding of fact.
II. Conclusions of Law
Having determined that substantial evidence supports all but one of the
challenged findings of fact, we turn to the question of whether these findings
substantiate the trial court’s conclusions of law.
- 10 -
No. 79678-0-I/11
A. Mortgage Broker Practices Act
The court first determined that the LeClaires had not demonstrated that
Henry had violated the MBPA. A mortgage broker violates the MBPA when they:
(1) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead borrowers or lenders or to defraud any person;
(2) Directly or indirectly engage in any unfair or deceptive
practice toward any person;
...
(6) Fail to make disclosures to loan applicants and
noninstitutional investors as required by RCW 19.146.030 and any
other applicable state or federal law;
(7) Make, in any manner, any false or deceptive statement or
representation with regard to the rates, points, or other financing
terms or conditions for a residential mortgage loan or engage in bait
and switch advertising[.]
RCW 19.146.0201. The MBPA specifies the disclosure requirements:
Within three business days following receipt of a loan
application from a borrower, a mortgage broker or loan originator
must provide to the borrower a full written disclosure containing an
itemization and explanation of all fees and costs that the borrower is
required to pay in connection with obtaining a residential mortgage
loan, and specifying the fee or fees which inure to the benefit of the
mortgage broker and other such disclosures as may be required by
rule. A good faith estimate of a fee or cost must be provided if the
exact amount of the fee or cost is not determinable.
RCW 19.146.030(1).
The trial court did not find that Henry had defrauded or misled borrowers,
engaged in unfair or deceptive practices, or made any false or deceptive statement
regarding the terms and conditions of a loan. We construe the absence of a finding
of fact against the party with the burden of proof. Barker v. Advanced Silicon
Materials, LLC, (ASIMI), 131 Wn. App. 616, 627, 128 P.3d 633 (2006). The
absence of these findings supports the conclusion that the LeClaires failed to prove
that Henry violated subsection (1), (2), or (7) of RCW 19.146.0201.
- 11 -
No. 79678-0-I/12
The record contained conflicting testimony regarding the disclosures, which
the court recognized in its findings. The court did not explicitly find that the
LeClaires received all disclosures timely, but neither did it find that Henry failed to
provide the required disclosures. The absence of these findings supports the
conclusion that the LeClaires did not demonstrate that Henry violated the
disclosure requirements of the MCBA. Also, implicit in the court’s factual finding is
a credibility determination, which we cannot review.
On the record before us, the factual findings supported the conclusion that
the LeClaires had not proven Henry’s alleged violations of the MBPA.
B. Consumer Protection Act
The court also concluded that the LeClaires had not met their burden of
demonstrating that Henry violated the CPA.
The CPA prohibits unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce. RCW 19.86.020. A
plaintiff must show five elements to establish a violation of the CPA: (1) an unfair
or deceptive act or practice, (2) occurring in trade or commerce, (3) that impacts
the public interest, (4) that causes injury to the party in the party's business or
property, and (5) that the injury is causally linked to the unfair or deceptive act.
Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778,
784–85, 719 P.2d 531 (1986).
As stated above, the trial court did not find that Henry had engaged in any
unfair or deceptive act or practice. The absence of any such finding supports the
conclusion that the LeClaires did not meet their burden of proof to show a violation
- 12 -
No. 79678-0-I/13
of the CPA. On the record before us, the findings of fact supported the conclusion
that the LeClaires had not demonstrated that Henry violated the CPA.
III. Admission of Evidence
The LeClaires contend that the court erred in admitting Henry’s testimony
that they could have switched their loan application from the 203b loan back to the
203k loan.
We may refuse to review any claim of error that was not raised before the
trial court. RAP 2.5(a). “It is well settled that objections to evidence cannot be
raised for the first time on appeal.” Sepich v. Dep’t of Labor & Indus., 75 Wn.2d
312, 319, 450 P.2d 940 (1969). Henry stated three times during cross-examination
that the LeClaires could have switched the loan back to a 203(k) from the 203(b).
The LeClaires did not object to this testimony or question Henry about the accuracy
of this statement. Because they did not raise any objection to this evidence before
the trial court, they cannot raise it for the first time on appeal.
IV. Consideration of Additional Evidence on Appeal
The LeClaires designated four “supplemental exhibits” as part of the clerk’s
papers before this court, then filed the documents with the superior court on July
8, 2019. Generally, the record on review may consist of a report of any oral
proceeding, papers filed with the clerk of the trial court, exhibits, and/or a certified
record of administrative adjudicative proceedings. RAP 9.1. The Rules of
Appellate Procedure provide a limited remedy under which we may direct that
additional evidence may be taken if all of the following criteria are met:
- 13 -
No. 79678-0-I/14
(1) additional proof of facts is needed to fairly resolve the issues on
review, (2) the additional evidence would probably change the
decision being reviewed, (3) it is equitable to excuse a party’s failure
to present the evidence to the trial court, (4) the remedy available to
a party through postjudgment motions in the trial court is inadequate
or unnecessarily expensive, (5) the appellate court remedy of
granting a new trial is inadequate or unnecessarily expensive, and
(6) it would be inequitable to decide the case solely on the evidence
already taken in the trial court.
RAP 9.11(a); Harbison v. Garden Valley Outfitters, Inc., 69 Wn. App. 590, 593–94,
849 P.2d 669 (1993).
In this case, we do not find that it is equitable to excuse the LeClaires’ failure
to present this evidence to the trial court. The evidence sought to be introduced
was available to the LeClaires at the time of trial, and they do not give any reason
to excuse their failure to present it. See Harbison, 69 Wn. App. at 594. We decline
to consider this evidence on review.
Affirmed.
WE CONCUR:
- 14 -