Carlyle Condominium Owners Association v. Yukiko Asano ( 2020 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
TEN BRIDGES, LLC, ) No. 80084-1-I
)
Appellant/Cross Respondent, )
)
v. )
)
TERESIA GUANDAI, )
)
Respondent/Cross Appellant, )
)
MIDAS MULLIGAN, LLC, )
)
Respondent. )
)
)
TEN BRIDGES LLC; CARLYLE ) No. 80456-1-I
CONDOMINIUM OWNERS )
ASSOCIATION, )
)
Appellants, )
v. )
)
YUKIKO ASANO, ) PUBLISHED OPINION
)
Respondent. )
)
VERELLEN, J. — To protect consumers, RCW 63.29.350 caps the fees a
fund-finder can claim as compensation for locating surplus proceeds deposited
with a superior court clerk following foreclosure of a lien on a property. Ten
Bridges, LLC argues the quitclaim deeds it convinced Yukiko Asano and Teresia
Nos. 80084-1-I & 80456-1-I/2
Guandai to sign were ordinary real estate transactions and not an equity-
stripping scheme violating the statutory cap on excessive fees. But the form of a
transaction cannot be used to evade a statute. Because the substance of the
quitclaim deeds reveals Ten Bridges sought more than five percent of the surplus
proceeds for itself as compensation for having located the surplus proceeds for
their rightful owners, the quitclaim deeds violated RCW 63.29.350 and were void.
Regarding Guandai’s cross appeal, the court did not abuse its discretion
by returning the parties to their respective positions prior to signing the void
quitclaim deed.
Therefore, we affirm.
FACTS
Appellant Ten Bridges describes itself as a national business that works to
locate surplus proceeds from foreclosure sales and to identify the individuals who
have a right to assert a claim to them but have not done so due to a lack of
awareness, desire, or ability to pursue the funds for themselves. Ten Bridges
culls thousands of foreclosure and public auction records to locate the proceeds
and the person with a right to claim them before acquiring the right to claim the
funds. Amici, including the Northwest Justice Project and Northwest Consumer
Law Center, assert Ten Bridges is running a predatory equity-stripping scheme
that causes both immediate and lasting harms to its customers because “post-
foreclosure equity-stripping schemes prevent homeowners from stabilizing their
lives following foreclosure, rebuilding wealth, and transmitting wealth to their
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children and grandchildren.”1 As part of the foreclosure of liens against their
condominiums, the King County Sheriff sold Yukiko Asano and Teresia
Guandai’s condominiums at auction to Madrona Lisa, LLC and Midas Mulligan,
LLC, respectively. Asano and Guandai then sold Ten Bridges their rights to
claim surplus proceeds. Both sales to Ten Bridges were voided for violating
RCW 63.29.350.
Yukiko Asano
In March 2019, Asano’s condominium was sold at public auction to
Madrona Lisa after the court foreclosed on a lien held by Asano’s condominium
owners association for just over $14,000 of unpaid assessments. The sheriff
returned $346,902.95 in surplus proceeds to the King County Superior Court
clerk’s office after paying off the lien and other expenses. A few weeks later,
Matt Cox of Ten Bridges e-mailed Asano, a resident of Tokyo, to convince her to
quitclaim her remaining interest in the condominium, including the right to the
surplus funds and the right to redeem, in exchange for $172,000 it would obtain
from the surplus funds and transfer to her. Asano was surprised because she
had not known about the foreclosure, sale, or surplus funds. Asano signed a
quitclaim deed in May.
In July, Ten Bridges tendered a check for $375,556.41 to the sheriff to
redeem the condominium, despite knowing the declared redemption price was
1 Nw. Just. Project Amicus Br. at 13. The Office of the Attorney General
also filed an amicus brief in support of respondents.
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Nos. 80084-1-I & 80456-1-I/4
$413,361.61. The sheriff refused the tender. Ten Bridges filed a motion to set
the redemption price at $375,556.41 and relied upon the quitclaim deed as proof
of its right to redeem. Madrona Lisa opposed the motion, arguing Ten Bridges
had no right to redeem the property because the quitclaim deed violated
RCW 63.29.350. On August 8, the court concluded Ten Bridges had no right to
redeem the property because the quitclaim deed was void for violating
RCW 63.29.350.
On August 10, Cox asked Asano to sign a second quitclaim deed,
explaining “the additional form I sent you may save us time” and would have “no
effect whatsoever on our existing agreement.”2 Cox did not tell her the court had
voided the first quitclaim deed. Asano signed the second deed. After learning
the first quitclaim deed had been declared illegal and void, she hired Madrona
Lisa’s attorney to represent her in opposing Ten Bridges’ efforts.
In October, Ten Bridges filed another motion to set the redemption price of
the property, this time at $375,506.03, and relied upon the second quitclaim deed
as proof of its right to redeem. Madrona Lisa opposed the motion, noted the
redemption price had increased to $430,937.91 due to accruing interest, and
argued the second quitclaim deed was also void for violating RCW 63.29.350.
The court concluded that Ten Bridges had no right to redeem the property
because the second quitclaim deed was also void for violating RCW 63.29.350.
Ten Bridges appeals both orders voiding the quitclaim deeds.
2 Clerk’s Papers (CP) at 505 (No. 80456-1-I).
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Teresia Guandai
Guandai’s condominium was sold to Midas Mulligan for $116,000 at public
auction. Guandai’s condominium owners association had filed for and
successfully foreclosed on a lien for unpaid assessments. By the time of the
sale, Guandai owed almost $27,000. After paying off the lien and other
expenses, the sheriff deposited just under $90,000 in surplus proceeds with the
King County Superior Court clerk’s office.
Guandai had one year to redeem. Matt Cox of Ten Bridges soon called
Guandai and told her she “might” be able to receive the surplus funds, but it
would be “nearly impossible.”3 Guandai had not known about the funds before
his call. Cox called repeatedly, offering $15,000 for her remaining interest in her
home and her right to claim the surplus proceeds. When the year was almost
over, Guandai faced losing her home and needed money. She spoke with Cox
again and agreed to sell. Guandai signed a quitclaim deed transferring her
interest in the condo, including any right to surplus proceeds from its sale, to Ten
Bridges. Ten Bridges wired her $15,000.
A few weeks later, Ten Bridges filed a motion to have the surplus funds
disbursed to it. It sent notice of its motion to Midas Mulligan and to Guandai at
her now-vacant condominium. Guandai did not appear at the May 15, 2019
hearing. Midas Mulligan opposed the motion and argued either Guandai was
entitled to the money or, if she did not assert a claim, then it was entitled to the
3 CP at 271-72 (No. 80084-1-I).
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surplus funds as the property owner. It requested an evidentiary hearing to
determine whether Ten Bridges’ agreement with Guandai violated
RCW 63.29.350.
At the next hearing, Guandai appeared pro se with Midas Mulligan and
Ten Bridges. The court concluded RCW 63.29.350 applied, voided Ten Bridges’
agreement with Guandai, and awarded her the surplus proceeds, except for the
$15,000 Ten Bridges already paid her.
Ten Bridges appeals, and Guandai cross appeals the ruling disbursing
$15,000 of the surplus proceeds to Ten Bridges.
ANALYSIS
I. Standing
As a threshold matter, we address Ten Bridges’ challenge to Madrona
Lisa’s standing to oppose its attempts to set the price of and redeem the
condominium Asano used to own.
“We review de novo whether a party has standing.”4 A party “whose rights
and interests are at stake” has standing to defend against an action.5 A party
has standing when it can demonstrate, first, an injury “fairly traceable to the
challenged conduct and likely to be redressed by the requested relief,” and,
4 Bavand v. OneWest Bank, 196 Wash. App. 813, 834, 385 P.3d 233 (2016)
(citing In re Estate of Becker, 177 Wash. 2d 242, 246, 298 P.3d 720 (2013)).
5 Riverview Cmty. Grp. v. Spencer & Livingston, 181 Wash. 2d 888, 893, 337
P.3d 1076 (2014) (citing Walker v. Munro, 124 Wash. 2d 402, 419, 879 P.2d 920
(1994)).
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Nos. 80084-1-I & 80456-1-I/7
second, a cognizable interest within the “‘zone of interests protected by the
statute’” at issue.6
Ten Bridges specifically argues the second requirement is not met
because it has an “unequivocal right to redeem” and Madrona Lisa has an
“unequivocal right” to receive the proper redemption price from Ten Bridges.7
Ten Bridges misunderstands Madrona Lisa’s rights and its own.
The purchaser of a foreclosed property has an inchoate ownership interest
in the property.8 This interest vests once no one has the right to redeem.9 Only
a person with a valid interest in the foreclosed property, or their successor, may
attempt to redeem the property.10 If a prospective redemptioner attempts to
redeem, then they take on a statutory duty to pay the purchaser the proper price,
and the purchaser has a corresponding statutory right to payment.11 Thus, Ten
Bridges had a right to redeem provided it held a valid interest in the property and
6Bavand, 196 Wash. App. at 834 (quoting State v. Johnson, 179 Wash. 2d 534,
552, 315 P.3d 1090 (2014)).
7 Appellant’s Br. at 11 (No. 80456-1).
8 Fid. Mut. Sav. Bank v. Mark, 112 Wash. 2d 47, 52-53, 767 P.2d 1382
(1989) (quoting W. T. Watts, Inc. v. Sherrer, 89 Wash. 2d 245, 248, 571 P.2d 203
(1977)); Gray v. C.A. Harris & Son, 200 Wash. 181, 186, 93 P.2d 385 (1939).
9
Performance Constr., LLC v. Glenn, 195 Wash. App. 406, 419, 380 P.3d
618 (2016) (citing RCW 6.21.120)).
10 Fid. Mut. Sav. Bank, 112 Wash. 2d at 53; RCW 6.23.010.
11See RCW 6.23.050 (referring to a purchaser’s “right to payment” from a
redemptioner); RCW 6.23.020(2) (defining the scope of a redemptioner’s duty to
pay); see also W.T. Watts, 89 Wash. 2d at 248-49 (explaining purchaser’s right to
receive payment) (citing former RCW 6.24.140 (1987), recodified as
RCW 6.23.020).
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Nos. 80084-1-I & 80456-1-I/8
tendered the proper amount. Madrona Lisa had an inchoate interest in the
condominium and a right to receive the proper amount of payment from Ten
Bridges upon proof of a valid interest.
Ten Bridges relied on the first quitclaim deed to show its right to redeem.
The posted redemption price at the time was $413,361.61. Ten Bridges
disagreed with Madrona Lisa’s calculation of the redemption price, challenging it
by tendering $375,556.41 and requesting a court order setting the redemption
price at that amount. Ten Bridges also asked the court to direct the sheriff to
accept that price. Because this motion threatened Madrona Lisa’s inchoate
ownership interest and its right to the proper amount of payment,12 it had
standing to challenge the validity of the first quitclaim deed.
And because Ten Bridges’ second motion to set the redemption price
asked the court to set the price for less than the amount declared by Madrona
Lisa and relied upon the second quitclaim deed for proof of its right to redeem,
Madrona Lisa had standing to challenge the validity of the second deed.13
12
The trial court never decided whether Madrona Lisa declared the correct
redemption price, and that question is not before us.
13 Ten Bridges argues Asano, as the grantor, is estopped from challenging
the validity of the second deed. For the reasons explained below, the second
quitclaim deed was illegal. Because it was illegal, Ten Bridges may not invoke
the doctrine of estoppel to bar Asano’s challenge. See Cooper v. Baer, 59
Wash. 2d 763, 763, 370 P.2d 871 (1962) (illegal contracts may not be enforced by
estoppel) (citing State v. Nw. Magnesite Co., 28 Wash. 2d 1, 26, 182 P.2d 643
(1947)).
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II. The Quitclaim Deeds Signed by Asano and Guandai Violated RCW 63.29.350
The quitclaim deeds signed by Asano and Guandai were each found to be
void for violating RCW 63.29.350. Ten Bridges argues the statute does not
apply. We review questions of statutory interpretation de novo.14 We construe a
statute to determine and implement the legislature’s intent based on the statute’s
plain meaning.15 We can use a dictionary to determine the plain meaning of a
term left undefined by the statute or by its context.16 We apply the rules of
statutory construction only if a statute is ambiguous.17
In relevant part, RCW 63.29.350(1) provides:
It is unlawful for any person to seek or receive from any person or
contract with any person for any fee or compensation for locating or
purporting to locate any . . . funds held by a county that are
proceeds from a foreclosure for delinquent property taxes,
assessments, or other liens . . . in excess of five percent of the
value thereof returned to such owner.
A statutory violation is both a criminal misdemeanor and a deceptive practice
under chapter 19.86 RCW, the Consumer Protection Act (CPA).18
14
TracFone Wireless, Inc. v. Washington Dep’t of Revenue, 170 Wash. 2d
273, 281, 242 P.3d 810 (2010) (citing Lake v. Woodcreek Homeowners Ass’n,
169 Wash. 2d 516, 526, 243 P.3d 1283 (2010))
Id. at 273 (citing Lake, 169 Wash. 2d at 526; Dep’t of Ecology v. Campbell
15
& Gwinn, LLC, 146 Wash. 2d 1, 9-10, 43 P.3d 4 (2002)).
Samish Indian Nation v. Dep’t of Licensing, ___ Wn. App. 2d ___, 471
16
P.3d 261, 264 (2020) (quoting Matter of Detention of J.N., 200 Wash. App. 279,
286, 402 P.3d 380 (2017)).
17Berger v. Sonneland, 144 Wash. 2d 91, 105, 26 P.3d 257 (2001) (citing
Davis v. Dep’t of Licensing, 137 Wash. 2d 957, 963, 977 P.2d 554 (1999)).
18 RCW 63.29.350.
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Ten Bridges argues three reasons why both trial courts misconstrued
RCW 63.29.350 to void its transactions with Asano and Guandai. It contends,
first, the statute applies only to surplus proceeds from foreclosures of
government-held liens; second, the statute applies only to proceeds held by a
county, and superior court clerks are not county officers; and, third, it did not
contract with Asano or Guandai to locate funds.
Other liens. Ten Bridges contends surplus proceeds from the judicial
foreclosure of both condominiums were not from “property taxes, assessments,
or other liens” as contemplated by RCW 63.29.350 because the statute’s terms
and structure suggest the legislature was referring only to “‘other liens’ that are
held by governmental . . . entities.”19
The statute’s plain language does not support Ten Bridges. “Property
taxes,” “assessments,” and “liens” have distinct meanings. For example, a tax
must be imposed by government, while a “lien” is a “charge upon real or personal
property for the satisfaction of some debt or duty ordinarily arising by operation of
law.”20 Liens can be imposed by a public or private entity, including a
condominium homeowners association. Ten Bridges’ restrictive interpretation
does not accord with the meaning of “lien.”
19 Appellant’s Br. at 20-21 (No. 80456-1-I).
20W EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1306, 2345 (3rd ed.
2002); see Samish, 471 P.3d at 264 (court may use a dictionary when statutory
terms are undefined) (quoting Det. of J.N., 200 Wash. App. at 286).
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Nos. 80084-1-I & 80456-1-I/11
The structure of the clause does not support Ten Bridges’ interpretation
either. It fails to provide any applicable authority or rule of interpretation that the
first noun in a series, such as “property taxes,” limits or modifies the meaning of
other distinct nouns in that series, such as “other liens.” The plain meaning of
“other liens” includes any lien that has been foreclosed upon.
Funds held by a county. Ten Bridges also argues the statute is
inapplicable because funds “held by a county” are distinct from funds held by a
superior court clerk.21 It asserts the critical role of courts in disbursing surplus
funds places superior court clerks solely within courts, separate from counties.
Understanding the office of superior court clerk and the role it plays in receiving,
holding, and disbursing excess funds from a judicial foreclosure shows why Ten
Bridges’ interpretation is incorrect.22
Article IV, section 26 of the Washington Constitution provides that each
“county clerk shall be by virtue of his office, clerk of the superior court.” In the
majority of Washington’s counties, superior court clerks are elected and serve
roles within the judiciary and within county government.23 Elected clerks fulfill “a
21 Appellant’s Br. at 18 (No. 80456-1-I).
22 None of the statutes and rules Ten Bridges cites support its position
because it focuses on an irrelevant portion of the statute or rule or because they
are not related to a superior court clerk’s role in foreclosures. Ten Bridges’
reliance on a foreign case, Dowling v. Stapley, 218 Ariz. 80, 179 P.3d 960 (Ariz.
Ct. App. 2008), is also misplaced because it has nothing to do with superior court
clerks and addresses the meaning of “county” in an Arizona education statute.
23
Burrowes v. Killian, 195 Wash. 2d 350, 358, 459 P.3d 1082 (2020) (citing
WASH. CONST. art. IV, § 26; art. XI, § 5).
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Nos. 80084-1-I & 80456-1-I/12
constitutional position that exists outside the judicial branch.”24 The office of
superior court clerk is “essentially ministerial in its nature, and the clerk is neither
the court nor a judicial officer.”25
In King County, the county at-issue here, the superior court clerk is not
elected but remains part of the county. The King County Charter provides for a
Department of Judicial Administration within the office of the county executive
and explains the superior court clerk administers it.26 The Department of Judicial
Administration is responsible for the superior court as part of the county’s
government and performs duties set by the county’s superior court judges and by
statute.27
The statutes governing judicial foreclosure of a homeowners association’s
lien for unpaid assessments also show superior court clerks act in ministerial
roles outside the court system when managing surplus funds. A homeowners
association can enforce its lien judicially under chapter 61.12 RCW.28
RCW 6.21.100 provides that the sheriff who conducted the foreclosure auction
“shall return the money” and related documents to the clerk of the superior court
issuing the execution order, and RCW 6.21.110(1) requires the superior court
24 Id. at 361 (citing Wash. Const. art. XI, § 5).
25
Swanson v. Olympic Peninsula Motor Coach Co., 190 Wash. 35, 38, 66
P.2d 842 (1937).
26 KING COUNTY CHARTER art. 3, § 350.20.20.
27
Id.; Burrowes, 195 Wash. 2d at 358-59 (citing In re Recall of Riddle, 189
Wash. 2d 565, 583, 403 P.3d 849 (2017)).
28 RCW 64.34.364(2), (9).
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Nos. 80084-1-I & 80456-1-I/13
clerk to use the auction proceeds “returned by the sheriff” to satisfy the judgment
and pay “any excess proceeds” in accordance with a court order. And although
the clerk may disburse excess proceeds only after a court orders them to,29 this
is no different from other ministerial acts by a county employee acting on a
court’s order. These statutes establish superior court clerks are fulfilling their
ministerial, nonjudicial, statutory duties as county employees managing the court
system when handling proceeds from judicial foreclosures.30
Locate or purport to locate. RCW 63.29.350 does not define “purport” or
“locate.” The dictionary defines “purport” as “to convey, imply, or profess
outwardly.”31 To “locate” is “to seek out and discover the position of.”32 Ten
Bridges contends it did not locate funds for Asano or Guandai for a fee or
compensation because it discovered the funds’ positions before contracting with
them and even disclosed the positions for free. But this argument relies on a
narrow, superficial interpretation of the statute. The prohibition in
RCW 63.29.350 is not on contracting for locating or purporting to locate surplus
funds. The statute caps a fund-finder’s potential compensation for locating
surplus funds.33 To protect consumers, the legislature prohibited fund-finders
29 RCW 6.21.110(5)(b).
30 See Burrowes, 195 Wash. 2d at 360-63 (explaining a county clerk was not
fulfilling an “in-court duty” when managing court records because her record-
keeping duties were set by statute and could not be altered by court rule).
31 W EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1847.
32 W EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1327.
33 RCW 63.29.350(1).
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Nos. 80084-1-I & 80456-1-I/14
from using their knowledge of the location of surplus funds held by a county
following foreclosure to enrich themselves at the expense of the individuals
entitled to claim the funds.
To determine whether Ten Bridges’ agreements with Asano and Guandai
violate the statute, we must evaluate how and why Ten Bridges was
compensated by examining the substance and not the form of the agreements.34
Ten Bridges argues it conducted mere real estate transactions, so
RCW 63.29.350 does not apply. When deciding whether a law applies to a
contract, we are “guided by the substance or effect of the transaction rather than
the particular form or label adopted.”35 This court has explained the contracting
parties’ “intention[s] cannot be ascertained from . . . the name given to the
instrument or to the legal relationship created, whether it be ‘deed’, ‘contract’,
‘lease’, or other relationship” because the substance of the agreement should
determine the parties’ intentions.36 Thus, regardless of their form, Ten Bridges’
34 Ten Bridges cites Nelson v. McGoldrick, 127 Wash. 2d 124, 896 P.2d 1258
(1995), and International Tracers of America v. Hard, 89 Wash. 2d 140, 570 P.2d
131 (1977), to argue RCW 63.29.350 applies only to contingent fee agreements.
Neither case is apt because both interpret an earlier version of RCW 63.29.350
that did not include the language at-issue here.
35 In re Smiley’s Estate, 35 Wash. 2d 863, 866, 216 P.2d 212 (1950); see
generally Port of Longview, Cowlitz County v. Taxpayers of Port of Longview,
Cowlitz County, 85 Wash. 2d 216, 527 P.2d 263 (1974) (examining the substance
and results of two putative leasing agreements between public ports and private
industry to determine whether the contracts violated article 8, section 7 of the
state constitution).
36
In re Estate of Verbeek, 2 Wash. App. 144, 149, 467 P.2d 178 (1970); see
Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wash. 2d 493, 504, 115 P.3d 262
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Nos. 80084-1-I & 80456-1-I/15
transactions with Guandai and Asano violated RCW 63.29.350 and were void if
Ten Bridges sought more than five percent of the value of the funds as
compensation for locating or purporting to locate the surplus funds. Assuming
that Ten Bridges disclosed the funds’ locations for free, the statute still applies if
Ten Bridges used its knowledge from having located the funds as part of a
scheme to compensate itself with more than five percent of the value of the
funds.
A. Asano
In May 2019, Asano signed the first quitclaim deed assigning to Ten
Bridges her interest in her condominium “together with any and all other tangible
or intangible rights and funds concerning or relating to the Property, to include
any interests conferred by . . . RCW 6.21 et seq., or RCW 61.12 et seq., or other
applicable law.”37 Chapter 6.21 RCW and chapter 61.12 RCW provide for a
judgment debtor’s right to receive surplus proceeds from a foreclosure. 38 In
exchange, Ten Bridges provided “$0 (Zero Dollars plus other valuable
consideration).”39 The “other valuable consideration” was Ten Bridges’ promise
to file a motion to obtain the $342,117.51 in surplus proceeds from the sheriff’s
(2005) (“[T]he subjective intent of the parties is generally irrelevant if the intent
can be determined from the actual words used.”).
37 CP at 97 (No. 80456-1-I).
See RCW 6.21.110(5)(a) (“Any remaining proceeds [from a judicial
38
foreclosure] shall be paid to the judgment debtor.”); RCW 61.12.150 (“Any
remaining surplus [from a mortgage foreclosure] shall be paid to the mortgage
debtor, his or her heirs and assigns.”).
39 CP at 97 (No. 80456-1-I).
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Nos. 80084-1-I & 80456-1-I/16
sale and then give Asano $172,000 of it. Ten Bridges would receive
compensation worth almost 50 percent of the value of the funds returned, far
above the statutory cap of five percent.
Ten Bridges reads the statute as applying when a party contracts only to
locate surplus funds.40 It contends its transaction with Asano was lawful because
it located the surplus funds before agreeing to connect her with them. But this
reading of RCW 63.29.350 is not persuasive because it requires inserting “only”
before the phrase “locating or purporting to locate.”41 In substance, Ten Bridges
relied upon having located the surplus funds for a fee of almost 50 percent of the
funds as compensation for obtaining the other 50 percent for Asano. The
statute’s purpose would be undermined if Ten Bridges could evade regulation by
tying the service of locating the funds with obtaining the funds or by locating the
funds before seeking compensation for having done so. Because Ten Bridges
combined the services of locating surplus funds held by King County and of
connecting Asano with her surplus funds, both in exchange for more than five
percent of the returned funds’ value, the first quitclaim deed violated
40 See Appellant’s Br. at 16 (No. 80456-1-I) (“In short, RCW 63.29.350
only applies to contracts that charge a fee for ‘locating or purporting to locate’
certain property.”).
41 See Millay v. Cam, 135 Wash. 2d 193, 203, 955 P.2d 791 (1998) (“This
court refrains from adding to, or subtracting from, the language of a statute
unless imperatively required to make it rational.”) (citing Applied Indus. Materials
Corp. v. Melton, 74 Wash. App. 73, 79, 872 P.2d 87 (1994)).
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Nos. 80084-1-I & 80456-1-I/17
RCW 63.29.350 and was void.42
Ten Bridges contends the court erred by concluding the second quitclaim
deed was also invalid because it did not promise to obtain surplus proceeds for
Asano in the second deed. Using the second deed, Asano transferred her
interest in her condominium to Ten Bridges “in consideration of $0 (Zero Dollars
plus other valuable consideration).”43 Unlike the first deed, the second deed
recites no other consideration in exchange for the rights and interests assigned.
But when Cox proposed the second deed to Asano, he explained it “changes
nothing about the agreement that you already signed,” would have “no effect
whatsoever on our existing agreement,” and would still entitle her to $172,000.44
Because the first quitclaim deed violated RCW 63.29.350 and the parties
intended that the second deed “change[ ] nothing” from the first,45 the second
42Asano urges affirmance on alternate grounds, arguing the quitclaim
deeds were unconscionable. Because we affirm the trial court’s reasoning and
nothing in the record suggests Asano or Madrona Lisa raised the doctrine of
unconscionability as grounds to void to transaction before the trial court, we need
not consider them.
43 CP at 534 (No. 80456-1-I).
44 CP at 468, 504-05 (No. 80456-1-I).
45 See Pelly v. Panasyuk, 2 Wash. App. 2d 848, 866, 413 P.3d 629 (2018)
(extrinsic evidence surrounding creation of a real estate contract can show
parties’ objective intent) (citing Hollis v. Garwall, Inc., 137 Wash. 2d 683, 695-97,
974 P.2d 836 (1999)).
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Nos. 80084-1-I & 80456-1-I/18
quitclaim deed was also void for violating RCW 63.29.350.46
B. Guandai
Ten Bridges sought to contract with Guandai because it had located
surplus funds from the foreclosure on her condominium.47 Ten Bridges offered
$15,000 to Guandai in return for her remaining interest in her condominium
“together with any and all other tangible or intangible rights and funds concerning
or relating to the Property, to include any interests conferred by . . . RCW 6.21 et
seq., or RCW 61.12 et seq., or other applicable law.”48 Chapter 6.21 RCW and
chapter 61.12 RCW provide for a judgment debtor’s right to receive all surplus
proceeds from a foreclosure.49 The quitclaim deed acknowledged the court clerk
held approximately $90,000 in surplus funds, which Ten Bridges knew only
because it had located them.
46 The parties debate the applicability of the doctrine of severability, but
severability does not apply where the transaction is illegal. See Brougham v.
Swarva, 34 Wash. App. 68, 80, 661 P.2d 138 (1983) (doctrine applies when “‘the
promise sued upon is related to an illegal transaction, but is not illegal in and of
itself’”) (quoting Sherwood and Roberts-Yakima, Inc. v. Cohan, 2 Wash. App. 703,
710, 469 P.2d 574 (1970)).
47 See CP at 260 (No. 80084-1-I) (Ten Bridges first contacted Guandai
after the sheriff’s sale); Appellant’s Reply to Amicus Nw. Just. Project, et al., at 1
(No. 80084-1-I) (Ten Bridges describing its business as finding individuals who
could claim surplus funds from a property foreclosure).
48 CP at 164 (No. 80084-1-I).
49RCW 6.21.110(5)(a) (“Any remaining proceeds [from a judicial
foreclosure] shall be paid to the judgment debtor.”); RCW 61.12.150 (“Any
remaining surplus [from a mortgage foreclosure] shall be paid to the mortgage
debtor, his or her heirs and assigns.”).
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Nos. 80084-1-I & 80456-1-I/19
The form of the transaction—a quitclaim deed transferring Guandai’s right
to surplus funds for $15,000 in cash—may not appear to be a fee or
compensation for locating the disclosed surplus proceeds. But here, Ten Bridges
based its compensation on Guandai’s assignment of her right to the surplus
funds, so the substance of the transaction inherently includes compensation for
having located the funds. Ten Bridges sought to gain almost 83 percent of the
value of the surplus funds by offering Guandai the equivalent of 17 percent of
those funds. This is, in substance, an agreement to a fee for having located and
obtained surplus funds that far exceeds the statutory five percent limit. Even if
there is some risk to Ten Bridges that a third party may contest its claim to the
surplus funds, the substance of the agreement is a form of equity stripping barred
by the statute. As explained, the statute’s purpose would be undermined by
limiting its applicability narrowly to offers only to “locate funds.” Because Ten
Bridges sought more than five percent of the value of the surplus funds as a fee
for, in substance, locating and obtaining those funds, the quitclaim deed violated
RCW 63.29.350 and was void.50
50Ten Bridges contends the trial court erroneously concluded the
quitclaim deed was void because it was unconscionable or obtained through
duress. The record shows otherwise. The trial court explicitly ruled against Ten
Bridges solely because its agreement with Guandai violated RCW 63.29.350.
See Report of Proceedings (RP) (May 31, 2019) at 59-60 (No. 800841-I); CP at
304-05 (No. 80084-1-I). Although it explained Ten Bridges’ approach to
negotiating with Guandai was “a form of economic duress” and the facts of the
case struck the court as “an unconscionable exchange,” RP (May 31, 2019) at 57
(No. 80084-1-I), that fleeting condemnation of Ten Bridges’ business practices
was not the basis for its decision. Ten Bridges fails to identify a reviewable error.
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III. Guandai’s Surplus Funds
After voiding Guandai’s quitclaim deed, the trial court ordered the superior
court clerk to disburse $15,000 of the surplus funds to Ten Bridges and the
remainder to Guandai. Ten Bridges argues Guandai was not entitled to the
funds because she never made a formal motion requesting them, depriving it of
the opportunity to respond. Anyone seeking disbursement of surplus funds from
a foreclosure sale must file a motion and serve notice of that motion on “all
persons who had an interest in the property at the time of sale, and any other
party who has entered an appearance in the proceeding.”51 The question is
whether the statute was satisfied despite the absence of a formal motion.
By May 8, 2019, both Ten Bridges and Midas Mulligan had moved for
disbursement of the surplus funds. At the first hearing on the funds one week
later, Midas Mulligan’s counsel argued, “If Miss Guandai was here, I’d say she’s
entitled to it.”52 The court declined to order disbursement at that hearing because
“the money potentially belongs to the former owner of the property.” 53 Ten
Bridges suggested holding another hearing with Guandai present, and the court
agreed. Guandai appeared at the next hearing, and the court found every party
with an interest at the time of sale received notice and was present. The court
concluded that requiring a formal motion for another hearing would be a useless
51 RCW 6.21.110(5)(b).
52 RP (May 15, 2019) at 16 (No. 80084-1-I).
53 Id. at 22.
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Nos. 80084-1-I & 80456-1-I/21
act because Guandai was entitled to the surplus funds under RCW 6.21.110 and
every party with an interest in the funds had presented their arguments.54
Ten Bridges does not dispute the trial court’s findings about notice, and
we conclude it had an adequate opportunity to present its argument that the
quitclaim deed was valid. The only other interested party, Midas Mulligan,
agreed Guandai is entitled to the funds. Because the absence of a formal motion
from Guandai caused no prejudice and vacating this portion of the order would
be a useless act wasting judicial resources, the trial court did not err by awarding
the funds to Guandai.55
On cross appeal, Guandai contends the court erred by disbursing $15,000
to Ten Bridges as repayment.56 We review the form of an equitable remedy
54 Contrary to Ten Bridges’ contention, it is immaterial that the trial court
may have considered Guandai’s presentation at the hearing as a form of
testimony because the court’s decision to award her the surplus fees can be
affirmed entirely upon her two declarations and the rest of the record apart from
her “testimony” at the hearing.
55 See McAlmond v. City of Bremerton, 60 Wash. 2d 383, 386, 374 P.2d 181
(1962) (concluding that requiring revocation and resubmittal of a petition to a city
council, despite the petitioners’ failure to comply with a statute, would be a
useless act where the failure to comply did not deprive anyone of notice or cause
prejudice, and ordering revocation would be a useless and inequitable act);
Jaramillo v. Morris, 50 Wash. App. 822, 833, 750 P.2d 1301 (1988) (declining to
order a new trial despite a reversible error when doing so would not change the
amount of damages awarded) (citing RAP 12.2).
56 Ten Bridges contends this matter is not properly before us because
Guandai and Midas Mulligan “never argued Ten Bridges’ agreement . . . was
illegal and unenforceable.” Appellant’s Reply Br. at 22 (No. 80084-1-I). But this
was the exact issue before the trial court. E.g., RP (May 31, 2019) at 34 (No.
80084-1-I) (the court discussing the effect of illegality on the quitclaim deed and
how to distribute the surplus funds).
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Nos. 80084-1-I & 80456-1-I/22
fashioned after rescission of a void contract for abuse of discretion.57 Upon
rescission, a court should attempt to return the parties to their relative positions
before the contract was made.58
Guandai was entitled to the $89,234.72 in surplus proceeds from the sale
of her condominium.59 Ten Bridges paid her $15,000, and the trial court awarded
her the difference between $89,234.72 and $15,000. Ten Bridges received
$15,000. The court returned the parties to their respective positions before
entering into their agreement. Guandai fails to show the court abused its
discretion.
IV. Attorney Fees on Appeal
Respondents request attorney fees from this appeal under the CPA and
under RAP 18.9 for answering a frivolous appeal. Neither basis is compelling.
Although a violation of RCW 63.29.350 is a presumptively unfair practice under
the CPA,60 no one alleged to either trial court that Ten Bridges violated the CPA.
Because a party cannot raise an entirely new claim on appeal,61 the CPA is not a
57 Hornback v. Wentworth, 132 Wash. App. 504, 513, 132 P.3d 778 (2006)
(citing Willener v. Sweeting, 107 Wash. 2d 388, 397, 730 P.2d 45 (1986)).
58 Willener, 107 Wash. 2d at 397.
59 See RCW 6.21.110(5)(a) (“Any remaining proceeds [from a foreclosure]
shall be paid to the judgment debtor.”).
60 RCW 63.29.350(2).
61 RAP 2.5(a).
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Nos. 80084-1-I & 80456-1-I/23
valid basis for an award of attorney fees. And attorney fees are not warranted
under RAP 18.9 because Ten Bridges’ appeals raised debatable issues.62
Therefore, we affirm.
WE CONCUR:
62 See Cox v. Kroger Co., 2 Wash. App. 2d 395, 410, 409 P.3d 1191 (2018)
(“‘An appeal is frivolous if, considering the entire record, the court is convinced
that the appeal presents no debatable issues upon which reasonable minds
might differ, and that the appeal is so devoid of merit that there is no possibility of
reversal.’”) (quoting Advocates for Responsible Dev. v. W. Wash. Growth Mgmt.
Hr’gs Bd., 170 Wash. 2d 577, 580, 245 P.3d 764 (2010)).
23