U.s. Bank, N.a. v. Jason Hagen

Filed
Washington State
Court of Appeals
Division Two
November 5, 2019
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
U.S. BANK TRUST, N.A. as trustee for LSF8 No. 51556-3-II
MASTER PARTICIPATION TRUST,
Respondent,
v.
JACK BAILEY, an individual; SHARON J. UNPUBLISHED OPINION
BAILEY, an individual; JASON HAGEN, an
individual; HOUSEHOLD FINANCE
CORPORATION III, a Washington
corporation; MOUNT VISTA ASSOCIATION
AKA MOUNT VISTA HOMEOWNERS
ASSOCIATION, a Washington corporation;
Clark Regional Wastewater District, a Special
Purpose District and Public Agency, and all
other person or parties unknown claiming any
legal or equitable right, title, estate, lien, or
interest in the real property described in the
complaint herein, adverse to Plaintiff’s title, or
any cloud on Plaintiff’s title to the Property,
Appellant.
LEE, A.C.J. — Jason Hagen appeals the superior court’s order granting U.S. Bank’s Civil
Rule (CR) 12(c) motion for judgment on the pleadings, denying Hagen’s motion for summary
judgment, and dismissing his counterclaim to quiet title. We affirm.
No. 51556-3-II
FACTS
On July 11, 2002, Jack and Sharon Bailey obtained a loan for $291,102.72. The loan was
secured by a deed of trust for property located in Clark County (the property). The Deed of Trust
required that notice of default be provided prior to acceleration. And the Deed of Trust provided
that if a breach is not cured, “Lender, at Lender’s option, may declare all of the sums secured by
this Deed of Trust to be immediately due and payable without further demand and may invoke the
power of sale and any other remedies permitted by applicable law.” Clerk’s Papers (CP) at 218.
The Baileys stopped making payments on the loan in August 2008.
On May 15, 2009, the Baileys received a notice of default for a total of $40,906.86. The
notice of default stated,
If the default(s) described above is (are) not cured within thirty days of the mailing
of this notice, the lender hereby gives notice that the entire principal balance owing
on the note secured by the Deed of Trust described in paragraph 1 above, and all
accrued and unpaid interest, as well as costs of foreclosure, shall immediately
become due and payable. Notwithstanding acceleration, the grantor or the holder
of any junior lien or encumbrance shall have the right after acceleration to reinstate
by curing all defaults and paying all costs, fees and advances, if any, made pursuant
to the terms of the obligation and/or deed of trust on or before 11 days prior to a
Trustee’s sale.
CP at 173. A notice required by the Fair Debt Collection Practices Act1 stated that the entire
amount owed under the loan was $311,221.42. However, this was not noted as the amount
currently due.
On June 19, 2009, Regional Trustee Services recorded a notice of Trustee’s sale. The
notice included a default amount of $46,208.58, which included delinquent payments starting
1
15 U.S.C. chapter 41.
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No. 51556-3-II
August 16, 2008. The notice stated that the principal amount owed under the loan, which would
be satisfied by the trustee’s sale, was $270,336.87 plus interest, charges, and fees (that were not
calculated in the notice).
Between June 2011 and January 2014, the Baileys were sent several notices of the right to
cure default.2 The June 2011 notice stated that the total amount due was $116,368.02. The January
2014 notice stated that the total amount due was $182,659.48. None of the notices included the
full amount due under the loan.
On September 17, 2009, the Baileys petitioned for bankruptcy. The Baileys included the
property in the bankruptcy, listing its value as $274,000 and disclosing a secured claim on the
property for $338,411. The Baileys intended to surrender the property in the bankruptcy. On
December 16, 2009, the United State Bankruptcy Court discharged the Baileys’ personal debts in
bankruptcy.
2
These notices were attached as exhibits to the Declaration of Nathaniel Mansi. Hagen objected
to Mansi’s declaration because there was not sufficient basis in the declaration to demonstrate
Mansi had personal knowledge that the notices were mailed to the Baileys. The superior court
declined to rule on Hagen’s objection to Mansi’s declaration and considered the declaration.
Before this court, Hagen states that “[t]hese letters cannot be considered because there is no
competent evidence that they were sent to the Baileys.” Br. of Appellant at 20. However, Hagen
does not argue that the superior court erred by declining to rule on his objection and considering
the declaration.
We do not consider issues or assignments of error that are not supported by argument or
citation to authority. RAP 10.3(a)(6); Bercier v. Kiga, 127 Wash. App. 809, 824, 103 P.3d 232
(2004), review denied, 155 Wash. 2d 1015 (2005). “Passing treatment of an issue or lack of reasoned
argument is insufficient to merit judicial consideration.” Holland v. City of Tacoma, 90 Wash. App.
533, 538, 954 P.2d 290, review denied, 136 Wash. 2d 1015 (1998). Therefore, we do address whether
the Mansi declaration may be considered. Furthermore, regardless of the subsequent notices, we
would reach the same conclusion based on the language of the notice of default to the Baileys.
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No. 51556-3-II
On the September 26, 2011, the Baileys executed a quit claim deed and transferred the
property to Jason Hagen.3
On September 22, 2015, U.S. Bank filed a complaint for foreclosure against the Baileys
and Hagen. On January 12, 2017, Hagen filed an answer to U.S. Bank’s complaint and included
a counterclaim to quiet title to the property.4
On August 21, 2017, U.S. Bank filed a CR 12(c) motion for judgment on the pleadings
seeking to dismiss Hagen’s counterclaim to quiet title. On October 18, 2017, Hagen filed a motion
for summary judgment on his counterclaim to quiet title.
On February 15, 2018, the superior court entered an order on the motions. The superior
court granted U.S. Bank’s CR 12(c) motion for judgment on the pleadings. The superior court
denied Hagen’s motion for summary judgment. And the superior court dismissed Hagen’s
counterclaim to quiet title. The superior court also ruled that the order dismissing Hagen’s
counterclaim to quiet title should be entered as final judgment.
Hagen appeals.
3
The record before us relating to the Baileys’ bankruptcy is limited. The record shows that the
Baileys intended to surrender the property in bankruptcy and their personal debt was discharged
in bankruptcy. But the records provide no explanation as to how the Baileys could quit claim the
property to Hagen a year after they supposedly surrendered the property in bankruptcy.
4
Hagen’s counterclaim sought to quiet title against U.S. Bank and any of its predecessors in
interest. Hagen sought the judgment quieting title based on his claim that U.S. Bank’s foreclosure
action was barred by the statute of limitations. See Terhune v. North Cascade Trustee Services,
Inc, ___ Wn. App. 2d ___, 446 P.3d 683, 689 (2019) (“If the statute of limitations has expired on
a promissory note secured by a deed of trust on real property, the owner is entitled to quiet title on
the property.”). And Hagen did not seek to quiet title against the Bailey’s, nor does there appear
to be a dispute between the Baileys and Hagen regarding title to the property.
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No. 51556-3-II
ANALYSIS
Hagen argues that the superior court erred by granting the order on motions because the
loan was accelerated in June 2009, and therefore, the statute of limitations barred U.S. Bank’s
foreclosure action.5 Because the language in the May 2009 notice of default did not accelerate the
loan, the statute of limitations did not bar the foreclosure. Therefore, the superior court did not err
in entering the order on motions.
A. LEGAL PRINCIPLES
We review a superior court's dismissal under CR 12(c) de novo. P.E. Sys., LLC v. CPI
Corp., 176 Wash. 2d 198, 203, 289 P.3d 638 (2012). CR 12(c) states, in relevant part, “After the
pleadings are closed but within such time as not to delay the trial, any party may move for judgment
on the pleadings.” Dismissal is appropriate when it appears beyond doubt that the plaintiff cannot
prove any set of facts, consistent with the complaint, that may entitle him or her to relief. Burton
v. Lehman, 153 Wash. 2d 416, 422, 103 P.3d 1230 (2005). We presume the plaintiff's allegations are
true, and we may consider hypothetical facts not included in the record. Id.
We review summary judgment orders de novo. Washington Federal v. Azure Chelan, LLC,
195 Wash. App. 644, 652, 382 P.3d 20 (2016). Summary judgment is appropriate if no genuine
issues of material fact exist and the moving party is entitled to judgment as a matter of law. CR
5
Hagen also argues that the statute of limitations was not tolled or “extended” by initiating the
nonjudicial foreclosure or the bankruptcy. However, because we hold that the loan was not
accelerated we do not address tolling. Moreover, this appeal does not address the substantive
foreclosure—it only addresses the superior court’s order dismissing Hagen’s counterclaim to quiet
title to the property. The superior court’s order would only be erroneous if the foreclosure was
entirely barred by the statute of limitations. Because the loan was not accelerated, the statute of
limitations does not bar the foreclosure and the superior court properly dismissed Hagen’s
counterclaim to quiet title.
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No. 51556-3-II
56(c). “‘A material fact is one upon which the outcome of the litigation depends.’” Washington
Federal, 195 Wash. App. at 652 (quoting Dong Wan Kim v. O’Sullivan, 133 Wash. App. 557, 559, 137
P.3d 61 (2006), review denied, 159 Wash. 2d 1018 (2007)). We review facts and inferences in the
light most favorable to the non-moving party. Washington Federal, 195 Wash. App. at 652.
RCW 4.16.040(1) provides a six year statute of limitations for actions on promissory notes
and deeds of trust. Westar Funding, Inc. v. Sorrels, 157 Wash. App. 777, 784-85, 239 P.3d 1109
(2010). When the note is paid in installments, the six year statute of limitations runs against each
individual installment when it is due. 4518 S. 256th, LLC v. Karen L. Gibbon, PS, 195 Wash. App.
423, 434, 382 P.3d 1 (2016), review denied, 187 Wash. 2d 1003 (2017). However, when a note is
accelerated, “the entire remaining balance becomes due and the statute of limitations is triggered
for all installments that had not previously become due.” Id. at 434-35. “If the lender elects to
accelerate the debt after a breach, the acceleration must be clearly and unequivocally expressed to
the debtor.” Washington Federal, 195 Wash. App. at 663.
An owner of property is entitled to quiet title to the property if the statute of limitations has
expired on a promissory note secured by a deed of trust. Cedar W. Owners Ass’n v. Nationstar
Martg., LLC, 7 Wash. App. 2d 473, 482, 434 P.3d 554, review denied, 193 Wash. 2d 1016 (2019);
RCW 7.28.300.6
6
RCW 7.28.300 provides,
The record owner of real estate may maintain an action to quiet title against the lien
of a mortgage or deed of trust on the real estate where an action to foreclose such
mortgage or deed of trust would be barred by the statute of limitations, and, upon
proof sufficient to satisfy the court, may have judgment quieting title against such
a lien.
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No. 51556-3-II
B. NO ACCELERATION OF LOAN
Hagen argues that the language in the notice of default in May 2009 was sufficient to
accelerate the loan. Specifically, Hagen asserts that because the Baileys failed to cure the default,
the loan was automatically accelerated. However, we recently resolved this issue contrary to
Hagen’s assertion.
In Terhune v. North Cascade Trustee Services, Inc., we held that “[a] default on the loan
alone will not accelerate a note, even if an installment note provides for automatic acceleration
upon default.” ___ Wn. App. 2d ___, 446 P.3d 683, 689 (2019). We also held that future,
conditional language is not sufficient to actually accelerate the loan because acceleration “‘must
be made in a clear and unequivocal manner which effectively apprises the maker that the holder
has exercised his right to accelerate the payment date.’” Terhune, ___ Wn. App. 2d ___, 446 P.3d
at 688-89 (quoting Merceri v. Bank of N.Y. Mellon, 4 Wash. App. 2d 755, 761, 434 P.3d 84 (2018)).
In Terhune, the lender sent the borrower a notice of default that stated that the loan “will be
accelerated” if the default was not cured by the specified date. ___ Wn. App. 2d ___, 446 P.3d at
689 (bold face omitted). We held that the “argument that the failure to cure automatically triggered
acceleration is inconsistent with the rule that the lender must take some affirmative action to
accelerate a note.” Terhune, ___ Wn. App. 2d ___, 446 P.3d at 689. This is especially true in
cases where subsequent notices demonstrate that the lender is seeking to recover past due
installments rather than the entire amount due. Terhune, ___ Wn. App. 2d ___, 446 P.3d at 689-
90.
Here, the May 2009 notice of default stated that the loan “shall immediately become due
and payable” if the default is not cured within 30 days. CP at 173. This was a conditional
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No. 51556-3-II
provision. And just as the language “will be accelerated” is not sufficient to automatically
accelerate the loan, the language in the May 2009 notice of default is not sufficient to automatically
accelerate the loan. Also, the May 2009 notice of default and all subsequent notices that were sent
to the Baileys show that only past due amounts, rather than the full amount of the outstanding loan,
was being sought. Therefore, the superior court properly determined that the May 2009 notice of
default did not accelerate the loan.
Because the notice of default did not automatically accelerate the loan, the statute of
limitations on the foreclosure did not expire. Therefore, U.S. Bank’s foreclosure action was not
barred and Hagen was not entitled to quiet title to the property. Terhune, ___ Wn. App. 2d ___,
446 P.3d at 689 (owner entitled to quiet title on the property if the statute of limitations has expired
on a promissory note secured by a deed of trust on the real property). Accordingly, the superior
court properly granted judgment in favor of U.S. Bank, denied Hagen’s motion for summary
judgment, and dismissed Hagen’s counterclaim to quiet title. We affirm.
Hagen also argues that the loan was automatically accelerated as a precondition of the
nonjudicial foreclosure action. Hagen’s argument is unpersuasive.
First, “the initiation of nonjudicial foreclosure proceedings does not automatically
accelerate a note.” Terhune, ___ Wn. App. 2d ___, 446 P.3d at 689. Second, the language that
Hagen relies on from the Deed of Trust does not demonstrate that the loan must be accelerated
prior to nonjudicial foreclosure or a Trustee’s sale. The Deed of Trust states,
Lender, at Lender’s option, may declare all of the sums secured by this Deed of
Trust to be immediately due and payable without further demand and may invoke
the power of sale and any other remedies permitted by applicable law.
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No. 51556-3-II
CP at 218 (emphasis added). The language “may” is permissive and does not require that the
Lender accelerate the loan prior to initiating a sale. Therefore, Hagen’s argument that the loan
was automatically accelerated by the Notice of Trustee’s sale also fails.
Although we have already decided that the conditional language in the notice of default
does not accelerate the loan, we address Hagen’s argument that judgment on the pleadings is
inappropriate because he has presented a hypothetical set of facts that would entitle him to relief.
Hagen’ argument conflates factual allegations with legal conclusions. Hagen is correct that, when
we consider a judgment on the pleadings, we accept his allegations as true. Burton, 153 Wash. 2d at
422. But the factual allegations are not in dispute here. Both parties agree regarding the actual
language contained in the notice of default, which are the facts; they disagree regarding the legal
effect regarding that language, which is a legal conclusion. We are not required to accept Hagen’s
legal argument that the language in the May 2009 notice of default accelerated the loan. See
Burton, 153 Wash. 2d at 422 (questions of law underlying a motion to dismiss are reviewed de novo).
Accordingly, we affirm the superior court’s order on the motions.
Similarly, there are no genuine issues of material fact that were presented to the court. The
only dispute is whether the language in the May 2009 notice accelerated the loan. We already
resolved that issue in Terhune—the loan at issue was not accelerated. Therefore, the superior court
also properly denied Hagen’s motion for summary judgment on his counterclaim.
Because the superior court properly granted U.S. Bank’s motion on the pleadings regarding
Hagen’s counterclaim to quiet title and properly denied Hagen’s motion for summary judgment
on his counterclaim to quiet title, the superior court did not err by granting U.S. Bank’s CR 12(c)
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No. 51556-3-II
motion, denying Hagen’s motion for summary judgment and dismissing Hagen’s counterclaim to
quiet title. Accordingly, we affirm the superior court’s order on the motions.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
Lee, A.C.J.
We concur:
Worswick, J.
Cruser, J.
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