Ocwen Loan Servicing, LLC, Appellant, v. Michael E. Bauman Et Al., Respondents

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
OCWEN LOAN SERVICING, LLC, No. 73548-9-1
Appellant, (Consolidated with
Nos. 73549-7-1, 73648-5-1,
v. and 73649-3-1)
MICHAEL E. BAUMAN and DIVISION ONE
ROCIO BAUMAN, individually
and their marital community;
and CROSS VALLEY WATER PUBLISHED OPINION
DISTRICT,
Respondents. FILED: September 6, 2016
Leach, J. — Ocwen Loan Servicing LLC appeals two related cases that
we consolidated. In each, the trial court dismissed, on summary judgment,
Ocwen's declaratory judgment action seeking to establish a right to redeem a
property foreclosed on by the Cross Valley Water District. Michael and Rocio
Bauman bought both at public auction. Based on a legal error in each order of
sale, the trial court decided that equitable grounds existed to grant a redemption
right but also concluded that Ocwen did not have standing to redeem either
property. The Baumans cross appeal, contending that the trial court erred when
it created an equitable right to redeem the properties.
No. 73548-9-1 (consol. w/ Nos. 73549-7-1,
73648-5-1, and 73649-3-1/ 2
Because a statute grants postforeclosure rights to redeem, the trial court
erred when it concluded that Ocwen had a longer equitable right to redeem the
properties. The relevant statute provides only a one-year right to redeem, and
Ocwen did not try to redeem during this time. Thus, for a different reason, the
trial court did not err by dismissing Ocwen's lawsuits on summary judgment.
Because we resolve the case on this basis, we do not reach the other issues
raised by Ocwen. We affirm.
FACTS
Patricia and Bruno Bonvicini and James L. Turner each borrowed money
to buy property. On June 20, 2008, the Bonvicinis purchased property located at
23030 105th Avenue SE in Woodinville. They financed their purchase with a
loan from Evergreen Moneysource, secured by a deed of trust in favor of
Mortgage Electronic Registration Systems Inc. (MERS). On November 9, 2009,
Turner purchased property located at 6602 63rd Street SE in Snohomish,
financing his purchase with a loan from Golf Savings Bank, secured by a deed of
trust also in favor of MERS.
Both the Bonvicinis and Turner failed to pay their water service charges.
Cross Valley Water District filed lawsuits against the Bonvicinis and Turner to
foreclose the water district's statutory lien for delinquent water service charges.
No. 73548-9-1 (consol. w/ Nos. 73549-7-1,
73648-5-1, and 73649-3-1/3
The trial court entered a judgment and order of sale for each property. It ordered
each sold "to the highest and best bidder for cash as provided by RCW
84.64.080 and RCW 57.20.135." Each judgment also stated that the property
was subject to a two-year postsale right of redemption under RCW 35.50.270, a
statute that governs foreclosures to collect local improvement assessments.
On March 13, 2012, the Baumans purchased both properties at public
auction. The water district delivered a quitclaim deed to the Baumans for each
property "subject to the right of redemption within two years from the date of the
sale pursuant to RCW 35.50.270."
Ocwen claims the right to enforce the deed of trust encumbering each
property. It notified the Baumans of its intent to redeem the Bonvicini property on
March 25, 2013, and of its intent to redeem the Turner property on May 8, 2013.
And on March 11, 2014, Ocwen filed two lawsuits against the Baumans, claiming
a right to redeem the properties under the Bonvicini and Turner deeds oftrust.
The Baumans moved for summary judgment after discovery. They
contended that the trial court entering the foreclosure judgment had erroneously
included the postsale redemption right under RCW 35.50.270 and that Ocwen
lacked standing to redeem either property.
No. 73548-9-1 (consol. w/ Nos. 73549-7-1,
73648-5-1, and 73649-3-1/4
The trial court decided that RCW 35.50.270 applied only to foreclosures to
recoup local improvement assessments; it did not apply to these properties. But
it concluded that because the trial court issued an order describing a right to
redemption under the statute, it would be inequitable to deny that right. But the
trial court also concluded that Ocwen lacked standing to exercise any redemption
right for either property because it did not show that it had a qualifying interest by
the relevant date, March 13, 2014. It dismissed both cases.
Ocwen moved for reconsideration in both cases and supported the
request with new evidence. The Baumans opposed each motion and asked that
the trial court not consider the evidence Ocwen offered because it was available
to Ocwen when it filed its response to the summary judgment motions. The trial
court agreed and denied Ocwen's motions for reconsideration. Ocwen appeals,
and the Baumans cross appeal.
STANDARD OF REVIEW
This court reviews summary judgment rulings de novo, viewing all the
facts and inferences in favor of the nonmoving party and finding summary
judgment proper only if no genuine issue of material fact exists.1 This court
1 Lyons v. U.S. Bank Nat'l Ass'n, 181 Wash. 2d 775, 783, 336 P.3d 1142
(2014).
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reviews a trial court's order granting equitable relief de novo as a question of
law.2 We review statutory interpretation de novo.3
DISCUSSION
We first address the Baumans' cross appeal and consider whether the
court erred when it created an equitable right to redeem the properties.
At oral argument Ocwen, for the first time, contended that we should not
consider this issue because the Baumans' claim is an impermissible collateral
attack on the two foreclosure judgments in the water district foreclosure lawsuits.
Ocwen did not make this argument in the trial court or in its briefing filed with this
court. It makes no claim that this issue involves a manifest error affecting a
constitutional right. Consistent with the general practice of Washington appellate
courts, we decline to review this contention raised for the first time at oral
argument.4
The trial court concluded that each order of sale and each deed conveying
a property to the Baumans should not have described a redemption right under
RCW 35.50.270 because that statute does not apply to a foreclosure to collect a
2 Bank of Am., NA v. Prestance Corp., 160 Wash. 2d 560, 564, 160 P.3d 17
(2007).
3 P.H.T.S.. LLC v. Vantage Capital. LLC, 186 Wash. App. 281, 287, 345
P.3d20(2015).
4 See RAP 2.5(a); Anderson v. Dussault, 181 Wash. 2d 360, 373, 333 P.3d
395 (2014) (citing RAP 12.1).
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water district's service charges. But the trial court also decided that since the
"[property was sold subject to the two year period of redemption," under
principles of equity, "language regarding redemption is binding on the Baumans."
The Baumans claim that a trial court cannot create an equitable
redemption right when a statute provides a redemption right. The Baumans rely
primarily on Schroeder v. City of Raymond.5 In that case, the Supreme Court
held that when an owner of municipal bonds brought a foreclosure action under a
statute permitting the lawsuit, "the court had no power to grant other than the
statutory relief, hence the language of the decree which goes beyond what the
statute directs is of no force or effect."6 The Schroeder court based its
conclusion on the fact that the foreclosure was "a purely statutory proceeding
brought under the statute and controlled thereby."7 Any language in the court
decree going beyond the statutory relief had no force or effect.8
More recent cases have applied equitable principles to temper the rule
that a redemption right must be exercised in strict compliance with the statute
creating the right.9 In GESA Federal Credit Union v. Mutual Life Insurance Co.,10
5 117 Wash. 238, 200 P. 1092 (1921), affd, 117 Wash. 238, 204 P. 180
(1922).
6 Schroeder, 117 Wash, at 243.
7 Schroeder, 117 Wash, at 242.
8 Schroeder, 117 Wash, at 243.
9 Fid. Mut.Sav. Bank v.Mark, 112 Wash. 2d 47, 54, 767 P.2d 1382 (1989).
10 105 Wash. 2d 248, 251, 713 P.2d 728 (1986).
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our Supreme Court considered whether a purchaser's failure to file a statement
of paid taxes, as required by a redemption statute, barred the purchaser from
recovering those payments from a subsequent redemptioner. Because the
redemptioner had received actual notice from the purchaser, the court applied
the equitable principle of substantial compliance to excuse the failure to file. The
court distinguished redemption statute provisions creating a substantive right
from those establishing the procedure to perfect that right. It found the filing
requirement to be a procedural step subjectto a substantial compliance rule.11
Fidelity Mutual Savings Bank v. Mark12 illustrates the importance of the
distinction between provisions creating substantive rights and those describing
perfection procedures. The court refused to apply equitable principles to provide
a redemption right to a judgment debtor's assignee whose assignment did not
comply with Washington's real property statutes and thus did not convey the
judgment debtor's title. Without title, the assignee was not "a successor in
interest" granted a statutory right to redeem.13 The court noted the harshness of
its decision to deny equitable relief but characterized the requested relief as the
granting of a substantive right and stated, "The rights established by the
11 GESA Fed. Credit Union, 105 Wash. 2d at 254-55.
12112Wn.2d47, 767 P.2d 1382(1989).
13 Mark, 112 Wash. 2d at 53.
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Legislature must remain exclusive if they are to remain reliable."14 Thus, the trial
court did not have the authority to create a redemption right.
Next we consider whether Ocwen hada statutory right to redeem the
properties. We interpret statutes to give effect to the legislative intent, looking
first to the statute's plain meaning and, where statutory language is
unambiguous, giving effect to that plain language.15
Cross Valley filed its foreclosure lawsuits under RCW 57.08.081 (4).16 This
statute provides that in a water district foreclosure lawsuit the laws "shall control
as in other civil actions."17 This means that we look to the statutes providing for
the sale of real property to satisfy a judgment to decide if Ocwen has redemption
rights. Chapter 6.21 RCW contains the statutory provisions for a real property
14 Mark, 112 Wash. 2d at 55.
15 P.H.T.S.. 186 Wash. App. at 290.
16 The district may, at any time after the connection charges or
rates and charges for services supplied or available and
penalties are delinquent for a period of sixty days, bring suit in
foreclosure by civil action in the superior court of the county in
which the real property is located. The court may allow, in
addition to the costs and disbursements provided by statute,
attorneys' fees, title search and report costs, and expenses as it
adjudges reasonable. The action shall be in rem, and may be
brought in the name of the district against an individual or against
all of those who are delinquent in one action. The laws and rules
of the court shall control as in other civil actions.
17 RCW 57.08.081(4).
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execution sale. RCW 6.21.080 applies to the sales in this case and provides for
redemption rights as granted in chapter 6.23 RCW:
A sale of a real property estate of less than a leasehold of two
years unexpired term and a sale of a vendor's interest in real
property being sold under a real estate contract shall be absolute.
In all other cases, real property shall be sold subject to redemption,
as provided in chapter 6.23 RCW.
(Emphasis added.) And RCW 6.23.010 grants qualifying parties, including
successors in interest, redemption rights:
(1) Real property sold subject to redemption, as provided in RCW
6.21.080, or any part thereof separately sold, may be redeemed by
the following persons, or their successors in interest:
(a) The judgment debtor, in the whole or any part of the
property separately sold.
(b) A creditor having a lien by judgment, decree, deed of
trust, or mortgage, on any portion of the property, or any portion of
any part thereof, separately sold, subsequent in priority to that on
which the property was sold. The persons mentioned in this
subsection are termed redemptioners.
(2) As used in this chapter, the terms "judgment debtor,"
"redemptioner," and "purchaser" refer also to their respective
successors in interest.
Qualifying parties must redeem within one year after the foreclosure sale:
"Unless redemption rights have been precluded pursuant to RCW 61.12.093 et
seq., the judgment debtor or any redemptioner may redeem the property from the
purchaser at any time . . . within one year after the date of the sale."18
18 RCW 6.23.020(1).
No. 73548-9-1 (consol. w/ Nos. 73549-7-1,
73648-5-I, and 73649-3-1/10
Thus, Ocwen had one year to redeem each property. Because it took no
step to redeem within this time, its redemption rights expired. The trial court did
not err by dismissing Ocwen's declaratory judgment lawsuits.
Baumans contend that Ocwen had no redemption rights. They correctly
note that each order of sale authorized the water district's treasurer to sell each
property as provided in RCW 84.64.080 and RCW 57.20.135. They claim that
the water district has two options to foreclose its statutory lien: (1) the civil
lawsuit authorized by RCW 57.08.081(4) and (2) a sale by its treasurer in the
same manner as a property tax foreclosure sale authorized by chapter 84.64
RCW.
Baumans begin their analysis with RCW 57.08.005(22). This statute
authorizes a water district to exercise any powers "granted to cities and counties
with respect to the acquisition, construction, maintenance, operation of, and
fixing rates and charges for waterworks and systems ofsewerage and drainage."
Former RCW 36.94.150 (1997) grants a county a lien for unpaid water service
charges and provides for foreclosure of that lien "in the same manner as the
foreclosure of real property tax liens." Thus, a water district can use this
alternate tax foreclosure process. In this tax foreclosure process, only minors
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and persons adjudicated legally incompetent have redemption rights.19 Thus,
Ocwen had no redemption rights.
Baumans' argument does not persuade us. RCW 57.08.005(22) does not
expressly grant any lien or foreclosure rights. We see no reason to imply a grant
by this statute of lien and foreclosure rights with different procedures when
another statute, RCW 57.08.081(4), expressly addresses the subject. To do so
would violate the general rule that a specific statute controls over a general
statute.20 Additionally, the exercise of these implied powers could produce harsh
results for which Baumans have shown no legislative intent.
We conclude that the specific language of RCW 57.08.081(4) authorizing
water districts to "bring suit in foreclosure by civil action" provides Cross Valley's
only statutory authority to foreclose on the properties.
CONCLUSION
Because a trial court may not provide equitable rights expanding a
statutory grant of the substantive right to redeem property, the trial court erred
when it concluded that Ocwen had an equitable right to redeem the properties
within two years. Ocwen had only the one-year statutory redemption right
granted by RCW 6.23.020(1). Because Ocwen did not attempt to redeem the
19 Former RCW 84.64.070 (2002).
20 Johnson v. Cent. Valley Sch. Dist., 97 Wash. 2d 419, 428, 645 P.2d 1088
(1982).
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properties within one year, the trial court properly dismissed Ocwen's declaratory
judgment lawsuits. While this was not the basis for the trial court's decision, we
may sustain the trial court on any basis the record supports.21 We affirm.
WE CONCUR
21 Nw. Collectors. Inc. v. Enders. 74 Wash. 2d 585, 595, 446 P.2d 200
(1968).
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