DWYER, J.
¶ 1 The appellants having filed a motion to publish opinion, and Columbia Legal Services, Northwest Justice Project, and Northwest Consumer Law Center, non-parties in this action, having filed a motion to publish opinion, and the hearing panel having reconsidered its prior determination and finding that the opinion will be of precedential value; now, therefore, it is hereby:
¶ 2 ORDERED that the unpublished opinion filed August 5, 2013, shall be published and printed in the Washington Appellate Reports.
Done this 2nd day of October, 2013.
¶ 3 Marion Rucker and April Miller appeal from a summary judgment order dismissing their claims under the Washington deeds of trust act, chapter 61.24 RCW (DTA). They contend that genuine issues of material fact exist regarding whether Rucker's property was actually sold at a trustee's sale and that, accordingly, summary judgment in favor of NovaStar Mortgage, Inc. — the winning bidder at the disputed trustee's sale — was improperly granted. They further contend that, even if the sale did occur, it was invalid because the trustee, Quality Loan Service Corporation of Washington (QLS), was not properly appointed by an eligible beneficiary prior to the sale taking place. Because there are genuine issues of material fact regarding QLS's authority to conduct a valid trustee's sale, we reverse the trial court's summary judgment order and remand for further proceedings.
¶ 4 In early 2006, April Miller and her husband, Carl Miller, were seeking to purchase a home. In February, Carl
¶ 5 Rucker, who resided in California, was unable to travel to Washington to sign the loan documents. Accordingly, April asked her sister, Micaela, if she would sign the necessary documents on their father's behalf. Micaela agreed. April thereafter arranged for Rucker to sign a durable power of attorney granting to Micaela specific powers to buy, acquire, and do all acts necessary to complete the purchase and sale of the property.
¶ 6 On March 23, 2006, Micaela met with an escrow agent to complete the transaction. An addendum to the purchase and sale agreement assigned the contract from Carl to Rucker. The purchase price of the property was satisfied by two loans issued by NovaStar Mortgage, Inc. The promissory note for the first position loan, in the amount of $374,400, listed Rucker as the borrower
¶ 7 Each note was secured by a deed of trust. Both deeds of trust listed Rucker as the grantor and both NovaStar and Mortgage Electronic Registration Systems, Inc. (MERS) as "grantees." Quality Loan Services, located in San Diego, California, was named as the trustee. NovaStar was additionally listed as the lender, and MERS was additionally listed as the beneficiary, acting as the "nominee" of NovaStar and NovaStar's "successors and assigns." These documents were recorded on March 24, 2006.
¶ 8 April and Carl thereafter moved into the house on the Woodinville property. Micaela also moved into the residence and resided there for several months. Rucker began to make monthly payments on the loans.
¶ 9 On June 15, 2006, both of Rucker's loans were conveyed by NovaStar to JPMorgan Chase Bank and J.P. Morgan Trust Company. The loans were securitized into the NovaStar Mortgage Funding Trust, Series 2006-2, NFI 2006-2, Group II (Funding Trust). JPMorgan Chase and J.P. Morgan Trust served as "co-trustees" of the Funding Trust.
¶ 10 Pursuant to a "pooling and servicing agreement," NovaStar retained responsibility for servicing Rucker's loans. The agreement stipulated that NovaStar's authority as servicer included the power to
In addition, the agreement specified that NovaStar was authorized to "exercise this power in its own name." The relationship of NovaStar to JPMorgan Chase and J.P. Morgan Trust was "intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent."
¶ 11 In September 2006, Rucker ceased to make payments on the loans, and a nonjudicial foreclosure action was initiated on his second position loan. On December 6, 2006, NovaStar, acting as "beneficiary," executed an "Appointment of Successor Trustee" appointing QLS as trustee.
¶ 12 On December 8, 2006, a notice of default was sent by QLS to the Woodinville residence. The notice was also posted on the property. The notice stated that $5,053.04 must be paid to NovaStar in order to cure the default. QLS stated that it was acting as "Agent for NOVASTAR MORTGAGE INC., the Beneficiary."
¶ 13 On March 16, 2007, MERS executed an "Assignment of Deed of Trust" purporting to transfer the beneficial interest in the deed of trust to NovaStar. This document was recorded on March 28, 2007.
¶ 14 On March 23, 2007, a notice of trustee's sale was issued by QLS. This document was mailed to the Woodinville residence, posted on the property, and published on May 29, 2007 and June 19, 2007. The notice stated that a trustee's sale would be held by QLS at the main entrance of the King County Administration building on June 29, 2007. The document stated that in order to cure the default, $8,526.44 must be paid to "NOVASTAR MORTGAGE, INC., the Beneficiary of your Deed of Trust and owner of the obligation secured thereby." The notice further explained that a lawsuit could be brought in order to restrain the sale and that "[f]ailure to bring such a lawsuit may result
¶ 15 April thereafter contacted both QLS and NovaStar regarding the upcoming trustee's sale. She would later testify that she spoke to Lysette Vargas at QLS. April stated that Vargas told her that due to uncertainty relating to the origination of the loans, the sale would be postponed.
¶ 16 Nevertheless, on June 29, 2007, the trustee's sale was held as scheduled. Jake Patterson conducted the sale. The property was sold to NovaStar for the "amount of the opening bid, $106,852.95."
¶ 17 On May 20, 2008, NovaStar filed an unlawful detainer action seeking to evict April and Carl from the Woodinville property. A writ of restitution was granted to NovaStar on October 8, 2008.
¶ 18 Rucker and the Millers thereafter filed a lawsuit against NovaStar and QLS seeking to quiet title, invalidate the trustee's deed, and restrain execution of the writ of restitution.
¶ 19 Numerous procedural delays followed. April and Rucker retained and then terminated the services of several different attorneys and law firms during the course of the litigation.
¶ 20 Then, on July 16, 2010, the trustee's deed — granted by QLS to NovaStar at the trustee's sale three years before — was amended and rerecorded "upon sale to correct the vesting." The Bank of New York Mellon — as "Successor Trustee under the NovaStar Mortgage Funding Trust, Series 2006-2" — was substituted for NovaStar as the grantee of the trustee's deed.
¶ 21 Both parties thereafter moved for summary judgment. On September 22, 2011, the trial court entered an order granting NovaStar's motion for summary judgment and denying the summary judgment motion of Rucker and April. The court ordered that NovaStar was entitled to immediate possession of the Woodinville property and to reissuance of a writ of restitution.
¶ 22 Rucker and April appeal.
¶ 23 Rucker and April first contend that the trial court erred by granting summary judgment to NovaStar because, they contend, there are genuine issues of material fact regarding whether a trustee's sale actually occurred. We disagree.
¶ 24 In reviewing an order of summary judgment, we engage in the same inquiry as the trial court. Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124
¶ 25 The DTA governs the procedures for nonjudicial foreclosure in Washington. See 18 WILLIAM B. STOEBUCK & JOHN W. WEAVER, WASHINGTON PRACTICE: REAL ESTATE: TRANSACTIONS § 20.1, at 403 (2d ed.2004). A deed of trust differs from a standard mortgage because it involves not only a lender and a borrower, but also a third party called a trustee. See Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83, 92-93, 285 P.3d 34 (2012). If a borrower defaults on the loan, the trustee may conduct a nonjudicial foreclosure sale. Such sales must occur in a "designated public place within the county where the property is located." RCW 61.24.040(5). Either the trustee or its authorized agent must "sell the property at public auction to the highest bidder." RCW 61.24.040(4). The purchaser at the trustee's sale is "entitled to possession of the property on the twentieth day following the sale." RCW 61.24.060(1).
¶ 26 Here, as Rucker and April correctly point out, NovaStar's entitlement to Rucker's property depends upon the existence of the trustee's sale. NovaStar was the winning bidder at the sale, acquiring title to Rucker's property through conveyance of a trustee's deed. If no trustee's sale in fact took place, then NovaStar never took title to the property, was not entitled to possession following the sale, and, accordingly, has no right to enforce the writ of restitution.
¶ 27 However, there is no genuine issue of material fact with regard the existence of the sale. The foreclosure sale was scheduled for 10:00 a.m. on June 29, 2007. The notice of trustee's sale stated that the sale would be conducted at the main entrance of the King County Administration building. Patterson, the authorized agent of QLS charged with conducting the sale, testified that the sale went forward as scheduled:
Patterson submitted several examples of a "certificate of sale" in which a property had been sold back to the beneficiary at a trustee's sale. The document pertaining to the sale of the Woodinville property was identical to these certificates of sale.
¶ 28 In contrast to this affirmative evidence of the sale, the testimony of April and Carl constitutes mere speculation. April stated in her declaration that an employee of QLS told her that the sale would be postponed. Nevertheless, she and her husband decided to attend the sale because she was "still concerned that a sale might take place." April explained that upon arriving at the King County Administration building at the appointed time, she spoke to several persons about the sale. She stated: "No one we spoke with had any information about the property or the sale. We stayed in the sale area for some time after 10:00 a.m. We heard many properties being called. No one called my father's property." Similarly, Carl stated
¶ 29 Neither Carl nor April, however, offered any evidence identifying with whom they spoke at the trustee's sale.
¶ 30 Similarly, April's testimony that an employee of QLS told her that the property would not be sold is not evidence that no sale occurred. It is true that ordinarily such a statement by a QLS employee could give rise to an inference that the sale had not taken place. Here, however, it is undisputed that the sale was conducted, not by QLS, but by North West Legal Support, Inc., the authorized agent of QLS charged with selling the property at foreclosure. Accordingly, the employee at QLS would not have had personal knowledge of the sale. Moreover, in this case, the person who actually conducted the sale testified that the sale took place as scheduled. Patterson, "acting as an independent contractor for North West Legal Support," stated in his affidavit that the Woodinville property was sold to NovaStar at the trustee's sale. This testimony was supported by additional documentation evidencing the sale.
¶ 31 Given the evidence presented, reasonable minds could conclude only that Rucker's property was sold at the trustee's sale. See Colorado Structures, 159 Wash.App. at 661, 246 P.3d 835. The evidence presented by Rucker and April was not inconsistent with a sale taking place. The trial court did not err by granting summary judgment with regard to this issue.
¶ 32 Rucker and April next contend that the trustee's sale is invalid because NovaStar had no authority to appoint QLS as successor trustee. This is so, they assert, because NovaStar was not the holder of Rucker's promissory note at the time that NovaStar executed the appointment. Accordingly, they reason, because QLS was not statutorily authorized to conduct a trustee's sale, the sale of the Woodinville property must be vacated. We agree that the trial court erred by dismissing this claim on summary judgment.
¶ 33 A nonjudicial foreclosure sale must be conducted by a "trustee or its authorized agent." Former RCW 61.24.040(4) (1998). The trustee may be named in the deed of trust or be replaced by the "beneficiary." Former RCW 61.24.010(2) (1998). The "beneficiary" is defined as "the holder of the instrument or document evidencing the obligations secured by the deed of trust." Former RCW 61.24.005(2) (1998). After the appointment is properly recorded, the successor trustee is "vested with all powers of an original trustee." Former RCW 61.24.010(2) (1998).
¶ 34 Because the DTA dispenses with many protections commonly enjoyed by borrowers, "lenders must strictly comply with the statutes, and courts must strictly construe the statutes in the borrower's favor." Amresco Independence Funding, Inc. v. SPS Props., LLC, 129 Wn.App. 532, 537, 119 P.3d 884 (2005). Applying these principles, our Supreme Court has explained that "only the actual holder of the promissory note or other instrument evidencing the obligation may be a beneficiary with the power to appoint a trustee to proceed with a nonjudicial foreclosure on real property." Bain, 175 Wash.2d at 89, 285 P.3d 34. "[W]hen an
¶ 35 This, of course, is precisely the defect in the foreclosure proceedings that Rucker and April assert occurred in this case. At the time that NovaStar appointed QLS as successor trustee, it did not hold the promissory note, having already conveyed the note to JPMorgan Chase and J.P. Morgan Trust as cotrustees of the Funding Trust. Accordingly, Rucker and April assert, NovaStar was not a proper beneficiary under the DTA. Because NovaStar had no "power to appoint a trustee to proceed with a nonjudicial foreclosure," Bain, 175 Wash.2d at 89, 285 P.3d 34, the company could not lawfully appoint QLS to foreclose on Rucker's property. And, because QLS was not a proper successor trustee vested with the power to conduct a nonjudicial foreclosure sale, the subsequent sale of the property was improper.
¶ 36 NovaStar concedes that it did not hold the promissory note at the time that it appointed QLS as successor trustee. Instead, NovaStar contends that the pooling and servicing agreement — setting forth the company's duties as the servicer of Rucker's loans — expressly authorized NovaStar to commence all acts necessary for foreclosure in its own name. In essence, the company argues that it was entitled to act as an agent for the true beneficiary.
¶ 37 As NovaStar correctly points out, in Bain, our Supreme Court explained that a note holder may utilize agents under the DTA. 175 Wash.2d at 106, 285 P.3d 34 ("[N]othing in this opinion should be construed to suggest an agent cannot represent the holder of a note. Washington law, and the deed of trust act itself, approves of the use of agents."). However, the court continued, "`a prerequisite of an agency is control of the agent by the principal.'" Bain, 175 Wash.2d at 107, 285 P.3d 34 (quoting Moss v. Vadman, 77 Wn.2d 396, 402, 463 P.2d 159 (1969)). "[A]gency requires a specific principal that is accountable for the acts of its agent." Bain, 175 Wash.2d at 107, 285 P.3d 34. Accordingly, where an entity fails to identify a lawful principal who controls its actions, it has not established that it is an agent for purposes of the DTA. Bain, 175 Wash.2d at 107, 285 P.3d 34.
¶ 38 Here, NovaStar's agreement with JPMorgan Chase and J.P. Morgan Trust — the apparent holders of the note at the time QLS was appointed successor trustee — specified that NovaStar's authority as loan servicer included all powers necessary to "effectuate foreclosure or other conversion of the ownership of the Mortgaged Property securing a related Mortgage Loan." NovaStar is correct that the agreement expressly permitted the company to "exercise this power in its own name." However, contrary to NovaStar's assertion that it acted only as an agent, the agreement specified that NovaStar's relationship to JPMorgan Chase and J.P. Morgan Trust was "intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent." (Emphasis added.)
¶ 39 The language of this agreement cannot be reasonably construed to indicate that NovaStar was acting as the agent of the true beneficiary. Instead, the agreement appears to give unlimited power to NovaStar to pursue foreclosure actions. There is no suggestion in the agreement that any entity was "accountable for the acts of [NovaStar]." Bain, 175 Wash.2d at 107, 285 P.3d 34. Indeed, an inference arises that NovaStar acted without direction from any lawful principal. Because the evidence does not establish that NovaStar was acting as the agent of JPMorgan Chase and J.P. Morgan Trust — the apparent beneficiaries under Rucker's deed of trust — it may well be that NovaStar had no statutory authority to appoint QLS as successor trustee. If this proves true at trial, then QLS had no authority to conduct a trustee's sale of Rucker's property and the foreclosure proceedings were contrary to the DTA. Walker, ___ Wash.App. at ___, 308 P.3d 716.
¶ 41 In two recent cases, our Supreme Court has explained that the vacation of a foreclosure sale is required where a trustee has conducted the sale without statutory authority. In Schroeder v. Excelsior Management Group, LLC, 177 Wn.2d 94, 297 P.3d 677 (2013), a property was sold at a trustee's sale despite evidence that the land was used primarily for agriculture. The court explained that the DTA's express requirement that such land be foreclosed judicially cannot be waived contractually. Schroeder, 177 Wash.2d at 107, 112, 297 P.3d 677. Moreover, "[a] trustee in a nonjudicial foreclosure may not exceed the authority vested by that statute." Schroeder, 177 Wash.2d at 112, 297 P.3d 677. Accordingly, the court directed that "the trial court must hold a hearing to determine whether the property was primarily agricultural at relevant times; if it was, the nonjudicial foreclosure sale shall be vacated." Schroeder, 177 Wash.2d at 115, 297 P.3d 677.
¶ 42 Similarly, in Albice v. Premier Mortgage Services of Washington, Inc., 174 Wn.2d 560, 276 P.3d 1277 (2012), the trustee had continued the trustee's sale for 161 days, thus exceeding the 120-day maximum set forth by RCW 61.24.040(6). The court explained that the trustee's failure to act within the allotted time violated the statute, thus divesting the trustee of statutory authority. Albice, 174 Wash.2d at 568, 276 P.3d 1277. Without such authority, the court explained, "any action taken is invalid." Albice, 174 Wash.2d at 568, 276 P.3d 1277. Accordingly, the court remanded to the trial court to "enter an order declaring the sale invalid." Albice, 174 Wash.2d at 575, 276 P.3d 1277.
¶ 43 Here, Rucker and April contend not only that QLS exceeded its statutory authority, but that QLS was never a proper trustee at all. If the failure of a properly-appointed trustee to follow statutory procedures can result in the vacation of a sale, this remedy is equally appropriate where an entity conducts a trustee sale in the complete absence of authority. There are genuine issues of material fact regarding whether QLS conducted the sale of Rucker's property without such authority. If it is determined at trial that NovaStar was not acting as the agent of a true beneficiary, then the appointment of QLS was improper, and it follows that QLS had no statutory authority to conduct the trustee's sale. As in Schroeder and Albice, in such circumstances, vacation of the sale is a proper remedy.
¶ 44 The trial court erred by granting summary judgment to NovaStar based upon a determination that the trustee's sale was valid.
¶ 45 NovaStar contends that even if the trustee's sale was invalid, Rucker and April waived their right to challenge the sale by failing to bring a presale lawsuit to restrain the nonjudicial foreclosure. We disagree.
¶ 46 "Waiver is an equitable principle that can apply to defeat someone's legal rights where the facts support an argument
¶ 47 In Albice, the owners of a residence entered into a forbearance agreement to cure the default on their loan. 174 Wash.2d at 564, 276 P.3d 1277. They agreed to tender monthly payments in order to postpone the nonjudicial foreclosure sale. Id. Although each payment was tendered late, the loan servicer nevertheless accepted the payments. Id. However, when the homeowners tendered their final payment 17 days late, the loan servicer deemed this to constitute a breach of the forbearance agreement. Id. Accordingly, the payment was rejected. Id. Although the forbearance agreement provided that upon breach, a 10-day written notice would be issued, the homeowners never received such a notice. Id. The property was thereafter sold at a trustee's sale only six days after the loan servicer's rejection of the homeowners' final payment. Id.
¶ 48 Under these circumstances, our Supreme Court concluded that "waiver cannot be equitably established." Albice, 174 Wash.2d at 571, 276 P.3d 1277. The court explained that, during the period that the homeowners were making payments under the forbearance agreement, they had no reason to seek to restrain the sale because they reasonably believed that such a sale would not proceed:
Albice, 174 Wash.2d at 571-72, 276 P.3d 1277. Because the loan servicer misled the homeowners into believing that the sale would not take place — thereby depriving them of the opportunity to prevent an unlawful foreclosure — the court held that the homeowners did not waive their rights by failing to bring
¶ 49 Here, there are genuine issues of material fact regarding the reasons for the decision not to file a lawsuit to restrain the sale. In both the trial court and on appeal, Rucker and April assert that they reasonably relied upon the representation of a QLS employee that the sale would not take place. This employee, however, did not testify and, accordingly, April's statements were the only evidence that such a representation was made. No written confirmation of the alleged postponement was presented. Nor is it clear that the failure to pursue a lawsuit to restrain the sale was entirely prompted by the QLS employee's representation. April also testified that she did not pursue a foreclosure sale because she was unaware that as a tenant of the property, she had any right to challenge the sale.
¶ 50 Nevertheless, in reviewing a summary judgment order, the evidence must be viewed in the light most favorable to the nonmoving party. Both Rucker and April assert that they would have filed a lawsuit had they known that the foreclosure sale would go forward. NovaStar points to no evidence indicating that a QLS employee did not, in fact, represent to April that no sale would take place. Nor does it argue that a homeowner would not be entitled to rely upon such a representation. Instead, the corporation points only to evidence demonstrating that the sale took place as scheduled. Such evidence, however, is not relevant to the question of reliance.
¶ 51 Because there are genuine issues of material fact regarding, first, whether a representation was made and, second, whether Rucker and April reasonably relied upon that representation in failing to bring a lawsuit to restrain the sale, the trial court erred by determining on summary judgment that Rucker and April waived their right to challenge the sale.
¶ 52 Reversed.
We concur: LAU and APPELWICK, JJ.
