Certification From the United States District Court for the Western District of Washington in Florence R. Frias , Plaintiff ,
Asset Foreclosure Services, Inc., et al. , Defendants
Argued February 27, 2014
Melissa A. Huelsman (of Law Offices of Melissa A. Huelsman ), for plaintiff.
Katrina E. Glogowski and Kimberly M. Hood (of Glogowski Law Firm PLLC ); Brian L. Lewis (of Ryan Swanson & Cleveland PLLC ); Lauren E. Sancken and David J. Lenci (of K& L Gates LLP ); Andrew H. Salter (of Teton Law Group LLC ); Lisa Franklin (of The Franklin Law Office LLC ); and Stephen M. Rummage, Fred B. Burnside, and Rebecca J. Francis (of Davis Wright Tremaine LLP ), for defendants.
Richard L. Jones and Ha Thu Dao on behalf of Coalition for Civil Justice, amicus curiae.
Kathleen M. O'Sullivan, Frederick B. Rivera, and Catherine S. Simonsen on behalf of Washington Bankers Association, amicus curiae.
Robert W. Ferguson, Attorney General, and Shannon Smith and Benjamin J. Roesch, Assistants, on behalf of the Attorney General of Washington, amicus curiae.
John M. Geyman on behalf of Columbia Legal Services, amicus curiae.
Sheila M. O'Sullivan on behalf of Northwest Consumer Law Center, amicus curiae.
Eulalia Sotelo and Lisa M. von Biela on behalf of Northwest Justice Project, amicus curiae.
AUTHOR: Justice Mary E. Fairhurst. WE CONCUR:  Chief Justice Barbara A. Madsen, Justice Susan Owens, Justice Debra L. Stephens, Justice Sheryl Gordon McCloud.
[181 Wn.2d 416] Mary E. Fairhurst,
¶ 1 We have been asked by the United States District Court for the Western District of Washington to determine whether state law recognizes a cause of [181 Wn.2d 417] action for monetary damages where a plaintiff alleges violations of the deeds of trust act (DTA), chapter 61.24 RCW, but no foreclosure sale has been completed. We are also asked to articulate the principles that would apply to such a claim under the DTA and the Consumer Protection Act (CPA), chapter 19.86 RCW.
¶ 2 We hold that the DTA does not create an independent cause of action for monetary damages based on alleged violations of its provisions where no foreclosure sale has been completed. The answer to the first certified question is no--at least not pursuant to the DTA itself. We further hold that under appropriate factual circumstances, DTA violations may be actionable under the CPA, even where no foreclosure sale has been completed. The answer to the second certified question is that the same principles that govern CPA claims generally apply to CPA claims based on alleged DTA violations.
I. FACTUAL AND PROCEDURAL HISTORY
¶ 3 In September 2008, plaintiff Florence R. Frias entered a promissory note secured by a deed of trust encumbering real property in Marysville, Washington. Defendant U.S. Bank National Association was identified on the note and deed of trust as the lender, and defendant Mortgage Electronic Registration Systems Inc. was identified as the beneficiary on the deed of trust. Frias eventually defaulted on her payments and attempted to contact representatives from U.S. Bank to obtain a loan modification. While Frias was waiting for a response from U.S. Bank, she received a notice of default followed by a notice of trustee's sale. Frias continued working toward a loan modification, and the trustee's foreclosure sale was voluntarily discontinued.
¶ 4 Frias received another notice of trustee's sale in May 2011, which relied on the prior notice of default. The notice of trustee's sale included an itemization of the fees Frias needed to pay to stop the sale, including an auctioneer fee, [181 Wn.2d 418] a bankruptcy check fee, an assignment recording fee, and a fee for the anticipated cost of recording a trustee's deed following the trustee's sale, all of which Frias alleges are, at best, unreasonable in amount and, at worst, simply illegal.
¶ 5 Approximately 90 days later, in July 2011, Frias received a loan modification offer from U.S. Bank. Frias alleges the modification offer was unworkable because it required her to devote more than half of her gross income to her monthly mortgage payments. The May 2011 notice of trustee's sale did not indicate the sale would be delayed to accommodate Frias' efforts at loan modification, and the sale was not discontinued or postponed after U.S. Bank made its July 2011 modification offer.
¶ 6 In August 2011, Frias contacted a housing counselor in an attempt to participate in mediation pursuant to the Washington foreclosure fairness act. Laws of 2011, ch. 58. Frias' case was referred to the appropriate agency and a mediator was appointed. At the scheduled mediation session, Frias appeared, but no one appeared on behalf of the beneficiary. The mediation was rescheduled and U.S. Bank's attorney confirmed the foreclosure sale would be stayed pending mediation.
¶ 7 At the second scheduled mediation session, Frias learned the sale had gone forward as originally scheduled--after the first scheduled mediation session but before the second. U.S. Bank was the successful bidder, but the sale was not completed because the deed to the property was not issued. A third mediation session was scheduled to give U.S. Bank time to reverse the wrongful foreclosure sale and produce the required documentation. At that third session, U.S. Bank still did not have all its required documentation and refused to consider modifying Frias' loan. The mediator determined U.S. Bank had not participated in mediation in good faith.
¶ 8 Frias claims she is now uncertain of her status--she still has title to her home but has not entered a loan modification agreement and has not made any payments on [181 Wn.2d 419] her promissory note since mediation, though she would like to. Frias alleges this uncertainty has caused her emotional distress accompanied by physical symptoms.
¶ 9 Frias filed a summons and complaint in Snohomish County Superior Court. She named a cause of action against all defendants under the CPA, alleging that U.S. Bank refused to mediate in good faith in violation of the DTA, that various defendants made numerous misrepresentations to her, that defendants Asset Foreclosure Services Inc. and LSI Title Agency Inc. do not have legal authority to act as foreclosing trustees in Washington, and that the defendants falsely inflated the costs of the improper foreclosure sale for their own profit. Frias also named a cause of action for violations of the DTA against Asset Foreclosure and LSI as purported trustees. Frias alleges these defendants violated their duties of good faith by initiating the foreclosure sale when they did not have legal authority to act as trustees and when they made demands for unreasonable payments not permitted by the DTA.
¶ 10 The matter was removed to the United States District Court for the Western District of Washington, and all defendants successfully moved for dismissal under Fed.R.Civ.P. 12(b)(6). As to the CPA claim, the federal court held Frias failed to allege any compensable injury because her property had not been sold and she had not paid any foreclosure fees. As to the DTA claim, the federal court held Frias could not state a cause of action under the DTA because no foreclosure sale had occurred. These holdings are consistent with prior western district decisions. E.g., Vawter v. Quality Loan Serv. Corp. of Wash., 707 F.Supp.2d 1115, 1123-24, 1129-30 (2010).
¶ 11 Frias moved for reconsideration. While her motion was pending, Division One of the Court of Appeals held in a published opinion that Washington law recognizes a cause of action for monetary damages under both the DTA and CPA for alleged DTA violations, even if no foreclosure sale [181 Wn.2d 420] has been completed. Walker v. Quality Loan
Serv. Corp., 176 Wn.App. 294, 313, 320, 308 P.3d 716 (2013). In light of Walker, the federal court refrained from ruling on Frias' motion for reconsideration and instead certified two questions to this court.
II. CERTIFIED QUESTIONS PRESENTED
1. Under Washington law, may a plaintiff state a claim for damages relating to breach of duties under the [DTA] and/or failure to adhere to the statutory requirements of the [DTA] in the absence of a completed trustee's sale of real property?
2. If a plaintiff may state a claim for damages prior to a trustee's sale of real property, what principles govern his or her claim under the [CPA] and the [DTA]?
Order Certifying Questions to the Wash. Supreme Ct. at 3.
III. STANDARD OF REVIEW
¶ 13 Certified questions are matters of law we review de novo. Carlsen v. Global Client Solutions, LLC, 171 Wn.2d 486, 493, 256 P.3d 321 (2011). We consider the questions presented in light of the record certified by the federal court. Id. Because the federal court certified these questions in connection with a motion for dismissal for failure to state a claim on which relief may be granted pursuant to Fed.R.Civ.P. 12(b)(6), all facts alleged in the complaint are accepted as true. Bell A. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
¶ 14 In light of the submissions made in this case, we must first specify the scope and nature of our analysis. We then analyze whether the DTA implies a cause of action for damages premised on DTA violations absent a completed foreclosure sale, and we conclude it does not. Finally, we [181 Wn.2d 421] hold that the ordinary principles ...