Kikuchi v. Riley

NEIL KIKUCHI and MARIE KIKUCHI, Appellants, v. WEINSTEIN & RILEY, P.S.;BANK OF NEW YORK MELLON CORPORATION fka The Bank of New York,as Trustee for the Certificateholders of CWALT, Inc. Alternative Loan Trust 2005-26CB,Mortgage Pass-Through Certificates, Series 2005-26CB;SHELLPOINT MORTGAGE SERVICING; NEW PENN FINANCIAL, LLC;BANK OF AMERICA, N.A.; and Doe Defendants 1 through 20, Respondents.

No. 79899-5-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

June 1, 2020

UNPUBLISHED OPINION

BOWMAN, J. — Neil and Marie Kikuchi appeal from the summary judgment dismissal of their Consumer Protection Act (CPA), chapter 19.86 RCW, lawsuit arising from a nonjudicial foreclosure proceeding initiated against their home. They also challenge the basis and reasonableness of the attorney fee award entered against them. Because the Kikuchis did not meet their burden to show any genuine issue of material fact and the fee award was proper, we affirm.

FACTS

Neil Kikuchi bought the property at issue in 1985. On March 9, 2005, the Kikuchis borrowed $200,000 from Benchmark Lending Group to refinance the property. They signed a promissory note and deed of trust identifying First American Title as the trustee, Benchmark as the lender, and Mortgage Electronic Registration Systems Inc. (MERS) as the beneficiary. The deed of trust describes MERS as "a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns." The note was endorsed to Countrywide Document Custody Services, then to Countrywide Home Loans Inc., and then endorsed in blank.

In May 2005, the loan was sold to the Bank of New York (BONY).¹ BONY was the actual holder of the note.

In the late 2000s, Neil engaged in criminal conduct involving his employer. In July 2007, a judge sentenced Neil to serve 17 months in federal prison and ordered him to pay $845,603.48 in restitution. In 2008, while Neil was incarcerated, Marie filed for Chapter 7 bankruptcy and was granted a discharge under 11 U.S.C. § 727. Neil also filed for bankruptcy but the court denied confirmation of his Chapter 13 plan and dismissed the case.

On December 12, 2009, the Kikuchis entered into a loan modification with Bank of America N.A., the loan servicer for BONY. The addendum provided forscheduled increases in the interest rate and monthly payments. The Kikuchis admit that they stopped making payments on the loan in 2011.

On July 13, 2011, MERS recorded an "Assignment of Deed of Trust," assigning its beneficial interest in the deed of trust to BONY. On May 18, 2012, BONY granted Bank of America a two-year power of attorney for the limited purpose of taking action on its behalf regarding foreclosure actions. This limited power of attorney was recorded in King County on April 22, 2013.

On September 19, 2012, the law firm of Bishop, Marshall & Weibel P.S. (Bishop) received a foreclosure referral from Bank of America for the Kikuchi property. The referral indicated that Bishop should bring the foreclosure on behalf of BONY.

On November 19, 2012, Bishop issued a "Notice of Default" to the Kikuchis. Attached to the Notice of Default was a copy of the foreclosure loss mitigation declaration executed by Bank of America on behalf of BONY.

On November 28, 2012, BONY executed an "Appointment of Successor Trustee," appointing Bishop to serve in that role. An officer of the Bank of America made the representation under oath.

On March 5, 2014, BONY granted New Penn Financial LLC dba Shellpoint Mortgage Servicing (Shellpoint) a two-year limited power of attorney. The limited power of attorney was recorded in King County on January 5, 2015.

On November 24, 2014, Bank of America notified the Kikuchis that the servicing of their loan would transfer to Shellpoint on December 16, 2014. On April 10, 2015, Shellpoint executed a beneficiary declaration stating that at alltimes on and after May 26, 2005, BONY has been the beneficiary of the deed of trust and actual holder of the note.

In May 2015, attorney William Bishop moved from the Bishop law firm to the law firm of Weinstein & Riley P.S. (Weinstein). He brought the Kikuchi file with him.

On December 16, 2015, BONY issued a second two-year limited power of attorney to Shellpoint. On June 24, 2016, Shellpoint executed an Appointment of Successor Trustee, appointing Weinstein as successor trustee. On the same day, Weinstein sent a "Notice of Trustee's Sale" to the Kikuchis.

On October 19, 2016, the Kikuchis filed this lawsuit against Weinstein, BONY, Shellpoint, and Bank of America alleging violation of the CPA and seeking an injunction and damages. They amended their complaint two days later, asserting essentially the same claims. On October 26, 2016, the Kikuchis obtained a temporary restraining order staying the foreclosure sale. The court granted preliminary injunction on December 16, 2016.

In 2018, BONY, Shellpoint, and Bank of America jointly moved for summary judgment and Weinstein separately moved for summary judgment. In support of summary judgment, the defendants submitted documentary evidence on the loan as well as the deposition of Neil and declarations from Weinstein, Shellpoint, and Bank of America. The trial court granted summary judgment dismissal of the Kikuchis' claims against all defendants. On March 21, 2019, the court entered an order and judgment awarding BONY $58,083.82 in attorneyfees and costs. The court denied the Kikuchis' motion for reconsideration of the attorney fee award. The Kikuchis appeal.

ANALYSIS

Summary Judgment

The Kikuchis contend that genuine issues of material fact preclude summary judgment because (1) none of the documentation used to support initiation of the attempted nonjudicial foreclosure was compliant with the deeds of trust Act (DTA), chapter 61.24 RCW, (2) Bank of America lacked authority to initiate a nonjudicial foreclosure when it was not the noteholder, and (3) these errors establish a violation of the CPA.

This court reviews de novo a trial court's decision to grant summary judgment. Lakey v. Puget Sound Energy, Inc., 176 Wn.2d 909, 922, 296 P.3d 860 (2013). A court properly grants a motion for summary judgment when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." CR 56(c). We view all facts and reasonable inferences in the light most favorable to the nonmoving party. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). The moving party bears the initial burden of showing the absence of an issue of material fact. Young v. Key Pharms., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989). "After the moving party submits adequate affidavits, the nonmoving party must set forth specific facts which sufficiently rebut the moving party's contentions and disclose the existence of a genuine issue as to a material fact." Meyer v. Univ. of Wash., 105 Wn.2d 847, 852, 719 P.2d 98 (1986). This court may affirm summary judgmenton any basis supported by the record. C.L. v. Dep't of Soc. & Health Servs., 200 Wn. App. 189, 198-99, 402 P.3d 346 (2017).

"Washington does not recognize an independent cause of action under the DTA seeking monetary damages for alleged DTA violations absent a completed foreclosure sale." Frias v. Asset Foreclosure Servs., Inc., 181 Wn.2d 412, 433, 334 P.3d 529 (2014). But a DTA violation may support a claim under the CPA under certain circumstances, regardless of whether a foreclosure sale has been completed. Frias, 181 Wn.2d at 433.

The Kikuchis assert that the assignments of deed of trust were improperly executed in violation of the DTA and that the identity of the noteholder at all times in the foreclosure process remains open. We disagree.

A foreclosure under the DTA generally commences with the issuance of a notice of default by the beneficiary or trustee at least 30 days prior to the recording of the notice of trustee's sale. RCW 61.24.030(8). The DTA defines a "beneficiary" as "the holder of the instrument or document evidencing the obligations secured by the deed of trust." RCW 61.24.005(2). A "holder" is a "person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession." RCW 62A.1-201(b)(21)(A). A holder need not own a note to enforce the note. Brown v. Dep't of Commerce, 184 Wn.2d 509, 525, 359 P.3d 771 (2015). Similarly, a loan "servicer" is not necessarily the owner, but the servicer must be a holder of the note to enforce it. Brown, 184 Wn.2d at 523.

"[T]he holder of a note has the right to appoint a successor trustee under the Deeds of Trust Act." Bavand v. OneWest Bank, FSB, 196 Wn. App. 813, 845, 345 P.3d 233 (2016). The beneficiary has the power to appoint any trustee that is qualified to act as such pursuant to law. RCW 61.24.010(2). Only a proper beneficiary has the power to appoint a successor to the original trustee named in the deed of trust, and only a properly appointed trustee may proceed with a nonjudicial foreclosure of real property. Walker v. Quality Loan Serv. Corp. of Wash., 176 Wn. App. 294, 306, 308 P.3d 716 (2013). Thus, if an unlawful beneficiary appoints a successor trustee, that trustee lacks legal authority to carry out the foreclosure. Walker, 176 Wn. App. at 306.

"[A] party satisfies the proof of beneficiary provisions [of] RCW 61.24.030(7)(a) and RCW 61.24.163(5)(c) when it submits an undisputed declaration under penalty of perjury that it is the actual holder of the promissory note." Brown, 184 Wn.2d at 547. An agent of the beneficiary may sign the beneficiary declaration. Terhune v. N. Cascade Tr. Servs., Inc., 9 Wn. App. 2d 708, 725, 446 P.3d 683 (2019), review denied by Terhune v. U.S. Bank Trust, N.A., 195 Wn.2d 1004, 458 P.3d 782 (2020). Here, evidence in the record submitted by the defendants in support of their motion for summary judgment establishes that BONY was the holder of the note. Weinstein as appointed successor trustee submitted a declaration stating that...