U.S. Bank Trust, N.A. v. Bailey

11 Wn.App.2d 1012

U.S. BANK TRUST, N.A. as trustee for LSF8 MASTER PARTICIPATION TRUST, Respondent, v. JACK BAILEY, an individual; SHARON J. 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.

No. 51556-3-II

Court of Appeals of Washington, Division 2

November 5, 2019

UNPUBLISHED OPINION

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.

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 Act^[1] 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 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.

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.

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 Wn.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 Wn.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 Wn.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 56(c). "'A material fact is one upon which the outcome of the litigation depends.'" Washington Federal, 195 Wn.App. at 652 (quoting Dong Wan Kim v. O'Sullivan, 133 Wn.App. 557, 559, 137 P.3d 61 (2006), review denied, 159 Wn.2d 1018 (2007)). We review facts and inferences in the light most favorable to the non-moving party. Washington Federal, 195 Wn.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 Wn.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 Wn.App. 423, 434, 382 P.3d 1 (2016), review denied, 187 Wn.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 Wn.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 Wn.App. 2d 473, 482, 434 P.3d 554, review denied, 193 Wn.2d 1016 (2019); RCW 7.28.300.^[6]

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 Wn.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 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...