347 P.3d 487
Wash. Ct. App.2015Background
- In 2006 Sandra Shelley Jackson refinanced her Seattle home with a note secured by a deed of trust naming 1st Choice Mortgage (lender), Fidelity (trustee), and MERS (nominee/beneficiary). The note was later sold to a securitized trust (WMALT 2006-AR4) for which U.S. Bank is trustee and holds the note.
- Jackson defaulted in 2011. MERS assigned its nominee interest back to U.S. Bank in 2012; U.S. Bank recorded an appointment of successor trustee (Quality Loan Service), then recorded a notice of trustee’s sale after Jackson failed to cure.
- Jackson sued before the sale alleging the Deed of Trust Act (DTA) is unconstitutional and asserting claims under the DTA, the Washington Constitution, the Consumer Protection Act, breach of contract, unconscionability, negligence, and quiet title. The trial court dismissed under CR 12(b)(6).
- On appeal Jackson argued primarily that the DTA impermissibly vests judicial power in private trustees and therefore violates the state constitution; she also challenged evidentiary sufficiency for beneficiary identification under the DTA.
- The court found procedural defects (Jackson failed to notify the Washington Attorney General of a statutory-constitutionality challenge) and addressed the merits, concluding the DTA is constitutional and that Jackson’s DTA claims are not viable absent an actual foreclosure sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff properly challenged the constitutionality of the DTA | Jackson contended the DTA delegates judicial power to trustees and is therefore unconstitutional | Defendants argued plaintiff failed to comply with procedural prerequisites and that the DTA is constitutional | Dismissed: plaintiff failed to notify the AG as required; alternatively, DTA is constitutional |
| Whether the nonjudicial foreclosure process unlawfully usurps superior court jurisdiction | Jackson: nonjudicial trustee sale exercises judicial functions over title/possession | Defendants: nonjudicial foreclosure is consensual, statutory, and preserves court jurisdiction when invoked | Rejected Jackson’s theory; DTA does not divest superior court jurisdiction |
| Whether beneficiary identification/declaration satisfied RCW 61.24.030(7)(a) | Jackson: insufficient proof identifying beneficiary/note owner before sale | Defendants: beneficiary’s declaration under penalty of perjury suffices; trustee may rely on it absent bad faith | Held: beneficiary declaration sufficient; no bad faith alleged |
| Whether DTA-based claims remain before an actual foreclosure sale | Jackson sought relief based on alleged statutory violations pre-sale | Defendants: DTA claims are generally not viable absent an actual foreclosure sale | Held: following Frias, without a completed foreclosure there are no viable DTA claims |
Key Cases Cited
- Kendall v. Douglas, Grant, Lincoln, & Okanogan Counties Pub. Hosp. Dist. No. 6, 118 Wn.2d 1 (Wash. 1991) (service on the attorney general is mandatory for constitutional challenges to statutes)
- Klem v. Washington Mutual Bank, 176 Wn.2d 771 (Wash. 2013) (discusses trustee duties in nonjudicial foreclosure; draws analogy to judicial process but does not convert foreclosure into judicial action)
- Lyons v. U.S. Bank National Ass’n, 181 Wn.2d 775 (Wash. 2014) (trustee may rely on beneficiary declaration absent breach of good faith)
- Frias v. Asset Foreclosure Servs., Inc., 181 Wn.2d 412 (Wash. 2014) (no viable DTA claim exists in absence of an actual foreclosure)
- Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83 (Wash. 2012) (describes the deed of trust three-party structure and DTA framework)
- Trujillo v. Northwest Trustee Services, Inc., 181 Wn. App. 484 (Wash. Ct. App. 2014) (beneficiary is holder of the note and trustee may rely on beneficiary’s declaration)