Summary
The Washington Supreme Court answers certified questions concerning whether the Deeds of Trust Act creates an independent damages claim for statutory violations before a completed foreclosure sale and how related Consumer Protection Act claims should be analyzed. The court holds that the Deeds of Trust Act does not provide an independent presale damages action, but that alleged Deeds of Trust Act violations may support a Consumer Protection Act claim under ordinary principles if the plaintiff establishes injury to business or property. The opinion also discusses legislative intent, foreclosure-sale limitations, and potentially compensable injuries.
Topics
Practice areas
Questions Presented
- Whether Washington law recognizes an independent cause of action for monetary damages under the Deeds of Trust Act for alleged statutory violations when no foreclosure sale has been completed.
- Whether alleged Deeds of Trust Act violations may support a Consumer Protection Act claim before completion of a foreclosure sale, and whether such claims are governed by ordinary Consumer Protection Act principles.
Holdings
- The Deeds of Trust Act does not create an independent cause of action for monetary damages based on alleged violations of the Act absent a completed foreclosure sale.
- Under appropriate factual circumstances, alleged Deeds of Trust Act violations may be actionable under the Consumer Protection Act even when no foreclosure sale has been completed.
- CPA claims based on alleged Deeds of Trust Act violations are governed by the same ordinary principles applicable to all Consumer Protection Act claims.
Key quotations
“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.” (181 Wash. 2d at 417)
“Even in the absence of a completed foreclosure sale, violations of the DTA may be actionable under the CPA under ordinary CPA principles” (181 Wash. 2d at 430)
“the analysis of the elements of a CPA action premised on alleged DTA violations is the same as the analysis of the elements of a CPA claim premised on any other allegedly unfair or deceptive practice” (181 Wash. 2d at 433)
Factual background
Frias obtained a mortgage loan secured by a deed of trust on her owner-occupied Washington home and later defaulted while seeking a loan modification. The lender issued notices of trustee's sale, listed allegedly unlawful or unreasonable fees, and proceeded with a foreclosure sale despite pending mediation; the sale was not completed because a trustee's deed was not issued and was later treated as void. Frias alleged bad-faith mediation, misrepresentations, unauthorized trustees, and inflated foreclosure costs, along with expenses and potential lost loan-modification opportunities.
Procedural history
Frias filed suit in Snohomish County Superior Court alleging violations of Washington's Deeds of Trust Act and Consumer Protection Act arising from foreclosure and mediation conduct. The action was removed to federal court, which dismissed the claims under Federal Rule of Civil Procedure 12(b)(6), concluding that Frias had no compensable injury and could not assert a Deeds of Trust Act claim without a completed foreclosure sale. After the Washington Court of Appeals reached a contrary conclusion in Walker, the federal court certified two questions to the Washington Supreme Court.