David Manning, Appellant V. Mortgage Electronic Registration Systems, Respondents

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DAVID AND ROBBIN MANNING,
husband and wife,
Appellants,
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.
("MERS"); THE BANK OF NEW YORK
MELLON, f/k/a THE BANK OF NEW
YORK, SOLELY AS TRUSTEE FOR
THE CERTIFICATE HOLDERS OF
CWMBS, INC., CHL MORTGAGE
PASS-THROUGH TRUST 2004-5
(A NEW YORK REMIC TRUST),
MORTGAGE PASS THROUGH
CERTIFICATES, SERIES 2004-5;
REGIONAL TRUSTEE SERVICES
PACIFIC, INC. ("RTS"); RESIDENTIAL
CREDIT SOLUTIONS, INC.; JOHN
DOESNOS. 1-20,
Respondents.
NO. 73908-5-
DIVISION ONE
UNPUBLISHED OPINION
FILED: 	October 31, 2016
CO
CO
en 	<_j
Leach, J. — David and Robbin Manning appeal the trial court's dismissal
of 	their 	lawsuit 	against 	successive 	holders 	of 	their 	promissory 	note, 	the
designated beneficiary of their deed of trust, and the successor trustee. 	They
challenge the trial court's decision that the four-year statute of limitations barred
their Consumer Protection Act (CPA)1 claim and that they waived other claims.
Ch. 19.86 RCW.

NO. 73908-5-1 / 2
They contend that the defendants violated the deeds of trust act (DTA)2 by
foreclosing without holding a "negotiable instrument." 	Because the Mannings did
not use the 	DTA's procedure for restraining the sale and 	allege only narrow,
technical violations of the DTA, they waived all their claims except the CPA and
fraud claims. 	Because the entity that appointed the successor trustee also held
the 	promissory note, that trustee 	had 	authority to foreclose. 	Because the
Mannings' CPA claim accrued more than four years before they brought suit, the
statute of limitations barred their CPA claim. 	And because the Mannings do not
contest the trial 	court's 	ruling 	that they did not plead their fraud claim with
specificity, they have abandoned that claim. 	We affirm.
FACTS
In 2004, David and Robbin Manning borrowed money from Countrywide
Home Loans to finance their purchase of a house on Lopez Island. They signed
a promissory note and executed a deed of trust securing it. 	The deed of trust
named 	Mortgage 	Electronic 	Registration 	Systems 	Inc. 	(MERS) 	as 	the
beneficiary, "acting solely as a nominee for [Countrywide] and [Countrywide]'s
successors and assigns." 	The deed of trust designated LS Title of Washington
the trustee.
2Ch. 61.24RCW.
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NO. 73908-5-1/3
The following occurred after the Mannings signed their note. 	The Bank of
New York (BNY) acquired the note in April 2004. 	MERS assigned the deed of
trust to BNY in March 2012. 	The Mannings defaulted on the loan in July 2012.
Residential 	Credit 	Solutions 	obtained 	possession 	of 	the 	note 	in 	2013 	for
purposes of servicing the Mannings' loan for BNY.3 	Residential Credit issued a
notice of default in January 2014. 	In May 2014, 	BNY appointed 	Residential
Trustee Services as successor trustee. 	Trustee Services recorded a notice of
trustee's sale in September 2014.
In January 2015, the Mannings sued MERS, BNY, Trustee Services, and
Residential Credit, claiming fraud, slander of title, and violations of the CPA and
seeking damages, declaratory and injunctive relief, and to quiet title. 	They did
not use the DTA procedure to ask the trial court to restrain the trustee's sale.4
Trustee Services sold the house on January 15, 2015.
The defendants moved to dismiss the Mannings' complaint for failure to
state a claim upon which relief could be granted. 	The trial court granted the
motion. 	It decided that the Mannings waived most of their claims by not using
the DTA restraint procedure. 	It also dismissed their two unwaived claims, ruling
3 As of April 2015, Residential Credit held the note "on behalf of the Bank
of New York."
4 See RCW 61.24.130.
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NO. 73908-5-1/4
that the four-year statute of limitations barred their CPA claim and that they did
not plead fraud with enough particularity.5 The Mannings appeal.
STANDARD OF REVIEW
The parties' briefs raise two issues relevant to the standard of review.
First, the 	Mannings challenge the trial court's application of the CR 	12(b)(6)
standard. 	They point to arguments the defendants made 	in their motion 	to
dismiss urging the trial court to apply the federal courts' pleading standard, which
is stricter than Washington's.6 	The record contains no indication that the trial
court applied that standard, nor do the Mannings explain how it would change the
outcome of this appeal. 	The Mannings also contend that the defendants "urged
the 	trial 	court 	to 	ignore 	a 	leading 	case 	in California" 	regarding 	borrowers'
standing to challenge assignments of loan documents. 	They do not, however,
explain how those developments in California case law should affect this court's
consideration of the issues in this appeal. We decline to speculate.
Second, 	the 	trial 	court's 	consideration 	of facts 	outside 	the 	pleadings
converted its decision to one for summary judgment. 	Generally, in considering a
CR 12(b)(6) motion to dismiss, "the trial court may consider only the allegations
contained in the complaint and may not go beyond the face of the pleadings."7 	It
5 See CR 9(b).
6 See Handlin v. On-Site Manager Inc.. 187 Wn. App. 841, 845, 351 P.3d
226(2015).
7 Rodriguez v. Loudeve Corp., 144 Wn. App. 709, 725-26, 189 P.3d 168
(2008).
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NO. 73908-5-1 / 5
>»8
may also take judicial notice of certain facts "'not subject to reasonable dispute.
But when the trial court considers other "matters outside the pleadings," such as
declarations and attached documents, it converts a motion to dismiss for failure
to state a claim to a motion for summary judgment.9
Here, the defendants supported their motion to dismiss with a request for
judicial 	notice 	containing 	several 	documents. 	These included 	a 	Residential
Credit 	officer's 	declaration 	describing 	the 	note's 	ownership 	and 	possession
history with the original note attached, the deed of trust, the assignment of the
deed from MERS to BNY, BNY's appointment of Trustee Services as successor
trustee, the notice of default from Residential Credit, the notice of trustee's sale
from Trustee Services, and the trustee's deed.
The trial court did not exclude those documents. 	Rather, it indicated in its
decision letter that it reviewed the defendants' request for judicial notice and its
order states that it reviewed "the files contained in this matter." 	Under CR 12(b),
8 Rodriguez, 144 Wn. App. at 725-26 (quoting ER 201(b)). 	These include
facts "capable of accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned." 	ER 201(b). 	The court may also
take notice of documents that are attached to the complaint or that the complaint
alleges the contents of. 	Rodriguez, 144 Wn. App. at 726.
9 CR 12(b); Perrin v. Stensland, 158 Wn. App. 185, 192, 240 P.3d 1189
(2010). 	CR 12(b) provides that where
matters outside the pleading are presented to and not excluded
by the court, the motion shall be treated as one for summary
judgment and disposed of as provided in rule 56, and all parties
shall be given reasonable opportunity to present all material
made pertinent to such a motion by rule 56.
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NO. 73908-5-1 / 6
this converted the trial court's decision to one for summary judgment.10 In their
response to the motion to dismiss, the Mannings made arguments based on
information from those documents. 	They did not ask for more time to present
their own 	evidence.11 	We thus 	review 	the trial 	court's 	summary judgment
decision de 	novo, 	asking 	whether the evidence creates a 	genuine 	issue of
material fact when viewed in the light most favorable to the nonmoving party.12
ANALYSIS
Waiver
The Mannings dispute the trial court's conclusion that they waived most of
their claims by failing to use the DTA procedure to stop the trustee's sale. 	We
agree with the trial court that only the Mannings' fraud and CPA claims survive
waiver.
The DTA "creates a three-party mortgage system allowing lenders, when
payment default occurs, to nonjudicially foreclose by trustee's sale."13 	The act
10 See Perrin, 158 Wn. App. at 192. 	While the trial court may consider
documents whose contents a complaint alleges without converting its ruling to a
summary judgment, this 	rule does not apply where the parties dispute those
contents, as the Mannings do here. 	See Trujillo v. Nw. Tr. Servs., Inc., 183
Wn.2d 820, 827 n.2, 355 P.3d 1100 (2015).
11 See CR 56(f).
12 Mohr v. Grantham. 172 Wn.2d 844, 859, 262 P.3d 490 (2011); CR
56(c).
13 Albice v. Premier Mortg. Servs. of Wash.. Inc.. 174 Wn.2d 560, 567, 276
P.3d 1277(2012).
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NO. 73908-5-1 / 7
has three goals: 	an efficient and inexpensive process, adequate opportunities for
parties to prevent wrongful foreclosure, and stability of land titles.14
To further these goals, RCW 61.24.130 provides a procedure for stopping
a trustee's sale.15 	The DTA requires borrowers to use this procedure or risk
waiving 	objections 	to 	the 	sale 	and 	claims 	arising 	out 	of 	the 	underlying
obligation.16 	Courts 	may 	apply 	waiver 	where 	it 	"is 	equitable 	under 	the
circumstances and . . . serves the goals of the act."17 	The borrower must have
"(1) received notice of the right to enjoin the sale, (2) had actual or constructive
knowledge of a defense to foreclosure prior to the sale, and (3) failed to bring an
action to obtain a court order enjoining the sale."18 	RCW 61.24.127(1) preserves
four types of claim that a 	plaintiff "may not" waive by failing to use the DTA
restraint procedure. 	These include claims for fraud and for CPA violations.
Here, the trial court ruled that "to the extent Plaintiffs' claims identify only
formal 	technical 	violations 	of 	the 	DTA, 	with 	no 	suggestion 	that 	any 	such
violations could not have been corrected if they had been timely raised under
RCW 61.24.130, Plaintiffs have waived their right to raise them." We agree.
14 Albice. 174Wn.2dat567.
15 Plein v. Lackey. 149 Wn.2d 214, 225, 67 P.3d 1061 (2003).
16 Plein, 149 Wn.2d at 227; Brown v. Household Realty Corp.. 146 Wn.
App. 157, 169, 189 P.3d 233 (2008); RCW 61.24.040(1 )(f)(IX).
17 Albice. 174 Wn.2d at 570.
18 Plein. 149Wn.2dat227.
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NO. 73908-5-1 / 8
The Mannings do 	not contest that they received notice of their right to
enjoin the sale, knew of the defenses to foreclosure they now assert, and did not
bring an action to stop the sale as authorized by the DTA.19 	They assert that
applying waiver here would be inequitable. 	They claim that unlike the "technical,
formal, likely correctable and nonprejudicial violations of the DTA" described in a
Division Three opinion the trial court cited, Merry v. Northwest Trustee Services.
Inc..20 the violations they allege are "gross violations."21 	They offer no support for
this distinction. 	Like the plaintiffs in Merry, the Mannings based their claims on a
deed of trust's designation of MERS as beneficiary and its assignment of its
interest to a company that later appointed a successor trustee.22 	Division Three
noted 	that 	the 	Supreme 	Court 	has 	"signaled 	disapproval 	of 	the 	type 	of
hypertechnical, inequitable result requested by Mr. Merry's complaint."23 	The
Mannings' claims fit this description. As in Merry, waiver is not inequitable here.
19 Plein, 149Wn.2dat227.
20 188 Wn. App. 174, 177, 352 P.3d 830 (2015).
21 	The 	Mannings 	mischaracterize 	the 	trial 	court's 	decision 	as
acknowledging that the defendants violated the DTA. 	The trial court instead
indicated that even if the defendants had violated the DTA, the Mannings waived
their claims.
22 See Merry, 188 Wn. App. at 183-84.
23 Merry. 188 Wn. App. at 196; see Bain v. Metro. Mortg. Grp.. Inc., 175
Wn.2d 83, 111, 285 P.3d 34 (2012).
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NO. 73908-5-1 / 9
The 	Mannings 	thus 	waived 	claims 	that 	RCW 	61.24.127(1) 	does 	not
preserve.24 	That provision saves only their CPA and fraud claims and, to the
extent made, DTA claims against the trustee.
Authority To Foreclose
The Mannings contend that the defendants lacked authority to foreclose
because MERS could not assign the deed of trust. We disagree.
A trustee must be properly appointed to initiate foreclosure proceedings
under the DTA.25 	An entity obtains the authority to appoint a successor trustee
from possession of the note, not by an assignment of the deed of trust.26
That MERS lacked authority to assign the deed of trust does not matter
because MERS did not appoint the successor trustee and the entity that did—
BNY—had the authority to do so. 	The record shows that possession of the note
passed from Countrywide to BNY in 2004 and from BNY to Residential Credit in
2013 to hold on behalf of BNY. 	BNY appointed Trustee Services as successor
trustee in 2014. 	BNY's power to do so came from its status as holder of the note
24 See Brown. 146 Wn. App. at 169. 	These include their slander of title
claim and forms of relief they requested other than damages, including injunctive
relief, declaratory relief, and quiet title.
25 Bavand v. OneWest Bank. FSB, 176 Wn. App. 475, 486, 309 P.3d 636
(2013).
26 McAfee v. Select Portfolio Servicing. Inc.. 	193 Wn. App. 220, 228-29,
370 	P.3d 25 (2016); 	Bain, 175 Wn.2d 	at 89 ("[Ojnly the actual holder of the
promissory 	note 	or 	other 	instrument 	evidencing 	the 	obligation 	may 	be 	a
beneficiary with the 	power to appoint a trustee to proceed with a 	nonjudicial
foreclosure on real property.").
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NO. 73908-5-1/10
through its agent, Residential Credit, and not MERS's assignment of the deed of
trust.27 	Trustee Services was thus properly appointed. 	The Mannings did not
create a 	genuine 	issue of material 	fact 	about Trustee Services' authority to
foreclose on their house.
The 	Mannings' 	argument 	that 	Trustee 	Services 	lacked 	authority 	to
foreclose because the promissory note is not a "negotiable instrument" lacks
merit.
The 	Washington 	Uniform 	Commercial 	Code 	defines 	a 	"negotiable
instrument" 	as an 	"unconditional 	promise or order to pay a fixed amount of
money."28
[A] promise or order to pay is unconditional unless it contains an
express condition to payment and 	states that (1) the promise or
order to pay is subject to or governed by another writing or (2)
rights or obligations with respect to the promise or order to pay are
stated in another writing.[29]
The Mannings contend that the note is not a "negotiable instrument," and
thus no defendant was the "holder of an instrument," and thus any foreclosure
actions any defendant took violated the 	DTA.30 	They rely on Anderson v.
27 See McAfee. 193 Wn. App. at 228-29. 	A note holder can possess a
note "directly or through an agent." RCWA62A.3-201 U.C.C. cmt. 1.
28 RCW 62A.3-104(a).
29 Alpacas of Am.. LLC v. Groome, 179 Wn. App. 391, 396-97, 317 P.3d
1103 (2014); see RCW 62A.3-106(a).
30 	See 	RCW 	61.24.005(2) 	("'Beneficiary' 	means 	the 	holder 	of 	the
instrument or document evidencing the obligations secured by the deed of trust,
excluding persons holding the same as security for a different obligation."); RCW
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NO. 73908-5-1/11
Hoard.31 a case that predates the DTA, in which the Supreme Court held a note
to be nonnegotiable. 	That note provided for the lender to apply payments first to
interest, then "to the payment, at the option of the holder, of such advances as
the holder may have made for taxes, assessments or insurance premiums and
other charges on any property mortgaged or pledged to secure this note." and
only then to principal.32 	The Mannings claim that their note likewise is not an
unconditional promise to pay and is nonnegotiable because it does not include a
fixed amount 	of 	principal and 	contains 	several 	material 	conditions, 	making
uncertain the amount due.
The 	Mannings are 	wrong. 	The 	promissory 	note 	states the 	principal
amount is $495,000.00 and fixes the annual interest rate at 5.875 percent. 	It
requires monthly payments of $2,928.11 and provides for a 5 percent charge on
overdue payments. 	Unlike the note in Anderson, the Mannings' note does not
provide for the borrowers to reimburse the holder for taxes and other charges "at
the option of the holder."33 	Thus, the Mannings did 	not make a conditional
promise to pay an uncertain sum.34 The note is a negotiable instrument.
62A.3-104(b) (defining "instrument" as "a negotiable instrument"); 62A.3-104(a)
(defining "negotiable instrument").
31 63 Wn.2d 290, 293-94, 387 P.2d 73 (1963).
32 Anderson. 63 Wn.2d at 291.
33 Anderson. 63 Wn.2d at 291, 293.
34 See Anderson, 63 Wn.2d at 293.
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NO. 73908-5-1/12
CPA Claim
Next, the Mannings challenge dismissal of their CPA claim. 	The trial court
correctly decided that the statute of limitations barred this claim.
RCW 	61.24.127(2)(a) 	provides 	that 	even 	when 	RCW 	61.24.127(1)
prevents a claim from being waived, the plaintiff must bring the claim within two
years of the trustee's sale and within the specific statute of limitations for the type
of claim. 	For a CPA claim, that period is four years.35 	Whether the statute of
limitations barred 	the 	Mannings' 	claim thus depends on whether their claim
accrued within four years of the filing of their complaint in January 2015.
In general, 	"'[a] cause of action accrues and 	the 	statute of limitations
begins to run when a party has the right to apply to a court for relief.'"36 	This
occurs "'when the plaintiff can establish each element of the action.'"37 	The
discovery rule is an exception to this general rule. 	Courts apply it, as a matter of
judicial policy, when "'injured parties do not, or cannot, 	know they have been
injured.'"38 	Where 	it applies, "'a cause of action accrues when the 	plaintiff,
through the exercise of due diligence, knew or should have known the basis for
35 RCW 19.86.120.
36 Shepard v. Holmes, 	185 Wn. 	App. 	730, 739, 	345 P.3d 	786 (2014)
(alteration in original) (quoting O'Neil v. Estate of Murtha. 89 Wn. App. 67, 69-70,
947P.2d 1252(1997)).
37 Shepard. 185 Wn. App. at 739 (quoting Hudson v. Condon. 101 Wn.
App. 866, 874, 6 P.3d 615 (2000)).
38 Shepard. 185 Wn. App. at 739 (quoting In re Estates of Hibbard. 118
Wn.2d 737, 744-45, 826 P.2d 690 (1992)).
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NO. 73908-5-1/13
the cause of action.'"39 	When that occurred is normally a fact question.40 	But a
court may infer actual discovery where the claim is based on documents in the
public record.41
Here, the Mannings' CPA claim accrued more than four years before the
Mannings sued. 	It accrued when they knew or had 	reason to know of facts
supporting every element of their claim.42 	The Mannings' claim thus accrued
when they were first injured since at that point they knew of facts 	supporting
every element of their CPA claim.43
The parties disagree on when the Mannings first knew or should have
known they were injured. 	The defendants assert that the Mannings' CPA claims
stem solely from the deed of trust naming MERS as beneficiary and thus accrued
when the deed of trust was recorded in 2004, giving the Mannings constructive
notice of any claims based on it. 	The Mannings contend their cause of action did
39 Shepard, 185 Wn. App. at 739 (quoting Green v. Am. Pharm. Co., 86
Wn. App. 63, 66, 935 P.2d 652 (1997)).
40 Samuelson v. Cmtv. Coll. Dist. No. 2, 75 Wn. App. 340, 346, 877 P.2d
734(1994).
41 See Shepard, 185 Wn. App. at 742 (inferring actual discovery of facts
constituting fraud).
42 See Green. 86 Wn. App. at 66.
43 A plaintiff can satisfy the injury element by showing that the plaintiff's
"'property interest or money is diminished because of the unlawful conduct even
if the 	expenses 	caused 	by the 	statutory violation are 	minimal.'" 	Panag 	v.
Farmers Ins. 	Co. 	of Wash.. 166 Wn.2d 27, 	57, 204 P.3d 885 (2009) (quoting
Mason v. Morto. Am.. Inc.. 114 Wn.2d 842, 854, 792 P.2d 142 (1990)). 	This can
include "[ijnvestigative expenses, taking time off from work, travel expenses, and
attorney fees." 	Walker v. Quality Loan Serv. Corp. of Wash.. 176 Wn. App. 294,
320, 308 P.3d 716 (2013).
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NO. 73908-5-1 /14
not 	accrue 	until after the defendants 	sought 	nonjudicial foreclosure 	in 2014
because until that time the defendants were "strangers to the Mannings' loan
obligations." They contend the "unfair and deceptive acts" that supports the CPA
claim was not the deed of trust itself but foreclosure based on "rogue documents"
that include the deed of trust.44
Neither party is correct. 	The test the defendants propose would start the
statute of limitations for CPA claims alleging illegal loan documents whenever
those documents are recorded. 	This rule is too broad. 	"[T]he mere fact MERS is
listed on the deed of trust as a beneficiary is not itself an actionable injury."45
Thus, while the defendants are correct that the Mannings had constructive notice
of the 	allegedly 	improper deed 	of trust when 	it was 	recorded 	in 2004, 	the
Mannings can rely on the assignment of MERS in the deed only for the "unfair or
deceptive acts or practices" element of their CPA claim, not the injury element.46
While the Mannings' complaint and briefing do not make clear when they
were first injured,47 they base their CPA claim on at least one injury that they
necessarily knew about before 2011. 	They assert that because "there has been
44 See Perez v. U.S. Bank, No. 2:15-CV-0114-TOR, 2016 WL 792420, at
*4 (E.D. Wash. Feb. 29, 2016) (court order) ("Plaintiffs' CPA claims accrued and
the statute of limitations began to run in 2013, when Plaintiffs[ ] allege their injury
occurred, namely when U.S. Bank foreclosed upon their property.").
45 Bain. 175 Wn.2d at 120.
46 See Bain, 175 Wn.2d at 116, 119-20.
47 The 	Mannings' brief alludes cursorily to investigation expenses, time
taken off from work, and travel expenses, but their complaint did not allege these
injuries, let alone attach a date to them.
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NO. 73908-5-1/15
no full disclosure of what entity, if any, actually provided funds to the plaintiffs,"
none of the defendants were entitled to 	receive 	payments from 	them. 	The
Mannings would thus have been injured when their first payment was received.
The record does not show when that happened, but this court can infer, given the
promissory note's requirement of monthly payments and a 	Residential Credit
officer's declaration that the Mannings defaulted 	in 2012, 	that the 	Mannings
made payments well before 2011.48 	Thus, the trial court was correct that the
four-year statute of limitations had run when the Mannings filed their complaint in
January 2015.
Fraud
Finally, the Mannings do not contest the trial court's finding that they did
not plead fraud with enough particularity to survive a motion to dismiss. 	They
have thus abandoned any challenge to that finding.49
CONCLUSION
Because the Mannings did not use the DTA procedure for stopping the
trustee's sale, they waived all claims except those brought under the CPA or for
fraud. 	Because BNY held the note when it appointed Trustee Services, Trustee
48 The Mannings also assert that the deed of trust was illegal and void and
placed a cloud on their title as soon as it was recorded in 2004. 	But they do not
appear to rely on this injury for their CPA claim.
49 See Cowiche Canyon Conservancy v. Boslev. 118 Wn.2d 801, 809, 828
P.2d 549 (1992) (holding that an appellant waives an issue by failing to argue it
in his opening brief).
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NO. 73908-5-1/16
Services had authority to foreclose regardless of MERS's attempted assignment
of the deed of trust. 	Because the Mannings became aware of every element of
their CPA claim more than four years before filing suit, the statute of limitations
barred that claim. 	And because the Mannings do not challenge the trial court's
dismissal of their fraud claim for insufficient pleading, they have conceded that
issue. Accordingly, we affirm.
WE CONCUR:
J %€&£#
•16-