                                                     MORI    APPEALS DIV 1
                                                     -STATEOF WASHiNGT

                                                      2010 JUN 25 M4 9:09


IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 FRED BARUCH,                    )
                                 )                       No. 76462-4-I
                Appellant,       )
                                 )                      DIVISION ONE
           V.                    )
                                 )                       UNPUBLISHED OPINION
BANK OF AMERICA, NA; WELLS FARGO )
BANK, NA; and NORTHWEST TRUSTEE )
SERVICES, INC.,                  )
                                 )
                 Respondents.    )                       FILED: June 25, 2018
                                 )

      APPELWICK, C.J. — Baruch argues that Wells Fargo, the servicer, and Bank

of America, the beneficiary, violated the Consumer Protection Act, I because they

gave deceptive statements about who possessed the note underlying Baruch's

mortgage. Baruch also argues that Northwest Trustee Services violated the CPA,

because it should have further investigated to ascertain the true beneficiary of the

note. We affirm.

                                      FACTS

              Fred Baruch financed a home in 2004.             The loan note for

$508,000.00 was payable to Wells Fargo Home Mortgage Inc.

      On December 31, 2013, Wells Fargo Bank, N.A. (WF),2 granted, sold,

assigned, transferred, and conveyed the rights and obligations under the deed to

      1 Ch. 19.86 RCW.
                                 Bank N.A., is the successor by merger to Wells
      2 It appears that Wells Fargo
Fargo Home Mortgage Inc. This distinction is immaterial for the issues on appeal.
No. 76462-4-1/2


Bank of America, N.A.(BOA).3 WF remained the servicer4 of the loan. The validity

of this assignment is not at issue.

       Baruch stopped making payments. In 2014, WF directed the trustee to

begin the non-judicial foreclosure process. On March 10, 2014, in keeping with

the December assignment, WF signed a beneficiary declaration that identified

BOA as the beneficiary. On November 18, 2014, WF signed another beneficiary

declaration, as "Attorney in Fact of Beneficiary," that identified BOA as the actual

holder and beneficiary of the note. However, also on November 18, 2014, WF,"as

actual holder of the Note," appointed Northwest Trustee Services Inc.5 (NTS) as


       3 We   refer to Wells Fargo and Bank of America collectively as the "banks."
       4 The following   describes the practical role of the loan servicer:

               The servicer stands in for the trust, the beneficial owners of
       the loans, and the investors in virtually all dealings with homeowners.
       It is the servicer to whom homeowners mail their monthly payments,
       the servicer who provides billing and tax statements for
       homeowners, and the servicer to whom a homeowner in distress
       must address a petition for a loan modification.



              Most of what servicers do is routine and automated: accepting
       payments and applying them to accounts. But when a loan becomes
       delinquent, the amount and nature of servicing changes. Decisions
       about whether to foreclose or modify must be made. The
       homeowner must be contacted. If the house is vacant, it must be
       secured. The timing of the foreclosure must be managed, and
       ancillary service providers, from title companies to attorneys to real
       estate brokers for a post-foreclosure sale, must be hired. All those
       decisions are left largely to servicers' discretion.

Diane E. Thompson, Foreclosing Modifications: How Servicer Incentives
Discourage Loan Modifications, 86 WASH. L. REV. 755, 765 (2011) (footnotes
omitted).
        5 NTS was originally represented by counsel in this appeal. But, after it filed
its appellate brief, its counsel withdrew. A Court of Appeals commissioner ruled

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No. 76462-4-1/3


the trustee. In other words, WF had identified BOA as the beneficiary and actual

holder of the note, but also stated that WF was the actual holder of the note.

      Baruch engaged in statutorily required mediation with BOA. Mediation was

unsuccessful. NTS issued a notice of trustee's sale, but the sale was suspended

pending this lawsuit.

      Baruch filed a Consumer Protection Act (CPA) claim alleging deceptive

practice by WF, BOA,and NTS. WE and BOA moved for summary judgment, and

NTS also moved for summary judgment. The trial court granted these two motions.

      Baruch appeals.

                                  DISCUSSION

       Baruch makes two arguments.6 First, he argues that the banks acted

deceptively and thus violated the CPA. Second, he argues that NTS violated the

CPA by relying on faulty beneficiary declarations. NTS, and NTS only, seeks

attorney fees.

      The trial court granted summary judgment to the banks and NTS. When

reviewing a summary judgment order, this court engages in the same inquiry as

the trial court. Hertoq v. City of Seattle, 138 Wn.2d 265,275,979 P.2d 400(1999).

Summary judgment is proper when there are no genuine issues of material fact,

and the moving party is entitled to judgment as a matter of law. Id. All facts and


that NTS, as an entity, must be represented by counsel on appeal. But, nothing in
the record suggests that NTS is now represented by new counsel.
       6 In his reply brief, Baruch raises a third argument regarding the note's
alleged special indorsement. But, he did not argue this below. Under RAP 2.5(a),
an appellate court need not address an argument not raised below. We therefore
do not address it.

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No. 76462-4-1/4


reasonable inferences are considered in the light most favorable to the nonmoving

party. Id. Questions of law are reviewed de novo. Id.

       This case is not a challenge to the foreclosure itself. It is a CPA case.

Washington's CPA provides that "[u]nfair methods of competition and unfair or

deceptive acts or practices in the conduct of any trade or commerce are hereby

declared unlawful." RCW 19.86.020. The purpose of the CPA is to "complement

the body of federal law governing restraints of trade, unfair competition and unfair,

deceptive and fraudulent acts and practices in order to protect the public and foster

fair and honest competition." RCW 19.86.920. The CPA is to be "liberally

construed [so]that its beneficial purposes may be served." RCW 19.86.920; Short

v. Demopolis, 103 Wash.2d 52, 60, 691 P.2d 163(1984).

       The CPA's citizen suit provision states that "[a]ny person who is injured in

his or her business or property" by a violation of the Act may bring a civil suit for

injunctive relief, damages, attorney fees and costs, and treble damages. RCW

19.86.090. To prevail in a private CPA claim, the plaintiff must prove (1) an unfair

or deceptive act or practice,(2) occurring in trade or commerce,(3) affecting the

public interest, (4) injury to a person's business or property, and (5) causation.

Panaq v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 37, 204 P.3d 885 (2009).

Whether a particular act or practice is "unfair or deceptive" is a question of law.

See Leinoang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 149-50, 930

P.2d 288 (1997).




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No. 76462-4-1/5


       Baruch does not seek relief under the deed of trust act.7 But, he argues

that certain provisions under the deed of trust act highlight the importance of clearly

identifying the status of the various parties in a foreclosure. Under the deed of

trust act, "beneficiary" is defined as the "holder of the instrument or document

evidencing the obligations secured by the deed of trust." RCW 61.24.005(2).

Lenders are free to sell a secured debt, typically by selling the promissory note

signed by the debtor. Bain v. Metro. Mort. Grp., Inc., 175 Wn.2d 83, 88, 285 P.3d

34 (2012). The deed of trust act recognizes that the beneficiary of a deed of trust

at any one time might not be the original lender. Id. The act therefore gives

subsequent holders of the debt the benefit of the act by defining "beneficiary"

broadly. Id.; RCW 61.24.005(2).

       A trustee or successor must be appointed by the beneficiary of a note. RCW

61.24.010(2). Only a trustee appointed by a beneficiary is authorized to conduct

a non-judicial foreclosure. Bavand v. OneWest Bank, FSB, 176 Wn. App. 475,

486, 309 P.3d 636 (2013), abrogated in part on other grounds by Frias v. Asset

Foreclosure Servs., Inc., 181 Wn.2d 412, 334 P.3d 529 (2014). Thus, when an

unlawful beneficiary appoints a successor trustee, that trustee lacks legal authority

to carry out the foreclosure. Walker v. Quality Loan Serv. Corp., 176 Wn. App.

294, 306, 308 P.3d 716(2013), abrogated in part on other grounds by Frias. And,

before issuing a notice of a trustee's sale, the trustee must have proof that the

claimed beneficiary is the actual holder of the note. Truiullo v. Nw. Trustee Servs.,

Inc., 183 Wn.2d 820, 832, 355 P.3d 1100 (2015). This may be satisfied by a

       7 Ch. 61.24   RCW.

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No. 76462-4-1/6


declaration of the beneficiary, in which the beneficiary attests that it is the actual

holder of the note. Id.

  I.   Deceptive Acts by Banks

       Here, Baruch identifies three separate acts by WF and BOA as deceptive.8

First, he argues that the declarations that distinguish between the holder and

owner of a note are deceptive. He reasons that an ordinary mortgage holder would

not understand the finer distinctions between note beneficiary and note holder.

       Second, he argues that the notice of trustee sale that identified BOA as the

beneficiary was deceptive, because it conflicted with statements by the banks'

attorney that, according to Baruch, suggested that WF was the holder of the note.8

       Third, he argues that it was deceptive for BOA or WF to appoint a trustee,

because only the holder of a note may appoint a trustee, but the identity of the note

holder was unclear. On the one hand, in its appointment of trustee NTS,WF stated

that was the actual holder of the note. But, on the other hand, WF's beneficiary

declarations stated that BOA was the actual holder and beneficiary of the note.

Baruch argues that these statements conflict, because "the beneficiary is the

actual holder of the promissory note." RCW 61.24.030(7)(a).

       8  The banks argue that this argument has been waived, because Baruch
failed to properly raise it below. We disagree. In his response to the summary
judgment, Baruch raised the issue with BOA and WF's entitlement to foreclose
based on owner status.
        9 In Baruch's second claim that the notice of trustee's sale was deceptive,
he primarily argues that it conflicted with counsel's statements before the trial court
that he interpreted to mean that WE, rather than BOA, is the beneficiary. Baruch
fails to identify how a statement by counsel before the trial court, well after the
foreclosure process began, deceived Baruch as a consumer of the banks'
services. Moreover, the banks actually asserted that WF was merely holding the
note on BOA's behalf.

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No. 76462-4-1/7


       Baruch relies on Rucker v. NovaStar Mortgage, Inc., 177 Wn. App. 1, 311

P.3d 31 (2013). Rucker sought to set aside a trustee's sale on grounds that the

trustee was not properly appointed by an eligible beneficiary prior to the sale taking

place. Id. at 5. Rucker had obtained two loans from NovaStar. Id. at 6. The deeds

of trust listed Quality Loan Services(QLS)as trustee. Id. NovaStar conveyed the

loans to JPMorgan Chase Bank and J.P. Morgan Trust Company respectively. Id.

NovaStar retained responsibility for servicing the loans. Id. NovaStar appointed

QLS as trustee. Id. Rucker defaulted, and QLS conducted a trustee's sale. See

id. at 7, 14. However, the servicing agreement explicitly stated that NovaStar's

relationship to JPMorgan Chase Bank and J.P. Morgan Trust Company was

intended "'to be that of an independent contractor and not that of a joint venture,

partner, or agent.'" Id. at 7. As a result, this court held that summary judgment

was not appropriate, because it was possible that QLS had no authority to appoint

the trustee in the first place. Id. at 16, 18.

       But, Rucker is critically different from Baruch's case, because of the

servicing agreement in Rucker that explicitly stated that the servicer was not the

owner's agent, WF was BOA's agent, and it identified itself as BOA's attorney in

fact. Our Supreme Court has explicitly endorsed the use of agents in possessing

notes: "Washington law, and the deed of trust act itself, approves of the use of

agents." Bain, 175 at 106. Moreover, in Brown v. Department of Commerce, our

Supreme Court explained the relationship between owner and servicer as follows:

       Even while the servicer acts on Freddie Mac's behalf to hold the note,
       to seek to modify the note, and to foreclose on the note, Freddie Mac



                                           7
No. 76462-4-1/8

       still owns the note. As the note owner, Freddie mac remains entitled
       to "the ultimate economic benefit of payments on the note."

184 Wn.2d 509, 523, 359 P.3d 771 (2015)(quoting the amicus brief at 3). It also

observed that "Washington's Uniform Commercial Code (UCC) authorizes this

division of note ownership from note enforcement." Id.

       WE explicitly identified itself as acting on behalf of BOA. This clarified its

status as the agent of BOA. As BOA's agent, WE could rightfully possess BOA's

note, without usurping the powers that BOA retained as owner, beneficiary, and

constructive possessor of the note. Moreover, WF's statement that it was actual

holder of the note was not deceptive, because it was in fact in actual possession

of the note, on behalf of BOA. And, as the agent it had authority to appoint the

successor trustee.

       None of the statements by WF were factually or legally erroneous. Baruch

may not have understood the nuance or legal effect of the statements, but that

alone does not make them deceptive acts. In essence, Baruch asks the court to

find that, if an agent of a beneficiary ever states that it is holding the note, without

simultaneously explicitly stating its status as agent, it is subject to CPA liability for

a deceptive act. But, that is not the rule. WF's status as agent was identified at

the outset. The acts by the banks to which Baruch points do not amount to a

deceptive practice.

 II.   Deceptive Acts by NTS

       Baruch next contends that the trial court erred in dismissing his CPA claim

against NTS. He claims that NTS violated the CPA, because it relied on WF's

beneficiary declaration claiming that BOA is the actual holder of the note, and also


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No. 76462-4-1/9


relied on WF's appointment of trustee that claimed WF was the actual holder of

the note. Baruch claims that, by relying on these allegedly conflicting statements,

NTS breached its duty of good faith to Baruch, and is therefore subject to CPA

liability.

         RCW 61.24.030(7) describes the proof that a trustee must require before

the trustee may proceed with a sale:

        (a) That, for residential real property, before the notice of trustee's
        sale is recorded, transmitted, or served, the trustee shall have proof
        that the beneficiary is the owner of any promissory note or other
        obligation secured by the deed of trust. A declaration by the
        beneficiary made under the penalty of perjury stating that the
        beneficiary is the actual holder of the promissory note or other
        obligation secured by the deed of trust shall be sufficient proof as
        required under this subsection.

               (b) Unless the trustee has violated his or her duty under RCW
         61.24.010(4), the trustee is entitled to rely on the beneficiary's
         declaration as evidence of proof required under this subsection.

RCW 61.24.010(4) imposes upon the trustee "a duty of good faith to the borrower,

beneficiary, and grantor."

         Our Supreme Court has described the trustee's duty of good faith as

follows:

         This duty requires the trustee to remain impartial and protect the
         interests of all the parties. "[T]he trustee in a nonjudicial foreclosure
         action has been vested with incredible power. Concomitant with that
         power is an obligation to both sides to do more than merely follow an
         unread statute and the beneficiary's directions." Klerni v. Wash. Mut.
         Bann 176 W[n].2d [771],791[,295 P.3d 1179(2013)]. A foreclosure
         trustee must "adequately inform" itself regarding the purported
         beneficiary's right to foreclose, including, at a minimum, a "cursory
         investigation" to adhere to its duty of good faith. Walker, 176 W[n].[
         ]App. 309-10. A trustee does not need to summarily accept a
         borrower's side of the story or instantly submit to a borrower's
         demands. But a trustee must treat both sides equally and investigate


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No. 76462-4-1/10

       possible issues using its independent judgment to adhere to its duty
       of good faith. See, e.g., Cox v. Helenius, 103 W[n].2d 383, 388,693
       P.2d 683 (1985). A trustee's failure to act impartially between note
       holders and mortgagees, in violation of the [deed of trust act], can
       support a claim for damages under the CPA.
Lyons v. U.S. Bank Nat. Ass'n, 181 Wn.2d 775, 787, 336 P.3d 1142 (2014)(first

alteration in original)(internal quotation marks omitted).

       Baruch does not analogize to any specific case. But, Lyons provides an

example of a trustee's breach of its duty of good faith. Lyons signed a deed of

trust that identified WF as beneficiary and NTS as the trustee. Id. at 780. Lyons

later filed for bankruptcy. Id. She requested a loan modification. Id. While she

was waiting for a response to the modification request, she received a notice of

trustee's sale. Id. After receiving that notice, WF informed her that her modification

request had been approved. Id. However, WF had sold the loan into a new trust,

with a new trustee, and a new servicer. Id. at 781. Lyons's attorney twice spoke

with an NTS representative to inform NTS that WF no longer had an interest in the

loan, that there was a new servicer, and that Lyons had received a modification

and therefore was no longer in default. Id. An NTS employee informed Lyons's

attorney that the new servicer had directed NTS to nevertheless proceed with the

trustee's sale. Id. But, three days later, the new servicer told Lyons's attorney that

it had not directed NTS to proceed with the trustee's sale. Id. Lyons's attorney

informed NTS, but NTS maintained that the sale was "still on." Id. Lyons filed suit.

Id.

       The court found that summary judgment was inappropriate on whether

NTS's acts violated its duty of good faith, and were thus unfair or deceptive. Id. at



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No. 76462-4-1/11


788-89. It reasoned that the controversy over the status of the loan was brought

to NTS's attention, but nothing in the record showed that anyone at NTS

investigated the issue for two months, at the same time that NTS was proceeding

to sale. Id. at 788. "If Lyons' allegations are true and [NTS] knew about the

conflicting information regarding their right to initiate foreclosure but did not look

into this matter, there are issues regarding whether this indicates deferral to WF

and therefore lack of impartiality." Id. Moreover, the court reasoned that

      [t]ypically, unless the trustee has violated a duty of good faith, it is
      entitled to rely on the beneficiary's declaration when initiating a
      trustee's sale. See RCW 61.24.030(7)(b). But if there is an
      indication that the beneficiary declaration might be ineffective, a
      trustee should verify its veracity before initiating a trustee's sale to
      comply with its statutory duty.
Id. at 790.

       In Baruch's case, there was no such indication that the beneficiary

declaration might be ineffective. On March 10, 2014, WF, as "beneficiary or

authorized agent for the beneficiary," executed a beneficiary declaration stating

unambiguously that BOA was the beneficiary. On November 18, 2014, WF, as

"Attorney in Fact of Beneficiary," executed another beneficiary declaration stating

unambiguously that BOA was the actual holder of the note and the beneficiary.

Also on November 18, 2014, WE executed the appointment of successor trustee

NTS, and that appointment explicitly identified WE as "servicing agent for" BOA.

The notice of default, mailed to Baruch on December 10, 2014, identified BOA as

the owner of the note. And, the record shows that Baruch engaged in foreclosure

mediation with BOA.



                                         11
No. 76462-4-1/12


        Baruch stresses that the November 18 appointment of successor trustee

referred to WF as actual holder of the note, which contradicts the November 18

beneficiary declaration. But, the !Lyons court explained that the trustee is entitled

to rely on an unambiguous beneficiary declaration. 181 Wn.2d at 790. And, here

the beneficiary declaration is unambiguous. Washington law permits the use of

agents to enforce rights under deeds of trusts. This would permit WF to be the

actual holder of the note, while holding it on behalf of BOA, which the appointment

reflected. The misrepresentation of facts and ambiguity of Lyons is not present

here. The fact that WE was holding the note on BOA's behalf did not require any

further investigation by NTS in order to comply with its duty of good faith.

        We hold that(1) Baruch fails to identify a deceptive act by the banks, and

(2)that NTS did not violate its duty of good faith, did not act deceptively. The trial

court properly dismissed Baruch's CPA claim.10

 III.   Attorney Fees

        NTS, and NTS only, requests attorney fees under RAP 14.2. NTS cites no

case law for its request. And, since it filed its response brief, its counsel withdrew.

No attorney subsequently filed a notice of appearance. "[C]orporations appearing

in court proceedings must be represented by an attorney." See Lloyd Enters, Inc.


        10 Baruch must also satisfy the public interest, causation, and damages
elements of a CPA claim. With respect to damages, Baruch argued below in his
motion response, rather than a declaration, that he lost business profits due to his
investigation of the alleged deceptive practices. He only briefly references those
alleged loss business profits, and provided no supporting evidence. He asks that
the court "exercise its discretion favorably" and overlook this omission, because
he is bringing to light a deceptive practice. Therefore, even if Baruch could identify
a deceptive act, his claim would fail the damages element.

                                          12
No. 76462-4-1/13


v. Longview Plumbing & Heating Co, Inc., 91 Wn. App. 697, 701, 958 P.2d 1035

(1998). Therefore, NTS is not entitled to attorney fees.

       We affirm.




WE CONCUR:




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