Barnhart v. Fidelity National Title Insurance Company et al

Filing 60

ORDER granting Defendant Fidelity National Title Insurance Company's 53 Motion to Dismiss for Failure to State a Claim. Signed by Chief Judge Thomas O. Rice. (BF, Paralegal)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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JOY LEE BARNHART,
No. 2:13-CV-0090-TOR

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Plaintiff,

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ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

v.

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FIDELITY NATIONAL TITLE
INSURANCE COMPANY;
HOMEWARD RESIDENTIAL f/k/a
AMERICAN HOME MORTGAGE
SERVICING, INC.; WELLS FARGO
BANK, NA as Trustee for Soundview
Home Loan Trust 2007-OPT1, AssetBacked Certificates, Series 2007OPT1, and Doe Defendants 1-20,

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Defendants.

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BEFORE THE COURT is Defendant Fidelity National Title Insurance

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Company’s Motion to Dismiss under FRCP 12(b)(6) (ECF No. 53). The Court has

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reviewed the record and files herein, and is fully informed. For the reasons

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discussed below, the Court GRANTS Defendant’s Motion to Dismiss (ECF No.

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53).

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 1

BACKGROUND1

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Plaintiff Joy Barnhart is the current owner of a home located in

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Spokane, Washington. ECF No. 3 at ¶ 1.2. The home was originally purchased by

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Plaintiff’s mother, Virginia Barnhart, who took out a loan from First Franklin

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Financial Corporation to finance the purchase and executed a deed of trust in the

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bank’s favor as security for the debt. ECF No. 3 at ¶ 2.1; ECF No. 12 at 10.2

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Plaintiff, who had power of attorney over her mother’s affairs, made payments on

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the loan on her mother’s behalf since the purchase in April 2000. ECF No. 4 at

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¶ 2.1. Later the same year, title to the property was transferred to Plaintiff via a

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quitclaim deed, and Plaintiff did not assume any obligations for the mortgage.

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Defendants’ Motion to Dismiss (ECF No. 26). The following facts are drawn

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primarily from Plaintiff’s Amended Complaint and are accepted as true for

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purposes of the instant motion.

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the material without turning the Rule 12(b)(6) motion into a summary judgment

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motion because the complaint necessarily relies on the documents and authenticity

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is not contested. See Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir.

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2001).

A more detailed background is included with the first Order Granting

Defendant submitted the Deed of Trust as an exhibit, and this Court reviews

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 2

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ECF No. 55 at 2.

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After some time, Plaintiff failed to make mortgage payments on behalf of

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her mother. ECF No. 3 at ¶ 2.3. In turn, Fidelity National Title Insurance Co.

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(“Fidelity”), as the successor trustee,3 issued a notice of default to Plaintiff’s

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mother on July 31, 2012, indicating that a payment of $4,403.31 was needed to

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cure the default, which was later increased to $9,369.27. ECF No. 3 at ¶ 2.3-2.4.

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Plaintiff challenged the fees, arguing the fees were inflated and unreasonable. ECF

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No. 3 at ¶ 2.4. Material to this dispute, Plaintiff also alleges a host of technical

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violations of the Deed of Trust Act (“DTA”) relating to the identity of the

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beneficiary of the deed of trust, the relevant notice of default, and the technical

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requirements for a trustee in Washington. ECF No. 3 at ¶¶ 3.11-3.15.

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Plaintiff filed suit, asserting several causes of action, all of which were

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dismissed by this Court (ECF No. 26) on the grounds that Plaintiff is a “stranger”

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to the loan and thus had no standing to assert the claims. ECF No. 26 at 10-11.

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Plaintiff appealed. ECF No. 35. The Ninth Circuit affirmed this Court’s ruling

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except for its dismissal of Plaintiff’s Washington Consumer Protection Act

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(“CPA”) claim. ECF No. 42. The Ninth Circuit did not address the merits of the

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trustee, ECF No. 3 at ¶ 3.13, but this contention is not material for this Order.

Plaintiff disputes whether Fidelity has been appointed as the successor

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 3

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CPA claim, but remanded because the claim “should be analyzed like any other

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CPA claim . . . [and] the court did not address [the] CPA claims independently of

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her DTA damages action.” ECF No. 42 at 4. The Court will now address

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Plaintiff’s CPA claim independently of the DTA action. As discussed below,

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Plaintiff does not have a viable CPA claim for the same reasons Plaintiff does not

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have standing to sue under the DTA.

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DISCUSSION
A. Standard of Review
A motion to dismiss for failure to state a claim pursuant to Federal Rule of

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Civil Procedure 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. Navarro

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v. Block, 250 F.3d 729, 732 (9th Cir. 2001). To avoid dismissal under Rule

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12(b)(6) for failure to state a claim, a plaintiff must allege “sufficient factual matter

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. . . to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556

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U.S. 662, 678 (2009). In this evaluation, the court should draw all reasonable

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inferences in the plaintiff’s favor, see Sheppard v. David Evans & Assocs., 694

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F.3d 1045, 1051 (9th Cir. 2012), but it need not accept “naked assertions devoid of

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further factual enhancement.” Iqbal, 556 U.S. at 678 (internal quotations and

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citation omitted). Dismissal is appropriate where the plaintiff fails to state a

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claim supportable by a cognizable legal theory. Balistreri v. Pacifica Police Dep’t,

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ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 4

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901 F.2d 696, 699 (9th Cir. 1990), abrogated on other grounds by Bell Atl. Corp. v.

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Twombly, 550 U.S. 544 (2007).

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B. Consumer Protection Act Claim
Pursuant to the Washington Consumer Protection Act, Revised Code of
Washington 19.86.090 provides:
Any person who is injured in his business or property by a violation of
RCW 19.86.020 . . . may bring a civil action . . . to enjoin further
violations, to recover . . . actual damages . . . together with the costs of
the suit, including a reasonable attorney's fee, and the court may in its
discretion . . . award . . . three times the actual damages . . . not [to]
exceed ten thousand dollars ...

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RCW 19.86.090; Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co.,

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105 Wash.2d at 778, 784 (1986). “[T]o prevail in a private CPA action . . . a

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plaintiff must establish five distinct elements: (1) unfair or deceptive act or

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practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury

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to plaintiff in his or her business or property; (5) causation.” Hangman Ridge

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Training Stables, 105 Wash.2d at 780. Because Plaintiff cannot establish the

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fourth and fifth elements, Plaintiff cannot prevail in her CPA action.

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The fourth element of a private CPA action requires a showing that plaintiff

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was injured in his or her “business or property”. Hangman Ridge Training Stables,

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105 Wash.2d at 792; see Cooper’s Mobile Homes, Inc. v. Simmons, 94 Wash.2d

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321, 327 (1980) (CPA plaintiffs must show that injury resulted from defendant’s

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 5

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acts); see also Seattle Rendering Works, Inc. v. Darling-Delaware Co., 104

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Wash.2d 15 (1985) (unless plaintiffs are injured, they cannot prevail under the

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CPA). “The injury involved need not be great, but it must be established.”

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Hangman Ridge Training Stables, 105 Wash.2d at 792. Plaintiff asserts damages

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for emotional distress, ECF No. 3 at 14, but these are not injuries to “business or

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property” protected by the CPA. Panag v. Farmers Ins. Co. of Washington, 166

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Wash.2d 27, 57 (2009) (“[D]amages for mental distress, embarrassment, and

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inconvenience are not recoverable under the CPA.”) (citation omitted).

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The fifth element is that of causation, which requires “[a] causal link . . .
between the unfair or deceptive acts and the injury suffered by plaintiff.” Id.

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Plaintiff’s allegations under the Consumer Protection Act cause of action are

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limited to specific complaints that, at best, resulted in injury to Plaintiff’s mother’s

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estate. See ECF No. 3 at ¶¶ 3.4-3.9. Plaintiff alleges Defendants have “made

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numerous misrepresentations” relating to the ownership of the Promissory Note

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and legal basis for the foreclosure proceedings, asserting Fidelity has not been

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appointed as a trustee by the beneficiary. ECF No. 3 at ¶¶ 3.5-3.6. As an alleged

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result, Fidelity has not complied with its alleged duty of good faith to Plaintiff

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because the foreclosure proceeding was allegedly initiated by an entity that did not

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have legal authority to do so. ECF No. 3 at ¶ 3.7. Last, Plaintiff alleges the

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ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 6

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“Assignment document . . . relied in initiating the foreclosure was untruthful.”

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ECF No. 3 at ¶ 3.8.
Essentially, Plaintiff’s allegations are premised on DTA violations. See ECF

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Nos. 3 at ¶¶ 3.4-3.15; 55 at 16 (Plaintiff’s heading stating “[Plaintiff] has properly

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pled claims for violations of the CPA predicated upon Fidelity's violations of the

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requirements of the DTA”). Counsel for Plaintiff apparently assumed such on

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appeal as the Ninth Circuit recognized Plaintiff’s counsel believed by addressing

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the DTA claim it also addressed the CPA claims. ECF No. 42 at 4. Although a

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remedy under the CPA may lie for conduct that violates the DTA (but may not be

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separately actionable under the DTA), the Plaintiff here does not state a cognizable

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claim, and in the alternative has no standing to assert the claim. This is because

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Plaintiff is not the injured party as a “stranger” to the loan and subsequent

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foreclosure proceeding, and will incur no damages personally.4 Thus, the CPA

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diminished recovery by Plaintiff of excess proceeds as a result of a foreclosure

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sale, for example, would be a consequence of taking title by a quit claim deed. It

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would not be an “injury” to Plaintiff as Plaintiff only received the rights her mother

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had, and she cannot assert her mother’s rights in her own capacity. This is the

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bargain of the deal when receiving such a deed.

Notably, Plaintiff took title by a quitclaim deed. As such, any potential

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 7

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claim fails on the fourth and fifth factor because Plaintiff is not injured, so

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Defendants could not have caused an injury to Plaintiff. Her mother’s estate could

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bring the claim, but Plaintiff does not bring the suit in her representative capacity.

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As this Court noted in the initial Order Granting Defendant’s Motion to
Dismiss (ECF No. 26):
Here, Plaintiff does not have any financial stake in the
underlying loan transaction. As Defendants correctly note, it was
Plaintiff’s mother—rather than the Plaintiff herself—who executed
the promissory note and the deed of trust. Plaintiff was not a party to
the transaction; she did not borrow the money, she did not grant the
security interest, and she did not guarantee the loan. In short, Plaintiff
had no interest in the property. Although Plaintiff later obtained title
to the property via a quitclaim deed, (see ECF No. 15 at 1), this
transfer did not result in Plaintiff assuming the underlying debt
obligation. Instead, Plaintiff took the property subject to the existing
deed of trust, with the obligation to repay the loan remaining with her
mother. Thus, Plaintiff is a “stranger” to the loan transaction and
cannot be held personally liable for any amount owing on the note.
By logical extension, Plaintiff could not have sustained monetary
damages as a result of Defendants’ efforts to foreclose on the deed of
trust. Accordingly, Plaintiff lacks standing to assert claims for
damages under RCW 61.24.127. Ramirez-Melgoze, 2010 WL
4641948 at *6 (unpublished). These claims must be pursued, if at all,
by Plaintiff’s mother’s estate. Defendants’ motion to dismiss is
granted.

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ECF No. 26 at 10-11. Plaintiff has incurred no cognizable damage personally, so

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Plaintiff’s CPA claim must necessarily fail under the fourth and fifth element

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requiring damages to Plaintiff caused by Defendant.

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ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 8

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Despite Plaintiff’s contentions to the contrary, ECF No. 55 at 8-11, Plaintiff

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is not a grantor, successor, or borrower under the DTA, as Plaintiff is not liable for

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the underlying obligation and was not a party to the underlying deed of trust. See,

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e.g., Ramirez-Melgoze v. Countrywide Home Loan Servicing LP, 2010 WL

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4641948, at *6 (E.D. Wash. Nov. 8, 2010) (“[T]he definition of ‘successor’ under

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R.C.W. 61.24.005(6) is limited to the successor in liability on the loan because a

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deed of trust is executed to serve as security for the performance of the borrower’s

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obligations under the loan. It would be illogical to extend the definition of

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‘successor’ to a party which had no liability on the underlying obligation. In

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limiting the definition of ‘successor’ to ‘successors in liability,’ the lender is

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protected from strangers to the loan.”). Consequently, Plaintiff has no cognizable

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claim for Defendant’s alleged acts involving the loan and subsequent foreclosure

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proceeding since she was a “stranger” to the loan and related mortgage.

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ACCORDINGLY, IT IS HEREBY ORDERED:

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Defendant’s Motion to Dismiss (ECF No. 53) is GRANTED.

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The District Court Executive is directed to enter this Order and furnish

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copies to counsel.
DATED January 19, 2017.

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THOMAS O. RICE
Chief United States District Judge
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS ~ 9