Smith v. Green Tree Servicing LLC

Filing 20

ORDER denying pltf's 12 Motion for Summary Judgment by Judge Robert S. Lasnik.(RS)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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_______________________________________
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CHRISTA SMITH,
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Plaintiff,
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v.
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GREEN TREE SERVICING, LLC,
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Defendant.
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_______________________________________)

No. C13-1573RSL
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT

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This matter comes before the Court on plaintiff’s “Motion for Summary

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Judgment.” Dkt. # 12. Summary judgment is appropriate if, viewing the evidence in the light

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most favorable to the nonmoving party, “the movant shows that there is no genuine dispute as to

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any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

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56(a); L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir. 2012). Having

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reviewed the memoranda, declarations, and exhibits submitted by the parties1 and taking the

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evidence in the light most favorable to Green Tree Servicing, LLC, the Court finds as follows:
BACKGROUND

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On October 31, 2003, Lon and Jacqueline McClellan transferred a piece of real

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property in Battleground, Washington, to Christopher A. Smith as part of a 1031 IRS exchange.

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This matter can be decided on the papers submitted. Plaintiff’s request for oral argument is
DENIED.
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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Decl. of Lauren Humphreys (Dkt. # 16), Ex. 1. On the same date, plaintiff Christa Smith

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conveyed all of her interest in the property to her then-husband, Christopher, “to separate

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community interest to fulfill a lender requirement.” Id., Ex. 2. In November 2004, Mr. Smith

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applied for a residential loan on the property, identifying himself as the “sole owner.” Decl. of

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Jim Grantham (Dkt. # 17), Ex. B. Bank of America, N.A., agreed to lend Mr. Smith $333,700.

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He signed a promissory note and a deed of trust, both of which identified Mr. Smith as the

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borrower. Id., Exs. A and C. Ms. Smith had no role in the transaction.

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On June 11, 2007, the Superior Court of Clark County entered a dissolution decree

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dissolving the marriage and awarding the property to Ms. Smith. Decl. of Audrey L. Udashen

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(Dkt. # 12-2), Exs. A and D. Because Mr. Smith refused to convey the property to his ex-wife,

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the Court appointed an attorney to sign on his behalf and a quit claim deed in Ms. Smith’s favor

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was recorded on August 2, 2007. Decl. of Lauren Humphreys (Dkt. # 16), Ex. 5. Mr. Smith

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failed to meet his obligations under the dissolution decree, and Ms. Smith has been unable to

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locate him even with the help of a private investigator. There has apparently been no activity

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associated with Mr. Smith’s social security number and he has not filed a tax return since 2007.

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Ms. Smith presumes that he is dead. Decl. of Christa Smith (Dkt. # 12-2) at ¶¶ 8-9 and 14.

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After the divorce, Ms. Smith made all payments on the loan. In November 2011,

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she contacted Bank of America, notifying it of the divorce and that Mr. Smith had disappeared.

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Ms. Smith requested that she be identified as a borrower on the mortgage. Decl. of Jim

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Grantham (Dkt. # 17), Ex. E. There is no indication that Bank of America responded or that Ms.

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Smith followed up on her request. In November 2012, defendant Green Tree Servicing, LLC,

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sent a notice to Mr. Smith at the Battleground property notifying him that it had taken over the

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servicing of his mortgage loan. Decl. of Jim Grantham (Dkt. # 17), Ex. D. In December 2012,

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plaintiff arranged to set up an automatic payment schedule for the loan. While Green Tree was

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willing to accept payments, it would not provide information regarding the loan because Ms.

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Smith was not the borrower. Ms. Smith cancelled the payment that was scheduled for February
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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28, 2013, and has not made any further payments. Id. at ¶¶ 10-11.
Ms. Smith requested a loan modification in early 2013 in the hopes of reducing her

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monthly payments, but was told that only the borrower could apply for a modification and that

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she would need Mr. Smith’s participation in order to assume the loan. Decl. of Christa Smith

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(Dkt. # 12-2) at ¶ 13. In May 2013, plaintiff’s counsel contacted Green Tree, asserting that the

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refusal to allow Ms. Smith to assume the loan and seek modification violated the Garn - St.

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Germain Depository Institutions Act of 1982 and contradicted applicable loan servicing

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guidelines. Decl. of Jim Grantham (Dkt. # 17), Ex. F. Green Tree denied violating any

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applicable laws or guidelines and reiterated that Ms. Smith is not a party to the loan documents

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and that only Mr. Smith, as the obligor, could seek a modification. Green Tree also declared that

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the loan cannot be assumed. Decl. of Jim Grantham (Dkt. # 17), Ex. G.

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Ms. Smith filed this lawsuit on July 18, 2013, in state court. She now seeks a

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summary determination that (a) she is a “borrower” on the loan, entitled to all of the statutory

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rights, privileges, and protections as if she were identified as a “borrower” on the promissory

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note and/or deed of trust, (b) Green Tree has violated the Garn - St. Germain Depository

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Institutions Act, (c) Green Tree is estopped from refusing to recognize Ms. Smith as a borrower

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on the loan, and (d) Green Tree has violated the Washington Consumer Protection Act.
DISCUSSION

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A. “BORROWER”
Although there is a presumption that property acquired during a marriage in

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Washington State is a community asset or liability, the presumption can be rebutted by proof that

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separate funds or assets were used. Finley v. Finley, 47 Wn.2d 307, 312 (1955). The evidence

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in this case is clear that Mr. Smith obtained the loan at issue using his separate property to secure

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the credit. Because Ms. Smith had quit claimed any interest she had in the Battleground

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property to Mr. Smith in 2003, he had sufficient separate property to secure an individual loan:

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neither Ms. Smith’s signature nor any asset in which she had an individual or community interest
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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was necessary to obtain the loan.
Under Washington law, the later transfer of the property to Ms. Smith - as

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occurred in the dissolution proceeding - did not undo or alter the pre-existing encumbrance.

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Snohomish County v. Hawkins, 121 Wn. App. 505 (2004). Thus, Ms. Smith took the property

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subject to the existing mortgage. Pursuant to the contract that governed the loan, Mr. Smith

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remained legally obligated for the payments. While Ms. Smith was (and apparently remains)

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free to make payments on the promissory note, as far as the lender is concerned, those payments

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were made on behalf of Mr. Smith, the borrower. Simply making payments on the note did not

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amend the note or deed or trust or otherwise make Ms. Smith the “borrower.”

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B. GARN - ST. GERMAIN DEPOSITORY INSTITUTIONS ACT, 12 U.S.C. § 1701j-3
Contrary to plaintiff’s unsupported assertions, Green Tree did not accelerate the

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loan or otherwise declare the loan due and payable when the property was transferred to Ms.

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Smith in 2007. The loan remained exactly as it was until Ms. Smith stopped making payments

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five years later. It was the failure to pay amounts as they became due that placed the loan in

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default, not the transfer to a spouse as part of the divorce decree. Plaintiff has not alleged facts

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that could support a finding that 12 U.S.C. § 1701j03(d)(7) was violated.

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C. ESTOPPEL

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Plaintiff has not identified any statement or conduct on Green Tree’s part that is

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inconsistent with its position that Mr. Smith, not Ms. Smith, is the borrower obligated on the

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loan documents. Simply accepting payment from a third-party is not a determination or

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acknowledgment that the person is a “borrower” or otherwise individually liable for the debt.

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Green Tree never indicated that it would treat Ms. Smith as the obligor, and she could not

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reasonably presume that it would. In fact, the record shows that Ms. Smith was aware that she

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did not hold “borrower” status: all correspondence regarding the servicing of the loan was

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addressed to Mr. Smith, Ms. Smith affirmatively but unsuccessfully attempted to alter the loan

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documents to formalize her interest in the loan, and Green Tree specifically informed Ms. Smith
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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that it did not recognize her as the “borrower.” Plaintiff has not established the elements of an

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estoppel claim.

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D. WASHINGTON CONSUMER PROTECTION ACT (“CPA”), RCW 19.86.010 ET SEQ.
There being no obligation under Washington law to amend loan documents upon

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the transfer of real property in a divorce decree, plaintiff has failed to identify an unfair or

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deceptive act that could support her CPA claim.

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For all of the foregoing reasons, plaintiff’s motion for summary judgment is

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DENIED.

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Dated this 28th day of March, 2014.

A
Robert S. Lasnik

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United States District Judge

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ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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