April 5, 2016
by Joseph H. Marshall
RCO Legal, P.S. – USFN Member (Alaska, Oregon, Washington)
A recent troubling, unpublished judicial decision holds that the grantee of a trustee’s sale purchaser lacks statutory authority to evict a former owner from foreclosed premises, and that eviction is premature where the former owner can show “color of title.” Selene RMOF II REO Acquisitions II, LLC v. Ward
, Wash. Ct. App., Div. 1 (Feb. 29, 2016).
Relief must be sought via an ejectment action, where title (not just possession) can be resolved. Servicers who purchase Washington assets — not at, but subsequent to, foreclosure sales — will be well-advised to consult with counsel about the proper procedure for evicting former owners on a case-by-case basis.
Division One of Washington’s Court of Appeals barred plaintiff Selene from evicting defendant Ward by means of unlawful detainer because Selene was not the trustee’s sale purchaser, and also because Ward claimed color of title based on a notarized, but unrecorded, 2004 quitclaim deed.
In 2012, Selene bought the property from LaSalle Bank (as trustee for certain mortgage loan asset-backed certificates). LaSalle had purchased the property at a deed of trust foreclosure sale in January 30, 2009. Dreier, the grantor of that deed of trust, had purchased the property in 2007 from one Chester Dorsey, as attorney in fact for Fred and Grace Brooks; the Brookses had bought the property from Dorsey in his personal capacity in 2005.
Dorsey had been quitclaimed the property by Vanessa Ward in 2001, but Ward claimed that she never “followed through” with her conveyance to Dorsey and that he had fraudulently executed the 2001 deed. He then quitclaimed the property back to her in 2004; however, that deed was not recorded.
Selene filed the unlawful detainer in 2014, alleging that Ward occupied the property as a tenant. Ward claimed that she was not a tenant and instead had color of title. The trial court granted a writ of restitution for Selene. Ward appealed and prevailed, with the appellate court analyzing questions of law.
Firstly, Selene was not the purchaser at the trustee’s foreclosure sale; the LLC was the quitclaim grantee of the sale purchaser. Selene thus lacked authority to evict because the unlawful detainer statute gave only sale purchasers the authority to evict. The court noted that Selene presented no authority as to why it should be treated like a sale purchaser, and the court did not sua sponte examine the usual function of a quitclaim deed to convey any rights of the grantor to the grantee, presumably including any rights of a trustee’s sale purchaser.
Secondly, unlawful detainer only applies to persons who lack “color of title” under RCW 59.12.030(6). Noting that the statute itself did not define color of title, the court looked to an IRS tax foreclosure case, Puget Sound Investment Group, Inc. v. Bridges, 92 Wash. App. 523, 963 P.2d 944 (1998). Bridges held that the defendant therein had color of title via a statutory warranty deed (details of which the court omitted) and that the unlawful detainer statute did not provide for tax sale purchasers to bring evictions (though it so authorized deed-in-lieu grantees).
Like the Bridges defendant, Ward’s unrecorded quitclaim deed gave her color of title, thus rendering an unlawful detainer action premature until an ejectment action could resolve the issue. Selene, therefore, had the burden to establish superior title.
Finally (and somewhat perfunctorily), the court determined that Ward could defend against the unlawful detainer action even though she had not served and noted her motion to dismiss and, further, that Ward’s claims under RCW 61.24.040(1) were not waived (even though she had not restrained the trustee’s sale). Moreover, the appellate court found that the issues as to Ward’s bona fide purchaser status, the impact of the trustee’s deed, and Ward’s knowledge of the trustee’s sale were beyond the scope of the unlawful detainer action and appeal.
Although the Selene decision is unpublished and cannot be cited as precedent, there is little question that analogous facts appealed to Division One in Washington will likely yield a similar result unless this case is reconsidered. If a servicer purchases subsequently from the trustee’s sale purchaser, and a former borrower/owner produces some kind of deed, this may well raise sufficient color of title to defeat a summary eviction action.
Evictions in Washington can be converted to civil ejectment/quiet title actions, but the process will take longer than eviction proceedings, which are limited to right of possession determinations.
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