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Defenses Raised to a Foreclosure Action and an Unlawful Detainer Action: Case Law Updates from: Washington

Posted By USFN, Monday, May 1, 2017
Updated: Tuesday, April 18, 2017

May 1, 2017

by Joshua Schaer
RCO Legal, P.S.
USFN Member (Oregon, Washington)

Is Trustee Sale Purchaser’s Successor-in-Interest able to Pursue Unlawful Detainer (or Must an Ejectment Action be Brought)?
On February 14, 2017 the Washington State Supreme Court heard oral argument in the case of Selene RMOF II REO Acquisitions II, LLC v. Ward.

History of the Subject Property — Vanessa Ward originally purchased a residence with a secured loan in 1999; in 2001, she deeded the property to an individual (Dorsey). Ward claimed that, in 2004, Dorsey transferred title back to her via quitclaim deed (QCD) for one dollar in consideration. The QCD was not recorded.

In 2005, Dorsey deeded the property to a couple and recorded the deed. In 2007, the couple transferred title to an individual (Dreier). Dreier obtained a refinance of Ward’s loan and encumbered the property with a new deed of trust. Ward continuously occupied the property and made mortgage payments, even after the refinance.

After a default in 2008, nonjudicial foreclosure commenced. Ward filed suit but failed to restrain the sale and, ultimately, her claims were dismissed. In 2009, the property sold at auction to LaSalle Bank, which received a trustee’s deed. In 2012, LaSalle Bank sought to evict Ward through an unlawful detainer (UD) action, but discontinued that attempt once it became contested.

Later in 2012, LaSalle Bank conveyed the property to Selene via a recorded special warranty deed. Selene filed its UD against Ward in 2014. For the first time, Ward disclosed the unrecorded QCD in response to Selene’s request for a writ of restitution; the trial court issued the writ.

Appellate Court Review — In 2016, Ward successfully appealed. [See 2016 WL 785097 (WA Div. 1, 2016).] The Court of Appeals held that state law only gives a trustee’s sale purchaser the automatic right to prosecute a UD, and Selene was merely a later owner. Further, Selene could not invoke a different provision of the unlawful detainer statute to evict Ward because she had “color of title” through the unrecorded quitclaim deed. Subsequently, the Washington Supreme Court granted Selene’s petition for review.

State Supreme Court Decision is Pending — In the Supreme Court Selene contended, firstly, that the UD process is not strictly limited to a trustee’s sale purchaser, and statutory rights are transferrable to a successor-in-interest. Selene relied on the reasoning of a California decision, Evans v. Superior Court, 67 Cal. App. 3d 162 (1977). Secondly, Selene asserted that a UD proceeding is not the proper forum for litigating title issues; Ward should have either restrained the sale or brought a separate civil action to adjudicate her title claim. Finally, Selene noted that case law requires good faith to show “color of title,” and Ward’s hidden QCD while still making payments on the refinanced loan did not amount to good faith.

A ruling from the Washington Supreme Court is expected later in 2017. The oral argument is online at http://www.tvw.org/watch/?eventID=2017021193.

Editor’s Note: The author’s firm represented the appellant Selene before the Washington Supreme Court in the Selene RMOF II REO Acquisitions II, LLC v. Ward case summarized here. [An earlier article on this case was published in the USFN e-Update (Apr. 2016 Ed.), which can be viewed in the Article Library at www.usfn.org.]

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