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Washington: State Supreme Court holds that a Successor-in-Interest to the Trustee’s Sale Purchaser can pursue an Unlawful Detainer Action

Posted By Rachel Ramirez, Thursday, August 3, 2017
Updated: Thursday, August 3, 2017

August 8, 2017

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

The Supreme Court of the State of Washington recently decided the case of Selene RMOF II REO Acquisitions II, LLC v. Ward (Wash. Aug. 3, 2017).

Facts: Ward originally purchased a residence with a secured loan in 1999, but in 2001 she deeded the property to an individual named Dorsey. Ward claimed that, in 2004, Dorsey transferred title back to her via quitclaim deed (QCD) for one dollar in consideration. However, the QCD lacked a full notarization and it was not recorded.

In 2005, Dorsey deeded the property to a couple and recorded that conveyance. In 2007, the couple transferred title to an individual named Dreier; he obtained a refinance of Ward’s loan and encumbered the property with a new deed of trust. Ward continuously occupied the property and continued to make mortgage payments even after the refinance.

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

Eviction Hearing and Appeal: In 2014, Selene filed its UD against Ward. 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.

In 2016, Ward successfully appealed. [See Selene RMOF II REO Acquisitions II, LLC v. Ward, Wash. Ct. App., Div. 1 (Feb. 29, 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 of the property. Further, Selene could not invoke a different provision of the UD statute to evict Ward because Ward had “color of title” through the QCD. The Washington Supreme Court subsequently granted Selene’s Petition for Review.

Final Result: In a 5-4 opinion, the Supreme Court agreed with Selene’s contention that the UD process is not strictly limited to a trustee’s sale purchaser, and statutory rights are transferrable to a successor-in-interest. The Court adopted Selene’s citation to a California case, Evans v. Superior Court, 67 Cal.App.3d 162 (1977), which is on-point. Secondly, the Court also sided with Selene by ruling that a UD action is not the proper forum for litigating title issues; Ward should have either restrained the nonjudicial foreclosure sale or brought a separate civil action to adjudicate her claim. Finally, the Court observed that Ward’s QCD was not properly notarized or recorded, and she therefore lacked “color of title.”

This outcome is a significant industry victory as it protects the rights of REO assignees.

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 discussed here. Earlier articles on this case have been published in the USFN Report (spring 2017 Ed.) and in the USFN e-Update (Apr. 2016 Ed.), which can be viewed in the Article Library at www.usfn.org.

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Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

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