Elmore v. Bank of America, N.A., No. 2:2014cv00241 - Document 32 (E.D. Wash. 2014)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS - granting in part and denying in part 20 Motion to Dismiss for Failure to State a Claim. Signed by Senior Judge Justin L. Quackenbush. (CC, Case Administrator)
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Elmore v. Bank of America, N.A. Doc. 32 1 2 3 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF WASHINGTON 6 7 8 NATHAN F. ELMORE, an individual, and on behalf of others similarly situated, 9 10 Plaintiff, NO. 2:14-cv-00241-JLQ ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS vs. 11 12 13 14 BANK OF AMERICA, N.A., a Delaware corporation, 15 Defendant. 16 17 BEFORE THE COURT is Defendant Bank of America, N.A.'s ("BANA") Motion 18 to Dismiss for Failure to State a Claim pursuant to Fed.R.Civ.P. 12(b)(6) (ECF No. 20). 19 The Motion was directed to Plaintiff Nathan F. Elmore's ("Elmore") First Amended 20 Complaint (ECF No. 16). The court heard telephonic oral arguments on December 11, 21 2014. H. Lee Lewis represented Elmore and Timothy M. Lawlor spoke for BANA. 22 I. Background 23 24 In 2005, Elmore purchased a single family home in Spokane, Washington with a 25 loan ultimately acquired and serviced by BANA. The deed of trust included language 26 protecting BANA interest in the property upon Elmore's breach: 27 28 If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument... or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, ORDER - 1 Dockets.Justia.com 1 2 3 4 5 6 7 8 9 10 11 including protecting and/or assessing the value of the Property, and securing and/or protecting the Property... Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or other code violations or dangerous conditions, and have utilities turned on or off. In 2011 Elmore defaulted on his loan payments. On December 7, 2011, instead of foreclosing on the property, BANA approved a deed in lieu of foreclosure from Elmore which mandated that Elmore vacate the property by December 27, 2011. Along with the deed in lieu of foreclosure Elmore signed two additional agreements. The first was the "Personal Property Release" in which he relinquished all interest in personal belongings left at the property after the vacancy date. The second was the "Surrender of Possessions Agreement" which included a "hold harmless" clause: 13 Borrower shall hold Bank of America, N.A., its representatives, servicers, agents, successors and assigns harmless from any and all liability, loss, cost, or expense, including reasonable attorney’s fees, arising out of and/or in connection with the Property. 14 Despite the December 27, 2011 vacancy date, Elmore did not sign these documents 12 15 until January 8, 2012. 16 Elmore contends that at an unknown date, but before December 27, 2011, while he 17 was in the process of moving out, BANA agents entered the property, removed at least 18 $30,000 worth of personal belongings, changed the locks, and installed a lock box over 19 the door knob. Upon discovering this, Elmore allegedly contacted BANA and demanded 20 an explanation, but never heard back. BANA charged Elmore fees related to claimed 21 property preservation measures. 22 Elmore claims he was denied rightful use and enjoyment of his property and that 23 his credit score was negatively affected. Elmore does not explain why, if the alleged 24 actions taken by BANA occurred prior to December 27, 2011, he still signed the deed in 25 lieu of foreclosure and the accompanying documents on January 8, 2012. II. Legal Analysis 26 27 Elmore's First Amended Complaint raises six claims: (1) trespass; (2) intentional 28 trespass; (3) violation of Washington's Deed of Trust Act, RCW 61.24; (4) violation of ORDER - 2 1 Washington's Consumer Protection Act, RCW 19.86; (5) breach of contract, and (6) 2 unjust enrichment. 3 a) Standard of Review 4 A plaintiff’s complaint requires only “a short and plain statement of the claim 5 showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “Specific facts are not 6 necessary; the statement need only ‘give the defendant fair notice of what the ... claim is 7 and the grounds upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007) 8 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 55 (2007)). Discovery is the 9 appropriate phase for more specific facts to develop. See Skaff v. Meridien North America 10 Beverly Hills, LLC, 506 F.3d 832, 842 (9th Cir. 2007) (“concerns about specificity in a 11 complaint are properly addressed through discovery devices...”). 12 Despite this low threshold, in answering the complaint a defendant may move for 13 dismissal by asserting that the plaintiff has “fail[ed] to state a claim upon which relief can 14 be granted.” Fed.R.Civ.P. 12(b)(6). The U.S. Supreme Court has outlined what a plaintiff 15 must show to survive a motion to dismiss: 20 To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.’” 21 Ashcroft v. Iqbal, 556 U.S. 662, 678 (quoting Twombly, 550 U.S., at 556-57, 570 16 17 18 19 22 (2007)); see also Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). 23 Plausibility rests between mere possibility and outright probability of success. 24 Plaintiffs are not required to win their case at the pleading stage, but are not allowed to 25 simply recite the elements of a chosen cause of action. This is a fine line because “a well26 pleaded complaint may proceed even if it appears ‘that recovery is very remote and 27 unlikely.’” Twombly, 550 U.S., at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 28 (1974)). Accepting Elmore’s factual allegations as true, his First Amended Complaint ORDER - 3 1 will survive the Motion to Dismiss only if he has pled facts, not legal conclusions, which 2 give rise to facially plausible claims. 3 b) Whether the "hold harmless" clause releases BANA from all legal liability 4 BANA argues that the Surrender of Possessions Agreement insulates it from any 5 legal responsibility in connection with its taking possession of the property. Elmore 6 responds that the specific words "hold harmless" rendered the clause an indemnity 7 agreement. Whether language used in a contract is sufficiently clear to release a party of 8 liability is a question of law, not fact. See Scott v. Pac. West Mountain Resort, 834 P.2d 9 6, 9 (Wash. 1992)(“The sufficiency of the language to effect a release is generally a 10 question of law.”). 11 "Exculpatory clauses are strictly construed and must be clear if the exemption from 12 liability is to be enforced." Id. When assessing whether a contract releases one party of 13 legal liability, "courts must look for clear, unambiguous and explicit language not to hold 14 the released party liability." Queen Villas Homeowners Assoc. v. TCB Prop. Mgmnt., 149 15 Cal.App.4th 1, 5 (2007). In so doing, "[c]ourts should use common sense in interpreting 16 purported releases," and the mere fact the parties use "the words 'hold harmless' rather 17 than the word 'release' does not significantly impact the issue of whether the effect" of an 18 agreement is to relieve one party from liability. Scott, 834 P.2d, at 10. Therefore, whether 19 the "hold harmless" clause released BANA from liability depends on whether a common 20 sense reading of the Surrender of Possessions Agreement clearly shows that exculpation 21 was parties' intent. 22 The court finds that BANA has not made a sufficient showing that the "hold 23 harmless" clause released it from all legal liability. The operative language uses financial 24 terms, such as "loss, cost, expense," and "reasonable attorneys fees" but not words 25 indicating clear legal contemplation, such as "claim" or "negligence." The contracting 26 language is too ambiguous for the court is to discern the parties clear intent. 27 c) Whether Elmore has stated a claim under the Deed of Trust Act, RCW 61.24 28 The Deed of Trust Act ("DTA") permits "a trustee to sell a property without a ORDER - 4 1 judicial process" but regulates the non-judicial foreclosure process to protect 2 homeowners against potential abuse. Amresco Independence Funding, Inc. v. SPS 3 Properties, LLC, 119 P.3d 884, 888 (Wash. App. 2005). The DTA furthers three basic 4 objectives: “First, the nonjudicial foreclosure process should remain efficient and 5 inexpensive. Second, the process should provide an adequate opportunity for interested 6 parties to prevent wrongful foreclosure. Third, the process should promote the stability of 7 land titles.” Bain v. Metropolitan Mortg. Group, Inc., 285 P.3d 34, 39 (Wash. 2012). The 8 DTA explicitly authorizes “an independent cause of action for damages premised on a 9 trustee’s material DTA violations.” Frias v. Asset Foreclosure Services, Inc., 334 P.3d 10 529, 534 (Wash. 2014). 11 Here, there was no non-judicial foreclosure sale because title to the property was 12 transferred from Elmore to BANA by deed in lieu of foreclosure. The general rule is that 13 "there is no actionable, independent cause of action for monetary damages under the 14 DTA based on DTA violations absent a complete foreclosure sale." Id. at 537. Permitting 15 a claim prior to the foreclosure sale "would be inconsistent with the DTA's purpose of 16 efficient and inexpensive foreclosures." Id. However, lenders may not "obtain through 17 self-help that which [they] could not accomplish pursuant to RCW 61.24." Thompson v. 18 Smith, 793 P.2d 449, 450-51 (Wash. App. 1990). In other words, a lender may not use a 19 deed in lieu of foreclosure to engage in conduct which would violate the DTA had title 20 transferred pursuant to a non-judicial foreclosure. 21 Elmore has not alleged a plausible DTA claim. He does not cite any specific 22 statutory violation or case law to support this cause of action, but rather asserts only that 23 BANA engaged in "self help" prohibited by the DTA. This bare allegation does not meet 24 the Rule 8(a) pleading requirement and therefore cannot survive BANA's Motion. 25 d) Whether Elmore has stated trespass, intentional trespass, or breach of contract 26 claims 27 BANA argues that the deed of trust language explicitly authorized it to engage in 28 property preservation measures upon breach, necessarily defeating each of Elmore's ORDER - 5 1 common law claims. In pleadings, BANA relied on the fact that the deed of trust 2 authorized it to secure and winterize the property after Elmore's default. During oral 3 arguments, BANA focused on the language authorizing this action if Elmore abandoned 4 the property, which it argued substantively for the first time. 5 The general rule is that once a borrower breaches the deed of trust, the lender is 6 authorized to secure and winterize the property. See Paatalo v. Morgan Chase Bank, 7 N.A., 2012 WL 2505742 at *10-11 (D. Mont. June 28, 2012); Bennett v. Bank of 8 America, N.A., 2012 WL 1354546, at *10 (E.D. Va. Apr. 18, 2012); McCray v. 9 Specialized Loan Servicing, 2013 WL 1316341, at *4-5 (D. Md. March 28, 2013). 10 However, these cases all involve whether banks acted in conformity with deeds of trust 11 only. While this case also has a deed of trust, BANA and Elmore subsequently entered 12 into the deed in lieu of foreclosure which stated that: “the property is to be vacated on or 13 before December 27, 2011. Bank of America, N.A. must be given at least 24 hours notice 14 of the exact move out date so that we may secure the property.” 15 BANA may have been authorized to take action on the property after breach of the 16 deed of trust, but that authorization did not allow it to violate the express terms of the 17 deed in lieu of foreclosure by entering the property prior to the vacancy date. The deed in 18 lieu language suggests that any action taken by BANA prior to December 27, 2011 19 without Elmore’s consent may give rise to plausible breach of contract, trespass, and 20 intentional trespass claims. See Jackass Mt. Ranch, Inc. v. South Columbia Basin Irr. 21 Dist., 305 P.3d 1108, 1122 (2013) (elements of trespass); Grundy v. Brack Family Trust, 22 213 P.3d 619, 624 (2009) (elements of intentional trespass); Nw. Indep. Forest Mfrs. v. 23 Dep’t of Labor & Indus., 899 P.2d 6, 9 (1995) (elements of breach of contract). 24 e) Whether Elmore has stated a claim under the Consumer Protection Act, RCW 25 19.86 26 The Consumer Protection Act ("CPA") prohibits “[u]nfair methods of competition 27 and unfair or deceptive acts or practices in the conduct of any trade or commerce.” RCW 28 19.86.020. The statute authorizes a private cause of action, stating: “‘[a]ny person who is ORDER - 6 1 injured in his or her business or property’ by a violation of the act may bring a civil suit 2 for injunctive relief, damages, attorneys fees and costs, and treble damages.” Panag v. 3 Farmers Ins. Co. of Washington, 204 P.3d 885, 889 (Wash. 2009) (quoting RCW 4 19.86.090). “To prevail in a private CPA claim, the plaintiff must prove (1) an unfair or 5 deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the public 6 interest, (4) injury to a person’s business or property, and (5) causation. Id. (citing 7 Hangman Ridge Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531 (Wash. 1986)). 8 BANA challenges Elmore's claim as to the first and fifth elements. Regarding the 9 first, BANA argues that Elmore has not sufficiently pled that it engaged in an unfair or 10 deceptive act or practice. This element “may be predicated upon (1) a per se violation of 11 statute, (2) an act or practice that has the capacity to deceive substantial portions of the 12 public, (3) or an unfair or deceptive act or practice not regulated by statute but in 13 violation of public interest.” Klem v. Washington Mut. Bank, 295 P.3d 1179, 1187 (Wash. 14 2013). Notably, “[b]y broadly prohibiting ‘unfair or deceptive acts or practices in the 15 conduct of any trade or commerce,’ the legislature intended to provide sufficient 16 flexibility to reach unfair or deceptive conduct that inventively evades regulation.” 17 Panag, 204 P.3d, at 895 (quoting RCW 19.86.020). Therefore, courts are statutorily 18 encouraged to refine “unfair or deceptive” as lenders and creditors find new ways to take 19 advantage of consumers. 20 BANA asserts it did nothing unfair or deceptive because it was authorized under 21 the deed of trust to engage in all of the actions Elmore claims violated the CPA. 22 However, as with the common law discussion, BANA again relies solely on the deed of 23 trust authorization without addressing the more pressing allegation that it violated the 24 deed in lieu of foreclosure by entering the property prior to the vacancy date. The court 25 finds a plausible argument exists that BANA engaged in an unfair or deceptive practice 26 by allegedly entering Elmore's property prior to the vacancy date. 27 In regards to the fifth element, BANA argues that Elmore has not sufficiently 28 alleged that it proximately caused him harm, instead claiming any injury was the result of ORDER - 7 1 his own breach of the deed of trust. Again, the alleged proximate cause is the premature 2 entering of the property under the deed in lieu of foreclosure, not the deed of trust. 3 The court finds that Elmore has pled a viable claim under the CPA by alleging that 4 BANA violated the deed in lieu of foreclosure prior to the vacancy date. Such allegations 5 give rise to a plausible argument that BANA engaged in unfair or deceptive acts or 6 practices that proximately caused Elmore harm. 7 f) Whether Elmore has stated an unjust enrichment claim 8 In the First Amended Complaint, Elmore alleges that BANA was unjustly enriched 9 and became a tenant by sufferance by taking possession of his property prior to the 10 vacancy date. BANA claims, as before, that the deed of trust authorized its action. 11 “Three elements must be established in order to sustain a claim based on unjust 12 enrichment: a benefit conferred upon the defendant by the plaintiff; an appreciation or 13 knowledge by the defendant of the benefit; and the acceptance or retention by the 14 defendant of the benefit under such circumstances as to make it inequitable for the 15 defendant to retain the benefit without the payment of its value.” Young v. Young, 191 16 P.3d 1258, 1262 (Wash. 2008) (quoting Bailie Communications, Ltd. v. Trend Business 17 Systems, Inc., 810 P.2d 12, 18 (Wash. App. 1991)). Elmore claims the unjust enrichment 18 derives from BANA's being a tenant by sufferance. RCW 59.04.050 defines this tenancy: 19 20 21 22 23 24 25 26 27 28 Whenever any person obtains possession of premises without the consent of the owner or other person having the right to give said possession, he or she shall be deemed a tenant by sufferance merely, and shall be liable to pay reasonable rent for the actual time he or she occupied the premises, and shall forthwith on demand surrender his or her said possession to the owner or person who had the right of possession before said entry, and all his or her right to possession of said premises shall terminate immediately upon said demand. BANA contends that the “without the consent of the owner” language renders Elmore’s claim meritless because the deed of trust authorized its entry into the property after default. As stated, supra, BANA’s argument is premised on the deed of trust authorizing its action. However, BANA again fails to address Elmore’s main argument that it was the deed in lieu of foreclosure that BANA violated by taking possession of his property prior to the vacancy date. Elmore authorized BANA to take possession of his ORDER - 8 1 property after default in the deed of trust, but that consent ultimately identified December 2 27, 2011 as the date of transition in the deed in lieu of foreclosure. Therefore, Elmore has 3 stated a plausible unjust enrichment claim. 4 III. Conclusion 5 Elmore has sufficiently stated a claim for all causes of action in the First Amended 6 Complaint except for the DTA claim. Elmore has not specified to the requisite degree 7 what conduct BANA engaged in that violated the DTA. Furthermore, Elmore has not 8 identified what provision of the DTA he alleges BANA violated, advancing only a 9 general statement that it engaged in "self help" prohibited by the statute. 10 The "hold harmless" clause does not relieve BANA of all legal liability. To release 11 a contracting party from liability, the contract must include unambiguous language 12 reflecting the parties' clear intent to exculpate. A common sense reading of the Surrender 13 of Possessions Agreement does not provide such clear language. 14 Elmore has sufficiently stated a claim under the CPA, alleging that the premature 15 entry onto his property amounted to an unfair or deceptive act or practice that 16 proximately caused him harm. BANA's argument that the deed of trust authorized its 17 actions does not excuse an alleged breach of the deed in lieu of foreclosure by acting 18 prior to the agreed upon vacancy date. Similarly, Elmore's common law claims: breach of 19 contract, trespass, intentional trespass, survive based on the alleged violation of the deed 20 in lieu of foreclosure. Lastly, Elmore has sufficiently stated an unjust enrichment claim 21 by pleading that BANA became a tenant by sufferance by entering the property prior to 22 the vacancy date. 23 IT IS HEREBY ORDERED: Defendant BANA's Motion to Dismiss (ECF No. 24 20) is GRANTED in part and DENIED in part. The Motion is Granted as to Plaintiff 25 Elmore's Deed of Trust Act claim, which is hereby dismissed. The Motion is Denied as to 26 the release of liability, Consumer Protection Act, trespass, intentional trespass, breach of 27 contract, and unjust enrichment claims. 28 ORDER - 9 1 IT IS SO ORDERED. The Clerk is hereby directed to enter this Order and furnish 2 copies to counsel. 3 DATED this 30th day of December, 2014. s/ Justin L. Quackenbush JUSTIN L. QUACKENBUSH SENIOR UNITED STATES DISTRICT JUDGE 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER - 10
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