Jordan v. Nationstar Mortg., LLC ( 2016 )

IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM THE UNITED )
STATES DISTRICT COURT FOR THE )
EASTERN DISTRICT OF WASHINGTON ) No. 92081-8
IN )
)
LAURA ZAMORA JORDAN, as her ) EnBanc
separate estate, and on behalf of others )
similarly situated, )
) Filed _JUL
__ 7 2®~®
0_ _ __
Plaintiff, )
)
v. )
)
NATIONSTAR MORTGAGE, LLC, )
a Delaware limited liability company, )
)
Defendant. )
________________________)
OWENS, J. - After defaulting on her home mortgage payment, plaintiff
Laura Jordan returned home from work one evening to discover she could not enter
her own house: the locks had been changed without warning. A notice informed her
that in order to gain access to her home, she must call defendant Nationstar Mortgage
LLC to obtain the lockbox code and retrieve the new key inside. Although she
Jordan v. Nationstar Mortgage, LLC
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eventually reentered her home, she removed her belongings the next day and has not
returned since. Jordan's home loan was secured by a deed of trust, a commonly used
security instrument that was created as an alternative to traditional mortgages to
provide for a simpler method of foreclosure. The deed of trust contained provisions
that allowed Nationstar to enter her home upon default without providing any notice
to the homeowner. Today, we are asked to decide whether those provisions conflict
with Washington law.
Jordan represents a class action proceeding in federal court, which has certified
two questions to us. The first question asks whether the deed of trust provisions
conflict with a Washington law that prohibits a lender from taking possession of
property prior to foreclosure. We hold that it does because the provisions allow
Nationstar to take possession of the property after default, which conflicts with the
statute. The second question asks whether Washington's statutory receivership
scheme--providing for a third party to possess and manage property in lieu of either
the lender or homeowner-is the exclusive remedy by which a lender may gain access
to the property. As explained below, we hold nothing in our law establishes the
receivership statutes as an exclusive remedy.
FACTS
In 2007, Jordan bought a home in Wenatchee, Washington, with a home loan of
$172,000 from Homecomings Financial. She secured the loan by signing a deed of
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trust. The original lender assigned the loan to the Federal National Mortgage
Association (Fannie Mae), one of the nation's largest mortgagees that primarily
participates in the secondary mortgage market, which hired Nationstar to service the
loan.
Jordan went into default on her mortgage payments in January 20 11. In March
2011, one ofNationstar's vendors came to Jordan's home and changed the locks on
her front door. Jordan returned home to find a notice on the front door informing her
that the property was found to be "unsecure or vacant" and that to protect her and the
mortgagee's interest in the property, it was "secured against entry by unauthorized
persons to prevent possible damage." Order Certifying Questions to Wash. Supreme
Ct., Jordan v. Nationstar Mortg., LLC, No. 2:14-CV-0175-TOR at 6 (E.D. Wash.
Aug. 10, 20 15). While the above-noted facts are undisputed, the parties dispute
whether the home was vacant. Jordan contends she was living there, left for work that
morning as usual, and returned to find the lockbox and notice. On the other hand,
Nationstar contends that its vendor performed an inspection of the property and
determined it was vacant.
Upon finding the notice when she returned home, Jordan called the phone
number provided and got the key from the lockbox to reenter her home. She took all
of her belongings and vacated the house the next day. Since then, Nationstar's vendor
has maintained the property's exterior and winterized the interior. Nationstar does not
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claim to have attempted to provide Jordan any notice of its intention to inspect the
property and rekey it. Nationstar contends that its usual practice is to change the locks
on only one door, such that it can access the home in the future, but also so that the
owner can still enter the home through another door. Here, Jordan's home had only a
front door and a sliding glass door in the rear of the home. Therefore, when
Nationstar's vendor rekeyed the front door, she had no means of entry.
Jordan represents a certified class of3,600 Washington homeowners who were
locked out of their homes pursuant to similar provisions in their deeds of trust with
Nationstar. This case presents an important issue for these homeowners and the
thousands of others subject to similar provisions, as well as the many mortgage
companies that have a concern with preserving and protecting the properties in which
they have an interest. Three amicus briefs were filed in this case: Federal Home Loan
Mortgage Corporation (Freddie Mac) and the city of Spokane supporting defendant
Nationstar, and the Northwest Consumer Law Center supporting plaintiff Jordan.
Freddie Mac tells us that the provisions such as the ones at issue here are important to
the foreclosure process because they allow lenders to enter the property to maintain
and secure it. It contends that such provisions help meet Freddie Mac's requirements
it imposes on companies like Nationstar to preserve properties.
In April20 12, Jordan filed a complaint against Nationstar in Chelan County
Superior Court, alleging state law claims that include trespass, breach of contract, and
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violations of the Washington Consumer Protection Act and the Fair Debt Collection
Practices Act. Ch. 19.86 RCW; 15 U.S.C. §§ 1692-1692p. Chelan County Superior
Court certified the class action, with Jordan as the representative for the 3,600
similarly situated homeowners. Nationstar removed the action to the United States
District Court for the Eastern District of Washington (District Court). The parties
each filed motions for partial summary judgment. Nationstar asked the District Court
to find the provisions at issue enforceable under Washington law. Jordan asked the
District Court to find that before the lender can enter a borrower's property, the lender
must obtain either the borrower's postdefault consent or permission from a court.
Furthermore, Jordan contends that receivership is the only remedy by which a lender
may gain access to the borrower's property. Finding that the case raised unresolved
questions of Washington state law, the District Court certified two questions to us.
We accepted the following certified questions.
CERTIFIED QUESTIONS
1. Under Washington's lien theory of mortgages and RCW 7.28.230(1), can
a borrower and lender enter into a contractual agreement prior to default that allows the
lender to enter, maintain, and secure the encumbered property prior to foreclosure?
2. Does chapter 7.60 RCW, Washington's statutory receivership scheme,
provide the exclusive remedy, absent postdefault consent by the borrower, for a lender
to gain access to an encumbered property prior to foreclosure?
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ANALYSIS
Certified questions present questions of law and we review them de novo. See,
e.g., Parents Involved in Cmty. Sch. v. Seattle Sch. Dist., No. 1, 149 Wash. 2d 660, 670,
72P.3d 151 (2003).
1. Washington's Lien Theory and RCW 7.28.230(1) Prevent a Borrower and a
Lender from Contracting To Allow the Lender To Take Possession Based on
Borrower Default
The District Court asks us to determine whether a predefault clause in a deed of
trust that allows a lender to enter, maintain, and secure the property before foreclosure
is enforceable. We must determine whether these provisions contravene Washington
law. As described below, the deed of trust provisions authorize a lender to enter the
borrower's property after default. The parties agree that a Washington statute
prohibits a lender from taking possession of a borrower's property prior to
foreclosure. The controversial issue here is whether the deed of trust provisions
allowing the lender to enter constitute taking possession prior to foreclosure, such that
they conflict with state law. Based on Nationstar's practices, we find that the
provisions do allow the lender to take possession and thus they are in conflict with
state law. As such, we answer the first certified question in the negative.
a. The Deed of Trust Provisions Allow a Lender To Enter the Borrower's
Property upon Default or Abandonment
"[I]t is the general rule that a contract which is contrary to the terms and policy
of an express legislative enactment is illegal and unenforcible [sic]." State v. Nw.
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Magnesite Co., 28 Wash. 2d 1, 26, 182 P.2d 643 (1947). While we recognize an
overarching freedom to contract, provisions are unenforceable where they are
prohibited by statute. State Farm Gen. Ins. Co. v. Emerson, 102 Wash. 2d 477,481, 687
P.2d 1139 (1984).
The provisions at issue are made up of two sections in the deed of trust. The
first provision, in pertinent part, is as follows:
9. Protection of Lender's Interest in the Property and Rights
Under this Security Instrument. 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, including
protecting and/or assessing the value of the Property, and securing
and/or repairing 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. Although Lender may take action under
this Section 9, Lender does not have to do so and is not under any duty
or obligation to do so.
Ex. 19, at 8. The provisions also allows the lender to "make reasonable entries upon
and inspections of the Property" where the lender has reasonable cause and gives the
borrower notice. !d. at 7. It also requires the borrower to maintain and protect the
property. !d.
Together, these sections are the so-called "entry provisions" that are at issue in
this case, which allow the lender to enter, maintain, and secure the property after the
borrower's default or abandonment. Nationstar hinges its argument on the need to
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secure abandoned property, stating it does not enter occupied property. However, the
provision plainly states that the lender may "secure" the property after the borrower
defaults or abandons the property. The provision specifically lists changing the locks
as a method of securing the property. Thus, the provisions authorize the lender to
enter and rekey the property solely upon default, regardless of whether the borrower
has abandoned the property.
As explained below, it is well settled that Washington law prohibits lenders
from taking possession of borrowers' property before foreclosure. This question turns
on whether the above provisions authorize lenders to "take possession" and if, in fact,
the lender's actions here constituted taking possession.
b. Washington's Lien Theory Does Not Permit a Lender To Take Possession of
Property Prior to Foreclosure
Our case law is clear that Washington law prohibits a lender from taking
possession of property before foreclosure of the borrower's home. Importantly, the
parties agree on this point; under state law, a secured lender cannot gain possession of
the encumbered property before foreclosure.
RCW 7.28.230 provides that
(I ) A mortgage of any interest in real property shall not be deemed a
conveyance so as to enable the owner of the mortgage to recover possession of
the real property, without a foreclosure and sale according to law.Pl
1Before 1969, this section of the statute ended after "without a foreclosure and sale according to
law." CODE OF 1881, § 546. It was amended in 1969 to make clear that the statute should not be
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This statute essentially codified Washington's lien theory of mortgages. The
mortgage lien theory prevails in Washington, meaning that the mortgage is seen as
"nothing more than a lien upon the property to secure payment of the mortgage debt,
and in no sense a conveyance entitling the mortgagee to possession or enjoyment of
the property as owner." W. Loan & Bldg. Co. v. Mifflin, 162 Wash. 33, 39,297 P. 743
(1931). We have interpreted RCW 7.28.230(1) to mean that a mortgagor's default
does not disrupt the mortgagor's right to possession of real property, and that the
mortgagor retains the right to possession until there has been foreclosure and sale of
the property. Howard v. Edgren, 62 Wash. 2d 884, 885, 385 P.2d 41 (1963).
The Restatement (Third) ofProperty takes the approach that mortgagee
possession agreements conflict with lien theory statutes. See RESTATEMENT (THIRD)
OF PROP.: MORTGAGES § 4.1 cmt. b (AM. LAW IN ST. 1997). Several lien theory
jurisdictions hold that provisions that allow the lender to take possession of the
property contravenes public policy that is inherent to the lien theory; indeed, some
states have even codified statutes that specifically invalidate such agreements. See,
e.g., COLO. REV. STAT. ANN.§ 38-35-117; IDAHO CODE ANN.§ 6-104; NEV. REV.
STAT.§ 40.050; OKLA. STAT. ANN. tit. 42, § 10; UTAH CODE ANN.§ 78B-6-1310.
interpreted to prohibit a mortgagee from collecting rents before foreclosure. See LAws OF 1969,
1st Ex. Sess., ch. 122, §I; and see Kezner v. Landover Corp., 87 Wn. App. 458,464,942 P.2d
I 003 (1997). However, the bedrock principle that borrowers have a right to possession prior to
foreclosure was not altered by the amendment.
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Washington's legislature, however, did not specifically invalidate such contrary
agreements in its codification of lien theory prohibiting the lender from taking
possession of property before foreclosure. That the legislature did not specifically
invalidate such contract provisions, as did other states, does not mean the provisions
do not conflict with our laws. Thus, we must determine whether its statute is in
conflict with such an agreement.
Nationstar concedes that the borrower's right to possession cannot be overcome
by a contrary provision in the mortgage or deed of trust because such a provision
would be nnenforceable as it would contravene Washington law. Def.'s Answering
Br. at 11. However, Nationstar argues that the entry provisions do not authorize the
lender to take "possession" and that its specific conduct at Jordan's residence did not
constitute possession. Therefore, the determinative issue in answering this first
certified question is whether the entry provisions cause the lender to gain
"possession." As explained below, the entry provisions do authorize conduct that
constitutes "possession."
c. These Entry Provisions Allow a Lender To Take Possession Prior to
Foreclosure and Therefore Conflict with State Law
We must determine if the entry provisions authorize the lender to take
"possession" of the property. If they do, the provisions are in conflict with
Washington law. Here, we look to the actions that Nationstar took pursuant to the
entry provisions to see if they constituted "possession." Possession has slightly
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different meanings in different areas of the law. The parties supplied defmitions from
real property law, tort law, and landlord-tenant law because it is unclear which
definition is applicable to RCW 7.28.230(1).
Under any definition, the conduct allowed under the entry provisions
constitutes possession because Nationstar's actions satisfY the key element of
possession: control. In property law, "possession" is defined as "a physical relation to
the land of a kind which gives a certain degree of physical control over the land, and
an intent so to exercise such control as to exclude other members of society in general
from any present occupation ofthe land." RESTATEMENT (FIRST) OF PROP.:
DEFINITION OF CERTAIN GENERAL TERMS§ 7(a) (AM. LAW INST. 1936).
The key element to the property defmition of "possession" is the "certain
degree of physical control." Tort law similarly requires control. In tort law, which is
concerned primarily with liability, a "possessor of land" is defined as "a person who
occupies the land and controls it." RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR
PHYSICAL AND EMOTIONAL HARM§ 49 (AM. LAW INST. 2012).
The Court of Appeals applied the tort definition of possession when it
considered the phrase "mortgagees in possession" for purposes of premises liability.
Coleman v. Hoffman, 115 Wash. App. 853, 858-59, 64 P.3d 65 (2003). There, the
lender used RCW 7 .28.230(1) as a defense to its putative possession to avoid liability,
arguing that it could not have been "in possession" because the statute forbids it. !d.
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at 863. The court relied on the above tort definition of "possession" and another
prominent source that stated for a lender to be liable, it must '"exercise dominion and
control over the property."' !d. at 859 (quoting 62 AM. JUR. 2D Premises Liability
§ 8, at 356 (1990)). In finding that the plaintiff showed enough facts of lender's
possession, the court pointed to the lender's repairs and payments of utility bills. !d.
at 862-63.
We also find that landlord-tenant law's treatment of"possession" helpful-
particularly its analysis of the impact of changing locks. In Aldrich v. Olson, the
Court of Appeals found that when the landlord changed the locks of her tenant's
home, it was an unlawful eviction. 12 Wash. App. 665, 672, 531 P .2d 825 (1975). The
court reasoned, "It is difficult to visualize an act of a landlord more specifically
intended as a reassumption of possession by the landlord and a permanent deprivation
of the tenant's possession than a 'lockout' without the tenant's knowledge or
permission." !d. at 667.
From any approach, we find that Nationstar's conduct constituted possession.
The foregoing possession definitions, as well as Coleman and Aldrich, are instructive.
Nationstar's vendor's actions constituted possession because its actions are
representative of control. The vendor drilled out Jordan's existing locks and replaced
the lock with its own. Nationstar stated in its brief that it rekeyed Jordan's property to
allow itself access to return to secure the property by winterizing it and to make
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repmrs. Def.'s Answering Br. at 33-34. Perhaps that is true; however, rekeying the
property also had the effect of communicating to Jordan that Nationstar now
controlled the property. The action left Jordan with no method of entering her own
property. Nationstar relies on the fact that it did not change the locks to exclude
Jordan (because it provided her a lockbox and phone nmnber to call) to provide proof
that it did not possess the premises. However, although she was able to obtain a key
by calling, the process made Nationstar the "middle man." She could no longer
access her home without going through Nationstar. This action of changing the locks
and allowing her a key only after contacting Nationstar for the lockbox code is a clear
expression of control. Although Nationstar did not exclude Jordan from the premises
(as she was able to gain a key and enter), she left the next day and did not return. In
its amicus brief, the Northwest Consumer Law Center advised us anecdotally that
many similarly situated Washington homeowners felt that when the lender changed
the locks to their homes, they no longer had a right to continue to possess the
property. See Br. of Amicus Curiae Nw. Consumer Law Ctr. at 6.
Nationstar effectively ousted Jordan by changing her locks, exercising its
control over the property. Although the mortgagee-mortgagor context is different
from the landlord-tenant context, Aldrich provides an apt analogy here because the
court there found that changing the tenant's locks was the most striking showing of a
reassmnption of possession. 12 Wash. App. at 667. Changing the locks is akin to
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exercising control, which is the key element of possession. By changing the locks,
Nationstar took possession of the property. Since these actions are authorized by the
entry provisions, the entry provisions allow the lender to take possession of the
property. Because Washington law prohibits lenders from taking possession of the
borrower's property before foreclosure, the provisions are in conflict with state law.
Therefore, we must answer the first certified question in the negative and find that the
entry provisions are unenforceable.
2. Chapter 7. 60 RCW Does Not Provide the Exclusive Remedy for a Lender To
Gain Access to an Encumbered Property Prior to Foreclosure
The second certified question asks whether this state's receivership statutes
separately prohibit the entry provisions. Specifically, this second question asks
whether chapter 7.60 RCW, which provides for the judicial appointment of a third
party receiver to manage the property, is the exclusive method by which lenders can
gain access to encumbered property prior to foreclosure.
This is an issue of first impression in this court, and no Washington appellate
decision is on point. We must answer this question in the negative because nothing
indicates that the statutory receivership scheme provides the exclusive remedy for
lenders to access a property.
a. Background on Receivership and Its Role in Mortgage Foreclosure
Chapter 7.60 RCW governs Washington's receivership scheme. A "receiver"
is a third party appointed by a court to take charge of property and manage it as the
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court directs. 18 WILLIAM B. STOEBUCK & JOHN W. WEAVER, WASHINGTON
PRACTICE: REAL ESTATE: TRANSACTIONS,§ 18.6, at 310 (2d ed. 2004). The statutes
enumerate some 40 circumstances under which a receiver may be appointed. Only a
few concern mortgaged real property. See RCW 7.60.025(1)(b), (g), (cc), (dd).
Although authorized by statute, lenders are not entitled to a receiver, even where a
clause in the mortgage provides for the appointment of a receiver. STOEBUCK &
WEAVER, supra, § 18.6, at 312. While statutory grounds exist for a court-appointed
receiver prior to foreclosure, it is rarely sought. I d. at 314.
In the context of mortgaged real property, a receiver might be appointed as a
"custodial receiver," who would take possession of the property and preserve it.
RCW 7.60.015; 7.60.025(1)(g). Commonly, receivers are appointed to collect rent
from income-producing property. STOEBUCK & WEAVER, supra, § 18.6, at 310-11;
see RCW 7 .28.230(1) (providing grounds for appointing a receiver to collect rent for
application to mortgage). Importantly, nothing in the text ofRCW 7.28.230(1) or
chapter 7.60 RCW requires the appointment of a receiver in this context.
Jordan argues that the entry provisions are Nationstar's attempt to contract
around chapter 7.60 RCW's requirements and that the legislature intended for the
statutes to provide lenders an exclusive remedy. However, as explained below,
Jordan's arguments fail to establish that chapter 7.60 RCW does so.
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b. The Contract Provisions Do Not Conflict with Chapter 7. 60 RCW
We have held that the deed of trust act in chapter 61.24 RCW cannot be
contracted around in two recent cases where parties attempted to modify the deed of
trust act's requirements by private contract. See Bain v. Metro. Mortg. Grp., Inc., 175
Wash. 2d 83, 107,285 P.3d 34 (2012) (holding that parties cannot contract to fit a
statutory definition to fulfill the act's requirements); Schroeder v. Excelsior Mgmt.
Grp., LLC, 177 Wash. 2d 94, 107,297 P.3d 677 (2013) (holding that parties cannot
contractually waive a requirement under the act that agricultural properties may only
be foreclosed judicially).
Jordan argues that like in B ain and Schroeder, the entry provisions attempt to
"bypass" statutes that dictate a lender's only entry method. Pl.'s Opening Br. at 25.
However, Jordan misconstrues the receivership statutes as providing a "list of
requisites to a lender gaining access to a borrower's property." Id. at 28. While the
statutes enumerate receivership requirements, they are not concerned with a lender's
access to borrower's property but rather merely set forth requirements should a
receiver be necessary. Thus, the entry provisions do not attempt to circumvent the
receivership statutes and thus do not conflict with chapter 7.60 RCW. Similarly,
Jordan's other arguments do not support her contention that the receivership statutes
provide lenders an exclusive remedy to access property. In fact, as explained below,
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the text of the statute and policy considerations support a finding that chapter 7.60
RCW does not provide lenders the exclusive remedy.
c. The Statute's Text Supports Finding That It Does Not Provide an
Exclusive Remedy
The text of the statute supports a finding that it does not provide the exclusive
remedy. First, the plain language of the statute must be examined to determine
exclusivity. We have held that when engaging in statutory interpretation, our
"fundamental objective is to ascertain and carry out the Legislature's intent, and if the
statute's meaning is plain on its face, then the court must give effect to that plain
meaning as an expression of legislative intent." Dep 't ofEcology v. Campbell &
Gwinn, LLC, 146 Wash. 2d 1, 9-10,43 P.3d 4 (2002).
Of course, an exclusivity clause would be the clearest indication of the
legislature's intent that the statute be exclusive, but as Jordan concedes, this statute
does not have one. However, Jordan argues that because the statutory scheme is
"comprehensive," the legislature intended for the statute to provide the exclusive
remedy for lenders such that they cannot contract for entry otherwise. See generally
Pl. Opening Br. at 24-37; and see LAWS OF 2004, ch. 165, § 1. It is true that the
receivership statutory scheme is comprehensive, but the plain language of the statute
does not suggest that chapter 7.60 RCW was intended to be an exclusive remedy.
If a court were to appoint a receiver in this context, it would likely be pursuant
to RCW 7.60.025(1). Thus, we analyze the question of whether the receivership
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provides lenders the exclusive remedy under that portion of the provision. The statute
provides, in part:
A receiver may be appointed by the superior court of this state in the following
instances, but except in any case ... in which a receiver's appointment with
respect to real property is sought under (b)(ii) of this subsection, a receiver
shall be appointed only if the court additionally determines that the
appointment of a receiver is reasonably necessary and that other available
remedies either are not available or are inadequate.
RCW 7 .60.025(1) (emphasis added). Subsection (b )(ii) provides that a receiver may
be appointed after the commencement of a foreclosure proceeding on a lien against
real property where the appointment is provided for by agreement or is necessary to
collect rent or profits from the property.
In analyzing this text, we look to its plain language. In general, the court's
discretion is illustrated by the word "may." Under subsection (b )(ii), a receiver shall
be appointed, but only if the court makes additional fmdings. First the court must find
a receiver is "reasonably necessary." RCW 7.60.025(l)(b)(ii). Second, and more
importantly, the court determines that "other available remedies either are not
available or are inadequate." RCW 7.60.025(1) (emphasis added).
Courts consider all of the facts and circumstances to determine whether to
appoint a receiver. Union Boom Co. v. Samish Boom Co., 33 Wash. 144, 152, 74 P.
53 (1903). "It is well established that a receiver should not be appointed if there is
any other adequate remedy." King County Dep 't of Cmty. & Human Servs. v. Nw.
Dejs. Ass 'n, 118 Wash. App. 117, 126, 75 P.3d 583 (2003) (citing Bergman Clay Mfg.
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Co. v. Bergman, 73 Wash. 144, 147, 131 P. 485 (1913)). The Court of Appeals
reasoned that allowing a current board of directors to oversee a corporation "was not
an adequate remedy" and, thus, found that appointment of a receiver was appropriate.
!d. at 126.
Thus, in general, other remedies exist outside of appointing a receiver. It is not
before us to determine what particular remedies are available. To answer this
question, it is sufficient that the plain language of the provision does not indicate that
chapter 7.60 RCW was meant to provide an exclusive remedy to lenders. Finally,
public policy also supports the finding that the statute is not the exclusive remedy,
which we discuss below.
d. Public Policy Supports Finding That Chapter 7.60 RCW Does Not Provide
an Exclusive Remedy
To the extent that chapter 7.60 RCW's language is not explicit, it is worth
noting a relevant policy consideration. One of the advantages of a deed of trust is that
it offers '"efficient and inexpensive"' nonjudicial foreclosure. Schroeder, 177 Wash. 2d
at 104 (quoting Cox v. Helenius, 103 Wn.2d 383,387,693 P.2d 683 (1985)). Thus,
requiring lenders to wade through the judicial receivership process in all cases-
regardless of the facts and circumstances-is illogical. Overall, both policy and the
plain text of the statute support finding that it does not provide an exclusive remedy to
lenders. Thus, we must answer this question in the negative.
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CONCLUSION
We answer the first certified question in the negative. Washington law
prohibits lenders from taking possession of property prior to foreclosure. These entry
provisions enable the lender to take possession after default, and the lender's action
here constitutes taking possession. Therefore, the entry provisions are in direct
conflict with state law and are unenforceable.
As to the second question, we also answer it in the negative. The text of the
receivership statutes, the legislative intent behind them, and public policy
considerations compel us to find that chapter 7.60 RCW is not the exclusive remedy
for lenders to gain access to a borrower's property.
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WE CONCUR:
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STEPHENS, J. (dissenting}-! respectfully dissent because the majority
erroneously equates the entry provisions at issue with actual possession. Months
after Laura Jordan defaulted on her loan, Nationstar Mortgage LLC inspected
Jordan's property and determined that it was vacant. Pursuant to the deed of trust's
entry provisions, Nationstar secured the home by changing the lock to the front door
and posted instructions on how Jordan could enter the home if she returned. This
practice is not inconsistent with Washington's lien theory of mortgages and RCW
7.28.230(1). Accordingly, the first certified question should be answered in the
affirmative.
"Washington courts have hesitated to 'invoke public policy to limit or avoid
express contract terms absent legislative action."' Brown v. Snohomish County
Physicians Corp., 120 Wash. 2d 747, 753, 845 P.2d 334 (1993) (quoting State Farm
Jordan v. Nationstar Mortgage, LLC, 92081-8 (Stephens, J. Dissenting)
Gen. Ins. Co. v. Emerson, 102 Wash. 2d 477, 481, 687 P.2d 1139 (1984)). It is
undisputed that the deed of trust's entry provisions were contractually agreed to and
authorized Nationstar to change the locks on Jordan's home after default. And as
the majority correctly notes, Washington's legislature has not "specifically
invalidate[d] such contrary agreements in its codification of lien theory prohibiting
the lender from taking possession of property before foreclosure." Majority at 10.
The majority nevertheless finds the entry provisions contravene Washington's
rule against lenders taking preforeclosure possession of borrowers' property. The
majority does so by describing the entry provisions as authorizing the lender to take
"possession." Id. at 8, 12. But the certified question asks not whether lenders can
take "possession" of property before foreclosure. Instead, it asks whether the lender
can "enter, maintain, and secure the encumbered property" before foreclosure.
Order Certifying Questions to Wash. Supreme Court, Jordan v. Nationstar Mortg.,
LLC, No. 2:14-CV-0175-TOR at 9 (E. Wash. Aug. 10, 2015). Absent legislation
stating otherwise, the entry provisions at issue are not inconsistent with
Washington's lien theory of mortgages and RCW 7.28.230(1).
The majority cites inapposite authority to equate the entry provisions with
actual possession. At the outset, the majority's reliance on the Restatement is
misplaced. RESTATEMENT (THIRD) OF PROP: MORTGAGES§ 4.1 (AM. LAW. INST.
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Jordan v. Nationstar Mortgage, LLC, 92081-8 (Stephens, J. Dissenting)
1997). The Restatement does not contemplate entry provisions, like those considered
here, but rather a lender taking possession. The Restatement merely reiterates the
general rule against accelerated preforeclosure possession of property. In illustrative
applications of this rule, the Restatement examines instances where the mortgagee
has "file[d] an action to obtain possession of [the property]." REsTATEMENT§ 4.1
cmt. b, illus. 1-3. Here, however, Nationstar has not filed an action to obtain
possession of Jordan's property. Instead, after Jordan defaulted on her loan,
Nationstar took contractually authorized steps to secure the abandoned property-
and it posted instructions on how Jordan could access the property, consistent with
her continued right of possession.
Neither of the two Court of Appeals decisions cited by the majority support
equating the entry provisions to possession. Aldrich v. Olson does not even interpret
"possession" in RCW 7.28.230(1). 12 Wash. App. 665, 531 P.2d 825 (1975). And
Coleman v. Hoffman merely clarifies the difference between the right to possession
(applicable to foreclosure actions) and actual possession (applicable to premises
liability matters): "Although RCW 7.28.230 effectively precludes a mortgagee from
obtaining possession of property to the mortgagor's exclusion, the statute does nof
bear on the question of whether a mortgagee actually possess the property. Actual
possession, not a right to possession, is the critical inquiry in premises liability
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Jordan v. Nationstar Mortgage, LLC, 92081-8 (Stephens, J. Dissenting)
cases." 115 Wash. App. 853, 863-64, 64 P.2d 65 (2003). But unlike the landlords in
Aldrich and Coleman, Nationstar never possessed the property to Jordan's exclusion.
Rather, Nationstar provided Jordan with instructions on how to enter her home if she
returned. At no point did Nationstar ever object to Jordan's continued right to
possession before foreclosure.
Finally, even if we regarded the entry provisions as interfering with Jordan's
right to possession, Nationstar was nevertheless justified in securing Jordan's
abandoned property. The Restatement recognizes three exceptions to the general
rule that mortgagees cannot obtain possession of the mortgagor's property before
foreclosure: (1) mortgagor consent, (2) mortgagee's possession as the result of
peaceful entry in good faith after purchasing the property at a void or voidable
foreclosure sale, and (3) mortgagor abandonment. RESTATEMENT§ 4.1 cmt. c. Here,
the evidence supported Nationstar securing Jordan's home under the mortgagor
abandonment exception. Months after Jordan defaulted on her loan, Nationstar
inspected Jordan's property and determined that it was vacant. Nationstar then
changed the locks, which it was allowed to do under the entry provisions in order to
secure the property. Cf PNC Bank, NA v. Van Hoornaar, 44 F. Supp. 3d 846, 856-
57 (E.D. Wis. 2014) (dismissing trespass claim against lender for changing a
homeowner's locks upon default because the mortgage agreement authorizing the
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Jordan v. Nations tar Mortgage, LLC, 92081-8 (Stephens, J. Dissenting)
lender to secure the premises upon default or abandonment created an implied
consent to entry); see also Tennant v. Chase Home Fin., LLC, 187 So. 3d 1172,
1181-82 (Ala. Civ. App. 2015). Moreover, public policy considerations support
Nationstar securing Jordan's abandoned property: "Not only is it important to protect
the [property] against the elements and vandalism, but society is benefited by [the
property's] productive use." RESTATEMENT§ 4.1 cmt. c.
Pursuant to entry agreements like the one mutually agreed on by Nationstar
and Jordan, a lender may "enter, maintain, and secure" seemingly abandoned
property before foreclosure without taking "possession" of it. Because the first
certified question should be answered in the affirmative, I dissent.
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Jordan v. Nationstar Mortgage, LLC, 92081-8 (Stephens, J. Dissenting)
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