U.s. Bank National Assoc. v. Henry Miller ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
HENRY MILLER, )
) No. 78044-1-I
Respondent, )
) DIVISION ONE
v.
)
U.S. BANK, N.A.; ASSET )
FORECLOSURE SERVICES, INC.; )
PEAK FORECLOSURE SERVICES OF)
WASHINGTON, INC., )
Appellants, ) UNPUBLISHED OPINION
)
and ) FILED: October 28, 2019
DOE DEFENDANTS 1-20, )
Defendants.
SMITH, J. — U.S. Bank N.A., Asset Foreclosure Services Inc., and Peak
Foreclosure Services of Washington Inc. (collectively the Bank Parties) appeal
from the trial court’s denial of their motion to dismiss Henry Miller’s claim for
equitable relief to set aside a foreclosure sale. Because Miller failed to raise a
genuine issue of material fact as to whether he waived that claim,1 we reverse
and remand to the trial court with instructions to enter summary judgment in favor
of the Bank Parties on Miller’s claim for equitable relief.
The trial court converted the Bank Parties’ motion to dismiss to a motion
1
for summary judgment.
No. 78044-1-1/2
FACTS
In June 2008, Miller obtained a $393,820 home mortgage loan from U.S.
Bank. In connection with the loan, Miller signed a promissory note and a deed of
trust encumbering his home in Seattle. Shortly after obtaining the loan, Miller’s
business began to struggle, and Miller fell behind on his loan payments. In
August 2009, Chicago Title Company of Washington, LSI Division, as successor
trustee, recorded a notice of trustee’s sale for Miller’s home. That sale never
occurred and in September 2009, U.S. Bank offered Miller a forbearance. In
October 2010, the parties entered into a loan modification agreement.
Miller’s business continued to struggle, and Miller again fell behind on his
loan payments. In May 2012, Asset, as “Agent for the Trustee and/or Agent for
the Beneficiary,” sent Miller a notice of default. Miller responded to the notice by
trying to get another loan modification. His efforts ultimately were unsuccessful.
In August 2012, Miller received a notice of trustee’s sale from Peak, as
successor trustee. That sale also did not occur as scheduled, though the record
is not entirely clear as to why. It appears, however, that the reason may have
been that Miller made a complaint to the Washington State Attorney General’s
Office (AGO), which made an inquiry of U.S. Bank on Miller’s behalf. Although
the inquiry itself is not in the record, U.S. Bank’s response indicates that Miller
raised a concern that U.S. Bank’s foreclosing trustee was not a domestic
corporation with at least one Washington officer, as required under Washington’s
deeds of trust act (DTA), chapter 61.24 RCW. Specifically, U.S. Bank clarified in
its letter that although its legal counsel, Asset, did reside in California, the
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No. 78044-1-1/3
trustee, Peak, resides in the State of Washington.
In May 2013, Miller received another notice of trustee’s sale from Peak.
After receiving this notice, Miller contacted a housing counselor, who requested a
foreclosure mediation. In September 2013, while the mediation process was
pending, Miller also filed suit against U.S. Bank and Mortgage Electronic
Registration Systems Inc. (MERS) to enjoin the foreclosure sale. Ultimately, that
sale also did not occur, and Miller dismissed his lawsuit against U.S. Bank and
MERS under a confidential settlement agreement.
In February 2014, Peak again issued a notice of trustee’s sale, setting a
sale date of June 27, 2014. The notice refers to a notice of default transmitted to
Miller on January 10, 2014. Miller asserts that he is “not sure” if he received the
January 2014 notice of default, and his declaration is silent as to whether he
received the notice of trustee’s sale. But he states that he was “unaware that the
foreclosure was going to actually happen because [he] had been in regular
communication with U.S. Bank about foreclosure avoidance options.” The
foreclosure nevertheless did occur on October 10, 2014. U.S. Bank was the
successful bidder, and a trustee’s deed was recorded on October 24, 2014. After
he was notified that the sale had occurred, Miller contacted attorney David Leen.
Leen sent a letter to U.S. Bank in November 2014, stating that he believed the
sale was void for a number of reasons and demanding “that the Trustee’s deed
be recalled and that no efforts be taken to evict [Miller].”
In August 2015, U.S. Bank sent Miller a notice to vacate. Leen responded
on Miller’s behalf, again asserting that the foreclosure sale was defective.
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No. 78044-1-114
According to Miller, “[w]hat followed was silence by U.S. Bank until late in
December 2016 when [Miller] was served with a Summons and Complaint in an
eviction case.” On March 10, 2017, the court entered a writ of restitution against
Miller and his family, requiring them to be removed from the property.
That same day, Miller filed the present lawsuit against the Bank Parties.
He alleged four causes of action: (1) equitable relief to set aside the sale (void
sale claim), (2) misrepresentation, (3) breach of the duty of good faith and other
DTA requirements, and (4) violation of the Washington Consumer Protection Act,
chapter 19.86 RCW. Miller also moved for a preliminary injunction “to prevent
the transfer of title to his home.” The motion was supported by declarations from
Miller and from his counsel. The record does not reflect the outcome of the
motion.
In December 2017, Peak and Asset moved under CR 12(b)(6) to dismiss
Miller’s claims, arguing that they were time barred under RCW 61.24.127, which
lists certain claims that a borrower does not waive even if he fails to bring an
action to enjoin a nonjudicial foreclosure sale—but that nonetheless must be
brought within the time limits set forth in that statute. U.S. Bank joined the
motion and argued further that Miller’s claims were barred by res judicata and
collateral estoppel as a result of arguments that Miller made during the eviction
proceeding. Miller opposed the Bank Parties’ motion, arguing among other
things that RCW 61.24.127 does not apply because Asset and Peak never had
the authority to foreclose. Specifically, Miller argued that Asset (which is located
in California) was the entity actually acting as the foreclosing trustee, and “was
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No. 78044-1 -115
using the sham identification of. . . Peak as the trustee to try to give the false
impression” that Asset and Peak were in compliance with Washington law.
The trial court treated the Bank Parties’ motion as a summary judgment
motion and granted it, in part. Specifically, except for the void-sale claim, the
court dismissed Miller’s claims as time barred by RCW 61.24.127. The court
concluded that the void-sale claim was not barred by RCW 61.24.127 because
that claim was “not included among the types of claims listed in
RCW 61.24.127(1).” It ruled that “[t]he void-sale claim should be allowed to
proceed to trial to determine whether, after considering all of the facts and
circumstances, [Miller] should be deemed to have waived his right to assert that
claim” and “whether [Miller] ‘promptly’ brought his claim, or ‘slept on his rights.”
We granted the Bank Parties’ motion for discretionary review of the court’s
decision not to dismiss the void-sale claim.
ANALYSIS
Void-Sale Claim
The Bank Parties argue that the trial court erred by not dismissing Miller’s
void-sale claim. We agree.
We review summary judgment orders de novo. Keck v. Collins, 184
Wn.2d 358, 370, 357 P.3d 1080 (2015). “[S]ummary judgment is appropriate
where there is ‘no genuine issue as to any material fact and . . . the moving party
is entitled to a judgment as a matter of law.” Elcon Constr., Inc. v. E. Wash.
Univ., 174 Wn.2d 157, 164, 273 P.3d 965 (2012) (second alteration in original)
(quoting CR 56(c)). “In a summary judgment motion, the moving party bears the
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No. 78044-1-116
initial burden of showing the absence of an issue of material fact.” Young v. Key
Pharm., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989). To that end, in the DTA
context, the recitals in the trustee’s deed stating that the sale was conducted in
compliance with the DTA “shall be prima facie evidence of such compliance.”
FormerRCW6l.24.040(7) (2012);2 RCW61.24.040(11); Plein v. Lackey, 149
Wn.2d 214, 228, 67 P.3d 1061 (2003).
If the moving party satisfies its initial burden, the burden shifts to the
nonmoving party to bring forth specific facts to rebut the moving party’s
contentions. Elcon Constr., 174 Wn.2d at 169. “The nonmoving party may not
rely on speculation, argumentative assertions, ‘or in having its affidavits
considered at face value; for after the moving party submits adequate affidavits,
the nonmoving party must set forth specific facts that sufficiently rebut the
moving party’s contentions and disclose that a genuine issue as to a material fact
exists.” Becker v. Wash. State Univ., 165 Wn. App. 235, 245-46, 266 P.3d 893(2011) (quoting Seven Gables Corp. v. MGM/UA Entm’t Co., 106 Wn.2d 1, 13,
721 P.2d 1 (1986)). Although the evidence is viewed in the light most favorable
to the nonmoving party, if that party is the plaintiff and he fails to make a factual
showing sufficient to establish an element essential to his case, summary
judgment is warranted. Young, 112 Wn.2d at 225.
Here, and as further discussed below, the Bank Parties met their initial
burden to establish the absence of any material fact as to whether Miller waived
his void-sale claim, and Miller failed to set forth specific facts to disclose the
2 This language now appears in RCW 61.24.040(11).
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No. 78044-1-117
existence of a genuine issue of material fact as to waiver. Therefore, the trial
court erred by not dismissing Miller’s void-sale claim.
The DTA “creates a three-party mortgage system allowing lenders, when
payment default occurs, to nonjudicially foreclose by trustee’s sale.” Albice v.
Premier Mortci. Servs. of Wash., Inc., 174 Wn.2d 560, 567, 276 P.3d 1277(2012). The DTA has three goals: an efficient and inexpensive process,
adequate opportunities for parties to prevent wrongful foreclosure, and stability of
land titles. Albice, 174 Wn.2d at 567. In furtherance of these goals, the DTA
specifies a procedure for stopping a trustee’s sale. Plein, 149 Wn.2d at 225.
That procedure is set forth in RCW 61 .24.130, and failure to follow the specified
procedure “may result in a waiver of any proper grounds for invalidating the
Trustee’s sale.” Former RCW61.24.040(1)(f)(lX) (2012) (emphasis added).3
Here, it is undisputed that Miller did not follow the procedure set forth in
RCW 61 .24.130 to stop the trustee’s sale of his home. Therefore, the only
questions before us are (1) whether Miller waived his void-sale claim and (2) if
not, whether that claim is nonetheless time barred.
Courts may apply waiver where it “is equitable under the circumstances
and . . . serves the goals of the [DTAj.” Albice, 174 Wn.2d at 570. To that end,
in Plein, our Supreme Court held that under the DTA, a borrower waives postsale
challenges to a foreclosure sale if he “(1) received notice of the right to enjoin the
sale, (2) had actual or constructive knowledge of a defense to foreclosure prior to
the sale, and (3) failed to bring an action to obtain a court order enjoining the
~ This language now appears in RCW 61 .24.040(2)(d)(lX). See LAWS OF
2018, ch. 306, § 2.
7
No. 78044-1 -1/8
sale.” Plein, 149 Wn.2d at 227, 229. Nevertheless, under RCW 61.24.127(1),
which was enacted post Plein, “[t]he failure of the borrower or grantor to bring a
civil action to enjoin a foreclosure sale . . . may not be deemed a waiver” of
claims asserting: (a) common law fraud or misrepresentation, (b) a violation of
Title 19 RCW, (c) the trustee’s failure to materially comply with the DTA, or (d) a
violation of ROW 61.24.026 (pertaining to short sales). These claims must,
however, still satisfy certain requirements to be nonwaivable under
ROW 61.24.127. As relevant here, they must: (a) be asserted within the earlier
of two years from the date of the foreclosure sale or the expiration of the
applicable statute of limitations, (b) not seek any remedy other than monetary
damages, and (c) not affect the validity or finality of the foreclosure sale.
ROW 61 .24.127(2)(a)-(c).
In short, to determine whether a claim is waived under the DTA, the court
first applies the Plein test and asks whether the borrower received notice of the
right to enjoin the sale, had presale knowledge of a defense, and failed to enjoin
the sale. If so, the claim is waived—unless it qualifies as a nonwaivable claim
under ROW 61.24.127. See Patrick v. Wells Fargo Bank, N.A., 196 Wn. App.
398, 407, 385 P.3d 165 (2016) (“The legislature’s decision to limit [ROW
61.24.1271’s safe harbor to four types of damage claims shows that the
legislature did not intend to protect other claims from waiver if the requirements
of notice, knowledge of a defense, and,failure to enjoin the sale are satisfied.”),
review denied, 187 Wn.2d 1022 (2017).
To this end, we reject the Bank Parties’ argument that if a claim is one of
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No. 78044-1 -119
the types of claims described in RCW61.24.127(l), then it is categorically
waived unless pursued within the time period specified in RCW 61 .24.127(2).
Specifically, the Bank Parties assert that “[all c/aims—including equitable claims
to void a sale—are waived if they are not brought prior to a foreclosure sale,
unless they fall within one of the four articulated exceptions” set forth in
RCW61.24.127(1). (Emphasis added.) In other words, the Bank Parties
contend that if a claim is not protected from waiver by RCW 61.24.127, then it is
waived regardless whether the Pie/n waiver requirements of notice, know/edge of
a defense, and failure to enjoin the sale are satisfied.
But the cases on which the Bank Parties rely do not support their
argument. Specifically, in both Patrick and Manning v. Mortgage Electronic
Registration Systems, Inc. (an unpublished opinion), it was undisputed that the
Plein waiver requirements were satisfied. See Patrick, 196 Wn. App. at 407
(“Here, the Patricks concede that they did not use the DTA’s procedure to
restrain the trustee’s sale. And they do not contest that Wells Fargo established
the three waiver elements, as the Patricks had notice of the sale, knew of the
defenses they now assert, and did not try to enjoin the sale.”); Manning v. Mortg.
Elec. Registration Sys., Inc., No. 73908-5-I, slip op. at 8 (Wash. Ct. App. Oct. 31,
2016) (unpublished), https://www.courts.wa.gov/opjnions/pcjf/739085pdf (“The
Mannings do not contest that they received notice of their right to enjoin the sale,
knew of the defenses to foreclosure they now assert, and did not bring an action
to stop the sale as authorized by the DTA.”). Therefore, the only issue before us
in those cases was whether the borrower’s postsale claims were nonwaivable
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No. 78044-1-1110
under RCW 61.24.127. And in Frizzell v. Murray, the court applied Plein and
concluded that the borrower’s claim was waived—but remanded to the trial court
to determine whether the claim was nonwaivable under RCW 61.24.127. 179
Wn.2d 301, 312-13, 313 P.3d 1171 (2013). These cases do not, as the Bank
Parties contend, support the proposition that Plein no longer applies to claims
that are not protected from waiver by RCW 61.24.127. Furthermore, concluding
that a claim is not necessarily waived—even if it is not protected from waiver by
RCW 61.24.127—would not, as the Bank Parties suggest, “permit borrowers
bringing actions to void completed foreclosure sales in perpetuity.” Rather,
otherwise applicable statutes of limitations would still apply, as would equitable
doctrines such as laches.
In short, RCW 61.24.127 merely sets forth the types of postsale claims
that cannot be waived even if the Plein waiver requirements are satisfied. But
the fact that a claim is not protected from waiver by RCW 61.24.127 does not
necessarily mean that it is waived if not brought prior to the foreclosure sale.
Rather, as discussed, waiver under the DTA involves a two-part analysis: The
court first applies Plein to determine whether the requirements of waiver have
been satisfied. If so, the court also considers whether the claim is nonetheless
nonwaivable under RCW6I.24.127. See Patrick, 196 Wn. App. at 407 (‘The
legislature’s decision to limit[RCW61.24.127}’s safe harbor to four types of
damage claims shows that the legislature did not intend to protect other claims
from waiver if the requirements of notice, knowledge of a defense, and failure to
enjoin the sale are satisfied.”) (emphasis added). Applying this two-part analysis
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No. 78044-I-I/li
here, we conclude that the trial court erred by not dismissing Miller’s void-sale
claim.
Specifically, turning to the first element of waiver: The recitals in the
trustee’s deed, which are prima facie evidence of compliance with the DTA, state
that a notice of trustee’s sale was executed and recorded on February 14, 2014,
under recording number 20140214000859, and was “transmitted by mail to all
persons entitled thereto.” That notice contained the required statutory notice of
the right to enjoin the sale, stating:
Anyone having any objection to the sale on any grounds
whatsoever will be afforded an opportunity to be heard as to those
objections if they bring a lawsuit to restrain the same pursuant to
RCW61.24.130. Failure to bring such a lawsuit may result in a
waiver of any proper grounds for invalidating the Trustee’s Sale.
Miller does not dispute receiving this notice. At most, he claims that he did not
think the foreclosure sale “would actually happen” because he had been in
communication with U.S. Bank about foreclosure avoidance options. But
believing that an impending foreclosure sale will not “actually happen” is not the
same as not receiving notice of it in the first place. Therefore, Miller has not
raised a genuine issue of material fact as to the first element of waiver, i.e., that
he received notice of his right to enjoin the sale.
Miller disagrees, contending that he “testified that he did not receive the
notices of the sale nor did he receive notices of continuance.” But this is not an
accurate characterization of Miller’s testimony. He testified that he was “not
sure” if he received a notice of default. He also testified that he did not receive a
“Notice of Pre-Foreclosure Options” or any continuance notices. But his
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No. 78044-1-1/12
testimony does not set forth specific facts to rebut that he received notice of his
right to enjoin the sale. Therefore, his argument is unpersuasive.
Turning next to whether Miller had actual or constructive knowledge of a
defense to foreclosure prior to the sale: “[un applying the waiver doctrine, a
person is not required to have knowledge of the legal basis for his claim, but
merely knowledge of the facts sufficient to establish the elements of a claim that
could serve as a defense to foreclosure.” Brown v. Household Realty Corp., 146
Wn. App. 157, 164-65, 189 P.3d 233 (2008). Here, Miller’s void-sale claim is
premised on his assertion that Peak and Asset lacked the authority to act as
trustees because neither is a domestic corporation with at least one Washington
resident officer. But Miller himself testified that when he talked to an AGO
investigator, ‘she also talked to me about Peak Foreclosure and whether it really
had an office in Washington.” ~former ROW 23B.05.010(1)(a) (2002)
(requiring domestic corporations to continuously maintain a registered office in
Washington). And Miller knew, as early as May 2013, that Asset resided in
California, as confirmed by U.S. Bank in its response to the inquiry made by the
AGO on Miller’s behalf. In other words, Miller had, no later than May 2013,
knowledge of facts sufficient to pursue his void-sale claim. Therefore, Miller has
not raised a genuine issue of material fact as to the second element of waiver,
i.e., that he had presale knowledge of a defense to foreclosure.
Miller again disagrees, asserting that he “had no way to know that
Defendants Peak and Asset were not compliant with the requirements of the DTA
until after he consulted with Mr. Leen after the foreclosure sale had occurred.”
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No. 78044-1-1/13
But Miller’s assertion amounts to an argument that, notwithstanding any presale
knowledge of the factual basis for his void-sale claim, he did not know he had a
legal claim until he saw an attorney. Washington courts have roundly rejected
that argument in the discovery rule context, and we do so here as well. See
Reicheltv. Johns-Manville Corp., 107 Wn.2d 761, 772, 733 P.2d 530 (1987) (The
plaintiff “would have us adopt a rule that would in effect toll the statute of
limitations until a party walks into a lawyer’s office and is specifically advised that
he or she has a legal cause of action; that is not the law.”); see ?J~Q Adcox V.
Children’s Orthopedic Hosp. & Med. Ctr., 123 Wn.2d 15, 35, 864 P.2d 921 (1993)
(“The key consideration under the discovery rule is the factual, as opposed to the
legal, basis of the cause of action.”).
Finally, with regard to the third element of waiver, it is undisputed that
Miller “failed to bring an action to obtain a court order enjoining the sale.”
Patrick, 196 Wn. App. at 406 (quoting Plein, 149 Wn.2d at 227).
In sum, because Miller failed to raise a genuine issue of material fact as to
any of the three elements of waiver, Miller’s void-sale claim is waived unless it
qualifies as nonwaivable under RCW 61.24.127. But because Miller asserted his
void-sale claim more than two years after the date of the foreclosure sale and
seeks not money damages—but rather to void the sale—it does not.
RCW 61.24.127(2). Miller waived his void-sale claim, and the trial court erred by
not dismissing it.
Miller relies on Albice to defend the trial court’s decision not to dismiss his
void-sale claim. In Albice, the borrowers entered into a forbearance agreement
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No. 78044-1-1/14
with the bank after they received a notice of trustee’s sale. 174 Wn.2d at 564.
The borrowers tendered all of the payments due under the forbearance
agreement but were late making each payment. Albice, 174 Wn.2d at 564. The
bank accepted each of the late payments except for the very last one, and it
continued the trustee’s sale with receipt of each late payment—except for the
very last one. Albice, 174 Wn.2d at 564. Additionally, although the forbearance
agreement provided that a 10-day written notice would be sent upon a breach,
the borrowers never received that notice. Albice, 174 Wn.2d at 564. Under
these facts, our Supreme Court concluded that the borrowers did not waive their
postsale challenges to the trustee’s sale. Albice, 174 Wn.2d at 571. In doing so,
it observed that the borrowers “had no knowledge of their alleged breach in time
to restrain the sale” and that they never received the 10-day breach notice
promised under the forbearance agreement. Albice, 174 Wn.2d at 57 1-72. Put
another way, Albice is consistent with Plein: The Albice court declined to apply
waiver because the borrowers did not have presale knowledge of a defense to
foreclosure. The court did suggest that courts may also decline to apply waiver
where doing so would not serve the goals of the DTA—for example, when a
borrower does not have an adequate opportunity to prevent wrongful foreclosure.
Albice, 174 Wn.2d at 570. But those are not the circumstances of this case,
where Miller knew he was in default on his loan as early as May 2012, had
presale knowledge of his defenses to foreclosure and even raised them to U.S.
Bank twice after the foreclosure sale was complete—yet did not seek equitable
relief until August 2017, more than two years after the foreclosure sale and only
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No. 78044-1-1/15
after a writ of restitution had been entered. Miller’s reliance on AIb ice is
misplaced.
Miller’s reliance on Schroeder v. Excelsior Management Group, LLC, 177
Wn.2d 94, 297 P.3d 677 (2013), is similarly misplaced. In Schroeder, the
question was whether a borrower could contractually waive a statutory
requirement of the DTA. 177 Wn.2d at 106. Our Supreme Court held that
borrowers cannot waive the DTA’s procedures by contract. Schroeder, 177
Wn.2d at 107. But the fact that a borrower cannot contractually waive the DTA’s
procedures does not mean that he cannot, by failing to try to enjoin the sale,
waive the right to challenge a completed sale based on an alleged violation of
those procedures. Indeed, unlike Miller, the borrower in Schroeder did try to stop
the sale before it occurred. 177 Wn.2d at 101. Schroeder does not control.
Miller next argues that because the trial court did not conduct a full waiver
analysis, deciding only that RCW 61.24.127 does not require his void-sale claim
to be asserted within two years, a remand for further proceedings is appropriate
given Miller’s factual assertions related to the reasons that he did not enjoin the
sale. But because, as discussed, Miller’s factual assertions do not raise any
genuine issue of material fact regarding waiver, further proceedings are not
necessary.
As a final matter, the Bank Parties argue that the trial court erred by
treating their motion to dismiss as a motion for summary judgment. But because
dismissal of Miller’s void-sale claim was warranted even under a summary
judgment standard, we do not decide whether the trial court erred by converting
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No. 78044-1 -1116
the Bank Parties’ motion to dismiss to a motion for summary judgment.
Attorney Fees
U.S. Bank argues that it is entitled to an award of attorney fees under
RAP 18.1. Weagree.
Attorney fees may be awarded on appeal only when authorized by a
contract, a statute, or a recognized ground of equity. Labriola v. Pollard Grp.,
lnc~ 152 Wn.2d 828, 839, 100 P.3d 791 (2004). Here, the deed of trust provides:
“Lender shall be entitled to recover its reasonable attorneys’ fees and costs in
any action or proceeding to construe or enforce any term of this Security
Instrument.” It provides further that “[t]he term ‘attorneys’ fees,’ whenever used
in this Security Instrument, shall include without limitation attorneys’ fees incurred
by Lender. . . on appeal.” Under the deed of trust, the term “Lender” means U.S.
Bank, and “Security Instrument” refers to the deed of trust. Thus, U.S. Bank is
entitled to a fee award because this appeal arises out of Miller’s attempts to
challenge U.S. Bank’s enforcement of the deed of trust, Indeed, Miller does not
argue otherwise. Therefore, we award U.S. Bank its reasonable attorney fees
subject to its compliance with RAP 18.1.
We reverse and remand to the trial court with instructions to enter
summary judgment in favor of the Bank Parties on Miller’s void-sale claim.
~Au~1Lt~94
WE CONCUR:
16 1