David And Terry Guttormsen, Apps. v. Aurora Bank, Et Ano., Resps. ( 2015 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DAVID GUTTORMSEN and TERRY
GUTTORMSEN, husband and wife, No. 72506-8-I
Appellants, DIVISION ONE
AURORA BANK, FSB, a federally
chartered savings bank; AURORA
LOAN SERVICES, LLC, a limited
liability company; NATIONSTAR
MORTGAGE LLC, a Texas limited UNPUBLISHED OPINION
liability company; FEDERAL
NATIONAL MORTGAGE FILED: August 3, 2015
ASSOCIATION, a United States
government sponsored enterprise;
QUALITY LOAN SERVICE
CORPORATION OF WASHINGTON,
a Washington corporation, MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware
corporation; and DOE DEFENDANTS,
1-10,
Respondents,
and
HSBC MORTGAGE SERVICES, INC.
a Delaware corporation,
Defendant.
No. 72506-8-1/2
Becker, J. — This appeal is from the dismissal of a lawsuit filed by
borrowers to resist a scheduled nonjudicial foreclosure sale. The issues raised
by the borrowers do not reveal any infirmity with the foreclosure proceedings nor
do they provide grounds for a consumer protection action. We affirm.
On February 23, 2006, appellants David and Terry Guttormsen executed a
promissory note in the amount of $200,000 payable to AIG Federal Savings
Bank. The Guttormsens secured the note with a deed of trust against real
property located in Everett, Washington. The deed of trust listed Stewart Title as
the trustee and the Mortgage Electronic Recording System (commonly referred
to as "MERS") as the beneficiary.
A history of transactions involving the note and deed of trust is found in
the declaration of A.J. Loll, a vice-president of Nationstar Mortgage LLC.
Nationstar was servicing the loan at the time this suit was filed. According to Loll,
HSBC Mortgage Services Inc. purchased the note from AIG on April 22, 2006.
HSBC then indorsed the note in blank via an allonge. On August 28, 2007,
Federal National Mortgage Association (hereinafter "Fannie Mae"), purchased
the loan from HSBC. Aurora Loan Services LLC was servicing the loan at the
time of Fannie Mae's purchase and continued in that role until Nationstar
acquired the right to service the loan in July 2012.
The Guttormsens failed to make the May 1, 2011, payment required under
the note. According to Loll, at the time of the motions for summary judgment in
this case, the Guttormsens were in arrears on their loan in the approximate
amount of $76,344.96.
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The record reflects that in November 2011, MERS assigned its rights as
the original beneficiary under the deed of trust to Aurora Bank FSB.
On June 13, 2012, Aurora Bank FSB appointed Quality Loan Service
Corporation of Washington as the successor trustee. On July 13, 2012, Quality
Loan issued to the Guttormsens a notice of default.
On December 17, 2012, Quality Loan recorded a notice of trustee's sale.
The notice set the date of the sale for April 19, 2013.
On April 18, 2013, the Guttormsens filed suit in Snohomish County
Superior Court against Aurora Bank FSB and Aurora Loan Services (collectively
"Aurora"), Nationstar, Fannie Mae, Quality Loan, HSBC, MERS, and 10 unknown
defendants. The complaint asserted claims for violation of the deed of trust act,
chapter 61.24 RCW, and the Criminal Profiteering Act, chapter 9A.82 RCW,
against all the named defendants. The complaint also asserted a consumer
protection claim against Aurora, Quality Loan, Nationstar, and MERS. The
Guttormsens sought and obtained an order restraining the sale.
On July 8, 2013, Quality Loan recorded a notice of discontinuance of
trustee's sale.
On March 28, 2014, the superior court granted the motion for summary
judgment brought by Aurora, Nationstar, Fannie Mae, and MERS.
On September 10, 2014, the superior court granted Quality Loan's motion
for summary judgment.
The Guttormsens appeal.
No. 72506-8-1/4
We review an order granting summary judgment de novo, performing the
same inquiry as the trial court. Owen v. Burlington N. & Santa Fe R.R. Co.. 153
Wash. 2d 780, 787, 108 P.3d 1220 (2005). Amotion for summary judgment will be
granted where there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. CR 56(c). The nonmoving party
may not rely on speculation, argumentative assertions that unresolved factual
issues remain, or on having its affidavits considered at face value. Wash. Fed.
Sav. v. Klein. 177 Wash. App. 22, 311 P.3d 53 (2013), review denied. 179Wn.2d
1019(2014).
Sufficiency of declarations
To establish the admissibility of business records documenting their roles
and authority in the events leading up to the attempted foreclosure, the
respondents rely primarily on facts provided by the declarations of Loll and Sierra
Herbert-West.
Loll, the vice-president of Nationstar whose declaration set forth factual
assertions related to the note and deed of trust, stated that the basis of his
declaration was either his personal knowledge or his review of Nationstar's
business records:
2. I have personal knowledge of the matters set forth herein,
or the facts set forth herein are based upon my review of
Nationstar's business records, which records are made by myself
or from information transmitted by a person with knowledge of the
event described therein, at or near the time of the event described,
and are kept and relied upon in the ordinary course or the regularly
conducted business activity of that person and/or Nationstar, and it
is the regular practice of Nationstar to make and maintain such
business records.
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3. I am familiar with Nationstar's practices and procedures
in making and maintaining its business records, and I have
reviewed and analyzed the relevant business records and other
documents referenced and attached hereto. In particular, I am
familiar with the systems that Nationstar uses to create and record
information related to the residential mortgage loans that Nationstar
services or serviced, including the process by which employees of
Nationstar enter information into those systems. Nationstar's
business records include the servicing records related to the loan
that were generated prior to the assignment of servicing rights to
Nationstar.
Loll attached to his declaration copies of the note, deed of trust, MERS'
assignment of the deed of trust to Aurora, and Aurora's assignment of the deed
of trust to Nationstar.
Herbert-West is a trustee sales officer for Quality Loan. Her declaration
states that Quality Loan had Aurora's beneficiary declaration before it issued the
notice of trustee's sale and that the sale was discontinued. She attached to her
declaration both the beneficiary declaration and the notice of discontinuance of
trustee's sale.
The Guttormsens assert that the trial court erred in admitting these
declarations, particularly Loll's.
Normally, we review a trial court's decision to admit or exclude evidence
for an abuse of discretion. Discover Bank v. Bridges. 154 Wash. App. 722, 726,
226 P.3d 191 (2010). However, the de novo standard of review is used by an
appellate court when reviewing all trial court rulings made in conjunction with a
summary judgment ruling. Folsom v. Burger King. 135 Wash. 2d 658, 663, 958
P.2d301 (1998).
No. 72506-8-1/6
To be considered on summary judgment, a supporting declaration must be
made on personal knowledge, and the facts set forth must be admissible in
evidence.
Supporting and opposing affidavits shall be made on personal
knowledge, shall set forth such facts as would be admissible in
evidence, and shall show affirmatively that the affiant is competent
to testify to the matters stated therein. Sworn or certified copies of
all papers or parts thereof referred to in an affidavit shall be
attached thereto or served therewith.
CR 56(e). Washington courts consider the personal knowledge requirement to
be satisfied if the proponent of the evidence satisfies the business records
statute. See Discover Bank, 154 Wash. App. at 726. A business record is
admissible as competent evidence under certain, enumerated circumstances.
A record of an act, condition or event, shall in so far as relevant, be
competent evidence if the custodian or other qualified witness
testifies to its identity and the mode of its preparation, and if it was
made in the regular course of business, at or near the time of the
act, condition or event, and if, in the opinion of the court, the
sources of information, method and time of preparation were such
as to justify its admission.
RCW 5.45.020.
In Discover Bank, debtors appealed from a judgment requiring them to
pay their credit card debt. They argued that the trial court erred in considering
business records and affidavits from three employees of a debt collection agency
working on behalf of their creditor. This court rejected the debtors' argument that
the witnesses were not competent. The court properly considered the business
records based on the declarants' statements that they worked for the collections
agency, they had access to the debtors' account records in the course of their
employment, they made their statements based on personal knowledge and
No. 72506-8-1/7
review of the records and under penalty of perjury, and the attached account
records were true and correct copies made in the ordinary course of business.
Discover Bank. 154 Wash. App. at 726.
Like the declarants in Discover Bank. Loll and Herbert-West made
declarations under penalty of perjury. They declared that (1) they were an officer
or an employee of Nationstar and Quality Loan, respectively, (2) they had
personal knowledge from their own review of records related to the Guttormsens'
note and deed of trust, and (3) the attached records were true and correct
copies. Loll also declared that he had personal knowledge of Nationstar's
practice of maintaining business records.
The Guttormsens zero in on Loll's statement that the business records he
reviewed were made by himself "or from information transmitted by a person with
knowledge of the event described therein." They argue that this statement
means his declaration was inadmissible under the business records exception
because it contains information compiled and received from third parties. They
cite State v. Weeks. 70 Wash. 2d 951, 425 P.2d 885 (1987), and 5C Karl B.
Tegland, Washington Practice: Evidence Law and Practice § 803.39 (5th ed.
2007).
The transactions discussed by Loll appear to be solidly and legitimately
rooted in Nationstar's business records. And in any event, the Guttormsens fail
to show how any of the challenged statements of fact by Loll are material. For
example, they question how Loll knew that HSBC acquired ownership of the note
from AIG and how he knew that Fannie Mae purchased it from HSBC. But
No. 72506-8-1/8
ownership of the note is not relevant. Trujillo v. Nw. Tr. Servs., Inc., 181 Wn.
App. 484, 502, 326 P.3d 768 (2014), review granted. 182 Wash. 2d 1020 (2015).
The important question is whether the entity that initiated the nonjudicial
foreclosure was the holder of the note. The record contains a declaration of
beneficiary, by Nationstar as Aurora's agent, that Aurora Bank FSB was the
actual holder of the note as of December 5, 2012. The foreclosure process
began after that date.
The Guttormsens fault Loll for failing to explain why the note was later
transferred from Aurora to Nationstar, for failing to set forth terms and conditions
of the transfer, and for failing to attach documentation of the transfer. The
Guttormsens cite no authority, and we have found none, requiring a declarant to
attach documentation to verify each assertion made. Further, they do not explain
why the terms of the Aurora to Nationstar transfer were material.
Loll declared that Aurora directed MERS to execute a corporate
assignment of the deed of trust in favor of Aurora. The Guttormsens challenge
Loll's competence to testify about the MERS assignment. Again, there is no
showing of materiality. The respondents do not rely on the MERS assignment to
establish their authority to act.
Loll declared that Nationstar, as Aurora's attorney in fact, executed an
assignment of the deed of trust to Fannie Mae in September 2012. This was an
incorrect statement, because as is shown by the document itself—attached by
Loll to his declaration—the document was Aurora's assignment of the deed of
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No. 72506-8-1/9
trust to Nationstar, not to Fannie Mae. This minor discrepancy does not by itself
raise a credibility issue that requires Loll's entire declaration to be discounted.
The Guttormsens complain generally in their brief that Loll's declaration
should be regarded as unreliable because of details he omitted:
Indeed, A.J. Loll fails to provide the Court facts that would establish
(1) what specific documents he is referring to and obtained his
information from; (2) how the documents he/she refers to or relies
on are maintained, whether in hard copy or electronic; (3) if the
records are maintained by electronic means, whether the computer
document retrieval equipment used by NATIONSTAR is standard;
(4) the original source of the materials maintained; (5) the identity of
person who compiled the information contained in the files or
computer printouts; (6) when the entries were made and whether
they were made at or near the time of the happening or event; and
(7) how Nationstar relies on these records; or (8) any means by
which the trial court could evaluate the authenticity of the
documents provided and the reliability of A.J. Loll's testimony. See
RCW 5.45.020; State v. Smith, 16 Wash. App. 425, 558 P.2d 265
(1976) and State v. Kane. 23 Wash. App. 107, 594 P.2d 1357 (1979).
Absent establishment of each of these elements, the information
A.J. Loll provides is unverifiable, unreliable and inadmissible. CR
56(e); RCW 5.45.020; ER 803.
(Footnote omitted.) The authorities cited by the Guttormsens do not support their
assertion that the listed items of information are required to make Loll's
declaration admissible.
We conclude that the trial court did not err in considering the Loll and
Herbert-West declarations in support of the motions for summary judgment.
Violations of the deed of trust act
The deed of trust act does not create an independent cause of action for
monetary damages based on alleged violations of its provisions where, as here,
no foreclosure sale has been completed. Frias v. Asset Foreclosure Servs., Inc.,
181 Wash. 2d 412, 417, 334 P.3d 529 (2014). But under appropriate factual
No. 72506-8-1/10
circumstances, violations of the deed of trust act may be actionable under the
Consumer Protection Act, chapter 19.86 RCW, even where no foreclosure sale
has been completed. Frias, 181 Wash. 2d at 417.
To prevail on an action for damages under the Consumer Protection Act,
the plaintiff must establish (1) unfair or deceptive act or practice, (2) occurring in
trade or commerce, (3) public interest impact, (4) injury to plaintiff in his or her
business or property, and (5) causation. Hangman Ridge Training Stables Inc. v.
Safeco Title Ins. Co., 105 Wash. 2d 778, 780, 719 P.2d 531 (1986).
Whether a particular action gives rise to a Consumer Protection Act
violation is reviewable as a question of law. Leingang v. Pierce County Med.
Bureau. Inc.. 131 Wash. 2d 133, 150, 930 P.2d 288 (1997).
To prove that an act or practice is deceptive, neither intent nor actual
deception is required. The question is whether the conduct has "the capacity to
deceive a substantial portion of the public." Hangman Ridge, 105 Wash. 2d at 785.
The Guttormsens assert that an unfair or deceptive act or practice is presumed
where MERS is involved. Bain v. Metro. Mortg. Group, Inc., 175 Wash. 2d 83, 285
P.3d 34 (2012). In Bain, our Supreme Court held that, notwithstanding the fact
that MERS was listed as the original beneficiary of the deed of trust, MERS was
not the holder of the note and thus did not have authority to appoint a trustee to
enforce the note. Bain, 175 Wash. 2d at 88. But because it was "likely true" that
"lenders and their assigns are entitled to name [MERS] as their agent," the court
stated that "nothing in this opinion should be construed to suggest an agent
cannot represent the holder of a note." Bain, 175 Wash. 2d at 106. The problem in
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No. 72506-8-1/11
Bain was that MERS appeared to be acting on its own, without direction from a
principal.
Contrary to the Guttormsens' argument, Aurora's appointment of Quality
Loan as successor trustee to Stewart Title was not "based upon" MERS'
assignment of its beneficiary interest to Aurora. As holder, Aurora's entitlement
to enforce was independent of MERS. Aurora's actions were not unfair or
deceptive for purposes of proving a consumer violation. The Guttormsens point
to the mere fact that MERS was listed as the original beneficiary, which, under
Bain, is not enough. Bain, 175 Wash. 2d at 120.
The violation of the trustee's duty of good faith may be actionable as a
violation of the Consumer Protection Act. See Frias, 181 Wash. 2d at 417. The
Guttormsens allege Quality Loan violated its duty of good faith by relying on the
beneficiary declaration when it had knowledge that the beneficiary was the holder
but not the owner of the note. Their argument rests on the assumption that the
beneficiary must be both the owner and the holder of the note to enforce it. That
argument was rejected by this court in Truiillo, 181 Wash. App. 484. The
Guttormsens assert that Truiillo was "made irrelevant by" Lvons v. U.S. Bank
National Association, 181 Wash. 2d 775, 336 P.3d 1142 (2014). We disagree. In
Lvons, the beneficiary declaration created an issue of material fact because the
beneficiary did not explicitly state that it was the holder of the note, and therefore
it was unclear whether the alleged beneficiary had authority to enforce the note.
That problem does not exist here. Nothing in Lvons undermines Truiillo's holding
that a holder of an instrument need not also be the owner to enforce it. Quality
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No. 72506-8-1/12
Loan was entitled to rely on Aurora's unambiguous declaration that it was the
holder of the note. We adhere to Truiillo.
An unusual feature of this case is that the deed of trust was recorded
twice, one minute apart. On March 23, 2006, at 12:40 p.m., U.S. Recordings Inc.
recorded the deed of trust under Snohomish County recording number
200603230406—the "406 recording." At 12:41 p.m., U.S. Recordings recorded
the same deed of trust again, under Snohomish County recording number
200603230407—the "407 recording." How this happened is not explained in the
record.
The Guttormsens argue that Quality Loan committed a consumer violation
by proceeding with the notice of default and notice of trustee's sale without
investigating why there had been two recordings, a minute apart, of the same
deed of trust. Some documents in the record refer to the 406 recording while
others refer to the 407 recording. The Guttormsens allege that by proceeding
toward foreclosure without clarifying the situation, Quality Loan materially
violated its duty of good faith. We are unable to regard this issue as anything but
a red herring. There was only one deed of trust. The Guttormsens do not make
clear what they think Quality Loan had a duty to do upon noticing the double
recording. There is no evidence of injury.
The Guttormsens argue that they were deceived by the notice of default.
Where the property secured by the deed of trust is residential, the notice of
default must include the name and address of the owner of the promissory note
or other obligation secured by the deed of trust. RCW 61.24.030(8)0). Here, the
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No. 72506-8-1/13
notice identified Fannie Mae as the current owner of the note and Aurora as the
current loan servicer. It gave Fannie Mae's address as "c/o Aurora Bank FSB."
The Guttormsens claim using Aurora's address for Fannie Mae was a statutory
violation that prevented them from realizing Fannie Mae was involved. They say
that if they had known Fannie Mae was involved, they could have pursued
Fannie Mae sponsored programs that might have provided them a modification
of their loan.
The respondents did not conceal Fannie Mae's ownership of the note.
The statute is not violated merely because the contact information for an entity is
through another entity. The notice of default plainly listed Fannie Mae as the
owner. The Guttormsens offer no proof that they tried to get in touch with Fannie
Mae but were prevented from doing so.
The Guttormsens have failed to establish necessary elements of a
consumer protection claim.
Criminal profiteering
The Guttormsens also argue that the trial court erred in dismissing their
claim under the Criminal Profiteering Act.
The Criminal Profiteering Act provides a civil cause of action to a person if
injured in his or her "person, business, or property by an act of criminal
profiteering that is part of a pattern of criminal profiteering activity, or by an
offense defined" in enumerated criminal statutes. RCW 9A.82.100(1)(a).
"Criminal profiteering" is "any act, including any anticipatory or completed
offense, committed for financial gain, that is chargeable or indictable under the
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No. 72506-8-1/14
laws of the state in which the act occurred." RCW 9A.82.010(4). The
Guttormsens assert that the respondents are liable under the act for attempting
to collect a debt for which they have no lawful interest in violation of RCW
9A.82.045 and for extortion in violation of RCW 9A.56.120 and RCW 9A.56.130.
The Guttormsens identify no action by the defendants that constitutes
either extortion or an attempt to collect on a debt in which the collector has no
lawful interest. The trial court properly dismissed the Guttormsens' criminal
profiteering claim.
Additional discovery
The Guttormsens claim that the trial court erred by denying their request
to continue discovery under CR 56(f). We review a trial court's denial of a CR
56(f) motion for abuse of discretion. Qwest Corp. v. City of Bellevue. 161 Wash. 2d
353, 369, 166 P.3d 667 (2007).
Where the party opposing summary judgment cannot, for reasons stated,
present essential facts to justify his or her opposition, courts may order a
continuance to permit additional discovery.
Should it appear from the affidavits of a party opposing the motion
[for summary judgment] that he cannot, for reasons stated, present
by affidavit facts essential to justify his opposition, the court may
refuse the application for judgment or may order a continuance to
permit affidavits to be obtained or depositions to be taken or
discovery to be had or may make such other order as is just.
CR 56(f). A party seeking such a continuance must provide an affidavit stating
what evidence it seeks and how this evidence will raise an issue of material fact
precluding summary judgment. Durand v. HIMC Corp., 151 Wash. App. 818, 214
P.3d 189(2009), review denied. 168Wn.2d 1020(2010). "A trial court may deny
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No. 72506-8-1/15
a motion for a continuance when: '(1) the requesting party does not have a good
reason for the delay in obtaining the evidence, (2) the requesting party does not
indicate what evidence would be established by further discovery, or (3) the new
evidence would not raise a genuine issue of fact.'" Qwest, 161 Wash. 2d at 369,
quoting Butler v. Joy, 116 Wash. App. 291, 299, 65 P.3d 671 (2003).
The Guttormsens did not file an affidavit. They made their request for a
continuance at the end of their response to the respondents' motion for summary
judgment. There, they stated that they needed a continuance to "flesh out the
ownership of the subject note and deed of trust and the agency relationships, if
any, among the defendants and the possible assignment of the subject obligation
to a mortgage backed security trust."
The Guttormsens did not specifically identify the evidence they believe
would be uncovered ifthey were to obtain a continuance. And they did not state
a good reason for their delay in obtaining whatever information they believe
would be uncovered. Under these circumstances, the trial court did not abuse its
discretion by denying the Guttormsens' request for a CR 56(f) continuance.
Affirmed.
WE CONCUR:
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