John E. & Shelley A. Erickson v. Deutsche Bank National Trust Co. ( 2017 )


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  • IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
    DEUTSCHE BANK NATIONAL TRUST
    COMPANY, as Trustee for Long Beach               No. 73833-0-I
    Mortgage Loan Trust 2006-4,
    DIVISION ONE
    Respondent,
    UNPUBLISHED OPINION
    V.
    JOHN E. ERICKSON AND SHELLEY A.
    ERICKSON, individuals residing in
    Washington;                                      FILED: February 13, 2017
    Appellants,
    BOEING EMPLOYEES' CREDIT UNION,
    a Washington corporation; AMERICAN
    GENERAL SERVICES, INC., a Delaware
    corporation; TBF FINANCIAL, LLC, an
    Illinois limited liability corporation; JUSTIN
    PARK & ROMERO PARK & WIGGINS,
    PS, a Washington Professional Services
    Corporation; RANDAL EBBERSON, an
    individual residing in Washington; THE
    LAW FIRM OF KEATING BUCKLIN &
    McCORMACK, INC., PS, a Washington
    professional services corporation; CITY
    OF AUBURN, WASHINGTON, a
    Washington municipality; CHARLES
    JOINER, an individual residing in
    Washington; PAUL KRAUSS, an individual
    residing in Washington; DAN HEID, an
    individual residing in Washington;
    SHELLEY COLEMAN, an individual
    residing in Washington; BRENDA
    HEINEMAN, an individual residing in
    73833-0-1/ 2
    Washington; and THE WASHINGTON                )
    CITIES INSURANCE AUTHORITY, a                 )
    municipal organization of Washington          )
    public entities,                              )
    )
    Defendants,             )
    )
    JPMORGAN CHASE BANK, N.A., a                  )
    national banking association; LONG            )
    BEACH MORTGAGE LOAN TRUST,                    )
    2006-4; JOHN DOES 1-99,                       )
    )
    Third Party Defendants.       )
    )
    )
    APPELWICK, J. — Deutsche Bank National Trust Co. (DBNTC) filed suit to
    foreclose on the Ericksons' home. The Ericksons argue that DBNTC has failed
    to show that it possesses the original note, and therefore it has no standing to
    foreclose. DBNTC argues that it is entitled to foreclosure because it produced
    the original note, and that the Ericksons are collaterally estopped from arguing
    otherwise. The trial court granted summary judgment in favor of DBNTC. We
    affirm.
    FACTS
    John and Shelly Erickson purchased a house in 2006 with a loan from
    Long Beach Mortgage Company. The Ericksons and Long Beach executed a
    deed of trust with Old Republic Title Ltd. as trustee. Long Beach was a part of
    Washington Mutual Inc. Washington Mutual failed and JPMorgan Chase Bank
    National Association purchased its assets. Shortly after executing the loan, Long
    2
    73833-0-1 / 3
    Beach sold the loan into Long Beach Mortgage Loan Trust 2006-4 (LBMLT).
    DBNTC was the trustee of the LBMLT.
    The Ericksons defaulted on their payments in 2009. In 2010, the
    Ericksons filed suit against Long Beach, JP Morgan Chase, and Deutsche Bank,
    seeking various forms of relief. Erickson v. Long Beach Mortg. Co., No. 10-1423
    MJP, 
    2011 WL 830727
    (W.D. Wash. Mar. 2, 2011), affd 
    473 F. App'x 746
    (9th
    Cir. 2012). After removal to federal court, that lawsuit was dismissed on
    summary judgment. 
    Id. at *2.
    The court held that the defendants provided
    sufficient evidence to prove their ownership of the 2006 note. 
    Id. at *3.
    Later, on January 31, 2013, JP Morgan assigned all beneficial interest
    under the deed of trust to DBNTC. DBNTC filed this lawsuit seeking foreclosure
    on the Ericksons' property in January 2014. DBNTC moved for summary
    judgment, arguing that it was entitled to foreclosure, because it possessed the
    note. DBNTC presented the original note with an endorsed in blank stamp at the
    summary judgment hearing. It also attached a copy of this original note to its
    attorney's declaration. The trial court granted DBNTC's motion for summary
    judgment and denied the Ericksons' motion for reconsideration. The Ericksons
    appeal.
    ANALYSIS
    First, DBNTC argues that collateral estoppel bars the Ericksons from
    contesting DBNTC's claim that it possesses the original note. Second, the
    3
    73833-0-1/ 4
    Ericksons argue that DBNTC has not shown that it possesses the note and
    therefore is not entitled to foreclosure.
    We review summary judgment orders de novo, taking all facts and
    inferences in the light most favorable to the nonmoving party. Estate of
    Haselwood v. Bremerton Ice Arena, Inc., 
    166 Wash. 2d 489
    , 497, 
    210 P.3d 308
    (2009). Summary judgment is proper when there is no genuine issue of material
    fact and the moving party is entitled to a judgment as a matter of law. Ranger
    Ins. Co. v. Pierce County, 
    164 Wash. 2d 545
    , 552, 
    192 P.3d 886
    (2008). A party
    resisting summary judgment cannot satisfy his or her burden of production
    merely by relying on conclusory allegations, speculative statements, or
    argumentative assertions. Bopuch v. Landover Corp., 
    153 Wash. App. 595
    , 610,
    
    224 P.3d 795
    (2009). Rather, the nonmoving party must set forth specific facts
    demonstrating a genuine issue of fact. 
    Id. I. Collateral
    Estoppel
    The Ericksons argue that DBNTC has not shown that it holds the original
    note. DBNTC responds that the 2010 federal lawsuit collaterally estops the
    Ericksons' argument that Deutsche Bank has not shown that it possesses the
    note. In that suit, the Ericksons argued that the defendants did not provide
    evidence that they held the note. The federal court's entire analysis of this
    argument was as follows:
    Plaintiffs' argument rests on the contention that Defendants lack
    standing to foreclose because they are not the original creditors,
    4
    73833-0-1 / 5
    and cannot produce the original note. Courts "have routinely held
    that [this] so-called 'show me the note' argument lacks merit."
    Freeston v. Bishop, White & Marshall, P.S., No. C09-5560BHS,
    
    2010 WL 1186276
    (W.D.[ ]Wash. Mar.[ ]24, 2010) (quoting
    Diessner v. Mortq. Elec. Registration Sys., 
    618 F. Supp. 2d 1184
    ,
    1187 (D. Ariz. 2009) (collecting cases)[, aff'd, 384 Fed. App'x 609
    (9th Cir. 2009)]). The Court agrees with these cases. More
    importantly, Defendants provide evidence demonstrating their
    ownership of the note, which the Ericksons do not credibly
    challenge. The Court GRANTS Defendants' motion and DENIES
    Plaintiffs' motion with respect to claims for a declaration or an
    injunction against foreclosure. The Court DISMISSES this claim.
    Erickson, 
    2011 WL 830727
    , at *3 (first alteration in original) (emphasis added).
    The doctrine of collateral estoppel prevents relitigation of an issue after
    the party estopped has had a full and fair opportunity to present its case.
    Hanson v. City of Snohomish, 
    121 Wash. 2d 552
    , 561, 
    852 P.2d 295
    (1993). The
    party seeking collateral estoppel must establish four elements: (1) identical
    issues; (2) a final judgment on the merits; (3) the party against whom the
    argument is asserted must have been a party to or in privity with a party to the
    prior adjudication; and (4) application of the doctrine must not work an injustice
    on the party against whom the doctrine is to be applied. Hadley v. Maxwell, 
    144 Wash. 2d 306
    , 311-12, 
    27 P.3d 600
    (2001). Although the doctrine is usually
    characterized as an affirmative defense, it is equally available to plaintiffs and
    may be applied "offensively" to bar a defendant from relitigating issues in a
    second proceeding. State Farm Fire & Cas. Co. v. Ford Motor Co., 186 Wn.
    App. 715, 722, 
    346 P.3d 771
    (2015).
    73833-0-1/ 6
    All four collateral estoppel elements are satisfied here. First, the issues
    are identical. 
    Hadley, 144 Wash. 2d at 311-12
    . In the federal case, the Ericksons
    alleged that the defendants lacked standing to foreclose because they were not
    the original creditor and could not produce the original note. Erickson, 
    2011 WL 830727
    , at *3. The Ericksons' main argument in this appeal is that DBNTC has
    failed to show that it possesses the original note. The Ericksons make the same
    argument in both cases: that DBNTC has not produced enough evidence to
    prove ownership of the original note and therefore cannot foreclose. These
    issues are identical.
    The "final judgment on the merits" element is also met. 
    Id. A final
    judgment includes any prior adjudication of an issue in another action that is
    determined to be sufficiently firm to be accorded conclusive effect. In re
    Dependency of H.S., 
    188 Wash. App. 654
    , 661, 
    356 P.3d 202
    (2015). The federal
    court entered summary judgment against the Ericksons on all issues, including
    their claim on possession of the note, and the Ninth Circuit Court of Appeals
    affirmed. Erickson, 
    2011 WL 830727
    , at *7; 
    Erickson, 473 F. App'x at 746
    . The
    resolution of the 2010 suit constitutes a final judgment on the merits.
    The Ericksons argue that the identity of party element is not satisfied,
    because in this case Deutsche Bank is appearing as "Deutsche Bank National
    Trust Company, a Trustee for Long Beach Mortgage Loan Trust 2006-4," while in
    the federal case it appeared only as "Deutsche Bank National Trust Company."
    6
    73833-0-1 /7
    (Emphasis added.) But, the standard requires that only the party against whom
    collateral estoppel is being asserted was a party to the prior case. 
    Hadley, 144 Wash. 2d at 311-12
    . The Ericksons were a party to the federal case. Erickson,
    
    2011 WL 830727
    , at *1. And, even if the standard required DBNTC to be a party
    to the prior case, it was. 
    Id. Regardless of
    whether DBNTC appeared on its own
    behalf or as a trustee in the federal case, it was clearly "a party to or in privity
    with a party to the prior adjudication." 
    Hadley, 144 Wash. 2d at 311-12
    . The
    identical party element is satisfied.
    Finally, applying collateral estoppel will not work an injustice against the
    Ericksons. The Ericksons make no substantive argument on this element.
    Applying collateral estoppel may seem unjust because the Ericksons were not
    represented by counsel in the federal case. But, they made the conscious choice
    to pursue those claims pro se. See Edwards v. LaDuc, 
    157 Wash. App. 455
    , 464,
    
    238 P.3d 1187
    (2010) ("[T]he trial court must treat pro se parties in the same
    manner it treats lawyers."). Enforcing collateral estoppel here would not amount
    to an injustice.
    We hold that collateral estoppel bars the Ericksons' arguments that
    Deutsche Bank does not hold the original note.
    II. Possession of the Note
    Even if the Ericksons were not collaterally estopped from their substantive
    arguments, a holder of a note endorsed in blank is entitled to enforce that note.
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    73833-0-1/ 8
    Brown v. Dep't of Commerce, 
    184 Wash. 2d 509
    , 536, 
    359 P.3d 771
    (2015).
    Presentation of the original note at a summary judgment hearing is sufficient to
    prove a party's status as holder of the note. Deutsche Bank Nat. Trust. Co. v.
    Slotke, 
    192 Wash. App. 166
    , 175, 
    367 P.3d 600
    , review denied, 
    185 Wash. 2d 1037
    ,
    
    377 P.3d 746
    (2016).
    DBNTC attached a copy of the note to its attorney's summary judgment
    declaration. That copy included an endorsement in blank.1 The summary
    judgment hearing transcript also shows that DBNTC presented an original copy
    of the note at the summary judgment hearing. Because DBNTC presented an
    original, signed, endorsed in blank note at the summary judgment hearing, it was
    entitled to summary judgment and to enforce the note against the Ericksons.
    The Ericksons make a number of counterarguments. First, the Ericksons
    argue that DBNTC should not be entitled to foreclosure because it has failed to
    explain how it came into possession of the note. The Ericksons do not provide
    any legal support for their argument that, despite possessing the note, DBNTC
    1 The  copy of the note attached to the complaint did not include the
    endorsed in blank stamp. DBNTC attached a copy of the note with the endorsed
    in blank stamp in support of its summary judgment motion. The Ericksons argue
    that DBNTC's failure to originally include the endorsement in blank stamp is
    evidence that DBNTC is actually not the proper holder of the note. But, this
    argument is merely speculative. See 
    Boquch, 153 Wash. App. at 610
    ("[A] party
    resisting summary judgment cannot satisfy his or her burden of production
    merely by relying on conclusory allegations, speculative statements, or
    argumentative assertions. Rather, the nonmoving party 'must set forth' specific
    facts demonstrating a genuine issue of fact." (citation omitted) (quoting Las v.
    Yellow Front Stores, Inc., 
    66 Wash. App. 196
    198, 
    831 P.2d 744
    (1992)).
    8
    73833-0-1 / 9
    cannot enforce the note if it cannot explain all previous transfers of the note.
    DBNTC produced the original note endorsed in blank. That alone allows DBNTC
    to enforce it. RCW 62A.1-201(21)(A) (defining "holder" as "[t]he person in
    possession of a negotiable instrument."); RCW 62A.3-205(b) ("When [e]ndorsed
    in blank, an instrument becomes payable to bearer and may be negotiated by
    transfer of possession alone until specially [e]ndorsed."); see also 
    Brown, 184 Wash. 2d at 536
    ("As the holder of the note [endorsed in blank], M & T Bank is
    entitled to enforce the note."); Deutsche 
    Bank, 192 Wash. App. at 173
    ("[1]t is the
    holder of the note who is entitled to enforce it. It is not necessary for the holder
    to establish that it is also the owner of the note secured by the deed of trust.").
    Second, the Ericksons argue that the note was not properly authenticated.
    DBNTC's attorney submitted the note as an exhibit to his declaration. The note
    is commercial paper. See United States v. Varner, 
    13 F.3d 1503
    , 1508 n.5 (11th
    Cir. 1994). Under ER 902(i), commercial paper qualifies as a self-authenticating
    document. See, e.g., Varner, 
    13 F.3d 1508-09
    ("Mere production of a note
    establishes prima facie authenticity and is sufficient to make a promissory note
    admissible.") (emphasis added)).
    Third, the Ericksons argue that the note constitutes inadmissible hearsay.
    Statements that have "operative legal effect" are not subject to the prohibition on
    hearsay. ARONSON & HOWARD, THE LAW OF EVIDENCE IN WASHINGTON § 10.05[2][f]
    (5th ed. 2016). The note is a legally enforceable promise to pay and it therefore
    73833-0-1 / 10
    has independent legal significance. See Kepner-Treqoe, Inc. v. Leadership
    Software, Inc., 
    12 F.3d 527
    , 540 (5th Cir. 1994) (" 'Signed instruments such as
    wills, contracts, and promissory notes are writings that have independent legal
    significance and are not hearsay.'" (quoting THOMAS A. MAUET, FUNDAMENTALS OF
    TRIAL TECHNIQUES   180 (1988)). The promissory note was self-authenticating and
    not subject to the prohibition on hearsay.
    Fourth, the Ericksons argue without citation to authority that notes are
    tantamount to a conveyance of real property, and therefore should be subject to
    the statute of frauds'2 protections. Washington cases involving enforcement of
    notes have not identified the statute of frauds as an impediment to foreclosure.
    See, e.g., 
    Slotke, 192 Wash. App. at 173
    ("Mt is the holder of a note who is entitled
    to enforce it."); 
    Brown, 184 Wash. 2d at 535-36
    ("M & T Bank is the holder of
    Brown's note because M & T Bank possesses the note and because the note,
    having been indorsed in blank, is payable to the bearer."). The statute of frauds
    does not bar DBNTC's enforcement of the note.
    III. Amount of Judgment
    The Ericksons also argue that, besides the note itself, DBNTC submitted
    no evidence to support the monetary judgment entered against them. But, the
    note is evidence of the debt. The trial court entered a judgment and decree of
    foreclosure against the Ericksons for the $465,047.67 loan principal and
    2   RCW 64.04.020.
    10
    73833-0-1/ 11
    $253,354.11 in interest. The Ericksons do not challenge the mathematical
    calculation of the amount due under the note, but stress the fact that no
    additional evidence of the amount was offered. Payment is an affirmative
    defense under Washington law. U.S. Bank Nat'l Ass'n v. Whitney, 
    119 Wash. App. 339
    , 347, 
    81 P.3d 135
    (2003). The Ericksons did not assert any payment
    defense in their answer. Thus, they cannot now challenge the principal and
    interest owed under the note.
    IV. Attorney Fees
    The Ericksons have requested attorney fees. Because we affirm
    summary judgment against the Ericksons, we deny their request for attorney
    fees.
    We affirm.
    WE CONCUR:
    ?e      l-
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