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

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UNPUBLISHED OPINION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
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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
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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,
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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).
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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."
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(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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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)).
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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
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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.
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$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:
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