Robert And Doris Cummings v. Nw Trustee Services Of Wa ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ROBERT and DORIS CUMMINGS, No. 74264-7-I
c:5
husband and wife,
DIVISION ONE CO
Appellants,
2»
up
ro
—j
NORTHWEST TRUSTEE SERVICES UNPUBLISHED
OF WASHINGTON, a Washington
corporation; MORTGAGE FILED: November 28, 2016
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware
corporation; and DEUTSCHE BANK
NATIONAL TRUST COMPANY AS
TRUSTEE IN TRUST FOR THE
REGISTERED CERTIFICATE
HOLDERS OF FIRST FRANKLIN
MORTGAGE LOAN TRUST, ASSET-
BACKED CERTIFICATES, SERIES
2006-FF8,
Respondents,
and
JOHN DOES 1-10,
Defendants.
Cox, J. — Robert and Doris Cummings (collectively, Cummings) appeal
the trial court's order granting summary judgment to Mortgage Electronic
Registration Systems Inc. (MERS) and Deutsche Bank National Trust Company.
They fail to show that there are any genuine issues of material fact for their
No. 74264-7-1/2
claims of violations of the Deeds of Trust Act or the Consumer Protection Act
(CPA). MERS and Deutsche Bank are entitled to judgment as a matter of law.
We affirm.
In April 2006, Cummings borrowed $240,000 from First Franklin. They
executed a promissory note dated April 12, 2006 in the principal amount of
$240,000 to memorialize this obligation.
In order to secure payment of the note, Cummings also executed a deed
of trust dated April 24, 2006 encumbering their home. The deed of trust was
recorded in the Auditor's Records of Snohomish County. It named First Franklin
as the lender, First American Title as the trustee, and MERS as the beneficiary
nominee for First Franklin.
Thereafter, First Franklin specially endorsed this note to First Franklin
Financial Corporation.1 First Franklin Financial Corporation then endorsed this
note in blank.2 Deutsche Bank has had possession of both this note and the
deed of trust securing it at all times material to enforcement of the obligations
evidenced by these documents.
Cummings defaulted on the loan by missing payments due under the
terms of the note.
MERS purported to assign "all beneficial interest" in the note and deed of
trust to Deutsche Bank by an Assignment of Deed of Trust dated October 6,
1 Clerk's Papers at 62.
2 Id.
No. 74264-7-1/3
2011. That assignment was recorded in the Auditor's Records of Snohomish
County on October 18, 2011.
Deutsche Bank recorded an agreement dated June 5, 2014 granting
Select Portfolio Serving Inc. (SPS) limited power of attorney to service the loan
and, if necessary, appoint a successor trustee to foreclose the deed of trust.
Deutsche Bank, through SPS, gave Northwest Trustee Services (NWTS) two
beneficiary declarations stating that Deutsche Bank, as trustee for the First
Franklin Mortgage loan trust, was the actual holder of the note.
On September 23, 2014, Deutsche Bank, through SPS, appointed NWTS
as successor trustee. NWTS sent a notice of default to Cummings the next day.
NWTS recorded a notice of trustee's sale on November 11, 2014, setting
a sale date for March 13, 2015. The home was sold at the trustee's sale on
March 13,2015.
On March 20, 2015, Cummings commenced this suit against MERS,
Deutsche Bank, and NWTS. They claimed violations of the Deeds of Trust Act
and the CPA. They sought declaratory and injunctive relief, damages, and
attorney fees.
NWTS moved to dismiss all claims against it. The trial court granted that
motion. Cummings sought to appeal, but a commissioner of this court directed
No. 74264-7-1/4
them to file a motion for discretionary review.3 They did not do so, and this court
dismissed that appeal.4 That dismissal is now final.
The trial court then granted summary judgment to MERS and Deutsche
Bank. Cummings's notice of appeal that is now before us designates only this
order.
SCOPE OF REVIEW
NWTS argues that the summary judgment order dismissing it from this
action is not properly before this court because Cummings did not designate that
order in their notice of appeal. We agree.
The notice of appeal dated November 11, 2015 designates only the order
granting summary judgment to MERS and Deutsche Bank. It neither designates
nor refers to the prior order dismissing NWTS. Thus, under RAP 2.4(a), the
NWTS order is not before this court.
We note that Cummings attempted to appeal the order dismissing claims
against NWTS in a prior notice of appeal. But a commissioner of this court
decided that the order was interlocutory and not yet subject to appeal.5 At that
time, all claims of all parties had not yet been resolved. The commissioner
directed Cummings to file a petition for discretionary review.6 They did not do so.
3 Cummings v. Truiillo v. Nw. Tr. Servs., Inc., No. 74264-7-I (Wash. Ct.
App. May 16, 2016) (notation ruling).
4ld,
5id,
6 Id.
No. 74264-7-1/5
At oral argument, Cummings contended that they rely upon their earlier
notice of appeal to somehow preserve for our review the earlier order of
dismissal. They are mistaken.
An interlocutory notice of appeal has no effect upon consideration of a
later appeal from a final judgment unless designated in that later appeal.7 Thus,
the prior notice of appeal does not change our conclusion that the prior order is
not properly before us.
Under RAP 2.4(b), the appellate court reviews orders not designated in
the notice of appeal when the undesignated order satisfies two elements. The
order must "prejudicially affectf] the decision designated in the notice," and the
order must have been entered before the appellate court accepted review of the
case.8
As for the first element, "prejudicial effect" means that the "order appealed
from would not have happened but for the" undesignated order.9 This requires
that the two orders "be so entwined that to resolve the order appealed, the court
must consider the order not appealed."10 This element is not satisfied because
the dismissal of NWTS had no bearing on the subsequent order granting
summary judgment in favor of MERS and Deutsche Bank.
7 State v. Thome, 39 Wash. 2d 63, 65, 234 P.2d 528 (1951).
8 RAP 2.4(b).
9 Right-Price Recreation, LLC v. Connells Prairie Cmty. Council, 146
Wash. 2d 370, 380, 46 P.3d 789 (2002).
10 Id. at 379 (internal citation omitted).
No. 74264-7-1/6
Because of failure to meet the first element, we need not address the
second.
In sum, the claims directed against NWTS are not properly before this
court. Likewise, there is no need to address the remaining arguments of NWTS.
We shall not address either any further.
DEEDS OF TRUST ACT
Cummings first argues that the foreclosure of the deed of trust securing
their delinquent note was wrongful. There is no merit to this claim.
Summary judgment is proper "only when there is no genuine issue as to
any material fact and the moving party is entitled to judgment as a matter of
law."11 "A genuine issue of material fact exists if 'reasonable minds could differ
on the facts controlling the outcome of the litigation.'"12
Summary judgment is subject to a burden-shifting scheme.13 The movant
is entitled to summary judgment by submitting affidavits establishing its
entitlement to judgment as a matter of law.14 The nonmoving party avoids
summary judgment by setting forth "'specific facts which sufficiently rebut the
moving party's contentions'" and disclosing the existence of a genuine issue of
11 Scrivener v.Clark Coll., 181 Wash. 2d 439, 444, 334 P.3d 541 (2014); see
also CR 56(c).
12 Knight v. Dep't of Labor & Indus., 181 Wash. App. 788, 795, 321 P.3d
1275 (quoting Ranger Ins. Co. v. Pierce County, 164 Wash. 2d 545, 552, 192 P.3d
886 (2008)), review denied, 339 P.3d 635 (2014).
13 Ranger Ins. Co., 164 Wash. 2d at 552.
14 Id.
No. 74264-7-1/7
material fact.15 To accomplish this, the nonmoving party may not rely either on
argumentative assertions that unresolved factual issues remain or on
speculation.16
We review de novo a trial court's grant of summary judgment.17
We may affirm on any basis supported by the record whether or not the
argument was made below.18
We start with basic principles applicable to this case. They arise from the
note and deed of trust on which this foreclosure was based.
First, this court and the supreme court have both held that the holder of a
promissory note is the person entitled to enforce that obligation.19 Ownership of
a note is irrelevant to the power to enforce that note.20
Second, the holder of the note has the power to enforce the deed of trust
because the deed of trust follows the note by operation of law. In Bain v.
Metropolitan Mortgage Group, Inc., the supreme court explained that the Deeds
15 |d (quoting Meyer v. Univ. of Wash., 105 Wash. 2d 847, 852, 719 P.2d 98
(1986)).
16 Id,
17 Id.
18 First Bank of Lincoln v. Tuschoff, 193 Wash. App. 413, 422, 375 P.3d 687
(2016).
19 Brown v. Dep't of Commerce, 184 Wash. 2d 509, 514, 359 P.3d 771
(2015); Bain v. Metro. Mortg. Grp., Inc.. 175 Wash. 2d 83, 104, 285 P.3d 34 (2012);
Truiillov. Nw. Tr. Servs., Inc., 181 Wash. App. 484, 502, 326 P.3d 768 (2014), rev'd
on other grounds, 183 Wash. 2d 820, 355 P.3d 1100 (2015).
20
Id.
No. 74264-7-1/8
of Trust Act "contemplates that the security instrument will follow the note, not the
other way around."21 This statement is consistent with well-settled law.
Commentators have explained that "transfer of the [note] alone will carry
the [deed of trust] along with it."22 Other commentators have elaborated:
[B]etween the parties to a transfer the assignment or
negotiation of the note itself is all that must be done. It is
unnecessary to have any separate document purporting to transfer
or assign the mortgage on the real estate, for it will follow the
obligation automatically.'2^
These two principles demonstrate that the holder of the note is entitled to
enforce both it and the deed of trust securing it. Here, it is undisputed that
Deutsche Bank has had possession of the note, which was indorsed in blank, at
all times material to this matter. Accordingly, it is the holder of the note, which
gives it the power to enforce it.
The deed of trust follows the note. Accordingly, Deutsche Bank also has
the power to enforce the deed of trust, by operation of law.
Because Deutsche Bank has possession of both the note and deed of
trust, with the power to enforce both, it has established a prima facie case that it
is entitled to summary judgment. The burden shifts to Cummings to show the
existence of a genuine issue of material fact.
21 175 Wash. 2d 83, 104, 285 P.3d 34 (2012).
2218 William B. Stoebuck & John W. Weaver, Washington Practice:
Real Estate § 18.18 at 334 (2d ed. 2004 & updated 2016).
231 Grant S. Nelson & Dale A. Whitman, Practitioner Treatise Series:
Real Estate Finance Law § 5.28 at 429 (4th ed. 2002).
8
No. 74264-7-1/9
Cummings first argues that RCW 62A.9A-203, part of Article 9 of the
Uniform Commercial Code, determines who is entitled to enforce the deed of
trust. This argument is without merit.
RCW 61.24.030(7)(a), the controlling portion of the Deeds of Trust Act,
states who is entitled to enforce a deed of trust that secures a delinquent note.
Case authority makes clear that Article 3 controls the right to enforce a note and
deed of trust under this statute.24 Article 9 has no bearing on enforcement of a
note and deed of trust.
Cummings next claims that "[t]here has never been a subsequent
assignment" of the note and deed of trust to Deutsche Bank. This contention is
irrelevant to the resolution of this case.
First, the note was indorsed in blank and Deutsche Bank has had
possession of this note at all times material to the foreclosure. The negotiation
by this indorsement is sufficient to make Deutsche Bank the holder of that
instrument, entitled to enforce it. A separate assignment is not required. Thus,
the purported assignment of an interest in the note by MERS is irrelevant.
Second, they argue that MERS's purported assignment of "a beneficial
interest" under the deed of trust was improper. This, too, is irrelevant.
In Bain, the supreme court recognized that MERS could not appoint a
successor trustee because it never held the promissory note and was thus an
24 Brown, 184 Wash. 2d at 528; Bain, 175 Wash. 2d at 103-04.
No. 74264-7-1/10
"ineligible beneficiary" under the Deeds of Trust Act.25 MERS thus lacked any
rights to confer on a successor trustee.26
But the lack of a valid assignment by MERS does not preclude Deutsche
Bank's ability to enforce the deed of trust in this case. That is because it has
possessed the note at all times material to the foreclosure.
As we previously discussed in this opinion, the deed of trust follows the
note. So when the bank obtained possession of the note, the deed of trust
followed it, by operation of law. Deutsche Bank possessed both the note and
deed of trust at all times that are material to the foreclosure. MERS's lack of a
"beneficial interest" under the deed of trust to assign to the bank is irrelevant.
Cummings also argues that MERS's assignment of its purported interest
under the deed of trust to Deutsche Bank was improper because it was made
over five years after the loan trust closed. As such, they contend this loan did not
become a "qualified mortgage" under 26 U.S.C. § 860 of the federal tax code.
This too is irrelevant to Deutsche Bank's right to foreclose. There is no
persuasive explanation why a MERS assignment, whether or not it complies with
the federal tax code, affects enforceability of the note and deed of trust in this
case. Accordingly, we reject this argument.
Cummings further contends that the assignment was untimely, given the
terms of the loan trust's Pooling and Servicing Agreement. But this record does
not contain a copy of this agreement. It is appellant's burden to provide an
25 175 Wash. 2d 83, 105, 285 P.3d 34 (2012).
26 Id,
10
No. 74264-7-1/11
adequate record for review, and they have failed in this burden. Thus, we need
not address this argument any further.27
Cummings next argues that the MERS assignment was invalid because
MERS did not exchange value for the note. They base this contention on the
mistaken notion that Article 9 of the UCC governs. It does not. Moreover, the
MERS assignment, as we already explained in this opinion, is irrelevant to the
authority of the bank to enforce the note and deed of trust.
For these reasons, we conclude that Cummings has failed to show there
are any genuine issues of material fact for their claim that either Deutsche Bank
or MERS violated the provisions of the Deeds of Trust Act. MERS and Deutsche
Bank are entitled to judgment as a matter of law.
CONSUMER PROTECTION ACT
Cummings brings several claims under the CPA. To succeed on these
claims, Cummings must show "(1) an unfair or deceptive act, (2) in trade or
commerce, (3) that affects the public interest, (4) injury to the plaintiff in his or her
business or property, and (5) a causal link between the unfair or deceptive act
complained of and the injury suffered."28 A claimant must establish all five
elements to prevail.29
27 See Darkenwald v. Emp't Sec. Dep't, 183 Wash. 2d 237, 248, 350 P.3d
647 (2015); RAP 10.3(a)(6).
28 Truiillo v. Nw. Tr. Servs., Inc., 183 Wash. 2d 820, 834-35, 355 P.3d 1100
(2015).
29 Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162
Wash. 2d 59, 74, 170 P.3d 10 (2007).
11
No. 74264-7-1/12
Whether a particular action constitutes a CPA violation is reviewable as a
question of law.30
The only CPA claims that we consider are those made against MERS and
Deutsche Bank.
MERS
Cummings claims that the purported assignment by MERS of its
"beneficial interest" under the deed of trust is presumptively deceptive. We must
agree.
Here, MERS purported to assign its "beneficial interest" in the note and
deed of trust to Deutsche Bank by an instrument dated October 6, 2011. But
MERS never held the note in which it claims an interest. Deutsche Bank held the
note at all times material to the foreclosure. And MERS never had a beneficial
interest in the deed of trust.
As our supreme court explained in Bain, "characterizing MERS as the
beneficiary has the capacity to deceive."31 Thus, that court held that listing
MERS in the deed of trust as a beneficiary is presumptively deceptive.
Deutsche Bank and MERS respond to this argument by pointing to Bain's
holding that "the mere fact MERS is listed on the deed of trust as a beneficiary is
not itself an actionable injury."32 While this is true inasmuch as a claimant must
30 Leingang v. Pierce County Med. Bureau, Inc., 131 Wash. 2d 133, 150, 930
P.2d 288 (1997).
31 175Wn.2dat117.
32 Id. at 120.
12
No. 74264-7-1/13
also show a separate injury, it does not alter the presumption that MERS acts
deceptively when it improperly lists itself as having a "beneficial interest" under a
deed of trust where it has no such interest.
Bain controls this issue. We are constrained to conclude that MERS
representing that it has a "beneficial interest" under a deed of trust in a recorded
assignment of that deed of trust that gives notice of its contents is presumptively
deceptive.
But that conclusion does not end our inquiry. Cummings must also show
a genuine issue of material fact as to causation. They have not.
Deutsche Bank is the holder of the note. As we previously discussed, the
deed of trust and the power to enforce it follow the note.33 Here, Deutsche
Bank's possession of the note, and not any purported assignment by MERS,
gave Deutsche Bank the power to foreclose. Thus, there is no injury causally
connected to the purported assignment by MERS.
The absence of a genuine issue of material fact as to this necessary
element makes all other factual issues for the other elements of the CPA claim
immaterial for summary judgment purposes. The trial court properly granted
summary judgment in favor of MERS on this claim.
Deutsche Bank
Cummings also challenges Deutsche Bank's actions in appointing NWTS
as successor trustee, arguing that the appointment violated the CPA as an unfair
33 jd, at 104. See also Stoebuck &Weaver, supra, §18.18; Nelson &
Whitman, supra. 5.28.
13
No. 74264-7-1/14
and deceptive act. They mount two arguments to support this contention. First,
Cummings argues that such conduct was impermissible because Deutsche Bank
only held the note. As discussed throughout this opinion, the power to enforce a
note and deed of trust derives from possession of the note. This first challenge
fails.
Second, Cummings argues that Deutsche Bank could not appoint the
successor trustee through use of an agent, SPS. Even if Deutsche Bank could
use an agent, Cummings alleges that SPS was not an agent but instead an
independent contractor. Cummings argues a beneficiary cannot act through an
independent contractor.
The supreme court has explicitly permitted the use of agents in appointing
a successor trustee.34 Thus, Cummings's argument on this point lacks merit.
A beneficiary cannot employ an independent contractor to appoint a
successor trustee so that such beneficiary remains accountable for its conduct.35
In Ruckerv. NovaStar Mortgage, Inc., we concluded that a beneficiary does not
make another party its agent by an agreement explicitly "intended by the parties
to be that of an independent contractor and not that of a joint venture, partner or
agent."36
34 Id at 106.
35 Ruckerv. NovaStar Mortg., Inc., 177 Wash. App. 1, 16,311 P.3d 31
(2013).
36 Id, at 15-16 (emphasis omitted).
14
No. 74264-7-1/15
Here, SPS was not an independent contractor. On June 5, 2014,
Deutsche Bank executed an agreement granting limited power of attorney to
SPS to make certain carefully specified transactions. The agreement authorizes
SPS to take such actions "in the name" of Deutsche Bank, the principal. It
specifies that SPS's authority is limited to its enumerated transactions and does
not extend to a general power of attorney. It does not authorize SPS to conduct
litigation in Deutsche Bank's name.
As such, this agreement is unlike that in Rucker. That case has no
bearing here.
Cummings has failed to show a genuine issue of material fact that
Deutsche Bank violated the CPA. The bank is entitled to judgment as a matter of
law.
We affirm the order granting summary judgment to Deutsche Bank and
MERS.
C&KfT*
WE CONCUR: