Docket No. 13-35008
In the
United States Court of Appeals for the
Ninth Circuit
TRAVIS MICKELSON and DANIELLE H. MICKELSON,
and the Marital Community Thereof,
Plaintiffs-Appellants,
v.
CHASE HOME FINANCE LLC, an Unknown Entity, JPMORGAN CHASE BANK NA, a Foreign Corporation, MORTGAGE ELECTRONIC REGISTRATION SERVICE, INC.,
a Foreign Corporation, NORTHWEST TRUSTEE SERVICES INC., a Domestic Corporation, CHICAGO TITLE, an Unknown Corporation, ROUTH CRABTREE OLSEN PS,
a Domestic Personal Services Corporation, FEDERAL HOME LOAN MORTGAGE CORPORATION, a Corporation, VONNIE McELLIGOTT, JEFF STENMAN and RHEA S. PRE,
Defendants-Appellees.
_______________________________________ Appeal from a Decision of the United States District Court for the Western District of Washington,
No. 2:11-cv-01445-MJP Honorable Marsha J. Pechman
REPLY BRIEF OF APPELLANTS
SCOTT E. STAFNE, ESQ.
ANDREW J. KRAWCZYK, ESQ. STAFNE LAW FIRM 239 North Olympic Avenue Arlington, Washington 98223 (360) 403-8700 Telephone (360) 386-4005 Facsimile
Attorneys for Appellants, Travis Mickelson and Danielle Mickelson
COUNSEL PRESS (800) 3-APPEAL PRINTED ON RECYCLED PAPER
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TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................... iii FACTS ....................................................................................................................... 1 REPLY ARGUMENTS REGARDING PARTIES ISSUES
ISSUE ONE: Whether federal courts must follow the Washington Supreme Courts construction of Washington State statutes? ........................ 2 ISSUE TWO: Whether the Trustee violated its duty of good faith to the grantor under RCW 61.24.010(3) and (4), by acting in association with a beneficiary and its agents to privately sell Homeowners residence pursuant to MERS/Freddie Mac foreclosure system? .................... 3 ISSUE 3: Whether the Trustee violated provisions of Washingtons DTA, RCW 61.24.010; .020; .030(7); 030 (8)(l); .040(2); .050, .070 pursuant to MERS/Freddie Mac foreclosure system. .................................... 11 ISSUE 4: Whether the district court erred as a matter of law in failing to find and conclude the Trustee did not comply with RCW 61.42.030(7) (have proof of ownership) before initiating and completing foreclosure under the DTA. ............................................................................................................... 22 ISSUE 5: Whether the district court erred as a matter of law in failing to find the Trustee failed to comply with the requirements of RCW 61.24.030(l) and 61.24.040(2) by not identifying the actual owner of the note or obligation to the borrower? ........................................................................... 24 ISSUES 6, 7, & 8: If the non-judicial sale of Mickelsons home was not legally commenced under the DTA, whether the district court erred in dismissing as waived the Mickelsons other state damage causes of action and other requests for relief? ........................................................................ 25 ISSUE 9: Whether the district courts decisions dismissing all of the CPA actions against defendants failed to comply with most recent[Washington precedent]? .................................................................................................... 28
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ISSUE 10: Whether the district court erred in dismissing homeowners FDCPA claims against RCO, NWTS, and McElligott? ................................. 30
OTHER ISSUES RAISED BY CHASE AND TRUSTEE DEFENDANTS RESPONSE: ........................................................................ 30
CERTIFICATE OF COMPLIANCE ....................................................................... 35 CERTIFICATE OF SERVICE ................................................................................ 36
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TABLE OF AUTHORITIES CASES Albice v. Premier Mortgage,
174 Wash. 2d 560, 276 P.3d 1277 (2012) ................................................. 3, 14 Bain v. Metro Mtg. Grp,
175 Wash. 2d 83, 285 P.3d 34 (2012) ....................................................passim Bass v. County of Butte,
458 F.3d 978 (9th Cir. 2006) ......................................................................... 12 Balderas v. Countrywide Bank, N.A.,
664 F.3d 787 (9th Cir. Cal. 2011). .................................................................. 1 Beaton v. JP Morgan Chase Bank, NA, 2013 U.S. Dist. LEXIS 42806 (W.D. Wash. 2013) ...................................... 14 Blanchard v. Golden Age Brewing Co., 188 Wash. 396, 63 P.2d 397 (1936) .............................................................. 27 Bowcutt v. Delta N. Star Corp., 95 Wash. App. 311 (1999) ............................................................................. 27 City of Tacoma v. O'Brien, 85 Wash.2d 266, 534 P.2d 114 (1975) .......................................................... 24 Cox v. Helenius,
103 Wash.2d 383; 693 P.2d 683 (1985) .................................................. 6, 7, 9 Dennis v. Dep't of Labor & Indus., 109 Wash.2d 467, 745 P.2d 1295 (1987) ...................................................... 17 Department of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 43 P.3d 4 (2002) ...................................................................... 16 Federal Trade Commission v. MTK Marketing, Inc., 149 F.3d 1036 (9th Cir. 1998) ....................................................................... 19
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Hagan & Van Camp, 96 Wash.2d 443, 63 5 P .2d 730 (1998 ) ......................................................... 8
Hebert v. J.F. Fliegel, 813 F.2d 999 (9th Cir. 1987) ......................................................................... 19 In re Swanson, 115 Wn.2d 21, 804 P.2d 1 (1990)............................................................ 16, 17 In re Veal, 450 B.R. 897 (B.A.P. 9th Cir. 2011) ....................................................... 18, 19 In re Wilhelm, 407 B.R. 392 (B.A.P. 9th Cir. 2009) ............................................................. 15 Klem v. Wash. Mut. Bank,
176 Wash. 2d 771, 295 P.3d 1179 (2013) ..............................................passim MHM&F, LLC v. Pryor, 168 Wash. App. 451, 277 P.3d 62 (2012) ..................................................... 10 Mintener v. Michigan Nat'l Bank,
117 Mich. App. 633, 324 N.W.2d 110 (1982) ................................................ 8 Plein v Lackey, 149 Wash.2d 214, 149 67 P.3d 1061 (2003) ............................... 13, 25, 26, 27 Schroeder v. Excelsior Mgmt Grp., LLC,
177 Wash.2d 94; 297 P.3d 677 (2013) ...................................... 3, 8, 14, 26, 27 Spokane County Health Dist. v. Brockett, 120 Wn.2d 140, 839 P.2d 324 (1992) ........................................................... 21 State v. Armendariz, 160 Wn.2d 106, 156 P.3d 201 (2007) State v. Posey, 174 Wash.2d 131, 272 P.3d 840 (2012) ........................................................ 10
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State v. Turner, 98 Wn.2d 731, 658 P.2d 658 (1983) ............................................................. 21 State ex rel. Roseburg v. Mohar, 169 Wash. 368, 13 P.2d 454 (1932) .............................................................. 10 Vawter v Quality Loan Service Corp. of Washington, 707 F. Supp. 1115 (W.D. Wash 2010) .......................................................... 31 Walker v. Quality Loan Service Corp. of Washington,
No. 65975-8-I, Slip Op., Wash. Ct. App. Div.I (Aug. 5, 2013) ...... 3, 4, 22, 30 Washington State Bar Ass'n v. State,
125 Wash.2d 901, 890 P.2d 1047 (1995) ........................................................ 7 Zylstra v. Piva
85 Wash.2d 743, 539 P.2d 823 (1975) ............................................................ 8 STATUTES Washington Constitution Art 4, 1 and 6 ......................................................... 5, 10 OTHER AUTHORITIES Philip A. Talmadge, A New Approach to Statutory Interpretation in Washington, 25 Seattle U. L. Rev. 179, 204 (2001) ............................................................................ 21
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FACTSThe Federal Home Loan Mortgage Corporation (hereafter Freddie Mac)
testified it acquired ownership of the Appellants Travis and Danielle Mickelson
(hereafter the Mickelsons) home loan on April 28, 2006, and has owned it at all
material times since. ER 216-7. Defendants Routh Crabtree and Olsen, P.S.
(hereafter RCO) and Northwest Trustee Services Inc. (hereafter NWTS) as
attorneys/trustees for defendant Chase Home Finance, LLC (Chase), claimed
Chase was Mickelsons mortgage company in a letter threatening a non-judicial
foreclosure. See e.g., ER 94, 97, 258-60; see also ER 164. RCO and NWTS told
Mickelsons they needed to negotiate with Chase, their client and the beneficiary,
regarding a modification of their loan. ER 154. Mickelsons attempted to work
with Chase, but received conflicting information, e.g., they were told one thing in a
letter (see Order at ER 45-52 ) and different things by phone. ER 152-175, 356-
3651.Mickelsons negotiated for two and one half years with Chase,2 during
which time non-judicial foreclosure proceedings against Mickelsons home were
1 The district courts reliance on a letter from Chase, the terms of which the Mickelsons alleged were ignored by Chase, was an inappropriate ground upon which to grant Chase defendants motions to dismiss. ER 45, 52. Balderas v. Countrywide Bank, N.A., 664 F.3d 787 (9th Cir. Cal. 2011).12 Mrs. Mickelson called Chase over 95 times between September 2008, and March 28, 2011. During this time she faxed more than 250 pages of documents, often re-
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scheduled, postponed, cancelled and rescheduled by Chase. Contrary to
defendants frequent assertions otherwise, Mickelsons did not know the
foreclosure sale in question would occur because Chase representatives told them it
had been rescheduled and therefore they did not believe they needed to restrain the
sale. ER 155. Only after discovering a Notice of Foreclosure Sale Occurrence taped to
their door on March 25, 2011, and contacting Chase, did Mickelsons learn their
home had been sold in spite of Chases assurance the sale would not occur because
Freddie Mac, the actual note owner, decided not to honor Chases decision to delay
the sale. ER 154, 155, 174. REPLY ARGUMENTS REGARDING PARTIES ISSUES
ISSUE ONE: Whether federal courts must follow the Washington Supreme Courts construction of Washington State statutes?
Mickelsons argued federal courts must follow state law as interpreted by
state appellate courts in any case that is awaiting final judicial determination (i.e.,
sub judice). Appellants Opening Brief (AOB), p. 17. Defendants Chase,
JPMorgan Chase Bank, N.A., Freddie Mac, and Mortgage Electronic Registration
Service, Inc. (MERS) (hereafter collectively Chase Defendants) agreed state law
applying and re-submitting the same material in response to the ever shifting requests, instructions and re-requests of Chases revolving cadre of representatives assigned to the Mickelsons account. ER 165-74.
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controls this appeal. See Answering Brief of Chase Defendants-Appellees
(ABC), p. 19. The following recent Washington precedent is applicable to the factual and
legal issues to be decided herein: Schroeder v. Excelsior Mgmt Grp., LLC, 177
Wash.2d 94; 297 P.3d 677 (2013); Klem v. Wash. Mut. Bank, 176 Wash. 2d 771,
295 P.3d 1179 (2013); Bain v. Metro Mtg. Grp, 175 Wash. 2d 83, 285 P.3d 34
(2012); Albice v. Premier Mortgage, 174 Wash. 2d 560, 276 P.3d 1277 (2012);
Walker v. Quality Loan Service Corp. of Washington, No. 65975-8-I, Slip Op.,
Wash. Ct. App. Div.I (Aug. 5, 2013). The district court erred in granting NWTS and its employees Vonnie
McElligott (McElligott), Rhea Pre (Pre), Jeff Stenman (Stenman) (hereafter
collectively NWTS Defendants) and RCO,3 summary judgment based on its
erroneous view of state law. Further, the district court has improperly dismissed
Mickelsons claims against all defendants pursuant to Fed. R. Civ. Pro. 12 under
the doctrine of DTA waiver because the court misunderstood Washingtons DTA
as it was written and has been recently construed by Washington appellate courts. ISSUE TWO: Whether the Trustee violated its duty of good faith to the grantor under RCW 61.24.010(3) and (4), by acting in association with a beneficiary and its agents to privately sell Homeowners residence pursuant to MERS/Freddie Mac foreclosure system?3 NWTS Defendants, RCO and Chicago Title Insurance Company (Chicago) hereafter are collectively referred to as Trustee Defendants.
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The district courts summary judgment order is based on the incorrect legal
conclusion that RCW 61.24.010(4) does not impose upon a Trustee a duty to act as
a neutral judicial substitute for purposes of conducting investigations relating to
non-judicial proceedings. Such investigations, i.e. judicial inquiries, include the
appropriateness of appointment of a successor trustee 4 and invocation of
foreclosure proceedings after determining proof of note ownership5. (See various
Orders improperly defining duty of good faith to include little or no investigation
or judicial inquiry of facts, at ER 5-6; 26-7; 38; 58-61.) 4 Throughout their briefs, Chase and Trustee defendants argue that Chase is a beneficiary within the meaning of RCW 61.24.005(2). To the extent defendants are attempting to rely on the MERS deed of trust and MERS as the genesis contractual beneficiary therein with the power to appoint successor trustees as a result of illegal contractual and fiduciary agreements, the trustee and Chase defendant groups are wrong; MERS is not a beneficiary under the DTA where there is no showing MERS has never held the obligations secured by the deed of trust and thus had authority to appoint successor trustee. See Walker, at **8-9. The agreements of defendants among themselves to violate DTA by appointing themselves agents for one another in transferring MERS interests (i.e. none) does not cure the problem as the district court finds. These agreements point out the unfair and deceptive nature of defendants attempt to use MERS as a DTA beneficiary, when it is not legal to do so in Washington. 45 RCW 61.24.030(7)(a) states in pertinent part:
5It shall be requisite to a trustee's sale:5 * * *5(7)(a) That, for residential real property, before the notice of trustee's sale is recorded, transmitted, or served, the trustee shall have proof that the beneficiary is the owner of any promissory note or other obligation secured by the deed of trust.
5
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Trustees suggest that Klems Neutral judicial substitute standard of good
faith does not apply because Klem was recently decided. See Answering Brief of
Trustee Defendants-Appellees (ABT), p. 38-39. This argument is flawed
because the neutral judicial substitute standard the district court was required to
apply comes from the language of the DTA, the policies of the DTA, the Klem
decision, and Klems constitutional underpinnings. See infra. Had the court
utilized this standard, no reasonable juror could have found RCO, NWTS, and its
employees complied with RCW 61.24.0406. Had the district court applied this
standard to Chicago Title it could not have dismissed Mickelsons claims against
them for being implausible.Mickelsons strongly dispute trustees statutory construction analysis that the
legislature expressly permitted or intended to or even could create a system
which allows advocates to replace neutral judicial officials in resolving disputes
over the title and possession to peoples homes in Washington. See Washington
Constitution Art 4, 1 and 67. RCO and NWTS misconstrue Thepvongsa, which
6McElligotts declaration indicates that all the parties adverse to the Mickelsons were contractually bound among themselves to perform non-judicial foreclosures as agents and fiduciaries of one another. See e.g. ER 264, at 4, 5; ER 265 at 9; ER 267 - 271; Cf. ER 3. It is difficult to think of how a similar contract would be allowable for a judge of a superior court.67Those relevant provisions state in pertinent part:
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deals with whether the beneficiary or trustee owed the borrower a fiduciary duty.
TR 31-32. Mickelsons have filed a motion with this Court to take judicial notice of the
legislative history underlying those provisions of the DTA this Court must construe
herein. The legislative history before and after Cox elucidates how the Court
should, and did in Klem, interpret the trustees duty of good faith to include
performing its judicial inquiry under the DTA as an impartial judicial substitute.
See Cox v. Helenius, 103 Wash.2d 383; 693 P.2d 683 (1985). Cox was decided
under the 1975 amendments to the DTA (see Appendix A to Motion to take
Judicial Notice, 1975, 1st Ex. Sess., ch. 129, 18). These amendments added to
RCW 61.24.010, that agents of title insurance companies, and any agency of the
U.S. Government, may qualify as a trustee under the DTA. 1975, 1st Ex. Sess., ch.
129, 1. These amendments also changed RCW 61.24.020 as follows:
7SECTION 1 JUDICIAL POWER, WHERE VESTED. The judicial power of the state shall be vested in a supreme court, superior courts, justices of the peace, and such inferior courts as the legislature may provide.
7 [* * *]7SECTION 6 JURISDICTION OF SUPERIOR COURTS. Superior courts and district courts have concurrent jurisdiction in cases in equity. The superior court shall have original jurisdiction in all cases at law which involve the title or possession of real property, [other instances of enumerate jurisdiction] 7
8 Hereafter all references to appendices shall refer to legislative history as to which the Mickelsons ask this court take judicial notice.
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No person, corporation or association may be both trustee and beneficiary under the same deed of trust ((nor may the trustee be an employee, agent or subsidiary of a beneficiary of the same deed of trust)): PROVIDED, That any agency of the United States government may be both trustee and beneficiary under the same deed of trust.
1975, 1st Ex. Sess., ch. 129, 1. Also noteworthy, was the 1975 statute added new
notices but did not require identification, in the notice of default and trustee sale, as
to who the beneficiary and note owner was, See 1975, 1st Ex. Sess., ch. 129, 1-
4, as is the case now. See infra. In 1985, the Court stated, [b]ecause the deed of trust foreclosure process is
conducted without review or confirmation by a court, the fiduciary duty imposed
upon the trustee is exceedingly high. Cox at 388-9. Further, the Court found the
1975 amendments had the potential to create troubling conflicts of interests,
specifically:It appears that the dual responsibility of trustee and attorney for the beneficiary precipitated at least some of the trustee's breaches. Although the dual role this trustee had troubles us, the Legislature specifically amended the statute in 1975 to allow an employee, agent or subsidiary of a beneficiary to also be a trustee. See Laws of 1975, 1st Ex. Sess., ch. 129, 2. The amendment furthers the general intent of the act that non-judicial foreclosure be efficient and inexpensive, and in the ordinary case would present no problem. However, the statute may not allow attorneys to do that which the Code of Professional Responsibility prohibits9. [***] Where an actual conflict
9 Cox statement that a statute may not allow attorneys to violate the rules of professional conduct is grounded upon Separation of Powers principles inherent in the Washington Constitution. See e.g. Washington State Bar Ass'n v. State, 125 Wash.2d 901, 890 P.2d 1047 (1995) where the Washington Supreme Court states:
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of interest arises, the person serving as trustee and beneficiary should prevent a breach by transferring one role to another person.
Cox, at 390 (citing as example, Mintener v. Michigan Nat'l Bank, 117 Mich. App.
633, 324 N.W.2d 110 (1982)). Amendments following Cox were not, as trustees urge, a legislative attempt
to overrule Cox, as attorney conduct is primarily within the control of the judiciary.
Id., at note 8. The statute was written to mean what it said; no person who owed a
fiduciary duty to an interested party in a non-judicial foreclosure could act as a
trustee.10 See RCW 61.24.010(3). This prohibition is essential to the good faith which is necessary for being
a neutral judicial substitute. RCW 61.24.010(4). See Klem at 790; Schroeder at
102 and note 3. The district court erred by not applying the neutral judicial "a legislative enactment may not impair this court's functioning or encroach upon the power of the judiciary to administer its own affairs. The ultimate power to regulate court-related functions belongs exclusively to this court." Id. at 909. In Washington, the regulation of the practice of law is within the sole province of the judiciary and legislative encroachment may be held to violate the separation of powers doctrine by the court. Zylstra v. Piva 85 Wash.2d 743, 539 P.2d 823 (1975); Hagan & Van Camp, 96 Wash.2d 443, 63 5 P .2d 730 (1998).10 Staff Summary of Public Testimony on Original Bill: PRO: Confusion exists regarding what duties a trustee owes to the debtor versus the lender, resulting in many lawsuits. The existence of duties to both the lender and the debtor creates a conflict of interest for the trustee. This bill strikes a fair compromise in eliminating the existence of trustee duties to either party, while giving a judge discretion in determining how much security to require from the debtor in a debtor's action to restrain a foreclosure sale. This way, a debtor is protected from potentially unfair practices by the trustee. Many attorneys for both debtors and creditors were consulted on the bill, which has wide support. Appendix B Senate Bill Report on Substitute Senate Bill 5378 at 2. (Emphasis supplied).
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substitute standard to the trustees actions. The district court also erred by not
finding as a matter of law that RCO and NWTS, its legal services company,
violated their duty of good faith where they owed fiduciary and contractual duties
to the Mickelsons adversaries while they were supposed to be acting as a neutral
judicial substitute with regard to taking the Mickelsons home pursuant to the
DTA.Secondly, the requirement that a judicial substitute be neutral and impartial
is a constitutional standard. See supra note 5. The Klem court minced no words
when it stated the DTA, a statute affording private parties the right to take real
property, must be construed so that it is constitutional: In a judicial foreclosure action, an impartial judge of the superior court acts as the trustee and the debtor has a one year redemption period. RCW 61.12.040, RCW 4.12.010; RCW 6.23.020(1) In a non-judicial foreclosure, the trustee undertakes the role of the judge as an impartial third party who owes a duty to both parties to ensure that the rights of both the beneficiary and the debtor are protected. Cox, 103 Wash.2d at 389. While the legislature has established a mechanism for non-judicial sales, neither due process nor equity will countenance a system that permits the theft of a person's property by a lender or its beneficiary under the guise of a statutory non-judicial foreclosure. An independent trustee who owes a duty to act in good faith to exercise a fiduciary duty to act impartially to fairly respect the interests of both the lender and the debtor is a minimum to satisfy the statute, the constitution, and equity, at the risk of having the sale voided, title quieted in the original homeowner, and subjecting itself and the beneficiary to a CPA claim.
Klem, 176 Wash. 2d at 790 & FN 10, 11 (emphasis supplied). Klems ruling is
mandated constitutional provisions relating to the enumerated original jurisdiction
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of the Washington Superior Court over disputes involving the title and
possession of real property. See Washington Constitution, Art. 4 1 and 6 (set
forth at note 7 hereof) See e.g., State v. Posey, 174 Wash.2d 131, 272 P.3d 840
(2012);11 State ex rel. Roseburg v. Mohar, 169 Wash. 368, 13 P.2d 454 (1932);12
see also, MHM&F, LLC v. Pryor, 168 Wash. App. 451, 277 P.3d 62 (2012).13
Assuming arguendo the legislature can substitute Trustees for judges of the
11The constitution grants the superior courts original jurisdiction in all criminal cases amounting to felony . The legislature cannot rescind this constitutional jurisdiction or vest it exclusively in another court. State v. Posey at 141.1112 In Mohar, the Washington Supreme Court states any attempt by the legislature to give a tribunal other than the superior court to authority to hear a dispute regarding water rights would be void under the superior courts constitutional grant of enumerated original jurisdiction to hear cases at law involving the title and possession of real estate. Mohar, Id. at 375. Query: If the legislature cannot create an entity to hear disputes regarding water, how can it enact legislation giving trustees the authority to resolve disputes involving the title and possession of land?1213Only within the last decade Washington courts have given Art. IV section 6 the importance it deserves in the context of the separation of powers under Washingtons constitution. 13
13In recent cases where our appellate courts have considered the constitutional grant of subject matter jurisdiction to the superior courts, they have accorded it the centrality that it deserves. Our Supreme Court has held that article IV, section 6 is dispositive and has overruled precedents that erroneously classify the superior court's jurisdiction as statutory.13
13Pryor, Id. at 159-60.13
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superior court, it strains the conscience to believe that such a substitute could,
constitutionally, be anything less than neutral and fair.Third, Mickelsons pled in their complaint basic principles later adopted by
the Supreme Court in Klem. ER 298-9 (alleges NWTS acted as agent for servicer
and alleged beneficiary); 305-306 (alleges robo-signing by NWTS and its agents as
part of scheme to take Mickelsons home); ER 317-325 (alleges facts supporting
trustees violations of their duty of good faith). Having set forth such claims as
procedural errors, violations of the DTA, breaches of good faith and bias, the
Mickelsons provided sufficient evidence14 for a fact finder to conclude RCO and
NWTS were not acting in good faith and therefore the courts grant of summary
judgment pursuant to Fed. R. Civ. Pro. 56 was inappropriate. ISSUE 3: Whether the Trustee violated provisions of Washingtons DTA, RCW 61.24.010; .020; .030(7); 030 (8)(l); .040(2); .050, .070 pursuant to MERS/Freddie Mac foreclosure system.
The district courts interpretation of the DTA is reviewed de novo, and
because DTA is a Washington statute, this Courts de novo review is governed by
14 See e.g. ER 264-65 (Declaration of Vonnie McElligott); FER 267-71 (Agreement between MERS, Chase, RCO and its legal service company, NWTS, creating contractual regarding foreclosure procedures); ER 366-67 (Power of Attorney by Chase in favor of RCO and NTS and its employees regarding non-judicial foreclosure proceedings creating fiduciary obligations); ER 164 (Chase identified RCO is its attorney/trustee); ER 164. RCO tells the Mickelsons they represent Chase, Mickelsons mortgage company; ER 258-262. NWTS identified Chase as their client (not as the beneficiary or owner of the note) See ER 93-101.
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Washington statutory interpretation rules. See Bass v. County of Butte, 458 F.3d
978, 979-81 (9th Cir. 2006). Defendants do not contest they violated the DTA provisions cited above as
these provisions were written by the Washington legislature. They argue the
legislature made mistakes in writing the law that federal courts should now
correct for the benefit of these MERS affiliated companies. Buying into this
argument, the district court chose not investigate whether Chase and Trustee
groups of defendants violated each of these statutory provisions; it simply accepted
defendants word that the legislature wrote the statute wrong.Mickelsons rely on the discussion set forth above and in their opening brief
as their basis for proving Chase and Trustees violated RCW 61.24.010 and .020.
Mickelsons rely on the notices of default and Trustees sale to prove violations of
RCW 61.24.030(8)(l) and 040(2). ER 93-101. Finally, Mickelsons rely on the
Courts own findings that defendants likely violated RCW 61.24.050 and .070. ER
40-41.15
15The district court also misinterpreted RCW 61.24.050 and .070 by holding as a matter of law that if defendants violated the credit bid provisions of the DTA by selling the property to Freddie Mac, who trustees claimed was not the beneficiary, there was no prejudice to the Mickelsons and therefore no remedy. Order 40-42. Immediately apparent from the courts order is its misunderstanding of the term prejudice. Mickelsons alleged prejudice includes loss of ownership of their home to a party who unfairly used their debt obligation to purchase their primary residence; issuance of a Deed which is inferior because it was not issued to the proper party in accordance with the DTA; years of being lied to, inconvenienced,
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The District Court misinterpreted RCW 61.24.030(7)(a) and erred in holding
that the Trustee was authorized to issue the Notice of Trustee Sale and proceed
with a non-judicial Foreclosure where (i) the Trustee had no proof that Chase was
the beneficiary and owner of the promissory note as required under that provision;
(ii) the Trustee did not have an unequivocal declaration stating that Chase was
actual holder of the note; (iii) contrary facts existed and were readily available to
the Trustee showing that Freddie Mac, not Chase, was the owner of the note;16 and
iv.) the Trustee had violated RCW 61.24.010(4). See ER 6 (10/31/12 SJ Order at
5). RCW 61.24.030(7)(a) expressly requires that before the notice of trustees
sale is recorded, transmitted, or served, the Trustee shall have proof that the
beneficiary is the owner of any promissory note or other obligation secured by the
deed of trust. (emphasis added). Through this requirement, the Washington
legislature intended to involve loan stakeholders, i.e., owners (not just holders) of and distracted. This district court erred when it held Mickelsons were not prejudiced by these manipulations of the Washington DTA.
15The district courts opinion was also wrong because under the rule stated in Plein, post sale relief (e.g., quiet title or declaratory) is not waived if the party did not have actual or constructive knowledge of a defense prior to the sale. See Plein, 149 Wash.2d at 227. It was impossible for the Mickelsons to have actual or constructive knowledge prior to the sale about the nature of the bid (credit bid or cash) or the bidder (beneficiary or other purchaser) because these DTA violations did not come into existence until the bid was made; which was well after the time a restraining order under the DTA could be filed.1516 See ER 216-7
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instruments or documents evidencing the obligations secured by the deed of trust,
in a process that would facilitate the policies intended to be implemented by the
DTA. See Bain, supra. See also, Schroeder, supra (RCW 61.24.030(7) sets forth as
a requisite to the DTA identifying the note owner). The second sentence of RCW 61.24.030(7)(a) provides that a declaration
by the beneficiary made under the penalty of perjury stating that the beneficiary is
the actual holder of the promissory note or other obligation secured by the deed of
trust shall be sufficient proof, i.e., sufficient proof that the beneficiary is the
owner of the promissory note as required under the first sentence of RCW
61.24.030(7)(a). The required wording of such a beneficiary declaration is
expressly stated, and the requirements of the DTA must be strictly construed in
favor of the borrower, such a beneficiary declaration cannot be relied on by the
Trustee as proof of ownership unless it strictly adheres to the requirements of this
provision. See Albice, 174 Wash.2d at 567 (DTA is strictly construed in
borrowers favor). See also Beaton v. JP Morgan Chase Bank, NA, 2013 U.S.
Dist. LEXIS 42806 (W.D. Wash. 2013) Here, it is undisputed that the declaration the Trustee relied on when it
issued the notice of trustee sale did not contain the unequivocal language required
by the second sentence of RCW 61.24.030(7)(a). The declaration defendants
relied upon stated, Chase Home Finance LLC is the actual holder of the
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15
promissory note or other obligation evidencing the above-referenced loan or has
requisite authority under RCW 62A.3-301 to enforce said obligation. ER 273
(emphasis added). The district courts summary judgment decision that the
Trustee properly proceeded with the foreclosure based on this equivocal
declaration, when Trustees knew Freddie Mac actually owned the note, should be
reversed on this ground, as well as on those other grounds stated herein and in
Mickelsons opening brief.17 RCO and NWTS do not dispute that the declaration on which it relied when
it issued the notice of trustee sale contains this qualifying language (the language
after the or) which departs from the required language set forth in the statute.
See TR at 46-55. Instead they argued below and to this Court that the legislatures
inclusion of the word owner in the DTA was a mistake by the legislature, which
meant to use the word owner as a synonym for the word holder. In the district
court, Trustees argued:It is NWTS position that the term owner is misused as a synonym for the term holder in RCW 61.24.030(7)(a). The terms are not synonymous. In re Veal, 450 B.R. 897, 912 (one can be an owner of
17 The Court should also note that in addition to violating the strict requirements of RCW 61.24.030(7), this equivocal additional language or has requisite authority under RCW 62A.3-301 to enforce said obligation upon which the Trustee relied is a legal conclusion, and could not be relied on to establish proof of ownership of the note for that reason as well. See In re Wilhelm, 407 B.R. 392, 402-03 (B.A.P. 9th Cir. 2009) (holding that a declaration stating that a party is the holder of the original promissory note at issue . . . is an inadmissible legal conclusion).
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a note without being a holder.). The term owner is not defined in Articles 3 or 9 of the UCC, or in the Deed of Trust Act. RCW 62A.3-103 (negotiable instruments); RCW 62A.9A-102 (secured transactions); RCW 61.24.005. Rather, as discussed herein, under both the DTAs definition of beneficiary and the U.C.C., the note holder is the party entitled to enforce the Note and Deed of Trust through non-judicial foreclosure. See RCW 61.24.005(2) and RCW 62A.3-301.
ER 110 at note 6. Similarly, the Trustee now argues to this Court:The NWTS Parties argued to the district court that the legislature conflated the term owner with holder/beneficiary in the two circumstances where owner appears in the DTA treating them as synonyms when they are not. In re Veal , 450 B.R. 897, 912 (one can be an owner of a note without being a holder.) SER R038-R049
TR p. 50. The Courts fundamental objective is to determine and carry out the intent
of the legislature, and if the statutes meaning is plain on its face, then the court
must give effect to that plain meaning as an expression of the legislative intent.
Department of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9-10, 43 P.3d
4 (2002). If the statute is unambiguous after a review of the plain meaning, the
courts inquiry is at an end. State v. Armendariz, 160 Wn.2d 106, 110, 156 P.3d
201 (2007). Moreover, in interpreting the statute every word is given meaning, and [w]here the legislature uses certain statutory language in one instance, and
different language in another, there is different legislative intent. In re Swanson,
115 Wn.2d 21, 27, 804 P.2d 1 (1990).
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The Trustee has listed numerous places within the DTA where the
legislature has used the term beneficiary, but that simply emphasizes that when
the legislature used the different term owner in RCW 61.24.030(7)(a); (8)(l),
and 040(2), there is a different legislative intent. See TR at 48-49. The Trustee
itself admits, owner and holder/beneficiary have different meanings. See TR
at 50. The Trustees argument that the legislature conflated the term owner with
the different term beneficiary is refuted by the language of the DTA and
established rules of statutory interpretation. See In re Swanson, 115 Wn.2d at 27;
see also Dennis v. Dep't of Labor & Indus., 109 Wash.2d 467, 479, 745 P.2d 1295
(1987)(words are not to be deemed inoperative or superfluous).The terms beneficiary, holder, and owner are crucial to proper statutory
construction in this situation. The beneficiary must be the holder of the instrument
or document evidencing the obligations secured by the deed of trust, excluding
persons holding the same as security for a different obligation. RCW
61.24.005(2). However, in order to start a non-judicial foreclosure the Trustee
shall have proof that the beneficiary is the owner of any promissory note or other
obligation secured by the deed of trust. RCW 61.24.030(7)(a). This means that
the beneficiary must be the holder and the owner of the instrument or
document evidencing the obligations secured by the deed of trust in order to
non-judicially foreclose.
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Further, the acceptable way for the Trustee to have proof that the beneficiary
is the owner is detailed in 61.24.030(7)(a). The statute states that [a] declaration
by the beneficiary made under the penalty of perjury stating that the beneficiary is
the actual holder of the promissory note or other obligation secured by the deed of
trust shall be sufficient proof as required under this subsection. The legislature
modified holder with the word actual. The legislature did this in order to
ensure that the owner, not the mere holder of the instrument or document
evidencing the obligations, was acting as the beneficiary in order to ensure the
three policies of the DTA were effectuated. Identifying the owner of the promissory note distinguished from the holder
or beneficiary is an essential part of a Trustees role as a neutral judicial
substitute under the DTA because: (1) interested parties, i.e. stakeholders need an
adequate opportunity to prevent wrongful foreclosure; (2) borrowers are entitled
negotiate foreclosure alternatives with owners who have actual discretion to settle;
and (3) all parties, not just beneficiaries, are entitled to a fair and inexpensive
resolution of disputes with proper parties, which does not occur when non-judicial
foreclosures are not transparent. See also, Laws 2011, c. 58, Findings-Intent-2011,
set forth at RCW 61.24.005, Revisers Note.18
18 These policies and legislative intent of the DTA also underscore why In re Veal, 450 B.R. 897 (B.A.P. 9th Cir. 2011), on which Defendants rely (see TR at 47, 50, 52 & 56; CR at 44), is not on point. Veal did not involve a trustees authority to
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It was an intent to fulfill these purposes of the DTA (i.e. transparency,
preventing wrongful non-judicial foreclosures, and inexpensive process) which led
to the current language of RCW 61.24.030(7)(a), which requires disclosure of the
note owner.19 The legislative history shows the Washington legislature drew a
clear distinction between owner of a promissory note and holder of the note,
and it deliberately used the term owner when it required in RCW 61.24.030(7)(a)
that the Trustee have proof that the beneficiary is owner of the note before
issuing the notice of trustee sale. The original version of the bill contained none of what is now RCW
61.24.030(7)(a). See Appendix C hereto (SB 5810 as originally proposed on
February 3, 2009). The next version of the bill contained language that is almost
identical to the language now contained in RCW 61.24.030(7)(a), with the notable
difference that where the word owner is used in the current provision, that
foreclose under RCW 61.24.030(7), nor did it involve or consider the policies and intent of the legislature to create a transparent process allowing borrowers to communicate with the owners of their loans. Veal simply analyzes the law under Articles 3 and 9 of the UCC governing enforcement of promissory notes, without discussing any of these policies and legislative intent of the DTA that are controlling in this case. See Veal, 450 B.R. at 908-13. 19 The Ninth Circuit regularly interprets state statutes based in part on state legislative history, and the Court should do so here. See, e.g., Federal Trade Commission v. MTK Marketing, Inc., 149 F.3d 1036, 1040-41 (9th Cir. 1998) (interpreting Californias Telephone Sellers Act based on state legislative history, including state Senate Committee Report); Hebert v. J.F. Fliegel, 813 F.2d 999, 1002 (9th Cir. 1987) (interpreting Oregon statute, ORS 23.170, based on state legislative history, including summaries of state legislative hearings).
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version used the words actual holder. See Appendix D at 11 (striker amendment
to Senate Bill 5810, adopted March 12, 2009). Under that early version, before the
notice of trustee sale was recorded, the Trustee would have been required to have
either proof that the beneficiary is the actual holder of any promissory note or
other obligation secured by the deed of trust, or possession of the original of any
promissory note secured by the deed of trust . . . Id. In the final version of the
bill, that language was stricken and replaced by the current language of RCW
61.24.030(7)(a) requiring that the Trustee have proof that the beneficiary is the
owner of the promissory note. See Appendix E at 12-13 (ESB 5810, adopted
April 9, 2009). In the accompanying Senate Bill Report, the Senate Committee on Financial
Institutions, Housing & Insurance summarized the public testimony that supported
the amended language and stated, in part: Few homeowners know who has the
authority to negotiate with them due to loan repackaging. The entity owning the
loan should have to present the paper to prove they have authority to foreclose.
See Appendix F at 3 (Senate Bill Report, ESB 5810) (emphasis added). The final
bill as enacted and codified contains identical language. See RCW 61.24.030(7). This sequential drafting history is powerful additional evidence that the
Trustees argument is wrong, and the district court erred when it ruled the
declaration provided to the Trustee was adequate and sufficient to authorize
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issuance of the notice of trustee sale under RCW 61.24.030(7). See ER 6 (12/3/12
summary judgment order).20 The legislature did not mistakenly conflate owner
with holder/beneficiary of the promissory note, as the Trustee argues and as
the district court mistakenly believed. The legislature knew what it was saying
when it enacted RCW 61.24.030(7) and it meant what it said. Federal courts are
expected to follow state law where constitutionally obligated to do so. Further, in Bain the Washington Supreme Court explained why reductive
theories used by federal courts for years to uphold the MERS system (which were
premised on the notion a borrower only needs to know what to pay, not who owns
the obligation he is paying on) were unhelpful and not consistent with the non-
judicial foreclosure process established by the Washington DTA. Bain, at 105-6,
109-10. Early on in Bain, the Court noted:Under the MERS system, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult. The MERS system may be inconsistent with our second objective when interpreting the deed of trust act: that the process should provide an adequate opportunity for interested parties to prevent wrongful foreclosure. Cox, 103 Wash.2d at 387(citing Ostrander, 6 Wash. App. 28)
20 See Spokane County Health Dist. v. Brockett, 120 Wn.2d 140, 153, 839 P.2d 324 (1992) (In determining legislative intent it is appropriate to consider sequential drafts); State v. Turner, 98 Wn.2d 731, 735-37, 658 P.2d 658 (1983) (changes made in bill revisions laid to rest all doubts about legislative intent); see also Philip A. Talmadge, A New Approach to Statutory Interpretation in Washington, 25 Seattle U. L. Rev. 179, 204 (2001) (Various drafts of a proposed bill can be very revealing as to the legislatures intent . . .).
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Bain at 97-8. The importance of this second policy was highlighted with the
legislatures enactment of the Foreclosure Fairness Act (which applies to the 2011
foreclosure, but not to the earlier wrongfully initiated foreclosure process). In
describing this addition to the DTA, Justice Chambers writes: The legislature was
attempting to create a framework where the stakeholders could negotiate a deal in
the face of changing conditions. Id. at 103. In this case, evidence showed Mickelsons had worked out a deal with Chase
not to foreclose; only to have it torpedoed when Freddie Mac appeared as the
owner of the loan years after Mickelsons had begun negotiating with Chase
(who, along with RCO and NWTS, falsely represented Chase was the
beneficiary under the DTA). This is certainly not an acceptable outcome under
the DTA as the Washington Supreme Court envisioned in Bain, Klem, and
Schroeder.ISSUE 4: Whether the district court erred as a matter of law in failing to find and conclude the Trustee did not comply with RCW 61.42.030(7) (have proof of ownership) before initiating and completing foreclosure under the DTA.
The DTA has always contemplated that Trustees, acting as neutral judicial
substitutes, would decide basic legal issues, like note ownership. In Walker,
Division One holds that even before enactment of RCW 61.24.030(7), a Trustee
had a duty to act as an impartial judicial substitute when applying the DTA.
Walker, at pp. 13-14.
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Under the intent of the DTA, even before the legislature required proof of
note ownership to start the non-judicial foreclosure process, a cursory investigation
by the Trustee of the ownership and custody status of the instrument or documents
evidencing the obligations was considered necessary to preserve the policies of the
DTA and basic rights afforded by the Washington constitution. See Klem. In this
case, if the district court had applied RCW 61.24.030(7)(a) correctly, it would have
found the Trustee did not have proof Chase was the owner of Mickelsons note
prior to starting Mickelsons non-judicial foreclosure nightmare.The court below held, without considering Mickelsons arguments to the
contrary, that Chases beneficiary declaration was adequate to comply with RCW
61.24.030(7). The court did this first, as previously shown by erroneously
conflating the word owner in the first sentence to mean holder. The court then
further erred by finding that the equivocal declaration of a purported Chase officer
that Chase was either the actual holder or entitled to enforce the note 21
constituted sufficient proof of note ownership, where Freddie Mac testified in
21 RCW 62A.3-301 provides "Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a non-holder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to RCW 62A.3-309 or 62A.3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
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discovery it actually owned the loan. See Beaton v. JP Morgan Chase Bank, NA,
2013 U.S. Dist. LEXIS 42806. To the extent the district court construed RCW 61.24.030(7)s beneficiary
declaration to be dispositive of the Trustees judicial inquiry it is mistaken, as the
Washington legislature cannot substitute its judgment for adjudicative facts. City
of Tacoma v. O'Brien, 85 Wash.2d 266, 271, 534 P.2d 114 (1975)(While a court
will not controvert legislative findings of fact, the legislature is precluded by the
constitutional doctrine of separation of powers from making judicial
determinations). Thus, where the facts before a judicial fact finder prove one
thing, i.e., Freddie Mac is the owner of loan, the legislature cannot require the fact
finder to ignore this evidence before it when exercising judicial discretion to
determine who owns the note. Cf. Klem, Cox.Moreover, even assuming arguendo, Chase unequivocally declared it was
the note owner, because the Trustees did not act in good faith under RCW
61.24.010(4), they could not have properly relied on such a declaration where there
was contradictory proof of note ownership in the Trustees possession. See RCW
61.24.030(7)(b).ISSUE 5: Whether the district court erred as a matter of law in failing to find the Trustee failed to comply with the requirements of RCW 61.24.030(l) and 61.24.040(2) by not identifying the actual owner of the note or obligation to the borrower?
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There is no dispute that the Trustee Defendants did not comply with RCW
61.24.030(8)(l) and .040(2). See ER 91-108 (Stafne declaration containing notice
of default and notice of trustees sale). The district courts failure to even consider
these violations was prejudicial error because violations of .030 requirements
prevent the Trustee from invoking the power of sale, see infra., and .040 violations
may divest the Trustee from exercising any power of sale under the DTA.
ISSUES 6, 7, & 8: If the non-judicial sale of Mickelsons home was not legally commenced under the DTA, whether the district court erred in dismissing as waived the Mickelsons other state damage causes of action and other requests for relief?
Both Chase and Trustee Defendants begin their arguments by maintaining
Mickelsons waived any claims under Plein v Lackey22 by failing to bring an
action to restrain the trustees sale. CR, pp. 19-26; TR. 19-26. Both attempt to
distinguish the Washingtons Supreme Courts recent decision in Schroeder by
suggesting its holding that a Trustee's failure to follow the DTA requisite
provisions set forth in RCW 61.24.020 and .030 only applies when a deed of trust
deals with agricultural land. CR p. 23, TR p. 22-3. This argument does not square
with the language or reasoning of Schroeder:RCW 61.24.030 is not a rights-or-privileges-creating statute. Instead, it sets up a list of requisite[s] to a trustee's sale. Among other things, it is a requisite to a trustee's sale that the deed contain the power of sale, .030(1); that the property not be used primarily for agricultural purposes, .030(2);
22149 Wash.2d 214, 149 67 P.3d 1061 (2003).
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that a default has occurred, .030(3); that there is no other pending action by the beneficiary to seek satisfaction of the obligation, .030(4); that the deed has been recorded in the relevant counties, .030(5); that the trustee maintain an address for service of process, .030(6); that the trustee have proof that the beneficiary is the owner of the obligation secured by the deed of trust, .030(7); and that the beneficiary has given written notice of the default to the debtor containing specific statutory language advising the debtors of their rights, .030(8). These are not, properly speaking, rights held by the debtor; instead, they are limits on the trustee's power to foreclose without judicial supervision.
Schroeder, 177 Wash.2d at 106-7 (emphasis supplied). The agricultural land
requirement is only one of the eight requisites to a beneficiary and trustee lawfully
invoking the DTA. Id., 112.23 If any of the DTAs requisites are not followed the
Trustee does not have authority to proceed with non-judicial foreclosure
proceedings and the failure to comply with DTAs five day notice proceeding has
no effect because the DTA has not been properly invoked. Id. Even Plein, at n.
6,24 recognizes that if a Trustee does not properly invoke the DTA by failing to
23 Again, the simple fact is that if Schroeder's property was primarily agricultural, then the trustee lacked the statutory power to foreclose non- judicially. RCW 61.24.020, .030(2). Schroeder [the borrower] could not vest the trustee with authority the statute did not. Nor could the trial court. RCW 61.24.020, .030.2324In discussing Cox, the Plein Court noted:24
24However, the court also held that the Coxs' action was an action on the obligation. Cox v. Helenius, 103 Wn.2d 383, 388, 693 P.2d 685(1985). Under RCW 41.24.030(4) [a requisite to invoking the DTA], a trustee may not commence foreclosure proceedings where there is an action pending on the obligation. Thus, the foreclosure sale was invalid on this basis.
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comply with one of the requisite provisions, the Trustee has no authority under the
DTA and any sale is void. Schroeder states in the decisions Claims for Damages section that the
DTA statutory provision requiring an effort to restrain a sale pursuant to the terms
of the DTA does not result in a waiver of other causes of action. We find no support in the law for the idea that the failure to enjoin a sale somehow extinguishes other claims, causes of actions, or remedies available to parties to a real estate transaction or deed of trust. As we noted recently, waiver only applies to actions to vacate the sale and not to damages actions. Klem v. Washington Mut. Bank, 176 Wn.2d 771, 796, 295 P. 3d 1179 (2013).
Schroeder was decided the same day as Klem. In Klem the Supreme Court
concludes:We hold that the right to enjoin a foreclosure sale is an equitable remedy and the failure to enjoin a sale does not operate to waive claims based on the foreclosure process where it would be inequitable to do so. Where applicable, waiver only applies to actions to vacate the sale and not to damages actions.
Klem, 176 Wash. 2d at 796-797 (emphasis supplied).
Equity is a creature of the judicial branch in Washington and the legislature
cannot interfere with its application by the courts. Blanchard v. Golden Age
Brewing Co., 188 Wash. 396, 412-420, 63 P.2d 397 (1936); Bowcutt v. Delta N.
24
24Plein, note 624
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Star Corp., 95 Wash. App. 311, 319 (1999) (Applying constitutional of principles
to DTAs restraint of sale equitable provisions). Since Trustees and Chase failed to comply with the conditions necessary to
invoke the authority of the DTA, they cannot rely on it as a shield. Id.ISSUE 9: Whether the district courts decisions dismissing all of the CPA actions against defendants failed to comply with most recent[Washington precedent]?
All of the recent precedent cited with regard to issue 1 hereof is contrary to
district courts dismissal of CPA claims. For example, Walker finds the improper
appointment of a successor Trustee through the original grant of contractual
beneficiary power to satisfy the deceptive or unfair trade practices requirement.
In Klem the Court found that having a Trustee committed to exercise its discretion
only on behalf of a beneficiary constituted an unfair and deceptive practice. Klem
at 787-792. Further, pre-dating notarized notices (exactly as occurred here) also
constituted unfair and deceptive practices. Id., at 792-795. In Bain the Supreme
Court found the MERS forms, which Mickelsons alleged to be unconscionable and
deceptive, problematic and manipulative. Bain, at 108-9. The term manipulative equates with both deceptive and unfair. The record
before the district court on summary judgment also included other illegal contracts,
the sole intent of which was to require or allow MERS affiliated defendants to
follow MERS system of non-foreclosure as opposed to that required by the DTA.
ER 3 (District Courts description of agreements between MERS affiliated
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defendants allowing each other to perform steps under DTA relating to the illegal
sale of Mickelsons home.) Mickelsons sprawling complaint throughout most of its sections,
not just limited to the CPA section, contains numerous allegations of unfair
and deceptive trade practices. Each was plausible and the district court erred
in its approach to ignoring them because MERS could be a beneficiary 25. Because the MERS forms, contracts between the MERS affiliated
defendants herein, and MERS non-judicial foreclosure practices (even after Bain)
affect thousands, if not millions, of Washington homeowners and residents (i.e.
families), the facts of this case satisfy the public interest test (regardless of the
trustees plea for this Court to find otherwise). See Bain at 118. The only question left unanswered by the Bain court was whether the
plaintiffs could show any injury caused by this deceptive and unfair conduct,
which the Court noted depended on a cases particular facts. Bain, at 118. Here,
the Mickelsons complaint directly alleged sufficient injury to be actionable under
25The district courts dismissal of Mickelsons CPA claims because there is no legal reason MERS cannot hold the note is not comprehensible. ER 49. There is no precedent, even federal precedent, to suggest Mickelson had to plead that under no circumstances MERS could never hold the note or meet the statutory definition of a beneficiary or appoint a successor trustee. All that was necessary was alleging that MERS was not a proper beneficiary in this case and that the deed of trust appointing it such has the capacity to deceive, Bain, at 115, and was unfair. Klem.
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the CPA, ER 35126, and the facts of the complaint showed that defendants had been
sufficient distract.ISSUE 10: Whether the district court erred in dismissing homeowners FDCPA claims against RCO, NWTS, and McElligott? Because RCO, NWTS, and McElligott did not represent the person entitled
to non-judicially foreclose under the Washington DTA, their threats to do so
violated the 1692f(6) of the FDCPA. See Walker, at **25-26. Because the
district court applied its own interpretation of Washington law, rather than that
which exists, the court inappropriately granted summary judgment on this issue.
See Order, ER 6-7.OTHER ISSUES RAISED BY CHASE AND TRUSTEE DEFENDANTS RESPONSE: Chase and Trustees argue Plein, supra., requires waiver of all Mickelsons
causes of action prayers for relief. They are wrong for the reasons set forth in the
discussions and authority set forth above relating to issues 1 through 8.
26 Paragraph 13.12 states:
26The Mickelsons were damaged by these deceptive practices because they were required to expend resources to avert an unlawful foreclosure previously, caused Plaintiffs to pay sums which were not owed, and prevented Plaintiffs from identifying the real beneficiary note holder and attempting to negotiate a new arrangement to avoid foreclosure. ER 351.
26
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Chase issue 3 asks: if Mickelsons a.) failed to allege facts plausibly
establishing injury resulting from MERS identification solely as a nominee for the
beneficiary in the deed of trust and b.) where letters to Mickelsons show Chase
stated it would halt foreclosure while reviewing plaintiff's loan modification, and it
never promised a loan modification? With regard to issue a.) the Mickelsons alleged cognizable injuries under
the CPA in their complaint because they alleged the successor Trustee, RCO and
NWTS, had no authority to invoke to appoint a successor Trustee. This created
injuries, which were clearly alleged. See supra. With regard to issue b.) the
undisputed facts show Chase (servicer) agreed to stop the sale, but Freddie Mac
foreclosed anyway. This was both unfair and deceptive because defendants misled
Mickelsons into believing Chase had the authority to stop the sale. Trustees issue 3 asks: if the district court properly dismissed claims against
NWTS for alleged violations of the DTA related to the 2008 foreclosure which was
never consummated? The district court relied on Vawter v Quality Loan Service
Corp. of Washington, 707 F. Supp. 1115, (W.D. Wash 2010) to hold that no cause
of action exists for the initiation of wrongful non-judicial procedure unless a sale is
consummated. Vawters interpretation of the DTA in this regard has been
specifically rejected by Washington precedent. Walker, at 14-18. Because the
Courts dismissal that the 2008 non-judicial foreclosure was based on Vawters
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erroneous determination of the DTA, the district court erred in finding Mickelsons
claims based thereon as implausible. See Orders at 25.Chase and the Trustee argue throughout their answering briefs that Chase is
the beneficiary because it holds physical possession of a note27 endorsed in blank28;
Ergo Chase argues it is the beneficiary. This is a gross oversimplification of the
concept of beneficiary and the district court erred in adopting it. Beneficiary is defined as (1) the holder of the instrument or document; (2)
evidencing the obligations; (3) secured by the deed of trust; and (4) excluding
persons holding the same as security for a different obligation.29 The district court relied on the UCC as adopted in Washington to define
holder. This is improper. The UCC, generally designed to fill gaps in contracts
where the parties are silent, permits variation by contract 30 and as the Note
provides a definition for Note Holder31 related UCC provisions are irrelevant.32
27 We will assume, arguendo, this was the original instrument and not a high resolution scan or autopenned copy.28 RCW 62A.1-201 (21)(A)"Holder" [means] [t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession29 RCW 61.24.005(2).30 RCW 62A.1-302.31The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the Note Holder.32The DTA does not define holder; strict construction does not prohibit this agreement as it did with MERS in Bain where beneficiary was statutorily defined.
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To be a Note Holder under the contractual definition, Chase would have to
have taken the note by transfer. Transfer is not defined by the Note. Application of
the UCC is proper and Chase did not take the note by transfer thereunder. Chase
admits Freddie Mac was entitled to proceeds of the note and [i]f a transferor
purports to transfer less than the entire instrument, negotiation of the instrument
does not occur. The transferee obtains no rights under this Article and has only the
rights of a partial assignee.33 Chases holder status is undermined by the fact that another party, not
Chase, is admittedly entitled to repayment of the debt. Chase does not hold an
instrument evidencing obligations owed to Chase.34The deed of trust does not secure an interest to anyone other than the
Lender and presumably a contractually defined successor Note Holder. 35Even if none of this were true, the UCC is also clear that a person may be in
possession of the note while not being the holder.36 Merely being in possession of
33 RCW 62A.2-203(d).34As Bain notes, [RCW 61.24.070(2)] makes little sense if the beneficiary does not hold the note[i]n essence, it would authorize the non-holding beneficiary to credit to its bid funds to which it had no right. Bain at 102. (Emphasis added).35This Security Instrument secures to Lender: (i) the repayment of the Loan Deed of Trust at 3 Transfer of Rights in the Property.36RCW 62A.3-301 "Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a non-holder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument A person may be a person entitled to enforce
Case: 13-35008 08/23/2013 ID: 8755218 DktEntry: 32-1 Page: 39 of 42
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the instrument is insufficient proof that the person in possession is a beneficiary, as
required and contemplated by the DTA, entitled to non-judicial foreclosure under
61.24.030(7)(a).All other issues raised by the Trustees and Chase defendants are addressed
above and establish 1.) Trustees were not entitled to summary judgment; and 2.) no
defendant should have been granted a motion to dismiss any claim as Mickelsons
complaint alleged plausible facts based on a proper interpretation of the
Washington DTA; which the district court failed to construe properly.
Dated: August 23, 2013
STAFNE LAW FIRM
By: s/Scott E. Stafne Scott E. Stafne Attorneys for Appellants, Travis and Danielle H. Mickelson
the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
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CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the type-volume limitation set forth in
Rule 32(a)(7)(B) of the Federal Rules of Appellate Procedure. This brief uses a
proportional typeface and 14-point font, and contains 9,037 words which exceeds
the word limit but a Motion to File Over-sized Brief is filed concurrently.
Dated: August 23, 2013
STAFNE LAW FIRM
By: s/Scott E. Stafne Scott E. Stafne Attorneys for Appellants, Travis and Danielle H. Mickelson
Case: 13-35008 08/23/2013 ID: 8755218 DktEntry: 32-1 Page: 41 of 42
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CERTIFICATE OF SERVICE
I hereby certify that on August 23, 2013, I electronically filed the foregoing
with the Clerk of the Court for the United States Court of Appeals for the Ninth
Circuit by using the appellate CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and
that service will be accomplished by the appellate CM/ECF system.
s/ Stephen Moore
Case: 13-35008 08/23/2013 ID: 8755218 DktEntry: 32-1 Page: 42 of 42