Easter v. American West Financial
| Citation | 381 F.3d 948 |
| Decision Date | 31 August 2004 |
| Docket Number | No. 03-35041.,03-35041. |
| Parties | Don EASTER, Plaintiff, and John Zacher; Bonnie Zacher, and the marital community composed thereof; on their own behalf and on behalf of all others similarly situated; Gregory Zoro; Jeffrey Stone; Janita Stone, and the marital community composed thereof; Mark Mayfield; Tamara Mayfield, and the marital community composed thereof; James Brown; Margaret Brown, and the marital community composed thereof, on their own behalf and on behalf of all others similarly situated; Paula Scott, Plaintiffs-Appellants, v. AMERICAN WEST FINANCIAL, a Nevada Corporation, Defendant, and Union Financial Corp., a California Corporation; PSB Lending Corporation, a Nevada corporation; Empire Funding Home Loan Owner Trust 1997-1, a Delaware business trust; Empire Funding Home Loan Owner Trust 1997-2, a Delaware business trust; Empire Funding Home Loan Owner Trust 1997-3, a Delaware business trust; Empire Funding Home Loan Owner Trust 1997-4, a Delaware business trust; Empire Funding Home Loan Owner Trust 1998-1, a Delaware business trust; Empire Funding Home Loan Owner Trust 1998-2, a Delaware business trust; Empire Funding Home Loan Owner Trust 1998-3, a Delaware business trust; Empire Funding Home Loan Owner Trust 1999-1, a Delaware business trust; Ocwen Federal Bank FSB, a United States savings bank; Tripoint Capitol Corporation, a California Corporation; Argent Mortgage Corporation, a California corporation fka Clearview Capital Corporation; TMS Mortgage Inc., a New Jersey corporation; Financial Asset Securities Corp Mego Mortgage Home Loan Owner Trust 1997-1, a Delaware business trust; Financial Asset Securities Corp Mego Mortgage Home Loan Owner Trust 1997-2, a Delaware business trust; Financial Asset Securities Corp Mego Mortgage Home Loan Owner Trust 1997-3, a Delaware business trust; Financial Asset Securities Corp Mego Mortgage Home Loan Owner Trust 1997-4, a Delaware business trust; FirstPlus Home Loan Owner Trust 1995-3; FirstPlus Home Loan Owner Trust 1995-4; FirstPlus Home Loan Owner Trust 1996-1; FirstPlus Home Loan Owner Trust 1996-2; FirstPlus Home Loan Owner 1996-4; FirstPlus Home Loan Owner Trust 1997-1; FirstPlus Home Loan Owner Trust 1997-2; FirstPlus Home Loan Owner Trust 1997-3; US Bank NA ND; American Mortgage Professionals Inc., a California corporation; FirstPlus Home Loan Owner Trust 1996-3, a Delaware business trust; FirstPlus Home Loan Owner Trust 1997-4, a Delaware business trust; FirstPlus Home Loan Owner 1998-1, a Delaware business trust; FirstPlus Home Loan Owner Trust 1998-2, a Delaware business trust; FirstPlus Home Loan Owner Trust 1998-3, a Delaware business trust; FirstPlus Home Loan Owner 1998-4, a Delaware corporation; FirstPlus Home Loan Owner Trust 1998-5, a Delaware business trust; German American Capital Corporation, a Maryland corporation; Paine Webber Real Estate Securities, Inc., a Delaware corporation; Ace Securities Corporate Home Loan Trust 1999A, a Delaware business trust; Sovereign Bank, a United States savings bank; Real Time Resolutions Inc., a Texas corporation; PB Reit Inc.; PB Investment Corp.; United National Home Loan Owner Trust 1999-1; United National Bank Home Loan Owner Trust 1999-2, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Christopher I. Brain, Beth E. Terrell, Michael D. Daudt, Toby J. Marshall, Tousley Brain Stephens PLLC, Seattle, Washington, for the appellants.
Michele Radosevich, Davis Wright Tremaine LLP, Seattle, Washington, for appellees TMS Mortgage, Inc., UBS Warburg Real Estate Securities, Inc.
James B. Hoff, Bullivant Houser Bailey PC, Seattle, Washington, for appellee American Mortgage Professionals.
Kevin Bay, Ryan Swanson & Cleveland, PLLC, Seattle, Washington and Antoinette P. Hewitt, Michael J. Mills, Kutak Rock, LLP, Irvine, California, for appellees FirstPlus Home Loan Trust 1996-2, FirstPlus Home Loan Owner Trust 1996-3, FirstPlus Home Loan Owner Trust 1996-4, FirstPlus Home Loan Owner Trust 1997-1, Empire Funding Home Loan Owner Trust 1998-3, Financial Asset Securities Corp. Mego Mortgage Home Loan Owner Trust 1997-1, Mego Mortgage Home Loan Owner Trust 1997-2, Ace Securities Corporate Home Loan Trust 1999A, Real Time Resolutions, Inc., German American Capitol Corporation.
Richard M. Clinton, Douglas L. Davies, Thuy Nguyen Leeper, Dorsey & Whitney LLP, Seattle Washington, for appellees FirstPlus Home Loan Owner Trust 1997-2, FirstPlus Home Loan Owner Trust 1997-3, FirstPlus Home Loan Owner Trust 1997-4, FirstPlus Home Loan Owner Trust 1998-1, FirstPlus Home Loan Owner Trust 1998-2, FirstPlus Home Loan Owner Trust 1998-3, FirstPlus Home Loan Owner Trust 1998-4, FirstPlus Home Loan Owner Trust 1998-5, Empire Funding Home Loan Owner Trust 1997-1, Empire Funding Home Loan Owner Trust 1997-2, Empire Funding Home Loan Owner Trust 1997-3, Empire Funding Home Loan Owner Trust 1997-4, Empire Funding Home Loan Owner Trust 1998-1, Empire Funding Home Loan Owner Trust 1998-2, Empire Funding Home Loan Owner Trust 1999-1, U.S. Bank National Association, N.D., Financial Asset Securities Corp. Mego Mortgage Home Loan Owner Trust 1997-3, Financial Asset Securities Corp. Mego Mortgage Home Loan Owner Trust 1997-4, GRMT Mortgage Loan Trust 2001-1, co-counsel for PSB Lending Corporation.
Jeffrey S. Miller, Foster Pepper & Shefelman PLLC, Seattle, Washington, for Ocwen Federal Bank, FSB.
J. William Ashbaugh, Kenneth Hobbs, Seattle, Washington, for PB REIT, Inc., PB Investment Corporation.
Appeal from the United States District Court for the Western District of Washington, Barbara Jacobs Rothstein, District Judge, Presiding. D.C. Nos., CV-01-01004-BJR, CV-01-01028-BJR and CV-01-01043-BJR.
Before: TASHIMA, PAEZ, and BEA, Circuit Judges.
I. Introduction
Washington's usury statute prohibits ordinary lenders from making loans bearing interest rates in excess of 12%. WASH. REV. CODE § 19.52.020. However, Washington's Consumer Loan Act (CLA) permits licensed lenders to charge interest rates up to 25% to borrowers with less than perfect credit. WASH. REV. CODE §§ 31.04.005, 31.04.035, 31.04.105. Washington also limits by statute the amount of origination fees a lender may charge. WASH. REV. CODE §§ 19.52.020, 31.04.035.
In the second-mortgage market, the identity of the actual lender is not always clear. This case deals with whether old usury laws have caught up with modern practices in lending, intermediating, discounting, and sales.
Put another way, have the brokers and lenders involved here structured their transactions so clearly that there remain no triable issues of fact whether unlicensed lenders made the loans? As discussed below, we conclude that in certain instances they have, in others they have not. However, we also conclude that on some claims in which such triable issues remain, the plaintiffs-appellants' (Borrowers) claims are time-barred by the applicable statutes of limitation. Accordingly, we will affirm in part and will reverse in part the orders of the district court, and will remand for further proceedings.
II. Factual and Procedural Background
Borrowers obtained residential second mortgage loans at interest rates greater than 12% from Union Financial Company (Union) or American Mortgage Professionals, Inc. (AMP). After Borrowers executed the loan documents, Union assigned the loans to Empire Funding Corporation (Empire) and TMS Mortgage, Inc. d/b/a The Money Store (TMS); AMP assigned the loans to FirstPlus Financial, Inc. (FirstPlus). Empire, TMS, and FirstPlus later sold the loans to various investment trusts (collectively, Trust Defendants) which pooled the loans together, securitized the loans into trusts, and sold interests in the trusts to investors.
Zacher v. Union Financial Company, D.Ct. No. CV-01-01043-BJR, and Stone v. American Mortgage Professionals, Inc., D.Ct. No. CV-01-01028-BJR, are the two lead cases in a group of putative class actions with similar allegations that were originally filed in King County Superior Court, Washington. Borrowers' complaints both allege that defendants violated Washington state usury and consumer protection laws. Invoking diversity jurisdiction, defendants in each action removed all putative class actions to federal court. The district court consolidated the actions, designated the lead actions, and stayed the others.
The complaints1 allege causes of action for (1) statutory usury; (2) violations of Washington's Consumer Protection Act (CPA);2 (3) negligence; and (4) common law usury. Borrowers contend that their loans were usurious because Union and AMP were not licensed by the state of Washington to charge interest in excess of 12%. They further allege that, as assignees of the loans, TMS and the Trust Defendants are subject to all claims and defenses that Borrowers may assert against Union and AMP.
Defendants contend that, as loan brokers, Union and AMP did not need licenses under the CLA because they were not lending their own money. They contend that in each of the loans at issue, Union and AMP acted only as brokers because each loan was "table-funded" by Empire, TMS, or FirstPlus, each of whom was licensed under the CLA to charge interest rates up to 25%.
"Table-funding" is defined as a "settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds." See, e.g., 24 C.F.R. § 3500.2.3 In a table-funded loan, the originator closes the loan in its own name, but is acting as an intermediary for the true lender, which assumes the financial risk of the transaction. The timing of the assignment is therefore sometimes pivotal in determining whether a residential mortgage loan is table-funded because the determinative question is who bears the risk of the transaction.
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