Meyer v. U.S. Bank Nat'l Ass'n
| Decision Date | 09 April 2015 |
| Docket Number | Bankruptcy No. 12–01630–KAO.,No. 14–00297RSM.,USBC, WAWB No. 14–S002.,14–00297RSM. |
| Citation | 530 B.R. 767 |
| Parties | Peter J. MEYER and Sharee L. Meyer, husband and wife; Appellee, v. U.S. BANK NATIONAL ASSOCIATION as Trustee for Structured Asset Securities Corporation Mortgage Pass–Through Certificates, 2006–GE1, a federally chartered national bank; America's Servicing Company, a Division of Wells Fargo NA d/b/a Wells Fargo Home Mortgage, a National Bank ; Mortgage Electronic Registration Systems, Inc., a Delaware corporation; and Doe Defendants 1–10, Defendants, and Northwest Trustee Services, Inc., Appellant Defendants. |
| Court | U.S. District Court — Western District of Washington |
Heidi Buck Morrison, Joshua Schaer, RCO Legal, P.S., Bellevue, WA, for Appellee.
Heidi C. Anderson, Ronald E. Beard, Lane Powell PC, Seattle, WA, for Appellant.
ORDER REVERSING BANKRUPTCY COURT
This matter comes before the Court upon appeal by Defendant–Appellant Northwest Trustee Services, Inc. (“NWTS”) from the Bankruptcy Court for the Western District of Washington's memorandum decision granting judgment in favor of Plaintiffs–Appellees Peter and Sharee Meyer (the “Meyers”). Following bench trial, the Honorable Karen Overstreet awarded the Meyers $72,008 plus costs and attorney's fees on their claims against NWTS for violation of Washington's Deed of Trust Act and Consumer Protection Act. Having considered the briefs and supporting exhibits of the parties and amicus curiae United Trustees Association (“UTA”), together with the relevant record below, and having heard oral argument by the parties, the Court REVERSES the Bankruptcy Court's judgment for the reasons stated herein.
On November 10, 2005, the Meyers executed an adjustable rate promissory note (the “Note”) in favor of Finance America LLC to secure a $425,000 loan. Bankruptcy Record, Case No. 12–01630KAO (“BR”), Dkt. # 1, Ex. A. The Note was secured by a Deed of Trust (the “Deed”) against the Meyers' residential property in Snohomish, WA. Id. at Ex. B. The Deed named Ocwen Loan Servicing as servicer, DCBL, Inc. as trustee, Finance America LLC as lender, and Mortgage Electronic Registration Systems (“MERS”) as beneficiary and nominee of the lender. The Deed provided that the Note, together with the Deed, could be sold one or more times without notice to the borrowers. Id. at ¶ 20. The Deed was recorded on November 18, 2005, and the Meyers moved into their residence in January 2006 with their three children and began making payments under the Note. Memorandum Decision, Dkt. # 145 (“MD”), p. 3.
In April 2006, the Note was transferred into a securitized trust, entitled Structured Asset Securities Corporation Mortgage Pass–Through Certificates Series 2006–GELS2 (“GEL2”). MD at p. 3. The relevant details of this transaction include the following: First GEL2 is not an operating entity and therefore lacks a physical address. Second, U.S. Bank National Association (“U.S. Bank”) served as Trustee of the trust, with America's Servicing Company (“ASC”), a division of Wells Fargo Bank NA (“Wells Fargo”), acting as the loan servicer. The trial court determined based upon a review of the evidence, that Wells Fargo held the Note as custodian for U.S. Bank, which in turn served as Trustee for GEL2. MD at p. 5. Third, under the trust agreement, U.S. Bank was authorized to execute powers of attorney in favor of any servicer to permit the servicer to foreclose against any mortgaged property in GEL2, with actions in pursuit of foreclosure delegated to the servicer under a Servicing Agreement. NWTS produced three separate Limited Power of Attorney documents executed by U.S. Bank authorizing Wells Fargo to act as its attorney-in-fact under the Servicing Agreement. MD at p. 26; Defendant–Appellant's Appendix (“DA”), Dkt. # 12, pp. 61–66.
The Meyers continued to make the required payments of principal and interest under the Note until they began to experience financial difficulties toward the end of 2008. Under the terms of the Note, the Meyers agreed that failure to pay the full amount of each monthly payment on the due date would put them in default. BR, Dkt. # 1, Ex. A, ¶ 7(B). The trial court could not determine from the evidence presented at trial precisely when the Meyers initially defaulted or whether any lender issued a formal notice of default. MD at p. 6.
On March 9, 2009, NWTS received its first referral to foreclose the Deed of Trust in the form of a (“CIR”) pulled from the third party website “Vendorscape.” MD at p. 6. According to Jeff Stenman, Foreclosure Manager for NWTS, NWTS has used Vendorscape to access foreclosure information for at least a decade but has no procedures in place to verify the accuracy of the information. Id. Based on the information in the CIR, Stenman executed an Assignment of Deed of Trust from MERS to U.S. Bank as Trustee for GEL2 on March 10, 2009. Although Stenman was an employee of NWTS, he prepared and signed the assignment as a Vice President of MERS pursuant to what he described as a tri-party agreement between himself, Wells Fargo, and MERS. Id. at p. 7. The agreement was not produced at trial, though the Assignment was recorded on July 1, 2009.Id.
On March 26, 2009, Anne Neely signed an appointment of NWTS as Successor Trustee. DA at p. 72. The document identified Neely as a Vice President of Wells Fargo, acting as attorney-in-fact for U.S. Bank, Trustee for GEL2. Id. The assignment was recorded July 1, 2009, and incorrectly identified MERS as beneficiary, although MERS' interest had already been assigned to U.S. Bank at the time. Id.
For undisclosed reasons, the 2009 foreclosure proceeding against the Meyers was discontinued and a new proceeding initiated in 2010, following NWTS's receipt of a second CIR from Vendorscape requesting commencement of foreclosure. MD at p. 8; DA at p. 277. Both the 2009 and 2010 CIRs incorrectly referenced the Note as non-adjustable and contained conflicting representations of the principal balance and interest rate. MD at p. 8. NWTS nonetheless issued a Notice of Default under the Meyers' Deed of Trust on July 9, 2010 based on information contained in the 2010 CIR. DA at pp. 73–75. The Notice, which was taped to the Meyers' door, stated that they would need to pay $82,035.65 in order to avoid foreclosure. Id.; MD at p. 11. Paragraph (K) of the Notice provided the following contact details in accordance with RCW 61.24.030(8)(1) :
DA at pp. 74–75. The Notice also identifies U.S. Bank, as Trustee for GEL2, as the “creditor to whom the debt is owed” and refers to NWTS as the “authorized agent” for U.S. Bank. Id. at p. 75.
In connection with the Notice of Default, NWTS provided a Foreclosure Loss Mitigation Form and Beneficiary Declaration, pursuant to RCW 61.24, each dated June 24, 2010. DA at p. 76; MD at p. 9. Both were signed under penalty of perjury by John Kennerty, though on the former he was identified as “VP of Loan Documentation” for ASC, while on the latter he was identified as “VP of Loan Documentation” for Wells Fargo as attorney-in-fact for U.S. Bank. Id. The Beneficiary Declaration identifies U.S. Bank, as trustee for GEL2, as the holder of the Note. DA at p. 76. Over NWTS's objection, the trial court admitted deposition testimony of Kennerty from a separate proceeding involving NWTS, Geline v. NWTS, et al., King Count Sup.Ct. Case No. 09–2–46576–2, in which Kennerty testified that he routinely signed such documents without personal knowledge of any factual statements therein. MD at p. 10. The trial court determined that no one at NWTS took any action to verify any information provided in the Notice of Default or referenced in the declarations. Id.
Believing the interest rate and monthly payments stated on the Notice to be inaccurate, Mr. Meyer contacted the phone number for ACS but was unable to resolve his concerns. MD at p. 11. The Meyers accordingly hired attorney Richard Jones to represent them in July 2010 in their mortgage-related dealings. Id. at pp. 11–12. On December 17, 2010, the Meyers, through Jones, issued a Qualified Written Request (“QWR”) under the Truth in Lending Act to ASC to determine the holder and owner of the Note. DA at pp. 138–159. On January 12, 2011, ASC responded by letter informing the Meyers that their loan was in a “pool” managed by U.S. Bank and provided a contact address for U.S. Bank. MD at p. 12.
On August 13, 2010, NWTS executed a Notice of Trustee's sale, reciting a sale date of November 19, 2010. DA at pp. 77–80. One day before the scheduled trustee's sale of their residence, the Meyers filed a Chapter 13 bankruptcy plan through separate retained counsel, Larry Feinstein. DA at pp. 81–126. On December 21, 2010, U.S. Bank, as trustee for GEL2, filed a proof of claim listing the total amount due under the loan as $502,190.76, with delinquent monthly payments from February 1, 2009 to November 1, 2010 and other costs totaling $86,020.02. Id. at pp. 127–28. The Meyers' first proposed a Chapter 13 plan that provided only for payments of $2,000 a month on their mortgage, which U.S. Bank opposed.
The dispute was resolved by the Meyers agreeing to give up their residential property in satisfaction of their debt. On June 1, 2011, the Meyers stipulated that U.S. Bank could have relief from the automatic stay, and the Meyers amended their plan to remove the U.S. Bank loan. Id. at pp. 129–36. On August 19, 2011, Judge Overstreet confirmed a plan without the...
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