United States District Court, W.D. Washington, Seattle
PAUL J. BECK, et al., Plaintiffs,
U.S. BANK NATIONAL ASSOCIATION, et al., Defendants.
ORDER ON MOTION TO DISMISS
L. ROBART UNITED STATES DISTRICT JUDGE.
the court is Defendants U.S. Bank National Association
(“U.S. Bank”) and Nationstar Mortgage LLC's
“Defendants”) motion to dismiss Plaintiffs Paul
J. Beck and Lin O. Beck's (collectively,
“Plaintiffs”) complaint for failure to state a
claim. (MTD (Dkt. # 10).) The court has considered the
parties' submissions in support of and in opposition to
the motion, the relevant portions of the record, and the
applicable law. Being fully advised,  the court GRANTS
August 17, 2005, Plaintiffs purchased a property at 817 North
Gales Street, Port Angeles, Washington, using a $122, 250.00
loan from lender Guaranty Bank. (Compl. (Dkt. # 1) ¶ 11,
Ex. 1 at 1-3.) Guaranty Bank secured the loan with a deed
of trust, which was recorded in Clallam County. (Id.
¶ 13, Ex. 1.) The deed lists Plaintiffs as the
borrowers, Guaranty Bank as the lender, Defendant Mortgage
Electronic Registration System, Inc.
(“MERS”) as the beneficiary of the deed
“solely as a nominee for [l]ender and [l]ender's
successors and assigns, ” and First American Title
Insurance Company (“First Title”) as the trustee.
(Id. Ex. 1 at 1-2.) The deed also notified
Plaintiffs that the promissory note it secured could be sold
without giving them prior notice. (Id. at 12.)
years later, on November 10, 2011, MERS executed and recorded
an Assignment of Deed of Trust assigning “all
beneficial interest in” the deed of trust to U.S. Bank,
as trustee for the LXS 2006-2N securitized trust investors,
“together with the note(s) and obligations therein
described.” (Compl. ¶ 14, Ex. 2 at 1.) Plaintiffs
acknowledge that this was the “first assignment”
of the deed of trust. (Resp. (Dkt. # 22) at 8.) Almost two
years later, on November 4, 2013, former Defendant Bank of
America, N.A. (“BANA”) recorded an assignment
using identical language and assigned the note and deed to
Nationstar. (Id. at 3-4.) However, BANA subsequently
recorded a Corrective Assignment of Deed of Trust on January
4, 2016, to clarify that it had recorded the 2013 assignment
in error and that the 2011 beneficiary, U.S. Bank-rather than
Nationstar-remained the beneficiary on the deed. (See
Id. at 3-6.)
February 23, 2016, U.S. Bank recorded an Appointment of
Successor Trustee that named Quality Loan Service Corporation
(“QLSC”) as the new trustee for the deed. (Compl.
¶ 18, Ex. 4 (“Trustee Appointment”) at 2.)
As of March 6, 2017, Plaintiffs were in arrears on their loan
for $66, 971.33, and QLSC initiated a non-judicial
foreclosure action that day by recording a Notice of
Trustee's Sale for Plaintiffs' property, scheduled
for July 14, 2017. (See Id. ¶ 37, Ex. 5
(“Not. of Sale”) at 1, 4.)
8, 2017, Plaintiffs filed the instant action. (See
generally id.) Three months later, the court granted a
stipulated motion dismissing MERS and BANA as defendants.
(9/12/17 Order (Dkt. # 16).) Accordingly, U.S. Bank and
Nationstar are the only remaining defendants.
seek equitable and monetary relief under federal and state
law. (See generally Compl.) They seek declaratory
and injunctive relief under two theories. (Id.
¶¶ 60, 66.) First, Plaintiffs allege that
Defendants violated Washington's Deed of Trust Act
(“DTA”), RCW 61.24.030, by “fail[ing] to
properly record all assignments of the [d]eed of
[t]rust” before they initiated foreclosure proceedings.
(Id. ¶ 60.) Second, Plaintiffs allege that the
securitized trust managed by U.S. Bank was an invalid
assignee because the 2011 assignment violated the trust's
pooling and service agreement (“PSA”) and
provisions of the internal revenue code, 26 U.S.C.
§§ 860F, 860G. (Id. ¶¶ 62-66.)
also seek damages under four different claims. (Id.
¶¶ 67-93.) First, Plaintiffs seek damages under a
theory of unjust enrichment. (Id. ¶¶
67-70.) Second, Plaintiffs claim Defendants violated
Washington's Consumer Lending Act (“CLA”),
RCW 31.04.027, and the state's Collection Agency Act
(“CAA”), RCW ch. 19.16. (Id. ¶ 74.)
Third, Plaintiffs claim Defendants violated Washington's
Consumer Protection Act (“CPA”), RCW ch. 19.86.
(Id. ¶¶ 75-85.) Fourth, Plaintiffs claim
Defendants violated the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692. (Id.
¶¶ 74, 86-93.)
considering a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), the court construes the complaint in the
light most favorable to the nonmoving party. Livid
Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d
940, 946 (9th Cir. 2005). The court must accept all
well-pleaded allegations of material fact as true and draw
all reasonable inferences in favor of the plaintiff. See
Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135
F.3d 658, 661 (9th Cir. 1998). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see
also Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003
(9th Cir. 2010). “A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S.
court, however, need not accept as true a legal conclusion
presented as a factual allegation. Id. Although
Federal Rule of Civil Procedure 8 does not require
“detailed factual allegations, ” it demands more
than “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Id. (citing Twombly, 550
U.S. at 555). A pleading that offers only “labels and
conclusions or a formulaic recitation of the elements of a
cause of action” will not survive a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6). Id.
Further, a pleading may fail to state a claim under Rule
12(b)(6) “either by lacking a cognizable legal theory
or by lacking sufficient facts alleged under a cognizable
legal theory.” Woods v. U.S. Bank N.A., 831
F.3d 1159, 1162 (9th Cir. 2016). Thus, a complaint must
contain sufficient factual allegations to “plausibly
suggest entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of
discovery and continued litigation.” Starr v.
Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
Washington's Deed of Trust Act
DTA, RCW ch. 61.24, governs statutory deeds of trust in
Washington and establishes the procedures required for
non-judicial foreclosure. See Massey v. BAC Home Loans
Servicing LP, No. C12-1314JLR, 2012 WL 5295146, at *1
(W.D. Wash. Oct. 26, 2012). Under the DTA, a deed of trust is
a form of three-party mortgage, involving not only a lender
and a borrower, but also a neutral third-party called a
trustee. See Buse v. First Am. Title Ins. Co., No.
C08-0510MJP, 2009 WL 1543994, at *1 (W.D. Wash. May 29,
2009). The trustee holds an interest in the title to the
borrower's property on behalf of the lender, who is also
called the beneficiary. Id. Should the borrower
default on his loan, the beneficiary need not petition a
court to initiate foreclosure proceedings but may instruct
the trustee to conduct a non-judicial foreclosure. RCW
§§ 61.24.010(2), .020, .030. The beneficiary may
replace the trustee with a successor trustee to initiate the
foreclosure. RCW 61.24.010(2).
the beneficiary of a deed of trust was “the lender who
has loaned money to the homeowner.” Bain v. Metro.
Mortg. Grp., Inc., 285 P.3d 34, 36 (Wash. 2012). But
lenders “have long been free to sell that secured debt,
typically by selling the promissory note signed by the
homeowner, ” and so the DTA defines
“beneficiary” more broadly as “‘the
holder of the instrument or document evidencing the
obligations secured by the deed of trust.'”
Id. (quoting RCW § 61.24.005(2)). In
Bain, the Washington Supreme Court interpreted the
DTA's definition of “beneficiary” and held
that a DTA beneficiary must be the “holder of the
promissory note.” Id. at 36, 43. Thus, MERS
could not lawfully foreclose because MERS was not the holder
of the note, even though the deed of trust listed MERS as the
“beneficiary” and MERS was purportedly “the
holder of the deed of trust.” Id. at 42-44.
status, and thus DTA beneficiary status, turns on possession
of the note, not ownership. In other words, a
“holder” does not need to own the note to be the
DTA beneficiary. Brown v. Wash. State Dep't of
Commerce, 359 P.3d 771, 784 (Wash. 2015). Although the
initial lender is both the owner of the note (the party with
the beneficial interest who is entitled to the payments on
the note and/or the proceeds of a foreclosure sale) and the
holder of the note (the statutory beneficiary entitled to
enforce the note, foreclose, and negotiate modifications),
those rights are often separated when the lender sells the
note on the secondary market. See Marts v. U.S. Bank
Nat'l Ass'n, 166 F.Supp.3d 1204, 1209 (W.D.
Wash. 2016); Brown, 359 P.3d at 779. As the note is
transferred between different holders, the DTA contemplates
that the security instrument, such as a mortgage or deed of
trust, will follow the note. Bain, 285 P.3d at 44.
Brown, the Washington Supreme Court held that a loan
servicer was the DTA beneficiary because it was the holder of
the note, even though Freddie Mac owned the beneficial
interest. 359 P.3d at 784. In concluding that the loan
servicer was the holder of the note, the Brown court
looked to the definition of “holder” in
Washington's Uniform Commercial Code: the
“‘person in possession of a negotiable instrument
that is payable either to bearer or to an identified person
that is the person in possession.'” Id. at
778 (quoting RCW 62A.1-201(21)(A)). The court noted that the
definition of holder focuses on ...