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Beck v. U.S. Bank National Association

United States District Court, W.D. Washington, Seattle

December 14, 2017

PAUL J. BECK, et al., Plaintiffs,




         Before the court is Defendants U.S. Bank National Association (“U.S. Bank”) and Nationstar Mortgage LLC's (“Nationstar”) (collectively, “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, [1] the court GRANTS Defendants' motion.


         On 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.)[2] 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”)[3] 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.)

         Six 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.)

         On 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.)

         On June 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.

         Plaintiffs 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.)

         Plaintiffs 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.)

         III. ANALYSIS

         A. Legal Standards

         When 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. at 678.

         The 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).

         B. Washington's Deed of Trust Act

         The 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).

         Traditionally, 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.

         “Holder” 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.

         In 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 ...

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