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Winters v. Quality Loan Service Corporation of Washington, Inc.

Court of Appeals of Washington, Division 1

December 30, 2019

BRIAN J. WINTERS and REBECCA L. WINTERS, Respondents,
v.
QUALITY LOAN SERVICE CORPORATION OF WASHINGTON, INC., Petitioner, WELLS FARGO BANK, NA as Trustee on behalf of the registered holders of Morgan Stanley ABS Capital I Inc. Trust 2007-HE4 Mortgage Pass-Through Certificates, Series 2007-HE4; SELECT PORTFOLIO SERVICING, INC.; and DOE DEFENDANTS 1-20, inclusive, Defendants.

          Schindler, J.

         Only the actual holder of a promissory note that is secured by a deed of trust has the authority to replace the trustee named in the deed of trust and appoint a successor trustee to proceed with a nonjudicial foreclosure. However, in Bain v. Metropolitan Mortgage Group, Inc., 175 Wn.2d 83, 106, 285 P.3d 34 (2012), the Washington Supreme Court makes clear that "Washington law, and the deed of trust act itself, approves of the use of agents" to act on behalf of the holder to enforce the promissory note or instrument evidencing the debt in a nonjudicial foreclosure proceeding. Brian and Rebecca Winters (collectively, Winters) defaulted on the promissory note secured by a deed of trust on their property. We granted discretionary review of denial of summary judgment dismissal of the Consumer Protection Act, chapter 19.86 RCW, claims against the successor trustee alleging the successor trustee did not have the authority under the deed of trust act (DTA), chapter 61.24 RCW, to foreclose on the property. The uncontroverted record establishes that the actual holder of the note, "Wells Fargo Bank, National Association, as Trustee, on behalf of the registered holders of Morgan Stanley ABS Capital I Inc., Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007-HE4" (Wells Fargo N.A.), executed a limited power of attorney appointing Select Portfolio Servicing Inc. (SPS) as its attorney-in-fact with authority to execute documents in the nonjudicial foreclosure proceeding. As a prerequisite to initiating the nonjudicial foreclosure, SPS as the attorney-in-fact for Wells Fargo N.A. executed a declaration stating under penalty of perjury that Wells Fargo N.A. was the actual holder of the note and appointed Quality Loan Service Corporation of Washington (QLS) as the successor trustee. Because SPS had the authority to act as the authorized agent of Wells Fargo N.A. and the uncontroverted record establishes QLS complied with the statute that governs qualifications for a successor trustee, we reverse denial of summary judgment. We remand to dismiss the claims against QLS. On remand, the court shall also address the propriety of imposition of expenses under RCW61.24.090(1)(b).

         Promissory Note and Deed of Trust

         In October 2006, Brian and Rebecca Winters (collectively, Winters) borrowed $114, 400 from Decision One Mortgage Company LLC to purchase property located at 306 South 6th Street, Satsop, Washington. Winters executed an adjustable rate note on October 20, 2006. Winters promised to make monthly payments until November 1, 2036. The note was indorsed in blank. The note states, "I understand that Lender may transfer this Note. Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the 'Note Holder.'" The note was secured by a recorded deed of trust on the property. The deed of trust identifies Winters as the borrower, Decision One as the lender, First American Title Insurance Company as "Trustee," and Mortgage Electronic Registration Systems Inc. (MERS) as the beneficiary and "nominee for Lender and Lender's successors and assigns."

         Decision One sold the note to a securitized trust, "Wells Fargo Bank, National Association, as Trustee, on behalf of the registered holders of Morgan Stanley ABS Capital I Inc., Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007-HE4" (Wells Fargo N.A.). Select Portfolio Servicing Inc. (SPS) acted as the mortgage servicer on the note. Winters stopped making payments on January 1, 2012.

         Limited Power of Attorney

         On August 31, 2012, Wells Fargo N.A. Vice President Barry Silvermetz executed a notarized "Limited Power of Attorney." Wells Fargo N.A. appointed SPS "as its true and lawful attorney-in-fact, acting by and through its authorized officers, with full authority and power to execute and deliver on behalf of" Wells Fargo N.A.:

(ii) [A]ll documents and instruments necessary to conduct any (a) foreclosure, or (b) the taking of any deed in lieu of foreclosure, or (c) any judicial or non-judicial foreclosure or termination, cancellation, or rescission of any such foreclosure, or (d) any similar procedure (collectively, as applicable, a "Foreclosure");
(iv) instruments appointing one or more substitute trustees or special purpose entities ("SPEs") to act in place of the corresponding entity named in any deed of trust;
(v) affidavits of debt, notice of default, declaration of default, notices of foreclosure, and all such contracts, agreements, deeds, and instruments as are appropriate to (a) maintain any real property acquired through Foreclosure, or (b) effect any sale, transfer, or disposition of real property acquired through Foreclosure;
(vi) all documents and instruments necessary to effect any assignment of mortgage or assignment of deed of trust; and
(vii) all other comparable instruments.[1]

         SPS recorded the Limited Power of Attorney on October 8, 2012.

         Appointment of Successor Trustee

         On December 5, 2013, SPS as the attorney-in-fact for Wells Fargo N.A. executed a notarized "Appointment of Successor Trustee." SPS appointed Quality Loan Service Corporation of Washington (QLS) as the successor to the trustee named in the October 20, 2006 deed of trust that secured the Winters' note. The Appointment of Successor Trustee states, in pertinent part:

[W]hereas, Wells Fargo Bank, National Association, as Trustee, in trust for the registered holders of Morgan Stanley ABS Capital I Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007- HE4 is the present Beneficiary under said Deed of Trust, and desires to appoint and hereby does appoint QUALITY LOAN SERVICE CORPORATION OF WASHINGTON as the new Trustee in place and stead of the present Trustee thereunder.
NOW THEREFORE, the undersigned, Wells Fargo Bank, National Association, as Trustee, in trust for the registered holders of Morgan Stanley ABS Capital I Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007- HE4, hereby substitutes QUALITY LOAN SERVICE CORPORATION OF WASHINGTON as Trustee under said Deed of Trust.
The Appointment of Successor Trustee was recorded on December 17, 2013.

         Beneficiary Declaration

         As a prerequisite to issuing a notice of trustee's sale, the trustee must have proof under penalty of perjury that the beneficiary is the actual holder of the note. RCW 61.24.030(7)(a). On November 25, 2013, SPS as the attorney-in-fact for Wells Fargo N.A. executed a declaration under penalty of perjury stating that Wells Fargo N.A. is the beneficiary and actual holder of the Winters' note. The "Declaration of Ownership" states:

Re: Loan Number. . .; BRIAN WINTERS
Under penalty of perjury, the undersigned hereby represents and declares as follows:
I am employed as Document Control Officer for Select Portfolio Servicing, Inc. I am duly authorized to make this declaration on behalf of:
1) Wells Fargo Bank, National Association, as Trustee, on behalf of the registered holders of Morgan Stanley ABS Capital I Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007-HE4
Hereby known as beneficiary.
2) Wells Fargo Bank, National Association, as Trustee, on behalf of the registered holders of Morgan Stanley ABS Capital I Trust 2007-HE4, Mortgage Pass-Through Certificates, Series 2007-HE4 is the actual holder of the Promissory Note evidencing the above-referenced loan.
3) The Note has not been assigned or transferred to any other person or entity.
4) Beneficiary understands that the trustee foreclosing the deed of trust securing the above-referenced loan will rely upon this Declaration before issuing the notice of trustee's sale.

         Notice of Default

         In March 2014, Winters filed for chapter 7 bankruptcy. Winters was discharged from bankruptcy in August 2014.

         On August 4, 2014, QLS sent Winters a "Notice of Default." The Notice of Default was signed by QLS assistant secretary Gladys Limon. The Notice of Default states Wells Fargo N.A. is the "current owner of the Note secured by the Deed of Trust." The attached "Foreclosure Loss Mitigation" form is executed by SPS "as authorized agent of Beneficiary." The Foreclosure Loss Mitigation form states that the "authorized agent for the beneficiary hereby represents and declares under the penalty of perjury" that the "beneficiary's authorized agent has contacted ...


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