PETER J. MEYER; SHAREE MEYER, husband and wife v. Northwest Trustee Services Inc., a Washington Corporation

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETER J. MEYER; SHAREE MEYER,
husband and wife,
Plaintiffs-Appellants,
v.
NORTHWEST TRUSTEE SERVICES
INC., a Washington Corporation,
Defendant-Appellee.
No. 15-35560
DC No. 2:14 cv-0297RSM
WD Wash., Seattle
ORDER
Before: TASHIMA and NGUYEN, Circuit Judges, and WALTER,* District
Judge.
The Memorandum Disposition filed on August 29, 2017, is withdrawn and
replaced by the Memorandum Disposition filed concurrently with this order. With
the filing of the revised Memorandum Disposition, the petition for rehearing en
banc is denied as moot. Further petitions for panel and/or en banc rehearing may
be filed with respect to the newly-filed revised Memorandum Disposition.
FILED
OCT 26 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* The Honorable Donald E. Walter, United States District Judge for the
Western District of Louisiana, sitting by designation.

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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETER J. MEYER; SHAREE MEYER,
husband and wife,
Plaintiffs-Appellants,
v.
NORTHWEST TRUSTEE SERVICES
INC., a Washington Corporation,
Defendant-Appellee.
No. 15-35560
DC No. 2:14 cv-0297 RSM
MEMORANDUM*
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, Chief District Judge, Presiding
Argued and Submitted July 11, 2017
Seattle, Washington
Before: TASHIMA and NGUYEN, Circuit Judges, and WALTER,** District
Judge.
Plaintiffs-Appellants Peter and Sharee Meyer (together, the “Meyers”) sued
Defendant-Appellee Northwest Trustee Services, Inc. (“NWTS”) after the latter
FILED
OCT 26 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Donald E. Walter, United States District Judge for the
Western District of Louisiana, sitting by designation.

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initiated non-judicial foreclosure proceedings on their deed of trust. Following a
bench trial, the bankruptcy court ruled that NWTS had violated the Washington
Deed of Trust Act and, in doing so, also violated the Consumer Protection Act. It
awarded the Meyers substantial damages and attorney’s fees. NWTS appealed to
the district court, which reversed the bankruptcy court. The Meyers now appeal
from the judgment of the district court.
We have jurisdiction under 28 U.S.C. § 158(d)(1). We affirm the district
court for the reasons stated in the district court’s Order Reversing Bankruptcy
Court, filed April 10, 2015, which is attached as Appendix “A” to this
Memorandum.
AFFIRMED.
2

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APPENDIX “A”
3

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ORDER REVERSING BANKRUPTCY COURT - 1
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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.
Case No. 14-00297RSM
USBC, WAWB 14-S002
BK No. 12-01630-KAO
ORDER REVERSING BANKRUPTCY
COURT
Case 2:14-cv-00297-RSM Document 35 Filed 04/10/15 Page 1 of 24

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ORDER REVERSING BANKRUPTCY COURT - 2
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.
FACTUAL BACKGROUND
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
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ORDER REVERSING BANKRUPTCY COURT - 3
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 “Case Information Report” (“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
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ORDER REVERSING BANKRUPTCY COURT - 4
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)(l):
(K) Contact Information for Beneficiary (Note Owner) and Loan Servicer
The beneficiary of the deed of trust is US Bank National Association, as Trustee for
[GEL2], whose address and telephone number are:
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ORDER REVERSING BANKRUPTCY COURT - 5
c/o America’s Servicing Company
MAC X7801-02T, 3476 Stateview Blvd
Fort Mill, SC 29715
855-248-5719
The loan servicer for this loan is America’s Servicing Company, whose address and
telephone number are:
MAC X7801-02T, 3476 Stateview Blvd
Fort Mill, SC 29715
800-662-5014
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.
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ORDER REVERSING BANKRUPTCY COURT - 6
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 subject mortgage.
Id. at p. 137. On June 29, 2011, NWTS restarted the foreclosure process with issuance of an
Amended Notice of Trustee’s Sale, reciting a sale date of August 12, 2011. MD at p. 13. The
Meyers subsequently sought mediation under the Foreclosure Fairness Act, RCW 61.24.163, and
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ORDER REVERSING BANKRUPTCY COURT - 7
participated in three mediation sessions that included a Wells Fargo representative. DA at pp. 163,
223-24.
PROCEDURAL BACKGROUND
The Meyers commenced this adversary proceeding on July 23, 2012, seeking a temporary
restraining order enjoining the scheduled foreclosure sale. The bankruptcy court entered the TRO
on August 2, 2012. BR at Dkt. # 16. Upon non-opposition by Defendants U.S. Bank and ASC, the
court entered a preliminary injunction on August 20, 2012, requiring the Meyers to continue
making monthly payments of $3,616.03 into the court registry. Id. at Dkt. # 20. Upon the Meyers’
failure to respond to discovery requests and to make the requirement payments, the bankruptcy
court subsequently dissolved the injunction, dismissed all claims against U.S. Bank, Wells Fargo,
and MERS as a discovery sanction, and ordered that the trustee’s sale could be reset. Id. at Dkt. ##
90, 91. Although the residence had not been sold when the case proceeded to bench trial against
NWTS, the Meyers decided to move into a rental house in July 2013. MD at p. 15. Mr. Meyers
testified that this decision was motivated by the stress of impending foreclosure.
On October 8, 2013, the case proceeded to bench trial against NWTS on claims for
violation of the Washington Deed of Trust Act, RCW 61.24 et seq. (“DTA”), the Washington
Consumer Protection Act, RCW 19.86 et seq. (“CPA”), and the Fair Debt Collection Practices Act,
15 U.S.C. § 1692 (“FDCPA”). On February 18, 2014, Judge Overstreet issued a memorandum
decision, finding in favor of Plaintiffs on their DTA and CPA claims but denying them relief under
the FDCPA. The Court therein awarded damages to the Meyers of $48,504, comprising actual
damages of $23,504, plus CPA treble damages of $25,000. See MD. Actual damages included
Jones’s fees related to filing the QWR, Feinstein’s fees related to filing the Chapter 13 bankruptcy,
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ORDER REVERSING BANKRUPTCY COURT - 8
monthly rent from July 2013 through trial, as well as security and pet deposit for the Meyers’ rental
home, moving expenses, and lost wages attributable to the Meyers’ attendance at mediations and
hearings. On March 26, 2015, the court also awarded the Meyers attorney’s fees of $30,324 and
costs of $294.40, pursuant to RCW 19.86. BR, Dkt. # 169.
The bankruptcy court issued its final order and judgment on April 8, 2014. The instant
appeal by NWTS followed, with the briefing schedule renoted on several occasions at the request
of the parties and permission granted to UTA to participate in the appeal as amicus curiae.
STANDARD OF REVIEW
The district court, acting in its appellate capacity, reviews the bankruptcy court’s legal
conclusion de novo and its factual determinations for clear error. In re Olshan, 356 P.3d 1078,
1083 (9th Cir. 2004). Mixed questions of law and fact are reviewed de novo. Banks v. Gills
Distributions Centers, Inc., 263 F.3d 862, 867 (9th Cir. 2001).
ANALYSIS
A. Judicial Estoppel
Although Judge Overstreet did not address the application of judicial estoppel in her
memorandum decision, NWTS urges the Court to find that the Meyers are judicially estopped
from asserting their claims against NWTS because they failed to list these claims as assets in their
bankruptcy schedule. The Meyers contend that judicial estoppel should not apply because: 1) the
argument was not raised or considered at trial, 2) their claims against NWTS were not known or
cognizable in July 2010 when they filed for Chapter 13 relief, and 3) NWTS concealed actions that
now give rise to the Meyers’ claims.
“Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage
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ORDER REVERSING BANKRUPTCY COURT - 9
by asserting one position, and then later seeking an advantage by taking a clearly inconsistent
position.” Hamilton v. State Farm & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). Under both
federal and Washington law, three factors inform the court’s decision whether to apply the
doctrine to a particular case. First, a party’s later position must be “clearly inconsistent” with its
earlier position. Second, the party must have succeeded in persuading a court to accept its earlier
position, such that judicial acceptance of a later inconsistent position would suggest that either the
first or second court was being misled. And third, the party seeking to assert a later inconsistent
position must derive an unfair advantage or impose an unfair detriment on the opposing party if not
estopped. Id.; Arkison v. Ethan Allen, Inc., 160 Wash.2d 5345, 538, 160 P.3d 13 (2007). Judicial
estoppel applies to preclude a debtor from pursuing claims when he “has knowledge of enough
facts to know that a potential cause of action exists during the pendency of [a] bankruptcy, but fails
to amend his schedules or disclosure statements to identify the cause of action as a contingent
asset.” Hamilton, 270 F.3d at 784.
As a threshold question, this Court must determine whether the judicial estoppel argument
was properly before the bankruptcy court. In the Ninth Circuit, an appellate court may consider an
issue, even if not ruled on by the bankruptcy court, so long as it was “raised sufficiently for the trial
court to rule on it.” In re E.R. Fegert, Inc., 8887 F.2d 955, 957 (9th Cir. 1989). Thus, even where
the bankruptcy court did not itself rule on it, “intermediate appellate courts may consider any issue
supported by the record.” Id. Here, the trial transcript shows that judicial estoppel was argued to
the bankruptcy court. See Dkt. # 12-5, p. 37 (arguing that the Meyers “should be estopped, under
case law from the Ninth Circuit” because they knew of the allegedly misleading information prior
to filing for bankruptcy); Dkt. # 27, p. 49 (response by Mr. Meyers to question by NWTS counsel,
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ORDER REVERSING BANKRUPTCY COURT - 10
admitting that he did not inclue his claims against NWTS in the bankruptcy schedule); Id. at pp.
45-46 (response by Meyers admitting that his “confusion began” upon receiving notice of default
in July 9, 2010, prior to filing bankruptcy). The Court consequently finds that the record is
sufficiently developed to allow it to reach the merits of the judicial estoppel issue.
Nonetheless, the Court agrees with the Meyers that application of judicial estoppel would
be inequitable, where the case law underlying their claims against NWTS, and on which Judge
Overstreet relied, only arose from 2012 – two years after the Meyers filed for bankruptcy.
Specifically, Judge Overstreet recognized that the Washington Supreme Court’s decision in Bain
v. Metropolitan Mortgage Group, Inc., 175 Wash.2d 83, 10, 285 P.3d 34 (2012), and its progeny
had changed the legal landscape of the Washington Deed of Trust Act. See MD at pp. 16-18.
Whereas pre-Bain decisions had generally not recognized a pre-foreclosure cause of action under
the DTA, Judge Overstreet followed the 2013 appellate decisions in Walker v. Quality Loan
Service Corp., 176 Wash.App. 294, 308 P.3d 716 (Wash.Ct.App. 2013) and Bavand v. OneWest
Bank, F.S.B., 176 Wash.App. 574, 309 P.3d 636 (Wash.Ct.App. 2013) in finding that the Meyers
may pursue a pre-foreclosure cause of action under the DTA. Similarly, Judge Overstreet based
her CPA analysis on the Washington Supreme Court’s recent clarification in Klem v. Washington
Mutual, 176 Wn.2d 771, 790, 295 P.3d 1179 (2013) that a trustee’s failure to exercise independent
discretion as an impartial third party may be actionable as an unfair and deceptive practice under
the CPA.
Accordingly, the Meyers assertion of claims against NWTS in the adversary proceeding is
not “clearly inconsistent” with their failure to list claims against NWTS on their bankruptcy
schedule, as they only became cognizable several years after their bankruptcy filing. Further, the
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change in intervening law undercuts the assertion that the bankruptcy court was misled by the
failure to list these claims, since the claims arguably could not have been considered assets at the
time the bankruptcy was filed. Given the unsettled and shifting state of DTA law in Washington,
the Court declines to find the Meyers judicially estopped from pursuing their claims against
NWTS.
B. Violation of Deed of Trust Act
While, as Judge Overstreet recognized, the legal landscape of the DTA had changed
considerably since Bain, it has changed once again since Judge Overstreet issued her
memorandum decision. Judge Overstreet reasonably relied on the Washington appellate court
decisions in Walker and Bavand to conclude that the “Washington courts have spoken” in rejecting
the earlier holding in Vawter v. Quality Loan Service Cop., 707 F.Supp.2d 1115, 1123 (W.D.
Wash. 2010) that there is no cause of action for violation of the DTA where no trustee’s sale has
occurred. However, since the parties filed their opening briefs in this appeal, the Washington
Supreme Court released its decision in Frias, in which it held that “there is no actionable,
independent cause of action for monetary damages under the DTA based on DTA violations
absent a completed foreclosure sale.” Frias v. Asset Foreclosure Services, Inc., 181 Wash.2d 412,
429, 334 P.3d 529 (2014). Frias thereby overruled the conflicting holdings of Walker and Bavand
and now clearly bars the Meyers’ DTA claim, which they admit is for “pre-sale [] compliance with
the DTA.” See Appellee’s Opening Brief, Dkt. # 23, p. 20 (asserting that “this case involves a
pre-sale challenge to the foreclosure sale in which Mr. and Mrs. Meyer brought suit against the
purported lenders, servicers, and trustee under RCW 61.24.130. No sale has occurred.”) (emphasis
in original). Accordingly, this Court’s de novo review of current law requires it to reverse Judge
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Overstreet’s determination as to the Meyers’ DTA claim.
C. Violation of Consumer Protection Act
At the same time that Frias abrogated the pre-sale DTA cause of action, it confirmed that
violations of the DTA may nonetheless be actionable under the CPA even in the absence of a
completed foreclosure sale. Frias, 181 Wash.2d at 430. The Court also determined that such
claims are governed by ordinary principles applicable to all CPA claims developed under this
independent statutory cause of action and its corresponding body of case law. Id. at 432; see also
Lyons v. U.S. Bank Nat. Ass’n, 181 Wash.2d 775, 784, 336 P.3d 1142 (2014) (“Frias clearly
resolves the first issue in this case. Lyons cannot bring a claim for damages under the DTA in the
absence of a sale, but she may bring a claim for similar actions under the CPA.”). Thus Judge
Overstreet did not err in determining that the Meyers could maintain a cause of action under the
CPA based on the alleged failure of NWTS to comply with the DTA. See MD at p. 23. The
question for this Court thus becomes whether the Meyers have established all of the elements of
their CPA claim.
The elements of a CPA claim are well-established and not in dispute. To prevail on her
CPA claim, a plaintiff must prove the following elements: (1) an unfair or deceptive act or
practice; (2) the act or practice occurred in trade or commerce; (3) the act or practice impacts the
public interest; (4) the act or practice caused injury to the plaintiff in his business or property; and
(5) the injury is causally linked to the unfair or deceptive act. Hangman Ridge Training Stables,
Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 719 P.2d 531 (1986). Whether a particular act
or practice is “unfair or deceptive” is a question of law that this Court reviews de novo. See Lyons,
181 Wash.2d at 786. As a general matter, the CPA is to be “liberally construed that its beneficial
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ORDER REVERSING BANKRUPTCY COURT - 13
purposes may be served.” RCW 19.86.920. On appeal, NWTS disputes Judge Overstreet’s
findings with respect to each prong of the CPA except the second, occurring in trade or commerce,
prong.
1. Unfair or Deceptive Act or Practice
Judge Overstreet identified four separate acts or practices by NWTS that violated the DTA
and also met the first prong of the CPA. These were: (1) NWTS failed to verify whether the
servicer, ACS/Wells Fargo, had the requisite authority to issue the Beneficiary Declaration in
accordance with RCW 61.24.030(7); (2) NWTS accepted the Loss Mitigation Form from ASC
without evidence that ASC was the authorized agent of U.S. Bank for the purpose of executing this
document; (3) NWTS referred to itself in the Notice of Default as the authorized agent for the
beneficiary when it was already the successor trustee; and (4) NWTS included the same address
for the beneficiary and service in the Notice of Default, rather than including a separate address
and phone number for either U.S. Bank (the Note holder) or GEL2 (the Note owner).
a) Reliance on Beneficiary Declaration and Loss Mitigation Form
The Deed of Trust Act, RCW 61.24.030, lays out requisites for a trustee’s sale in a
nonjudicial foreclosure on a deed of trust. Among these requirements, subsection (7) provides:
(a) That for residential property, before the notice of a trustee’s sale is recorded,
transmitted, or served, the trustee shall have proof that the beneficiary is the
owner of any promissory note or other obligation secured by the deed of trust. A
declaration by the beneficiary made under the penalty of perjury stating that the
beneficiary is the actual holder of the promissory note or other obligations
secured by the deed of trust shall be sufficient proof as required under this
subsection.
(b) Unless that trustee has violated his or her duty under RCW 61.24.010(4), the
trustee is entitled to rely on the beneficiary’s declaration as evidence of proof
required under this subsection.
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RCW 61.24.030(7). RCW 61.24.010(4) in turn provides that the “trustee or successor
trustee has a duty of good faith to the borrower, beneficiary, and grantor.”
The Act further requires that a Notice of Default include a declaration from the beneficiary
or authorized agent, referred to as a “Loss Mitigation Form,” certifying that it has contacted or
tried to contact the borrower. RCW 61.24.031(2); see also RCW 61.24.031(9) (specifying the
required contents of the Foreclosure Loss Mitigation Form). As with the Beneficiary Declaration,
the Act provides trustees a safe harbor to rely on this declaration, absent a violation of the trustee’s
duty of good faith to the borrower, beneficiary, or grantor. See RCW 61.24.031(2) (“Unless the
trustee has violated his or her duty under RCW 61.24.010(4), the trustee is entitled to rely on the
declaration as evidence that the requirements of this section have been satisfied, and the trustee is
not liable for the beneficiary’s or its authorized agent’s failure to comply with the requirements of
this section.”).
Here, it is undisputed that NWTS accepted and relied on both a Beneficiary Declaration
and Loss Mitigation Form. Nonetheless, Judge Overstreet determined that this reliance was
improper. As to the former, Judge Overstreet recognized that NWTS “had a declaration from
Wells Fargo, the purported attorney-in-fact for U.S. Bank.” MD at p. 21. While noting the
existence of three powers of attorney issued by U.S. Bank to Wells Fargo in 2007 which “would
have given Wells Fargo broad powers to sign documents related to foreclosures on behalf of U.S.
Bank,” Judge Overstreet found that “NWTS had no notice or knowledge of any of these powers of
attorney or any other agreement substantiating the authority of Wells Fargo to act on behalf of U.S.
Bank.” Id. Judge Overstreet found that NWTS was not entitled to rely on a Beneficiary Declaration
where it lacked such proof. She similarly found that NWTS could not rely on the Loss Mitigation
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Form, signed by John Kennerty on behalf of ASC, because it lacked evidence that ASC was the
authorized agent of U.S. Bank for the purpose of executing the document. MD at p. 23. In essence,
as amici point out, Judge Overstreet held NWTS to an affirmative duty to investigate the veracity
of the representations contained in the declarations on which it relied.1
Once again, case law developed since Judge Overstreet issued her decision has
circumscribed the situations in which such an affirmative duty would maintain. First, courts have
clarified that, in accordance with the plain language of the statute, the trustee is entitled to treat the
representations in a beneficiary declaration as true and rely on the declaration in initiating
nonjudicial foreclosure proceedings, absent evidence conflicting with the declaration’s
representations or a separate violation of the trustee’s duty of good faith. See, e.g. Trujillo v.
Northwest Service, Inc., 181 Wash.App. 484, 326, P.3d. 768 (Wash.Ct.App. 2014) (“Absent
conflicting evidence, the declaration should be taken as true.”)2; Pelzel v. Nationstar Mortg., LLC,
2015 WL 1331666, *6 (Wash.Ct.App. 2015). The Meyers cite to no authority suggesting that a
different standard should pertain with respect to reliance on the Loss Mitigation Form, and the
Court can identify none.
The fact that Wells Fargo signed the Beneficiary Declaration as attorney-in-fact fact for
U.S. Bank, where specifically authorized to do so by power of attorney agreements, does not
change this result. See, e.g. id. (“[W]e hold that under RCW § 61.24.030(7)(b), the declaration of a
1 NWTS asks the Court to find admission of John Kennerty’s Geline testimony improper under Federal Rule of
Evidence 804. The Court declines to do so, as it is unable to find that Judge Overstreet clearly erred in determining that
Kennerty was unavailable as a witness and that his testimony fell under the former testimony exception to the rule
against hearsay, FRE 804(b)(1), or that the admission, if in error, affected the bankruptcy court’s disposition. Further,
it appears that NWTS failed to lodge objections to any specific portions of the testimony upon Judge Overstreet’ s
invitation. See DA at p. 204.
2 The Washington Supreme Court’s recent acceptance of a petition to review Trujillo does not affect this Court’s
decision. The central holding of Trujillo, that RCW 61.24.030(7) is satisfied by proof that the beneficiary is either the
owner or holder of the promissory note, is not implicated in this case, where the Beneficiary Declaration identified
U.S. Bank as both the Note’s holder and trustee for its owner, GEL2.
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beneficiary’s agent stating the beneficiary is the note’s holder is sufficient proof that the
beneficiary is the note’s holder, unless the trustee has violated its duty of good faith in some other
way.”); U.S. Bank Nat. Ass’n v. Woods, 2012 WL 2031122 (W.D. Wash. 2012) (rejecting
borrowers’ claims under the DTA where lenders submitted evidence showing that NWTS was in
possession of a declaration signed by Wells Fargo as attorney-in-fact for U.S. Bank”); see also
Knecht v. Fid. Nat. Title Ins. Co., 2013 WL 7326111 (W.D. Wash. 2013) (“Mr. Knecht complains
that there is no recorded power-of-attorney document establishing AHMSI’s right to act on DB’s
behalf, but he points to no authority requiring AHMSI to record such a document. He also fails to
establish his own standing to object to AHMSI’s acting on DB’s behalf.”). This result is so because
an authorized agent is empowered to make binding declarations within the scope of its agency on
its principal’s behalf such that the declarations of the agent are deemed to be those of the principal
itself. Ennis v. Smith, 171 Wash. 126, 130, 18 P.2d 1 (1993).
Further, courts have since uniformly rejected the invitation to import a duty to verify the
information contained in the beneficiary declaration into the trustee’s duty of good faith. In Pelzel,
for instance, the Washington Court of Appeals declined to find a DTA violation where the only
violation of the trustee’s duty of good faith alleged was in its reliance on the beneficiary
declaration as proof that the beneficiary was the note’s holder. See Pelzel, 2015 WL 1331666 at *6.
In an unpublished decision, the Ninth Circuit also recently rejected a borrower’s argument that
NWTS violated its duty of good faith by failing to obtain proof that OneWest was the promissory
note’s owner, where OneWest had declared itself to be the note’s holder on the beneficiary
declaration. The Ninth Circuit found that “NWTS complied with its obligation under the statute
when it relied on OneWest’s declaration under penalty of perjury,” thereby refusing to hold NWTS
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to an affirmative duty to investigate. Bavand v. OneWest Bank FSB, 587 Fed.Appx. 392, 394 (9th
Cir. 2014). Courts in this district have also been uniform in declining to import an affirmative duty
to verify into the trustee’s duty of good faith. See, e.g. Mickelson v. Chase Home Fin. LLC, 2012
WL 6012791 (W.D. Wash. 2012), aff’d , 2014 WL 2750133 (9th Cir. 2014) (“The duty of good
faith does not create a duty to conduct an independent verification of sworn affidavits….NWTS
relied, as they are specifically permitted to do, on a declaration made under penalty of perjury.
They did not breach their duty of good faith in doing so.”); In re Butler, 512 B.R. 643, 657 (Bankr.
W.D. Wash. 2014) (finding that NWTS was “entitled to rely on the Beneficiary Declaration, and
had no duty to undertake an independent investigation”).
Here, as in Pelzel, Plaintiffs have failed to show that NWTS breached its duty of good faith
independent of its allegedly improper reliance on the Beneficiary Declaration and Loss Mitigation
Form without investigating their veracity. Further, NWTS could not have been alerted to any
errors in the information attested to on these documents, as it is undisputed that the information
they contained was in fact true. Absent a showing that NWTS violated its duty of good faith
independent of its reliance on the declarations, the vast weight of case law now deems NWTS’s
reliance without further inquiry to be proper.
Plaintiffs’ citations to the recent Washington Supreme Court decisions Lyons and Klem
only lend further support to this conclusion. The Court in Klem, a decision heavily relied on by
Judge Overstreet, opined that a trustee owes a duty to act impartially toward both parties to a
foreclosure proceeding. Klem, 176 Wash.2d at 790. The Court found that a trustee violated this
duty, and could be liable under the CPA for doing so, where it deferred to a lender on whether to
postpone a foreclosure sale and ignored entirely the dozens of requests by the guardian for the
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borrower to postpone the sale. Id. at 791. While Judge Overstreet reasonably read Klem’s
pronouncements on the duty of impartiality to be implicated in this case, the Washington Supreme
Court subsequently made clear that this duty is not so capacious. In Lyons, the Supreme Court
found that a trustee had violated its duty of good faith by summarily deferring to Wells Fargo’s
preferred course of action and ignoring the borrower’s vociferous protests that the situation
between the parties had changed subsequent to which NWTS lacked the authority to foreclose.
Lyons, 181 Wash.2d at 788. In both these cases, the Court faulted the trustee for failing to
investigate only when confronted with a host of information about irregularities in the foreclosure
process. By contrast, no such irregularities exist in this case, NWTS had no notice of errors in the
declarations or problems in the foreclosure proceeding, and all parties recognized that NWTS
possessed authority to foreclose.
While the Court agrees with both Judge Overstreet and the Meyers that there may be good
reason to require trustees to take some action or institute some process to ensure that the
information on which they rely is correct, the Washington legislature has evidently chosen not to
follow such a course. The Court finds that a proper reading of Lyons is that a trustee has a duty to
investigate only when it “knew about [] conflicting information regarding [its] right to initiate
foreclosure” or when the beneficiary declaration contained an inherent ambiguity. See Lyons, 181
Wash.2d at 788, 791 (holding that NWTS may not “just rely on [an] ambiguous declaration”). No
such duty would be triggered in this case.
Finally, a technical violation of the DTA is not in itself sufficient to constitute an unfair or
deceptive practice. As the Ninth Circuit noted, “Washington state courts have required the
borrower to show prejudice before they will set aside a trustee’s foreclosure sale in the face of
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allegations of technical errors.” See Bavand, 587 Fed.Appx. at 394-95 (citing Amresco
Independence Funding, Inc. v. SPS Properties, LLC, 199 P.3d 884, 886-87 (Wash.Ct. App. 2005));
see also Steward v. Good, 51 Wn.App. 509, 754 P.2d 150 (1998) (locating a “requirement that
prejudice be established” where a “technical violation” of the DTA occurs and there was “no
showing of harm to the debtor”). Even if NWTS had a duty to investigate the veracity of the
declarations, its investigations would have only revealed that the information contained in them
was correct. Accordingly, the Meyers cannot show that they were prejudiced or deceived, even if
NWTS did not strictly comply with the DTA. For all these reasons, the Court declines to find that
NWTS’s reliance on the Beneficiary Declaration and Loss Mitigation Form without independent
verification constituted an unfair or deceptive practice in violation of the CPA.
b) Issuance of Notice of Default as an Authorized Agent
Judge Overstreet also located a deceptive practice in NWTS’s reference to itself as
authorized agent for the beneficiary in the Notice of Default when the evidence established that
NWTS was already the successor trustee as the time it issued the Notice. The Court finds that
Judge Overstreet’s conclusion to this effect is not supported by the statutory language.
Under the DTA, a notice of default may be issued by the “beneficiary or trustee.” RCW
61.24.030(8); see also RCW 61.24.031(1)(a) (“A trustee, beneficiary, or authorized agent” may
issue a notice of default). Because NWTS had already been appointed successor trustee at the time
that it issued the notice, the statute provided it authority to do so, regardless of whether it was
actually an authorized agent for the beneficiary as well.
Further, if improper, the Meyers have made no showing that they were prejudiced by
NWTS’s reference to itself as an agent rather than trustee, where NWTS indisputably had
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authority either way to issue the Notice. See In re Butler, 512 B.R. at 657 (rejecting identical
argument on the grounds that even if NWTS was not the beneficiary’s authorized agent, “Plaintiff
did not address why a reference to [NWTS] being One West’s ‘duly authorized agent’ would be a
material violation of the Deed of Trust Act. It is unclear what alleged harm stemmed from that
particular inaccuracy.”) (emphasis in original). While Bain recognized that a CPA violation may
lie where a trustee closes without authority, the Meyers here have not made a showing that NWTS
lacked the authority to foreclose or issued the Notice without authority to do so. The Court
consequently concludes that this alleged inaccuracy did not constitute an actionable unfair or
deceptive act.
c) Inclusion of Same Address for Owner and Servicer in Notice of Default
Finally, there does not appear to be any support for Judge Overstreet’s conclusion that
NWTS violated the CPA by only providing an address and phone number for ACS on the Notice
of Default. RCW 61.24.030(8)(l) provides that the notice of default shall contain the following
information:
In the event the property secured by the deed of trust is residential real property, the
name and address of the owner of any promissory notes or other obligations
secured by the deed of trust and the name, address, and telephone number of a party
acting as a servicer of the obligations secured by the deed of trust.
Here, NWTS provided the same address and phone number for both the Note holder/beneficiary,
U.S. Bank, and its servicer, ACS. NWTS argues that it was proper for it to provide U.S. Bank’s
phone number “care of” ACS because U.S. Bank was merely the legal title holder for the Note’s
owner, GEL2, which lacked a physical address and phone number, and because ACS was the
relevant entity to address the Meyers’ queries.
Regardless of whether NWTS strictly complied with the language of this statutory
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provision, the Meyers were unable to point to any way in which they were deceived or otherwise
prejudiced by only receiving a phone number for ACS, either at trial or when specifically
prompted by this Court upon oral argument. Mr. Meyer was able to immediately reach a Wells
Fargo employee through the ACS phone number, where Wells Fargo was acting as
attorney-in-fact for U.S. Bank. While the Meyers claim that they would not have had to hire
attorney Jones to issue a Qualified Written Request had they known of their lender’s true identity,
the QWR itself makes no mention of the notice of default and instead complains of inaccuracies in
accounting of the loan, robo-signing, and predatory lending practices. See DA at pp. 138-159. The
Meyers were also able to engage in three, albeit apparently unsuccessful, mediation sessions after
contacting ACS. Even if NWTS did not strictly comply with this statutory provision, its deviation
was only a technical one, and liability cannot lie where the Meyers could not show at trial that the
practice was likely to deceive. See Panag v. Farmers Ins. Co. of WA, 166 Wash.2d 27, 50, 204
P.3d 885 (2009) (“Deception exists if there is a representation, omission or practice that is likely to
mislead a reasonable customer.”).
2. Injury and Damages
Before a violation of the CPA may be found, an injury to the claimant’s business or
property must be established. Hangman, 105 Wash.2d at 792. Plaintiffs may only recover for
injuries that they demonstrate were proximately caused by a defendant’s unfair or deceptive
practices. See Bhatti v. Gild Mfg. Co., 2013 WL 6773673, *3 (9th Cir. 2013) (rejecting CPA claim
premised on DTA violation because the “cause prong” was not satisfied). The injury “need not be
great” and no monetary damages need be proven. Mason v. Mortgage America, Inc., 114 Wash.2d
842, 854, 792 P.2d 142 (1990). Nonquantifiable injuries suffice, although mental distress alone
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does not establish injury. Stephens v. Omni Ins. Co., 138 Wash.App. 151, 180, 159 P.3d 10
(Wash.Ct. App. 2007). Incurring time and money to prosecute a CPA claim also does not suffice,
Sign-O-Lite Signs, Inc. v. DeLaurenti Florists, Inc., 64 Wash.App. 553, 564, 825 P.2d 714 (1992),
although “consulting an attorney to dispel uncertainty regarding the nature of an alleged debt”
may. Panag, 166 Wash.2d at 62. Because damages are strictly limited to those in “business or
property,” lost wages are not compensable under the CPA. Ambach v. French, 167 Wn.2d 167, 216
P.3d 405 (2009).
Here, the record does not support Judge Overstreet’s finding that the damages awarded
were proximately caused by the alleged unfair or deceptive acts. As stated above, the QWR was
addressed to the loan’s servicers and raised no concerns about identification of the Note owner.
The Court is also unable to discern how the Meyers’ bankruptcy filing could have been
proximately caused by any of the alleged deceptive acts, particularly given that the bankruptcy
plan was confirmed even after the subject loan was removed from it. The Meyers’ bankruptcy
filing lists two automobile loans and a cumulative unsecured debt of $105,681.42 in addition to the
home mortgage loan. See DA at pp. 94-110 (bankruptcy schedules). Although apparently
precipitated by pending foreclosure proceedings, the bankruptcy filing was plainly not dependent
on them, and in no event were NWTS’s alleged DTA violations the but-for cause of the Meyers’
Chapter 13 filing.
Similarly, the record does not support the finding that the Meyers’ rent, deposits, and
moving expenses were proximately cause by any of the allegedly deceptive acts by NWTS in
initiating the foreclosure proceedings. Mr. Meyers testified that the family moved out before their
house was foreclosed on after four years without making any mortgage payments. DA at pp. 231,
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233. The Meyers’ decision to move out was precipitated by their default, not be any of the asserted
technical violations of the DTA by NWTS. Finally, the lost wages that Judge Overstreet awarded
are not compensable under the CPA as a matter of law. See Ambach, 167 Wn.2d at 409 (lost wages
are compensable in personal injury, not CPA, actions).
Plaintiffs have undeniably suffered a great loss, and like many former homeowners, were
the victim of an economic downturn and the cumulative decisions of the many exploitative actors
that precipitated it. While the Court does not deny that the Meyers are victims, it simply cannot
find that they were victimized by NWTS in a way that can be traced to the losses they have
endured. Similarly, the Court in no way endorses the decision by NWTS to fulfill only the bare
minimum of its duty of good faith to borrowers. A greater fiduciary standard may well be called
for in light of the evident power differentials and access to information extent between lenders and
borrowers; indeed, the nature of a trustee relationship seems to require more than what the Meyers
were given in this case. Although a legislative fix may well be called for, this Court can do little
more than chastise NWTS for not behaving with greater affirmative care toward vulnerable
borrowers relying on them to act fairly and diligently. As Judge Jones recently remarked in a
similar situation, “[t]he court can chide Defendants for abysmal customer service in a business tied
intimately to its customers’ financial and emotional well-being. The court cannot, however,
change the basic truth that if a homeowner cannot pay her mortgage, she will ultimately lose her
home.” Singh v. Federal Nat. Mortg. Ass’n, 2014 WL 504820, *7 (W.D. Wash. 2014).
As current case law and the facts in the record do not support either the existence of
actionably unfair or deceptive acts by NWTS or of a causal nexus between NWTS’s acts and the
Meyers’ injuries, the Court concludes that the bankruptcy court erred in finding for the Meyers on
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their CPA claim and in granting damages.3 See Singh, 2014 WL 504820 at *6 (dismissing CPA
claim where plaintiff borrowers failed to show causation despite finding that borrowers pled
sufficient fact to establish that defendant trustee violated its duty of good faith).
CONCLUSION
For the reasons stated herein, the Court concludes that the Meyers failed to meet their
burden of proof under Washington’s Deed of Trust Act and Consumer Protection Act. The Court
REVERSES the decision of the bankruptcy court and grants judgment in favor of
Defendant-Appellant Northwest Trustee Service, Inc. on all claims.
Dated this 9 th day of April 2015.
ARICARDO S. MARTINEZ
UNITED STATES DISTRICT JUDGE
3 As the Court determines that the Meyers have not made a sufficient showing under multiple prongs of the CPA, it
does not reach NWTS’s argument that Judge Overstreet erred in finding the public interest prong to be satisfied.
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