THE SUPERIO COURR T OF THE STATE OF … · 20-07-2015 · MetLife' s beneficiar y status i) perfectl acceptable under MERS membership rules. S explains in its MSJ: The current loan

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THE SUPERIOR COURT OF THE STATE OF W A S H I N G T O N I N A N D FOR THE COUNTY OF W H A T C O M

JOSEPH J. SCHIAVONE and STACIE L . SCHIAVONE, and their martial community,

Plaintiff,

FIRST A M E R I C A N T I T L E ; METLIFE H O M E LOANS; M O R T G A G E ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for M Y NEIGHBORHOOD MORTGAGE, LLC; Q U A L I T Y L O A N SERVICE CORPORATION OF WASHINGTON; and DOE DEFENDANTS 1 THROUGH 1000,

Defendants.

CASE NO. 13-2-00525-1

PLAINTIFF'S RESPONSE TO DEFENDANT MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, I N C S M O T I O N FOR S U M M A R Y JUDGMENT

PLAINTIFF'S RESPONSE TO DEFENDANT MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, I N C S MOTION FOR SUMMARY JUDGMENT- 0

S T A F N E T R U M B U L L , P L L C

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1. Introduction and Requested Relief

MERS seeks summary judgment' on Plaint i f fs , Joseph and Stacie Schiavone

("Schiavones) because MERS believes it has no liability under Washington's Deeds o f Trust Act,

Ch. 61.24 RCW ("DTA") and Consumer Protection Act Ch. 19.86 RCW ("CPA") for recording

an assignment o f a beneficial interest, an interest MERS did not have, w i th the Whatcom County

auditor. As w i l l be demonstrated, this recording, and those fol lowing i t , violated criminal statutes

enacted to protect Washington's land registration system. MERS asserts the filing o f this

admittedly false instrument, which was used as a basis for taking the Schiavone's' home, did not

harm the Schiavones.

MERS' arguments are without merit. The Schiavone's request this Court (1) deny MERS's

motion for summary judgment (MS J) and (2) grant summary judgment against MERS in their

favor.

I I . Counter Statement of Facts

MERS's "Statement o f Facts" is notable because it asserts legal conclusions as facts. This

requires the Schiavones' response to explain why such assertions are either factually or legally

inappropriate. For the convenience o f the Court, the Schiavones w i l l address MERS' assertions in

this Response by reference to the factual headings in which MERS makes those assertions.

A. Schiavones' Response M E R S ' s factual arguments regarding "Plaintiffs Loan.", M S J , 2:2-19

MERS argues: "The Deed of Trust explains that M y Neighborhood Mortgage was the

'Lender,' but the Lender was designating MERS as 'beneficiary" o f the Deed o f Trust solely as

Schiavones object to the overlength 17 page Motion filed by MERS without leave of Court. See WCLCR 10.3(a). In order to fully respond to MERS' arguments, the Schiavones respectfully request leave of Court to respond with an equally overlength brief of 17 pages.



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nominee (i.e., limited agent) for the Lender and the lender's successors or assigns, and that First

American Title was Trustee...." MSJ 9-13. The deed of trust does not say that a "nominee" is a

limited agent or establish any agency relationship (limited or otherwise) between MERS or M y

Neighborhood Mortgage or its successors in interest. See Bain v. Metro. Mortgage Grp., Inc., 175

Wn.2d 83, 106-07, 285 P.3d 34, 45 (2012).

Although MERS infers an agency relationship may exist by virtue o f membership rules,^ it

admits those rules require its members to violate the DTA's recording requirements. See infra.

The deed o f trust was recorded wi th the Whatcom County Recorder's Office. The deed o f

trust identifies MERS as the legal owner o f the "deed o f trust" security instrument.

A l l o f the foregoing is referred to in this Security Instrument as the "Property." Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, i f necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all o f those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required o f Lender including, but not limited to, releasing and canceling this Security Instrument.

Dkt. 175, Ex. E, at 3. Nowhere does the deed o f trust state MERS has a beneficial interest in the

loan, note, or deed o f trust. The deed simply asserts MERS is a "beneficiary" within the meaning

o f RCW 61.24.005(2). Id.; contra BainMl Wn. 2d at 36-37.

MERS next asserts as fact that the Deed allowed parts o f the note and deed o f trust to be

sold separately, but does not explain how the deed o f trust could alter the terms o f the note. MSJ,

Asserting agency as a "fact" in the context of its MSJ is inappropriate. The Schiavone's dispute the existence of any agency relationship between MERS and the lender and its successors. "The burden of establishing an agency rests upon the one who asserts it. Moss v. Vadman, 11 Wn.2d 396, 403, 463 P.2d 159 (1970). Agents must be subject to control by a principal. Bain, 175 Wn.2d at 106 (citing Moss, 11 Wn.2d at 402-03). MERS Members enter into agreements, not with MERS, but with MERSCORP. Dkt 174, The Declaration of Brian Blake ("Blake Decl.") Ex. A 8 and 11; and Ex. B Rule 1 §§ 2 and 3. MERSCORP "provides the services" of MERS to MERS Members. Id. Agents must actually be distinct from their principals; a separate person acting in the principal's stead. Moss, 11 Wn.2d at 403. MERS does not act subject to the control of MERS Members; instead MERS Members act

PLAINTIFF'S RESPONSE TO DEFENDANT MORTGAGE E L E C T R O N I C REGISTRATION SYSTEMS, I N C S MOTION FOR SUMMARY JUDGMENT- 2



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2:13-17. The note states: " I understand the lender may transfer this note." Dkt . 175, Ex. D, f 1.

The deed directly contradicts this provision o f the note. It provides: "The Note or a partial interest

in the Note (together with this Security Instrument) can be sold one or more times without prior

notice to Borrower. Id. Ex. E, § 20 (emphasis supplied) The note only references the deed o f trust

in f 10 o f the Note, which states the deed of trust is only for purposes o f ensuring the borrower's

payment o f the debt; not for altering the terms o f the note.

B. Schiavone's Response to M E R S ' s factual arguments regarding " M E R S Role and Relationships"; "Termination of M E R S relationship" and " M E R S ' s Assignment Had no Effect on the Schiavone's." M S J , 3:7-5:2.

On May 28, 2012, a MERS officer recorded an assignment o f the deed o f trust wi th the

Whatcom County Auditor's Office. Dkt. 175, Ex. H . MERS officers are appointed by MERS and

act on MERS behalf Blake Deck, 1 3. Significantly, MERS does not assign "only its legal title" in

the deed o f trust. Rather the assignment o f the deed states MERS transfers its beneficial interest in

the deed o f trust to Metlife Home Loans, a Division o f MetLife Bank N .A . ("MetLife") . Dkt. 175,

Ex. A . It is undisputed MERS had no beneficial interest in the deed or the note to transfer to

MetLife .

On May 30, 2012, MetLife recorded its "Appointment o f Successor Trustee." Dkt 96, Ex.

B. Af ter identifying MERS as the original beneficiary, the "Appointment o f Successor Trustee"

states:

Official Records whereas, MetLife Home Loans, a division of MetLife Bank, N.A. is the present beneficiary under said Deed of Trust, and desires to appoint and does appoint Q U A L I T Y L O A N SERVICE CORPORATION as the new Trustee in the place and stead o f the present trustee thereunder."

for MERS according to the rules propagated by MERSCORP. Blake Decl. (Dkt. 174) Ex. B, Rules 2; 3 § 3; 8 § 1(d).




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Id. at f 2 (emphasis supplied). This appointment references "Off ic ia l Records." The only "off icial

record" in the Whatcom County's land records that supports this appointment by MetLife, as a

beneficiary under the D T A , is MERS' assignment o f its non-existent beneficial interest to

MetLife .

The Notice o f Trustee Sale ("NOTS"), which was required by R C W 61.24.040(l)(a) and

( f ) to be recorded and to document the assignment o f beneficiary status in the County land

records, falsely states that MERS acted as a beneficiary under the deed o f trust (rather than as the

legal owner o f the deed o f trust). Specifically, the NOTS states the deed o f trust was executed by

the Schiavones:

to secure an obligation in favor of MORTGAGE ELECTRONIC REGISTRATION

SYSTEMS INC., ("MERS"), AS NOMINEE FOR M Y NEIGHBORHOOD MORTGAGE COMPANY, LLC, as Beneficiary, the beneficial interest in which was assigned by MORTGAGE ELECTRONIC REGISTRATION COMPANY, LLC (or by its successors-in-interest and/or assigns, if any), to MetLife Loans, a division of MetLife Bank, N.A.

Dkt. 175, Ex. M (emphasis supplied). The Schiavones never owed any monetary obligation to

MERS and MERS does not contend otherwise in its Motion.

Although the assignment, appointment o f successor trustee, and NOTS all indicate MetLife

derives its beneficiary status f rom MERS, MERS contends MetLife 's beneficiary status actually

occurred privately and was concealed f rom the public records. MERS argues the recording o f the

erroneous and misleading assignment in the public records purporting to transfer MERS'

beneficiary status to MetLife (while concealing from the public records the real source o f

MetLife 's beneficiary status) is perfectly acceptable under MERS membership rules. MERS

explains in its MSJ:

The current loan servicer and investor, MetLife and Fannie Mae, respectively, are both current M E R S ® System members and were in 2012. See Declaration o f Brian Blake ^ 2. To become M E R S ® System members, entities must agree to MERS's



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Terms and Conditions and Rules o f Membership. Id, Exs. A & B . The Terms and

Conditions and Rules of Membership each provide that MERS may take direction from the servicer (MetLife), absent contrary instructions from the investor and

owner of the loan (Fannie Mae). See id. Exs. A f 3 & Ex. B at § 6. Here, Fannie Mae was the investor owning the right to the economic benefit (i.e., the payment) of the loan, and MetLife was Plaintiffs' loan servicer. See, e.g., T A C 11.8. Fannie

Mae's Servicing Guide—including the version in effect in 2012 during the relevant events here—explains that a loan servicer may, at its discretion, choose to "deactivate" the loan from the MERS® System. See Abadir Dec!., Ex. G. Under those Fannie Mae requirements, "[t]he servicer w i l l need to prepare an assignment o f the mortgage loan from MERS to itself and have it executed, and then record the executed assignment in the public land records." Id. (emphasis added). Here, Fannie Mae was the investor owning the ultimate right to the economic benefit (i.e., the

payments) of the loan, MetLife was Plaintiffs' loan servicer entitled to collect payments from Plaintiffs, and MERS was a limited agent for Fannie Mae.

Termination of M E R S ' s Role and Interest in the Deed of Trust . On Apri l 25, 2012— months before any notice o f default was executed or foreclosure sale was scheduled—MetLife chose to avail itself o f the discretion Fannie Mae gave it, by having a MERS Signing Officer (and MetLife employee) execute an assignment of

MERS's interest in the Deed of Trust to MetLife. See Abadir D e c l , Ex. H . Under

MERS's Terms and Conditions and Rules of Membership, MERS was obligated to take direction from MetLife and to execute the Assignment for MetLife. MERS executed the Assignment in Texas, but there is no evidence MERS ever recorded the Assignment in Washington. See id.

MERS Motion at 3:10-4:8 (emphasis supplied).

MERS argues as a statement o f fact that "the entirety o f MERS's role [with regard to

Schiavone's nonjudicial foreclosure] was its 2009 designation as nominee i n the Deed of Trust by

the original Lender, and its assignment o f that nominee interest to MetLi fe . " MSJ, 4:6-9. MERS'

own Statement o f facts establishes that MERS's membership rules required the recording o f false

and forged land records. Indeed, MERS concedes in its statement o f facts that MERS' officer

followed MERS' rules by falsely stating MERS was selling its beneficial interests in the deed of

trust to MetLife for purposes o f establishing MetLife 's beneficiary status in order to allow

MetLife to nonjudicially foreclose pursuant to the DTA.




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C. Response to MERS's factual arguments "MetLife and QLS Initiate Foreclosure After MERS Terminated its Interest in the Deed of Trust" and "Plaintiffs admit MERS did nothing to injure them." MSJ, 5:3-6:7.

MERS admits its signing officer executed the assignment o f the deed o f trust. MSJ, 3:24-

4:2. Although MERS argues: "there is no evidence MERS ever recorded the Assignment in

Washington", MSJ, 5-6, this is not true. The Assignment itself, which the MERS officer is

required to sign under MERS' membership rules, indicates that it is to be recorded^ and MERS

rules require an assignment out o f MERS prior to foreclosure. Blake Deck, Ex. B, Rule 8 § 1(d).

Moreover, Washington law requires the MERS assignment be recorded and referenced in the

NOTS. RCW 61.24.040(1 )(a) and ( f ) .

MERS next argues, quoting f rom the Schiavone's depositions, there is no factual dispute

that the assignment did not cause the Schiavone's injury. MSJ 5:16-7:7. But this is not true. In the

absence o f MERS recording o f the false assignment necessary to comply with RCW

61.24.040(l)(a) and ( f ) , the unlawful trustee could not have filed, served, and recorded a NOTS

that compHed with RCW 61.24.040(l)(a) and ( f ) . Finally, i f the trustee was unable to file the

NOTS there could be no foreclosure because RCW 61.24.030(7), (8), and (9) require a Notice o f

Trustee's Sale as a requisite to a trustee's sale.

D. Response to " P R O C E D U R A L H I S T O R Y R E L E V A N T T O P E N D I N G M O T I O N . " M S J 7:8-8:25.

MERS argues: "Just months ago, the Washington Court o f Appeals clarified and confirmed

that MERS has a valid nominee interest to assign." MSJ 8:23-25. But Jackson did not involve any

See upper right hand comer of the MERS assignment, which indicates that after the document is recorded with the Whatcom County it should be returned to Security Connections, Inc.




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legal or factual issue regarding whether MERS had any interest to assign."* A case that did involve

this issue was Knecht v. Fid. Nat. Title Ins. Co., No. C12-1575RAJ, 2015 W L 3618358 (W.D.

Wash. June 9, 2015): which concluded after a trial on this very issue that MERS' assignment o f its

beneficial interest was a nullity. Id. at 6-7.

I I I . C O U N T E R S T A T E M E N T O F I S S U E

Is MERS liable under the D T A and CPA for recording a false instrument to facilitate the nonjudicial foreclosure o f Schiavones' home? (Short answer: YES)

I V . E V I D E N C E R E L I E D U P O N :

The Schiavones rely upon the admissions against interest contained in MERS' Motion, the

declarations submitted in support o f MERS' MSJ, the Declaration o f Scott Stafne, this

memorandum o f law, and all pleadings and documents already on file wi th the Court.

V . A R G U M E N T AND A U T H O R I T Y

A. Summary Judgment Standard

CR 56(C) provides in pertinent part:

.. . The judgment sought shall be rendered forthwith i f the pleadings, depositions, answers to interrogatories, and admissions on file, together wi th the affidavits, i f any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter o f law. . . .

A trial court may grant summary judgment to the non-moving party where there are no

issues o f material fact. See, e.g., Rubenser v. Felice, 58 Wn.2d 862, 365 P.2d 320 (1961);

4

Jackson was about a constitutional challenge to the DTA which the Court of Appeals rejected on procedural grounds. Jackson v. Quality Loan Servs., Wn.2d , 347 P.3d 487, 489, (Div. I , 2015). With regards to Jackson's claims related to her nonjudicial foreclosure, the Jackson Court deemed those arguments waived. Id. at 491 ("Jackson's failure to assign error to and argue against the court's decision for failure to state a claim on [her non-constitutional claims] waives any argument as to those claims."). Accordingly, Jackson's analysis of the DTA is entirely dicta, and is not binding authority on this Court. Furthermore, in Jackson MERS assigned its interest to the holder of the Note. Here, MERS assigned a beneficial interest it did not have to MetLife, who was not the holder of the Schiavones' Note under E-SIGN. Compare Stafne Deck, Ex. 1 (MERS Assignment in Jackson) with Dkt. 122 Ex. E (MERS Assignment here).




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Impecoven v. Department of Revenue, 120 Wn.2d 357, 841 P.2d 752 (1992) (summary judgment

for nonmoving party entered by appellate court).

Here, the facts are not in dispute. MERS executed the Assignment to further the

foreclosure, and, as explained infra, the Assignment was a legal nullity. Accordingly, MERS is

liable to the Schiavones under the D T A and CPA as a matter o f law.

///

///

B. M E R S violated the D T A .

RCW 61.24.040(l)(a) requires the trustee to "record a notice in the form described in ( f ) o f

this subsection in the office o f the auditor in each county in which the deed o f trust is recorded."

RCW 61.24.040(l)(f) requires the Trustee to reference the assignment o f the deed o f trust

recorded with the Auditor establishing a beneficiary's authority to nonjudicially foreclose under

the DTA.^ The Schiavones contend this Court should construe these provisions to require the

recording o f an accurate assignment o f the deed o f trust establishing MetLife as the beneficiary

(within the meaning o f RCW 61.24.005(2)). Accuracy is required because Washington statutes

prohibit the recording o f false or forged instruments. See e.g. RCW 9.38.020 (false representation

regarding title); RCW 40.16.030 (offering a forged or false instrument); RCW 65.12.750 (false

entries in an instrument).

MERS admits, as it must,*^ that the assignment its officer signed to be recorded with the

Whatcom County auditor contained false statements. MERS concedes i t had no beneficial interest

Specifically, RCW 61.24.940(a)(4) requires the NOTS to state: "the beneficial interest in which was assigned by . , under an Assignment recorded under Auditor's File No [Include recording information for all

counties i f the Deed of Trust is recorded in more than one county.]"




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in the deed o f trust, and no beneficiary status within the meaning o f RCW 61.24.005(2), to

transfer to MetLife. Indeed, this has been a common problem for MERS since Bain, which i t has

resolved simply by filing forged and false instruments, like the one recorded here.

The practice o f MERS filing unfair or deceptive assignments that are legal nullities is well

known to the Courts. See, e.g. Bain, 175 Wn.2d at 111. Division I I I confimied earlier this summer

that MERS cannot assign a "beneficial interest" within the meaning o f the D T A :

The Bain decision has presented problems for foreclosure o f deeds o f trust like Ms. Weirich's, in which lenders designated MERS as a nominee or mortgagee o f record. Because MERS does not hold the underlying promissory notes, banks who are assigned a "beneficial interest" in a deed of trust by MERS do not thereby acquire a beneficial interest within the meaning o f the D T A nor are they able, legally, to appoint a successor trustee.

Merry v. Nw. Tr. Servs., Inc., Wn. App. , P.3d , 2015 W L 3532992, at *8

(Div. I I I . , June 4, 2015).'

So why does MERS record assignments containing false statements? Because the D T A

requires the recording o f the assignment as a predicate to the issuance of a NOTS. RCW

61.24.040(l)(a). The recorded assignment transferring beneficiary status is absolutely necessary to

initiate nonjudicial foreclosures because the NOTS is required to reference the recorded

assignment transferring the beneficial interest. RCW 61.24.040(1 )(f) . The D T A was intended to

be an open process, where borrowers and the public alike could obtain necessary information fi-om

public land records to evaluate the merits o f a nonjudicial foreclosure. This fiindamental purpose

o f the D T A is reflected in its policy objectives: "First, the nonjudicial foreclosure process should

The MERS assignment in this case is precisely the same the one rejected by the Supreme Court in Bain 175 Wash. Wn2dat 117.

To the extent Merry is not contradicted by Washington Supreme Court and Division I Court of Appeals authority, it is good law. However, to the extent Merry stands for the proposition that waiver may apply to a trustee's sale conducted by a trustee appointed by an unlawful beneficiary, Bavand and Rucker control. See. e.g., Bavand v.




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remain efficient and inexpensive. Second, the process should provide an adequate opportunity for

interested parties to prevent wrongful foreclosure. Third, the process should promote the stability

o f land titles." Bain, 175 Wn.2d at 94

This Court should not construe the D T A to allow routine recording o f false assignments in

violation o f Washington's criminal statutes. " [ 0 ] u r system of title registration hinges upon the

integrity o f the documents which comprise i t . . . " Klem v. Washington Mut. Bank, 176 Wn.2d 771,

794, 295 P.3d 1179 (2013); see also Bain, 175 Wn.2d at 111-12 (rejecting MERS' proposal that it

be allowed to file assignments transferring its interest in the deed o f trust, because it l ikely had

none); Knecht, 2015 W L 3618358 at *6-7 (concluding after a trial that MERS had no interest in

the deed o f trust to transfer and the assignment was a nullity).

MERS officers now routinely record assignments falsely claiming beneficial interests in

and beneficiary status under, the deed o f trust wi th County Auditors so that such false and forged

documents can be referenced in recorded NOTS as documenting a chain o f title in the public

record that trustees can rely upon to initiate nonjudicial foreclosures. RCW 61.24.040(l)(a) and

( f ) . I f the borrower complains, MERS and its members then argue (as they do here) that

beneficiary status was really transferred out o f public sight by transfer o f an endorsed note among

MERS members.

The Schiavone's urge this Court to hold that MERS cannot record assignments required by

RCW 61.24.040(l)(a) and ( f ) for purposes o f facilitating nonjudicial foreclosures when those

assignments are false. The D T A incorporates and utilizes Washington's land registration statutes

as part o f its nonjudicial foreclosure process. In this regard, RCW 61.24.005(12) defines "record"

and "recorded" to include "the appropriate registration proceedings, in the instance o f registered

OneWest Bank. 176 Wn. App, 475, 490, 309 P.3d 636 (Div. 1, 2013), Rucker v. Novastar Mortgage, Inc., 177 Wn.




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land." RCW 61.24.020 explicitly states: "... a deed o f trust is subject to all laws relating to

mortgages on real property. . . . The county auditor shall record the deed as a mortgage and shall

index the name of the grantor as mortgagor and the names of the trustee and beneficiary as

mortgagee." The D T A relies on the accuracy o f Washington's recorded instruments to work. See

e.g. RCW 61.24.008(2),(3); .010(2); .030(5), (7), (8); .040(l)(a), ( f ) ; .045; .050; .080; 090; .110;

160; and 163.

The D T A must be construed consistently wi th Washington's public land registration

statutes. C.f. BAC Home Loans Servicing, LP v. Fulbright, 180 Wn. 2d 754, 756-57, 328 P.3d 895,

896 (2014) (evaluating interplay between various statutes); see also Bain, 175 Wn.2d at 94 (DTA

should be construed to promote stability o f land titles). It cannot be seriously contended the

legislature intended (and Washington courts would sanction) MERS to routinely record false and

forged assignments in violation o f RCW 40.16.030, RCW 9.38.020, and R C W 65.12.750 to

further nonjudicial foreclosures. Because MERS admits the statements in the assignment were

false, and because MERS had no interest in the property to assign, MERS assignment violated

RCW 61.24.040(1 )(a) and (4).

C . Waiver Does Not Apply to Schiavones' Claims for Damages

Waiver under the D T A does not apply to damages actions; i f waiver applies at all, a

borrower only waives the right to contest the validity o f the sale. "The language o f the [DTA]

provides that failure to bring a lawsuit to restrain a sale may result in a waiver o f grounds that may

be raised for invalidating the sale, not for other distinct damages claims." Frizzell v. Murray,

179 Wn.2d 301, 310, 313 P.3d 1171 (2013) (emphasis added); see also Klem, 176 Wn.2d at 796.

App. 1, 16,311 P.3d31 (Div. 1,2013).




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Even i f waiver did apply, applying waiver would be inequitable here. The Schiavones had

no access to the MERS eNote registry which indicated that Fannie Mae (and not MetLife) was the

holder o f the Note when MetLife appointed Quality Loan Services as successor trustee until well

after the completion o f the March 1, 2013 trustee's sale. Because the Schiavones did not have

actual or constructive knowledge that MetLife was not the holder o f the Note (a defense to the

foreclosure), waiver does not apply.

The Schaviones also assert that RCW 61.24.130 and .127 are unconstitutional and

unenforceable to the extent they are are construed to require waiver o f common law damage

actions unless borrowers pay those statutory sums required by the legislature to obtain an

injunction under the D T A . This is because Wash. Const, art. I V , § 6 gives superior courts'

equitable jurisdiction. Injunctions are the strong arm of equity and courts do not tolerate statutory

restrictions on Superior Court's ability to use them. Blanchard v. Golden Age Brewing Co., 188

Wn. 396, 63 P.2d 397 (1936). Cf. Dennis v. Moses, 18 Wn. 537, 52 P. 333 (1898) ("[cjourts o f

equity have always exercised a control over sales o f property...") Id. at 578.

Interpreting RCW 61.24.130 and .127, as MERS suggests, so as to impose statutory

requirements that deed o f trust borrowers, unlike any other type o f borrowers, must pay whatever

his creditor claims is due in order to access the superior court also runs afoul o f those protections

guaranteed by Washington's Constitution. Putman v. Wenatchee Valley Med. Ctr., P.S., 166

Wn.2d 974, 216 P.3d 374 (2009) ("The people have a right o f access to courts; indeed, it is "the

bedrock foundation upon which rest all the people's rights and obligations.'" (internal citations

omitted). The legislature cannot restrict the access to the superior court's jurisdiction by the

imposition o f special restrictions not consistent with the court rules. In Putman the Supreme

Court held the legislature could not impose restrictions on the access to courts which interfered to




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their right to discovery under the court rules Id.^ This same principle should apply here because

MERS' noncompliance with RCW 61.24.040(l)(a) and ( f ) has spoiled the public records to the

point where discovery is essential.

Finally, MERS' proposed construction of this statute is inimical to the Schaviones' rights

under Const, art. I , § 12, which protects Washingtonians from any legislative forfeiture o f their

rights to bring common law personal injury actions against special interest defendants. See

Schroeder v. Weighall, 179 Wn.2d 566, 573, 316 P.3d 482 (2014); Gotten v. Wilson, 21 Wn.2d

314, 178 P.2d 287 (1947). In order to jus t i fy legislative elimination o f the negligence cause o f

action from borrowers, the legislature must actually show a reasonable ground for such special

legislation. Id. None has been advanced here.

This Court has a duty to adopt an interpretation o f the D T A that is constitutional over one

that is unconstitutional. "Statutes should be construed to avoid results that are absurd and

unconstitutional." Gabelin v. Diking Dist. No 1 of Island County, 182 Wn. App. 217, 233, 328

P.3d 1008 (Div. I , 2014). Accordingly, this Court should not hold the Schaviones right to bring

causes o f actions for damages are waived.

D. The Schaviones have demonstrated M E R S has violated the C P A

1. MERS engaged in unfair and deceptive practices

MERS argues the Schaviones do not identify an unfair or deceptive act on their part. MSJ

13:15-15:5. This, o f course, is not true. MERS conceded that i t was not a beneficiary within the

The specific restriction in Putnam involved medical malpractice litigation. RCW 7.70.150 required medical malpractice plaintiffs to file a "certificate of merit" signed by an expert stating there is a reasonable probability the defendant's actions fell short of the standard of care. The Supreme Court struck down simply having to file a declaration as being an unconstitutional restriction on access to the courts. Putnam, 166 Wn.2d at 979. I f having to simply file a certificate is an unconstitutional restriction on access to justice, then clearly the much more onerous financial requirements of obtaining an injunction under RCW 61.24.130 in order to assert claims arising out of an unlawful nonjudicial foreclosure is an unconstitutional restriction on access to justice.




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meaning o f RCW 61.24.005(2) notwithstanding the deed o f trast falsely stated otherwise. MERS

also admits that the assignment which it recorded stating that it owned a beneficial interest in the

property and/or had beneficiary status under the D T A for purposes o f complying wi th RCW

61.24.040(1 )(a) and ( f ) was false. Thus, MERS outright admits recording lies in Washington's

land registration system, which i t has no legal authority to do, in violation o f Washington's

criminal laws. See e.g. RCW 9.38.020; RCW 40.16.030; RCW 65.12.750. These violations o f the

D T A may give rise to a cause o f action under the CPA. Lyons v U.S. Bank, 181 Wn.2d 775, 784,

336 P 3d 1142 (2014); Frias v. Asset Foreclosure Services, Inc., 181 Wn.2d 412, 417, 334 P.3d

529 (2014).

MERS wants to quibble. It wants to argue that none o f these recorded instruments matter

because MetLife came into possession o f the note secretly, in a manner not reflected in

Washington's land registration system or anywhere else for that matter. MSJ 15:1-5. But that

argument does not hold water. The mere holder o f a note is not the equivalent o f a beneficiary.

This is important because MERS doesn't claim to be a holder o f either the deed or the

assignment. It claims a beneficial interest in the deed and the right to transfer beneficiary status.

These false statements have been recorded in the public record for a purpose; namely, RCW

61.24.040(l)(a) and ( f ) require this so that borrowers, like the Schaviones, and the public can rely

on the land registration records to ascertain who is the beneficiary for purposes o f nonjudicial

foreclosure. MERS' false assignment prevented the Schaviones' investigation o f the public record

from ever identifying the true beneficiary because o f its false recordings pursuant to RCW

61.24.040(l)(a)and (4).

2. MERS acted in trade or commerce

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subsidiary o f MERSCORP Holdings, serves as the mortgagee in the land records for loans

registered on the M E R S ® System, and is a nominee (or agent) for the owner o f the promissory

note." Stafne Decl., Ex. 2. It is MERS and MERSCORP's business to use the MERS System and

to (falsely) assert itself as nominee for the Lenders in the Deed of Trust. Accordingly, the trade

and commerce element is met.

3. MERS filing offalse and forged assignments affects the public interest.

RCW 19.18.093 provides in pertinent part: "a claimant may establish that the act or

practice is injurious to the public interest because it: . . . (3)(a) Injured other persons; (b) had the

capacity to injure other persons; or (c) has the capacity to injure other persons." The recording o f

an assignment containing false statements, by a MERS officer who has no authority to make such

a filing and therefore has to commit forgery to do so, has injured and has the capacity to injure

other persons.

The Assignment was publicly recorded; it is visible to everyone. Strong v. Clark, 56 Wn.2d

230, 352 P.2d 183 (1960) ("When an instrument involving real property is properly recorded, i t

becomes notice to all the world o f its contents."). MERS acted unfairly and deceptively by

pretending it was a beneficiary and purporting to assign that status to MetLife to make the public

record look right to comply with RCW 61.24.040(l)(f). Every Washington citizen was on notice

o f the Assignment and had the capacity to be deceived into thinking MetLife 's beneficiary status

comes fi-om the Assignment. This has the capacity o f deceiving Washington's residents into

investigating MetLife 's authority, like the Schiavones did. Furthermore, when MERS destabilizes

the land records by filing documents purporting to assign interests i t does not have, every member

of the public is equally injured by the weakening o f our recording system. Finally, given MERS'

appearance on so many deeds o f trust, the Bain Court found this element is presumptively met




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when examining an Assignment with identical language. Bain, 175 Wn.2d at 118.''

Others may be injured as have the Schaviones by MERS unfair and deceptive practice o f

recording false instruments so as to appear compliant with RCW 61.24.040(1 )(a) and ( f ) . MERS'

Assignments have the capacity to enable trustees to record Notices o f Trustee's Sales against

Washington citizens even where no such beneficial interest was actually assigned. The public

interest element is met.

4. MERS was a proximate cause of the Schiavones' loss of title to their property.

Further, "[wji thout question, where a pla int i f f actually loses title to her house in a

foreclosure sale or actually remits foreclosure fees, that plaintiff has suffered injury to his or her

property." Frias, 181 Wn.2d at 430-31. There may be more than one proximate cause o f hanm

compensable under the CPA. See 6A Wash. Prac, Wash. Pattern Jury Instr. Civ. W P I 310.07 (6th

ed.) (references citations). Further, "[wji thout question, where a plaintiff actually loses title to her

house in a foreclosure sale or actually remits foreclosure fees, that plaint i ff has suffered injury to

his or her property." Frias, 181 Wn.2d at 430-31.

I f MERS had not filed a false assignment claiming to transfer its nonexistent beneficial

interest and/or beneficiary status to MetLife, their home could not have been nonjudicial ly sold

because there would have been no compliance wi th RCW 61.24.040(l)(a) and ( f ) . SeeAlbice v.

Premier Mortgage Servs. of Washington, Inc., 174 Wash. 2d 560, 568, 276 P.3d 1277, 1281-82

(2012) (invalidating sale for procedural t iming irregularity arising pursuant to RCW 61.24.040 (6).

MERS correctly notes that RCW 19.86.093 provides a new way to establish the public interest element, but claims Bain's public interest impact is irrelevant because it did not consider the statute. MERS Motion at 15:11-14. However, by its own terms RCW 19.86.093 is not the exclusive way to establish public interest impact. RCW 19.86.093 ("a claimant m a y establish that the act or practice is injurious to the public interest because i t . . . " ) . As evidenced by MERS' citations to Hangman Ridge, a case decided twenty three years before the enactment of RCW 19.86.093, Bain and other cases analyzing public interest impact are still good law despite not considering RCW 19.86.093.




TEL. 360.403.8700 /FAX 360.386.4005

See also Schroeder v. Excelsior Mgmt. Grp., LLC, 111 Wash. 2d 94, 106-07, 297 P.3d 677, 683

(2013)(Holding the failure to strictly comply with DTA's predicate provisions cannot be waived

and invalidate a sale.)

MERS violation having its officers forge, and then file an assignment containing false

statements in order to facilitate nonjudicial foreclosures is not technical violation o f the DTA. It

undermines Washington's land registration system and was extremely prejudicial to the

Schaviones and the people o f the Washington. MERS filing o f the false and forged assignment in

this case was the rock which caused the avalanche which ultimately resulted in the wrongfii l

foreclosure o f the Schiavones' home.

V I . Conclusion

MERS MSJ should be denied. The Schiavones should be granted summary judgment o f

liability against MERS.

Dated this 20th day o f July, 2015 at Arlington, W A

RespectfiiUy Submitted,

STAFNE T R U M B U L L , PLLC

Scott E. Stafne, WSBA # 6964 Josh Trumbull, WSBA# 40992

Brian Fisher, WSBA# 46495

Attorneys for Plaintiffs'



239 N O R T H OLYMPIC A V E N U E ARLINGTON, WA 98223

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C E R T I F I C A T E O F S E R V I C E

I , Shaina Dunn, certify under penalty o f perjury under the laws o f the State o f Washington

that the foregoing is true and correct:

1. A t all times hereinafter mentioned I am a citizen o f the United States o f America, a

resident o f the State o f Washington, over the age o f eighteen years, not a party to the above-

entitled action, and competent to be a witness herein.

2. That on the 20th day o f July, 2015, I caused to be served a true and correct copy o f

Pla in t i f f s Response To Defendant Mortgage Electronic Registration Systems, Inc.'s Motion For

Summary Judgment to defendants in the above title matter by causing it to be delivered to:

Valerie Holder Melanie Ronen

•Facs imi le

•Express Mai l Fred Bumside David Abadir

• Express Mai l

KlProcess Server

• H a n d Delivery

•Facsimile

[email protected] [email protected] m

Keesal Young & Logan 1301 5th Ave, Ste 3300 Seattle, WA 98101

mu.S. First Class

Mai l Postage Paid


• Legal Messenger

Kl Electronic-Email

Davis Wright Tremaine 1201 3"* Ave, Ste 2200 Seattle, WA 98101 [email protected] [email protected]

• Legal Messenger

• Electronic-Email

Robert McDonald Joseph Ward Mcintosh Mary Steams McCarthy & Holthus 108 r ' A v e S , Ste 300 Seattle, WA 98104 rmcdonald@mccarthyholt hus.com jmcintosh@mccarthyholt hus.com msteams@mccarthyholth us.com

mV.S. First Class

Ma i l Postage Paid


• Legal Messenger

M Electronic-Email

•Facs imi le

• Express Ma i l

DATED this 20th day o f July 2015 at Arlington, Washington.

I Shaina Dunn Paralegal

Stafne Trumbull, PLLC

PLAINTIFF'S RESPONSE TO DEFENDANT M O R T G A G E ELECTRONIC REGISTRATION SYSTEMS, I N C S MOTION FOR SUMMARY JUDGMENT- 18



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Documents

THE SUPERIO COURR T OF THE STATE OF … · 20-07-2015 · MetLife' s beneficiar y status i) perfectl acceptable under MERS membership rules. S explains in its MSJ: The current loan