Marts v. U.S. Bank Nat'l Ass'n

166 F.Supp.3d 1204

John and Michelle Marts, Plaintiffs,

v.U.S. Bank National Association, et al., Defendants.

CASE NO. C15–198 RAJ

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

Signed February 26, 2016

Jason E. Anderson, Seattle, WA, for Plaintiffs.

Zana Bugaighis, Fred B. Burnside, Davis Wright Tremaine, Seattle, WA, for Defendants.

ORDER

The Honorable Richard A. Jones, United States District Court

I. INTRODUCTION

This matter comes before the court on defendants' motion for summary judgment. Dkt. # 10. Defendants are U.S. Bank National Association (“USB”) and Mortgage Electric Registration Systems, Inc. (“MERS”). For the reasons stated below, the motion is GRANTED.

In their complaint, plaintiffs John and Michelle Marts seek: (1) damages arising out of the attempted foreclosure of their home and (2) an injunction restraining a trustee sale.¹ (Compl.) Dkt. # 1–2. The complaint alleges that defendants violated the Washington Consumer Protection Act (Counts I–V: CPA Claims) and breached the parties' agreement (Count VI: Breach of Contract). Id. In their response to defendants' motion, plaintiffs concede that Count I is not a viable claim and fail to make any argument opposing dismissal of Count VI—their contract claim. (Opp.) Dkt. # 14, p. 2. Plaintiffs further state that they have no intention of seeking to enjoin foreclosure. Id., p. 4 n.3. Accordingly, the only remaining claims at issue are Counts II–V, all of which allege violations of the CPA.

II. BACKGROUND

On April 25, 2007, plaintiffs refinanced the loan on their residence at Lake Stevens, Washington (the “Property”) for $411,200.00, as evidenced by a 30–year adjustable rate promissory note (the “Note”) payable to Flexpoint Funding Corporation (“Flexpoint”). Declaration of Joseph G. Devine, Jr. (“Devine Decl.”), Ex. C (Note). The Note was secured by a deed of trust (the “Deed of Trust”), which provided that upon loan default, the note holder could sell plaintiffs' property to recover the loan proceeds. Id., Ex. D. Flexpoint was listed as the lender and MERS was listed as the nominee for Flexpoint and its successors and assigns on the Deed of Trust. Id. at 1–2.

Before closing, EMC Mortgage Corp. (“EMC”) committed to funding and then purchasing plaintiffs' loan from Flexpoint. Id., Ex. E. To allow for the transfer to EMC, defendants contend that an Allonge—a paper used to attach an endorsement in blank—was affixed to the Note. See Id., Ex. G; Ex. H. Plaintiffs dispute this fact and contend that additional discovery is necessary to determine whether the Allonge was indeed attached to the Note. (Opp.) Dkt. # 14, p. 13.

Review of the document itself reveals that it is titled “Allonge to Note,” identifies John and Michelle Marts as the borrowers and accurately states the property address and the loan amount. Devine Decl., Ex. C. The Allonge is dated April 25, 2007 (the same day as the closing) and is signed by Aldo Marroquin, Vice President of Funding for Flexpoint. Id. Inclusion of the Allonge with the loan file was a necessary precondition to closing. See Id., Ex. H (cover page for closing instructions includes check-boxes for all loan documents and the “allonge” box is checked); id., Ex. G (identifying the allonge in the Collateral Stacking Order).

On May 7, 2007, EMC deposited the Note into the Bear Stearns Asset Backed Certificates Series 2007–HE6 Trust (the “Bear Stearns Trust”). EMC continued to act as the loan servicer. See Devine Decl. ¶ 13 & Ex. J; id. ¶ 14, Ex. K (identifying Bear Stearns as the investor); id. ¶ 15, Ex. L (original loan documents identify EMC Mortgage as servicer as of June 1, 2007). J.P. Morgan Chase Bank, N.A. (“Chase”) later became the loan servicer. (Opp.) Dkt. # 14, p. 5.

To summarize, Flexpoint was the initial “owner” of the Note. Flexpoint then transferred the Note to EMC and EMC transferred it to the Bear Stearns Trust. All of this occurred in 2007. Thus, since 2007 the Bear Stearns Trust has been the “owner” of the Note and defendant USB, as trustee of the Bear Stearns Trust, has been the “holder” of the Note. See Devine Decl. ¶ 17 & Ex. N. Throughout this period, EMC, and later, Chase acted as the loan servicers, i.e., the parties responsible for day-to-day interaction with plaintiffs. (Opp.) Dkt. # 14, p. 5.

Plaintiffs do not dispute that they defaulted on their Note. Declaration of Fred B. Burnside (“Burnside Decl.”) ¶ 2, Ex. A (Transcript of Mr. John Marts' Deposition (“Marts Dep.”) at 19:14–19); see also Burnside Decl. ¶ 3, Ex. B (Answers to Requests for Admissions) at No. 5 (admitting default) and No. 7 admitting Plaintiffs have made no monthly mortgage payments towards the principal of the loan since September 1, 2007). Plaintiffs also do not dispute that they knew at all times where to submit payments and whom to contact regarding loan modifications. Marts Dep. at 48: 17–25; 50: 18–23; 80:18–81:2.

USB has attempted to foreclose on plaintiffs' property a number of times, beginning in 2007. See Dkt. # 16–2, pp. 2, 9, 16, 23, 38 (notices of trustee sale). In 2008, plaintiffs filed for bankruptcy, which forestalled the foreclosure of their home. Burnside Decl., Ex. C (voluntary petition). On April 15, 2015, the bankruptcy court approved a settlement of all of plaintiff's pre-petition claims for $5,000. Burnside Supp. Decl., Ex. A. Although no trustee sale is currently pending, defendants assert that plaintiffs “have not brought their loan current (or made any overtures to pay their loan balance or modify their loan)” and thus foreclosure proceedings “could resume at any point.” Dkt. # 27, p.6.

Plaintiffs contend that defendants engaged in two deceptive practices that violate the CPA: (1) USB and MERS “engaged in a scheme to create a private property recording system” that served to “obscure any ability of the Marts to determine who actually owned their loan and had the right to foreclose” and (2) USB and MERS initiated foreclosures against the Marts before perfecting an interest in the note (presumably based on plaintiffs' theory that the Note and Allonge were not affixed to each other). See, e.g., (Opp.) Dkt. # 14, p. 2; see also (Compl.) Dkt. # 1–2, ¶ 27 (“[T]he note and allonge were subsequently transferred separately to U.S. Bank and never affixed to each other until sometime after December 21, 2012.”).

Plaintiffs contend that these practices injured them in two ways: (1) they “incurred costs associated with investigating ownership of their note,” to determine “the party entitled to enforce the note secured by their residence,” and (2) Ms. Marts suffered significant emotional distress. Id., p. 13.

III. ANALYSIS

a. Legal Standard

Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will have the burden of proof at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Calderone v. United States, 799 F.2d 254, 259 (6th Cir.1986). On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex Corp., 477 U.S. at 325, 106 S.Ct. 2548. If the moving party meets the initial burden, the opposing party must set forth specific facts showing that there is a genuine issue of fact for trial in order to defeat the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150–51, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).

b. CPA Claim

Plaintiffs' only remaining claims allege a violation of the CPA. See (Compl.) Dkt. # 1–2. Plaintiffs bear the burden of proof at trial on this claim. Accordingly, plaintiffs must show: (1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) impacting the public interest; (4) injuring plaintiffs' business or property; and (5) caused by defendants' unfair or deceptive act. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 780, 719 P.2d 531 (1986). “Failure to satisfy even one of the elements is fatal to a CPA claim.” Sorrel v. Eagle Healthcare, 110 Wash.App. 290, 298, 38 P.3d 1024 (2002).

i. Injury and Causation

Here, defendants are moving for summary judgment and therefore it is their burden to demonstrate that there is an absence of evidence to support one or more elements of plaintiffs' claim. Celotex Corp., 477 U.S. at 325, 106 S.Ct. 2548. They have met that burden. There is simply no evidence in the record that supports the fifth element of plaintiffs' claim, i.e., that plaintiffs' injury was caused by the unfair or deceptive acts of defendants.

To prove causation, the “plaintiff must establish that, but for the defendant's unfair or deceptive practice, the plaintiff would not have suffered an injury.” Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wash.2d 59, 84, 170 P.3d 10 (2007). Here, plaintiffs admit that they stopped making payments on their loan. Marts Dep. at 19:14–19) (“Q. And you stopped making payments on this loan approximately September of 2007. Is that right?, A. Yes.; Q. So you would agree with me that you're in default on this loan? A. Yes.”); see also Burnside Decl., Ex. B (Answers to Requests for Admissions) at No. 5 (admitting default) and No. 7 admitting Plaintiffs have made no monthly mortgage payments towards the principal of the loan since September 1, 2007). The record does not contain a declaration from the...