Morris et al v. Northwest Trustee Services, Inc. et al
Filing
77
Opinion and Order - Defendants' Motions for Summary Judgment (Dkt. 32 , 35 ) are GRANTED and Plaintiffs' claims are DISMISSED WITH PREJUDICE. Defendants' Request for Judicial Notice (Dkt. 65 ) is GRANTED. Defendants' Motion to Strike (Dkt. 66 ) is DENIED as moot. All pending motions to compel or for additional discovery are DENIED as moot. Signed on 10/30/2014 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
LEE W. MORRIS and DOROTHY J.
MORRIS, individuals,
Case No. 3:12-cv-01183-HU
OPINION AND ORDER
Plaintiffs,
v.
NORTHWEST TRUSTEE SERVICES,
INC., a Washington state profit corporation;
JPMORGAN CHASE BANK, N.A., a
nationally chartered bank and by purchase
a/k/a WASHINGTON MUTUAL BANK,
FA, a federal savings bank,
Defendants.
Thomas H. Cutler, HARRIS BERNE CHRISTENSEN LLP, 5000 S.W. Meadows Road, Suite
400, Lake Oswego, OR 97035. Of Attorneys for Plaintiffs.
Michael J. Farrell and Bruce C. Hamlin, MARTIN BISCHOFF TEMPLETON LANGSLET &
HOFFMAN LLP, 888 S.W. Fifth Avenue, Suite 900, Portland, OR 97204. Of Attorneys for
Defendant JPMorgan Chase Bank, N.A.
John M. Thomas, RCO Legal, P.C., 511 S.W. Tenth Avenue, Suite 400, Portland, OR 97205. Of
Attorneys for Defendant Northwest Trustee Services, Inc.
Michael H. Simon, District Judge.
PAGE 1 – OPINION AND ORDER
Plaintiffs, Lee W. Morris and Dorothy J. Morris, filed suit in state court against
Defendants Northwest Trustee Services, Inc. (“NWTS”) and JPMorgan Chase Bank, N.A.
(“Chase”) seeking: (1) declaratory relief invalidating the non-judicial foreclosure sale of their
property and quieting title in favor of Plaintiffs; and (2) injunctive relief enjoining Defendants
from proceeding with any action to dispossess Plaintiffs of their property. Defendants timely
removed this case to federal court. Both Defendants now move for summary judgment against
Plaintiffs’ claims. For the following reasons, Defendants’ motions are granted.
STANDARDS
A party is entitled to summary judgment if the “movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine
dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view
the evidence in the light most favorable to the non-movant and draw all reasonable inferences in
the non-movant’s favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th
Cir. 2001). Although “[c]redibility determinations, the weighing of the evidence, and the
drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling
on a motion for summary judgment,” the “mere existence of a scintilla of evidence in support of
the plaintiff’s position [is] insufficient . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252,
255 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for
the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).
BACKGROUND
In February 2006, Plaintiffs obtained a loan (the “Loan”) originated by Washington
Mutual Bank, FA, (“WaMu”) and signed a promissory note (the “Note”) secured by a trust deed
PAGE 2 – OPINION AND ORDER
(the “Deed of Trust”) to purchase their home in Washington County, Oregon. The Deed of Trust
identified WaMu as both the lender and the beneficiary. In September 2008, the Federal Deposit
Insurance Corporation seized WaMu and sold its assets to Chase. Chase currently holds the Note,
which is endorsed in blank. Chase appointed NWTS as trustee of Plaintiff’s loan in March 2009.
In August 2008, Plaintiffs defaulted on their loan by failing to make the required monthly
mortgage payments. A notice of default was recorded on August 17, 2011. The notice of default
named Chase as the beneficiary on the loan. Plaintiffs do not dispute that they were served with
the statutorily-required notice of foreclosure. Plaintiffs’ home was sold at a foreclosure sale on
January 11, 2012. More than four months later, on June 4, 2012, Plaintiffs filed this action.
DISCUSSION
A. Judicial Notice
Defendants move for judicial notice of multiple documents related to Plaintiffs’
foreclosure and bankruptcy proceedings. Plaintiffs did not file any opposition to Defendants'
request for judicial notice. Because the documents about which Defendants seek judicial notice
are part of the public record and their accuracy cannot reasonably be questioned, judicial notice
is proper. See Fed. R. Evid. 201(b); see also Santa Monica Food Not Bombs v. City of Santa
Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006) (facts contained in public records are ordinarily
considered appropriate subjects for judicial notice). Accordingly, Defendants’ request for judicial
notice (Dkt. 65) is granted.
B. Plaintiffs’ Claims
The Oregon Trust Deed Act (“OTDA”), Or. Laws 1959, ch. 625, codified at Or. Rev.
Stat. (hereinafter “O.R.S.”) § 86.705 to O.R.S. § 86.815, provides an alternative to the judicial
foreclosure process. Where a trust deed is used to secure a loan, the trust deed “conveys an
interest in real property to a trustee in trust to secure the performance of an obligation the grantor
PAGE 3 – OPINION AND ORDER
or other person named in the deed owes to a beneficiary.” O.R.S. § 86.705(8) (formerly O.R.S.
§ 86.705(7)).1 Under the OTDA, a trustee may conduct a non-judicial foreclosure of a trust deed
by advertisement and sale when certain conditions are met. See O.R.S. § 86.752 (formerly O.R.S.
§ 86.735, setting out conditions). In addition to these requirements, the OTDA prescribes notice
requirements that “protect trust deed grantors from unauthorized non-judicial foreclosures and
sales of property.” Brandrup v. ReconTrust Co., N.A., 353 Or. 668, 677 (2013); O.R.S. § 86.764
(formerly O.R.S. § 86.740); O.R.S. § 86.782 (formerly O.R.S. § 86.755). Judicial involvement is
not needed to complete a foreclosure by advertisement and sale, but “the 120-day advance notice
period gives a grantor time to seek judicial intervention in certain circumstances.” Brandrup, 353
Or. at 677. After the trustee has complied with the statutory notice requirements, and assuming
default is not cured, the property may be sold at a public auction to the highest bidder without
judicial oversight. O.R.S. § 86.782. After such a sale, the trustee may execute and deliver the
deed to the purchaser. O.R.S. § 86.800 (formerly O.R.S. § 86.775). The trust deed must contain,
among other information, “a recital of the facts concerning the default, the notice given, the
conduct of the sale and the receipt of the purchase money from the purchase.” Id. After a trust
deed is recorded, the deed’s recitals are prima facie evidence in any court of the truth of the
matters set forth therein and are conclusive in favor of a purchaser for value who relies on them
in good faith. O.R.S. § 86.803 (formerly O.R.S. § 86.780).
Plaintiffs’ Complaint alleges that the foreclosure sale of their property was unlawful
because neither assignments of the Deed of Trust nor substitution of trustees were recorded in
the county records before the foreclosure sale as required by O.R.S § 86.752 (formerly O.R.S.
1
In 2013, the Legislative Counsel Committee of the Legislative Assembly of the State of
Oregon renumbered portions of Title 9, Chapter 86 in the 2013 Oregon Revised Statutes. The
Court cites to the 2013 numbering, but on first reference also notes the former numbering in
parentheticals.
PAGE 4 – OPINION AND ORDER
§ 86.735). This failure to record, Plaintiffs argue, voids the Deed of Trust because it no longer
names a proper beneficiary. Plaintiffs also allege that the original Deed of Trust to WaMu and
assignment to Fidelity National Title Company were unlawful because neither entity was legally
permitted to serve as trustee or beneficiary under Oregon law. Plaintiffs argue that, because these
instruments were unlawful, Chase did not have authority to appoint NWTS as successor trustee,
making the appointment of NWTS and the non-judicial foreclosure sale it conducted null and
void.
Defendants argue that, among other things, Plaintiffs’ challenge to the non-judicial
foreclosure sale of the property at issue is barred by O.R.S. § 86.797 (formerly O.R.S. § 86.770).
O.R.S. § 86.797 creates statutory finality for non-judicial foreclosure sales where a challenging
party has received proper notice of sale. In relevant part, it provides:
(1) If, under ORS 86.705 to 86.815, a trustee sells property
covered by a trust deed, the trustee’s sale forecloses and terminates
the interest in the property that belongs to a person to which notice
of the sale was given under ORS 86.764 and 86.774 or to a person
that claims an interest by, through or under the person to which
notice was given. A person whose interest the trustee’s sale
foreclosed and terminated may not redeem the property from the
purchaser at the trustee’s sale. A failure to give notice to a person
entitled to notice does not affect the validity of the sale as to
persons that were notified.
O.R.S. § 86.797(1). The notice required under O.R.S. § 86.797 is defined by reference to O.R.S.
§ 86.764 and O.R.S. § 86.774. O.R.S. § 86.764 governs the notice that must be provided to the
grantor of the trust deed. See O.R.S. § 86.764(2)(a). After the notice of default is recorded and
“at least 120 days before the day the trustee conducts the sale, notice of the sale with the contents
described in O.R.S. § 86.771 must be served pursuant to ORCP 7D(2) and 7D(3) or mailed by
both first class and certified mail with return receipt requested.” O.R.S. § 86.764(1).
PAGE 5 – OPINION AND ORDER
Beginning with Judge Panner’s decision in Mikityuk v. Northwest Trustee Services, Inc.,
952 F. Supp. 2d 958 (D. Or. 2013), courts within this district have consistently found that O.R.S.
§ 86.797 bars a challenge to a completed non-judicial foreclosure sale where timely notice was
served. See, e.g., Morkal v. Fed. Home Loan Mortg. Corp., 2014 WL 2041364 (D. Or. May 8,
2014) (Aiken, J.) (granting motion to dismiss where plaintiff did not dispute she received
required notice); Mitchell v. Homesales, Inc., 2014 WL 1744991 (D. Or. Apr. 30, 2014)
(Simon, J.) (granting motion for summary judgment where notice of the foreclosure sale was
given); Liu v. Nw. Tr. Servs., Inc., 2014 WL 657000, at *3-4 (D. Or. Feb. 19, 2014) (Brown, J.)
(granting motion for summary judgment on a plaintiff’s post-sale challenge to a non-judicial
foreclosure because the plaintiff received “notice of the foreclosure sale within the time required
under the Oregon Trust Deed Act”); Baricevic v. Mortg. Elec. Registration Servs., Inc., 2014 WL
297091, at *2-3 (D. Or. Jan. 24, 2014) (Mosman, J.) (holding that a plaintiff’s claim challenging
a final non-judicial foreclosure was barred because the plaintiff received the notice required
under O.R.S. § 86.764); Collette v. Sutherland, 2014 WL 203922, at *1-2 (D. Or. Jan. 15, 2014)
(Aiken, J.) (holding that a completed trustee’s sale barred a plaintiff’s challenge to a non-judicial
foreclosure where the plaintiff did not “allege improper service of the Notice or any failure to
provide him with information pertaining to his default or right to cure said default”).2
2
Although Plaintiffs do not allege that notice of the non-judicial foreclosure sale of their
home was deficient under the OTDA, the Court notes that a failure of the notice required by
O.R.S. § 86.764 gives the person to whom notice was due “the same rights possessed by the
holder of a junior lien or interest who was omitted as a party defendant in a judicial foreclosure
proceeding.” O.R.S. § 86.761. A junior lienholder would be required to exercise their right of
redemption within 60 days after the date of sale. O.R.S. §§ 18.964(2); 88.106. This time period
has passed in this case, and Plaintiffs do not allege that they would have or could have redeemed
the property. Consequently, even if the statutory notice requirements had not been met, it would
not affect the outcome of this case.
PAGE 6 – OPINION AND ORDER
Judge Panner’s analysis of the OTDA in Mikityuk is informative. In that case, Judge
Panner analyzed O.R.S. § 86.797 in light of the dual purpose of the OTDA to: (1) “provide
‘creditors with a quick and efficient remedy against a defaulting grantor’”; and (2) “‘protect the
grantor against the unauthorized loss of its property and to give the grantor sufficient opportunity
to cure any default.’” Mikityuk, 952 F. Supp. 2d at 965, 966 (quoting Staffordshire Invs., Inc. v.
Cal-Western Reconveyance Corp., 209 Or. App. 528, 542 (2006)). The text of the notice of sale
provision referenced in O.R.S. § 86.797 contains several important components: a 120-day time
requirement, a content requirement prescribed by O.R.S. § 86.771, and a service requirement
pursuant to the processes described in O.R.S. § 86.764. In balancing the notice requirements
against the interest of finality in O.R.S. § 86.797, the court in Mikityuk found that, in the
legislature’s view, “certainty and finality trump the risk . . . of a wrongful sale of property.” 952
F. Supp. 2d at 967. The notice requirements referenced in O.R.S. § 86.797 function to “give
people whose interest in property could be affected by a pending trust deed foreclosure and sale
notice of the sale sufficiently in advance of the sale to enable them to act in their interest.” Id. at
965 (citing NW Prop. Wholesalers, LLC v. Spitz, 252 Or. App. 29, 33 (2012)).
In their response brief, Plaintiffs argue that the present case is distinguishable from the
Mikityuk line of cases barring post-sale challenges because “the evidence does not indicate any
mere violation of the technical requirements of the OTDA” but rather “go[es] to the very identity
and authority to conduct a sale.” Specifically, Plaintiffs allege that: (1) some unknown third party
purchased and securitized the Loan before the FDIC’s seizure of WaMu’s assets3; and (2) that
3
To support this allegation, Plaintiffs provide the expert opinion testimony of Tim
Stevenson, who states that “[it] is my expert opinion that a blank endorsement would not have
been placed on the subject Note unless the loan was sold by Washington Mutual to another party
and unless it was prior to the FDIC taking over Washington Mutual.” Mr. Stevenson also states
that “[t]here is strong evidence that the subject loan was securitized.” Defendants ask the Court
PAGE 7 – OPINION AND ORDER
Chase was only the servicer and not the holder of the Note. Plaintiff, however, provides no
evidence that the loan was purchased or securitized by a third party or that Chase is not the
holder of the Note.4 Moreover, Mikityuk and other cases in this district have consistently held
that post-sale challenges on the grounds that a deed of trust names an improper beneficiary are
barred. See Collette v. Sutherland, 2014 WL 203922 (D. Or. Jan. 15, 2014); Roisland v. Flagstar
Bank, FSB, 989 F. Supp. 2d 1095, 1106 (D. Or. 2013); Woods v. US Bank Nat. Ass'n, 2013 WL
5592962 (D. Or. Oct. 10, 2013). As the Mikityuk court explained:
The legislature provided notice and reinstatement provisions to
protect grantors against the threat of wrongful foreclosure. Voiding
the sale here would encourage grantors who receive notice of a
sale to sit on their rights, rather than compelling grantors to bring
pre-sale challenges to a trustee's sale. Grantors are wise to raise
any challenges to non-judicial foreclosure proceedings, including
challenges based on ORS 86.735, before the statutory presumption
of finality contained in ORS 86.780. Post-sale challenges run the
risk of being barred, as is the case here, because the grantors’
interest in the property was “foreclosed and terminated” pursuant
to ORS 86.770(1).
Mikityuk, 952 F. Supp. at 970 (citation and footnote omitted). Here, Plaintiffs admit that they are
in default. Plaintiffs also admit that NWTS timely served notice of the foreclosure sale. The time
for Plaintiffs to challenge the authority of Chase and NWTS to conduct the non-judicial
foreclosure sale was within the statutorily-required 120-day period after receiving notice, not
five months after the completion of the foreclosure sale of their home. Because Plaintiffs did not
to strike Mr. Stevenson’s declaration. Mr. Stevenson’s testimony is conclusory and speculative,
and Plaintiff provides no actual evidence establishing that a third party holds the Note or that the
Loan was ever securitized. Accordingly, the Court need not resolve Defendants’ Motion to Strike
Mr. Stephenson’s testimony. Dkt. 66.
4
Defendants also correctly note that a loan servicer has the authority to appoint a trustee
and commence non-judicial foreclosure proceedings. See O.R.S. § 86A.175(1), (3)(e)(C)
(authorizing loan servicer to exercise “statutory or common law remedies such as injunction,
specific performance, judicial or nonjudicial foreclosure or receivership”).
PAGE 8 – OPINION AND ORDER
challenge the non-judicial foreclosure sale of their home until after the sale was completed, their
interest in the property was foreclosed and terminated by operation of O.R.S. § 86.797.
Accordingly, Defendants are entitled to summary judgment on Plaintiffs’ claims.
Finally, in response to the pending motions for summary judgment, Plaintiffs for the first
time allege that O.R.S. § 86.797 violates Plaintiffs’ Due Process rights protected by the
Fourteenth Amendment of the United States Constitution. This argument is improper. Plaintiffs
have not obtained Defendants’ consent or the Court’s approval to amend their June 2012
complaint.5 Moreover, even if Plaintiffs’ Due Process claim had been properly raised, the Ninth
Circuit has long held that non-judicial foreclosure does not implicate the Due Process clause
absent “overt official involvement in the enforcement of creditors’ remedies.” Apao v. Bank of
New York, 324 F.3d 1091, 1095 (9th Cir. 2003) (citation omitted); Charmicor v. Deaner, 572
F.2d 694, 696 (9th Cir. 1978) (finding no state action where plaintiffs challenged Nevada’s nonjudicial foreclosure statute on due process grounds). Plaintiffs do not allege any overt official
involvement in the non-judicial foreclosure sale of their home. Accordingly, Defendants are
entitled to summary judgment on this claim.
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5
Plaintiffs also have failed to comply with Federal Rule of Civil Procedure 5.1(a), which
requires a party “drawing into question the constitutionality of a . . . state statute” to serve the
paper raising the question on the state attorney general. The record contains no evidence that
Plaintiffs timely filed a notice of constitutional question or timely served it on the state attorney
general as required by Fed. R. Civ. P. 5.1(a). Plaintiffs’ failure to file and serve the notice,
however, does not result in forfeiture of their constitutional claim. Fed. R. Civ. P. 5.1(d).
PAGE 9 – OPINION AND ORDER
CONCLUSION
Defendants’ Motions for Summary Judgment (Dkt. 32, 35) are GRANTED and
Plaintiffs’ claims are DISMISSED WITH PREJUDICE. Defendants’ Request for Judicial Notice
(Dkt. 65) is GRANTED. Defendants’ Motion to Strike (Dkt. 66) is DENIED as moot. All
pending motions to compel or for additional discovery are DENIED as moot.
IT IS SO ORDERED.
DATED this 30th day of October, 2014.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
PAGE 10 – OPINION AND ORDER
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