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STATE OF IV:AS1-:!;CITOil
2017 JI..0 11!I 0: 5 1
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
JOHN P. HURNEY and LESLIE A. No. 75043-7-1
HURNEY,
DIVISION ONE
Appellants,
V.
HSBC BANK, USA, N.A., as Trustee
for Merrill Lynch Alternative Note Asset
Trust, Series 2007-0AR2; ONEWEST
BANK, F.S.B.; UNPUBLISHED OPINION
Respondents,
INDYMAC BANK, N.A.; REGIONAL
TRUSTEE SERVICES
CORPORATION; and Doe Defendants
1 through 20, inclusive,
Defendants. FILED: June 5, 2017
SCHINDLER, J. — John and Lesley Hurney appeal summary judgment dismissal of
their lawsuit and claims against HSBC Bank USA NA and OneWest Bank FSB under
the Consumer Protection Act, chapter 19.86 RCW. Because the Hurneys did not meet
their burden to show any genuine issue of material fact, we affirm.
FACTS
In February 2005, John and Lesley Hurney (collectively, Hurney) obtained a loan
from IndyMac Bank FSB. Hurney executed an adjustable rate note, dated February 22,
No. 75043-7-1/2
2005, in the principal amount of $825,000. The note designates IndyMac as the
"Lender" and "Note Holder." The note requires Hurney to make monthly payments. The
failure to make payments accelerates the date the debt is due. The note was secured
by a deed of trust on Hurney's residential property in Kirkland. The deed of trust is also
dated February 22, 2005 and is signed by Hurney as the borrower. The deed of trust
identifies IndyMac as the lender, Ticor Title Insurance Company as trustee, and
Mortgage Electronic Registration Systems Incorporated (MERS)as "nominee for Lender
and Lender's successors and assigns" as the beneficiary.
In January 2007, Hurney and IndyMac agreed to a loan modification. As a part
of the agreement, Hurney agreed to increase the principal amount of the loan to
$850,186.
In March 2007, IndyMac sold the Hurney loan to a securitized trust, "Merrill Lynch
Alternative Note Asset Trust, Series 2007-0AR2." HSBC Bank USA NA serves as
trustee for the trust. IndyMac continued to service the loan. IndyMac endorsed the
promissory note to HSBC and then in blank.1
In July 2008, the United States Department of the Treasury Office of Thrift
Supervision closed IndyMac Bank and appointed the Federal Deposit Insurance
Corporation (FDIC) as receiver. FDIC then sold assets of IndyMac to OneWest Bank
FSB. In March 2009, OneWest purchased the loan servicing rights to the Hurney loan.
1 Neither endorsement is dated, but IndyMac's blank endorsement was made on an "allonge." An
allonge is a paper attached to a negotiable instrument for purposes of receiving further endorsements.
BLACK'S LAW DICTIONARY 88 (9th ed. 2009); see UCC § 3-204(a)(defining "indorsement"). A "blank
indorsement" is an endorsement that does not identify a person to whom the instrument is payable. RCW
62A.3-205(b). Hurney does not challenge the banks' position that IndyMac's endorsement to HSBC
preceded its blank endorsement on the allonge.
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No. 75043-7-1/3
Hurney stopped making payments on the note on December 1, 2009. In March
2010, HSBC initiated nonjudicial foreclosure proceedings and issued a notice of
default.2
MERS assigned "all beneficial interest" in the note and deed of trust to HSBC by
an "Assignment of Deed of Trust" dated March 23, 2010. On the same date, HSBC
appointed Regional Trustee Services Corporation (RTS)as successor trustee to the
original trustee under the deed of trust, Ticor Title Insurance Company. A corporate
officer of OneWest signed the appointment document as "Attorney in Fact" of HSBC.
The same OneWest officer also executed an "Affidavit of Holder of Note," identifying
HSBC as the "owner of the promissory note" and OneWest as the "current holder" of the
note. RTS issued a notice of trustee's sale, setting October 15, 2010 as the date of
sale. The assignment, appointment of successor trustee, and notice of trustee's sale
were recorded sequentially on July 15, 2010.
Because Hurney filed for bankruptcy, the October 15, 2010 sale did not take
place. After the bankruptcy court dismissed the bankruptcy petition, HSBC initiated
foreclosure proceedings. On March 4,2013, RTS issued a notice of default.3 The
notice identified HSBC as the "owner" of the note and OneWest as the loan servicer.
Hurney and OneWest participated in foreclosure mediation but Hurney could not secure
another loan modification. In February 2014, RTS issued a notice of trustee's sale
setting June 27, 2014 as the date of sale.
2 The 2010 notice of default is not included in the record on appeal.
3 Hurney mentions that the 2013 notice of default directs them to contact HSBC "c/o ONEWEST
BANK, FSB" and provides OneWest Bank's physical address. Hurney also alleges, without elaboration,
that the amounts listed to cure the default were incorrect. However, Hurney does not rely on either of
these alleged errors as a basis for their Consumer Protection Act claim.
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No. 75043-7-1/4
Shortly before the scheduled sale date, Hurney filed this lawsuit against HSBC,
OneWest, and others to enjoin the trustee's sale. Hurney also alleged violations of the
deeds of trust act, chapter 61.24 RCW; and the Consumer Protection Act(CPA),
chapter 19.86 RCW. Because the nonjudicial foreclosure sale did not occur, the
statutory 120-day period to complete the sale expired. See RCW 61.24.040(6).
HSBC and OneWest filed a motion for summary judgment. In response, Hurney
conceded that except for the CPA claim, dismissal was appropriate. The court granted
summary judgment and dismissed the lawsuit, including the CPA claim against HSBC
and OneWest.4
ANALYSIS
Hurney contends genuine issues of material fact preclude summary judgment on
the CPA claim because HSBC and OneWest violated the deeds of trust act during the
course of the attempted nonjudicial foreclosures. Hurney asserts the banks intentionally
and repeatedly misrepresented the identity of the holder of the note and presented no
evidence that OneWest or HSBC was, at any time, the noteholder. Hurney further
asserts the banks committed an unfair and deceptive act by, without authority,
appointing a successor trustee to initiate foreclosure.
Summary judgment is appropriate if there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. CR 56(c). A material
fact is one upon which the outcome of the litigation depends. Greater Harbor 2000 v.
City of Seattle, 132 Wn.2d 267, 279, 937 P.2d 1082(1997). We review an order
granting summary judgment de novo; all facts and reasonable inferences must be
4 In a separate order, the trial court dismissed Hurney's claims against IndyMac and RTS.
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No. 75043-7-1/5
considered in the light most favorable to the nonmoving party. Lynott v. Nat'l Union Fire
Ins. Co. of Pittsburgh, Pa., 123 Wn.2d 678, 685, 871 P.2d 146 (1994); Greater Harbor,
132 Wn.2d at 279.
Summary judgment is subject to a burden-shifting scheme. Ranger Ins. Co. v.
Pierce County, 164 Wn.2d 545, 552, 192 P.3d 886(2008). The moving party is entitled
to summary judgment by submitting affidavits establishing entitlement to judgment as a
matter of law. Ranger, 164 Wn.2d at 552. The nonmoving party must then present
"'specific facts which sufficiently rebut the moving party's contentions'"and create a
genuine issue of material fact. Ranger, 164 Wn.2d at 552(quoting Meyer v. Univ. of
Wash., 105 Wn.2d 847, 852, 719 P.2d 98(1986)). The nonmoving party cannot rely
either on argumentative assertions that unresolved factual issues remain or on
speculation. Ranger, 164 Wn.2d at 552.
In the absence of a completed trustee's sale, a borrower may not bring a claim
for damages under the deeds of trust act. Frias v. Asset Foreclosure Servs., Inc., 181
Wn.2d 412, 429, 334 P.3d 529(2014). However, wrongful conduct during a nonjudicial
foreclosure proceeding that does not result in a sale may be the basis for a claim under
the CPA. Trujillo v. Nw. Tr. Servs., Inc., 183 Wn.2d 820, 834, 355 P.3d 1100 (2015).
To succeed on a CPA claim, Hurney must show:
(1)[A]n unfair or deceptive act,(2) in trade or commerce,(3) that affects
the public interest,(4) injury to the plaintiff in his or her business or
property, and (5) a causal link between the unfair or deceptive act
complained of and the injury suffered.
Tru'illo, 183 Wn.2d at 834-35. A claimant must establish all five elements to prevail.
Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wn.2d 59, 74, 170
P.3d 10 (2007). Conduct is "deceptive" under the CPA if it misleads or misrepresents
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No. 75043-7-1/6
something of material importance. Walker v. Quality Loan Serv. Corp. of Wash., 176
Wn. App. 294, 318, 308 P.3d 716 (2013). Whether a particular action constitutes a CPA
violation is reviewable as a question of law. Leingang v. Pierce County Med. Bureau,
Inc., 131 Wn.2d 133, 150, 930 P.2d 288(1997).
It is well established under Washington law that the holder of a promissory note
is entitled to enforce that obligation. Brown v. Dep't of Commerce, 184 Wn.2d 509, 524-
25, 359 P.3d 771 (2015); Bain v. Metro. Mortg. Grp., Inc., 175 Wn.2d 83, 104, 285 P.3d
34 (2012); Trujillo v. Nw. Tr. Servs., Inc., 181 Wn. App. 484, 502, 326 P.3d 768 (2014),
rev'd on other grounds, 183 Wn.2d at 820. The "holder" of the note is not necessarily
the "owner," and ownership of a note is irrelevant to the power to enforce it. Brown, 184
Wn.2d at 524-25. A loan "servicer" is not necessarily the owner, but the servicer must
be a holder of the note in order to enforce it. Brown, 184 Wn.2d at 523. "[A] party's
undisputed declaration submitted under penalty of perjury that it is the holder of the note
satisfies. . .[the deeds of trust act]'s proof of beneficiary provisions." Brown, 184
Wn.2d at 544. The holder of the note, which is the evidence of the debt, has the power
to enforce the deed of trust because the deed of trust follows the note by operation of
law. Bain, 175 Wn.2d at 104 (the deeds of trust act "contemplates that the security
instrument will follow the note, not the other way around").
Here, the evidence shows that IndyMac initially possessed the original note. At
some point prior to March 23, 2010, IndyMac transferred physical custody of the note to
OneWest. The banks' counsel brought Hurney's original note to court for the summary
judgment hearing to substantiate the banks' claim that OneWest had physical custody
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No. 75043-7-1/7
of the note on behalf of HSBC.5 See Deutsche Bank Nat'l Trust Co. v. Slotke, 192 Wn.
App. 166, 175, 367 P.3d 600(2016)("This record makes clear that the bank presented
the original note for inspection by the court at the summary judgment hearing. This was
sufficient to prove the bank's status as holder of[the borrower's] delinquent note.").
Hurney fails to identify any specific evidence showing that either OneWest or HSBC
misled him about the identity of the noteholder. The 2010 Affidavit of Holder of Note
establishes that on the date OneWest appointed RTS as the successor trustee on
behalf of the beneficiary, HSBC, OneWest possessed the original note endorsed in
blank. The appointment of RTS as successor trustee was neither unfair nor deceptive.
Noteholders may have their interests represented by agents. Bain, 175 Wn.2d at
106. Hurney asserts no evidence shows OneWest was acting as HSBC's agent in 2010
when it signed the document to appoint the successor trustee. Hurney points out the
banks provided only a document showing that OneWest had limited power of attorney in
2011, after RTS was appointed. Hurney argues Bavand v. OneWest Bank, FSB, 176
Wn. App. 475, 309 P.3d 636(2013), is comparable. We disagree.
In Bavand, OneWest executed an appointment of successor trustee when it was
neither the named beneficiary under the deed of trust nor the holder of the promissory
note. Bavand, 176 Wn. App. at 487. Because OneWest was not the holder of the
borrower's note when it appointed the successor trustee, the trustee did not succeed to
any of the original powers under the deed of trust and did not have power to conduct the
foreclosure. Bavand, 176 Wn. App. at 488. Accordingly, we reversed dismissal under
CR 12(b)(6). Bavand, 176 Wn. App. at 511.
5 Neither Hurney nor the court asked to inspect the note during the hearing.
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No. 75043-7-1/8
In contrast to the position of OneWest in Bavand, here, OneWest had authority
conferred by a power of attorney or agency relationship with HSBC and the power to
enforce the deed of trust and initiate foreclosure by virtue of possession of the note. In
addition to the 2011 document giving limited power of attorney to OneWest, the
evidence in the record includes the declaration of a OneWest assistant vice president
stating that in 2010, OneWest was the loan servicer and "attorney in fact for HSBC."
The record also includes the declaration of an HSBC vice president stating that a similar
power of attorney document covered the period before January 2011, but that a copy of
the document could not be located. Nevertheless, the HSBC corporate officer ratified
the 2010 appointment of RTS on its behalf.6 In addition, the HSBC 2007 "Pooling and
Servicing Agreement" authorizes loan servicers such as OneWest to conduct
foreclosure. Hurney does not identify any evidence creating a genuine issue of fact as
to OneWest's authority to sign the document appointing RTS as successor trustee.
Although Hurney suggests otherwise, MERS's assignment of its "beneficial
interest" in the deed of trust is irrelevant to the authority of OneWest to commence
foreclosure by appointing a successor trustee. In Bain the Supreme Court recognized
that MERS could not appoint a successor trustee because it never held the promissory
note and was thus an "ineligible" beneficiary under the deeds of trust act. Bain, 175
Wn.2d at 110. This was so because MERS lacked any right to confer on a successor
trustee. Here, MERS did not appoint a successor trustee or otherwise initiate
foreclosure. Because OneWest possessed the note at the time of the foreclosure, the
6 See Riss v. Angel, 131 Wn.2d 612, 636, 934 P.2d 669(1997)(ratification of acts is given effect
as if originally authorized).
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' No. 75043-7-1/9
lack of a valid assignment of interest by MERS does not preclude or affect OneWest's
authority to enforce the deed of trust and to appoint a successor trustee on behalf of
HSBC.
Hurney alleges the representation by MERS that it had a "beneficial interest" was
deceptive. But MERS is not a party to this action. As noted, OneWest's possession of
the note, not any purported assignment by MERS, gave OneWest the power to
foreclose. In addition, Hurney fails to demonstrate any injury causally related to the
purported assignment by MERS. See Bavand v. OneWest Bank, FSB, 196 Wn. App.
813, 842-43, 385 P.3d 233(2016)(although MERS's assignment of interest was
"presumptively deceptive," the deceptive characterization of its interest did not cause
any injury where authority to enforce the note and deed of trust arose by operation of
law due to the bank's noteholder status).
Hurney also points to a 2013 document entitled "Beneficiary Declaration
Pursuant to Chapter 61.24 RCW(HB 2614) and Foreclosure Loss Mitigation Form" as
unfair or deceptive. The document, submitted by the banks in support of the motion for
summary judgment, designates HSBC as the beneficiary and OneWest as the loan
servicer and confirms that the beneficiary or its agent contacted Hurney prior to
mediation to discuss options to avoid foreclosure. Hurney asserts this document failed
to comply with the requirements of the deeds of trust act proof of beneficiary provisions
and should not have been relied on in the foreclosure mediation or the attempted
foreclosures. But Hurney does not allege, much less establish, that they received this
document during the foreclosure process or was somehow misled by it.
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No. 75043-7-1/10
Hurney claims the document does not comply with RCW 61.24.030(7)(a) that
requires before recording, transmitting, or serving a notice of trustee's sale, the trustee
must have proof that the beneficiary is the owner of the note. But the foreclosure
trustee RTS is not a party to this appeal. In any event, the document was created in
2013 and clearly not relied on by RTS in 2010.
Hurney also claims the Beneficiary Declaration Pursuant to Chapter 61.24 RCW
(HB 2614) and Foreclosure Loss Mitigation Form does not satisfy RCW 61.24.163(5).
RCW 61.24.163(5) lists documents that must be submitted to the mediator prior to
mediation under the foreclosure mediation program, including a document to establish
that the entity claiming to be the beneficiary is the owner of the note. RCW
61.24.163(5)(c). Hurney does not present any evidence that the mediator did not
receive such a document or that the mediator relied upon inadequate information to
determine that HSBC was the beneficiary of the note.
Hurney cites no authority to support the argument that OneWest lacked authority
to participate in foreclosure mediation in 2013 when it was both the noteholder and had
power of attorney to act on behalf of HSBC. The limited power of attorney document
specifically empowered OneWest to "collect, negotiate or otherwise settle any
deficiency claim."
Because Hurney did not present evidence that HSBC or OneWest engaged in an
unfair or unlawful practice in the course of the attempted foreclosures, we affirm
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No. 75043-7-1/11
summary judgment dismissal of the CPA claim and the lawsuit against HSBC and
OneWest.
WE CONCUR:
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