Herbert Pearse v. First Horizon Home Loan Corp. ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 31 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
HERBERT R. PEARSE, No. 16-35935
Plaintiff-Appellant, D.C. No. 3:16-cv-05627-BHS
v.
MEMORANDUM*
FIRST HORIZON HOME LOAN
CORPORATION; NATIONSTAR
MORTGAGE, LLC; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; BANK OF NEW YORK
MELLON F/K/A BANK OF NEW YORK,
AS TRUSTEE FOR FIRST HORIZON
MORTGAGE PASS-THROUGH TRUST
2007-AR3; QUALITY LOAN SERVICE
CORPORATION OF WASHINGTON,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Washington
Benjamin H. Settle, District Judge, Presiding
Argued and Submitted May 18, 2018
Seattle, Washington
Before: BERZON and HURWITZ, Circuit Judges, and DEARIE,** District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Raymond J. Dearie, United States District Judge for the
Eastern District of New York, sitting by designation.
Herbert Pearse appeals an order dismissing, for failure to state a claim upon
which relief can be granted, his complaint against various defendants for wrongful
foreclosure, fraud, and violation of the Washington Consumer Protection Act
(“CPA”), Wash. Rev. Code § 19.86.010 et seq. We affirm.
1. Because no foreclosure sale occurred, any wrongful foreclosure claim
necessarily fails. Frias v. Asset Foreclosure Servs., Inc., 334 P.3d 529, 537 (Wash.
2014).
2. Pearse’s complaint alleged that First Horizon Home Loan Corporation
(“First Horizon”), the loan originator, violated the CPA and committed fraud by
(1) refusing to modify his loan after promising to do so; (2) listing Mortgage
Electronic Registration Systems (“MERS”) as a beneficiary on the deed of trust; and
(3) later assigning its interest in the note and deed of trust to a securitized trust. The
complaint alleges that MERS, the original beneficiary on the deed of trust, violated
the CPA and committed fraud because (1) the deed of trust improperly listed it as
beneficiary and (2) MERS later assigned an interest in the deed of trust to Bank of
New York Mellon (“BNYM”) that it did not legally possess. Fraud claims are
subject to a three-year statute of limitations, Wash. Rev. Code § 4.16.080(4), and
CPA claims to a four-year statute, Wash. Rev. Code § 19.86.120. These statutes
begin to run “when a party has the right to apply to a court for relief,” Shepard v.
Holmes, 345 P.3d 786, 790 (Wash. Ct. App. 2014) (quoting O’Neil v. Estate of
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Murtha, 947 P.2d 1252, 1254 (Wash. Ct. App. 1997)), or, alternatively, “when the
plaintiff, through the exercise of due diligence, knew or should have known the basis
for the cause of action,” Shepard, 345 P.3d at 790 (quoting Green v. Am. Pharm. Co,
925 P.2d 652, 655 (Wash. Ct. App. 1997)).
The district court correctly found the fraud and CPA claims against First
Horizon and MERS time-barred. At the latest, Pearse was on notice of First
Horizon’s refusal to modify the loan terms in June 2011, when he received a letter
from First Horizon indicating that it intended to foreclose. At that point, reasonable
diligence—a review of the recorded deed of trust—would have disclosed that MERS
was the named beneficiary. See Green v. Am. Pharm. Co., 960 P.2d 912, 916 (Wash.
1998) (finding plaintiff “is deemed to have notice of all acts which reasonable
inquiry would disclose”) (quoting Hawkes v. Hoffman, 105 P. 156, 158 (Wash.
1909)); Shepard, 345 P.3d at 790 (“[T]he public record serves as ‘constructive notice
to all the world of its contents.’”) (quoting Davis v. Rogers, 222 P. 499, 501 (Wash.
1924)). Similarly, Pearse should have been aware of the putative assignment by
MERS to BNYM no later than October 18, 2011, when the second such assignment
was recorded. See Shepard, 345 P.3d at 790 (stating that discovery is inferred
“where the facts constituting the fraud were a matter of public record”). Pearse did
not file his complaint until June 10, 2016.
3. Pearse’s CPA claims against BNYM are grounded in the theory that
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BNYM improperly appointed the successor trustee that noticed a foreclosure sale,
because BNYM was not the legal holder of the note at the time of appointment. The
district court correctly rejected those claims.
A. Pearse alleged that because the deed of trust improperly listed MERS as a
beneficiary, all subsequent assignments of MERS’s alleged beneficial interest in the
deed of trust and the promissory note were void. Although “a CPA action may be
maintainable” when MERS has “act[ed] as an unlawful beneficiary,” “the mere fact
MERS is listed on the deed of trust as a beneficiary is not itself an actionable injury.”
Bain v. Metro. Mortg. Grp., Inc., 285 P.3d 34, 49, 52 (Wash. 2012). And, interests
in negotiable instruments are freely transferrable under Washington law. Wash.
Rev. Code § 62A.3-203. Pearse’s promissory note was endorsed in blank, and thus
payable to any possessor. See Wash. Rev. Code § 62A.3-205(b) (“When indorsed
in blank, an instrument becomes payable to bearer and may be negotiated by transfer
of possession alone until specially indorsed.”). Indeed, the deed of trust expressly
contemplates assignment, naming MERS the beneficiary as “nominee for Lender
and Lender’s successors and assigns”; similarly, the note expressly contemplates
transfers, indicating that Pearse “understand[s] that Lender may transfer this Note.”
If BNYM actually possessed the note at the time of appointment of the successor
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trustee—and Pearse did not allege otherwise in his complaint1—it was the
beneficiary, and the appointment conformed to Washington law. See Wash. Rev.
Code § 61.24.005(2); Trujillo v. Nw. Tr. Servs., Inc., 355 P.3d 1100, 1105–06
(Wash. 2015).
B. Nor may Pearse argue that the defendants’ alleged violations of the
securitized trust’s pooling and servicing agreement voided the assignments, note, or
deed of trust. Pearse lacks standing to assert claims based on the securitized trust
agreement, to which he was not a party. Deutsche Bank Nat’l Tr. Co. v. Slotke, 367
P.3d 600, 606 (Wash. Ct. App. 2016).
4. The complaint makes no allegations of deceptive conduct by Nationstar
Mortgage, LLC, the loan servicer, sufficient to give rise to CPA liability. See
Trujillo, 355 P.3d at 1107 (requiring a causal link between the act complained of and
the injury suffered). Rather, his only claim is that Nationstar could not seek
payments because the purported transfer from MERS to BNYM had voided the
promissory note, deed of trust, and later assignments. The district court correctly
rejected that argument for the reasons stated above.
AFFIRMED.
1
The district court afforded Pearse the opportunity to amend his complaint, and
Pearse declined to do so, instead filing a notice of appeal before the time allowed by
the court for amendment had expired.
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