State Of Washington v. Diana Joline Merritt ( 2017 )

lN THE COURT OF APPEALS OF THE STATE OF WASH|NGTON
STATE OF WASH|NGTON, NO. 74469-1-|
Respondent, D|V|SlON ONE
v.
UNPUBL|SHED OP|N|ON
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D|ANA JOLINE l\/lERR|``IT,
Appellant. F|LED: August 21, 2017
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LEAcH, J. - Diana Merritt appeals her conviction of several counts of
mortgage fraud. She contends these convictions should be set aside for three
reasons. First, she claims that the statute of limitations is an essential element of
each offense that the State failed to include in the information. Second, she
contends that the State charged these crimes after the statute of limitations for
them had expired. Third, she challenges the sufficiency of the evidence to
support the convictions.
The statute of limitations is not an essential element of a crime. Because
the State filed the amended information Within three years of its actual discovery
of Merritt’s wrongdoing, the statute of limitations does not bar her prosecution
And because sufficient evidence supports her conviction, We affirm the judgment
Jand sentence.
NO. 74469-1-| / 2
§@_C_k_qLM
The State initially charged Diana Merritt with 5 counts of second degree
identity theft, alleging she committed these offenses with Douglas White. The
State later filed an amended information that charged 9 counts of second degree
identity theft and 11 counts of mortgage fraud. White pleaded guilty to the 55
counts of fraud and identity theft as charged in the amended information. Merritt
waived her right to a jury and proceeded to a bench trial.
At the State’s request, the court dismissed count 54. By oral ruling, the
trial court acquitted Merritt on the second degree identity theft charges and found
her guilty on the remaining 10 counts of mortgage fraud.
Before the court entered findings of fact and conclusions of law, Merritt
obtained new counsel who asked the court to reconsider its mortgage fraud
~ decision. Counsel argued that the evidence did not support a finding that Merritt
knew White was unlicensed and, further, that the State failed to prove the alleged
crimes occurred within the statute of limitations.
The court denied the reconsideration request. The court entered findings
of fact and conclusions of law finding Merritt guilty on all counts of mortgage
fraud. The court sentenced Merritt to 90 days in jail. Merritt timely appeals.
No. 74469-1-| / 3
Substantive Facts
ln 2004, Tom Reed, a licensed real estate appraiser, hired White as a
trainee to perform appraisals for his company, Washington Appraisal Reviews
~ lnc. White took the appraiser licensing exam twice during his time at Washington
Appraisal. He failed each time. During the economic downturn, Reed laid off his
employees, including White. ln 2010, after White left, Reed discovered that
someone was using his name and license number for appraisals that he had not
performed. 1
Reed did not know that White performed appraisals doing business as
Washington Real Estate Services lnc. He used Reed’s electronic signature and
license number on appraisal reports he submitted to clients and others. White
met Merritt in 2005 and later moved in with her and became engaged. '
Special Agent Boze``na Schrank, of Housing & Urban Development’s Office
of inspector General, met with Reed in July of 2010. Reed gave her the names
of the only two people who had access to his appraisal software and his
password, White and another person.
Schrank’s initial investigation focused on White. Schrank obtained copies
of White’s banking``records in late 2013 or 2014. These showed several financial
transactions between White and Merritt. Schrank learned that Merritt had
operated a mortgage brokerage business,* lVlerit Hom``e Finance.~ After reviewing
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No. 74469-1-\ /4
several loan files processed through Merit, Schrank obtained a search warrant
for the Sammamish home shared by White and Merritt.
A search of this home uncovered additional loan files with appraisals
bearing Reed’s name and electronic signature that were not performed by Reed.
A forensic search of White’s and Merritt’s computers revealed numerous e-mail
exchanges in which Merritt asked White to perform appraisals for her clients.
At trial, Merritt describe her duties as a loan originator. They included
collecting appraisals and other documentation for a loan officer to use to decide
whether to make,a loan. Merritt knew that the documents submitted to loan
officers to support a loan included copies of Tom Reed’s certified appraiser
license. Merritt also knew that White performed the appraisals She had
accompanied White to at least two homes where he performed the appraisals
that Were later submitted under Tom Reed’s electronic signature. Merritt testified
that she believed White’s assertion that Reed was the managing partner and his
signature was embedded in the software. She knew that White, not Reed,
owned Washington Real Estate Services. She testified that she reviewed
documents for White.
Merritt further testified that she always assumed that White prepared the
reports, even though Reed’s signature was on them. She recognized the
NO. 74469-1-| / 5
discrepancies on invoices that did not match the company names of Reed and
White.
Laura Kiel, employed by Mortgage Broker Services as a loan officer,
mortgage loan specialist, and on its board of directors, testified about industry
practices. She has worked in the``mortgage industry since 1992. Kiel testified
that it was standard practice to have a copy of the appraiser's license as an
appendix to any submitted appraisal. The appraisal document is essential to
obtaining a loan for property. A fraudulent appraisal places a transaction at risk
for the loan being recalled.
l\/lerritt timely appeals the trial court’s findings of facts and conclusions of
law.
Analysis
Through counsel, Merritt asserts three reasons why her convictions should
be vacated. First, she claims that the State failed to include in the information an
alleged essential element of each crime, the statute of limitations. Second, she
contends that the statute of limitations bars the convictions. Third, she
challenges the sufficiency of the evidence to support her conviction, Finally,
Merritt filed a statement of additional grounds for review, none of which have any
merit.
No. 74469-1-| / 6
information
Merritt contends that the amended information was defective because it
failed to state an essential element of the crime: that the crime took place within
the statute of limitations. Defendants have the right to be fully informed of the
nature of accusations against them so that they may prepare an adequate
defense.1 Both the state and federal constitutions require that the charging
document state a criminal offense.2 All the essential elements of a crime must be
included in the charging document.3 Omitting an essential element from the
charging document violates a defendant’s due process right to be fully informed
of the charges.4
The amended information set forth the particular facts of each incident
involved in the commission of the crime. Each count listed the time frame within
which l\/lerritt aided borrowers in obtaining residential mortgage loans by
directly or indirectly: (1)(a) knowingly employ any scheme, device,
or artifice to defraud or materially mislead a borrower, to-wit:
[borrower’s name], during the lending process; and``(b) knowingly
defraud or knowingly materially mislead a lender, or any person, to-
wit: [borrower’s name], in the lending process, or knowingly engage
in any unfair or deceptive practice toward any person, to-wit:
[borrower’s name], in the lending process; and (c) knowingly obtain
property by fraud or material misrepresentation in the lending
process; and (2) knowingly make any misstatement,
misrepresentation, or omission during the mortgage lending
1 State v. Leach, 113 Wash. 2d 679, 695, 782 P.2d 552 (1989).
2 Leach, 113 Wash. 2d at 695.
3 State v. K'|orsvik, 117 Wash. 2d 93, 97, 812 P.2d 86 (1991). '
4 Leach, 113 Wash. 2d at 690.
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No. 74469-1-| / 7
process knowing that it might be relied on by a mortgage lender,
borrower, or any other party to the mortgage lending process, to-
wit: [borrower’s name]; and (3) knowingly use or facilitate the use
of any misstatement, misrepresentation, or omission, knowing the
same to contain a misstatement, misrepresentation, or omission,
during the mortgage lending process with the intention that it be
relied on by a mortgage lender, borrower, or any other party to the
mortgage lending process, to-wit: [borrower’ name]; and (4)
knowingly receive any proceeds or anything of value in connection
with a residential mortgage closing that the defendant knew
resulted from a violation of RCW 19.144.080;
,Contrary to RCW 19.144.080 and 19.144.090, and against
the peace and dignity of the State of Washington,
And further do allege the crime was a major economic
offense or series of offenses, so identified by consideration of the
following: multiple incidents per victim, monetary loss substantially
greater than typical for the offense, occurred over a long period of
time, and the defendants used their position of trust to facilitate the
commission of the current offense, under the authority of RCW
9.94A.535(3)(d).
RCW 19.144.080 defines certain prohibited practices in the mortgage
lending process. RCW 19.144.090(2) states that “[n]o information may be
returned more than (a) five years after the violation, or (b) three years after the
actual discovery of the violation, whichever date of limitation is later.” The five-
year statute of limitations begins to run only when all the elements of the crime
have been completed5 The three-year statute begins to run only when the State
has actually discovered that a defendant has committed the completed crime.
5 Toussie v. United States, 397 U.S. 112, 115, 90 S. Ct§ 858,``25 L. Ed. 2d
156 (1970) (quoting Penderqast v. United States, 317 U.S. 412, 418, 63 S. Ct.
268, 87 L. Ed. 368 (1943)).
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' NO. 74469-1-| / 8
Merritt claims that State v. Naillieux6 and State v. Kjorskik7 establish that
the statute of limitations is an element of every crime, We disagree. ln Naillieux,
the information cited the current statute but stated some elements from a
previous statute while also omitting some in the current statute. The court held
that the State’s citation to a current statute did not inform the defendant of the
actual missing elements of the crime with which he was charged.8 ln EjLskik,
the information excluded a court-imposed essential element of the crime. The
court again found that the information did not adequately inform the defendant,
stating that the “defendant should not have to search for the rules or regulations
they are accused of violating.”9 ln Naillieux and M, the State failed to
allege an element of the charged crime, but in neither case was that element the
statute of limitations. Thus, they do not support Merritt’s position.
Merritt has not cited any case from any jurisdiction holding that the
information must state the applicable statute of limitations. At oral argument
Merritt’s counsel conceded that he was not aware of any case where the State
introduced a copy of the information as an exhibit or othen/vise presented
evidence informing the jury when the State filed the information. A jury would
need this information to find that the State timely charged a defendant We have
6 158 Wash. App. 630, 241 P.3d 1280 (2010).
7117 Wash. 2d 93, 812 P.2d 86 (1991).
8 Naillieux, 158 Wash. App. at 645.
9 Kjorsvik, 117 Wash. 2d at 101.
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No. 74469-1-| / 9
also reviewed the pattern elements instructions for various crimes. None lists the
statute of limitations as an element. The statute of limitations is not an essential
element of the crime,
Statute of Limitations
The State added the mortgage fraud counts by amended information filed
February 20, 2015. The counts all involve mortgage fraud acts that occurred
between June 12, 2008, and June 10, 2009. RCW 19.144.090(2) states that
“[n]o information may be returned more than (a) five years after the violation, or
(b) three years after the actual discovery of the violation, whichever date of
limitation is later.” The charged incidents\all occurred more than five years
before the State filed the amended information. But the statute allows the State
to file an information within three years after actual discovery of a violation, lt
requires an actual awareness that the loss occurred by virtue of the defendant’s
criminal act.
Merritt claims that the State discovered the fraud charged in these counts
when Tom Reed contacted the police in 2010 about someone illegally using his
electronic signature on an appraisal. But the victim of that appraisal was not a
victim listed in the challenged mortgage fraud counts. ln July of 2010, Reed met
with an investigator from the Department of Housing and Urban Development
and provided her with a copy of a property appraisal performed for Stay in Home
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NO. 74469-1-| / 10
Mortgage. ln 2012, Reed supplied the investigator with another incident of
misuse of his credentials. An investigation over the course of the next several
years revealed many additional incidents of fraud and eventually led to the
discovery of Merritt’s participation in these activities Here the testimony of the
investigator indicated she did not become aware of Merritt’s possible involvement
until late 2013 or early 2014 when they discovered the banking records showing
multiple transactions between White and Merritt.
Nothing in the record shows that the State had actual knowledge of the
charged incidents more than three years before it charged Merritt with them. A
complaint about one incident by a potential victim of a crime that an investigation
later shows involved a continuing course of criminal conduct with many incidents
does not provide the State with actual knowledge of each incident. The State’s
actual discovery of an incident starts the statute of limitations for that incident. ln .
2010 a suspicion existed that White had committed a crime. The subsequent
investigation focused on White’s identify thefts Only when the investigation
team executed the 2014 warrant did the State acquire actual knowledge about
Merritt’s involvement in the charged crimes Only then did the State’s three-year
period to file begin.
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No. 74469-1-| / 11
Sufficient Evidence
To decide whether sufficient evidence supports a conviction, this court ``
asks whether, after viewing the evidence in the light most favorable to the State,
any rational trier of fact could have found the essential elements of the crime
beyond a reasonable doubt.10 An appellate court limits its review in a bench trial
to determining whether substantial evidence supports the trial court’s findings of
fact and, if so, whether those findings support its conclusions of law.11
Substantial evidence is that which is sufficient to persuade a rational person of
the truth of the asserted premise.12 Unchallenged findings are verities on ``
appeal.13 This court reviews challenges to a trial court’s conclusions of law de
novo.14
An insufficiency claim admits the truth of the State’s evidence and all v
inferences that reasonably can be drawn from itt15 The court “defers to the trier ``
of fact for purposes of resolving conflicting testimony and evaluating the §
persuasiveness of the evidence.”16
Merritt challenges several of the findings of fact.
Finding C states,
10 State v. Salinas, 119 Wash. 2d 192, 201, 829 P.2d 1068 (1992).
11 State v. Homan, 181 Wash. 2d 102, 105-06, 330 P.3d 182 (2014).
12 Homan, 181 Wash. 2d at 106.
13 Homan, 181 Wash. 2d at 106.
14 Homan, 181 Wash. 2d at 106.
15 Salinas, 119 Wash. 2d at 201.
16 Homan, 181 Wash. 2d at 106.
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No. 74469-1-| / 12
Between September 7, 2008 and October 6, 2008, Andaras Darazs
applied for and obtained a residential mortgage through Defendant
Diana l\/lerritt's mortgage brokerage company, Merit Home Finance.
Merritt was they loan originator and ordered the appraisal from the
co-defendant, Douglas White. The appraisal report provided to
Merritt by White (Ex.174) stated that it was prepared by Tom Reed,
a licensed certified residential appraiser and contained his
electronic signature. Merritt provided the appraisal report to the
lender as the basis for the value of the residential property. Darazs
did not know that the appraisal report submitted to the lender by
Merritt was not in fact prepared by Reed, but rather by White. At
the closing of the loan, Merritt received payment for brokering the
mortgage in the form of an origination fee.
The court found several of the borrowers “did not know that the appraisal
report submitted to the lender by l\/lerritt was not in fact prepared by Reed, but l
rather by White.” She challenges finding C as it relates to borrower Andaras 1
Darazs Merritt claims that because Darazs could not recall or remember who j
did the appraisal, the evidence was insufficient
But Darazs testified that he refinanced or purchased his place through
Merritt, who was “a friend of a friend.” He knew White was Merritt’s boyfriend.
He initially hired him as his real estate agent but changed to someone else.
Darazs testified that that was the extent of his relationship with White. He ,
identified exhibit 172 as his loan application for the property which describes its
purchase as the reason for the loan. Darazs testified that Merritt helped him
finance the property through Merit Home Finance. Darazs verified exhibit 174 as
the appraisal for his property. He further testified that the document contained
Reed’s signature as the appraiser for that property. Although Darazs could not
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No. 74469-1-| / 13
specifically recall reviewing the appraisal report, he did identify his home in the
report and that the report contained Reed’s name as the appraiser, Exhibit 174,
along with Darazs’s testimony, is substantial evidence supporting the trial court y
finding.
Merritt next challenges finding L which states,
As to each count, Merritt knew that the respective appraisal listed
Tom Reed as the appraiser and bore his electronic signature.
Merritt also knew that Reed did not do the appraisals; in fact, she
hired Douglas White, the co-defendant, to do them. There is no
indication anywhere on the appraisal reports that White was
involved in the preparation of the appraisal or the report1
irrespective of whether White had a certified residential appraiser
license.
(Emphasis added.) Merritt claims that because the reports listed White’s
company, Washington Real Estate Services lnc., as the business and included
White’s e-mail and phone number, this was sufficient to find that White was
involved in the preparation of the appraisal. However, the reports contained Tom
Reed’s signature above any address and company name. The cover sheet of
each appraisal contained Tom Reed’s name without a company name. Tom
Reed’s signature appears on a letter transmitting the appraisal report that
contained Merit Home Finance’s address in Redmond. White’s name does not
appear anywhere in those appraisal documents Substantial evidence supports
the court’s finding.
Finally, l\/lerritt challenges findings N and O.
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NO. 74469-1-| / 14
Finding N states,
Based on her knowledge of the mortgage lending process, Merritt
knew that the appraisals purportedly signed by Reed would be
relied upon by the mortgage lender, the borrower and others in the
lending process By intentionally providing these invalid appraisals
to others involved in the mortgage lending process, Merritt
employed an artifice, scheme, or device to materially mislead
borrowers and lenders alike, knowing full well that the lenders
borrowers and others would rely upon these misrepresentations
Finding O states
Merritt received monetary payment upon the closing of each of
these loans with the knowledge that these residential mortgages
had been obtained as a result of mortgage fraud, in violation of
RCW 19.144.080(1)(a) and (b), (2), and (3) and RCW 19.144.090.
Substantial evidence supports both of the trial court’s findings
Anyone reading the appraisals would reasonably conclude that a licensed
appraiser named Tom Reed completed them. Merritt knew that White did the ``
appraisals as she hired him to do them. Without valid appraisals by a licensed ``
appraiser, lenders would not have made the loans As Keil’s testimony points
out, the appraisal document is essential to obtaining funds for a loan or refinance ,
and the appraisal must be done by a licensed appraiser. Thus, a facially valid
appraisal is a material aspect of the lending process Merritt knew that Tom
Reed’s signature was on the appraisals and that he did not perform them. She
received monetary compensation at the closing of each mortgage as a result of »
those appraisals
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No. 74469-1-| / 15
Substantial evidence supports the findings of fact and they support the
court’s conclusions of law. Conclusion of law ll states,
The following elements of the crimes charged have been
proven by the State beyond a reasonable doubt:
On the date or dates specified for each count described in
the Findings of Fact, in conjunction with making, brokering,
obtaining, or modifying a residential mortgage the defendant
directly or indirectly knowingly:
(1)(a) Employed any scheme, device or artifice to defraud or
materially mislead any borrower during the lending process; (b)
defrauded or materially misled any lender or person, or engaged in
any unfair or deceptive practice toward any person in the lending
process; and
(2) l\/lade any misstatement, misrepresentation or omission during
the mortgage lending process knowing that it may be relied upon by
a mortgage lenderl borrower or any other party to the mortgage
process; and ``
(3) Used or facilitated the use of any misstatement,
misrepresentation, or omission, knowing the same to contain a
misstatement, misrepresentation, or omission, during the mortgage
lending process with the intention that it be relied on by a mortgage
lender, borrower or any other party to the mortgage lending
process; and
(4) Received any proceeds or anything of value in connection with
the residential mortgage closing that such person knew resulted
from a violation of subsection (1), (2) or (3) of this section; and
(5) Any of these acts occurred in the State of Washington.
Merritt’s claim that insufficient evidence supports this conclusion lacks 5
merit. Evidence clearly showed that Merritt submitted copies of Reed’s license to ``
support the appraisals that were performed by White. She further submitted :
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No. 74469-1-| / 16
those appraisals with Reed’s electronic signature when she knew that White had 1
performed the appraisals The mortgage lenders relied on the fact that the
appraisals were performed by a licensed appraiser to determine whether to fund
a particular transaction and the amount to fund. Merritt testified that she was
aware of the rules and regulations of a loan originator. Documents that did not
contain a certified appraiser's license would be insufficient to obtain a loan. '
Merritt’s company received over 57 percent of its income from loans based on
appraisals that were performed by White but submitted under Reed’s signature »
and license certifications
Sufficient evidence supports the convictions
Statement of Additional Grounds for Review
Merritt submitted a statement of additional grounds for review. There, she
alleges some of the same issues that we have addressed in her direct appeal, z
namely, lack of sufficient evidence to support the convictions and that the
convictions were barred by the statute of limitations
Merritt identifies inconsistencies in the testimony and from them argues ‘
that substantial evidence does not support the trial judge’s findings We defer to
the trier of fact on issues of conflicting testimony, witnesses’ credibility, and the
persuasiveness of the evidence.17
17 State v. Thomas, 150 Wash. 2d 821, 874-75, 83 P.3d 970 (2004).
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NO. 74469-1-| / 17
Finallyl lVlerritt suggests that an improper relationship existed among the ``
defense attorney, prosecutor, and judge because they all had known each other
for a long period of time, She insinuates that she might not have chosen a bench
trial had she been aware of these relationships The record contains no 1
evidence of any improper relationship. Merritt’s conclusory allegations provide ``
no basis for appellate review.113
Conclusion
Because the statute of limitations is not an element of a crime, the statute
of limitations does not bar l\/lerritt’s convictions and substantial evidence
supports those convictions we affirm.
WE CONCUR:
18 §_e_e RAP 10.10(c) (appellate court will not consider statement of
additional grounds for review unless it informs the court of the nature and
occurrence of alleged errors).
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