Lorina Delfierro, App. v. Bsi Financial Services, Res.

• Court: Court of Appeals of Washington
• Decided: November 16, 2015
• Docket: 73016-9
• Status: Unpublished

Opinion

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON

LORINA DEL FIERRO, No. 73016-9-1 Appellant, DIVISION ONE

BSI FINANCIAL SERVICES; DELTORO UNPUBLISHED OPINION LOAN SERVICING, INC.; MARINERS INVESTMENT FUND, LLC; MARINERS INVESTMENT FUND II REO, LLC; SECOND MARINERS RES FUND II, LLC; AMERICAN DEFAULT MANAGEMENT; PENSCO TRUST c?i COMPANY CUSTODIAN FBO, JEFFERY D. HERMANN, IRA ACCOUNT NUMBER 20005343; APRIL SMITH in her individual and cr-

official capacity; JEFFERY D. HERMAN in his individual and official capacity, JENNIFER TAIT c? in her individual and official capacity; and STEVE OLSON in his individual and official capacity.

Respondents. FILED: November 16, 2015

Spearman, C.J. — This appeal is from a trial court's findings of fact and

conclusions of law regarding a borrower's claims against a series of entities

involved in the transfer of her loan. We find no error and affirm.

FACTS

In 2006, Lorina Del Fierro purchased property real property located at Lot

83, Twin Lakes No. 4, Vol. 91, pgs. 44-46, tax parcel No. 873196-0830-00,

commonly known as 4009 SW 323rd Street, Federal Way, Washington (the

Property). She refinanced the property in 2007 with EquiFirst Corporation

(EquiFirst), taking out a loan of $572,850.00 to be repaid according to the terms No. 73016-9-1/2

of an Adjustable Rate Note (Note). EquiFirst endorsed the Note in blank. The

Note was secured by a deed of trust (Deed of Trust) on the Property that listed

First American Title Insurance Company (First American) as trustee and

Mortgage Electronic Registration Systems (MERS) as the beneficiary. The loan

itself was serviced by Specialized Loan Servicing, Inc., (Specialized). In 2008,

Del Fierro ceased making payments on the loan.

The Note and the Deed of Trust were transferred multiple times before

arriving in the hands of respondent Pensco Trust Company (Pensco). Equifirst

sold the loan to Sutton Funding LLC (Sutton). On September 12, 2008, Sutton

sold its interest in the loan to a third party known as FCDB FF1, LLC. On January

5, 2009, MERS recorded an Appointment of Successor Trustee, appointing

Fidelity National Title Insurance Company (Fidelity) as trustee. On April 14, 2009,

FCDB FF1, LLC, as part of a group of entities known collectively as Fortress

Investment Group (Fortress)1, sold their interests in number of residential first lien

mortgage loans, including Del Fierro's loan, to Second Mariners Investment Fund

II REO, LLC, and Mariners Investment Fund II, LLC (individually, Mariners 4 and

Mariners 5; collectively, "Mariners"). As part of this sale, Fortress provided

Mariners with the original Note.

Specialized, on behalf of MERS, began foreclosure proceedings in early

2009. Fidelity issued a Notice of Trustees Sale on February 9, 2009, setting the

1During trial, there was some confusion over whether FCDB FF1, LLC, the entity that purchased the loan from Sutton, was the same as any of the entities that sold the series of loans to Mariners. Steve Olson testified that Mariners purchased the Del Fierro loan from Fortress, which "had multiple sellers, different entities internally when [Mariners] purchased from them," and that Fortress had purchased the loan from Sutton. Verbatim Report of Proceedings (Nov. 3, 2014) at 48-49. No. 73016-9-1/3

sale date for May 15, 2009. Del Fierro began working with a loan modification

representative, Michael Colwell, who contacted Fidelity on her behalf. On May 7,

2009, the sale was placed "on hold." Somewhere around the 7th or the 8th,

Fidelity informed Colwell that the sale was on hold, and that it would not take

place on the 15th as originally set. On May 12, 2009, however, the sale was

taken off "on hold" status and the servicing rights were transferred to BSI

Financial Services (BSI). Del Fierro and Colwell were both told that the sale was

on hold and would not proceed, even after each made separate inquiries up to

the scheduled date of sale. On May 15, 2009, Fidelity proceeded to sell the

Property at auction. Mariners 4 purchased the Property for $370,000 and initiated

an unlawful detainer action on June 4, 2009.

The King County Superior Court dismissed the unlawful detainer action,

finding that Fidelity had made material misrepresentations and breached its duty

to act in good faith and impartially to both parties. The trial court voided the

trustee's sale and reinstated the Deed of Trust to its original lien position.

On March 11, 2010, MERS assigned the Deed of Trust to Mariners 4.2 On

December 8, 2010, Mariners 4 assigned the Deed of Trust to Mariners 5. Ex. 11.

On May 19, 2011, Mariners 5 executed a Residential Mortgage Loan Sale

2 In Bain v. Metropolitan Mortg. Group. Inc.. 175 Wn.2d 83, 110, 285 P.3d 34 (2012), our Supreme Court held that if MERS never held the promissory note or other debt instrument, it was not a lawful beneficiary and could not appoint a successor trustee. MERS therefore did not have independent authority to assign the Deed of Trust to Mariners. The Bain court declined to decide the legal effect of MERS acting as an unlawful beneficiary, but that "the equities of the situation would likely (though not necessarily in every case) require the court to deem that the real beneficiary is the lender whose interests were secured by the deed of trust or that lender's successors." Ja\ at 111. Based on this notion, Mariners would likely have been deemed the beneficiary anyway, having succeeded to EquiFirst's interest (via transfers involving Sutton and Fortress) in the Note. Mariners was also the holder of the Note at that time and MERS's involvement would not have affected the validity of the Deed of Trust or Mariners' interest. No. 73016-9-1/4

Agreement, selling its interest in Del Fierro's loan, including the Note and the

Deed of Trust, to Pensco.

In 2010, Mariners initiated foreclosure proceedings on the Deed of Trust.

Del Fierro filed for Chapter 13 bankruptcy on April 5, 2010. In July 2010, Del

Fierro filed an Adversary Proceeding in bankruptcy court to determine the

amount of the lien. The bankruptcy court reduced the secured debt from

$572,291.63 to $325,000.00. Mariners appealed and lost. On October 18, 2010,

Del Fierro stipulated to an order requiring her to make monthly payments to the

court. Mariners transferred its claim on June 6, 2011 to Pensco and listed Del

Toro Loan Servicing, Inc. ("Del Toro") as the loan's servicer. Del Fierro did not

object to this transfer. She continued making payments as per the stipulation until

August of 2011, when she converted her bankruptcy action to a Chapter 11. Her

bankruptcy action was dismissed on November 13, 2012.

The original Note remained in Mariners' possession until it was requested

by Mariners' counsel, Robinson Tait P.S. (Robinson Tait), in case it was needed

in the bankruptcy litigation. The original Note was shipped to Robinson Tait on

March 24, 2011, along with a bailee letter. On March 25, 2011, Robinson Tait

acknowledged receipt of the Note. Because Robinson Tait had the original Note,

Mariners did not forward it to Pensco when the sale closed in May 2011. Pensco

then retained Robinson Tait and asked them to continue holding the Note.

Even though they were holding the original Note for Pensco, Robinson

Tait sent it back to Mariners on April 3, 2012, under the terms of the bailee letter

executed with Mariners. The intent was for Mariners to send the original Note to No. 73016-9-1/5

Pensco. Mariners received the original Note, but was unable to find it after a

diligent search. Pensco never received the original Note.

In 2012, Del Fierro filed a lawsuit in King County Superior Court regarding

the transfer of the loan, alleging claims such as fraud, conversion, slander of title,

unjust enrichment, quiet title, and violations of chapter 19.86 RCW, the

Consumer Protection Act; RCW 19.86.010, the Uniform Deceptive Trade

Practices Act, and chapter 19.182 RCW, the Fair Credit Reporting Act. She

named multiple defendants including BFI, Del Toro, Mariners,3 Equifirst, MERS,

American Default Management, Pensco's custodian, Jeffrey Hermann,4 and

other named individuals who were involved in notarizing the transfer documents.

Del Fierro argued that Pensco had no right to enforce the Note because it

did not have the original Note. Mariners, Hermann, and Robinson Tait each filed

Lost Note Affidavits indicating that the original Note was held by Robinson Tait,

counsel for Pensco, at the time Pensco purchased the loan, and that it had been

lost after Robinson Tait sent it back to Mariners. Mariners and other defendants

moved for summary judgment. The court granted summary judgment and

dismissed Del Fierro's claims for conversion, slander of title, violation of the

Uniform Deceptive Trade Practices Act, violation of the Fair Credit Reporting Act,

and portions of the claim for Unjust Enrichment. The remaining claims including

Notary Malfeasance, Notary Negligence, Unjust enrichment (pending evidence of

3 Del Fierro also named a number of additional Mariners entities in her complaint but only Mariners 4 and Mariners 5 are involved in the transfer and sale of Del Fierro's loan.

4 Del Fierro argues that it is important to note that "counsel for Mariners represented Hermann in his individual capacity but [] did not represent Pensco the company..., the real player in this litigation." Brief of Appellant at 40. However Del Fierro did not name Pensco as a defendant in this action. No. 73016-9-1/6

the price Pensco paid for the loan), and quiet title, proceeded to a bench trial on

October 28, 2014.

The trial court found that the Note had been endorsed in blank and that

Pensco had the right to endorse it as the holder at the time it was lost under

RCW 62A.3-309. The court entered judgment in favor of defendants and

reserved an award of fees and costs. Del Fierro appeals.

DISCUSSION

Del Fierro assigns error to a number of the trial court's findings regarding

the transfers of the Note and Deed of Trust. When a trial court has reviewed the

evidence, our review is limited to determining whether the trial court's findings

are supported by substantial evidence, and if so, whether those findings support

the conclusions of law. Ridqeview Props, v. Starbuck, 96 Wn.2d 716, 719, 638

P.2d 1231 (1982). Findings of fact will be upheld on appeal if they are supported

by "'a sufficient quantity of evidence to persuade a fair-minded person of [the

order's] truth or correctness." Raven v. Dep't. of Soc. & Health Servs., 177 Wn.2d

804, 817, 306 P.2d 920 (2013) (quoting Port of Seattle v. Pollution Control Hr'gs

BdL, 151 Wn.2d 568, 588, 90 P.3d 659 (2004)). We will not substitute our

judgment for that of the trial court or weigh evidence or credibility of witnesses.

Davis v. Dep't of Labor & Indus. 94 Wn.2d 119, 124, 615 P.2d 1279 (1980).

Endorsement of the Note

Del Fierro first argues that the allonge endorsing the note in blank was

defective and that as a result, Mariners 4 was never the holder of the Note. She

contends that because the endorsement was on a separate sheet of paper, and

there were "no clip marks, folds, or glue marks," it was not "firmly affixed" to the No. 73016-9-1/7

Note in order to make it negotiable. Brief of Appellant at 21. Respondents argue

that testimony from witnesses clearly established that the Note included the

allonge, which was sufficiently affixed to it, and Del Fierro has not presented any

evidence to the contrary.

Under RCW 62A.3-204(a), an indorsement is a signature made on an

instrument for the purposes of negotiating the instrument. An indorsement-in-

blank is an indorsement that is not payable to an identified person. RCW 62A.3-

205(b). Thus an instrument indorsed-in-blank becomes payable to bearer and

any person who possess the instrument becomes its holder. RCW 62A.3-204(a)

also provides that for the purposes of determining whether a signature is made

on an instrument, a paper affixed to the instrument is part of the instrument.

Comment 1 to RCW 62A.3-204. This section requires an allonge to be "so firmly

affixed" to the check "as to become a part thereof." Id. A separate paper, or one

pinned or clipped to the check, will not suffice. 7 WASHINGTON PRACTICE,

Uniform Commercial Code (UCC) Forms § 3-205 Form 2 (2015) (citing

Tallahassee Bank & Trust Co. v. Raines. 125 Ga.App. 263, 187 S.E.2d 320, 312

(1972); Duxburv v. Roberts. 388 Mass. 385, 446 N.E.2d 401 (1983) (separate

document assigning the note did not constitute an endorsement).

Respondents argue that even though the allonge is on a separate page,

there is ample testimony in the record showing that the allonge in blank was

affixed to the original Note. Jennifer Tait of Robinson Tait testified that the last

page of the note, titled "'Note Endorsements,'" was part of all one package with

the original Note. VRP (Oct. 29, 2014) at 121-22. Steve Olson of Mariners also

testified that while Mariners purchased the Note from Fortress, Equifirst was the No. 73016-9-1/8

originator and "sign[ed] on the note endorsement on the last page." VRP (Nov. 3,

2014) at 38-39. Olson also testified that he was familiar with the requirements of

endorsements in blank and that Mariners would have checked to make sure that

the Note was endorsed in such a way that it would permit them to negotiate that

note to someone else. Del Fierro has presented no controverting evidence

demonstrating that the allonge was not included or attached to the Note.5 We find

no error in the trial court's finding that the Note was properly endorsed in blank

and the allonge was "firmly affixed" under chapter 63A-309 RCW.

Del Fierro assigns error to a number of the trial court's other factual

findings, including findings that Mariners purchased its interest in the loan from

FCDB FF1, LLC, that the sale was a good faith, arms-length transaction in which

Mariners paid value for the beneficial interest in the loan, and that the sale of the

loan to Pensco was an arms-length transaction. These challenges all fail,

because there is sufficient evidence in the record to persuade a fair-minded

person of the truth of the finding.

Enforcement of Lost Instrument

Del Fierro argues that the trial court erred when it concluded that Pensco

had proved it was entitled to enforce the Note and Deed of Trust. She argues

that Pensco does not meet the requirements of RCW 62A.3-309(a) because it

never had possession of the Note.

5 Del Fierro argues that the testimony should be disregarded because the Mariners failed to lay any foundation for the allonge at trial. The record shows, however, that the testimony by Tait and Olsen established their personal knowledge of the Note and its contents, including the allonge.

8 No. 73016-9-1/9

Article 3 of the UCC governs who is entitled to enforce a promissory note.

RCW 62A.3-301 provides that a "[pjerson entitled to enforce" an instrument"

means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to RCW 62A.3-309 or 62A.3- 418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

A holder, in this case, is a "person in possession of a negotiable

instrument that is payable either to bearer or to an identified person that is the

person in possession." RCW62A.1-201(21)(A).

RCW 62A.3-309 governs the enforcement of lost instruments. The statute

requires:

(a) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

The trial court found that Robinson Tait was in possession of the original

Note on behalf of Pensco as the purchaser, even though it sent the Note back to

Mariners in 2012. The record contains testimony from Robinson Tait about the

terms of the bailee letter in which they agreed to hold the original Note in custody

for Mariners. After the note was purchased, Pensco retained Robinson Tait and

asked them to continue holding the Note. The law firm's policy was to return

original documents to the entity that sent it to them and for which they have a No. 73016-9-1/10

bailee letter, unless they receive information that they should send it elsewhere.

Even though they were holding the original Note on behalf of Pensco, Robinson

Tait sent it to back to Mariners as per their document policy. It is undisputed that

the intent of the parties was that Mariners would then forward the original Note to

Pensco.

We find that there is sufficient evidence in the record to support the trial

court's findings of fact, which in turn, support the conclusion that Pensco was

entitled to enforce the Note under RCW 62A.3-309. The trial court did not err in

concluding that Pensco was in possession of the original Note, endorsed in

blank, when its loss occurred; the loss was not a result of a transfer by Pensco or

a lawful seizure; and Pensco could not reasonably obtain possession of the

original Note because its whereabouts could not be determined.

Evidentiary Rulings and Discovery Sanctions

We review a trial court's decision to admit or exclude evidence for an

abuse of discretion. Salas v. Hi-Tech Erectors. 168 Wn.2d 664, 669, 230 P.3d

583 (2010). A trial court abuses its discretion when its decision "is manifestly

unreasonable or based on untenable grounds or reasons." Id., (quoting State v.

Stenson. 132 Wn.2d 668, 701, 940 P.2d 1239 (1997)). A "'manifestly

unreasonable decision is one that adopts a view that no reasonable person

would take.'" jd, (quoting In re Personal Restraint of Duncan. 167 Wn.2d 398,

402-03, 219 P.3d 666 (2009)). A decision is based on untenable grounds or

untenable reasons if the trial court applies the wrong legal standard or relies on

unsupported facts. Id. We also review a trial court's sanctions for a party's

10 No. 73016-9-1/11

noncompliance with discovery orders for an abuse of discretion. Rivers v. Wash.

State Conf. of Mason Contractors. 145 Wn.2d 674, 684, 41 P.3d 1175 (2002).

Del Fierro claims that a number of documents relating to the loan transfer

should have been excluded because they were incomplete or unsigned, including

the Residential Mortgage Loan Sale Agreement and Master Asset Sale and

Interim Servicing Agreement. Br. of Appellant at 24. According to Del Fierro, the

documents were "not fully executed,... replete with blanks and didn't include

cited attachments." jd. She also argues that the purchase and sale agreements

should have been excluded because respondents failed to provide them until

after the discovery cutoff, and because they lacked foundation, were not

authenticated, and were submitted after the parties had rested.

Along with the documents, Del Fierro objects to the trial court's admission

of testimony of Mariners and Robinson Tait, because respondents did not ask the

court to admit the witnesses' Lost Note affidavits. Del Fierro also argues that

because Mariners did not mention Fortress or any of its sub-entities in discovery,

the court should not have allowed testimony about them.

A trial court necessarily has broad discretion in ruling on evidentiary

matters and imposing sanctions for discovery violations; we will not overturn a

trial court's ruling absent manifest abuse of discretion. Sintra, Inc. v. City of

Seattle. 131 Wn.2d 640, 662-23, 935 P.2d 555 (1997). Courts may sanction

parties under CR 37(b)(2) for two reasons: (1) failure of a party to comply with an

order to provide or permit discovery and (3) failure of a party to respond to a

request for discovery under CR 33 or CR 34, or to appear after proper notice for

a deposition. Pamelin Industries. Inc. v. Sheen-U.S.A.. Inc.. 95 Wn.2d 398, 401,

11 No. 73016-9-1/12

622 P.2d 1270 (1981). A trial court should not exclude testimony for abuse of

discovery without showing intentional or tactical nondisclosure, willful violation of

a court order, or otherwise unconscionable conduct. Barci v. Intalco Aluminum.

Corp.. 11 Wn. App. 342, 351, 522 P.2d 1159 (1974).

Del Fierro has not shown that respondents have engaged in any such

unconscionable conduct. The record shows that respondents produced discovery

in response to Del Fierro's request. Del Fierro did not move to compel more

complete answers nor did she move for sanctions other than exclusion of the

contested documents. We find that it was within the trial court's discretion to

refrain from excluding the testimony and documents as a discovery sanction.

Finally, Del Fierro argues that the trial court erred when it dismissed Del

Toro from the case with prejudice. She also assigns error to the court's dismissal

of the CPA claim on summary judgment and the quiet title claim. But she does

not provide factual or legal arguments in support of these assignments. Thus, we

do not consider them. RAP 10.3(a)(5); Cowiche Canyon Conservancy v.

Boslev. 118 Wn.2d 801, 809, 828 P.2d 549 (1992).

Del Fierro asks for an award of attorney's fees on appeal based on the

provisions of the Note and the Deed of Trust and presumably RCW 4.84.330 and

RAP 18.1. Because we affirm the trial court in all respects, we deny her request.

Affirm.

WE CONCUR: