In The News

Recent Appellate Decisions – August 10 to August 16, 2012

Selected summaries prepared by Commissioner James Verellen (ret.)

Washington Supreme Court

August 16, 2012

Bain v. Metropolitan Mortgage Group No. 86206-1 (consolidated w/ No. 86207-9)

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=862061MAJ

deed of trust – foreclosure – MERS not beneficiary unless it holds promissory note – Consumer Protection Act

The beneficiary of a deed of trust is “the holder of the instrument or document evidencing the obligations secured by the deed of trust.”   The Mortgage Electronic Registration System (MERS) is a corporation established by a consortium of public and private entities to establish a central registry for tracking mortgage rights.  MERS is often named as a beneficiary under a deed of trust but does not possess the promissory note secured by the deed of trust.

In two cases pending in the Federal District Court for the Western District of Washington, the borrowers secured their loans with deeds of trust, naming MERS as the beneficiary of the deed of trust.  When the borrowers defaulted, MERS, acting as beneficiary, named a successor trustee and those trustees began non-judicial foreclosures.

The Federal District Court certified three questions to the Washington Supreme Court:

  1. Is MERS a lawful “beneficiary” under the Washington Deed of Trust Act if it never held the promissory note secured by the deed of trust?
  2. If so, what is the legal effect of acting as an unlawful beneficiary under the terms of the Washington Deed of Trust Act?
  3. Does a homeowner possess a cause of action under Washington’s Consumer Protection Act against MERS if MERS acts as an unlawful beneficiary?

The Washington Supreme Court (9-0) concludes “No” “We decline to answer” and “It depends.”

  • If MERS never “held the promissory note” then it is not a “lawful ‘beneficiary.’”
  • The “unless the context clearly requires otherwise” provision of the statutory definitions does not mean the parties to a contract can alter a statutory definition.
  • The “instrument or document evidencing the obligations secured by the deed of trust” means the promissory note or other debt instrument and not the deed of trust itself.
  • Consistent with the UCC definitions of “holder” and “person entitled to enforce,”  a beneficiary of a deed of trust must either actually possess the promissory note or be the payee.
  • An agent can represent the holder of a note, but “MERS fails to identify the entities that control and are accountable for its actions.  It has not established that it is an agent for a lawful principal.”
  • “MERS did not become a beneficiary by contract or under agency principals.”
  • The legislature is in the best position to assess policy considerations.
  • “[N]othing herein should be interpreted as preventing the parties to proceed with judicial foreclosure.  That must await a proper case.”
  • A more complete record and additional briefing is required to resolve the legal effect of MERS being an unlawful beneficiary because it is not the holder of the note:  whether MERS would simply need to assign its legal interests to the lender before the lender proceeds with foreclosure; whether MERS should be required to assign its interest in any deed of trust to the holder of the note and have that assignment recorded; whether rescission precluding non-judicial foreclosure is available to the borrower; whether the deed of trust is unenforceable;  or whether an equitable mortgage should be created.
  • “While we are unwilling to say it is per se deceptive, we agree that characterizing MERS as the beneficiary has the capacity to deceive and thus, for the purposes of answering the certified question, presumptively the first element [of a CPA claim] is met.”
  • “If in fact the language is unfair or deceptive, it would have a broad impact.  This [public interest] element is also presumptively met.”
  • A homeowner may be able to establish injury for a CPA claim; “Depending on the facts of a particular case, a borrower may or may not be injured by the disposition of the note, the servicing contract, or many other things, and MERS may or may not have a causal role.”
  • “The mere fact that MERS is listed as a beneficiary is not itself an actionable injury.”

Gorman v Woodinville No. 85962-1

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=859621MAJ

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=859621Co1

adverse possession -  government subject to previously perfected claim of adverse possession

The government is not subject to a claim of adverse possession, but an adverse possessor who satisfies the elements of adverse possession while land is privately owned is automatically vested with title when all the elements are satisfied.

The private owner of Tract Y dedicated the land to the City of Woodinville in 2005.  In 2007, adjoining landowner G filed an action to quiet title claiming he acquired title to Tract Y through a 10-year period of adverse possession that transpired before 2005.  The trial court granted the City’s CR 12(b)(6) motion to dismiss.  Division I reversed and remanded for a trial to determine the validity of G’s claim of title.

The Washington Supreme Court (6 with 2 concurring) affirmed Division I on an issue of first impression:

  • State owned land is statutorily protected from claims of adverse possession.  RCW 4.16.160.
  • The purpose of the statute is to protect the public from losing land due to the carelessness of civil servants and to shield the government from costly litigation.
  • “If the dedicator’s title had been extinguished by adverse possession prior to the dedication, he had nothing to convey.”
  • G’s claim is not “predicated upon the lapse of time” as against the City.  G claims the requisite time already ran against the private owner.”
  • “[T]he City could have avoided the cost of the litigation by conducting an inspection or survey of the dedicated property to ensure no superior claim to it existed”
  • Title is acquired by adverse possession upon the passage of the 10-year period.  The quiet title action merely confirms that title to the land has passed to the adverse possessor.
  • “If a claimant satisfies the requirements of adverse possession while land is privately owned, the adverse possessor is automatically vested with title to the subject property.  The prior owner cannot extinguish this title by transferring record title to the government.”
  • The concurring opinion (Madsen and Wiggins) calls upon the legislature to curtail the adverse possession doctrine as outdated and inapposite.

Marriage of Katare No. 85591-9

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=855919MAJ

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=855919Co1

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=855919Di1

domestic relations – restrictions on foreign travel – expert testimony on risk factors

B was born and raised in India.  In 1989, he moved to Florida where he met L.  They married in 1995 and moved to Washington State in 1999.   Their two children were born in Washington.  In 2002, B was offered a job in India.  L opposed moving to India with the children.  L filed for dissolution of their marriage, and alleged that B had threatened to take the children to India without L.  A parenting evaluator noted that two witnesses corroborated B’s threat.  The evaluator was not certain B would actually attempt to abduct the children and recommended three days of visitation a month and suggested supervised visitation until the children’s passports be secured.  The trial court allowed temporary unsupervised visitation subject to the requirement that B’s attorney hold B’s passport during visitation.

In 2003, the dissolution hearing resulted in a parenting plan that prohibited B from taking the children out of the county until they turned 18.  The trial court imposed the restrictions even though it concluded that RCW 26.09.191(3) (court may preclude or limit any provisions of the parenting plan if the court expressly finds factors or conduct adverse to the best interests of the child) did not apply.   On appeal (Katare I), the Court of Appeals held that the trial court’s statement that RCW 26.09.191(3) did not apply created an ambiguity.   The court remanded for clarification of the travel restrictions.

On remand, the trial court found that “the husband appears to present no serious threat of abducting the children” but went on to impose travel restrictions based on the risk of abduction.  On appeal (Katare II), the Court of Appeals found the trial court recitations deficient, and remanded a second time for clarification.

In 2009, the trial court conducted a two-day hearing, including the testimony of an attorney with 17 years experience with child abduction cases.  Over objection, the attorney testified regarding risk factors for child abduction and that several of the risk factors applied to B.  The trial court eliminated its earlier finding that there appeared to be no serious threat of abduction and found that B’s extreme anger, abuse, unreasonableness, and poor judgment convinced the court that “the risk of abduction had not abated” and perhaps had increased.  The trial court maintained travel and passport restrictions.  On appeal (Katare III), the Court of Appeals found the travel and passport restrictions were supported by substantial evidence.  The Court of Appeals also held that the trial court abused its discretion by admitting the attorney’s expert testimony on risk factors because there was not an adequate foundation and L did not establish that the Frye standard had been satisfied.  The Court of Appeals concluded the error was harmless because the trial court did not adopt the analysis of the expert witness.

The Washington Supreme Court (5-1-3) upheld the travel restrictions, affirming the Court of Appeals, except that the Supreme Court held that the admission of the expert testimony was not an abuse of discretion:

  • A risk of abduction can support travel restrictions even though there has not been any actual harmful conduct toward the child; “the trial court need not wait for actual harm to accrue before imposing restrictions on visitation…Because the trial court found a danger of serious damage (abduction) here, restrictions were appropriate even though [B] had not yet attempted abduction.”
  • Despite a lack of formal education on child abduction, the expert witness had 17 years of experience in the field of child abduction, including his participation in organizations, attendance at conferences, consultation with government agencies and testimony as an expert in other cases.  The trial court did not abuse its discretion concluding that the attorney’s expert testimony would be helpful.
  • The lack of personal familiarity with B or India goes to the weight of the expert’s testimony.
  • “[T]he risk factor evidence in this case was not inadmissible ‘profile evidence,’ but was properly admitted and utilized.”
  • The risk factors considered by the trial court “cannot conceivably be regarded as ‘racial profiling evidence.’”
  • There is no fundamental right to travel abroad.
  • “Because the restrictions imposed by the trial court ultimately complied with RCW 26.09.191(3) and served the best interests of the children, and because the trial court had to balance the constitutional rights of both parents, [B’s] constitutional rights as a parent were not violated.”
  • B was obstinate in challenging the travel restrictions through three appeals, but L “has not shown that his conduct crossed the line to intransigence.”  The court declines to award attorney fees to L.

Division I Washington State Court of Appeals

August 13, 2012

Cooper v. Stedman No. 66839-1

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=668391MAJ

expert testimony – biomechanical forces soft tissue injury –  mandatory arbitration – prevailing party on appeal – costs from arbitration and trial

C pulled from a parking place into the lane of traffic where she collided with the right front bumper and right side of S’s car.  S sued C.  In mandatory arbitration, the arbitrator awarded S a total of $23,300 in special and general damages.  C requested a trial de novo.  S offered to settle for 1 penny less than the amount of her arbitration award.

Prior to the trial de novo, S learned that C intended to call Dr. Allan Tencer a professor of mechanical engineering to testify about the severity of the force involved in the accident.  An offer of proof and opinion letter revealed that Dr. Tencer intended to testify that the forces resulting from the impact were “low relative to forces experienced in daily living” and the accident was “not a likely source of significant forces acting on [S’s] body.”  Dr. Tencer explained how he used the speed and weight of the vehicles to conclude the approximate force acting on the occupants was 1.1 G or a “jolt” about the same as hitting a curb at three to five miles per hour while parking a car.  In his opinion, it was unlikely that S hit her head on the driver side window as she described because her body should have moved in the opposite direction.  Medical witnesses would testify that S suffered “a pretty minor injury.”  The trial court granted S’s motion to exclude the testimony of Dr. Tencer as irrelevant and cumulative.

The jury returned a verdict of $22,000 for S.  The trial court added statutory costs of $1,469.83, including costs of medical records used in the arbitration.  Because the total recovered at the trial de novo of $23,469.83 exceeded the amount offered by S of $23,299.99, the trial court awarded S her reasonable attorney fees.

Division I affirmed the trial court:

  • A timely motion for a new trial extended the time for filing a notice of appeal; use of the term “vacate” in the posttrial motion did not convert it into a motion to vacate that would not extend the time for appeal.
  • The biomechanical testimony was not cumulative to medical testimony, a different area of expertise.
  • Although Dr. Tencer disavowed any intention of giving an opinion whether S was hurt in the accident, “his clear message was that [S] could not have been injured in the accident because the force of the impact was too small.   Indeed, according to [C’s] brief, Tencer’s conclusion was exactly that: the forces generated by the impact were not sufficient to cause the type of injuries [S] was claiming.”
  • Such testimony was more likely to be misleading than helpful; the trial court did not abuse its discretion in excluding the expert biomechanical testimony as irrelevant.
  • S’s offer to settle for a judgment against C of $23,299 was “inclusive of costs, statutory attorney fees and attorney fees and sanctions.”   C “did not preserve her argument that the arbitrator’s award and the jury award are the only relevant figures to be used in determining whether she improved her position as the appealing party.  The only argument properly before us is whether the court correctly determined the costs allowable to [S], an issue [C] presented to the trial court in a motion for reconsideration.”
  • “The court properly included the costs of obtaining all medical records admitted at the arbitration or at trial.”  C did not improve her position in the trial de novo.
  • S is entitled to reasonable attorney fees on appeal.

Division II Washington State Court of Appeals

August 14, 2012

Greenalgh v. Dept. of Corrections No. 42052-0

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=420520MAJ

public records request – statute of limitations

An inmate filed two requests for public records regarding the different rates charged by the Department of Corrections for copying expenses.  As to each request, the Department produced some documents and asserted that others were exempt.  The inmate pursued an administrative appeal.  Within eight months of the denial of his administrative appeal, but more than a year after the Department asserted exemptions, the inmate filed this lawsuit for alleged Public Records Act violations.  The Department moved to dismiss for failure to comply with the statute of limitations.  The inmate argued that the Department failed to assert the statute of limitations in its answer.  The trial court granted the Department’s motion to amend its answer and then dismissed the lawsuit for failure to comply with the one-year statute of limitations.

Division II affirmed:

  • The one-year statute of limitations for violations of the Public Records Act runs from the date of the assertion of exemptions to disclosure.
  • The trial court did not abuse its discretion by allowing the Department to amend its answer.
  • The Department did not waive the statute of limitations defense by responding to the inmate’s discovery request.
  • The Department is not equitably estopped from asserting the one-year statute of limitations defense; WAC regulations and DOC policy statements are consistent with the one-year statute of limitations.

Division III Washington State Court of Appeals

August 14, 2012

Tatham v. Rogers No. 30085-4

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=300854MAJ

http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=300854DIS

appearance of fairness – judge’s interactions with counsel – vacation of judgment under CR60(b)(11) if risk of injustice is demonstrated

Judges must recuse themselves when there is an appearance of unfairness, measured by whether a reasonable and disinterested person aware of all the facts would conclude that all parties obtained a fair, impartial and neutral hearing.

After a nine-year committed intimate relationship, T and R filed an action seeking an equitable division of their community-like property and a parenting plan for their daughter.   T, a 47-year-old physician worked continuously during their relationship.  R, a 52-year-old former carpenter, spent most of his time renovating a house he purchased prior to their relationship.  R’s $1.3 million of separate property included the house, real property in another state, and a substantial inheritance.   T’s separate property was valued at just under $19,000.   Their community-like assets were valued at $625,000, including a $54,000 “529” college savings account for the daughter. The trial court emphasized R’s considerable separate property in deciding to award 75% of the community-like assets to T.

R moved for reconsideration of the property division arguing that the court did not adequately consider his deteriorating mental health and limited earnings, and if the college account for the daughter was disregarded or treated as equally divided, then the division of community-like assets was really an 82%-18% split. The trial court denied the motion to reconsider.

R hired a private investigator to inquire into the relationship between the trial judge and T’s first of three trial attorneys (T’s counsel).  The investigation revealed that years before trial and before the judge was elected in the one-judge county: the judge and T’s counsel were partners in their law firm; the judge was arrested for DUI when T’s counsel was a passenger; T’s counsel posted $500 bail; T’s counsel acted as campaign manager for the judge’s successful election campaign; and T’s counsel contributed money to that campaign.  Two years before the trial, T’s counsel designated the judge as an alternate attorney-in-fact on a durable power of attorney.

R moved to vacate the judgment, arguing that the trial judge’s failure to disclose any prior or existing relationship with T’s counsel violated due process and the appearance of fairness doctrine.  R asked that a visiting judge hear the motion to vacate.   The trial judge denied the motion for a visiting judge and the motion to vacate.  The court stated that all three attorneys who represented R knew everything pertinent to the recusal issue prior to trial except the power of attorney, which was intended for a single real estate transaction and was never used.

Division III reversed (2-1) and remanded for a new trial before a different judge:

  • A visiting judge was not necessary; a trial judge normally is not required to recuse from deciding a motion for new trial even where the motion is based on grounds critical of the trial judge;  “Certainly a trial judge who feels personally stung by the matters being alleged and argued by the moving party would be wise to ask a fellow judge to take his place, but recusal is not required.”
  • The personal bias or prejudice grounds alleged by R, do not fall within the “extraordinary situations” implicating due process.
  • A judge’s failure to recuse where required by the judicial canons is a violation of the appearance of fairness doctrine.  A judge is required to disclose past associations that might reasonably suggest or create a conflict of interest, including associations with trial counsel.
  • Waiver is not established; the record does not include evidence that R or R’s trial counsel were previously aware of the facts giving rise to the motion to vacate; the 9-month delay between hiring the investigator and filing the motion to vacate did not prejudice T.
  • A violation of the appearance of fairness doctrine does not render a judgment void.
  • A motion to vacate under the “catch-all” provision of CR 60(b)(11) “is an appropriate procedure for raising a posttrial challenge based on a violation of the appearance of fairness doctrine, and whether relief should be granted turns on the risk of injustice to the parties in the particular case if relief is not granted.”
  • Standing alone, the past personal and business dealings between the trial judge and T’s counsel years before the trial “would probably not require the judge’s disqualification, although they still required disclosure.”  The broad power of attorney remained in effect at the time of trial and gave the trial judge “virtually complete authority to handle [T’s counsel’s] affairs, albeit upon a contingency.”
  • A property distribution is the height of discretion and the disproportionate award of property here raises concerns of possible prejudice.  R demonstrated a risk of injustice supporting a violation of the appearance of fairness doctrine.

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