declaration of jody m. mccormick filed by defendants. document no. 41
TRANSCRIPT
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7/24/2019 DECLARATION of Jody M. McCormick Filed by Defendants. DOCUMENT NO. 41
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The Honorable Benjamin H. Settle
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
T
TACOMA
PAMELA
S.
OWEN,
Plaintiff,
vs.
FEDERAL HOUSING FINANCE AGENCY;
FEDERAL HOME LOAN MORTGAGE
CORPORATION; MTC FINANCIAL, INC.,
dba TRUSTEE CORPS; BISHOP,
MARSHALL WEIBEL, P.S.; CHUCK
E.
ATKINS, in his official capacity as Clark
County Sheriff,
Defendants.
Case No. 3:15-cv-05375-BHS
DECLARATION OF JODY M.
MCCORMICK IN SUPPORT OF
FEDERAL HOUSING FINANCE
AGENCY'S ND
FEDERAL HOME
LOAN MORTGAGE CORPORATION'S
JOINT MOTION TO DISMISS
PLAINTIFF'S COMPLAINT
NOTE
ON
MOTION CALENDAR:
November 6 2015
I Jody M. McCormick, make the following declaration:
1.
I am a partner with the law firm Witherspoon Kelley. I
am
counsel of record for
Defendant Federal Housing Finance Agency ( FHF A ) and Defendant Federal Home Loan
Mortgage Corporation ( Freddie Mac ) in the above-captioned case. I submit this Declaration
in support
of
the accompanying Joint Motion to Dismiss Plaintiffs Complaint submitted by
FHF A and Freddie Mac.
DECLARATION OF JODY M. MCCORMICK
IN
SUPPORT
or FEDER.AL HOUSING FINANCE AGENCY'S AND
FEDERAL HOME LOAN MORTGAGE CORPORATION'S
JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT - I
Case No. 3: 15-cv-05375-BHS
Sl2790lODQCX
~ W I T H R S P O O N K L L
Attorneys Counselors
422 W. Riverside Avenue, Suite l
100
Phone: 509.624.5265
Spokane, Washington 99201-0300
Fax:
509.458.2728
Case 3:15-cv-05375-BHS Document 41 Filed 10/14/15 Page 1 of 63
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2 I contacted Plaintiff on two occasions
to
inform Plaintiff that she had not
2
properly effected service upon Freddie Mac and FHFA. On behalf
of
Freddie Mac and FHF A, I
3
represented that both parties would be willing to accept service on the condition that Plaintiff
4
agree to seek a stipulated order that would establish a briefing schedule for Freddie Mac and
5
FHF A to respond to her claims.
6
7
3.
y
letter dated August 4, 2015, and by email dated September 30, 2015, Plaintiff
s rejected the offers described above.
9
4
Attached are true and correct copies of the August 4, 2015 letter (Exhibit A) and
10
September 30, 2015 email (Exhibit B).
I I
5
Attached hereto as Exhibit C
is
a true and correct copy of the Motion and
12
13
Declaration to Vacate Judgment and to Stay Enforcement and Writ of Restitution filed by
14
Plaintiff in
Clark County Superior Court Case No. 15-2-00924-2 (the Unlawful Detainer
15
Action ).
16
6
Attached hereto as Exhibit D is a true and correct copy of Motion to Quash
17
18
Service
of
Summons filed by Plaintiff in the Unlawful Detainer Action.
19
7
Attached hereto as Exhibit E is a true
and
correct copy of the Judgment for Writ
20 of Restitution Only entered
in
the Unlawful Detainer Action.
21
22
23
25
26
27
28
DECLARATION OF JODY M MCCORMICK IN SUPPORT
OF FEDERAL HOUSING FINANCE AGENCY'S AND
FEDERAL HOME LOAN MORTGAGE CORPORATION'S
JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT- 2
Case
No 3: J5-cv-05375-BHS
1279016
DOCX
l ~ W I T H R S P O O N K L L
ttorneys Counselors
422 W Riverside Avenue, Suite l 100 Phone: 509.624.5265
Spokane, Washington 99201-0300 Fax: 509.458.2728
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Respectfully submitted this 14'" day
of
October, 2015.
WITHERSPOON KELLEY
s Jody M McCormick
Jody M. McCormick WSBA # 26351
422 W. Riverside Ave., Suite 1100
Spokane,
W
99201-0300
Phone: 509-624-5265
Fax: 509-458-2728
Attorneys
or
Defendants Federal Home Loan Mortgage
Corporation and Federal Housing Finance Agency
DECLARATION
OF JODY
M
MCCORMICK
IN
SUPPORT
OF FEDERAL HOUSING FINANCE AGENCY'S AND
FEDERAL HOME LOAN MORTGAGE CORPORATION'S
JOINT MOTION TO DISMISS PLAINTIFF'S COMPLAINT - 3
Case
No 3: l 5-cv-05375-BHS
W I T H R S P O O N K L L
ttorneys Counselors
422
W
Riverside Avenue, Suite 1100 Phone: S09.624.S265
Spokane, Washington 99201-0300
Fax:
509.458.2728
Sr/.790 6DOCX
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CERTIFICATE
OF
SERVICE
I hereby certify that on the 14
1
day of October, 2015,
1. I caused to be electronically filed the foregoing DECLARATION OF JODY M.
MCCORMICK IN SUPPORT OF FEDERAL HOUSING FINANCE
AGENCY S
AND
FEDERAL HOME LOAN MORTGAGE CORPORATION'S JOINT MOTION TO DISMISS
PLAINTIFF'S COMPLAINT with the Clerk
of
the Court using the CM/ECF System which will
send notification
of
such filing to the following:
Michael Steven DeLeo [email protected], [email protected]
Barbara L Bollero [email protected], [email protected]
William P. Richardson [email protected],
[email protected], [email protected]
Pamela S. Owen [email protected], [email protected],
parnela. [email protected]
David A Weibel [email protected]
2. I hereby certify that I have mailed
by
United States Postal Service the foregoing
document to the following non-CM/ECF participants at the address listed below:
None
3. I hereby certify that I have mailed by United States Postal Service the foregoing
document to the following CM/ECF participants at the address listed below: None
4.
I hereby certify that I have hand-delivered the foregoing document to the
following participants at the addresses listed below: None
s Jody M McCormick
Jody M. McCormick WSBA
#
26351
WITHERSPOON KELLEY
422 W. Riverside Ave., Suite 1100
Spokane,
WA
99201-0300
Phone:509-624-5265
Fax: 509-458-2728
DECLARATION OF JODY M.
MCCORMICK
JN SUPPORT
OF
FEDERAL
HOUSING FINANCE AGENCY'S AND
FEDERAL HOME
LOAN MORTGAGE CORPORATION'S
JOINT MOTION TO
DISMISS
PLAINTIFF'S COMPLAINT 4
Case No. 3:15 cv 05375 BHS
~ W I T H R S P O O N K L L
Attorneys Counselors
422
W_
Riverside Avenue, Suite 1100 Phone: 509.624.5'265'
Sl27QIJJ6DOCX
Spokane, Washington 9920\-0300 Fax: 509.458.2728
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EXHIBIT
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Pamela S. Owen
3912 NE 57th A venue
Vancouver, WA 98661
Tel: (360) 991-4758
August 4, 2015
Jody M. McCormick
Witherspoon Kelley
422 W Riverside A venue, Suite 1100
Spokane, WA 99201
Tel: (509) 624-5265; Fax: (509) 458-2728
Cause:
Owen
v
Atkins et al. 15-cv-053 75-BHS; United States District Court for the
Western District of Washington (Tacoma)
Subj: Plaintiffs Rejection of Joint Offer to Stipulate
to
Order Setting Briefing Schedule
Dear Counsel:
l decline to accept your offer received on the above date for the following reasons, among
others not listed:
1.
The above-titled action was removed on June 4, 2015, and not June 5, 2015 as
stated in the Stipulation.
2.
The Stipulation erroneously claims that ''Plaintiff did not properly serve your
clients. Plaintiff has never attempted to serve your clients with sun1mons and complaint is a more
accurate statement
of
the fact.
3.
On June 7 2015, your clients were asked to waive service of summons. Your
clients have one choice at this late stage: Waive service or pay the costs of service. Rule 4(d)(2)
makes mandatory that:
lf
defendant located within the United States fails, without good cause, to sign
and return a waiver requested by a plaintiff located within the United States, the
ourt must impose on the defendant
(A) the expenses later incurred in making service; and
(8) the reasonable expenses, including attorney's fees,
of
any motion required to
collect those service expenses.
4. You were provided with a copy
ofmy
motion to stay proceedings pending the
outcome of the unlawful detainer appeal. Your clients may use this opportunity to oppose this
1
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motion and argue against delay. Should your clients prevail on appeal, the District Court would
be left with only one choice to dismiss the action.
5. Defendant Sheriff Atkins informed the District Court that your clients agreed to
have this action ren1oved to Federal Court while being aware
of
the unlawful detainer appeal:
6 Pursuant to J8 lT.S.C . 1446(b)t2)(AJ, consent to this re1110Yal has be
obtained
fro111 all
r
defendants
that
h1Ye filed
a
Notice
of
Appearance. or notified Defendant Atkins
of
their intent to
e
tile
a Kotice of
Appearance.
(Atkins Notice
of
Removal, Dkt. No. 1at2, filed 06/05/15.(
6. Your clients may, without my stipulation, file a 1notion seeking an Order setting a
briefing schedule consistent with your current Stipulation. I will oppose your clients' motion for
the reason herein stated and for the reasons stated in my motion to stay pending outcome
of
the
unlawful detainer appeal.
7.
Your client, Freddie Mac, has a
brief
on appeal due on August 19 2015. You are
required to remind your client of Rev. Code Wash. (ARCW) 40.16.030 (2015) (Offering false
instrument for filing or record); Exhibits 5 and 6 attached to the complaint; the Trustees Deed
Upon Sale; and the Declarations made under penalty
of
perjury to cause the Superior Court and
Sheriff Atkins to allegedly violate my State and Federal constitutional and statutory rights.
On
a
side note,
you mentioned
that
should my settlement
offer
is 7 figures, you
would not take this
amount
to your clients. Washington State Court Rules
of
Professional
Conduct (RPC) 1.2 and 1.4 mandates that a lawyer n1ust communicate with her or his clients all
settlement offers. ''A lawyer shall abide by a client's decision whether to settle a matter. A
lawyer for a government agency, such as yourself, may have authority on
behalf
of
the
government to decide upon settlement or whether to appeal from an adverse judgment. Such
authority must be consistent with the Government's it1-house lawyers. Thus, any failure to
comply with an obligation or prohibition imposed by a RPC would be a basis for invoking the
disciplinary process. While the RPC may not serve as a cause of action against you and your
other lawyers, the Rules do establish standards
of conduct by lawyers and
a
lawyer's violation
of
a Rule may be evidence
of
breach
of
the applicable standard
of
conduct.
Yours truly,
,/)
. ,I_ 1
/-f
I
.: 1 .
._-_ c c L f l c . 1 1 ~ ' ~ _ , , ~ ' : ~ c . : : , , _ ~ ' ~ ~ - - ' ' - ' - ; ' - ' I - ; : ~ . : _ - ~ ; , _ ,
Pamela S. Owen
Plain1ifr
Tel: (360) 991-4758
pan1ela. owcn 9 a ~ g m ai I con1
2
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Jody M. McCormick
From
Sent
To
Subject
Dear Counsel:
Pamela
Owen
Wednesday,
September
30, 2015
5:36 AM
[email protected]; Alicia Asptint;
Steven
J
Dixson;
[email protected]; Erin Hill; [email protected];
[email protected]; [email protected];
Emanuel McCray;
[email protected]; [email protected]; [email protected]; Jody
M.
McCormick
Re: Owen v
Atkins
As a courtesy, the following is provided per
your
email dated 9/29/2015:
1 Regarding service of summons and complaint on your clients, your attention is directed
to
Dkt.
#s
35
and 36.
2
Pursuant to
R W
238.18.040 and .050. service was complete and ' had by serving the
secretary
of
state
of
the state
of
Washington
[23B.18.040];
and: ''No proceedings shall be had against the
nonadmitted organization nor shall it be required to appear, plead, or answer until the expiration
of
forty days
after the date
of
service upon the secretary of state. ' [238.18.050], which was September 1. 2015.
3
Under Local Civ.R. 55(a): ''A motion for entry of default need not be served on the defaulting
party. However, in the case
of
a defaulting party who has entered an appearance, the moving party must give the
defaulting party written notice
of
the requesting party's intention to move for the entry
of
default at least
fourteen days prior to filing its motion and must provide evidence that such notice has been given in the motion
for entry
of
default.
4
Because your clients have been duly served under Chapter
23B.18
RCW, your request to
stipulate is moot.
I hope the above infonnation is useful to you. Please also confinn the interest of your clients in reaching
a settlement within the next week or two. This will save them the time and costs from sub1nitting an Answer
and Reply.
ls/Pamela Owen
Plaintiff
On Tue, Sep 29, 2015
at 11
:20 AM, Jody M. McCormick wrote:
Ms. Owen:
I
am
writing on behalf
of the
Federal Housing Finance Agency and Freddie Mac about
Owen
v
tkins t
al
Case
No.
3:15-cv-05375 in the Western District of Washington.
Freddie Mac and FHFA have still not been served
with
a summons and complaint in accordance
with
court
rules. However, both Freddie Mac and FHFA are willing
to
waive their objections to the sufficiency of service in order
to
establish a plan to proceed with the case. We therefore wish to enter into a stipulation th t would waive objections to
1
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service
and
set
dates for Freddie Mac and
FHFA to
respond
to the complaint by a
dispositive
motion for you to oppose
that motion and for
Freddie
Mac and FHFA to
reply
to
your opposition.
If
you
agree I will
send you
proposed
dates for a briefing schedule and we can
discuss
further how we can document
the
agreement
in
the
form
of a stipulation.
Jody
Jody
M.
Mc ormick
Principal
IWitherspoon Kelley
[email protected] I Attorney Profile I
vCard
Cont1denr1al1/y Notice The J11forma/1on
r::onlaJ11ed
in ths email
and
any accompanymg attac/Jment(s) s intended
only
for the use of the intended rec fJ e
nd
may be
conf1denlial and/or privileged If any reader
of
Ill
s
comm11mcat1 111s 1101 he111te11ded rec1p1en/ unauthonied
se
disclosure or copying is stnctly prohibited
and
may be
un ai;.1ul If you have recei ved this com1mm1ca1mn in error, please 1mmed1a/e/y notify h ' sender
by
return email
and
delete tl1e origma/ message and
ll
copies from your
system Thank you
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T0:12066220354
FROM:3802187896
Page:
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Plaintiff s),
Defendant s .
FILED
?Dl5APRl1
lt\1119
scan
GWEB R.
CLEM
Cl
ARI\
COUNTY
r ~
No /
5),ocffl -/-8.
Motion
and Declaration to
Vacate Judgment and to Stay
Enforcement
o
Judgm1nt and
Wiii
of RHIHutlon
1. Relief reg,uested. The
defendant s} move s)
the
court
for an order vacating the
14 judgment
entered
in this action and
staying enforcement
of the judgment and the
writ of
15
restitution
until the
motion
can be heard.
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otion
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TO:l2066220354 FROM:3602167696
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Evidence
relied up on This motion
is
based on the
attached declaration
of
9 i c
UJ\ tt ' - - ~ . - f o _ _ , ~ ~ { , = u : ; ' - -
Motion
and O ClaretJon
to
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and
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statement
is true
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City)
Washingtonon
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...... .
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Case 3:15-cv-05375-BHS Document 41 Filed 10/14/15 Page 15 of 63
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4113/2015
Find Your
Legislator
Visiting
the Legtslature
* Agendas, Schedules and
Calendars
t
Biii information
Laws
and
A(Jency
Rules
Legislative
Committee
Legislative Agencies
Legislative
Information
Center
E-mail Notifications
Civic Education
i;
Historyofthe State
Legislature
Congress
-
the Other
Washington
TVW
Washington
Courts
_ OFM Fiscal Note V\lebSlte
Aaess
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Rew a11a.m unawu delalner adloo Dltib essed
tune.
p-evt1J.Slr.
RCWs >
> Chaoter
59.1 >Section 59.18.363
59.18.360
>
59 18.365
RCW
59.18.363
Unlawful
detainer
action - Distressed
home previously.
In
an
unlawful
detainer action Involving
property that
was
a
distressed
home:
1) The plaintiff shall disdose to
the court
whether the defendant previously
held title
to
the
property that
was
a distressed home, and explain how
the plaintiff
came to acquire litle;
2)
A
defendant
who previously
held title to the property
that was a
distressed
home shall not be required
to escrow ny
money pending tr1al when
amaterial
question
of
fact exists as to whether the plaintiff acquired title from the defendant
directly or indirectly through
a distressed
home conveyance;
3)
There must be both an
automatic
stay
of the
action and
a
consolidation
of
the
action with
a
pending
or
subsequent quiet title
action
when
a defendant
claims
that the
plaintiff acquired tltle to the property through
a
distressed home
conveyance.
2ooa
c 2 a
13 J
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I
2
3
4
COPY
ORIG\NA.l, fll,ED
APR
23 26 5
ScottG
Weber
Cieri< Clatk
co
IN THE SUPERIOR COURT OF THE STATE OF WASlllNGTON
IN
AND
FOR THE COUNTY OF CLARK
FEDERAL HOME LOAN MORTGAGE NO. 15-2-00924-2
CORPORATION
6
7
8
10
11
12
13
14
5
16
17
18
19
20
21
22
23
24
25
26
27
28
Plaintiff,
vs.
MOTION
T
QUASH
PAMELA S. OWEN, et al.
SERVICE OF SUMMONS
Defendants.
Hearing Date: May
l
2015
Time:
9:00a.m.
Judge: Honorable Judge Robert
Lewis
Court:
Department
9
COMES NOW Defendant, Pamela S. Owen, fur her motion captioned above, and states:
TABLE OF CONTENTS
Table
of
uthorities ...2
Questions resented
3
I
II
A.
1.
2.
3.
4.
Whether
the
trial court lacks subject matter unlawful detainer
0
urisdicti
3
on
Whether
the trial court erred in directing issuance
of
default
judgment against Defendant by order
entered
on April
3,
201
S
.
3
Whether the trial court erred
in
directing issuance ofwrit
of
restitution against Defendant by order entered on
April 3, 2015,
at
Sub. 12 ...................................................3
Whether Defendant is entitled
to
have
the
writ of restitution
quashed,
and
the action dismissed with prejudice .. .. .. .. .. .. .. .. .. .. ..3
Summary
ofLegal Argument
.....................................................
3
Plaintiff's Reliefls Barred By Doctrine of Unclean Hands .................3
BriefHistory and
Overview
ofSecuritizationand Mortgage-Backed
Securities
MBS) and the
Active Role ofPlaintiff Federal Home Loan
Mortgage Corporation (FHLMC) or ( Freddie Mac ) Leading
To
DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS
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Recent
Mortgage Crisis
................................................................
4
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
B
c.
III.
B.
IV
Federal
Takeover
ofPlaintiff Freddie
Mac ..........................................
7
Plaintiff
Freddie
Mac s
Role In
the
Creation
of
he Mortgage
Electronic
Registration
Systems MERS) To
Circumvent the
State Land Registry.........
9
PlaintiffDoes Not State In Its Complaint A Claim and Can Never State
A Claim
Cogniz.able
Under Chapter 59.12 RCW ..................................15
Tue Court Lacks Subject Matter Jurisdiction Because
ofPlaintiff s
Unclean Hands
and
Plaintiff s Failure to Strictly Comply
With
Chapter 59 12 RCW 15
Defendant
Was
Never
In Demult As
A Matter ofState
and
Federal
Law
......
18
CONCLUSION
20
AVIHORJIIES
Fedm Q se
Arbaugh
v.
Y
HCorp .
546
U.S. 500, 510-516 (2006)
....................................23
State Cases
In
re Agard, 444 B.R. 231, 247 (Bankr.E.D.N.Y.2011)
.................................
9, 17
Asuncion
v.
Superior Court
o
San Diego County,
108
Cal. App.
3d 141,
146-147, 166
Cal. Rptr.
306
(Cal. App.
4th
Dist.
1980)
...............................
23
Bain v. Metropolitan
Mortgage
Group, Inc.,
175
Wn.2d 83, 285 P.3d 34 2012)
..........................................................
9, 14
Hangman Ridge Training Stables,
Inc.
v. Safeco Title
Ins. Co
.
105 Wasb.2d 778, 780, 719P.2d 531 1986)
..................................................
15
Housing
Au horll)i ofCil)Io Everett v. Terry, 114 Wn.2d 558 (1990) ... ... ... ...23, 24, 25
Landmark
Nat /
Bankv.
Kesler,
216 P.3d
158,
166-67
(Kan.
2010)
.......................
12
Little
v. Catania, 48 Wn.2d 890,
297
P.2d255 (1956)..........................19, 23,
24,
24
Sowers
v.
Lewis, 49
Wn.2d 891, 894, 307P.2d 1064 (1957) ... ... ... ... .. ... .. 19, 23, 24,
25
Wilson
v.
Daniels,
31Wn.2d633, 643, 198 P.2d 496 (1948)
.......................
20, 23, 25
DEFENDANT S MOTION
TO
QUASH
SERVICE
OF SUMMONS
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Statutes
Washington Revised Code
7 28 19
9A 52
21
59.12.030 19, 21
59.12.032
19
59.12.040 20, 21
59.12.050 19
59.12.070 20, 21,
22
59.12.080 20, 21, 22
59.12.090 24
59.12.120 22
59.12.121
23
61.24 et
seq
........................................................................... 13
61.24.040 14,18, 20
61.24.040, subd 9) 20
61 24 060
19, 20
OUESJIONS
PRESENTED
Defendant is alleging
that
Plaintiffbas entered this Temple ofJustice with unclean bands
and bas completely failed
to
follow the procedures
mandated
by the Legislature under Chapter
59.12 RCW.
The
issues thus
presented are:
1
Wbether the trial court
lacks
subject
matter
unlawful
detainer jurisdiction.
2
Wbether
the
trial court erred in directing issuance
of
default judgment
against Defendant by order entered
on
April 3, 2015.
3 Whether the trial court ~
in
directing Issuance ofWritofRestitution
against Defendant
by
order entered on April 3, 2015, at Sub. 12.
DEFENDANT S MOTION TO QUASH SERVICE
OF
SUMMONS
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4.
Whether Defendant is entided
to
have the writ of restitution quashed, and
the action dismissed with prejudice.
J. SUMMARY OF LEGAL ARGUMENT
1.1
The
question at
the
heart of his motion is the Court's subject matter unlawful detainer
jurisdiction and the procedure the Court must
follow
when a Plaintiff intentionally fails to strictly
follow the
statutory provisions governing the Plaintiff's rights and remedies and the Court's
jurisdiction lintited
by
the unlawful detainer statutes, Chapter 59.12 RCW.
1.2 As
more fully
set
forth and supported
herein,
Plaintiff failed
to
follow any of
he
procedure
prescn bed by the unlawful detainer statute. Tho Superior Court cannot assert subject
matter
jurisdiction due to the Plaintiff's failure to follow procedure.
1.3
Plaintiff;
a
Federal government corporation,
is
attempting
to
use
this
Honorable Temple
of
Justice to circumvent the unlawful detainer laws of this State
to
summarily evict Defendant, who
is
the
lawful owner ofher primary residence in violation of the Federal and State constitutions and
laws
and due process of law.
1.4 The law in this State mandates that the proper action
by
the court in this proceeding is to
dismiss Plaintiff's action with prejudice.
D PLAINTIFF'S RELIEF IS BARRED
BY
DOCTRINE OF UNCLEAN HANDS.
A. Brief History and Overview of
Securitizatlon
and Mortaap-Baeked
Seeuritieo
(MBS)
and
lbe Active Role of Plalntttf Federal Home Loan Mortgage Corporation (FHLMC)
or
( Freddie
Mnc ) Leading To
Reeent Mortgage Crisis.
2.1
Securitization is the creation and issuance ofdebt securities, or bonds whose payments of
principal and interest derive from cash flows generated
by
separate pools of assets. It
had
grown
from a non-existent industry
n
1970 to $6.6 trillion
as
of he second quarter of2003, before the
start
of
he recent financial crisis
in 2008.
22 2.2 Financial institutions
and
businesses
of all
kinds
use
securitizatlon to immediately realize
23
24
25
26
27
28
the value ofa cash-producing asset These are typically financial assets such as loans, but can also
be
trade
receivables or leases.
lo
most cases, the
originator
of
the
asset
aotlcipates a regular stream
of
payments. By pooling
the
assets together, the payment
streams
can be used to support interest
and principal payments on debt securities.
2.3
When assets
are securitized,
the originator receives the payment stream as a
lump
sum
rather than spread out over time. Securitiz.ed mortgages are known as mortgage-backed securities
DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS
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MBS), while securitized assets-non-mortgage loans or assets with expected payment streams-
are known as asset-backed securities ABS).
2.4
To
initiate a
securiti7;ation,
a company must
first createwhat
is called a special purpose
vehicle SPV) in the parlance
o
securiti7;ation.
The
SPV
is legally
separate
from the company, or
the bolder of
he
assets. Typically a company sells its assets
to the SPV.
2.5
The payment streams generated
by
the assets can then be repackaged kl back an issue of
bonds, or the SPV can transfer the assets to a trust, which becomes the nominal issuer. In both
cases, the bonds are exchanged
with
an
underwriter
for cssh The
underwriter
then sells
the
securities
to
investors. Unlike other bonds, securities backed by mortgages
usually
pay both
interest and a portion of
the
investor's principal on a monthly basis, in addition
to
including
insurance for
the
financial
product.
2.6
The first mortgage-backed securities arose from the secondary mortgage market in
1970.
Investors had traded whole loans, or unsecuritized mortgages, for some time before the
Government National Mortgage Asaociation GNMA), also called Ginoie Mae, guaranteed the
first
mortgage pass-through securities
that
pass
the
principal and
interest
payments
on
mortgages
through
to
investors.
2.7 Ginnie Mae
was
soon followed
by
Plaintiff Freddie Mac as
part
of a federsl scheme
to
promote homeownership
by
fostering a secondary marl
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1 2.11
Growth
in the pass-through market inevitably led to innovations especially
as
originators
2
3
4
5
6
7
8
9
IO
11
12
13
sought a broader MBS investor base. In response, Fannie Mae issued the first
collaterali7.ed
mortgage
obligations (CMO) in 1983. Amore complicated twist on pass-tbroughs, CMOs redirect
the
cash
flows
of
rusts
to create securities
with
several different payment features.
2.12
The
central goal
with CMOs
was to address prepayment
risk the main
obstacle to
expanding the demand for pass-throughs. Prepayment risk for MBS investors is the unexpected
return of principal stemming from
consumers who
refinance the mortgages that bsck the
securities
2.13
It was calculated
that homeowners would
be more likely to refinance mortgages
when
inlerest
rates
are fillling. As this traoslates into prepayment ofMBS principal, investors were often
forced
to reinvest the retnmed principal at a lower
return.
2.14 Thus,
CM
Os
were
created to accommodate the preference
of
investors to lower
prepayment
risk with classes ofsecurities that offer principal repayment at varying speeds. The
different bond classes associated with CMOs are also called tranches (a French
word
meaning
slice).
14
2.15
Some CMOs can include
50
or more tranches
and
can also be subordinate
to
other
15
16
17
18
19
20
21
22
23
24
25
26
27
28
tranches. In the event loans in the underlying securitization pool defaul4 investors in the
subordinate tranche would have to absorb the loss first.
2.16 As
part
of he Tax Reform Act of 1986, Congress created the Real Estate Mortgage
Investment
Conduit REMIC) to facilitate
the
issuance of M
Os.
Almost
all CM
Os are cumntly
issued in the form ofREMICs. In addition to varying maturities, REM Cs can be
issned
with
different risk characteristics.
2.17
REMIC
investors, in exchange for a higher coupon paymen4 can choose to take on greater
credit risk. Along with a simplif\ed
tax
treatmen4
these
changes made the REMIC strueture
an
indispensable
feature of
ho MBS market. Plaintiff Freddie Mac, and his sister, Fannie Mae
are
the
largest issuers
of
this typo
of
security.
B
Federal Takeover
of
Plaintiff Freddie Mac.
2.18 On September 6, 2008, the director
of
he Federal Housing Finance Agency
(FHFA)
placed two
of
he
United
States' Goveromont-Spousored Enterprises (OSEs), PlaintiffFederal
Home Loan
Mortgage Corporation ( Freddie Mac ),
and
Federal National Mortgage Association
(''Fannie
Mae ),
into a conservatorship run by
the
FHFA as a result
of
heir active participation
in
DEFENDANT'S MOTION TO QUASH SERVICE
OF
SUMMONS
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the "subprime mortgage crisis" involving
Bank of America Countrywide
Bank
and
other national
banks.
2.19
At a September
8, 2008 press
conference,
former United
States Treasury Secretary
Henry
Paulson
stated
''that
conservatorship
was
the
only
form
in
which
I would commit taxpayer money
to
the
GSEs.
He
further said that "I attribute the need
for
today's aetion primarily
to
the
inherent
conflict
and
lawed
business
model embedded in the
GSE structwe,
and
to
the ongoing housing
correction."
2.20
At
a subsequent
news
conference,
Ben
Bernanke,
former
Federal Reserve Bank
Chainnan
stated:
"I strongly endorse both the decision
by FHF
A Director
Loclthort to
place Fannie Mae
and
Freddie Mac
into
conservatorshjp
and
the actions
taken
by Treasury Secretary Paulson to ensure
the financial soundness
o
hose
two companies.
2.21 The
combined losses Plaintiff Freddie
Mac
and
Fannie
Mae
ofUS$14.9 billion
and market
concerns
about
their
ability
to
raise capital
and
debt,
threatened to
disrupt the
U.S.
housing
financial market.
2.22 n an effort
t
bsil out Plaintiff Freddie
Mac
and Fannie Mae, the
U.S.
Treasury
Department committed to invest as much as US$200 bi111on in preferred stock and
extend
credit
through 2009 to keep
Plaintiff Freddie
Mac
and
Fannie Mae
solvent
and
operating.
2.23
Reportedly, Plaintiff FreddieMac and Fannie Mae have outstanding
more than US$5
trillion inmortgage-backed securities (MBS)
and
debt-where the debt portion alone is US$1.6
trillion.
2.24
The conservatorsbip action has been
described
as
one
of he most sweeping
government
interventions
in private
financial markets in decades,"
and one that
"could
turn
into
the
biggest
nd
costliest government bailout ever
o
private companies.
2.25 On July
30, 2008, President George W. Bush
signed into law
the Housing
and Economic
Recovery Act
(HERA) of2008,
Pub.L.
110-289, 122 Stat 2654,
which
enabled expanded
regulatory authority over Plaintiff Freddie Mac and
Fannie
Mae by the newly established FHFA.
6
This new law also
gave
the
U.S.
Treasury
the
authority
to
advance funds
for
the
purpose of
stabilizing Plaintiff Freddie
Mac and Fannie Mae,
limited only
by the
amount
of
debt that
the
entire federal govemment is permitted
by
law to commit to.
2.27
The
HERA
was designed primarily
to
address the
subprime
mortgage crisis. To ensure
Plaintiff Freddie
Mac and
Fannie Mae obtain the desired solvency, the
law
further
raised the U.S.
DEFENDANT'S MOTION TO QUASH SERVICE
OF
SUMMONS
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Treasury's debt ceiling
by
US 800
billion,
to
a total ofUS$10.7 trillion, in anticipation
of the
potential
need for the
Treasury
to
have the flexibility to support Plaintiff Freddie
Mac and
Fannie
Mae, or the
Federal
Home Loan Banks.
8
Many
commercial
banks
own
preferred
shares
issued
by
Plaintiff Freddie
Mac
and Fannie
Mae. These shares
have
bad
their dividends
suspended,
end
are
junior
to the senior
preferred
stock
issued to the Treasury in the
restructuring of
Plaintiff Freddie
Mac and
Fannie
Mae. The market
value of he
preferred
shares
plunged after
the restructuring
announcement and suspension
of
dividends.
Banks
were
required
to
write
down the
value
of
Plaintiff Freddie Mac and Fannie Mae
prefened stock held in their portfolios, thus compounding capitalttation concerns for certain
U.S.
banks. Gateway Bank, e.g., agreed to be bought out
by
Hampton Roads Banksbares, Inc. to make
up
for
a
writedown
ofUS 40 million on
its stock
in Plaintiff FreddieMac
and
FannieMae which
put
it below regulatory requirements
to
be
considered adequately capitalized.
2.29
ecause
of
he
change
in
management control of
PlaintiffFreddie
Mae
and Fannie
Mae,
the
parties in the credit default swap (CDS) market contracts have defined the action of placing
Plaintiff Freddie Mac end Fannie Mae
into
conservatorship to be equivalent to bankruptcy.
2.30 In CDS parlance,
this is termed a "credit evenf' that triggers
the
settling
of
outstanding
contracts
for the
derivatives,
which are used to
hedge or speculate
on
the potential risk that
a
company will default on its
bonds.
This "credit event" also means that some owners ofCDSs
that
were
hedging against
the
risk ofa bond default may be worse off, since the value of he bonds
may
be
higher than when they
purchased the
swap.
2.31 On August I0, 2011, the
Federal
Housing
Finance
Agency asked
investors for ideas on
renting
homes
owned
by
Plaintiff Freddie
Mac and
Fannie Mae and the Federal Housing
Administration as an alternative
to
evicting the occupants,
among
other
things.
1
C.
Plalnllff
Freddie
Mae'1
Role n the
Creation of
the Mortgage Eleetronle
Registration
Syltem1 (MERS)
To Cirenmvent the State Land Registry.
2.32
As mortgage-backed securities
grew in record
volume during the 1980s, itbecame self
evident
to the MBS
market participants
that
a similar mechanism or
SPV
was
needed
for the
mortgages placed into
these
securities.
26
1
U.S. Government May
Renl
FOTflC/osedHomu
To
Ease HowIng Slump, by.
News
Hub.
htto:tlwww.ponscreen.com y/6 l 4mP/US-0Pvemment-May-Rent-Foreclosed-Homes-To-Ease:Housjng-Slumo-News.
27 HY b_...
PopScreen"
is the
world's
first
Video
Prediction
Engine (VPE), http://www.popscreen.com/abmrt. See
aho:
GtwemmenJ may rent out foreclosedproperties, "The Sun News, published on
August
8, 2011.
28 DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS
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In October 1993, Plaintiff Freddie Mac co-founded en electronic mortgage registration
2
3
4
5
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8
10
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system that became known
as
MERS and a corporation that became
known
as Mortgage
Electrnnic Registration Systems,
Inc.,
or
MERS, Inc.
in October
1995.
Electronic Data System
(EDS)
was
awarded a contract
to
develop and service the
MERS
technology systems, and
M RS
was
officially launched in April 1997. See
Bain
v.
Metropolitan
Mortgage Gr P,
Inc., 175
Wn.2d 83, 285 P.3d 34 (2012), citing In re Agard 444 B.R. 231, 247 (Bankr.E.D.N.Y.2011); In
re
MERSCORP,
lnc. v. Romaine, 8 N.Y.3d 90, 96 n. 2, 861N.E.2d81, 828 N.Y.S.2d 266 (2006);
Phyllis
K.
Slesinger Daniel McLaughlin,
Mortgage Electronic Registration System,
31 Idaho
L.Rev. 805, 807 (1995); Christopher L. Peterson, Foreclosure,
Subprime Mortgage
Lending, and
the Mortgage Electronic Registration
System,
78 U.
Cin.
L.Rev.
1359,
1361 (2010),
and
Defendant's Exhibit 1 attached hereto.
2.34
The
underlying problem Plaintiff Freddie Mac and its co-founders sought to curb or
circumveot
was
the fact that
a
mortgage loen transferred
into
en MBS had to
become
bankruptcy
remote
from
the originating lender in
the
event the originating lender collapsed, such
as
happened
to
Countrywide
ank
in 2007 and many others during the financial crisis of2008.
2.35 Thus, MBS investors demanded some
kind
o protection to ensure that the lender's
own
creditors could not avoid or ''rollback the transfer of the loans
into
the
MBS
as fraudulent
conveyances and suck them
back
into
the
lender's bankruptcy
estate.
2.36 The easiest
way
to create
such protection was
to
simply convey the loan for consideration
through three or four entities before it
roached
the
MBS. However,
each of these conveyances
had
to be recorded with tho relevant recorder or land registry.
2.37 With each loan requiring three or four assignments, end hundreds
of
mortgage loans going
into each
MBS,
the result
was that
recorders were flooded with assignments, and investment
banks
found
themselves choking on paperwork and recorders' fees.
2.38 Plaintiff Freddie Mac
and
its co-founders used MERS in an endesvor to ix
this
problem
by requiring
all members ofMERS to change their standard loan documents to name M RS as
the
nominal
beneficiary or mortgagee
of
record. This enabled loaders
and
investors
to
transfer
mortgages without recording assignments in local recorders' offices and in
turn
avoid having to
pay recording fees.
2.39 Plaintiff Freddie Mac's MERS became immediately problematic for State land registries,
since all intermediate transfers between
points
are
tracked
only on the
MERS system, and
tho
DEFENDANT'S MOTION
TO
QUASH SERVICE
OF
SUMMONS
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3
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13
14
IS
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entity
who
holds
the loan at
the end
merely records the reconveyance
as
an agent for
MERSCORP
Holdings,
Inc.
2.40 Plaintiff Freddie Mac's MERS presented an additional problem forthe States' Uniform
Commercial
Code
UCC) because neither the owner
of
he original Note or the original Note
was
tracked
by
MERS.
2.41 f
a
borrower defaults, and in an effort
to
citcumvent the
UCC
problem, Plaintiff Freddie
Mac
and its co-founders
authoriz.ed MERS,
through the use of individuals known as robo-
signers,
to
record an assignment ofthe Note on
behalf
of Mortgage Electronic Registration
Systems, Inc. to the
real
party in interest, i.e., an investmentbank such as ReconTrust Company,
NA
in its
capacity as
Trustee for a
bank
or
MBS,
in order
to
initiate
a
nonjudicial
foreclosure.
242
The
problems associated
with
Plaintiff Freddie Mac's nonjudicial foreclosure of
Defendant's mortgage
is
highlighted by the February
10,
2011 Decision of he
U.S. Bllllkruptcy
Court
in In re Agard Case No. 8-10-77338-reg, (Eastem District of
New
York), reported in In re
Agard
B.R.
231, 247 Bankr.E.D.N.
Y.2011
); the Complsint filed by the Stste of Washington
against ReconTrust
Company,
N.A.
in August
2011
and
the
Consent Decree
and
Injunction filed
against ReconTruston August 20,
2012.
A complete and correctcopy of each document is
attached hereto
as
Exhibits 1, 2 and 3, respectively.
2.43
On
Februacy
10, 2011, the U.S. Bankruptcy Court for the Eastern District of
New
Yotk
considered a motion
for
relief
from
the bllllkruptcy
stay
brought
by U.S. Bank as
the
trustee
ofa
securiti7.ation trust.
2.44 U.S. Bank claimed the right to foreclose on the debtor's mortgage in part because of
purported assignmaot of the mortgage
from
MERS.
The
court
found
itself constrained by the
Rooker-Feldman
doctrine
to give
effect
to
a prior state-court judgment of foreclosure, but
went
on
to
consider several
arguments MERS
advanced about
its legal statos
aud authority,
noting
that it
had
held
off on deciding
dozens
of additional cases until those matters
were
clarified.
2.45 The
court
found
that
MERS
bad no power aa
an
agent
to
assign
the
mortgage under its
rules,
its
membership
agreement,
or the
tellllS
of
the mortgage itself. The court
also found
that
MERS bad no power as the mortgagee ofrecord to assign the mortgage: MERS's position that it
can be
both the mortgagee and
an
agent of the mortgagee is absurd,
at
best.
2.46 The court observed further that MERS audits partners/members, which include Plaintiff
Freddie Mac, made the decision
to
create and operate under a business model that
waa
designed in
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MOTION
TO QUASH
SERVICE
OF SUMMONS
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large part
to
avoid
the
requirements of he traditional mortgage recording process, and the
fact
that
because MERS may
be involved with
50
of
all
residential
mortgagea in
the country,
was
insufficient reason for the Court
to tum
a blind
eye to the fact that
the
MERS process
does not
comply with
law.
The
Court
further stared that:
The Court finds that the record of his case
is
insufficient to prove that an agency
relationship exists under the laws of the state ofNew York between
MERS
and its
members. According to
MERS, the principaUagent
relatiowihip among itself and its
members
is
created by the MERS rules ofmembership
and
tenns
and
conditions,
as well as
the Mortgage itself.
However,
none of he
documents
expressly creates
an agency
relatiowihip
or even mentions the word agency. MERS would have
this
Court cobble together
the
documents
and draw
inferences from the
words
contained in those documents. For example,
MERS
argues that its agent status can
be found in the Mortgage which states
that MERS
is a nominee
and
a
mortgagee o record.
However,
the
fa.ct
fuat MERS s named nominee n the
Mortgage
is not dispositive
of
he
existence
of
an agency relatiowihip
and
does
not,
in and of itself, give
MERS
any authority to act.
MERS
also
relies
on
its
rules
ofmembership
as evidence
of the agency
relationshlp.
However,
the rules lack
any
specific mention of an agency
relationship, and do not bestow upon MERS any authority to
ct
Rather, the rules
are ambiguous as to MERS's authority to take offirmative actions with respect to
mortgages registered on its system.
n
addition to casting itself
as
nominee/agent, MERS seems to
argne
that its role
as
mortgagee ofrecord gives it the rights of a mortgagee in its own right ... The
provisions ofSection 1921 relate solely to
the
discharge ofmortgages and the
Court
will
not apply
that
definition beyond
the
provisions of hat section
in
order to
find
that MERS
is a
mortgagee
with
full
authority
to
perform the duties of
mortgagee
in
its
own
right Aside
from the
inappropriate reliance upon the
statutory definition of mortgagee, MERS's position
that
it can be
both
the
mortgagee and an ageot of the mortgagee is absurd, at best
Adding to this absurdiry, it is notsble in this case that the AssignmentofMortgage
was
by
MERS,
as
nominee for
First Franklin, the origioal lender. By the Movant's
and MERS's own admission at the time
the
assignment
was
effectuated, First
Franklin no longer held any interest in the Note. Both
the
Movant and
MERS
have
represented to the Court that subsequent to the origioation of he loan, the Note
was
assigned, through
the MERS
tracking
system,
from
First Franklin
to
Aurora,
and
then from Aurora to
U.S. Bank.
Accordingly, at the time that
MERS, as nominee
of
First Franklin,
assigned the
interest in the Mortgage
to U.S.
Baok,
U.S.
Bank
allegediy already held the Note and it
was atU.S.
Bank's
direction,
not First
Franklin's, that the Mortgage was assigned to U.S.
Bank.
Said anolher wsy, when
MERS
assigned the Mortgage
to
U.S.
Bank on
First Franklin's behall; it took its
direction
from U.S.
Bank, not First Franklin, to provide documentation of an
DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS
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assignment from an entity that no longer bad any rights to the Note or the
Mortgage. The
documentation
provided to
the Court in this
case (and
the Court
has
no
reason to believe that
any
further documentation
exists),
is stunningly
inconsistent
with
what
the
parties
define as the
fucts of
his
case.
However, even
ifMERS
bad assigned
the
Mortgage acting on behalf
of
he entity
which held the Note at
the
time
of he
assignment, this Court finds that MERS did
not have authority,
as 'nominee or
agent,
to
assign
the
Mortgage
absent
showing
that it
was
given specific written
directions
by its principal.
This Court finds that MERS's theory
that
it can set
as
a common agent for
undisclosed principals
is not support
by
the
law The relationship between
MERS
and
its lenders and its distortion of its alleged nominee
status
was appropriately
described by
the
Supreme Court of
Kansas as follows: ''The
parties
appear
to
have
defined
the
word
[nominee)
in much the same wsy
that
the blind men
of
Indian
legend described an elephant-their description depended on which part they
were
touching
at
any given time.
Landmark
Nat / Bankv.
Kesler,
216 P.3d 158, 166-67
(Kan. 2010).
2.48
In addition
to
Plaintiff Freddie
Mac, the
following organizations are current
MERSCORP
Holdings shareholders: I) American Land Title Association; (2) Bank ofAmerica National
Association; (3) CCO Mortgage Corporation;
(4)
CitiMortgage,
Inc.;
(S) CoreLogic, Inc.;
(6)
CRE
Finance o u n c i ~ (7) EverBank; (8) Fannie
Mae;
(9) First American Title
Insurance
Corporation;
(10)
Guaranty Bank;
(11)
Housing Residential, Ltd.;
(12)
HSBC Finance Corporation; (13)
MGIC
Investor Services Corporation;
(14)
Morserv, Inc.; (15) Mortgage Bankers Association;
(16)
PM
Mortgage Insurance Company; (17) Residential Funding Company, LLC; ( 8) Stewsrt Title
Guaranty Company; (19) SunTrust Mortgage, Inc.; (20) Wells Fargo Bank, N.A.; and (21) WMC
Mortgage Corporation. https:l/www.mersinc.org/about-us/shareholders. [Last visited on April 19,
2015.)
2.49 In August 2011,
the
State
of
Washington suedReconTrustCompany, N.A.
in
State of
Washington
King
County Superior
Court.
The case is
State o Washington v. Recon .lrust Co.
N.A.
case number 11-2-26867-5, filed on August
S,
2011.
2.50 In
the
lawsuit, Washington State Attorney General Rob McKenna accused ReconTrust
Co.,
a subsidiary
of
BankofAmerica N
A.,
and
which also sets as
a foreclosure
trustee,
of
conducting illegal nonjudicial foreclosures on thousands
of
homeowners
and
putting up
roadblocks to saving residents' homes and violating its obligation to be a neutral
third
party acting
in the best
interest oflenders
and
borrowers.
DEFENDANT'S MOTION
TO
QUASH SERVICE
OF
SUMMONS
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I 2.51
Rather than act in
good faith
to borrowers, ReconTrust would only halt a
home
sale
i
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beneficiary approved it, failed to
identify
the ownera
ofloans and conducted
foreclosure
sales in
private locations instead of public spaces, the suit alleged.
2.52 McKenna
also
accused
ReconTrust
of
providing confusing information about how
borrowers defaulted and
how to
rectify default, and using documents that were rife with errors or
improperly notariz ed
2.53 R.econTrust's illegal practices
make
it difficult, i not impossible, for borrowers
who
might
have
a shot
at
saving their homes
to
stop those foreclosures, McKenna said in a
statemenL
ReconTrost's claim that
the company
doesn't have
to
follow Washingtoo
law and
procedures
because it
is
a national
bank
is
wrong,''
said
McKenna.
2.54 The former Attorney General further accused ReconTrust, which
haa
issued nearly I 0,000
foreclosures notices since 2008, of stonewalling his office's investigation into its foreclosure
practices and ignoring
warnings
that it
was
in violation
of
Washington's Deed
of
Trust Act
(DTA), RCW 61.24 et
seq.
2.55 According to the State's complaint, because courts in Washington cannot get involved in
noajudicial foreclosure proceedings, the
OTA
and a neutral Trustee are the
only
protectiona
for
homeowners n foreclosures.
Homeowners
facing foreclosure
are captive
t
ReconTrust'
s trustee
services, the complaint
said.
2.56 The complaint further alleged that ReconTrust failed
to
comply with one essential
requirement
of
he
deed
of trust
statute
reqniring a
trustee to
keep a physical
office
in
Washington
State so
that residents
at risk
oflosing their homes can
make
a
last-mim1te
payment, seek
information or request that a foreclosure sale be postponed.
2.57
On September 2,
2011,
ReconTrust removed the Complaint to the U.S. District Court,
Western
District
of
Washington.
On
August 20, 2012, the
U.S.
District
Court
entered
an
Injunction and
Conaent Decree against
ReconTrost
and
ordering this benking entity
to pay to
the
State
$1,090,000 for costs and attorney fees and for possible enforcement
of he
Consent Decree.
2.58
Defendant's legal title
to
ownership
and
continued
unfettered
possession
of
the real
property located
at
3912 NE
57 '
Avenue,
Vancouver, Washington
98661,
is inextricably
intertwined
in
the business
model
Plaintiff Freddie
Mac
and its coconspirators intentionally
created and operates
as part
of
a
scheme
that
was
designed from the outset
to
intentionally
avoid
DEFENDANT'S MOTION TO QUASH SERVICE
O
SUMMONS
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the
requirements
of
he traditional
mortgage
recording process,
the UCC
regarding negotiable
instruments,
this
State's Deed of Trust
Act,
and the
unlawful
detainer statutes, RCW
59.12
et
seq.
2.59
n Bain
v.
Metropolitan
Mortgage Group
Inc.
175
Wn.2d 83, 285
P.3d
34
(2012),
the
Court unanimously
held
that
under
the Washington Deeds
of
Trust
ct
WDTA),
chapter
61.24
RCW, the
beneficiary
in
a nonjudicial foreclosure
action
must
be
the
actual
bolder of the
promissory note.
2.60 With
regards
to MERS, the
Court rejected
the
claim
made by MERS
that it could
be
a
beneficiary of a Note in a Deed of Trust i f t
never
held
the
Note:
''The plaintiffs
argue
that our interpretation of he
deed
of
rust
act should be
guided by
these
UCC
definitions,
and thus
a beneficiary
must
either actually
possess the
promissory note
or
be
the payee.
E.g., Selkowitz
Opening
Br. at 14. We
agree.
This
aecords
with
the
way
the
term holder
is used
across
the
deed of trust
act and
the
Washington
UCC.
By
contrast,
MERS's approach would require
us
to
give
bolder a different
meaning
in differeot related statutes
and
construe the deed
of trust act to mean
that
a
deed
of trust
may
secure itselfor
that
the note follows the
security inatnnnent. Washington's deed of rust act contemplates that
the
security
inatnnnent
will follow
the
note, not the other way around MERS isnot a holder''
under
the plain language of the
statute.
2.61
The
Supreme
Court
in Bain
also rejected MERS's
agency
claims:
But oss
also
observed
that
[w]e have repeatedly held that a prerequisite of an
agency
is control of
the
agent
by the
principal.
Id. at 402, 463
P.2d
159
(emphasis
added) (citing McCarty
v
King
County
Med. Serv.
Corp.
26 Wash.2d 660, 175
P.2d
653
(1946)).
While
we
have
no
reason
to
doubt
that
the
lenders
and
their
assigns
control
MERS,
agency requires a specific principal that is accountable for
the
acts of its
agent.
But
MERS
offers
no
authority
for
the implicit proposition
that
the lender's
nomination o M RS as noll inee
rises to
an gency relationship with
successor
notebolders. (Footnote
omitted.)
MERS fails
to
identify the entities that control and
are
aecountable for its actions. It has not established that it
is
an agent for a lawful
prineipal.
We will not allow waiver of statutory protections lightly. MERS did not become a
beneficiary by conttact or under agency principals .
We
answer the first certified question No, based
on
the plain language of
the
statute. MERS is an ineligible 'beneficiary' within
the
terms of
he
Washington
Deed ofTrust Act, if it never
held
the promissory
note
or other debt inatnnnent
secured
by
the
deed
of trust.
27 2.62
The
Supreme
Court
further
held
that
a
homeowner could
state a cause of action
under
28 DEFENDANT'S MOTION T QUASH SERVICE OF SUMMONS
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Washington's Consumer Protection
Act
against
Mortgage
Electronic Registration Systems,
Inc., i
MERS acts as an unlawful beneficiary under
the
terms of Washington's Deed of Trust Act:
Bain contends
that
MERS violated
the
CPA when it acted as a beneficiary ... .
To
prevail
on a CPA action,
the plaintiff
must
show
"( ) unfair or deceptive act or
practice;
(2)
occurring in
trade or
commerce;
(3)
public interest impact; (
4)
injury
to
plaintiff in
his or ber
business
or
property;
(5)
causation."
Hangmao Ridge
Training Stables. Inc. v. Safeco Title Ins. Co.,
105
Wasb.2d
778, 780,
719 P.2d 531
1986).
MERS
does not dispute all the elements.
The attorney
general of his
state
maintains
a
consumer
protection division
and bas
considerable experience and expertise in
consumer
protection matters. As an lcus,
the
attorney general
contends that MERS
is
claiming to
be
the
beneficiary
when
it
knows or should know that under
Washington
law
it
must
bold
the note
to be
the
beneficiary"
and seems to suggest we bold that
claim is
per ee
deceptive and/or
unfair.
AG Br.
at
14. This
contention
finds
support inimloor
Billboard/Wash.
Inc.
v
Integra
Telecom
ofWash.
Inc. 162
Wash.2d
59,
170
P.3d
10
2007),
where
we
found
a telephone
company
had
committed
a deceptive
act
as a matter oflaw
by
listing a sun:harge "on a portion of he invoice that included state and federal tax
charges." d at
76, J70
P.3d
10.
Our attorney general
also
notes
that the
assignment
of the deed o trust that
MERS
uses purports
to
transfer its beneficial interest
on
behalf
of ts own
successors
and
assigns, not
on behalf
ofany
principal .... This undermines MERS's contention that
it acts only as an agent for a lender/principal and its successors and it "conceals the
identity ofwhichever loan holder
MERS
purports
to be
acting for
when
assigning
the deed of
trust." AG Br.
at
14. The
attorney
general
identifies
other
places where
MERS
purports
to be acting
as
the agent
for its
own
successors, not for
some
principal.
Id.
at
15
(citing
Doc.
l,
Ex. B). Many
other courts
have
found
it
deceptive
to
claim authority
when
no authority existed and to
conceal
the true
party
in a transaction.
While we are
1Jllwilling
to
ssy it is
per se deceptive, we agree that
characterizing
MERS as the beneficiary
has
the cspacity
to
deceive and
thus,
for the purposes of
answering
the
certified question, presumptively the first element is met.
MERS
contends that plaintiffs csnnot
show
a public
interest
impact becsuse, it
contends,
each
plaintiff is challenging "MERS's
role aa
the beneficiary under
Plaintifl's Deed of Trust in the context of the foreclosure proceedings on Plaintiff's
property."
Resp.
Br.
ofMERS
at
40
Solkowitz) emphasis
omitted).
But
there
is
considerable evidence that MERS is involved with an enormous number of
mortgages
in the
cowttry and our state), perhaps as
many
as half nationwide.
John
R.
Hooge &
Laurie Williams,
Mortgage
Electronic Registration Systems, Inc.: A
Survey
of
Cases
Discussing MERS'
Authority
to NORTON BANKR.L.
ADVISORY
NO. 8, at
21(Aug.2010).
lfin fact
the language
is unfair or
deceptive,
it would have a
broad impact.
This
element
is
also
presumptively
met.
DEFENDANT'S MOTION TO QUASH SERVICE OF SUMMONS
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As
amicus notes, '
1
MERS' concealment of
loan transfers also could
also
deprive
homeowners of other
rights,
such as the ability to take advantage
of
the
protections of he Truth in Lending Act and other actions that require the
homeowner to sue or negotiate with the actual holder
of
he promissory note. AG
Br.
at 11 (citing
15
U.S.C.
1635 1); Miguel v Country Funding
Corp 309 F.3d
1161, 1162-65 (9th Cir.2002)) ...
If the first
word in the third
question was
"may"
instead
of
"does,"
our
answer
would be yes. Instead, we answer the question with a qualified yes, depending
on whether
the
homeowner can produce evidence on each element required to
prove a CPA claim. The fact that MERS claims to be a beneficiary, when under a
plain reading of he
statute
it
was
not, presumptively meets
the
deception
element
ofa CPA action .. We answer the third question with a qualified yes; a CPA
action may be maintainable .... A true and correct
copy of
he Attorney
General
Ainicns Brief
is attached
hereto
as
Defendant's Exhibit
S
I l 2.63 The following is a screenshot ofClari< County Auditor's documents tracking the
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transactions associated with Defendant's property:
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7/24/2019 DECLARATION of Jody M. McCormick Filed by Defendants. DOCUMENT NO. 41
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and
to
become due
'8\neou
WM Interest utcl
all ripl.I .ccrurcl
or 10 ICr.nMI imder s id Deed otTnJst.
5
2.65
A
true
and com:ct copy
of
this public record is attached hereto
as
Defendant's Exhibit 5.
6
7
8
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Both
the Supreme Court and the Attorney General
found
the language
used
in
the
aforementioned
Assignment
to
constitute a violation
of
he
CPA. he
Assignment also discloses the
filct
that
MERS
is
claiming to be the bolder
of
he
Note,
the mortgagee and the agent for the mortgagee.
Bain
citing In
re
Agard
444 B.R.
231,
247
Bankr.E.D.N.Y.2011
),
held that
an interpre1Blion of
the term beneficiary that has the deed
of
rust securing itself is untenable. MERS s position
that it
can
be both
the
mortgagee and an agent
of
the mortgagee is
absurd,
at best.
In re
Agard
444 B.R. 231, 247
E.D.N.Y.2011).
2.66
Bain
also
rejected the notion that a lender's nomination
of
MERS as a nominee rises to an
agency
relationsbip with successor noteholders. MERS intentionally avoids the agency question in
the above Assignment by presenting a history
of
the
''Original
Lender, to wit:
OriPI
Lender.
LANDMARK MORTGAGE COMPANY
"'4NcBy: . PAMELA S.OWllN AMA.u1EDWOMANASllERIBPAR.\TB
UTA
TE
Origiul
Trunco: l"IDEUTY NATIONAL
TITLE INSURANCE
Dat.e of Deed ofTrusc:
1V412DOS
Orii: ui Lo.ri
Amour.I: S2Dl.UD.OD
~ o r e
ir.i
Clsrk
Couf7.Wlt. on:
Jlll IHOJ.
book
NIA,
P9JO
NIA and
binrwnl
mn
4Gl2)1t
2.67
Plaintiff Freddie
Mac, who
is a co-founder of
MERS
and also a
member
of
MERS, is
actively perpetrating a fraud upon this Honorable Court. To establish it is the new legal owner
of
Defendant's property, Plaintiff does pot attach to its complaint a copy of he Trustee's Deed
Upon Sale issued
on
January 22,
2015, nor does
Plaintiff Freddie Mac claim in its Complaint that
it was an innocent purchaser
of
Defendant's
real
property.
As the
co-founder and co-creator
of
MERS and Its electronic registration system, Plaintiff's innocent
purchaser
claim would be
untenable, simply because Plaintiffnot
only
ratified the fraud
of
MERS and Bank
of
America,
as
part
ofMERS' membersbip agreement which Plaintiff helped
create,
Plaintiff
demanded
that
this fraud be undertaken by
all
ofMERS's members, including itself and its agents, Trustees,
successors
and assignees. A true and correct
copy of
he Trustee's Deed
on file
with the
County
Auditor is attached
hereto as
Defendant's Exhibit
6.
DEFENDANT'S MOTION
TO
QUASH SERVICE
OF
SUMMONS
17
Case 3:15-cv-05375-BHS Document 41 Filed 10/14/15 Page 34 of 63
-
7/24/2019 DECLARATION of Jody M. McCormick Filed by Defendants. DOCUMENT NO. 41
35/63
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2.68 A legally,
cogniz.able
Trustee's
Deed
requires
that
the Trustee must have complied with
the Deed
of Trust
Act,
Chapter
61.24 RCW.
The
Bain
Court reiterated the law of
this
State
requiring Trustees
to be
obligated
to all of he
parties :
Critically
un