Background to Deed of Trust
In 2007, Sharon Weirich borrowed $205,440 from Countrywide Home Loans, Inc. and executed a Deed of Trust on her real property as security. The deed identified Countrywide as the lender, Landsafe Title of Washington as the Trustee, and the Mortgage Electronic Registration Systems, Inc. (MERS) as “a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns.”
In Bain v. Metropolitan Mortgage Group, 175 Wn.2d 83, 93, 285 P.3d 34 (2012), the Supreme Court of Washington held that the MERS registry’s business practices in creating and transferring beneficial interests with regard to mortgages conflict with the requirements of Washington’s Deed of Trust Act.
Beginning in 2011 MERS made a number of assignments and changes in ownership of the note, beneficiary, and trustee using the business practices found to conflict with the Deed of Trust Act. Following these changes, in October 2012, Northwest Trustee Services, Inc. served Mrs. Weirich with a notice of default on behalf of Bank of America.
The same month Ms. Weirich executed a deed of trust to Thomas Merry. This deed of trust secured payment of a $68,000 promissory note. Ms. Weirich also executed a power of attorney and an assignment of legal claims to Mr. Merry.
In December 2012, Ms. Weirich received a notice of trustee’s sale informing her that her property would be sold on April 19, 2013 to satisfy her promissory note she originally gave to Countrywide. However, property was not sold on April 19, 2013 and no sale was rescheduled within the 120-day window following service of process. Ms. Weirich fell further into arrears on her promissory note and by October 2013 was over $235,000 in arrears.
Trustee’s Notice and Sale
In October 2013, Northwest Trustee recorded an amended notice of trustee’s sale in Chelan County, setting November 15, 2013 as the date of the sale. The notice, also served on Mr. Merry as holder of a junior deed of trust, included the required form, which stated:
Anyone having any objection to the sale on any grounds whatsoever will be afforded an opportunity to be heard as to those objections if they bring a lawsuit to restrain the sale pursuant to RCW 61.24.130. Failure to bring such a lawsuit may result in a waiver of any proper grounds for invalidating the Trustee’s sale.
Mr. Merry was aware of the trustee’s sale scheduled for November 15 and instituted legal action pro se in Chelan County against Northwest Trustee and Nationstar by serving both with a “Complaint to Declare Lien Priority, and to Declare Deed of Trust Void and Promissory Note Unenforceable.” Mr. Merry’s complaint alleged a number of technical violations of the Deed of Trust Act including actions by entities that had been improperly designated or appointed or who otherwise lacked authority. However, Mr. Merry’s complaint did not attempt to enjoin the trustee’s sale of the property.
After the sale was completed Northwest Trustee and Nationstar moved for judgment on the pleadings arguing that Mr. Merry waived his right to challenge the completed sale by failing to seek an order restraining it, that Mr. Merry’s interest was eliminated by the sale and that his waiver precluded any right to set aside the sale. The court granted the motion in March 2014 and denied Mr. Merry’s request for reconsideration.
Mr. Merry cites a number of technical violations in the Deed of Trust Act, including the MERS practices that the Supreme Court found in Bain to violate the Act. Consequently, Mr. Merry contends that Nationstar had no enforceable deed of trust and that the promissory note it held had been rendered void. But Mr. Merry does not argue that the MERS practices harmed him. Instead, he argues that the MERS practices rendered the bona fide, senior obligation secured by the property void, and that because it was void; his junior interest superseded the original obligation.
Controlling authority in Washington states that conduct of a foreclosure sale that does not strictly comply with the Deed of Trust Act can cause the sale to be set aside where it would be inequitable under the circumstances and inconsistent with the goals of the Act to apply the defense of waiver. (Albice v. Premier Mortgage Services of Washington, Inc., 174 Wn.2d 560, 568, 276 P.3d 1277 (2012) and Schroeder v. Excelsior Management Group, LLC, 177 Wn.2d 94, 104, 297 P.3d 677 (2013).)
Waiver is the intentional abandonment of a known right, and the intent must be shown by acts or conduct that is inconsistent with an intention other than to waive. Mr. Merry received notice of his right to enjoin the trustee’s sale; he had actual notice that MERS had acted as an unlawful beneficiary under the deed of trust interest asserted by Nationstar; yet he failed to bring action to enjoin the sale.
Division III of the Washington State Court of Appeals found that where the violations were technical, formal, likely correctable and non-prejudicial and the longstanding elements of waiver were present, it was neither inequitable nor inconsistent with Washington’s Deed of Trust Act to apply waiver and that Mr. Merry had waived any right to set aside the sale.
Waiver Under Washington’s Deed of Trust Act Permitted Where Technical Violations Did Not Harm Plaintiff