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Washington: Appellate Court Defines “Beneficiary”

Posted By USFN, Friday, November 7, 2014
Updated: Tuesday, October 13, 2015

November 7, 2014


by Joshua Schaer & Lance Olsen
RCO Legal, P.S.
USFN Member (Arkansas, Oregon, Washington)

On June 2, 2014, Division One of the Washington Court of Appeals affirmed a trial court ruling dismissing all claims against NW Trustee Services, Inc. (NWTS) for alleged violations of state law. [Trujillo v. NW Trustee Services, Inc., 326 P.3d 768].

The appellant/borrower, Trujillo, had obtained a loan in 2006, and secured repayment with a deed of trust. Shortly thereafter, the loan was sold to Wells Fargo, and then to Fannie Mae. Wells Fargo retained servicing rights. In November 2011, Trujillo defaulted on the loan.

As part of nonjudicial foreclosure proceedings, Wells Fargo executed a beneficiary declaration and delivered it to NWTS. That declaration stated, “Wells Fargo is the actual holder of the promissory note ... evidencing the loan or has requisite authority under RCW 62A.3–301 to enforce said obligation.” The court analyzed the beneficiary declaration statute, which requires that: “[b]efore the notice of trustee’s sale is recorded, transmitted, or served, the trustee shall have proof that the beneficiary is the owner of any promissory note or other obligation secured by the deed of trust. A declaration by the beneficiary made under the penalty of perjury stating that the beneficiary is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection.”

According to the statute, unless the trustee has violated its statutory duty of good faith, the trustee is entitled to rely on this declaration. The court held that, because no evidence contradicted the declaration’s validity or truthfulness, it “should be taken as true,” and Wells Fargo provided the necessary proof for purposes of the statute.

The court also concluded that a “beneficiary” is defined under Washington law as the note holder, and that it “need not show that it is the owner of the note.” Accordingly, the question of a note’s ownership is “irrelevant” in a Washington nonjudicial foreclosure.

Further, the borrower’s arguments concerning the applicability of various cases and codes were all rejected. The court found: (1) UCC § 9-313 “has no bearing” on the foreclosure; (2) UCC § 3-301 is “dispositive on the question of who is entitled to enforce the note,” as supported by the Washington Supreme Court decision of Bain v. Metropolitan Mtg. Grp., Inc.; and (3) the limited federal district court case law suggesting that a beneficiary must also be the note owner is “not persuasive.” Lastly, the court affirmed that no violation of NWTS’s good faith duty occurred, and the trustee was fully able to rely on Wells Fargo’s beneficiary declaration.

The Trujillo case is the first Washington appellate decision that specifically addresses the beneficiary declaration, and confirms that the “beneficiary” in the deed of trust act is the “note holder,” and not the “owner.” For these reasons, the court decided to publish the Trujillo decision. Therefore, it is controlling authority in Washington and may be relied upon to defeat similar pending and future claims.

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Autumn 2014 USFN Report

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