DS News

70 I N D U S T R Y I N S I G H T / L A U R A N . C O U G H L I N A N D T . R O B E R T F I N L A Y Spurred by the United Trustee Association's amicus efforts, the Ninth Circuit recently provided foreclosure trustees with some well-needed protection from borrower lawsuits. Meyer v. Northwest Trustee Services, No. 15-35560, 2017 U.S. App. LEXIS 16551 (Ninth Circuit, 2017). While the Meyer decision is unpublished, the rationale behind the ruling could arguably apply to future litigation against trustees in the Ninth Circuit of the Federal Courts, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. In its decision, the Ninth Circuit declined to review the borrower's claims but instead determined that the borrowers were barred from bringing the claims against North- west Trustee Services, Inc. (NWTS) under the doctrine of judicial estoppel. e ruling sends the message to borrowers that, as soon as they learn of a potential claim during their bankruptcy, they must amend their schedules or disclosure state- ments to include the claim as an asset. If they don't, their subsequent claims could be barred by the doctrine of judicial estoppel. Judicial Estoppel prevents a party from claiming one set of circumstances and then later claiming a different inconsistent set to their advantage. Any potential claim a debtor has is an asset of the bankruptcy estate because if they prevail on those claims, the monies they receive could go toward paying their creditors. By failing to include a potential claim, debtors mislead the court and their creditors. eir failure to disclose the claim during the bankruptcy prevents them from bringing the claim at a later date when it is most advantageous to the debtor. THE MEYERS CASE In late 2005, Peter J. Meyer and Sharee L. Meyer executed a promissory note and deed of trust. e loan was later transferred into a securi- tized trust. U.S. Bank was appointed the trustee of the trust and Wells Fargo Bank, N.A. was the authorized servicer and custodian. Sometime in 2008, the Meyers defaulted on the loan. In 2010, NWTS received a referral to fore- close along with the required beneficiary declara- tion, executed by Wells Fargo as attorney-in-fact for the beneficiary. e referral also included the loss mitigation declaration, signed by the same person but as an employee of America's Servicing Company (ASC), which is a division of Wells Fargo. NWTS issued a notice of default (NOD) relying on the information in the referral and the executed declarations. NWTS performed no ad- ditional inquiries into the authority of the person signing the declarations or the information contained in the referral. e NOD included language that NWTS was acting as an agent for the beneficiary. e NOD also listed the address for ASC as the address for the owner of the note and for the servicer. e phone numbers pro- vided for the owner of the note and the servicer were numbers for Wells Fargo. Believing the arrears listed in the NOD were incorrect, the Meyers contacted the numbers listed on the NOD. e Meyers assert that they were confused when the calls led to Wells Fargo (as opposed to ASC), an entity they had not dealt with before. In August 2010, NWTS recorded the Notice of Trustee's Sale (NOTS). e day before the scheduled foreclosure sale, the Meyers filed for Chapter 13 Bankruptcy. In December 2010, an attorney for the Mey- ers sent a Qualified Written Response (QWR) that, as U.S. District Court Judge Martinez noted, "raised no concerns about the identifica- With its recent decision, the Ninth Circuit Court has barred claims against trustees in certain situations. Could it help keep future frivolous lawsuits at bay?

• Cover