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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE UMPQUA BANK, an Oregon bank, Respondent,

v. RYAN SANTWIRE, an individual, Appellant. No. 68832-4-1

UNPUBLISHED OPINION FILED: August 5, 2013 

### Verellen, J. — Ryan Santwire challenges a court order appointing a custodial receiverfor property securing a debt. Santwire does not contest default on the 

### underlying debt. He primarily argues that Umpqua Bank lacked standing to initiate the receivership proceedings because he executed the promissory note at issue in favor of Evergreen Bank and Umpqua Bank failed to establish that it is the successor beneficiary. He also contends he was denied the opportunity to presenttestimony and that a receivership was not reasonably necessary. Finding no error, we affirm. FACTS 

### On July 9, 2009, Ryan Santwire executed a promissory note for a face amount of $1,251,685 in favor ofEvergreen Bank. The note had a maturation date of July 6, 2010. The note is secured by deeds oftrust on two properties, three of five units in a 

### condominiumbuilding (Beach Drive property) and a Seattle house (75th Avenue 

### property). Both deeds of trust providethat the lender has the right to have a receiverNo. 68832-4-1-1/2 appointed inthe event of default. As additional security, Santwire executed 

### assignments ofrentfor both properties and a commercial pledge agreement ofanother

asset. On January 10, 2010, the State ofWashington closed Evergreen Bank and 

### appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Immediately upon the closure, the FDIC and Umpqua Bank entered into a purchase and assumption agreement under which Umpqua Bank purchased the failed bank's assets. Santwire did not make timely payments on the promissory note and failed to pay the balance due when the note matured. Umpqua Bank did not receive any payments 

### under the commercial pledge agreement. The bank sent several notices to the Beach Drive property tenants to enforce the assignment of rent agreements. Santwire instructed the tenants to ignore the notices. Eventually, the tenants ofone of the three units began paying rent to the bank. Umpqua Bank sent similar notices to the tenants atthe 75th Avenue property, but did not receive any rental payments from those

tenants. 

### InFebruary 2011, Umpqua Bank learned of water intrusion problem at the Beach Drive property. An investigator reported that one of the units had a collapsed ceiling 

### caused by water damage and possible mold. A July2011 report showed that the problem had not been remediated and identified other maintenance issues. Santwire 

## did notpay2011 propertytaxes ontheBeach Drive property.1

1The record does not reveal whetherthere was a tax delinquency on the 75th Avenue property.No. 68832-4-1-1/3 

### Umpqua Bankcommenced thisaction seeking appointment ofa receiver.2 On March 20, 2012, the court entered a show cause order requiring Santwire to appearfor
a hearing on April 23, 2012. 

### Three days before the hearing, Santwire filed a response. He argued that Umpqua Bank failed to demonstrate that it is the holder ofthe note and beneficiary of the two deeds oftrust. Specifically, Santwire pointed outthat Umpqua Bank had not provided a copy ofthe agreement between the FDIC and Umpqua Bank to show its purchase of Evergreen Bank's assets. Santwire asked for a continuance so Umpqua Bank could obtain and provide the documents necessary to establish its interest. The attorney for Umpqua Bank produced a copy ofthe 2010 purchase and assumption agreement at the April 23 hearing. The commissioner continued the hearing for two days. When the hearing resumed on April 25, Santwire reasserted his objection. He argued that because the agreement between Umpqua Bank and the FDIC did not reference specific assets, including the promissory note at issue, the evidence failed to establish Umpqua Bank's interest inthe note. Umpqua Bank's attorney offered to retrieve and present the actual promissory note or presentthe testimony of a bank officerwho was present in the courtroom and could testify that the bank had physical possession ofthe promissory note and had not sold the debt to a third party. The court agreed to hearthe testimony. Lynette Chen-Wagner, vice president and asset resolution officer for Umpqua Bank, testified that she was the manager ofthe loan at


### 2Umpqua Bank began foreclosure proceedings on the Beach Drive property in 2011, but terminated those proceedings before initiating this action for receivership.No. 68832^-1-1/4 issue, that the bank possessed the actual note and deeds oftrusts, and that the bank had not sold its interest in the note. 

### Following this testimony, the commissioner determined "that Umpqua Bank has standing, that they own the note, that they have possession, dominion, and control over 

### it, thatthey have therighttoenforce it."3 When itbecame apparentthat the commissionerwas preparing to enterthe orderto appoint a receiver, Santwire's counsel expressed surprise because he believed his client would have the opportunity to testify. 

### The commissioner stated that he had heard all ofthe testimony needed to address Santwire's challenge to Umpqua Bank's standing, and pointed out that Santwire had ample opportunity to submit material evidence by means of a declaration. The court entered an order appointing a custodial receiver. The courtfound appointment of a receiver appropriate both in accordance with the deeds oftrust and under the court's statutory authority. Santwire filed a motion to revise. Again, he asserted that Umpqua Bank had not established its interest as the successor beneficiary of Evergreen Bank and therefore, had no standing to pursue a receivership. Santwire also challenged the commissioner's decision to deny his request to testify and offer exhibits at the April 25 hearing, and asserted that receivership was unnecessary because other remedies would have been sufficientto address the alleged problems.



### 3Report ofProceedings (RP) (Apr. 25,2012) at 13. Thecommissionerfurther noted that Santwire initiallyrecognized Umpqua Bank's right to manage and collectthe proceeds from the loan.No. 68832-4-1-1/5


### The motion was heard by a King County Superior Courtjudge. Umpqua Bank produced the original promissory note at the hearing, but the court declined to consider any new evidence. Nevertheless, considering that the bank sought receivership as provided for inthe deeds oftrust, as opposed to judgment on the note, the court concluded that the sworn testimony that the bank possessed the original note was 

### sufficientto establish its interest. The court concluded thattransfer ofEvergreen Bank's assets "was effectuated through the bulk sale, which was overseen by the FDIC, and 

### thatshould besufficient."4 Thecourt rejected Santwire's claim that he wasdenied the opportunity to defend because he was able to respond to the bank's petition and was not prohibited from submitting any evidence in support of his position. The court denied the motion for revision. ANALYSIS In ruling on a motion for revision, the superior court reviews the commissioner's decisions de novo based upon the evidence and issues presented to the 

### commissioner.5 Wereviewthedecision ofthe superiorcourt.6 When the superiorcourt denies a motion for revision, ithas the effect ofadopting the commissioner's rulings as



### 4RP(May 17, 2012) at 13. 5Inre Marriage ofMoodv. 137 Wn.2d 979, 992-93, 976 P.2d 1240 (1999). 

### 6Boeing Emps. CreditUnion v. Burns, 167 Wn. App. 265, 270, 272 P.3d 908, review denied. 175 Wn.2d 1008, 285 P.3d 885 (2012).No. 68832-4-1-1/6 

### its own.7 When therecord isentirelydocumentary, an appellate courtstands in the
same position as the trial court and reviews the record de novo.8 A receiver is "a person appointed by the court as the court's agent, and subjectto the court's direction, to take possession of, manage, or dispose of property of a 

### person."9 Thepowertoappoint a receiverisdiscretionary.10 Atrial courtabuses its discretion when its decision is "manifestly unreasonable, or exercised on untenable 

### grounds, orfor untenable reasons."11 Standing/Partyin Interest Santwire contends that Umpqua Bank lacked standing to initiate receivership proceedings. Consistent with his position below, Santwire claims that Umpqua Bank failed to prove it is the owner and holder ofthe note because it did not produce the actual note nor evidence ofa written endorsement transferring Evergreen Bank's interestto Umpqua Bank. The deed oftrust act, chapter 61.24 RCW, governs transactions in which a lender issuing a promissory note or other debt instrument to a borrower utilizes a deed



### 7State ex rel. J.V.G. v. VanGuilder. 137Wn. App. 417, 423, 154 P.3d 243 (2007); see also In re Marriage ofWilliams. 156 Wn. App. 22, 27-28, 232 P.3d 573 (2010).

### 8Hous. Auth. ofCity ofPasco &Franklin County v. Pleasant, 126 Wn.App. 382, 387, 109 P.3d 422 (2005). 

### 9RCW 7.60.005(10). 10 King County Cmtv. & Human Servs. v. N.W. Defenders Ass'n, 118Wn. App. 117, 122, 75 P.3d 583 (2003). 

### 11 T.S.v.Bov Scouts of Am.. 157 Wn.2d 416, 423, 138 P.3d 1053 (2006) 

### (internal quotation marks omitted) (quoting State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971)).No. 68832^-1-1/7 

### oftrustto secure a promissory note orotherdebt oftheborrower.12 Theborrower becomes thegrantorofthe deed oftrust and the lenderis thebeneficiary.13 Atrustee holds title to the property in trustfor the lender.14 In the event theborrowerdefaults on his or her debt or other obligation, the beneficiary may direct the trustee to foreclose 

### pursuantto a trustee's salewithoutjudicial supervision.15 Before issuing notice of a trustee's sale, the trustee must "have proofthat the beneficiary is the owner of any promissory note or other obligation secured by the deed 

### oftrust."16 However, in thecontextoflawsuits seeking toenjoin foreclosure proceedings or set aside trustee sales, several courts, including federal courts in Washington applying the deed oftrust act, have rejected the argument thatthis requirement means that a lender must produce the original signed promissory note 

### before it can lawfullyforeclose.17 The statuteitselfestablishes a meansforthelenderto satisfy the proofrequirement: "A declaration bythe beneficiary made under penalty of



### 12 Bain v. Metro. Morta. Grp.. Inc.. 175 Wn.2d 83, 92-93, 285 P.3d 34 (2012). 

### 13Id. 14 id

### 15Jd16 RCW61.24.030(7)(a); see also Bain. 175 Wn.2d at 93-94 (trustee has statutory obligation to obtain proof of beneficiary's ownership of the note as element of its duty to the grantor ofthe deed oftrust). 17 See, e.g.. Beaton v. JPMorgan Chase Bank N.A.. Case No. C11-872RAJ, 

### 2013 WL 1282225 at*4 (W.D. Wash. March 26, 2013); Petree v. Chase Bank, No. 12- CV-5548-RBL, 2012 WL 6061219, at *2 (W.D. Wash. Dec. 6, 2012); Hooan v. Washington Mutual Bank. N.A., 230 Ariz. 584, 586, 277 P.3d 781, 783 (2012); Diessner v. Morto. Elec. Registration Svs.. 618 F. Supp. 2d 1184, 1187 (D. Ariz. 2009).No. 68832-4-1-1/8 

### perjury stating thatthe beneficiary is the actual holderofthe promissory note ... shall 

### be sufficientproofas required under thissubsection."18 This case does not involve nonjudicial foreclosure. But we can analogize to these provisions because Umpqua Bank also seeks to enforce a remedy provided for in the deed oftrust. The evidence shows, and Santwire does not dispute, that the FDIC
was appointed as receiver of Evergreen Bank. Umpqua Bank submitted evidence of the 2010 purchase and assumption agreement, the method by which the FDIC transferred its interest inthe failed bank's assets to Umpqua Bank. The agreement provides that, subject to certain specific exceptions not applicable here, "Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Bank, all right 

### title, and interest ofthe Receiverin and toall of the assets ... of the Failed Bank."19 The bank also submitted copies ofthe promissory note and related instruments, 

### including the deeds oftrust and assignments of rent. Finally,the court considered
sworn testimony ofthe bank's vice president and asset resolution officer thatthe bank had not sold the note and has physical possession of it. This evidence would satisfy the 

### lender's proofrequirementunder RCW 61.24.030(7).20 Santwire relies on a Uniform Commercial Code (UCC) provision, chapter 62A.3- 203 RCW, "Transfer ofinstrument; rights acquired by transfer," which provides that a 

### negotiable instrument is transferred when "delivered by a person otherthan its issuerfor 

### 18RCW61.24.030(7)(a). 

### 19 Clerk's Papers at 302. 20 See Pierson v. SMS Financial II. LLC. 959 S.W.2d 343, 348-49 (Tex. App. 1998) (affidavitfrom records custodian that FDIC transferred note and that it owned the note, togetherwith photocopy of the note, was sufficientevidence to establish that the lender owned and held the note).

8No. 68832-4-1-1/9


### the purpose of giving to the person receiving delivery the right to enforce the 

### instrument."21 Guided by UCC definitions underRCW62A.3-201 and-301, the Supreme Court in Bain v. Metropolitan Mortgage Group, Inc. determined that a 

### beneficiary musteitheractually possess thepromissory note or be the payee.22 Santwire does not cite any UCC provision, or any other legal authority, suggesting that

a promissory note may not be transferred in a bulk asset transfer agreement such as the one here between the FDIC and Umpqua Bank. Nor does Santwire pointto any authority suggesting that in this context, the lender did not sufficiently prove that it is both the possessor and beneficiary ofthe note. Santwire also cites the best evidence rule. Under ER 1002, the original is required to prove the content of a writing, recording, or photograph. But under ER 1003, duplicates are admissible to the same extent as the original unless "a genuine question is raised as to the authenticity ofthe original" or "inthe circumstances it would be unfairto admitthe duplicate in lieu ofthe original." Although Santwire argued that production ofthe actual note was required, he did not objectto the admissibility of a duplicate under the evidentiary rules. Nor does Santwire identify any genuine issue as to authenticity or articulate why admission of a duplicate was unfair. Right to PresentEvidentiary Testimony 

### Santwire contends he was denied his right to testify atthe April 25 hearing. He claims his testimony would have refuted Umpqua Bank's position that the properties
were not being maintained. But Santwire fails to establish that he had a right to present 

### 21RCW62A.3-203(a). 22 Bain v. Metro. Morto. Group. Inc.. 175 Wn.2d 83, 103-04, 285 P.3d 34 (2012).No. 68832-4-1-1/10 

### live testimony at the hearing. Santwire points out that with respectto receivership proceedings, a "creditoror other partyin interest has a right to be heard with respect to 

### all mattersaffecting the person" whetherornot a partyto the action.23 But Santwire was heard in this matter. He was permitted to respond to Umpqua Bank's action in briefing and oral argument. Nothing prevented Santwire from presenting evidence in support of his response, including declaration testimony. King County local rules 

### provide thatmotion practice rules applytoreceivership petitions.24 Nothing in these rules requires evidentiarytestimony and factfinding.25 Santwire's counsel explains that he was led to believe there was no need to submit declaratory evidence because the commissioner indicated that his clientwould be permitted to testify. But Santwire misinterprets the record. When the commissioner 

### decided to continue the hearing on April 23, Umpqua Bank!s counsel asked whether she should be prepared to present certain documents. The commissioner replied, 

### "Bring whateveryou want, Counsel."26 Santwire's counsel asked whether hewould have an opportunity atthe next hearing to respond to the asset transfer agreement, the 

### commissionersaid hecould respond "with whatever" hewished.27 Theseexchanges do not suggest that the commissioner agreed to conduct an evidentiary hearing or consider



### 23 RCW7.60.190(2). 24LCR66(2). 25 LCR 7. 

### 26RP(Apr. 23,2012) at 9. 27 Id. at 10.

10No. 68832^-1-1/11
live testimony. Neither party asked about presentation oftestimony, and up to that 

### point, Santwire hadraised noobjection to the bank'sfactual allegations.28 Although Santwire argues that the commissioner's decision denying his request to presenttestimonial evidence violated his constitutional right to due process, the facts 

### are not comparableto thecases upon which he relies.29 Santwire was aware of Umpqua Bank's allegations regarding the maintenance ofthe properties and the need for a receivership to protectthe assets for a month priorto the April 23 hearing. Santwire never challenged the bank's assertions with regard to its inability to collect rent. Nor did he challenge the bank's claims as to lack of maintenance until he filed a supplemental response on April 25, the date ofthe reconvened hearing. Santwire cannot demonstrate that the court's ruling on his last minute request to testify deprived 

### him ofa meaningful opportunitytorespond in this proceeding.30 Evidence ofReasonable Necessity Santwire contends that even ifUmpqua Bank has standing to enforce the remedies provided under the deed oftrust, the appointment of a receiver was an abuse of discretion because the evidence did not show that a receiver was reasonably


### 28 Santwire filed a supplemental response onApril 25, the day ofthe reconvened hearing, and argued forthe first time that a receivership was unnecessary because the bank exaggerated the extent of needed repairs. 

### 29 See Baxterv.Jones. 34Wn. App. 1,2-4, 658 P.2d 1274(1983) (in order to conclude trial by the end ofthe day, trial court terminated cross-examination before 

### counsel could pursue questions related to a key issue in the dispute); Inre Marriage of Ebbighausen. 42 Wn. App. 99, 102, 708 P.2d 1220 (1985) (father's due process rights 

### violated when the court resolved a joint custody issue in chambers and failed to hear testimony concerning the merits of both parties' custody request). 

### 30 See Mathews v. Eldridge. 424 U.S. 319, 333, 96 S. Ct. 893, 47 L Ed. 2d 18 (1976).

11No. 68832^-1-1/12 

### necessary.31 He insists thatother adequateremedies were available, such asjudicial foreclosure or injunctive relief. He also claims that the bank exaggerated the disrepair and that the order appointing a receiver exceeded the scope ofthe established necessity. But the deed oftrust expressly provides for the remedy of receivership upon default. Umpqua Bank provided documentary evidence to establish that (1) Santwire defaulted on the note; (2) the bankwas not able to fullyenforce the assignment of rent 

### agreements due to Santwire's interference; (3) the bank had not received payments under the pledged promissory note in accordance with the commercial pledge 

### agreement; and (4) the property had not been maintained and/or repaired inaccordance 

### with the grantor's maintenance duties under the deeds of trust. While Santwire asserts that receivership was unnecessary, there is no evidence inthe record to controvert these facts. Santwire did not argue in favor ofalternative remedies before the commissioner, nor did he challenge the scope ofthe receivership. The bank asserted 

### below thatthere were no adequate alternative remedies in light of the inability to collect rents and the need to prepare the properties for sale. In view ofthe evidence 

### demonstrating a risk of loss of value, Santwire fails to demonstrate that the commissioner abused his discretion ingranting the orderto appoint a receiver.



### 31 See RCW 7.60.025(1) (receiver may be appointed ifthe court determines "the appointment of a receiver is reasonably necessary and that other available remedies either are not available or are inadequate").

12No. 68832-4-1-1/13 Attorney Fees 

### Umpqua Bank contends it is entitled to an award ofattorney fees incurred in defending this appeal. Both the promissory note and deeds oftrust contain provisions obligating Santwire to pay fees and costs incurred inenforcing the terms ofthe loan under the note and deeds. These provisions both expressly provide for fees on appeal. Accordingly, we grant Umpqua Bank's requestfor fees upon compliance with RAP 18.1(d). Affirmed.

WE CONCUR: 

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