198
Argued and submitted July 28, 2020, reversed May 5, 2021
Joan M. ALLMAN,
an individual,
Petitioner-Respondent,
v.
John C. ALLMAN,
an individual,
Respondent,
and
DEUTSCHE BANK
NATIONAL TRUST COMPANY,
as Trustee for Long Beach Mortgage
Loan Trust 2006-10, an investment trust,
Respondent-Appellant.
Washington County Circuit Court
18CV14916; A168782
493 P3d 50
This appeal involves a dispute over the validity of a trust deed encumbering property owned in part by petitioner-respondent Joan Allman. Petitioner-respondent filed a petition to strike the trust deed as an invalid encumbrance
under ORS 205.460, contending that John Allman, who signed the deed, had
no valid authority to encumber the property. In response, defendant-appellant
Deutsche Bank National Trust Company (DBNTC) argued that the invalid
encumbrance procedures under ORS 205.460 were not available against DBNTC
because it fell into a statutory exclusion to those procedures. The trial court
granted petitioner-respondent’s petition and struck DBNTC’s lien. Held: DBNTC
is within the group of persons against whom the procedures of ORS 205.460 are
not available. Accordingly, the trial court erred in striking the trust deed under
that statute.
Reversed.
Janelle F. Wipper, Judge.
Matthew R. Cleverley argued the cause for appellant.
Also on the briefs was Fidelity National Law Group.
Thomas R. Rask, III, argued the cause for respondent.
Also on the brief was Kell, Alterman & Runstein, L.L.P.
Before Lagesen, Presiding Judge, and James, Judge, and
Kamins, Judge.
Cite as 311 Or App 198 (2021) 199
KAMINS, J.
Reversed.
200 Allman v. Allman
KAMINS, J.
This appeal involves a dispute over the validity of a
trust deed encumbering property owned in part by petitioner-respondent Joan Allman. Respondent-appellant Deutsche
Bank National Trust Company (DBNTC) appeals the trial
court’s order striking its lien on the property as an invalid
encumbrance under ORS 205.460. We conclude that the
invalid encumbrance proceeding is not available against
DBNTC and therefore reverse.
I. BACKGROUND
We begin with the legal context of the dispute,
including the history and purpose of the invalid encumbrance statutes. We then describe the factual and procedural history of DBNTC’s trust deed on Joan’s property and
the trial court’s order striking that lien. Finally, we apply
ORS 205.460 to the facts of this case.
A. Removing Encumbrances from Property without the
Invalid Encumbrance Statutes
There are several actions available to property owners seeking to remove competing claims to their property.
Generally, the owner of a property may challenge encumbrances on that property through a quiet title suit. See ORS
105.605 (providing that “[a]ny person claiming an interest
… in real property not in the actual possession of another
may maintain a suit in equity against another who claims
an adverse interest … therein for the purpose of determining conflicting or adverse claims[ or] interests”). Quiet
title suits provide “an easy and simple method by which one
having a substantial interest in real estate, but who cannot maintain an action at law against another claiming
an interest adverse to him, may require such claimant to
appear in a court of equity, and … have [the competing
claims] adjudicated.” Savage v. Savage, 51 Or 167, 170,
94 P
182 (1908).
In addition to suits to quiet title, a property owner
may file a suit to remove “a cloud on title,” which enables the
property owner to remove an encumbrance that is “apparently valid, but, in fact, [is] without foundation, and is
therefore capable of injuring the marketability of the title.”
Cite as 311 Or App 198 (2021) 201
Anderson v. Guenther,
144 Or 446, 463,
25 P2d 146 (1933)
(on rehearing). A property owner may use a suit to remove
a cloud on title to “have declared invalid a seemingly operative instrument, decree, judgment, or other proceeding, the
weakness of which cannot be disclosed from mere inspection, but” which “can be shown by extrinsic evidence to be
void or inapplicable to the estate in question.” Richards v.
Mohr,
73 Or 57, 59,
143 P 1102 (1914).
If a property owner has not filed a suit to quiet or
remove a cloud from title before the owner of a competing
claim attempts to foreclose on the property, the property
owner may raise an affirmative defense to that action, such
as illegality or fraud. ORCP 19 B. Forgery provides one such
affirmative defense. See Whitney v. Whitney, 114 Or 102,
109,
235 P 293 (1925) (“It is well settled that a forged deed
is a void deed, and no title can be obtained by a guilty or
innocent purchaser under a forged deed.”). Thus, whether
a property owner becomes aware of the claim on her property before or after a party purporting to encumber that
property initiates judicial foreclosure proceedings, the property owner has several avenues to defend herself from that
encumbrance.
B. The Invalid Encumbrance Statutes
In 1997, the legislature added another tool to the
property owners’ arsenal: the invalid encumbrance statutes, ORS 205.450 to 205.470. Those statutes were “proposed by the Oregon Department of Justice in response to
anti-government activities that [had] escalated recently in
Oregon and in other states.” Testimony, House Committee
on Judiciary, Subcommittee on Civil Law, HB 2318, Jan 29,
1997, Ex D (statement of Assistant Attorney General
Brenda JP Rocklin). The invalid encumbrance statutes
were proposed as a solution to “anti-government activists”
who file “documents in response to governmental action
that might impose a liability on the citizen[—]e.g., a traffic
citation or a lien for overdue taxes or fees.” Id. Those documents are difficult for court clerks to recognize “because
the anti-government activists create their own ‘legal’ doctrine, misstate accepted legal principles, use legal terms in
a novel fashion, and attribute great significance to symbols
202 Allman v. Allman
that have no recognized legal effect.” Exhibit 3, House
Committee of Judiciary, Subcommittee on Civil Law, HB
2318, Dec 4, 1996 (letter from Attorney General Theodore
R. Kulongoski).
The bill created a mechanism by which public
officials could clear invalid “common law liens” and “UCC
filings” that have no basis in law and are filed “not with
the hope of obtaining money, but to harass, annoy, intimidate, or threaten the government official that is targeted.”
Testimony, House Committee on Judiciary, Subcommittee
on Civil Law, HB 2318, Jan 29, 1997, Ex D (statement of
Assistant Attorney General Brenda JP Rocklin). Although
inspired by claims against public officials, the bill “establish[ed] an expedited and simple procedure for clearing
invalid encumbrances from title to property for any person
whose property is subject to an invalid claim of encumbrance. Id. (Emphasis in original.)
Under the procedures set forth in the invalid encumbrance statutes, a person may file a petition “for an order,
which may be granted ex parte, directing the encumbrance
claimant to appear at a hearing before the court and show
cause why the claim of encumbrance should not be stricken
and other relief … should not be granted.” ORS 205.460(1).
The statutes define an invalid encumbrance as one that is
not (1) “an encumbrance authorized by statute”; (2) “a consensual encumbrance recognized under [Oregon law]”; or
(3) “an equitable, constructive or other encumbrance imposed
by a court of competent jurisdiction.” ORS 204.450(5), (8).
That description of validity reflects the legislature’s concern with “purported common law liens” and “improper
UCC filings,” which were filed without legal authority and
were, upon knowledgeable inspection, invalid on their face.
Exhibit 3, House Committee on Judiciary, Subcommittee
on Civil Law, HB 2318, Dec 4, 1996 (letter from Attorney
General Theodore R. Kulongoski). Because those were the
type of invalid encumbrances which the legislature was
attempting to address—encumbrances by individuals who
rely on a bespoke interpretation of legal authority—the statutes also include a list of persons against whom the statutory procedures cannot be used, such as banks, financial
holding companies, credit unions, mortgage companies,
Cite as 311 Or App 198 (2021) 203
and government officers, agencies, and departments. ORS
205.460(7), (8).
C. History of the Subject Property and DBNTC’s Trust Deed
The subject property was purchased in 2000
by John Allman,1 while Joan and John were married.
Ownership of the property shifted several times between
Joan and John in the years since John made the original
purchase. In 2006, John took out a loan with Washington
Mutual Bank (“WaMu”) to refinance his original purchase
loan. John secured the 2006 loan by granting a trust deed
in the property to WaMu;2 WaMu assigned that deed to
DBNTC, as trustee for Long Beach Mortgage Loan Trust
2006-10, in 2007, and John defaulted on the loan in 2012.
DBNTC then foreclosed on the trust deed and received a
stipulated foreclosure judgment against John and a limited
judgment against Joan and any others with an interest in
the property in 2014. John did not appeal the stipulated
foreclosure judgment, and Joan did not appeal the limited
judgment.
D. Joan Allman’s Petition to Strike DBNTC’s Trust Deed
Despite the 2014 foreclosure judgment, in 2018,
Joan filed a petition to strike the 2006 WaMu trust deed as
an invalid encumbrance on the property under ORS 205.460.
Joan alleged that the trust deed was invalid because John
did not have any right to encumber the property in 2006.
Instead, she contended that the property was owned by her
alone at that time. According to Joan, the 2006 deed was
the product of a forgery: John had forged a deed granting
himself an estate by the entirety in the property, which he
used to encumber the property with the 2006 trust deed.
To support her petition, Joan submitted an affidavit from
John attesting to having committed forgery. Joan argued
1
John does not appear on appeal.
2
A trust deed is an instrument that secures a loan by granting the loan
creditor an interest in the loan debtor’s property. That interest is held in trust;
however, if the loan debtor defaults, the trustee may foreclose on the property.
See ORS 86.705(8) (“ ‘Trust deed’ means a deed executed in conformity with ORS
86.705 to 86.815 that conveys an interest in real property to a trustee in trust to
secure the performance of an obligation the grantor or other person named in the
deed owes to a beneficiary.”).
204 Allman v. Allman
that, because the underlying deed granting John the right
to encumber the property was forged, it was void, and any
encumbrance he made was consequently void as well.
In response, DBNTC argued that Joan’s petition
was barred by claim preclusion, issue preclusion, the statute of limitations, and/or laches. DBNTC also argued that
it is exempt from a claim brought under ORS 205.460, and,
accordingly, the trial court did not have the authority to
grant the petition. The trial court did not explicitly address
the merits of DBNTC’s contention that the court did not
have the authority to strike its trust deed under the invalid
encumbrance statutes. However, apparently concluding that
it did have the requisite authority, the trial court struck
DBNTC’s encumbrance.
On the issue of DBNTC’s jurisdictional argument,
the court stated that DBNTC provided only “an attorney declaration attaching public records from a previous Foreclosure
Action concerning the Property. DBNTC produced no sworn
statement from any nonattorney with direct evidence of
the WaMu Deed of Trust, the loan documents, or DBNTC’s
relationship to the beneficial interest in the WaMu Deed of
Trust.” The trial court also explained that it was striking
the trust deed because Joan provided “substantial evidence
that the John C. Allman Deed” was forged and “[f]orged documents are void ab initio under Oregon law.” Accordingly,
the court concluded that the WaMu deed “did not attach to
or validly encumber Property because it was owned solely
by [Joan]” at the time of its execution. The court noted that
“DBNTC did not dispute this point and offered no evidence
to rebut Petitioner’s evidence of [the] forgery.”
DBNTC appeals the general judgment striking
its trust deed, as well as the trial court’s subsequent
order denying DBNTC’s motion for relief from that judgment under ORCP 71 B and the supplemental judgment
and money award against DBNTC. This appeal requires
us to consider, first, whether DBNTC is exempt from an
ORS 205.460 action. As explained below, we conclude that
DBNTC is exempt and that, consequently, the trial court
was not authorized to enter a judgment striking and releasing DBNTC’s trust deed from the property.
Cite as 311 Or App 198 (2021) 205
II. STANDARD OF REVIEW
We review the trial court’s interpretation of ORS
205.460 for legal error. State v. Thompson, 328 Or 248, 256,
971 P2d 879, cert den,
527 US 1042 (1999). When we interpret a statute, “[w]e ascertain the legislature’s intentions by
examining the text of the statute in its context, along with
any relevant legislative history, and, if necessary, canons of
construction.” State v. Cloutier,
351 Or 68, 75,
261 P3d 1234
(2011) (citing State v. Gaines,
346 Or 160, 171-73,
206 P3d
1042 (2009)).
III. ANALYSIS
As described above, the ORS 205.460 procedures
are “not available against a person lawfully conducting
business as … [a]n institution, a national bank, an out-of-state bank or an extranational institution, as those terms
are defined in ORS 706.008, a savings bank, a federal savings bank or a subsidiary of an entity described in this paragraph[.]” ORS 205.460(7)(a).
DBNTC contends that it meets the definitions of
both “national bank” and “out-of-state bank” under ORS
706.008. A “bank” is “a company, other than an extranational institution, that accepts deposits that the Bank
Insurance Fund insures to any extent under the provisions
of the Federal Deposit Insurance Act[.]” ORS 706.008(1).
Additionally, a “national bank” is “a bank that was organized under the provisions of the National Bank Act” and an
“out-of-state bank” is “an out-of-state state bank or an out-of-state federal bank.” ORS 706.008(12), (23). As explained
below, we agree that DBNTC is a bank for the purposes of
ORS 205.460(7)(a).3
3
DBNTC also assigns error to the trial court’s refusal to consider its supplemental response to Joan’s petition to strike DBNTC’s encumbrance as untimely.
However, the court accepted the parties’ oral arguments on the issue at both the
show cause hearing and the attorney fee hearing. Accordingly, the substantive
issue is properly within our consideration, and we do not reach the timeliness
issue. See State v. Taylor, 198 Or App 460, 469,
108 P3d 682, rev den,
339 Or 66
(2005) (An issue is properly before an appellate court if “the appealing party’s
statements before the trial court … alerted the trial judge and opposing counsel to the substance of the position that is advanced on appeal.”). Additionally,
because we conclude that the trial court did not have the authority to strike
DBNTC’s trust deed through the procedures set out in ORS 205.460, we do not
address DBNTC’s additional assignments of error.
206 Allman v. Allman
DBNTC’s charter documents, which indicate that
DBNTC, originally chartered as “BT Trust Company of
California, National Association,” is a “national banking
association formed under the laws of the United States and
is authorized thereunder to transact the business of banking.” 4 As such, DBNTC is a national bank as defined by ORS
706.008(12) and therefore is not subject to the procedures
set out in ORS 205.460.
Additionally, ORS 205.460(7)(a) provides that “a
subsidiary of an entity” in the list of exempt persons is also
exempt from the invalid encumbrance statute. Joan argues
that, although “Deutsche Bank might well be ‘lawfully conducting business’ as ‘a bank’ when acting in its own capacity, Deutsche Bank is legally distinct from the Deutsche
Bank National Trust Company,” but she does not dispute
that DBNTC is a subsidiary of Deutsche Bank, a national
bank.5
Thus, DBNTC is within the group of persons against
whom the procedures of ORS 205.460 are not available, and
the trial court did not have the authority to strike the deed
of trust held by DBNTC under that statute. Our interpretation is consistent with the legislature’s intent that the
expedited invalid encumbrance procedures are available to
strike spurious encumbrances sought by antigovernment
activists, not facially valid encumbrances held by financial
institutions. Accordingly, we reverse the trial court’s general judgment, which granted Joan’s petition to strike and
release the encumbrance created by the deed of trust, as
well as the supplemental judgment awarding Joan attorney
fees as the prevailing party in that action.
Reversed.
4
Joan contends that the documents that DBNTC submitted were not authenticated by declaration or affidavit and that DBNTC did not otherwise present any
evidence that it was “lawfully conducting business” as “a bank” as described in
ORS 205.460(7). DBNTC responds, and we agree, that the documents at issue are
public records—indeed, the trial court described them as such—and, accordingly,
do not require extrinsic evidence of authenticity. See ORS 40.570; ORS 40.510.
5
Because DBNTC is either a bank or a subsidiary of a national bank, we
reject Joan’s argument that DBNTC is acting as a “trust company” rather than a
bank without further discussion.
