Mbaku et al v. Bank of America, National Association

Filing 108

ORDER adopting in part 81 Report and Recommendations by Judge Philip A. Brimmer on 1/10/14. 39 Second Motion for Leave to File Amended Complaint Pursuant to Fed. R. Civ. P. 15(a)(2) is granted in part. Plaintiffs shall file an amended complaint in conformance with this Order by 1/23/14. (dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 12-cv-00190-PAB-KLM
JOHN M. MBAKU,
LUVIBIDILA JOLIE LUMUENEMO,
Plaintiffs,
v.
BANK OF AMERICA, NATIONAL ASSOCIATION,
as successor by merger to BAC Home Loans Servicing, LP
f/k/a Countrywide Home Loans Servicing LP,
Defendant.
_____________________________________________________________________
ORDER
_____________________________________________________________________
This matter is before the Court on the Recommendation of United States
Magistrate Judge (the “Recommendation”) [Docket No. 81]. The magistrate judge
recommends that the Court grant Plaintiffs’ Second Motion for Leave to File Amended
Complaint Pursuant to Fed. R. Civ. P. 15(a)(2) [Docket No. 39] with respect to plaintiffs’
proposed amended due process claim and deny the motion with respect to all other
proposed amended claims. Docket No. 81. On October 7, 2013, plaintiffs filed timely
objections [Docket No. 88] to the Recommendation. The Court will “determine de novo
any part of the magistrate judge’s disposition that has been properly objected to.” Fed.
R. Civ. P. 72(b)(3).
Rule 15(a) of the Federal Rules of Civil Procedure instructs courts to “freely give
leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a). Nevertheless,
denying leave to amend is justified if the proposed amendments are unduly delayed,

unduly prejudicial, futile, or sought in bad faith. Foman v. Davis, 371 U.S. 178, 182
(1962); Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). “A proposed
amendment is futile if the complaint, as amended, would be subject to dismissal for any
reason.” Watson ex rel. Watson v. Beckel, 242 F.3d 1237, 1239-40 (10th Cir. 2001)
(internal citation omitted). In light of plaintiffs’ pro se status, the Court reviews their
filings liberally. See Haines v. Kerner, 404 U.S. 519, 520 (1972); Hall v. Bellmon, 935
F.2d 1106, 1110 n. 3 (10th Cir. 1991). The facts of this case are set out in detail in the
August 20, 2012 Recommendation of United States Magistrate Judge [Docket No. 22]
and will not be recited here.
I. SPURIOUS LIEN
Plaintiffs argue that the Court should grant them leave to amend their complaint
to assert a claim for violation of Colo. Rev. Stat. § 38-35-109(3) (Spurious Lien).
Docket No. 88 at 1-2.
Section 38-35-109(3) imposes a penalty for offering to record or refusing to
release “any document purporting to convey, encumber, create a lien against, or
otherwise affect the title to real property” if a party knows or has reason to know “that
such document is forged or groundless, contains a material misstatement or false
claim, or is otherwise invalid.” In their proposed amended complaint, plaintiffs allege
that defendant violated this provision by “filing and recording the false assignment
purporting to transfer Plaintiffs’ promissory note and deed of trust, and by causing the
filing of a notice of election and demand.” Docket No. 39-1 at 43, ¶ 150.
The magistrate judge found that this statute does not cover the recording of an

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assignment or a Notice of Election and Demand because these documents do not
convey an interest in, or otherwise encumber, real property. Docket No. 81 at 4-5
(citing Colo. Rev. Stat. § 38-35-201(2) (“‘Lien’ means an encumbrance on real or
personal property as security for the payment of a debt or performance of an
obligation.”)). Thus, the magistrate judge found that amending the complaint to add this
claim would be futile. Id.
Plaintiffs object on the grounds that the magistrate judge’s reading of the statute
would “open[] the door to misconduct” and “lead to an absurd result” because anyone
could fabricate an assignment to wrongfully obtain an interest in real property. Docket
No. 88 at 1-2. Plaintiffs’ argument does not undermine the magistrate judge’s
conclusion that, according to the plain language of the statute, it does not apply to
plaintiffs’ proposed claim. Plaintiffs may disagree with the wisdom of the Colorado
legislature in maintaining this legislative scheme, but it is not within the purview of the
Court to depart from the clear meaning of the statute.
II. FRAUD
Plaintiffs argue that the Court should grant them leave to amend their complaint
to assert a claim for fraud. Docket No. 88 at 2-3.
A claim for fraud requires a plaintiff to show that the defendant knowingly made a
false representation “with the intention that it be acted upon.” Vinton v. Virzi, 269 P.3d
1242, 1247 (Colo. 2012). In its February 1, 2013 Order [Docket No. 26], the Court
found that plaintiffs did not satisfy this element because they alleged that they acted in
a way contrary to defendant’s intent. In their proposed amended complaint, plaintiffs
allege that defendant made various misrepresentations in the course of initiating non3

judicial foreclosure proceedings against plaintiffs and that these were made “with the
intent of misleading plaintiffs into relying upon [the misrepresentations] and [filing] for
bankruptcy.” Docket No. 39-1 at 19, 20, 21 ¶¶ 64, 70, 74. These allegations contradict
the allegation that, “in furtherance of its fraud scheme, BOA made the strategic decision
that most homeowners will not challenge its claimed status as mortgagee/assignee”
Docket No. 39-1 at 18, ¶ 59. Plaintiffs address this contradiction in their objections to
the Recommendation, arguing that:
there could only be two possible outcomes to Defendant’s initiating
foreclosure; Plaintiffs could have either fought the foreclosure with all means
available to them which includes filing for bankruptcy or simply stood idly by
while the foreclosure process took its course. Therefore, the Defendant
could be characterized as having dual intent–where bankruptcy filing by the
Plaintiffs is the less preferable of the two possible outcomes from the
Defendant’s perspective. Because this is a question of fact, it therefore
belongs to a reasonable jury to render judgment on the allegation.
Docket No. 88 at 3.
In essence, plaintiffs argue that defendant made a false representation with the
intention that plaintiffs choose one of two options available–either do something or do
nothing–and that, by doing something, plaintiffs were acting in reliance on defendant’s
misrepresentation. Plaintiffs’ concept of “dual intent” is virtually meaningless when
plaintiffs only had two options. Moreover, this argument does not render plausible
plaintiffs’ allegation that defendant acted with the intent that plaintiffs file for bankruptcy.
It is not plausible that defendant would seek to induce plaintiffs’ bankruptcy despite the
fact that this runs counter to defendant’s interest, as alleged by plaintiffs in the
proposed amended complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In sum, it would be futile to grant plaintiffs leave to amend their fraud claim.
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III. COLORADO CONSUMER PROTECTION ACT
Plaintiffs argue that the Court should grant them leave to amend their complaint
to allege a violation of the Colorado Consumer Protection Act (“CCPA”), Colo. Rev.
Stat. §§ 6-1-101, 6-1-105. Docket No. 88 at 3-4.
The CCPA affords relief upon a showing (1) that defendant engaged in an unfair
or deceptive trade practice; (2) in the course of defendant’s business; (3) which
significantly impacts the public as actual or potential consumers of the defendant’s
goods, services, or property; (4) that plaintiff suffered injury in fact to a legally protected
interest; and (5) that the challenged practice caused plaintiff’s injury. Rhino Linings
USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146-47 (Colo. 2003). To
meet the first element, a plaintiff must allege that defendant knowingly made a false
representation that “either induce[s] a party to act, refrain from acting, or ha[s] the
capacity or tendency to attract consumers.” Id. at 147. Allegations of a deceptive trade
practice must be set forth with particularity in accordance with the heightened pleading
standards under Colorado Rule of Civil Procedure 9(b). Duran v. Clover Club Foods
Co., 616 F. Supp. 790, 793 (D. Colo. 1985). Pleading with particularity requires, at a
minimum, setting forth the “‘who, what, when, where and how’ of the alleged fraud and
. . . the time, place, and contents of the false representation, the identity of the party
making the false statements and the consequences thereof.” United States ex rel.
Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726-27 (10th Cir.
2006) (internal citations omitted).
In their proposed amended complaint, plaintiffs allege that defendant violates the

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CCPA (1) through its “routine pursuit of foreclosure proceedings with knowledge that a
TBW mortgage has not and cannot follow the note,” Docket No. 39-1 at 25-26, ¶ 91;
(2) in attempting “through MERS . . . to assign plaintiffs’ mortgage and note as well as
that of other consumers,” Docket No. 39-1 at 27, ¶ 99; (3) through its “pursuit of
foreclosure proceedings with knowledge that Freddie Mac, Ginnie Mae or another entity
guarantees the timely payments of principal and interest on plaintiffs’ promissory note,”
Docket No. 39-1 at 28, ¶ 102; (4) by arguing that “MERS can validly transfer the
beneficial rights to plaintiffs’ promissory note,” Docket No. 39-1 at 34, ¶ 125; and (5) by
foreclosing on homeowners on the basis of fabricated assignments, Docket No. 39-1 at
37, ¶ 134.
In objecting to the Recommendation, plaintiffs argue that defendant’s alleged
misrepresentations induced them to act insofar as they “believe[d] that the entire
foreclosure proceedings . . . [were] legitimate and therefore filed for bankruptcy in 2010
as a means of protection.” Docket No. 88 at 4. They further argue that a false
assignment “induces consumers to believe that the assignment is legitimate and
therefore do not challenge the foreclosure.” Docket No. 88 at 3.
Plaintiffs’ proposed amended CCPA claim is futile for the same reason as
plaintiffs’ proposed amended fraud claim. Plaintiffs allege that defendant’s
representations tend to induce both action and inaction, including action, such as filing
for bankruptcy, of no apparent benefit to defendant. See Rhino Linings USA, 62 P.3d
at 147. Absent clear allegations regarding the impact of defendant’s practices on
plaintiffs and on the consuming public at large, plaintiffs’ allegations regarding
defendant’s alleged deceptive trade practices are too vague to meet the standard set
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forth under Rule 9(b). See Sikkenga, 472 F.3d at 726-27; see also People ex rel.
Dunbar v. Gym of Am., Inc., 493 P.2d 660, 668 (Colo. 1972) (“it is in the public interest
to invoke the state’s police power to prevent the use of methods that have a tendency
or capacity to attract customers through deceptive trade practices. . . The [CCPA] is an
outgrowth of this conclusion.”). Id.
The Court finds that granting plaintiffs leave to amend their complaint to allege a
violation of the CCPA would be futile. This finding renders futile plaintiffs’ request to
assert a claim for negligence per se based on defendant’s alleged violation of the
CCPA. See Lombard v. Colo. Outdoor Educ. Ctr., Inc., 266 P.3d 412, 417 (Colo. App.
2011).
IV. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
Plaintiffs argue that the Court should permit them leave to amend their complaint
to assert a claim for intentional infliction of emotional distress. In their proposed
amended complaint, plaintiffs state that, “[b]ecause the Defendant foreclosed on the
Plaintiffs’ property in whole or in part on the basis of the false assignment, Plaintiffs
suffer and have suffered severe emotional distress.” Docket No. 39-1 at 40, ¶¶ 144-45.
In their objections, they note that they also alleged that, at the Rule 120 hearing,
defendant produced a note:
with no actual signature on it but rather a ‘facsimile signature’ that is part
of a signature stamp it claims to be a proper endorsement. Plaintiffs contend
that the said signature is a forgery, a fabricated signature just as the
assignment of the promissory note and deed of trust was fabricated. As a
result, BOA cannot and would not offer TBW corporate record (resolution)
relating to a facsimile signature of that officer as being valid. There is no
date as to the purported endorsement, and no notary signature or stamp.
More importantly, there was no allonge indicating that it has been transferred
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to another party.
Docket No. 39-1 at 15, ¶ 49 (emphasis in original).
To prevail on a claim for intentional infliction of emotional distress, a plaintiff
must show that “(1) the defendant engaged in extreme and outrageous conduct;
(2) recklessly or with the intent of causing the plaintiff severe emotional distress;
(3) causing the plaintiff to suffer severe emotional distress.” Han Ye Lee v. Colorado
Times, Inc., 222 P.3d 957, 966-67 (Colo. App. 2009).
The Court has previously explained that a valid assignment is not necessary to
initiate foreclosure proceedings under Colorado law and, thus, any defects in the
assignment cannot support a claim for intentional infliction of emotional distress. See
February 1, 2013 Order [Docket No. 26] at 16-17. Given that plaintiffs do not dispute
that they were in default on their mortgage loan, and that some entity had authority to
foreclose, defendant’s initiation of foreclosure proceedings was not “so extreme in
degree, as to go beyond all possible bounds of decency, and to be regarded as
atrocious, and utterly intolerable in a civilized community.” See Coors Brewing Co. v.
Floyd, 978 P.2d 663, 666 (Colo. 1999).
V. NEGLIGENCE
Plaintiffs argue that they should be granted leave to amend their complaint to
assert a claim for negligence on the basis that defendant violated a duty set forth in its
April 31, 2011 consent decree with the Office of the Comptroller of the Currency
(“OCC”). Docket No. 88 at 5.
A claim for negligence requires allegations of four elements: duty, breach of duty,

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causation, and damages. Redden v. SCI Colo. Funeral Servs., Inc., 38 P.3d 75, 80
(Colo. 2001).
The consent decree that plaintiffs cite provides that defendant shall submit a
“compliance program [to the OCC] to ensure that . . . foreclosure operations . . . comply
with all applicable Legal Requirements,” including state law requirements regarding
documentation of its ownership of the promissory note and mortgage. Available at
http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47b.pdf at 6-8.
However, the consent order also provides that no compliance plan need be submitted
until sixty days after the order was set to take effect on April 13, 2011. Id. In addition,
the consent decree states: “Nothing in the Stipulation and Consent or this Order,
express or implied, shall give to any person or entity, other than the parties hereto, and
their successors hereunder, any benefit or legal or equitable right, remedy or claim
under the Stipulation and Consent or this Order.” Id. at 27, ¶ 10.
By its own terms, the consent decree does not create a duty of care that plaintiffs
can enforce against defendant. See id. Moreover, since plaintiffs allege that the
assignment at issue in this case was executed on April 28, 2011, there is no basis for
finding that the assignment would be covered by the consent order, even assuming the
consent order did give rise to a duty of care enforceable by plaintiff. Docket No. 39-1 at
5, ¶ 16. Thus, it would be futile to grant plaintiffs leave to amend their claim for
negligence.
VI. COLORADO FAIR DEBT COLLECTION PRACTICES ACT
Plaintiffs argue that the Court should grant them leave to amend their complaint

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to assert a claim for violation of the Colorado Fair Debt Collection Practices Act
(“CFDCPA”), Colo. Rev. Stat. § 12-14-101 et seq., on the basis that “the forging of a
promissory note endorsement as Plaintiffs have alleged, is a false and deceptive
means in connection with the collection of a debt.” Docket No. 88 at 6.
The CFDCPA prohibits debt collectors from using “false, deceptive, or
misleading representation(s) or means in connection with the collection of any debt.”
Colo. Rev. Stat. § 12-14-107(1). In order to be actionable, a false statement must be
material–that is, it must be the type of statement that would impact the least
sophisticated consumer’s decisions with respect to a debt. See Hahn v. Triumph
P’ships, LLC, 557 F.3d 755, 758 (7th Cir. 2009) (interpreting federal FDCPA); O’Connor
v. Check Rite, Ltd., 973 F. Supp. 1010, 1016 n.2 (D. Colo. 1997) (applying “least
sophisticated consumer” standard to CFDCPA claim); see also Udis v. Universal
Commc’ns Co., 56 P.3d 1177, 1179 (Colo. App. 2002) (“When analyzing a state statute,
interpretation of an analogous federal statute is persuasive.”).
The authenticity of the endorsement on the promissory note was necessary to
the foreclosure proceedings because an endorsement in blank renders a note
enforceable by the bearer of the note based solely on possession of the note, and,
likewise, renders immaterial the validity of any corresponding assignment. See Colo.
Rev. Stat. § 38-38-100.3(10)(c) (the “person in possession of a negotiable instrument
evidencing a debt, which has been . . . indorsed in blank” is presumed to be a holder of
an evidence of debt). Defendant does not address plaintiffs’ allegations that the
endorsement was forged, focusing instead of plaintiffs’ allegations regarding the validity

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of the assignment. See Docket No. 96 at 12-14.
In Wallace v. Washington Mut. Bank, F.A., 683 F.3d 323, 326 (6th Cir. 2012), the
court held that a plaintiff stated a claim for relief under the FDCPA where she alleged
the “filing of foreclosure action by [a] law firm claiming ownership of [a] mortgage by its
client . . . when the bank has not received a transfer of the ownership documents.” The
court held that the alleged conduct constituted a material misrepresentation that would
confuse or mislead the least sophisticated consumer because it could cause “confusion
and delay in trying to contact the proper party concerning payment on [the] loan and
resolution of the problem.” Id. at 327-28.
Plaintiffs’ allegation that defendant forged the blank endorsement on plaintiffs’
promissory note is sufficient to state a claim for relief under the CFDCPA. Defendant
does not argue that plaintiffs are seeking leave to amend for an improper purpose or
that granting such leave would be prejudicial to defendant. The Court, “mindful of the
spirit of the Federal Rules of Civil Procedure to encourage decisions on the merits,” will
permit plaintiffs to amend their complaint to allege a violation of the CFDCPA as set
forth in their proposed amended complaint. See Koch v. Koch Indus., 127 F.R.D. 206,
209 (D. Kan. 1989).
VII. CONCLUSION
For the foregoing reasons, it is
ORDERED that the Recommendation of United States Magistrate Judge [Docket
No. 81] is ADOPTED in part. It is further
ORDERED that Plaintiffs’ Second Motion for Leave to File Amended Complaint

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Pursuant to Fed. R. Civ. P. 15(a)(2) [Docket No. 39] is GRANTED in part. It is granted
with respect to plaintiffs’ proposed amended sixth, eighth, ninth, and tenth claims for
relief. It is denied with respect to plaintiffs’ remaining proposed amended claims for
relief. It is further
ORDERED that plaintiffs shall file an amended complaint in conformance with
this Order on or before January 23, 2014.

DATED January 10, 2014.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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