Rader et al v. U.S. Bank National Association

Filing 23

ORDER Granting Defendants' 17 Motion to Dismiss. Plaintiffs' claims are DISMISSED WITH PREJUDICE. This case is dismissed in its entirety. By Judge Christine M. Arguello on 10/14/2014. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 14-cv-00784-CMA-BNB
VIVIAN L. RADER, and
STEVEN R. RADER,
Plaintiffs,
v.
CITIBANK, N.A. as Successor Trustee to U.S. Bank
National Association, as Successor to Wachovia Bank
National Association as Trustee for the Certificate Holders
of Mastr Alternative Loan Trust 2004-1 Mortgage Pass
Through Certificates Series 2004-1,
MORTGAGE REGISTRATION SYSTEMS, INC.,
UBS WARBURG REAL ESTATE SECURITIES, INC.,
OCWEN LOAN SERVICING LLC, and
DOES 1-10,
Defendants.

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
This matter comes before the Court on Defendants’1 Motion to Dismiss (Doc. #
17), filed on August 27, 2014. For the following reasons, the Court grants the motion.
I. BACKGROUND
In October of 2003, Steven Rader signed a promissory note (“the Note”) in favor
of Greenpoint Mortgage Funding Inc., in the principal amount of $630,000. (Doc. # 171

Defendants include Citibank, N.A., as Successor Trustee to Wachovia Bank National
Association as Trustee for the Certificate holders of Mastr Alternative Loan Trust 2004-1
Mortgage Pass Through Certificates Series 2004-1, Mortgage Electronic Registration Systems,
Inc., UBS Warburg Real Estate Securities, Inc., and Ocwen Loan Servicing LLC. Hereinafter,
these parties shall be collectively referred to as “Defendants.”

10.) The Note was secured by a Deed of Trust on his primary residence, located at 47
Bennett Court, Pagosa Springs, Colorado 81147 (“the Property.”) (Id.; see also Doc.
#17-1 at 1.)2 In late 2008, the Raders stopped making payments on this Note. (Doc. #
17-1.) At some point thereafter, U.S. Bank National Association, N.A. (“U.S. Bank”)
assumed the servicing rights on the Raders’ loan. (Doc. # 17-2 at 2.)
This matter has been on two litigation tracks – one in state court, and one in
federal. As for the state court action, in September of 2012, U.S. Bank initiated
foreclosure proceedings on the Property, pursuant to Rule 120 of the Colorado Rules of
Civil Procedure. (Doc. # 17-2.) Specifically, U.S. Bank filed a copy of the original Note
and a “Statement by Attorney for Qualified Holder” with the Archuleta district court (“the
Rule 120 court”), pursuant to Colo. Rev. Stat. § 38-8-101(1)(b). (Doc. # 17-9.) In March
of 2014, U.S. Bank filed a Motion to Substitute Petitioner after the mortgage was
transferred to Citibank. (Doc. # 17-5.) At a hearing regarding the Motion to Substitute,
Citibank presented an original Note bearing a blank indorsement, as well as evidence of
the Raders’ payment history. (Doc. # 17-6 at 21, 30.) After this hearing, the court
granted the motion, finding that Citibank was the real party in interest and that the
Raders had defaulted on the note. (Id. at 46-47.) The Raders appealed the Rule 120
court’s order, and the Colorado Court of Appeals affirmed the lower court’s findings.3

2

Although Vivian Rader did not indorse the Note, she is a party to this action. Consequently,
the Court refers to the Plaintiffs as “the Raders.”
3

Plaintiffs inform the Court that they have petitioned the Colorado Supreme Court to grant
certiorari on this matter. This Court, however, does not rely on the state court’s findings in
granting the Motion to Dismiss.
2

(Doc. # 18 at 2.) On July 28, 2014, the state court entered an order authorizing the sale
of the Property.4 (Doc. # 17-8.)
The Raders commenced their federal action in March of 2014 by filing a
Complaint against U.S. Bank. (Doc. # 1.) The Complaint is relatively simple, and
contains two counts -- one claim for declaratory and injunctive relief, and one for quiet
title. (Id. at 9-12.) Specifically, it alleges that the Note on the Property was not properly
transferred through various mortgager entities, such that no entity has proven that it has
standing to initiate foreclosure proceedings. (Id. at 9.)
Defendants move to dismiss Plaintiffs’ Complaint, arguing that as a qualified
holder of the original Note, they have standing to enforce that Note and foreclose on the
Property.5 (Doc. # 17.)

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The significant delay between the initiation of foreclosure proceedings and the order
authorizing sale seems to have been at least partly attributable to the fact that the Raders
engaged in a variety of procedural tactics – including an attempted removal of their foreclosure
proceeding to federal court and two separate motions to disqualify the state judges assigned to
their case. (See Doc. ## 17-4, 17-5.)
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Defendants note that there is some case law supporting the proposition that the RookerFeldman doctrine precludes this Court from exercising subject matter jurisdiction over Plaintiffs’
claims in the first instance. See, e.g., Diskell v. Thompson, 971 F. Supp. 2d 1050, 1063 (D.
Colo. 2013). However, because the Tenth Circuit has explicitly held that Rooker-Feldman does
not apply when a foreclosure proceeding is still pending, In re Miller, 666 F.3d 1255, 1262 (10th
Cir. 2012), and because it is not clear to the Court whether the foreclosure sale in the instant
case has yet occurred, Rooker-Feldman cannot fully resolve this case. Compare Dillard v. Bank
of New York, 476 F. App'x 690, 692 (10th Cir. 2012) (holding that Rooker-Feldman did apply
when a plaintiff had already been foreclosed upon and evicted from her home, and was
“attempting to completely undo the foreclosure and eviction proceedings, which were both final
before she ever initiated this suit.”)

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II. STANDARD OF REVIEW
Rule 12(b)(6) provides that a court may dismiss a complaint for “failure to state a
claim upon which relief can be granted.” See Fed. R. Civ. P. 12(b)(6). In deciding a
motion under Rule 12(b)(6), the Court must “accept as true all well-pleaded factual
allegations . . . and view these allegations in the light most favorable to the plaintiff.”
Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)). However, a plaintiff may not rely on
mere labels or conclusions, “and a formulaic recitation of the elements of a cause of
action will not do.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
To withstand a motion to dismiss, a complaint must contain sufficient allegations
of fact to state a claim for relief that is not merely conceivable, but is also “plausible on
its face.” Id. at 570. As the Tenth Circuit explained in Ridge at Red Hawk, L.L.C. v.
Schneider, “the mere metaphysical possibility that some plaintiff could prove some set
of facts in support of the pleaded claims is insufficient; the complaint must give the court
reason to believe that this plaintiff has a reasonable likelihood of mustering factual
support for these claims.” 493 F.3d 1174, 1177 (10th Cir. 2007) (emphasis in original).
It is the plaintiff’s burden to frame a complaint with enough factual matter – taken as
true – to suggest that he or she is entitled to relief. Robbins v. Oklahoma, 519 F.3d
1242, 1247 (10th Cir. 2008). Ultimately, the Court has a duty to determine whether the
complaint sufficiently alleges facts supporting all the elements necessary to establish an
entitlement to relief under the legal theory proposed. Forest Guardians v. Forsgren, 478
F.3d 1149, 1160 (10th Cir. 2007). “[F]actual allegations that contradict . . . a properly

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considered document are not well-pleaded facts that the court must accept as true.”
GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1385 (10th Cir.
1997); see also Rapoport v. Asia Electronics Holding Co., Inc., 88 F. Supp. 2d 179, 184
(S.D.N.Y.2000) (“If [the] documents contradict the allegations of the . . . complaint, the
documents control and [the] court need not accept as true the allegations in the . . .
complaint.”)
Generally, a court considers only the contents of the complaint when ruling on a
Rule 12(b)(6) motion. Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010).
Nevertheless, a court may consider materials in addition to the pleadings in certain
circumstances. For example, it may consider documents attached to the complaint, or
documents referred to in and central to the complaint, when no party disputes their
authenticity. Id. The Court may also consider “matters of which a court may take
judicial notice.” Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,
322 (2007)). In particular, if a plaintiff does not incorporate by reference or attach a
document to his or her complaint, a defendant may submit an undisputably authentic
copy which may be considered in ruling on a motion to dismiss. GFF Corp., 130 F.3d at
1384; see also Utah Gospel Mission v. Salt Lake City Corp., 425 F.3d 1249, 1253–54
(10th Cir. 2005) (noting that a document which is “central to the plaintiff’s claim and
referred to in the complaint may be considered in resolving a motion to dismiss, at least
where the document's authenticity is not in dispute.”). The Court may take judicial
notice of a fact which is not subject to reasonable dispute, a requirement that is satisfied

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if the fact is “capable of accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2).
Defendants offered ten exhibits in support of their Motion to Dismiss and three in
support of their Reply. Plaintiffs appended no exhibits either to their Complaint or to
their Response to Defendants’ Motion to Dismiss. In their Response, Plaintiffs do not
dispute the authenticity of any of these exhibits in and of themselves, but rather,
disagree with the Defendants about the legal conclusions that can be drawn from these
exhibits; they allege, for example, that “there is a conflict in claimed ownership of the
[N]ote,” but do not allege the Note itself is fraudulent or inauthentic in any way. (Doc. #
18 at 4.) Accordingly, this Court may consider the public records attached as exhibits
to Defendants’ Motion, including the documents filed in Archuleta County case number
2012-cv-000143, without converting the pending Motion to Dismiss into a motion for
summary judgment. See Pacheco, 627 F.3d at 1186; GFF Corp., 130 F.3d at 1384.
III. DISCUSSION
Colorado foreclosure law allows a holder of evidence of a debt to foreclose upon
breach of the terms of the deed of trust. Under Colorado law, a promissory note is a
negotiable instrument that is freely assignable, Colo. Rev. Stat. § 4-3-104,6 and if an
instrument is payable to the bearer, it may be negotiated to a holder by transfer of
possession alone, Colo. Rev. Stat. § 4-3-201. The term “holder” also includes a “person

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Indeed, the Note itself specifically provides that “I understand that the Lender may transfer this
note. The Lender or anyone who takes this note by transfer and who is entitled to receive
payments under this Note is called the ‘Note Holder.’” (Doc. # 17-10 at 1.)
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in possession of a negotiable instrument evidencing a debt, which has been duly
negotiated to such person or to bearer or indorsed in blank.” Id. § 38–38–100.3(10)(c).
The Note was executed on Plaintiff’s behalf payable to the original lender,
GreenPoint Mortgage Funding, Inc. (Doc. # 17-10.) The Note is endorsed in blank, and
Defendants have possession of the note. (See id.; see also Doc. # 17-6 at 21.)
Accordingly, the Defendants are the holder of the Note.
In order to properly foreclose on a property, the holder of an evidence of debt
must file:
The original evidence of debt . . . together with the original
indorsement or assignment thereof, if any, to the holder . . . or, in
lieu of the original evidence of debt . . . a statement signed by the
attorney for such holder, citing the paragraph of section 38-38100.3(20) under which the holder claims to be a qualified holder
and certifying or stating that the copy of the evidence of debt is true
and correct.
§ 38-38-101(1)(b), (1)(b)(II). Here, U.S. Bank, the prior holder of the Note, fulfilled this
requirement by filing a Verified Motion for Order Authorizing Sale, which included a
“Statement by Attorney for Qualified Holder” indicating that U.S. Bank was a qualified
holder of the Note pursuant to 38-38-100.3(20)(j). (Doc. ## 17-2, 17-9.) Accordingly,
upon U.S. Bank’s subsequent assignment of the note to Citibank, and the Rule 120
court’s approval of the Motion to Substitute Petitioner, Citibank stood in the shoes of
U.S. Bank – as a matter of law – and had standing to enforce the Note.
Plaintiffs’ primary argument in opposition to the instant motion is that Defendants
have not shown precisely how they came to be the holders of the Note, as the Note
was transferred through multiple loan servicer entities. See (Doc. # 18 at 5.)

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(referencing alleged conflicts of ownership of the Note due to “the alleged transfers of
the loan from the original lender to Wachovia, then from Wachovia to the Countywide
entity, from that entity to the non-existent Deutsche Wachonia Bank, and then to [U.S.
Bank].”). Nevertheless, the Plaintiffs present no allegation that another party (other
than Citibank) is actually the holder of the Note; rather, their argument is that it is
impossible to tell which party is the actual holder of the Note. As discussed above,
however, this argument misses the mark: a plain reading of the documents show that
Defendants are the holders of the Note, by virtue of their possession of the Note and its
blank indorsement. Under Colorado law, a party need not prove how it was in
possession of a promissory note to enforce it, and can establish standing to foreclose
simply by complying with the requirements of Colo. Rev. Stat 38-38-101(1)(b)(II) – just
as Defendants have done here. Mbaku v. Bank of Am., No. 12-CV-00190-PAB-KLM,
2014 WL 4099313, at *7 (D. Colo. Aug. 20, 2014) (noting that, under Colorado law,
“physical possession of a promissory note endorsed in blank is itself sufficient to
establish a right to enforcement”) (citing In re Miller, 666 F.3d 1255, 1263 (10th Cir.
2012)).
In sum, because Defendants have shown that they have standing to foreclose on
the Property,7 Plaintiffs’ claim to declaratory relief fails as a matter of law. Because the
viability of their second claim for quiet title is inextricably linked with that of their
7

Citing Plymouth Capital Co.., Inc. v. District Court of Elbert County, 955 P.2d 1014, 1017
(Colo. 1998), the Plaintiffs argue that the Rule 120 court’s finding that Citibank had standing to
enforce the Note is not binding upon this Court. This Court need not decide this issue, however;
its own careful, independent review of the court filings in that case, the facts alleged in the
Complaint, and Colorado foreclosure law, led it to the same conclusion as the Archuleta district
court.
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declaratory relief claim, the quiet title claim also fails as a matter of law Additionally, an
amendment to the complaint would be futile and the Court dismisses this action with
prejudice. See Grossman v. Novell, Inc., 120 F.3d 1112, 1126 (10th Cir. 1997) (A
dismissal with prejudice is appropriate where a complaint fails to state a claim under
Rule 12(b)(6) and granting leave to amend would be futile).
IV. CONCLUSION
Having carefully reviewed the Complaint, the arguments advanced by the parties,
and permissible evidence, the Court concludes the Plaintiffs fail to state a claim upon
which relief may be granted, and the Clerk of the Court shall enter judgment in favor of
Defendant and against Plaintiff. Pursuant to D.C. Colo. L Civ. R. 54.1, Defendant may
thereafter have its costs by filing a bill of costs within 14 days of the date of that order.
Accordingly, it is
ORDERED that Defendants’ Motion to Dismiss (Doc. # 17) is GRANTED. It is
FURTHER ORDERED that Plaintiffs’ claims are DISMISSED WITH PREJUDICE.
It is
FURTHER ORDERED that this case is dismissed in its entirety.
DATED: October 14, 2014
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge
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