Breinholt et al v. Aegis Wholesale Corporation et al

Filing 70

MEMORANDUM DECISION AND ORDER granting 64 Motion to Dismiss Complaint. Plaintiffs complaint against MERS is DISMISSED WITH PREJUDICE. MERS Alternative Motion for a More Definite Statement is MOOT. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (dks)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
RICHARD W. BREINHOLT AND
SUSAN L. BREINHOLT,
Plaintiffs,

Case No. 10-cv-00466-EJL
MEMORANDUM DECISION AND
ORDER

v.
AEGIS WHOLESALE
CORPORATION, a Corporation,
ONEWEST BANK, formerly
INDYMAC FEDERAL BANK, FSB, a
Bank, TRI-COUNTY PROCESS
SERVING, LLC, a Limited Liability
Corporation, a Corporation, PIONEER
LENDER TRUSTEE SERVICES, LLC,
a Limited Liability Corporation,
MORTGAGE ELECTRONIC
REGISTRATION SERVICES (MERS);
TITLE ONE CORPORATION,
JENNIFER TAIT, ROBINSON TAIT,
P.S. (Law Firm) JOHN and JANE DOES
IV, CORPORATIONS VI-X, and
ABC PARTNERSHIPS XI-XV,
Defendants.

INTRODUCTION
The Court has before it defendant Mortgage Electronic Registration Systems’
(MERS) Motion to Dismiss or, in the Alternative, for a More Definite Statement (Dkt.
64). Having fully reviewed the record, the Court finds that the facts and legal arguments
are adequately presented in the briefs and record. Accordingly, in the interest of avoiding
further delay, and because the Court conclusively finds that the decisional process would

MEMORANDUM DECISION AND ORDER - 1

not be significantly aided by oral argument, this matter shall be decided without oral
argument. For the reasons explained below, the Court will grant the motion.
BACKGROUND
In September 2005, plaintiffs Richard and Susan Breinholt refinanced their home
with a loan from Aegis Wholesale Corporation. Compl., Dkt. 1, at 20, 25, 38. The loan
was secured by a deed of trust. See id. Defendant MERS was named as the beneficiary
under the deed of trust, acting as the “nominee” for Aegis. Sept. 1, 2005 Deed of Trust,
Ex. 1 to Plaintiff’s Response,1 Dkt. 67-1, at 1, 2; see also Compl. at 25 (referencing the
deed of trust). Plaintiffs allege that in May 2009, the property was “unlawful[ly]”
foreclosed upon. Compl. at 25.
Within a few weeks of the foreclosure, the Breinholts sued various defendants in
state court. Id. at 20 (referring to the state court complaint at Dkt. 19-6). There, the
Breinholts alleged that “the Bank” (defined to include IndyMac and its successor,
OneWest) foreclosed, despite having verbally assuring the Breinholts that a loan
modification was in place. See State Court Compl., Dkt. 19-6, ¶¶ 20, 25, 35. Further, the
Breinholts said they showed up on the courthouse steps at the time stated in the notice of
trustee’s sale because they had a third party lined up to buy the home out of foreclosure.
They waited around for an hour and a half and then left when no one showed up to sell
the property. Id. ¶¶ 27-32.

In addition to filing a response, plaintiffs filed a sur-reply (though the sur-reply is
labeled as an “Objection to MERS’ Motion to Dismiss . . . .”). See May 16, 2012 Response, Dkt.
67, and June 25, 20912 Objection, Dkt. 69. Although plaintiffs did not obtain permission to file
a sur-reply, the Court nonetheless considered it in deciding this motion.
1

MEMORANDUM DECISION AND ORDER - 2

Based on these facts, the Breinholts sought a declaration that the foreclosure sale
had either not occurred or, alternatively, was a sham. They also sought damages for
breach of trustee’s duties, forgery, fraud, theft, and conspiracy.
On September 10, 2010, the Breinholts brought this action in federal court. Three
days later, on September 13, 2010, the Breinholts stipulated to a dismissal with prejudice
of their state court action.
THE LEGAL STANDARD
A motion to dismiss based on Federal Rule of Civil Procedure 12(b)(6) “tests the
legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). A
complaint generally must satisfy “only the minimal notice pleading requirements” of
Federal Rule of Civil Procedure 8(a)(2) to avoid a 12(b)(6) dismissal. Porter v. Jones,
319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) “requires only ‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests . . . .”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355
U.S. 41, 47 (1957)).
In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), “all well-pleaded allegations of material fact are taken as true and construed in a
light most favorable to the non-moving party.” Wyler Summit Partnership v. Turner
Broadcast Sys., Inc., 135 F.3d 658, 661 (9th Cir.1998) (citation omitted). While a
complaint attacked by a Rule 12(b)(6) motion to dismiss “does not need detailed factual
allegations,” it must set forth “more than labels and conclusions, and a formulaic
MEMORANDUM DECISION AND ORDER - 3

recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.
To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to “state a claim to relief that is plausible on its face.” Id. at 570. A
claim has facial plausibility when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.
Id. at 556.
Finally, under Rule 12(b)(6), the Court may consider matters that are subject to
judicial notice. Mullis v. United States Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). The
Court may take judicial notice “of the records of state agencies and other undisputed
matters of public record” without transforming the motions to dismiss into motions for
summary judgment. Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d
861, 866 (9th Cir. 2004). The Court may also examine documents referred to in the
complaint, although not attached thereto, without transforming the motion to dismiss into
a motion for summary judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir.
2005).
ANALYSIS
MERS argues that the complaint should be dismissed because (1) it is barred by
res judicata principles, and (2) it fails to state any claim upon which relief can be granted.
The Court agrees on both counts.
A.

Dismissal Based on Res Judicata Principles
Earlier in this litigation, the Court dismissed defendant OneWest based on res

judicata principles. See Feb. 18, 2011 Order, Dkt. 36, at 7. As the Court explained, the

MEMORANDUM DECISION AND ORDER - 4

Breinholts have already litigated their claims against OneWest in state court. Id. MERS
was not a named defendant in the state court action but argues that it is “in privity” with
OneWest and thus entitled to a res judicata dismissal as well.
Generally, res judicata “prevents litigants who were parties in a prior action and
those in privity with them from bringing or having to defend a claim arising from the
transaction or series of transactions giving rise to the first suit.” State Bureau of Child
Support v. Knowles, 919 P.2d 1036, 1038 (1996) (emphasis in original). More
specifically, res judicata applies when three elements are met: (1) the claims are
identical; (2) the parties are identical or in privity with each other; and (3) there has been
a final judgment on the merits. See generally Farmers Nat’l Bank v. Shirey, 878 P.2d
762, 767 (Idaho 1994).
The Court will not analyze each of these elements here because it has already done
so in ruling on OneWest’s motion to dismiss. The narrow question presented by MERS’
motion is whether MERS is in privity with OneWest.
“Privity is defined as a mutual or successive relationship to the same property
rights, or such an identification in interest of one person with another as to represent the
same legal rights.” Sun Valley Land & Minerals, Inc. v. Burt, 853 P.2d 607, 614 (Idaho
Ct. App. 1993). Under this definition, the Court is satisfied that MERS and OneWest are
in privity with each other. As noted above, MERS acted as the nominal beneficiary for
the lender under the deed of trust and as the agent for the originating lender (Aegis) and
the originating lender’s successors and assigns. Although Idaho has not yet decided the
issue, other courts have determined that MERS stands in privity with entities that

MEMORANDUM DECISION AND ORDER - 5

subsequently acquire a promissory note or deed of trust. See Middlebrook v. Mortg. Elec.
Registration Sys., Inc., 2011 WL 6934233, *4 (E.D. Mich. Dec. 30, 2011) (finding MERS
in privity with bank to which MERS had assigned mortgage); Butts v. JP Morgan Chase
Bank, 2011 WL 7109344, *2 (N.D. Tex. Dec. 28, 2011) (finding MERS in privity with
Chase Home Finance because MERS was previously the beneficiary under the deed of
trust and had assigned the same to Chase Home Finance); Radford v. U.S. Bank Nat’l
Ass’n, 2011WL 4054863, * 9 (D. Hawai’i Sept. 9, 2011) (finding MERS in privity with
bank which was party to prior foreclosure action where MERS had served as nominee to
bank’s predecessor in interest). The Court predicts that Idaho courts would agree with
these holdings and therefore finds MERS in privity with OneWest for res judicata
principles. Accordingly, the Court will dismiss the complaint against MERS
B.

Dismissal Based on Failure to State a Claim Upon Which Relief Can Be
Granted
The Court also finds that the Breinholts’ complaint against MERS should be

dismissed because it fails to state a claim upon which relief can be granted. Bluntly, the
complaint is nearly incomprehensible. It is clear that the Breinholts continue to challenge
the foreclosure of their property, just as they did in state court. But otherwise, the
complaint contains almost no evidentiary factual allegations. Instead, the complaint is
mostly filled with legal conclusions, and many of those are obviously irrelevant to this
action. As a result, the complaint fails the most basic command of Rule 8 – MERS does
not have fair notice of the specific claims it is facing. The Court will therefore dismiss
the complaint on this additional ground as well.

MEMORANDUM DECISION AND ORDER - 6

Finally, the Court will dismiss the complaint against MERS with prejudice. The
Court is cognizant that pro se litigants must be given leave to amend their complaints
unless it is absolutely clear that the deficiencies of the complaint could not be cured by
amendment. See, e.g., Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). In this case,
it is clear that the Breinholts will not able to save their complaint with an amendment. As
already explained, they are barred from challenging defendants’ ability to foreclose the
property on res judicata grounds. They already litigated that issue in state court; thus
nothing remains to be litigated here. The Court will therefore dismiss the complaint with
prejudice.
ORDER
IT IS ORDERED THAT Defendants MERS’ Motion to Dismiss (Dkt. 64) is
GRANTED. Plaintiffs’ complaint against MERS is DISMISSED WITH PREJUDICE.
MERS’ Alternative Motion for a More Definite Statement is MOOT.

DATED: July 11, 2012

Honorable Edward J. Lodge
U. S. District Judge

MEMORANDUM DECISION AND ORDER - 7