Cherian v. Countrywide Home Loans, Inc. et al

Filing 35

MEMORANDUM DECISION AND ORDER granting Defendant CitiMortgage, Inc's 31 Motion to Dismiss. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
ALEXANDER CHERIAN,
Case No. 1:12-CV-00110-BLW
Plaintiff,
v.
COUNTYWIDE HOME LOANS, INC.,
NATIONAL TITLE INSURANCE
a New York corporation, dba AMERICA’S
WHOLESALE LENDER; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware corporation;
FIDELITY NATIONAL TITLE
INSURANCE CO., a California
corporation; CITIMORTGAGE, INC., a
New York corporation; BAC HOME
LOAN SERVICING LP, a Texas limited
partnership; US BANK NATIONAL
ASSOCIATION, AS TRUSTEE FOR THE
HOLDERS OF THE CMLTI 2006-AR5
TRUST FUND, MORTGAGE PASSTHROUGH CERTIFICATES SERIES
2006-AR5; RECONTRUST COMPANY,
N.A.; NORTHWEST TITLE, LLC DBA
NTL LLC a Washington corporation;
FIRST AMERICAN TITLE COMPANY,
INC., an Idaho Corporation, Bank of
America N.A., a Delaware Corporation,
and JOHN DOES 1 THROUGH 10,
Defendants.
MEMORANDUM DECISION AND ORDER - 1

MEMORANDUM DECISION AND
ORDER

INTRODUCTION
The Court has before it Defendant CitiMortgage, Inc.’s Motion to Dismiss (Dkt.
31). For the reasons set forth below, the Court will grant the motion to dismiss.
BACKGROUND1
In April 2006, Plaintiff Alexander Cherian obtained a refinance mortgage loan in
the amount of $895,000 through Defendant Countrywide Home Loans, Inc. The loan
was secured by a Deed of Trust to the residential real property in favor of Countrywide,
dba America’s Wholesale Lender. The Deed of Trust designated Fidelity National Title
Insurance Company as trustee, and Mortgage Electronic Registration Systems, Inc.
(MERS) as the beneficiary.
On August 10, 2011, MERS assigned its interest in the Deed of Trust to Defendant
U.S. Bank National Association. This assignment was recorded in Blaine County on
August 15, 2011, as Instrument No. 589766. Months later, on December 6, 2011,

1

The following facts are taken from the Amended Complaint (Dkt. 6-1) and attached exhibits,
and documents of public record attached to Defendants’ Motion to Dismiss of which the Court takes
judicial notice.

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ReconTrust Company, N.A. was appointed successor trustee. The Appointment was
recorded on December 19, 2011.
In January 2010, Cherian stopped making his monthly loan payment, defaulting on
his loan obligation. Almost two years later, after the loan was transferred to U.S. Bank
and ReconTrust was appointed successor trustee, a Notice of Default was recorded on
December 16, 2011. At the time the Notice of Default was recorded, Cherian was
$127,000 behind on his loan payments. The original Notice of Trustee’s Sale, dated
December 22, 2011, showed the foreclosure sale was scheduled to take place on April 30,
2012.
Now Cherian claims that he does not know who owns the underlying Note and
Deed of Trust and contends that none of the Defendants has any “right, estate, title, lien,
or interest . . . in or to the Property” Compl. ¶14, Dkt. 6-1. Cherian alleges that the
following issues somehow deprived Defendants, including CitiMortgage, of any valid
interest in the property: (1) defects in the execution and transfers of the Note and Deed of
Trust and in the recording of title and assignment documents; (2) the splitting of the Note
and Deed of Trust; (3) securitization of the Note; (4) satisfaction of the Note by third
parties; and (5) violations of the Idaho Code, the ICPA, the FDCPA, and TILA.
On January 23, 2012, Cherian filed his original complaint in state court. Cherian
filed an amended complaint on February 2, 2012. The Amended Complaint was removed
to this Court on March 6, 2012. A little over a month later, on April 16, Plaintiff filed a
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motion to file a second amended complaint. The Court denied this motion. In the same
order denying the motion to amend, the Court granted a motion to dismiss all of the
defendants but CitiMortgage, which did not join the motion to dismiss. Now
CitiMortgage moves to dismiss the Amended Complaint.
LEGAL STANDARD
Federal Rule of Civil Procedure 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). 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 recitation of the elements of a cause
of action will not do.” Id. at 555.
In a more recent case, the Supreme Court identified two “working principles” that
underlie Twombly. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). First, the tenet
that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions. Id. “Rule 8 marks a notable and generous departure
from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the
doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at
1950. Second, only a complaint that states a plausible claim for relief survives a motion
to dismiss. Id. “Determining whether a complaint states a plausible claim for relief will .
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. . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id.
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
1. Motion to Dismiss
A. Cherian’s Quiet Title Claim Fails.
Cherian includes a claim for quiet title in his Amended Complaint, requesting a
declaration that Cherian owns “in fee simple, and is entitled to the quiet and peaceful
possession of the Property.” Compl. at 8, Dkt. 1-6. Cherian’s quiet title claim against
CitiMortgage suffers from two fatal defects: (1) he fails to allege that CitiMortgage
specifically has any interest in the Property; and (2) he fails to allege an ability or
willingness to tender the balance due on the loan.

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First, Cherian’s quiet title claim against CitiMortgage must be dismissed because
Cherian fails to allege that CitiMortgage specifically has any interest in the Property.
Indeed, Cherian’s Complaint fails to allege any specific allegations against CitiMortgage
– the only reference to CitiMortgage is in paragraph 6 of the Complaint which states
CitiMortgage is a corporation in good standing. Compl. ¶ 6. Cherian provides no
allegations to explain why CitiMortgage is named as a party. This alone warrants
dismissal of the quiet title claim against CitiMortgage.
Second, Cherian’s quiet title claim against CitiMortgage must be dismissed
because Cherian has not alleged an ability or willingness to tender the balance due on the
loan. This omission is fatal to Cherian’s quiet title claim. Hobson v. Wells Fargo Bank,
N.A., Case No. 1:11–cv–00196–BLW, 2012 WL 505917, *3 (D.Idaho February 15, 2012)
(quoting Trusty v. Ray, 249 P.2d 814, 817 (Idaho 1952)). “A mortgagor cannot without
paying his debt quiet title as against the mortgagee.” Trusty, 249 P.2d at 817 (internal
quotation marks and citation omitted).
B. Cherian Does not Allege Any Facts to Support his Claim that
CitiMortgage Failed to Comply with Idaho’s Foreclosure Statutes.
Cherian alleges Defendants – without specifying CitiMortgage – do not have an
interest in the property allowing them to foreclose for the following reasons: “lack of
proper recording of required documents of title”, “defects in the execution [and transfer]
of the notes and deeds of trust”, “violation of the law rendering the documents void”,
“satisfaction of the notes by third parties or entities, by federal relief, by tax credits, or
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otherwise”, and “other such defects as may be revealed during discovery.” Compl. ¶¶
24(a), (c)-(d), (f)-(h).
Cherian, however, asserts no facts to support these claims. These purely
conclusory and speculative allegations do not state a claim for violation of Idaho’s
foreclosure statutes, or otherwise suggest that the initiation of foreclosure proceedings
against Cherian was improper.
C. Securitization of the Note Does Not Affect the Right to Foreclose.
Cherian alludes to several theories to suggest that securitization of the loan
somehow affects CitiMortgage’s interest in the property or otherwise affects its right to
foreclose. “This is not a new battlefield. Several courts have rejected various theories
that securitization of a loan somehow diminishes the underlying power of sale that can be
exercised upon a trustor's breach.” Washburn v. Bank of America, N.A., Case No. 1:11–
cv–00193–EJL–CWD, 2011 WL 7053617, *4-5 (D. Idaho October 21, 2011) (internal
quotation marks omitted) (citing cases).
Nothing Cherian offers convinces the Court to reject those decisions. In his
response brief, Cherian ponders:
How does Plaintiff know what interest Defendant Citimortgage Inc., still
has? This is a cloud on Plaintiffs title until resolved. How did Defendant
U.S. Bank N.A wind up with something Defendant Cititmortgage Inc., once
had, which was securitized, and the trust involved maybe having been
dissolved before any transfer to U.S. Bank N.A.? Who knows what claims
may be made unless Citimortgage Inc. is found to really have no interest?”

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Pl’s Resp. at 3, Dkt. 33. But Cherian’s ruminations do not convince the Court that
securitization of the loan affects the right to foreclose. As the Ninth Circuit Bankruptcy
Appellate Panel recently observed, the borrower (the maker of the note) “should be
indifferent as to who owns or has an interest in the note so long as it does not affect the
maker's ability to make payments on the note.” Veal v. Am. Home Mortgaging Serv., Inc.,
450 B.R. 897, 912 (9th Cir. BAP 2011).
Here, Cherian’s allegations and publicly recorded documents show that he has the
information he needs to make payments on the note. And he alleges no facts that
duplicate claims have been made to collect on the note. Rather, all the evidence shows
that Cherian is over $100,000 behind on his loan payments. He defaulted on his loan
obligation and the documents he signed in connection with obtaining the loan state that
the property may be sold in a non-judicial foreclosure sale under these circumstances.
Securitization of the loan does not discharge Cherian’s clear contractual obligation to
repay the loan.
D. Proof of Note Ownership Does Not Bear on Defendants’ Right to
Foreclose.
Cherian suggests that CitiMortgage must produce the note to prove their right to
foreclose. But the Idaho Supreme Court rejected this argument in Trotter v. Bank of New
York Mellon: “a trustee may initiate nonjudicial foreclosure proceedings on a deed of
trust without first proving ownership of the underlying note….” 275 P.3d 857 (Idaho
2012). This Court, in conformance with the Idaho Supreme Court’s interpretation of
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Idaho law, likewise rejects Cherian’s argument that his lack of knowledge regarding
which entity owns the note somehow affects the right to foreclose. The Court will
therefore dismiss this claim.
E. The Alleged Splitting of the Note and Trust Deed Did Not Extinguish the
Right to Foreclose.
Cherian alleges that none of the Defendants “have any valid claim to or interest
in” the property due to “split of ownership of the notes and deeds of trust.” Compl. ¶
24(b), Dkt. 6-1. In Cervantes v. Countrywide Home Loans, Inc., the Ninth Circuit,
explaining that MERS is an electronic database that tracks the transfers of the beneficial
interest in home loans, held that use of the MERS system does not eliminate a party’s
right to foreclose – even accepting the premise that use of MERS splits the note from the
deed. 656 F.3d 1034 (9th Cir. 2011). Applying Ninth Circuit law, this Court finds that
any alleged splitting of the note from the deed does not preclude the proper Defendant in
this case, or any other proper party, from foreclosing on Cherian’s Deed of Trust.
F. MERS Is a Proper Beneficiary.
Cherian also argues that MERS did not have the authority under Idaho law, either
“by right” or “by agency,” to transfer the beneficial interest in the Deed of Trust to U.S.
Bank. This position has been routinely rejected by the courts, including this Court. See,
e.g., Hobson v. Wells Fargo Bank, N.A., 2012 WL 505917, *5 (D.Idaho February 15,
2012). In Hobson, relying in part on the Idaho Supreme Court decision in Trotter, this
Court concluded that MERS had the authority to assign its beneficial interest in the deed
MEMORANDUM DECISION AND ORDER - 9

of trust to the foreclosing bank. Id. By contrast, Cherian has failed to cite any
controlling authority supporting his position that MERS is a sham beneficiary. Nor has
Cherian alleged any facts distinguishing this case from Hobson or Trotter. In accordance
with these decisions, the Court likewise concludes here that MERS had the authority to
assign its beneficial interest in the Deed of Trust to U.S. Bank.
G. CitiMortgage Is Not a Debt Collector Under the FDCPA.
Congress enacted the Fair Debt Collection Practices Act (FDCPA) “to eliminate
abusive debt collection practices by debt collectors, to insure that those debt collectors
who refrain from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers against debt
collection abuses.” 15 U.S.C.A. § 1692. But the “activity of foreclosing on [a] property
pursuant to a deed of trust is not the collection of a debt within the meaning of the”
FDCPA. Hulse v. Ocwen Fed. Bank, FSB, 195 F.Supp.2d 1188, 1204 (D.Or. 2002). And
lenders and mortgage companies are not “debt collectors” within the meaning of the
FDCPA. Ines v. Countrywide Home Loans, Inc., Case No. 08cvl267 WQH (NLS), 2008
WL 2795875, *3 (S.D.Cal. July 18, 2008) (citing Williams v. Countrywide, 504
F.Supp.2d 176, 190 (S.D.Tex.2007) (“Mortgage companies collecting debts are not ‘debt
collectors.’”). In this case, Cherian does not allege any facts in support of his allegations
that the Defendants, including CitiMortgage, qualify as “debt collectors,” or that
CitiMortgage engaged in “debt collection activity.”
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H. Cherian Fails to Allege a Violation of the ICPA or the Idaho Code.
In his Amended Complaint, Cherian alleges that Defendants, including
CitiMortgage, violated the ICPA, as well as other unnamed sections of the Idaho Code,
but he does not explain how. Without facts to support this conclusory allegation, any
claim against CitiMortgage asserting a violation of ICPA must be dismissed. Twombly,
550 U.S. at 555.
I. Cherian Fails to Allege a Violation of the Truth In Lending Act.
The Truth in Lending Act describes both an obligor’s right to rescind, as well as
the “tender” rule referenced above. 15 U.S.C. § 1635(a) and (b). Upon rescission both the
creditor and obligor must return or tender the property of the other. The Ninth Circuit
explained in Yamamoto v. Bank of New York that rescission should be conditioned on
repayment of the amounts lent by the creditor. 329 F. 3d 1167 (9th Cir 2003). Because,
as discussed above, Cherian has not met this tender requirement, his TILA claim must be
dismissed.
Even if Cherian could tender the amount of the loan the statute of limitations
would still apply. TILA imposes a three-year statute of limitations: “An obligor’s right
of rescission shall expire three years after the date of consummation of the transaction. 15
USC § 1635(f) (2006). The consummation of the transaction as alleged was in April 2006
which is more than three years ago and, therefore, a TILA claim is time barred. Compl. ¶
15.

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ORDER
IT IS ORDERED that Defendant CitiMortgage, Inc.’s Motion to Dismiss (Dkt. 31)
is GRANTED.

DATED: November 20, 2012

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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