Jerde et al v. JPMorgan Chase Bank, N.A. et al

Filing 48

ORDER granting 15 Motion to Dismiss; granting 17 Motion to Dismiss; granting 19 Motion to Dismiss; denying 30 Motion to Remand to State Court (Written Opinion). The Amended Complaint 10 is dismissed with prejudice. LET JUDGMENT BE ENTERED ACCORDINGLY. Signed by Judge Paul A. Magnuson on January 23, 2012. (alt)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Mardelle D. Jerde, Bennie Lee,
Jennifer M. Campos and Michael
Campos f/k/a Miguel Campos,
Sheldon Joppru and Kay Joppru,
Dwight Bradley Reisenauer and
Michelle Christine Reisenauer,
Akom Lero and Abang Gowi,
Donna M. Habeck and Kenneth G.
Habeck, Darren J. Carlson and
Kristel L. Carlson, Justin R. Herzog
and Ciara D. Herzog, Derek A.
Melichar and Melissa J. Melichar,
Jeffrey D. Robinson and Debra L.
Robinson, and John E. Norris,

Civil No. 11-2666 (PAM/FLN)

Plaintiffs,
v.

MEMORANDUM AND ORDER

JPMorgan Chase Bank, N.A., Chase
Home Finance, LLC, Mortgage
Electronic Registration Systems, Inc.,
Wells Fargo Bank, N.A., Federal
National Mortgage Assocation,
MERSCORP, Inc., and Shapiro &
Zielke, LLP,
Defendants.

This matter is before the Court on Defendants’ Motions to Dismiss and Plaintiffs’
Motion to Remand. For the reasons that follow, the Motion to Remand is denied and the
Motions to Dismiss are granted.

BACKGROUND
The 21 individual Plaintiffs in this case own homes in various places in Minnesota,
including Chisago, Scott, Washington, Hennepin, Anoka, and Dakota Counties. One or more
of the Defendants hold mortgages on Plaintiffs’ homes, and Plaintiffs apparently have
defaulted on these mortgages. Plaintiffs claim that Defendants do not have valid title to the
original notes for their mortgages and, as such, cannot foreclose. Essentially, Plaintiffs are
challenging the legality of the mortgage securitization system. As Defendants note,
Plaintiffs’ theory has been rejected by every court to consider it, including the Minnesota
Supreme Court. Plaintiffs’ counsel has brought no fewer than 15 similar lawsuits in this
District, all alleging that Defendants had no right to foreclose on their mortgages because
Defendants do not hold the original notes. At least three of the cases have already been
dismissed. Murphy v. Aurora Loan Servs., LLC, Civ. No. 11-2750 (D. Minn. Jan. 12, 2012)
(Montgomery, J.); Larsen v. Bank of America, Civ. No. 11-1775, 2011 WL 6065426 (D.
Minn. July 21, 2011) (Davis, C.J.); Butler v. Bank of America, N.A., Civ. No. 11-461, 2011
WL 2728321 (D. Minn. July 13, 2011) (Frank, J.). In all of these cases, as here, the
defendants removed the case to federal court claiming that the only non-diverse defendant,
a local law firm or the county sheriff, for example, was fraudulently joined, and the plaintiffs
moved to remand. In dismissing the cases listed above, each Judge determined that joinder
of the non-diverse defendant was fraudulent and denied the plaintiffs’ remand request.
Plaintiffs’ Amended Complaint (Docket No. 10) contains 13 counts. Count I is a
claim for “quiet title” against the bank Defendants (JPMorgan Chase Bank LLC and Chase
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Home Finance, LLP (collectively “JPMorgan Chase”), Mortgage Electronic Registration
Systems, Inc. (“MERS”), Wells Fargo Bank, N.A., Federal National Mortgage Assocation
(“Fannie Mae”), and MERSCORP, Inc.). Count II contends that these bank Defendants “Are
Not Real Parties in Interest,” and Count III contends that they “Do Not Have Legal Standing
to Foreclose Mortgages.”1 (Am. Compl. at 22, 23.) Count IV claims slander of title, Count
V claims conversion, Count VI claims unjust enrichment, Count VII claims a civil
conspiracy, Count VIII claims a breach of fiduciary duty, Count IX claims fraud, Count X
claims negligent misrepresentation, Count XII claims equitable estoppel, and Count XIII
seeks an accounting, all against the bank Defendants. Several of these causes of action are
also brought against Shapiro & Zielke, LLC, the law firm that allegedly effectuated the
illegal foreclosures: Counts IV, V, VII, X, and XII.
Plaintiffs assert only one cause of action against Shapiro & Zielke alone. Count XI
(misnumbered Count XIV) claims the law firm committed fraud by “conduct[ing] false and
fraudulent non-judicial foreclosures” because the firm did not verify “that the mortgage
assignee was the actual owner of Plaintiffs’ debt and/or the holder of Plaintiffs’ Original
Note.” (Am. Compl. ¶¶ 136, 137.)

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As the Honorable Ann D. Montgomery of this District recently noted, these two
claims “are not causes of action in Minnesota.” Murphy v. Aurora Loan Servs., LLC., Civ.
No. 11-2750, slip op. at 6 (D. Minn. Jan. 12, 2012). The Court will therefore dismiss these
claims without further discussion.
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DISCUSSION
A.

Motion to Remand
Plaintiffs have moved to remand the action, contending that the Court lacks diversity

jurisdiction over the matter because Shapiro & Zielke is a proper Defendant and not diverse
from Plaintiffs.
Fraudulent joinder occurs when a plaintiff files “a frivolous or otherwise illegitimate
claim against a non-diverse defendant solely to prevent removal.” Filla v. Norfolk S. Ry.
Co., 336 F.3d 806, 809 (8th Cir. 2003). Every Court in this District to have considered the
situation presented here has concluded that “there is no reasonable basis in fact and law
supporting a claim against the resident defendants.” Id. at 810.
Plaintiffs’ claims against the law firm are that the law firm had a duty to ensure that
its clients were actually entitled to foreclose on Plaintiffs’ homes and that it misrepresented
the legal standing of its clients to foreclose. But there is no basis in fact or law to infer any
legal duty between the law firm and Plaintiffs here. Moreover, attorneys are, in the main,
immune from actions taken within the scope of the employment relationship unless those
actions amount to “active steps” to conceal a fraud. L&H Airco, Inc. v. Rapistan Corp., 446
N.W.2d 372, 380 (Minn. 1989). No such active steps are alleged here.
Finally, and as discussed more fully below, Plaintiffs’ claims against the law firm fail
because their claims against all Defendants fail. As the Minnesota Supreme Court held more
than two years ago, a mortgagee need not have an interest in a promissory note to foreclose
on a mortgage. Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn.
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2009). Thus, whether or not Defendants are in possession of the actual promissory note is
beside the point; if they are the legal holders of the underlying security interest (the
mortgage), they are entitled to foreclose.
There is no reasonable basis supporting a claim against Shapiro & Zielke and, as such,
the Motion to Remand must be denied and Shapiro & Zielke dismissed as fraudulently
joined. The Court may thus exercise diversity jurisdiction over this matter.
B.

Motions to Dismiss
1.

Standard of Review

For purposes of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6),
the Court takes all facts alleged in the complaint as true. See Westcott v. Omaha, 901 F.2d
1486, 1488 (8th Cir. 1990). The Court must construe the factual allegations in the complaint
and reasonable inferences arising from the complaint favorably to the plaintiff and will grant
a motion to dismiss only if “it appears beyond doubt that the plaintiff can prove no set of
facts which would entitle him to relief.” Morton v. Becker, 793 F.2d 185, 187 (8th Cir.
1986) (citations omitted). The complaint must include “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
2.

Merits

Plaintiffs’ contentions can be summed up in this allegation from the Amended
Complaint: “Because Defendant has no right, title or interest in [Plaintiff’s] Original Note,
Defendant cannot exercise rights in the security instrument securing payments in the Original
Note.” (Am. Compl. ¶ 46.) In other words, despite their lengthy protestations to the contrary
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in their memoranda in opposition to the Motions to Dismiss, Plaintiffs’ argument is that
Defendants do not own the notes for Plaintiffs’ mortgages and thus cannot foreclose on those
mortgages.
Plaintiffs highlight findings by the Comptroller of Currency that some of the
Defendants here initiated foreclosure proceedings without insuring that the mortgage
documents were properly endorsed or assigned. But, again, Plaintiffs have no evidence that
this is what happened to them. They do not allege that they did not properly enter into the
mortgages on which the banks are foreclosing. Rather, they ask the Court to infer from the
Comptroller’s findings that all mortgages to which JPMorgan Chase or Wells Fargo are
parties are somehow faulty. This inference is not appropriate. To allow these patently
meritless claims to go forward would merely encourage all defaulting homeowners to file
similar suits, engaging in fishing expeditions to see if, possibly, there is some defect in their
mortgage that prevents the bank from foreclosing.
The legal foundation for Plaintiffs’ argument is simply incorrect. As the Eighth
Circuit recently stated, “the right to enforce a mortgage through foreclosure by advertisement
lies with the legal, rather than equitable, holder of the mortgage.” Stein v. Chase Home
Finance, LLC, 662 F.3d 976, 980 (8th Cir. 2011). The legal holder of a mortgage is the
holder of the mortgage itself; the holder of the note is the equitable holder of the mortgage.
Thus, it is irrelevant whether Defendants can establish that they hold the notes; there is no
dispute that Defendants hold the mortgage instruments and are therefore entitled to foreclose
on Plaintiffs’ properties.
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All of Plaintiffs’ other arguments are similarly without merit. For instance, Plaintiffs
have alleged no defect in the mortgage instrument, such as forgery or the like, and thus have
no legal support for their claim that Defendants are not holders in due course of the notes.
In addition, it is irrelevant whether Defendants are “holders in due course” or have any other
interest in the notes, as discussed above. Plaintiffs’ Amended Complaint fails to state a claim
on which relief can be granted and must be dismissed.
CONCLUSION
Plaintiffs’ claims are patently meritless, and border on frivolous. Dismissal of those
claims is therefore appropriate. Accordingly, IT IS HEREBY ORDERED that:
1.

Plaintiffs’ Motion to Remand (Docket No. 30) is DENIED;

2.

The Motion to Dismiss filed by Chase Home Finance, LLC, Federal National
Mortgage Association, JPMorgan Chase Bank, N.A., MERSCORP, Inc., and
Mortgage Electronic Registration Systems, Inc. (Docket No. 15) is
GRANTED;

3.

Shapiro & Zielke’s Motion to Dismiss (Docket No. 17) is GRANTED;

4.

Wells Fargo Bank, N.A.’s Motion to Dismiss (Docket No. 19) is GRANTED;
and

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5.

The Amended Complaint (Docket No. 10) is DISMISSED with prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated:

January 23, 2012

s/Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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