Mustafa et al v. Bank of America, N.A. et al
Filing
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MEMORANDUM OPINION AND ORDER 1. Defendants' respective motions to dismiss (Doc. Nos. 5 , 8 , & 11 ) are GRANTED. 2. Plaintiffs' Complaint (Doc. No. 1 ) is DISMISSED WITH PREJUDICE. 3. BOA's, MERSORPS's, and MERS' Motions for Sanctions (Doc. Nos. 31 , 32 & 33 ) are GRANTED. 4. Pursuant to Fed. R. Civ. P. 11, attorney William Butler shall reimburse BOA, MERSCORP, and MERS in the amount of their reasonable attorney fees and expenses incurred in litigating this action . Within fourteen (14) days of the date of this Order, BOA, MERSCORP, and MERS shall submit affidavits in support of the attorney fees and expenses incurred. Within one week from the date that Defendants submit their affidavits in support of attorney fees and expenses, Plaintiffs counsel will be permitted to file a response, limited to the issue of the reasonableness of the requested amount of attorney fees and costs. (Written Opinion). Signed by Judge Donovan W. Frank on 8/20/2012. (BJS)Y
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Waseem Mustafa; Lorin Mustafa;
Radjindre K. Bhoelai; Roger R. Cottrell;
Jennifer A. Cottrell; Shafiqua Janetkhan;
Hayat Janetkhan; Blia Tou Lee; May Lee;
Trang Le; Minh Quang Tran; Charles J. Cordes;
W. Scott Long, III; Susan M. Long;
Chia Pao Xiong; Ying Xiong; Brad Everett;
Lily Everett; Stacey R. Becklund, individually
and as personal representative of the estate of
Robert C. Anderson; Chad W. Everett; Robert J.
Schumacher; Tim Gallagher; and
Shannon E. Gallagher,
Civil No. 12-590 (DWF/TNL)
Plaintiffs,
v.
MEMORANDUM
OPINION AND ORDER
Bank of America, N.A.; BAC Home Loans
Servicing, LP; Mortgage Electronic
Registration Services, Inc.; MERSCORP, Inc.;
The Bank of New York Mellon; The Bank
of New York Mellon Trust Company; Federal
National Mortgage Association; and Federal Home
Loan Mortgage Corporation,
Defendants.
William B. Butler, Esq., Butler Liberty Law, LLC, counsel for Plaintiffs.
Alan H. Maclin, Esq., Mark G. Schroeder, Esq., and Benjamin E. Gurstelle, Esq., Briggs
& Morgan, PA; Calvin P. Hoffman, Esq., and Timothy M. Kelly, Esq., Leonard Street
and Deinard, PA, counsel for Bank of America, N.A.
Alan H. Maclin, Esq., Mark G. Schroeder, Esq., and Benjamin E. Gurstelle, Esq., Briggs
& Morgan, PA, counsel for BAC Home Loans Servicing, LP, Mortgage Electronic
Registration Services, Inc., MERSCORP, Inc., The Bank of New York Mellon, The Bank
of New York Mellon Trust Company, Federal National Mortgage Association, and
Federal Home Loan Mortgage Corporation.
INTRODUCTION
This matter is before the Court on a Motion to Dismiss Plaintiff Chad W. Everett’s
Claims brought by Bank of America, N.A. (“BOA”), Mortgage Electronic Registration
Systems, Inc. (“MERS”), and MERSCORP Holdings, Inc. (f/k/a MERSCORP, Inc.)
(Doc. No. 5); a Motion to Dismiss brought by Defendant Federal Home Loan Mortgage
Corporation (“Freddie Mac”) (Doc. No. 11); a Motion to Dismiss the Complaint brought
by BOA, BAC Home Loans Servicing, LP (“BOAHLS”), MERS, MERSCORP, The
Bank of New York Mellon, The Bank of New York Mellon Trust Company, and Federal
National Mortgage Association (“Fannie Mae”) (Doc. No. 8); and separate motions for
sanctions brought by BOA, MERS, and MERSCORP (Doc. Nos. 31, 32, & 33). For the
reasons set forth below, the Court grants Defendants’ motions to dismiss and the motions
for sanctions.
BACKGROUND
Plaintiffs are twenty-three individual homeowners and loan borrowers who claim
ownership in fourteen different properties located in Minnesota. (Doc. No. 1, Ex. 1,
Compl. ¶¶ 1-14.) Plaintiffs each took out loans that were secured by mortgages on their
properties. (Id.)
Plaintiffs assert that the mortgages against their respective homes are invalid and
voidable. (Id. ¶ 28.) In particular, Plaintiffs allege that they executed original promissory
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notes and/or mortgages in favor of entities different from Defendants, who now claim the
legal right to foreclose. (Id. ¶ 29.) Plaintiffs further allege that each of their notes and
mortgages was assigned to the corpus of a trust underlying a mortgage-backed security,
and that those assignments were not endorsed, executed, or recorded as required. (Id.
¶¶ 31-36.) Plaintiffs claim that the chain of title to each of their mortgages is thus
“broken,” that Defendants have no right, title, or interest in Plaintiffs’ properties, and that
Defendants have falsely asserted the power of sale pursuant to each of Plaintiffs’
mortgages. (Id. ¶¶ 37, 43-56.)
Plaintiffs initially filed suit in Ramsey County District Court on or around
February 15, 2011. (Compl.) In their Complaint, Plaintiffs assert four causes of action:
Count I—Quiet Title; Count II—Declaratory Judgment (alleging that parties other than
Defendants have legal title to Plaintiffs’ notes and mortgages); Count III—Declaratory
Judgment (seeking declarations as to the rights and obligations under the original notes
and mortgages); and Count IV—Slander of Title. (Compl.) The case was removed to
this Court on March 6, 2012, based on diversity jurisdiction under 28 U.S.C. § 1332(a).
(Doc. No. 1.) Defendants now move to dismiss all of Plaintiffs’ claims in the Complaint.
DISCUSSION
I.
Motions to Dismiss
A.
Legal Standard
In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court assumes all
facts in the complaint to be true and construes all reasonable inferences from those facts
in the light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th
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Cir. 1986). In doing so, however, a court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999), or legal conclusions drawn by the pleader from the facts alleged. Westcott v. City
of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A court may consider the complaint,
matters of public record, orders, materials embraced by the complaint, and exhibits
attached to the complaint in deciding a motion to dismiss under Rule 12(b)(6). Porous
Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
545 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. As the United States Supreme Court recently reiterated, “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,”
will not pass muster under Twombly. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 555). In sum, this standard “calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of [the claim].” Twombly, 550
U.S. at 556.
B.
Rule 8
Defendants argue that Plaintiffs’ Complaint violates Rule 8 of the Federal Rules of
Civil Procedure. Under Rule 8, a complaint must include “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While
the Rule 8 pleading standard does not require “detailed factual allegations,” it does
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demand “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Iqbal, 556 U.S. at 678. A complaint will not suffice if it “tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557).
Plaintiffs’ Complaint asserts four causes of action involving twenty-three
Plaintiffs, fourteen mortgage loans, and eight Defendants. Plaintiffs’ Complaint,
however, fails to provide any facts establishing the current status of the loans or the
status of any foreclosure proceedings (i.e., when a notice of foreclosure sale was
published, when a foreclosure sale is scheduled to occur, whether the mortgages have
been foreclosed upon, or whether the statutory redemption period has expired for any
properties already sold). In addition, the Complaint contains very few factual allegations
regarding each Defendant’s purportedly wrongful conduct and instead contains
numerous factual allegations and claims that are asserted without any differentiation
among the Defendants. The Complaint also fails to specify which Plaintiff is asserting
which claims against which Defendant. The Court concludes that such pleading is
inadequate and that Rule 8 requires greater specificity than that found in Plaintiffs’
Complaint. See, e.g., Liggens v. Morris, 749 F. Supp. 967, 971 (D. Minn. 1990). Thus,
this case is properly dismissed under Rule 8. 1 Even so, the Court considers alternative
grounds for dismissal below.
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It also appears that Plaintiffs lack standing. To have standing under Article III of
the Constitution, a plaintiff must allege (1) a concrete injury in fact, (2) that is fairly
traceable to the challenged action, and (3) that is likely to be redressed by the relief
sought. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). Here,
(Footnote Continued on Next Page)
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C.
Claims Against Defendants
At the heart of all of Plaintiffs’ claims is the allegation that Defendants do not
have legal title to Plaintiffs’ original notes, and do not have a right, title, or interest in
Plaintiffs’ properties. In essence, Plaintiffs argue that Defendants do not possess the
original promissory notes secured by Plaintiffs’ respective mortgages and thus cannot
enforce the notes through acceleration and a foreclosure sale. (See, e.g., Compl.
¶¶ 43 -56.) The Minnesota Supreme Court, the Eighth Circuit Court of Appeals, this
Court, and other courts in this District have already considered and rejected this
argument. See Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 500-01
(Minn. 2009) (holding that a mortgagee with legal title is not required to have any interest
in the promissory note to foreclose by advertisement); Stein v. Chase Home Finance,
LLC, 662 F.3d 976, 980 (8th Cir. 2011) (“[T]he right to enforce a mortgage through
foreclosure by advertisement lies with the legal, rather than equitable, holder of the
(Footnote Continued From Previous Page)
Plaintiffs do not allege sufficient facts with respect to the status of each loan and the
related foreclosure proceedings, and thus the Court cannot determine whether there is a
viable controversy between the parties, let alone one that can be redressed by the relief
sought. See, e.g., Tully v. Bank of Am., N.A., Civ. No. 10-4734, 2011 WL 1882665,
at *5-6 (D. Minn. May 17, 2011); see also Sovis v. Bank of New York Mellon, Civil No.
11-2253, 2012 WL 733758, at *4-5 (D. Minn. Mar. 6, 2012) (noting that the plaintiff’s
failure to identify a causal nexus between the challenged mortgage assignments and her
injuries evidenced a lack of standing); Karnatcheva v. JPMorgan Chase Bank, N.A., Civil
No. 11-3452, 2012 WL 1657531, at *6 (D. Minn. May 11, 2012) (“Plaintiffs have no
standing to assert any breaches of the [Pooling and Servicing Agreements], as they are
not parties or third-party beneficiaries to such agreements.”).
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mortgage.”); Butler v. Bank of Am., Civil No. 11-461, 2011 WL 2728321, at *6 (D. Minn.
July 13, 2011); Welk v. GMAC Mortgage, LLC, Civil No. 11-2676, 2012 WL 1035433, at
*6 (D. Minn. Mar. 29, 2012); Jerde v. JPMorgan Chase Bank, N.A., Civil No. 11-2666,
2012 WL 206271, at *3 (D. Minn. Jan. 24, 2012); Murphy v. Aurora Loan Servs., LLC,
Civil No. 11-2750, 2012 WL 104543, at *3 (D. Minn. Jan. 12, 2012); Kraus v.
CitiMortgage, Inc., Civil No. 11-3213, 2012 WL 1581113, at *3 (D. Minn. May 4, 2012)
Vang v. PNC Mortgage, Inc., Civil No. 11-3741, 2012 WL 2005398, at *3 (D. Minn.
June 5, 2012); Johnson v. Deutsche Bank Nat’l Trust Co., Civil No. 12-445, 2012 WL
2119258, at *2-3 (D. Minn. June 11, 2012); Adorno v. Citi Mortgage, Inc., 2012 WL
2395322, at *4 (D. Minn. June 25, 2012).
As previously explained in the above cases, it does not matter whether Defendants
can establish that they hold the promissory notes. Moreover, to the extent Plaintiffs argue
that the chain of title to their mortgages is somehow “broken” (Compl. ¶ 37), such claims
have also been rejected. See Karnatcheva, 2012 WL 1657531, at *5. Plaintiffs have not
alleged facts that would show that any Defendant was not the record owner of any
mortgage at the time it initiated any foreclosure by advertisement. Nor have Plaintiffs
alleged any specific facts that would demonstrate a defect in any of the mortgage
instruments or specific facts or law that would call into question any assignment of a
mortgage in this action.
For these reasons, Plaintiffs cannot establish that Defendants were not entitled to
foreclose. Because all of Plaintiffs’ claims against Defendants are based on the same
discredited legal argument, they are all properly dismissed with prejudice.
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II.
Motions for Sanctions
BOA, MERSCORP, and MERS all move for Rule 11 sanctions against Plaintiffs’
attorney, William B. Butler, and his law firm, Butler Liberty Law, LLC. (Doc. Nos. 31,
32, and 33.) Rule 11(b) of the Federal Rules of Civil Procedure requires an attorney to
certify to the court that his client’s “claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for extending, modifying, or
reversing existing law or for establishing new law.” Fed. R. Civ. P. 11(b)(2). In
determining whether Rule 11 has been violated, a court determines whether a reasonable
and competent attorney would believe in the merit of an argument. Coonts v. Potts, 316
F.3d 745, 753 (8th Cir. 2003). An attorney who violates Rule 11 may be sanctioned.
Fed. R. Civ. P. 11(c)(1). A sanction under Rule 11 “must be limited to what suffices to
deter repetition of the conduct or comparable conduct by others similarly situated.” Fed.
R. Civ. P. 11(c)(4).
Here, the Court concludes that sanctions are warranted because Butler is again
attempting to assert the consistently rejected “show me the note” legal theory, along with
similarly baseless quiet title and slander of title claims. See, e.g., Jackson, 770 N.W.2d
at 500-01; Stein, 662 F.3d at 980; Welk, 2012 WL 1035433, at *21 n.14. In spite of clear,
binding precedent to the contrary, Butler continues to file cases based on these legal
arguments. Moreover, Butler has already been sanctioned for bringing similar claims.
See, e.g., Welk, 2012 WL 1035433, at *26–27 (assessing $50,000 in sanctions). Given
Butler’s continued insistence on filing and litigating the same claims based on
consistently rejected legal theories, the Court finds that sanctions here are warranted in
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the amount of reasonable attorney fees and other expenses incurred by BOA, MERS, and
MERSCORP in litigating this case.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that:
1.
Defendants’ respective motions to dismiss (Doc. Nos. [5], [8], & [11]) are
GRANTED.
2.
Plaintiffs’ Complaint (Doc. No. [1]) is DISMISSED WITH PREJUDICE.
3.
BOA’s, MERSORPS’s, and MERS’ Motions for Sanctions (Doc.
Nos. [31], [32] & [33]) are GRANTED.
4.
Pursuant to Fed. R. Civ. P. 11, attorney William Butler shall reimburse
BOA, MERSCORP, and MERS in the amount of their reasonable attorney fees and
expenses incurred in litigating this action. Within fourteen (14) days of the date of this
Order, BOA, MERSCORP, and MERS shall submit affidavits in support of the attorney
fees and expenses incurred. Within one week from the date that Defendants submit their
affidavits in support of attorney fees and expenses, Plaintiffs’ counsel will be permitted to
file a response, limited to the issue of the reasonableness of the requested amount of
attorney fees and costs.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: August 20, 2012
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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