Lee et al v. Federal National Mortgage Association et al

Filing 29

MEMORANDUM OPINION AND ORDER 1. Bank Defendants' Motion to Dismiss (Doc. No. 7 ) is GRANTED. 2. WGC's Motion to Dismiss (Doc. No. 6 ) is GRANTED. 3. Plaintiffs' Complaint (Doc. No. 1 , Ex. 1) is DISMISSED WITH PREJUDICE. (Written Opinion). Signed by Judge Donovan W. Frank on 6/12/2013. (BJS)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Cheng Lee and Sheng Lee,

Civil No. 13-180 (DWF/SER)

Plaintiffs,
v.

MEMORANDUM
OPINION AND ORDER

Federal National Mortgage Association;
SunTrust Mortgage, Inc.; Wilford and
Geske P.A., and also all other persons,
unknown claiming any right, title, estate,
interest, or lien in the real estate described
in the complaint herein,
Defendants.

William B. Butler, Esq., Butler Liberty Law, LLC, counsel for Plaintiffs.
Andre T. Hanson, Esq., Margaret Rudolph, Esq., and Sparrowleaf Dilts McGregor, Esq.,
Fulbright & Jaworski LLP, counsel for Defendants Federal National Mortgage
Association and SunTrust Mortgage, Inc.
Christina M. Snow, Esq., Wilford, Geske & Cook, PA counsel for Wilford, Geske &
Cook, PA.

INTRODUCTION
This matter is before the Court on a Motion to Dismiss brought by Defendant
Wilford, Geske & Cook, PA (“WGC”) (Doc. No. 6) and a Motion to Dismiss brought by
Defendants Federal National Mortgage Association (“Fannie Mae”) and SunTrust
Mortgage, Inc. (“SunTrust”) (together, “Bank Defendants”) (Doc. No. 7). For the
reasons set forth below, the Court grants the motions to dismiss.

BACKGROUND
Plaintiffs Cheng Lee and Sheng Lee (together, “Plaintiffs”) are loan borrowers
who executed a note and mortgage with respect to their home in Ramsey County,
Minnesota. (Doc. No. 1, Ex. 1 (“Compl.”) ¶¶ 1, 6.) 1 On July 9, 2008, Plaintiffs executed
a promissory note in favor of SunTrust and a mortgage in favor of Mortgage Electronic
Registration Systems, Inc. (“MERS”), as nominee for SunTrust. (Id. ¶ 6, Ex. 1.) MERS
assigned its interest in the mortgage to SunTrust on November 20, 2009, in a recorded
assignment. (Id. ¶ 9, Ex. 2.) The assignment was executed by Annette Holman-Foreman
as Vice President of MERS. (Id.)
WGC was retained to foreclose on the property. (Id. ¶ 13.) WGC executed and
recorded a Notice of Pendency and Power of Attorney (“POA”), dated November 20,
2009. (Id.) The POA was executed by Annette-Homan-Foreman, as Vice President of
SunTrust. (Id.) The foreclosure was stopped after Plaintiff was granted a loan
modification. (Doc. No. 10, Lindahl Aff. ¶ 2, Ex. 1.) 2

1

Both Bank Defendants and WGC filed their papers in support of their respective
motions on March 1, 2013. (Doc. Nos. 9 & 12.) Plaintiffs filed their opposition to
WGC’s motion to dismiss on March 21, 2013, and then on March 22, 2013, filed an
Amended Complaint. (Doc. Nos. 18 & 19.) Plaintiffs filed the Amended Complaint
without a supporting motion for leave to amend. Thus, the Amended Complaint is
procedurally improper and the Court declines to consider it. Even so, the Court has
reviewed the Amended Complaint and notes that it would not survive the pending
motions to dismiss and is, therefore, futile.
2

The Court considers these materials because they are necessarily embraced by the
pleadings. See Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).

2

Plaintiffs then defaulted on their modified loan. MERS again assigned any
interest it had in the mortgage to SunTrust, in a recorded assignment, on
February 1, 2012. (Compl. ¶ 15, Ex. 4.) Rachel Dixon executed the assignment as Vice
President of MERS. (Id.) WGC was retained to foreclose and executed and recorded a
new POA. (Id. ¶ 17, Ex. 5.) Kanitra Roberts executed the POA as an Officer of
SunTrust. (Id.) WGC noticed a foreclosure sale on behalf SunTrust. (Id. ¶ 19, Ex. 6.)
The property was sold to SunTrust at the Sheriff’s sale on May 25, 2012. (Id.) On July
3, 2012, SunTrust assigned the Sheriff’s Certificate to Fannie Mae. (Id. ¶ 21, Ex. 7.) The
six-month statutory period for Plaintiffs to redeem the property expired on November 25,
2012. See Minn. Stat. § 580.23. Fannie Mae commenced an eviction proceeding, which
was stayed in January 2013 pending resolution of this case. (Doc. No. 9 at 3, citing Fed.
Nat’l Mortg. Ass’n v. Sheng Lee, Cheng K. Lee, John Doe and Mary Rowe, Civ. No. 62HG-CV-12-3793 (Ramsey County District Court, Housing Conciliation Division).)
On or around December 20, 2012, almost seven months after the Sheriff’s sale,
Plaintiffs commenced this action in Ramsey County District Court. (Compl.) Fannie
Mae and SunTrust removed the action to this Court. (Id.) In their Complaint, Plaintiffs
assert five causes of action: (1) Determination of Adverse Claims, Minn. Stat. § 559.01;
(2) Declaratory Judgment, Minn. Stat. § 555.01, et seq.; (3) Penalties for Deceit or
Collusion, Minn. Stat. § 481.07; (4) Negligence Per Se; and (5) Slander of Title. (Compl.
¶¶ 35-62.) Plaintiffs’ claims are all based on two legal theories: (1) that the foreclosure
was procedurally defective because there was an unrecorded assignment of mortgage to
Fannie Mae before the Sheriff’s sale (id. ¶¶ 11, 22-29); and (2) that the signatories on
3

several of the foreclosure related mortgage instruments did not have legal authority to
execute the instruments (id. ¶¶ 10, 14, 16 & 18). Plaintiffs contend that the foreclosure
sale was void and that they are the owners of fee title to the property. (Id. ¶¶ 32-34.)
Defendants now move to dismiss all of Plaintiffs’ claims. The Court considers the
pending motions below.
DISCUSSION
I.

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
Cir. 1986) (citations omitted). 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, 186 F.3d at 1079 (citations omitted).
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,
547 (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
4

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.
II.

Motions to Dismiss
A.

Rule 8

Bank Defendants and WGC 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 demand “more than an unadorned, the-defendant-unlawfullyharmed-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). 3

3

Tthe Court rejects Plaintiffs argument that “it is fundamentally unfair, unjust, and
raises an issue of due process to apply federal Rule 8 standards to a complaint meant for
state court proceedings.” (Doc. No. 18 at 7.) It is clear that federal pleading standards
apply to state substantive law to determine if a complaint sets forth a claim under state
law. See Karnatcheva v. JPMorgan Chase Bank, N.A., 704 F.3d 545, 548 (8th Cir.
2013). Counsel for Plaintiffs should be aware of this considering his “extensive history
of amending his filed complaints in other cases.” Stilp v. HSBC Bank USA, N.A., Civ.
No. 12-3098, 2013 WL 1175025, at *3 (D. Minn. Mar. 20, 2013).

5

Plaintiffs’ Complaint asserts two theories of an invalid foreclosure. However,
Plaintiffs base their claims on factual assertions that are based entirely on “information
and belief.” (Compl. ¶¶ 8, 10-12, 14, 16, 18, 20, 22 & 29.) For example, Plaintiffs allege
that the foreclosure sale is invalid because there was an unrecorded assignment of the
mortgage. In support, Plaintiffs allege, “upon information and belief,” that MERS no
longer considered the loan active prior to November 20, 2009. (Id. ¶ 12.) Plaintiffs
further assert that the alleged “deactivated” status of the loan resulted from an alleged
unrecorded assignment of the mortgage to Fannie Mae. (Id. ¶¶ 11, 20.) However,
Plaintiffs do not plead any specific facts to demonstrate that MERS assigned the
mortgage to Fannie Mae prior to November 20, 2009. 4 Plaintiffs do, however, allege that
there is a recorded assignment between MERS and SunTrust. (Id. ¶ 9.) In addition,
Plaintiffs allege “upon information and belief” that the various signatories who executed
the various mortgage instruments did not have legal authority to do so. (Id. ¶¶ 10, 14, 16,
18.) Again, Plaintiffs fail to offer any specific factual allegations to support the claim,
such as facts that would show that the signatories lacked legal authority. The allegations
do not satisfy Rule 8. See, e.g., Novak v. JP Morgan Chase Bank, N.A., Civ. No. 12-589,
2012 WL 3638512, at *6 (D. Minn. Aug. 23, 2012) (holding that plaintiffs’ claims “upon
information and belief” regarding the execution and validity of assignments are bare and

4

The only fact even arguably cited in support of the conclusion that there is an
unrecorded assignment is that Fannie Mae’s Seller/Servicer Guides require that an
assignment of mortgage be executed in favor of Fannie Mae. (Id. ¶¶ 22-26.) This
conclusory allegation is insufficient.

6

conclusory and fail to satisfy Rule 8); Haubrich v. U.S. Bank Nat. Ass’n, Civ. No.
12-565, 2012 WL 3612023, at *3-4 (D. Minn. Aug. 21, 2012) (holding conclusory
statements made “upon information and belief” regarding the execution and validity of
assignments did not meet requirements of Rule 8).
The Court concludes that Plaintiffs have failed to comply with Rule 8, as their
Complaint “tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal,
556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Plaintiffs’ bald assertions fail to
provide any facts necessary to render Plaintiffs’ claims plausible. 5 Accordingly, the
Complaint is properly dismissed. Even so, the Court considers alternative grounds for
dismissal below.
B.

Standing

Even if Plaintiffs’ pleading satisfied Rule 8, Plaintiffs lack standing. At the heart
of Plaintiffs’ claims is the allegation that the foreclosure and mortgage are void because
unrecorded assignments exist and because various documents were signed without legal
authority. However, the foreclosure sale occurred on May 25, 2012, and Plaintiffs filed
suit on December 20, 2012. Thus, on the face of the Complaint, it is clear that Plaintiffs
did not object to the foreclosure on their property within the six-month redemption
period. See Minn. Stat. § 580.23(a). Plaintiffs, therefore, no longer have standing to
5

This is especially true in light of the effect of the sheriff’s certificate of sale. See
Minn. Stat. § 580.19 (“Every sheriff’s certificate of sale made under a power to sell
contained in a mortgage shall be prima facie evidence that all the requirements of law in
that behalf have been complied with . . . after the time for redemption therefrom has
expired.”).

7

challenge the foreclosure. See Stein v. Chase Home Fin., Civ. No. 09–1995, 2010 WL
4736828, at *6 (D. Minn. Aug. 13, 2010) (holding that a plaintiff could not challenge the
validity of a foreclosure because the challenge was raised after the expiration of the
redemption period), aff’d, 662 F.3d 976 (8th Cir. 2011); Haubrich, Civ. No. 12-565, 2012
WL 3612023, at *3-4.
Accordingly, Plaintiffs’ Complaint is also properly dismissed for lack of standing.
C.

Merits

Because Plaintiffs’ entire Complaint is properly dismissed with prejudice for the
reasons stated above, the Court need not address the reasons that each individual cause of
action fails to state a claim. The Court does, however, note that the two theories posited
by Plaintiffs fail as a matter of law. First, Plaintiffs’ theory that prior to foreclosure, there
was an unrecorded assignment of their mortgage to Fannie Mae fails because Plaintiffs
do not allege that someone actually created and executed (and then failed to record) an
assignment prior to the foreclosure. Instead, Plaintiffs allege that Fannie Mae’s servicing
guides and certain of MERS system rules illustrate that there was an agreement to assign
the mortgage. Plaintiffs offer mere speculation about what may have happened, but the
facts alleged in the Complaint do not allow for any plausible inference in favor of
Plaintiffs’ theory. See, e.g., Dunbar v. Wells Fargo Bank, N.A., 853 F. Supp. 2d 839, 848
(D. Minn. 2012). Second, Plaintiffs’ allegations simply do not support their theory that
the signatories lacked legal authority to execute certain documents. Instead, their
allegations are refuted by the very documents upon which they rely. See, e.g., Nelson v.

8

The Bank of New York Mellon, Civ. No. 12-1096, 2012 WL 4511165, at *3 (D. Minn.
Oct. 1, 2012).
In short, Plaintiffs have not alleged any specific facts that would demonstrate a
defect in the mortgage instruments or specific facts or law that would call into question
any assignment of a mortgage in this action. Rather, Plaintiffs’ allegations are belied by
the exhibits attached to or embraced by the Complaint. For these reasons, Plaintiffs
cannot establish that Defendants were not entitled to foreclose. Plaintiffs’ claims are all
properly dismissed with prejudice. Because it is apparent to the Court that there is no
legal or factual basis for any asserted claim against Defendants, the Court grants both
Bank Defendants’ and WGC’s motion to dismiss.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that:
1.

Bank Defendants’ Motion to Dismiss (Doc. No. [7]) is GRANTED.

2.

WGC’s Motion to Dismiss (Doc. No. [6]) is GRANTED.

3.

Plaintiffs’ Complaint (Doc. No. [1], Ex. 1) is DISMISSED WITH

PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: June 12, 2013

s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge

9