Mine v. Federal Home Loan Mortgage Corp. et al

Filing 16

MEMORANDUM OPINION AND ORDER granting 4 Defendants' Motion to Dismiss, unless within 14 days, Plaintiff files with the court a loan modification agreement signed by Mine and relevant Defendants (Written Opinion). Signed by Judge Ann D. Montgomery on 06/05/2013. (TLU)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Zaw Mine,
Plaintiff,
MEMORANDUM OPINION
AND ORDER
Case No. 13-220 ADM/JSM

v.
Federal Home Loan Mortgage Corporation,
CitiMortgage, Inc., and Usset, Weingarden
& Leibo, PLLP,
Defendants.

William Bernard Butler, Esq., Butler Liberty Law, LLC, Minneapolis, MN, on behalf of
Plaintiff.
Thomas J. Lallier, Esq., and Cameron A. Lallier, Esq., Foley & Mansfield, PLLP, Minneapolis,
MN, on behalf of Defendants.

I. INTRODUCTION
On March 26, 2013, the undersigned United States District Judge heard oral argument on
Defendants Federal Home Loan Mortgage Corporation’s (“Freddie Mac”), CitiMortgage, Inc.’s
(“CMI”) and Usset, Weingarden & Leibo, PLLP’s (“Usset”) (collectively, the “Defendants”)
Motion to Dismiss [Docket No. 4].
II. BACKGROUND1
On November 23, 2005, Plaintiff Zaw Mine, his wife Kyi Kyi Lwin, and a third person,

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In considering Defendants’ Motion to Dismiss, the Court considers the facts alleged in
Plaintiff’s Amended Complaint to be true. See Hamm v. Groose, 15 F.3d 110, 112 (8th Cir.
1994). The Court may also consider materials embraced by the pleadings, exhibits attached to
the pleadings, and matters of public record. Illig v. Union Elec. Co., 652 F.3d 971, 976 (8th Cir.
2011).

Khaing Aung, acquired a house by warranty deed in St. Paul, Minnesota (the “Property”).2 Decl.
Paul A. Weingarden [Docket No. 7] Ex. A (“Warranty Deed”). On the same day, Mine and his
co-owners also executed a $203,000 mortgage (the “Mortgage”) on the Property. Id. Ex. B.
First Republic Mortgage Corporation (“First Republic”) was the initial mortgagee. On March 7,
2006, the Mortgage was filed in the Registrar of Titles office in Ramsey County, Minnesota. Id.
The provisions of the Mortgage, signed by Plaintiff, specifically allowed for assignment
and transfer of the rights in the Mortgage:
This Security Instrument secures to Lender:
(i) the repayment of the Loan, and all renewals, extensions and modifications of
the Note; and
(ii) the performance of Borrower's covenants and agreements under this Security
Instrument and the Note. For this purpose, Borrower does hereby mortgage, grant
and convey to Lender and Lender's successors and assigns, with power of sale,
the following described property . . . .
Id. at 3.
First Republic assigned the Mortgage to ABN AMRO Mortgage Group, Inc. (“ABN”) by
drafting an assignment of mortgage (the “AOM”). Weingarden Decl. Ex. C. Susan LeGrand
executed the AOM as the Assistant Secretary for First Republic on November 23, 2005. Id.
First Republic filed the AOM on March 7, 2006. Id.
Almost two years later, ABN merged into CMI, and CMI recorded a Certificate of
Merger on August 21, 2007. Id. Ex. D; Am. Compl. [Docket No. 3] ¶ 14. In May 2009, CMI

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In a footnote in Defendants’ brief in support of its motion to dismiss, Defendants note
that only Zaw Mine is named as a Plaintiff. Mem. Supp. Mot. Dismiss [Docket No. 6] 2 n.2.
The status of the other registered owners of the property is unknown. Defendants express
concern that if this complaint is dismissed, Plaintiff’s counsel, William B. Butler, has
strategically excluded them as named parties so that he can plead new cases at a later time under
the names Kyi Kyi Lwin and/or Khaing Aung. Id. Neither party briefed the issue and the Court
will not sua sponte join Kyi Kyi Lwin and Khaing Aung without further information.
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authorized Usset to foreclose the Property by advertisement. Weingarden Decl. Ex. E. Aaron
Menne executed a Notice of Pendency of Proceeding and Power of Attorney to Foreclose
Mortgage (“NOP”) as a Vice President of CMI. Id. On July 16, 2009, the Sheriff’s sale was
conducted and CMI bought the Property for $125,000. Id. Ex. F. The next day, CMI assigned
the Sheriff’s Certificate of Sale to Freddie Mac. Id. Ex. G.
Freddie Mac petitioned for a new certificate of title after the mortgage sale. On August
11, 2010, the Ramsey County District Court found: 1) “Petitioner and owners have entered into a
Loan Modification Agreement, and 2) “by virtue of the Loan Modification Agreement, the
Sheriff’s sale . . . and the Assignment of the Sheriff’s Certificate . . . became a nullity and void;
that said mortgage Document . . . was fully reinstated and that the power of sale contained in
said mortgage was also reinstated.” Id. Ex. H.
In March 2012, CMI authorized Usset to institute a second foreclosure proceeding by
advertisement. Id. Ex. I. Brian Liebo signed the NOP on behalf of Usset. Id. In April 2012,
CMI filed a Power of Attorney (“POA”) under the signature of Jonica Booth. Id. Ex. J. The
second Sheriff’s sale was conducted on May 22, 2012. Id. Ex. K.
Mine asserts the following, “upon information and belief.” First, Mine asserts that First
Republic originated the mortgage loan for delivery to Freddie Mac through CMI. Am. Compl. ¶
8. Second, Freddie Mac acquired its interest in the November 2005 Mortgage prior to the
commencement of the foreclosure by advertisement. Id. ¶¶ 10, 34. Next, LeGrand did not have
legal authority to execute the November 23, 2005 AOM to CMI. Id. ¶ 13. Meene did not have
legal authority to execute the May 5, 2009 NOP. Id. ¶ 16. CMI did not have any interest in the
Mortgage as of May 12, 2009, because there was an unrecorded assignment of mortgage from
CMI to Freddie Mac. Id. ¶ 18. In addition, Liebo did not have legal authority to execute the
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March 30, 2012 NOP because as an employee of CMI, he and CMI did not have any interest in
the Property as a result of the unrecorded AOM to Freddie Mac. Id. ¶ 22. For the same reason,
Booth also did not have legal authority to execute the April 4, 2012 POA. Id. ¶ 24.
Finally, Mine alleges that at an unidentified time during one of the foreclosure periods,
CMI offered him a modification agreement, which he accepted and honored by making
payments of approximately $1300 per month to CMI. Id. ¶ 26. CMI, Mine claims, breached this
agreement by demanding more than amounts due on the modification agreement and then
wrongly declaring a default, and proceeding with non-judicial foreclosure. Id. ¶ 27.
The Amended Complaint raises five causes of action. Count 1 seeks a “Determination of
Adverse Interests” under Minnesota’s quiet title statute, Minn. Stat. § 559.01, and is brought
against CMI, “and/or other Defendants whose identity is unknown, claims [sic] an adverse
interest, claim or right to the real property . . . . Id. ¶ 42. Count 2 asks for a declaratory
judgment that the Sheriff’s certificate of sale is void, that the assignments of mortgage are void,
that the notices of pendency are void, that the power of attorney is void, and that Mine “remains
the owner of the property in fee title.” Id. ¶ 48. Count 3 claims Usset (the “law firm”) violated
Minn. Stat. § 580.05 and Minn. R. Prof. Conduct 3.3, and that these alleged violations constitute
negligence per se. Id. ¶¶ 50-55. Count 4 claims slander of title against the law firm. Id. ¶ 57.
Finally, Count 5 claims breach of contract against CMI, acting as an agent of Freddie Mac, for
its alleged failure to honor its loan modification agreement with Mine. Id. ¶¶ 62-65.
III. DISCUSSION
A. Motion to Dismiss Standard of Review
A motion to dismiss a complaint for failure to state a claim is governed by Rule 12(b)(6)
of the Federal Rules of Civil Procedure. In considering a Rule 12(b)(6) motion, the court views
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the pleadings in the light most favorable to the nonmoving party and treats the alleged facts as
true. See Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Conclusions of
law made by the nonmoving party, however, are not “blindly accept[ed].” Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A Rule 12(b)(6) motion to dismiss is granted
when the factual allegations, even assumed to be true, do not entitle that party to relief. See, e.g.,
Taxi Connection v. Dakota, Minn. & E. R.R. Corp., 513 F.3d 823, 826-27 (8th Cir. 2008). On a
motion to dismiss, a court may refer to public records and documents to which the complaint
refers. Illig v. Union Elec. Co., 652 F.3d 971, 976 (8th Cir. 2011); Porous Media Corp. v. Pall
Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings “shall contain a short
and plain statement of the claim showing that the pleader is entitled to relief.” A pleading must
allege “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). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw a reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Determining whether
a complaint states a plausible claim for relief is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense.” Id. “But where the
well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,
the complaint has alleged—but not ‘shown’—‘that the pleader is entitled to relief.’” Id. (quoting
Fed. R. Civ. P. 8(a)(2)).
B. The Claims
1. Breach of Contract
Minnesota’s statute of frauds bars some breach of contract claims. That statute prohibits
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any action to enforce a “credit agreement” unless “the agreement is in writing, expresses
consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the
debtor.” Minn. Stat. § 513.33, subd. 2. A credit agreement is any agreement “to lend or forebear
repayment of money, goods, or things in action, to otherwise extend credit, or to make any other
financial accommodation.” Id. subd. 1. “[A] promise to postpone the foreclosure sale falls
squarely within the plain meaning of a forbearance agreement and is thus a ‘credit agreement’
within the meaning of the [Minnesota credit statute of frauds].” Brisbin v. Aurora Loan Servs.,
LLC, 679 F.3d 748, 752 (8th Cir. 2012). Furthermore, under Minnesota law, “[t]he formation of
a contract requires communication of a specific and definite offer, acceptance, and
consideration.” Commercial Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782
(Minn. Ct. App. 2006) (citing Pine River State Bank v. Mettille, 333 N.W.2d 622, 626-27 (Minn.
1983)).
At the core of Mine’s claims is an alleged loan modification agreement. In an earlier
proceeding in this case in Ramsey County District Court, Judge Dale Lindman referenced a loan
modification agreement.3 Mine asserts that he paid $1300 per month based on this loan
modification agreement. Mine claims CMI demanded higher payments in violation of the loan
modification and then improperly conducted the second foreclosure proceeding based on Mine’s
refusal to pay the higher amount. If the loan modification agreement does exist and contains the
terms as conveyed by Mine, then he may have stated a breach of contract claim.
But, these claims are thus far unsupported by proof of the actual agreement. In Forseth v.
Bank of Am., N.A., 2013 U.S. Dist. LEXIS 73834, at *16 (D. Minn. May 24, 2013), Judge

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It is unclear from the record whether Mine alleges this agreement was with CMI or
Freddie Mac and whether the loan modification agreement was produced in court.
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Susan Richard Nelson granted a motion to dismiss because the only evidence attached to the
complaint was a letter discussing loan modification possibilities with plaintiffs. The letter could
not be considered a contract because it was not signed by both parties and it was not supported
by consideration. Id. Similarly here, Judge Lindman’s Order and Mine’s allegations suggest the
possibility of a contract, but the formation of a contract is one-step removed from the suggestion
of misconduct in relation to the contract. The evidence attached to the Amended Complaint only
suggests a mere possibility of misconduct. To prevent possible injustice if there is in fact a loan
modification agreement with the terms Mine alleges, the Court allows Mine fourteen (14) days,
from the filing of this order, to file with the Court a copy of the loan modification agreement
itself.4
2. “Quiet Title” and Related Claims
At the core of Mine’s remaining claims against Defendants is the allegation that
Defendants do not have valid title to the Mortgage and the note and therefore cannot legally
foreclose. To the extent that Mine asserts that Defendants did not possess the promissory note
secured by Mine’s mortgage and thus cannot foreclose on that mortgage, every Minnesota court
that has considered this argument has rejected it. See Warner v. Chase Home Fin. LLC, 2013
U.S. Dist. LEXIS 43324 at *5-6 (D. Minn. Mar. 27, 2013) (citing Jackson v. Mortg. Elec.
Registration Sys., Inc., 770 N.W.2d 487, 500-01 (Minn. 2009) and listing the multitude of cases

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In this case, Mr. Butler did not defend Mine’s breach of contract claim in his
Memorandum in Opposition to Motion to Dismiss [Docket No. 9], and at the oral argument
hearing, Mr. Butler expressed confusion between the claims in this case and his approximately
70 other federal foreclosure suits. But, if Mine does have the loan modification agreement he
describes, a contract that should be relatively easy to produce, then the Court will provide Mine
an opportunity for the breach of contract claim to survive this dismissal motion, though his
counsel has not assisted the Court in identifying viable claims.
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following Jackson’s precedent). As held by numerous courts, the mortgage interest is one held
separately from the note.
Moreover, to the extent that Mine argues that the chain of title to their mortgage is
somehow defective because assignment and foreclosure documents were not executed by an
authorized person, such vague claims have also been rejected previously. See, e.g. Karnatcheva
v. JPMorgan Chase Bank, N.A., 871 F. Supp. 2d 834 (D. Minn 2012), aff’d, 704 F.3d 545 (8th
Cir. 2013). As in Karnatcheva, Mine’s claims of unauthorized persons signing AOM’s, NOP’s,
and POA’s, are conclusory and not supported by a factual basis.
To the extent that Mine argues “upon information and belief” that Freddie Mac acquired
an unrecorded AOM before the start of foreclosure proceedings, Mine is rehashing another
implausible allegation without proof. See Pope v. Fed. Home Loan Mortg. Corp., 2013 U.S.
Dist. LEXIS 72551 (D. Minn. May 22, 2013). Mine essentially asks the Court to assume that an
assignment occurred because he alleges it occurred.
3. Negligence Per Se
Mine asserts Usset is negligent per se for violating of Minn. Stat. §§ 580.02 and 580.05.
As Mine’s counsel was recently reminded in Stilp v. HSBC Bank USA, N.A., 2013 U.S. Dist.
LEXIS 38531, at *7 (D. Minn. Mar. 20, 2013), “no state or federal court has ever found a
violation of Minn. Stat. §§ 580.02 or 580.05 to be negligence per se.” When negligence per se is
appropriate, showing a violation of a statute substitutes for plaintiff’s required showing of duty
and breach. Anderson v. State Dept. of Natural Res., 693 N.W.2d 181 (Minn. 2005). But here,
there is no indication that §§ 580.02 and 580.05 are negligence per se statutes or that they relate
to negligence per se statutes. If the Minnesota legislature ever intended §§ 580.02 and 580.05 as
per se waivers of law firm immunity, Plaintiff has offered nothing to show it.
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Since the last time Plaintiff’s counsel presented a negligence per se argument before this
Court, Mr. Butler has added, to the amended complaint, an alleged violation of Minnesota Rules
of Professional Conduct.5 Minn. R. Prof. Conduct 3.3. But, “[t]here is no private right of action
to enforce violations of the Rules of Professional Conduct, nor do those Rules create a
presumption that a legal duty has been breached.” Pope, 2013 U.S. Dist. LEXIS 72551, at *11
(citing Leonard v. Dorsey & Whitney, LLP, 553 F.3d 609, 628 (8th Cir. 2009)).
The claims Mine raises against Usset have “no chance of success.” See, e.g., Nelson v.
Bank of N.Y. Mellon, 2012 U.S. Dist. LEXIS 141277, at *12 (D. Minn. Oct. 1, 2012).
4. Slander of Title
Mine’s slander of title claim against Usset is completely frivolous. Am. Compl. ¶¶ 5661. As highlighted recently in Stilp, the Court has repeatedly reminded Plaintiff’s attorney that a
Minnesota slander of title claim requires plaintiffs allege four elements: (1) a false statement; (2)
was published to others; (3) was published maliciously; and (4) the publication caused the
plaintiff pecuniary loss in the form of special damages. Nelson, 2012 U.S. Dist. LEXIS 141277,
at *10 (citing Paidar v. Hughes, 615 N.W.2d 276, 279-80 (Minn. 2000)); Blaylock v. Wells
Fargo Bank, N.A., 2012 U.S. Dist. LEXIS 90246, at *8-19. For a statement to be malicious, it
must be a “groundless disparagement of the plaintiff’s title or property . . . made without
probable cause.” Quevli Farms, Inc. v. Union Sav. Bank & Trust Co., 226 N.W. 191, 192
(Minn. 1929). References to amounts due on mortgages are not properly characterized as false

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The Amended Complaint actually alleges “Attorneys PFB” violated the Rules of
Conduct. ¶ 54. The law firm named in this suit is Usset. PFB appears to be Peterson, Fram and
Bergman, P.A., a law firm Mr. Butler has unsuccessfully sued in at least four other mortgage
foreclosure cases. See, e.g., Xiong v. Bank of Am., N.A., 2012 U.S. Dist. LEXIS 140454 (D.
Minn. Aug. 10, 2012).
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or misleading statements. See Welk v. GMAC Mortgage, LLC, 850 F. Supp. 2d 976, 992-93 (D.
Minn. 2012). In this case, Mine fails to plead the malice element, much less any factual basis for
the other elements. As a result, Defendants’ motion to dismiss is granted.
IV. CONCLUSION
Based upon all the files, records, and proceedings herein, IT IS HEREBY ORDERED:
1.

Counts 1, 2, 3, and 4 of Defendants’ Motion to Dismiss are GRANTED;

2.

Count 5 of Defendants’ Motion to Dismiss is GRANTED, unless within 14 days,
Mine files with the court a loan modification agreement signed by Mine and
relevant Defendants.6

LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:

s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: June 5, 2013.

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The Court envisions submission of the relevant loan modification agreement, no further
briefing, affidavits, or exhibits will be considered.
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