Ko v. Mortgage Electronic Registration Services, Inc. et al

Filing 41

MEMORANDUM OPINION AND ORDER granting defendants' 17 Motion to Dismiss; denying plaintiff's 27 Motion to Remand to State Court (Written Opinion). Signed by Judge John R. Tunheim on August 9, 2013. (DML)

Ko v. Mortgage Electronic Registration Services, Inc. et al

Doc. 41

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
OCIN KO,

Civil No. 13-596 (JRT/AJB)
Plaintiff,

v.
MORTGAGE ELECTRONIC
REGISTRATION SYSTEM; MERSCORP,
INC.; EVERBANK FINANCIAL
CORPORATION; SHAPIRO & ZIELKE;
ALL OTHER PERSON, UNKNOWN
CLAIMING ANY RIGHT, TITLE,
ESTATE, INTEREST, OR LIEN IN THE
REAL ESTATE DESCRIBED IN THE
COMPLAINT HEREIN,

MEMORANDUM OPINION AND
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

Defendants.

William B. Butler, BUTLER LIBERTY LAW, LLC, 33 South Sixth
Street, Suite 4100, Minneapolis, MN 55402, for plaintiff.
Wendy Oien Sanchez and Kalli L. Ostlie, SHAPIRO & ZIELKE, LLP,
12550 West Frontage Road, Suite 200, Burnsville, MN 55337, for
defendants.

This case is one of more than seventy cases in this district where the plaintiff is
represented by William B. Butler – in each, the plaintiffs challenge the validity,
assignment, or foreclosure of their mortgage in an attempt to prevent or frustrate
foreclosure. Plaintiff Ocin Ko brought this action in state court against Defendants
Mortgage Electronic Registration System, Inc. (“MERS”); MERSCORP, Inc.; EverBank
Financial Corporation (“EverBank”); and Shapiro & Zielke, LLP (“Shapiro”) seeking to

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void the residential foreclosure sale of his home.1 Ko’s Complaint contains five counts:
(1) quiet title; (2) declaratory relief; (3) penalties for deceit or collusion, (4) negligence
per se, and (5) slander of title. Ko moves for remand to state court and Defendants move
to dismiss the Complaint. The Court will deny Ko’s motion for remand because it finds
that the party destroying diversity was fraudulently joined.

The Court will grant

Defendants’ motion because Ko fails to state a claim upon which relief can be granted.

BACKGROUND
Ko executed a promissory note secured by a mortgage in 2008 for property located
in Fridley, Minnesota. (Compl. ¶¶ 1, 7, Mar. 14, 2013, Docket No. 1.) Ko executed the
mortgage in favor of MERS. (Id.) Although the timing is unclear from the record, at
some point, Ko defaulted on his loan. On February 7, 2012, MERS assigned its interest
in Ko’s mortgage to EverBank.2 (Id. ¶ 9.) On February 8, 2012, Shapiro drafted and
recorded a Notice of Pendency and a Power of Attorney. 3 (Id. ¶ 11.) On February 10,
2012, EverBank, through Shapiro, noticed a sheriff’s sale. (Id. ¶ 13.) On June 28, 2012,

1

Ko also purports to bring claims against “all other person[s] unknown claiming any
right, title, estate, interest, or lien in the real estate described in the complaint herein.” There are
no factual allegations sufficient to identify these unnamed defendants or state a claim against
them, and all claims against them will be dismissed. See Estate of Rosenberg ex rel. Rosenberg
v. Crandell, 56 F.3d 35, 37 (8th Cir. 1995) (affirming dismissal of unidentified defendants about
whom no factual allegations were made).
2

Ann Johnson, an employee of EverBank, executed the mortgage as an assistant
secretary of MERS. (Compl. ¶¶ 9-10.) MERS had previously executed an agreement conferring
signing authority and officer status to Johnson. (Decl. of Kalli L. Ostlie, Ex. H, Apr. 3, 2013,
Docket No. 11.)
3

Lorri Beltz, an employee of EverBank, executed the Notice of Pendency as a Vice
President of MERS. (Compl. ¶¶ 11-12.)
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EverBank, through Shapiro, purchased the property at the sheriff’s sale and recorded the
purchase of the property with the Anoka County Office of Recorder.

(Id.)

On

February 6, 2013, Shapiro, acting for EverBank, commenced an eviction proceeding
against Ko. (Id. ¶ 22.)
On February 20, 2013, Ko filed this action in Minnesota state court.

(See

generally id.) Defendants timely removed this action. (Notice of Removal, Mar. 14,
2013, Docket No. 1.) Ko sought a temporary restraining order from this Court enjoining
eviction proceedings. (Mot. for TRO, Apr. 2, 2012, Docket No. 3.) This Court denied
the motion. Ko v. Mortg. Elec. Registration Sys., Civ. No. 13-596, 2013 WL 1364164
(D. Minn. Apr. 4, 2013), appeal dismissed (8th Cir. June 11, 2013). Ko now seeks
remand of the case, contending that the Court’s exercise of diversity jurisdiction is
inappropriate. Defendants move to dismiss all of Ko’s claims.

ANALYSIS
I.

KO’S MOTION TO REMAND
Ko seeks remand of this case, asserting that this Court lacks jurisdiction because

Ko and Shapiro are both Minnesota residents and, therefore, not diverse. In general, for a
removed action, complete diversity must exist when the state complaint and the petition
for removal are filed. See Knudson v. Sys. Painters, Inc., 634 F.3d 968, 975 (8th Cir.
2011). Application of this rule here would mean the Court did not have jurisdiction
pursuant to 28 U.S.C. § 1332(a)(1) because at the time of filing and removal, Shapiro’s
citizenship destroyed diversity. The fraudulent-joinder exception, however, prevents a

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plaintiff from defeating a defendant’s right of removal by fraudulently joining a
defendant. Knudson, 634 F.3d at 976.
“[T]o prove that a plaintiff fraudulently joined a diversity-destroying
defendant . . . a defendant seeking removal [must] prove that the plaintiff’s claim against
the diversity-destroying defendant has ‘no reasonable basis in fact and law.’” Id. at 977
(citation omitted). “Fraudulent joinder exists if, on the face of plaintiff’s state court
pleadings, no cause of action lies against the resident defendant.” Anderson v. Home Ins.
Co., 724 F.2d 82, 84 (8th Cir. 1983). As outlined below, Ko failed to state a cause of
action against Shapiro or any other defendant. See Karnatcheva v. JPMorgan Chase
Bank, N.A., 704 F.3d 545, 546 (8th Cir. 2013). Because all the claims against Shapiro
have no reasonable basis in fact or law, the Court concludes that Shapiro was
fraudulently joined. Without Shapiro – whose citizenship may be disregarded – the Court
has diversity jurisdiction over this action pursuant to § 1332. Because the Court finds
jurisdiction is proper, it will deny Ko’s remand motion.

II.

DEFENDANTS’ MOTION TO DISMISS
A.

Standard of Review

Reviewing a complaint under a Rule 12(b)(6) motion to dismiss, the Court
considers all facts alleged in the complaint as true to determine if the complaint states a
“claim to relief that is plausible on its face.” See, e.g., Braden v. Wal-Mart Stores, Inc.,
588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
To survive a motion to dismiss, a complaint must provide more than “‘labels and

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conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’” Ashcroft,
556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Id.

“Where a complaint pleads facts that are merely consistent with a defendant’s

liability, it stops short of the line between possibility and plausibility,” and therefore must
be dismissed. Id. (internal quotation marks omitted). Finally, Rule 12(b)(6) “authorizes
a court to dismiss a claim on the basis of a dispositive issue of law.” Neitzke v. Williams,
490 U.S. 319, 326 (1989).

B.

Quiet Title

Ko brings a claim for quiet title against EverBank, arguing that it is EverBank’s
burden to “prove its title to the Mortgage.” (Compl. ¶ 28.) Ko contends that “on
information and belief,” EverBank’s employees did not have the authority to sign the
Assignments of Mortgage and Notice of Pendency documents and, therefore, Defendants’
foreclosure on the property was void. (See Compl. ¶¶ 10, 12, 19-23.) In order to survive
Defendants’ motion to dismiss, Ko must plead facts that support his quiet title claim
sufficient to satisfy federal pleading standards. See Karnatcheva, 704 F.3d at 548. The
Minnesota quiet title statute provides, in relevant part, that “[a]ny person in possession of
real property . . . may bring an action against another who claims an . . . interest therein,
or a lien thereon, adverse to the person bringing the action, for the purpose of
determining such adverse claim and the rights of the parties, respectively.” Minn. Stat.

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§ 559.01. Ko’s complaint provides nothing to support his claim that “[D]efendants’
adverse claims are invalid, other than labels and conclusions, based on speculation that
transfers affecting payees and assignments of the notes were invalid.” Karnatcheva, 704
F.3d at 548. In sum, Ko does not sufficiently plead his quiet title claim and this count
will be dismissed.

C.

Declaratory Judgment Under Minn. Stat. § 522.02

Ko also seeks a declaratory judgment that the sheriff’s sale was void, the
Assignment of Mortgage was void, the Notice of Pendency was void, and he is the owner
of the property. Ko relies on the same allegations used to support his quiet title claim.
Consequently, his declaratory judgment claim must fail for the same reasons. The Court
will dismiss this claim because of the speculative nature of the underlying allegations.

D.

Deceit or Collusion

Ko brings a claim for deceit or collusion under Minnesota Statutes § 481.07
against Shapiro. The statute provides that “[a]n attorney who, with intent to deceive a
court or a party to an action or a judicial proceeding, is guilty of or consents to any deceit
or collusion . . . shall be liable to the party injured in treble damages.” Minn. Stat.
§ 481.07. However, this statute “does not create a new cause of action.”

Love v.

Anderson, 61 N.W.2d 419, 422 (Minn. 1953). Rather, a plaintiff seeking damages under
§ 481.07 must “specifically allege a claim of fraud as the underlying cause of action, in
compliance with Fed. R. Civ. P. 9(b).” Schumacher v. Fed. Home Loan Mortg. Corp.,
Civ. No. 13-29, 2013 WL 3033746, at *3 (D. Minn. June 17, 2013) (quoting Beardmore
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v. Am. Summit Fin. Holdings, LLC, Civ. No. 01–948, 2001 WL 1586785, at *8 (D. Minn.
Dec. 10, 2001)). Because Ko does not allege a claim for fraud or plead fraud with the
specificity required by Rule 9(b), the Court will dismiss his claim seeking penalties for
deceit or collusion.

E.

Negligence Per Se

Ko alleges that Shapiro is negligent per se because Shapiro (1) failed to record all
the assignments, in violation of Minnesota Statutes § 580.02; (2) failed to record the
Powers of Attorney before sending the notice of foreclosure sale, in violation of
Minnesota Statutes § 580.05; and (3) represented to the eviction court that the foreclosure
was valid, in violation of Minnesota Rule of Professional Conduct 3.3. To plead a
negligence claim, a plaintiff must allege “(1) the existence of a duty of care; (2) a breach
of that duty; (3) [that] an injury was sustained; and (4) [that] breach of the duty was the
proximate cause of the injury.” Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn.
1995). “A per se negligence rule substitutes a statutory standard of care for the ordinary
prudent person standard of care, such that a violation of a statute (or an ordinance or
regulation adopted under statutory authority) is conclusive evidence of duty and breach.”
Gradjelick v. Hance, 646 N.W.2d 225, 231 n.3 (Minn. 2002).
Ko fails to allege a claim for negligence per se. Under Minnesota law, “an
attorney acting within the scope of his employment as attorney is immune from liability
to third persons for actions arising out of that professional relationship.” McDonald v.
Stewart, 182 N.W.2d 437, 440 (Minn. 1970). “Further, attorneys are generally not liable

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to the client’s adversary, absent evidence of an affirmative misrepresentation.”
Karnatcheva v. JPMorgan Chase Bank, N.A., 871 F. Supp. 2d 834, 839 (D. Minn. 2012),
aff’d, 704 F.3d 545 (8th Cir. 2013). Ko does not allege an affirmative misrepresentation
in this case. In addition, Ko’s claim fails because “violations of § 580.02, § 580.05, and
Rule 3.3 cannot establish negligence per se.” Schumacher, 2013 WL 3033746, at *3; see
also Richter v. Fed. Nat’l Mortg. Ass’n, Civ. No. 13-475, 2013 WL 3223377, at *5
(D. Minn. June 25, 2013).

F.

Slander of Title

Finally, Ko alleges a claim for slander of title against Shapiro. To state a claim for
slander of title, a plaintiff must allege facts that show:
(1) That there was a false statement concerning the real property owned by
the plaintiff; (2) That the false statement was published to others; (3) That
the false statement was published maliciously; [and] (4) That the
publication of the false statement concerning title to the property caused the
plaintiff pecuniary loss in the form of special damages.
Paidar v. Hughes, 615 N.W.2d 276, 279-80 (Minn. 2000). Ko alleges that Shapiro
drafted and recorded documents that it knew were false because they were executed
without the proper authority. But Ko fails to allege that Shapiro acted with malice. See
Dunbar v. Wells Fargo Bank, N.A., 709 F.3d 1254, 1258 (8th Cir. 2013) (“The pleadings
contain nothing but naked assertions that one or more of the named defendants suspected
that [the party initiating foreclosure] lacked legal title to the mortgages yet chose to
publish statements to the contrary.”). Because Ko fails to allege malice, he has not stated
a claim for slander of title, and this claim will be dismissed.

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ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Plaintiff’s Motion to Remand to State Court [Docket No. 27] is DENIED.

2.

Defendants’ Motion to Dismiss [Docket No. 17] is GRANTED.

3.

Plaintiff’s Complaint is DISMISSED with prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.
DATED: August 9, 2013
at Minneapolis, Minnesota.

____s/
____
JOHN R. TUNHEIM
United States District Judge

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