Otremba et al v. CitiMortgage, Inc. et al
Filing
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MEMORANDUM OPINION AND ORDER granting defendants' 3 Motion to Dismiss. (1) Plaintiffs' claim under Minn. Stat. 580.05 (Count I) and Plaintiffs' claim for slander of title (Count V ) are dismissed with p rejudice. (2) Plaintiffs' claims under Minn. Stat. 580.03 (Count II) and Minn. Stat. 580.07 (Count III) and Plaintiffs' quiet title claim (Count IV) are dismissed without prejudice.(Written Opinion). Signed by Judge John R. Tunheim on December 6, 2013. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
GERALD M. OTREMBA and
JULIE M. OTREMBA,
Civil No. 13-871 (JRT/JJG)
Plaintiffs,
MEMORANDUM OPINION
AND ORDER ON
MOTION TO DISMISS
v.
CITIMORTGAGE, INC. and FEDERAL
HOME LOAN MORTGAGE
CORPORATION,
Defendants.
Michael J. Wang, DREWES LAW, PLLC, 1516 West Lake Street, Suite
300, Minneapolis, MN 55408, for plaintiffs.
Gerald G. Workinger, Jr., USSET, WEINGARDEN & LIEBO, PLLP,
4500 Park Glen Road, Suite 300, Minneapolis, MN 55416, for defendants.
Plaintiffs Gerald M. Otremba and Julie M. Otremba bring this action against
Defendants CitiMortgage, Inc. (“CitiMortgage”) and Federal Home Loan Mortgage
Corporation (“Freddie Mac”), alleging that the foreclosure sale of their home was invalid.
Plaintiffs claim that CitiMortgage violated Minn. Stat. § 580.05 because it commenced
the foreclosure process prior to executing the required power of attorney; Minn. Stat.
§ 580.03 because it published notice of the foreclosure in a newspaper that did not
provide sufficient notice to the affected area; and Minn. Stat. § 580.07 because it did not
send notice of the sale’s postponement to the occupants by first class mail. Plaintiffs
further claim that they are entitled to have title quieted in their name because the
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foreclosure sale was invalid; and that Defendants committed slander of title because they
published documents indicating that the foreclosure was valid when they should have
known that they had violated Minn. Stat. § 580.05. Defendants move to dismiss all of
Plaintiffs’ claims.
Because the Court concludes that CitiMortgage complied with Minn. Stat.
§ 580.05 by recording the required power of attorney prior to the foreclosure sale, the
Court will grant Defendants’ motion to dismiss Plaintiffs’ claim under Section 580.05
and Plaintiffs’ slander of title claim, and dismiss those claims with prejudice. The Court
will also grant Defendants’ motion to dismiss Plaintiffs’ claims under Minn. Stat.
§ 580.03 and Minn. Stat. § 580.07 because Plaintiffs have not pled sufficient facts to
support their allegations. The Court will dismiss the claims under Section 580.03 and
Section 580.07, as well as the quiet title claim, without prejudice because Plaintiffs may
be able to more adequately support their claims with additional factual allegations.
BACKGROUND
The present action involves a home located in Elko, MN, which Plaintiffs
occupied as their residence at the time they filed the complaint. (Notice of Removal,
Ex. 1 (“Compl.”) ¶¶ 1-2, Apr. 15, 2013, Docket No. 1.) Plaintiffs originally granted a
mortgage in the amount of $353,000.00 to Mortgage Electronic Registration Systems,
Inc. (“MERS”) as mortgagee and nominee for Bell America Mortgage LLC, the initial
lender. (Decl. of Paul A. Weingarden, Ex. B, Apr. 22, 2013, Docket No. 6.) MERS
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assigned the mortgage to CitiMortgage on December 14, 2011 and the assignment was
recorded on January 17, 2012. (Compl. ¶ 3; Weingarden Decl., Ex. C.)
CitiMortgage appointed Usset, Weingarden & Liebo, PLLP (“UWL”) as its
attorney for foreclosures by executing a “Limited Power of Attorney” on December 21,
2009. (Weingarden Decl., Ex. D.) The Limited Power of Attorney was recorded on
January 7, 2010. (Id.) Pursuant to the Limited Power of Attorney, CitiMortgage granted
UWL the authority to perform “all lawful acts . . . it deems necessary . . . in connection
with the management and disposition of the foreclosure of mortgages.” (Id.)
UWL, acting on behalf of CitiMortgage, executed a Notice of Pendency to
Foreclose Mortgage on January 12, 2012, and the document was recorded on January 17,
2012. (Compl. ¶ 11; Weingarden Decl., Ex. E.) The notice was published in the Belle
Plaine Herald for six consecutive weeks, beginning on January 18, 2012. (Compl. ¶¶ 12,
18; Weingarden Decl., Ex. I.)
On February 1, 2012 CitiMortgage executed a document entitled Notice of
Pendency of Proceeding and Power of Attorney to Foreclose Mortgage (“Power of
Attorney to Foreclose”), which related specifically to Plaintiffs’ property. (Weingarden
Decl., Ex. F.) The Power of Attorney to Foreclose gave UWL the power to foreclose
Plaintiffs’ mortgage by advertisement and to “do any and all other things necessary . . .
for the due and lawful foreclosure” of Plaintiffs’ mortgage. (Id.; see also Compl. ¶ 10.)
The Power of Attorney to Foreclose was recorded on February 16, 2012. (Compl. ¶ 10.)
The foreclosure sale was originally scheduled for March 13, 2012 but was
postponed to June 5, 2012. (Id. ¶¶ 4, 25.) Defendants contend that UWL sent notice of
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the postponement by first class mail to plaintiffs on March 15, 2012, but Plaintiffs allege
that the notice was not mailed. (Weingarden Decl., Ex. H; Compl. ¶ 26.) Notice of the
postponement was published in the Belle Plaine Herald on March 21, 2012. (Weingarden
Decl., Ex. I.)
The sale occurred on June 5, 2012 and CitiMortgage purchased the
property for $363,759.71. (Id.) The Sheriff’s Certificate of Sale was recorded on June 6,
2012, and no one redeemed the property during the six month redemption period. (Id.)
Freddie Mac now asserts an ownership interest in the property. (Compl. ¶ 6.)
ANALYSIS
I.
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, and construes the pleadings in a light
most favorable to the non-moving party. See Braden v. Wal-Mart Stores, Inc., 588 F.3d
585, 594 (8th Cir. 2009). To survive a motion to dismiss, a complaint must provide more
than “‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of
action.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). That is, to avoid dismissal, a complaint must
include “sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). “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
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short of the line between possibility and plausibility,” and therefore must be dismissed.
Id. (internal quotation marks omitted). In reviewing a motion to dismiss, “the court
generally must ignore materials outside the pleadings, but it may consider some materials
that are part of the public record or do not contradict the complaint, as well as materials
that are necessarily embraced by the pleadings.” Porous Media Corp. v. Pall Corp., 186
F.3d 1077, 1079 (8th Cir. 1999) (citations and internal quotation marks omitted).
II.
MINN. STAT § 580.05 – POWER OF ATTORNEY
Plaintiffs claim that CitiMortgage failed to comply with Minn. Stat. § 580.05
because UWL published the Notice of Pendency to Foreclose Mortgage prior to
execution of the Power of Attorney to Foreclose. The statute provides that:
When an attorney at law is employed to conduct such foreclosure, the
authority of the attorney at law shall appear by power of attorney executed
and acknowledged by the mortgagee or assignee of the mortgage in the
same manner as a conveyance, and recorded prior to the sale in the
county where the foreclosure proceedings are had. If such attorney be
employed on behalf of such mortgagee or assignee by an attorney in fact,
the attorney’s authority shall likewise be evidenced by recorded power.
Minn. Stat. § 580.05 (emphasis added).
The Court concludes that Defendants have complied with Minn. Stat. § 580.05.
Defendants executed the Power of Attorney to Foreclose on February 1, 2012, and
recorded it on February 16, 2012, prior to the sale on June 5, 2012. The only timing
requirement contained in the statute is that the power of attorney be recorded prior to
the sale, and that requirement is unquestionably satisfied in the present case.
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Plaintiffs contend, however, that Minn. Stat. § 580.05 requires a foreclosing party
to execute a power of attorney prior to taking any steps in the foreclosure process. In
this case, UWL published the Notice of Pendency to Foreclose Mortgage on January 12,
2012, but the Power of Attorney to Foreclose was not executed until February 1, 2012.
Despite the fact that Minn. Stat. § 580.05 does not, by its terms, include the requirement
that Plaintiffs propose, Plaintiffs argue that the statute is ambiguous because it is silent as
to when the power of attorney must be executed. Plaintiffs rely heavily on Minn. Stat.
§ 582.25, a statute of repose that immunizes foreclosures from certain challenges if the
challenges are not made within one year of the expiration of the redemption period. In
relevant part, the statute provides that:
Every mortgage foreclosure sale by advertisement . . . is, after [one year
after the expiration of the redemption period], hereby legalized and made
valid . . . , as against . . . the following objections: (1) that the power of
attorney, recorded or filed in the proper office provided for by section
580.05 . . . (e) was executed subsequent to the date of the printed notice of
sale or subsequent to the date of the first publication of such notice.
Minn. Stat. § 582.25. Plaintiffs suggest that it would be superfluous for the legislature to
enact a provision protecting foreclosures from a certain type of challenge if the challenge
was not a ground for liability.
The Court acknowledges the general preference for avoiding interpretations that
render statutory language superfluous. See Mavco Inc. v. Eggink, 739 N.W.2d 148, 155
(Minn. 2007). However, it would be inappropriate to use Minn. Stat. § 582.25 to inject
additional substantive requirements into Minn. Stat. § 580.05 when such requirements are
clearly absent from the latter provision. See Connoy v. U.S. Bank N.A., Civ. No. 11-
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2352, 2011 WL 6013001, at *3 n.6 (D. Minn. Dec. 1, 2011) (rejecting the argument that
Minn. Stat. § 582.25 contains requirements that a foreclosing party must follow). Section
580.05 explicitly provides a timing requirement: the power of attorney must be recorded
prior to the sale. The fact that the statute does not provide a requirement for when the
power of attorney must be executed does not give the Court license to create such a
requirement. Therefore, the Court will grant Defendants’ motion to dismiss Plaintiffs’
claim under Minn. Stat. § 580.05.1
The Court notes that neither party contends that the Limited Power of Attorney
that was executed and recorded long before the instant foreclosure proceedings is
sufficient, in itself, to comply with the statute. The power of attorney required by the
first sentence of Section 580.05 “must describe the mortgage with reasonable certainty.”
See Molde v. CitiMortgage, Inc., 781 N.W.2d 36, 40 (Minn. Ct. App. 2010) (internal
quotation marks omitted). The Limited Power of Attorney made no reference to the
property or mortgage at issue in this case. The Limited Power of Attorney did, however,
give UWL authority to initiate the foreclosure proceedings. See id. at 38, 43.
1
Although Plaintiffs’ brief addresses Minn. Stat. § 580.02(3), which requires a
foreclosing party to record all assignments of the mortgage before taking “the first step” in a
foreclosure proceeding, see Ruiz v. 1st Fidelity Loan Servicing, LLC, 829 N.W.2d 53, 57-58
(Minn. 2013), Plaintiffs have not challenged the present foreclosure under Section 580.02(3),
though they may do so in an amended complaint if they desire. To the extent that Plaintiffs
argue that the date of the last assignment of the mortgage somehow creates a violation of Section
580.05, the Court finds that the argument fails.
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III.
MINN. STAT. §§ 580.03 and 331A.03 –NOTICE OF SALE
The Court must next determine whether Defendants complied with Minn. Stat.
§ 580.03 by publishing notice of the foreclosure in the Belle Plaine Herald. Minnesota
Statute § 580.03 requires a foreclosing party to publish notice of the foreclosure for six
weeks and Minn. Stat. § 331A.03, subd. 1, specifies that such public notice must be
published in a “qualified newspaper . . . that is likely to give notice in the affected area or
to whom it is directed.” A “qualified newspaper” is one that meets various requirements
regarding form, content, and frequency of distribution, and is “circulated in the political
subdivision which it purports to serve.” Minn. Stat. § 331A.02, subd. 1. “Political
subdivision” is defined as “a county, municipality, school district, or any other local
political subdivision or local or area district, commission, board, or authority.” Minn.
Stat. § 331A.01, subd. 3.
The Secretary of State maintains a list of newspapers that meet the technical
qualification requirements and the Belle Plaine Herald is on the list.
See
http://www.sos.state.mn.us/index.aspx?page=98. Belle Plaine is in Scott County (which
contains Elko), and Elko does not have a newspaper that appears on the Secretary of
State’s list.
See id.
However, the Belle Plaine Herald is one of several qualified
newspapers in Scott County.
As an initial matter, the Court concludes that a foreclosing party does not
necessarily comply with Minn. Stat. § 580.03 simply by publishing notice of the
foreclosure in a qualified newspaper that is based in the county where the home is
located. See Furlow v. HSBC Bank USA, No. 55-cv-11-928, slip op. at *5-6 (Minn. 3d
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Jud. Dist. June 7, 2011); Pearson v. Wells Fargo Bank, N.A., No. 55-cv-11-3929, slip op.
at *12 (Minn. 3d Jud. Dist. Sept. 1, 2011).2 This fact alone does not definitively establish
that the selected newspaper is “likely to give notice in the affected area or to whom it is
directed.” Minn. Stat. § 331A.03, subd. 1.
Plaintiffs allege that the Belle Plaine Herald “is not sufficiently circulated in Elko
to make it a qualified newspaper to publish the notice” and that it “did not provide
sufficient notice to the people and area affected by the sale.” (Compl. ¶¶ 20-21.) If true,
these allegations would amount to a violation of Minn. Stat. § 580.03 despite the fact that
the Belle Plaine Herald is a qualified newspaper that is located within the county that
contains Elko. However, the Court finds that Plaintiffs’ allegations are no more than “a
formulaic recitation of the elements,” which are insufficient to state a claim. Ashcroft,
556 U.S. at 678; see also Schulz v. Wells Fargo Bank, N.A., Civ. No. 12-2147, 2012 WL
6591457, at *2 (D. Minn. Dec. 18, 2012) (“The Stewartville Star is one of the listed
qualified legal newspapers in Olmsted County. Rochester, where the mortgaged property
is located, is also in Olmsted County. The Complaint contains no facts to support the
bald allegation that the Stewartville Star was not an appropriate legal publication for the
notice of foreclosure.”). Although the Court acknowledges that there are limitations on
the investigation Plaintiffs can undertake without the aid of discovery, the Court
nonetheless finds that something more is needed than what Plaintiffs currently allege.
The Court will therefore dismiss Plaintiffs’ claim without prejudice and give Plaintiffs
2
The unpublished Minnesota district court orders are available on the docket. (See Decl.
of Michael J. Wang, Exs. A & B, May 13, 2013, Docket No. 11.)
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the opportunity to strengthen their pleading with additional factual allegations to support
their contention that publication in the Belle Plaine Herald is not likely to give sufficient
notice in the present case.
IV.
MINN. STAT. § 580.07 – NOTICE OF POSTPONEMENT
The Court must next determine whether Plaintiffs’ have stated a claim that
Defendants failed to comply with Minn. Stat. § 580.07. The statute provides that when a
foreclosure sale is postponed, the foreclosing party must, among other things:
(1) [P]ublish, only once, a notice of the postponement and the rescheduled
date of the sale, if known, as soon as practicable, in the newspaper in which
the notice under section 580.03 was published; and (2) send by first class
mail to the occupant, postmarked within three business days of the
postponed sale, notice (i) of the postponement; and (ii) if known, of the
rescheduled date of the sale . . . .
Minn. Stat. § 580.07, subd. 1(a).
Much like their claim under Minn. Stat. § 580.03, Plaintiffs’ claim under Minn.
Stat. § 580.07 provides only bare-bones allegations. (See Compl. ¶ 26 (asserting that
Defendants “did not send the Notice of Postponement . . . to [Plaintiffs] by first-class
mail”).)3 Plaintiffs alleged that the notice was not sent, as opposed to alleging that it was
not received, because Section 580.03 focuses on whether notice was sent as opposed to
whether it was received. See Artz v. Bank of Am., N.A., 883 F. Supp. 2d 792, 797
3
The Complaint alleges that “Foreclosing Party initially scheduled the Sheriff’s Sale for
March 13, 2012 and [the sale] was later postponed until June 5, 2012,” and that “Foreclosing
Party did not send the Notice of Postponement required by Minn. Stat. § 580.07 to Homeowner
by first-class mail after either postponement.” (Compl. ¶¶ 25-26.) Plaintiffs’ reference to
multiple postponements appears to be accidental as there are no references to more than one
postponement elsewhere in the complaint or the parties’ briefs.
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(D. Minn. 2012).
However, absent any allegation as to why Plaintiffs believe that
Defendants failed to mail the required notice, the Court finds that Plaintiffs’ allegation is
not sufficiently plausible to survive a motion to dismiss. See Karnatcheva v. JPMorgan
Chase Bank, N.A., 704 F.3d 545, 548 (8th Cir. 2013) (“[T]he plaintiffs’ pleadings, on their
face, have not provided anything to support their claim that the defendants’ adverse
claims are invalid, other than labels and conclusions, based on speculation . . . .”).
The Court recognizes that there is little a plaintiff can reasonably be expected to
plead in order to state a claim that a letter was not mailed.
See Am. Boat Co., Inc. v.
Unknown Sunken Barge, 418 F.3d 910, 914 (8th Cir. 2005) (“In cases involving lack of
notice, there is often little a party can do except swear he or she did not receive the
communication.”). But Plaintiffs have not even explicitly alleged that they did not
receive the letter – or any other fact that supports their assertion the letter was not sent.
The Court will therefore dismiss the claim without prejudice and give Plaintiffs the
opportunity to support the claim with additional factual allegations.
V.
QUIET TITLE
Plaintiffs contend that they are entitled to have title quieted in their name if they
establish that the sheriff’s sale was invalid. Minnesota’s quiet title statute provides that:
Any person in possession of real property . . . may bring an action against
another who claims an estate or 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. § 559.01. If Plaintiffs present a viable claim that the foreclosure was invalid
due to a statutory violation, Plaintiffs may be able to proceed on their quiet title claim as
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well. See Murphy v. Aurora Loan Servs., LLC, 699 F.3d 1027, 1033 (8th Cir. 2012).
However, at this stage, Plaintiffs have not presented a viable statutory claim. Therefore,
the Court will dismiss Plaintiffs’ quiet title claim without prejudice.
VI.
SLANDER OF TITLE
Plaintiffs’ final claim is for slander of title. The elements of slander of title are
(1) that there was a false statement concerning 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 caused pecuniary loss in the form of
special damages. Paidar v. Hughes, 615 N.W.2d 276, 279-80 (Minn. 2000). “The
element of malice requires reckless disregard concerning the truth or falsity of a matter
despite a high degree of awareness of probable falsity or entertaining doubts as to its
truth.” Brickner v. One Land Dev. Co., 742 N.W.2d 706, 711-12 (Minn. Ct. App. 2007)
(internal quotation marks and alterations omitted).
Plaintiffs contend that the published record of the foreclosure contains false
statements because the foreclosure was invalid. The basis for Plaintiffs’ allegation that
Defendants acted with malice is that Defendants knew or should have known that they
violated Minn. Stat. § 580.05 (the power of attorney statute). (Compl. ¶ 40.)4 Because
the Court concludes that Defendants did not violate Minn. Stat. § 580.05, Plaintiffs
cannot successfully allege that Defendants acted maliciously in publishing a statement
4
Plaintiffs confirmed at oral argument that the only basis for their slander of title claim
was the purported violation relating to the Power of Attorney to Foreclose.
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indicating that they had complied with that provision. Therefore, the Court will grant
Defendants’ motion to dismiss Plaintiffs’ slander of title claim.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Defendants’ Motion to Dismiss [Docket No. 3] is
GRANTED as follows:
1.
Plaintiffs’ claim under Minn. Stat. § 580.05 (Count I) and Plaintiffs’ claim
for slander of title (Count V5) are DISMISSED with prejudice.
2.
Plaintiffs’ claims under Minn. Stat. § 580.03 (Count II) and Minn. Stat.
§ 580.07 (Count III) and Plaintiffs’ quiet title claim (Count IV) are DISMISSED without
prejudice.
3.
Plaintiffs shall have thirty (30) days from the date of this Order to file an
amended complaint addressing the noted shortcomings in their claims under Minn. Stat.
§ 580.03 (Count II) and Minn. Stat. § 580.07 (Count III), and the quiet title claim (Count
IV).
4.
If plaintiffs do not file an amended complaint within the specified time
period, their Complaint will be dismissed with prejudice.
DATED: December 6, 2013
at Minneapolis, Minnesota.
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____s/
____
JOHN R. TUNHEIM
United States District Judge
Slander of title is labeled Count IV in the complaint, but it is the fifth count alleged.
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