Lee v. Mortgage Electronic Registration System, Inc., et al.

Filing 23

REPORT AND RECOMMENDATION 1. Defendants' Motion to Dismiss [Docket No. 10 ] be GRANTED. 2. This matter be dismissed with prejudice. Objections to R&R due by 1/20/2014. Signed by Magistrate Judge Janie S. Mayeron on 01/06/214. (jz)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

SUSAN LEE,

CIVIL NO. 13-950 (JNE/JSM)

Plaintiff,
v.

REPORT AND RECOMMENDATION

MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
MERSCORP HOLDINGS, INC.,
HSBC BANK USA, N.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.
This matter came before the undersigned on defendants’ Motion to Dismiss
[Docket No. 10]. This matter has been referred to the undersigned Magistrate Judge for
a Report and Recommendation by the District Court pursuant to 28 U.S.C.
§ 636(b)(1)(A), (B) and Local Rule 72.1(c).

Pursuant to this Court’s Order dated

September 6, 2013 [Docket No. 20] this Report and Recommendation is being issued
based on the parties’ written submissions.
Plaintiff seeks to invalidate the foreclosure of the mortgage on her home. Plaintiff
asserts three claims against defendants: (1) quiet-title, to determine adverse claims
under Minn. Stat. § 559.01; (2) declaratory judgment; and (3) slander of title. For the
reasons stated forth below, the Court recommends that defendants’ Motion to Dismiss
be granted and plaintiff’s claims be dismissed with prejudice. 1

1

In the caption of the Complaint, in addition to suing Mortgage Electronic
Registration System, Inc., MERSCORP Holdings, Inc. and HSBC Bank USA, N.A.,
plaintiff also purports to sue “all other persons unknown claiming any right, title, estate,

I.

BACKGROUND
On April 2, 2013, plaintiff, sued defendants Mortgage Electronic Registration

System, Inc., MERSCORP Holdings, Inc. and HSBC Bank USA, N.A., (collectively
“defendants”) in state court. Notice of Removal, Ex. Attach. 1 (Complaint) [Docket No.
1-1]. Defendants removed the suit to federal district court on April 24, 2013. Notice of
Removal [Docket No. 1].
The facts bearing on defendants’ motion to dismiss are as follows: On October
26, 2006, plaintiff executed and delivered a note to Decision One Mortgage Company,
LLC (“Decision One”) relating to property located in Bloomington, MN (“Property”). See
Complaint [Docket No. 1-1], ¶¶ 1, 6. On the same day, plaintiff executed and delivered
a mortgage in favor of Mortgage Electronic Registration System, Inc. (“MERS”) as
nominee for Decision One. Id., ¶ 6, Ex. 1 (Mortgage). Plaintiff claims that a “MERS
ServicerID Report” dated March 20, 2013, provided that defendant HSBC Bank USA,
Inc. (“HSBC”) was an “investor” of the loan and Wells Fargo Bank, N.A. (“Wells Fargo”)
was the “Servicer.” Id., ¶ 8, Ex. 2 (MERS ServicerID Report). 2
On February 17, 2009, HSBC executed a Limited Power of Attorney from it to
Wells Fargo to service mortgage loans (including the mortgages and the loans the
mortgages secure) held by HSBC, which was recorded with the Hennepin County
interest, or lien in the real estate described in the complaint herein.” As “[t]here are no
factual allegations sufficient to identify these unnamed defendants or state a claim
against them;” the Court therefore recommends that all claims against them be
dismissed. See Sonsalla v. Mortg. Elec. Registration Sys., Inc., Civ. No. 13-659, 2013
WL 4052825, *1 (D. Minn. Aug. 9, 2013) (citing 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

Exhibit 2 makes no mention of HSBC. If fact, no investor’s name is listed on the
document.
2

Recorder on March 24, 2009. Index to Appendix to Defendants’ Motion to Dismiss
(“Def. Appx.”) [Docket No. 12], App. 1-5 (Limited Power of Attorney Between HSBC
Bank and Wells Fargo Bank). Tasks delegated to Wells Fargo by this Limited Power of
Attorney included obtaining any interest in any property which is the subject of a
mortgage, and to “contract for, purchase, receive, take possession of and obtain
evidence of title in and the Property.” Id.
On February 27, 2012, Decision One drafted an assignment of Mortgage from
MERS, as nominee of Decision One, to HSBC.

Id., ¶ 9, Ex. 3 (Assignment of

Mortgage). Kate Johnson, Assistant Secretary for MERS, executed the Assignment of
Mortgage, which was recorded in the Hennepin County Office of the Recorder on March
5, 2012. Id. Plaintiff pled upon “information and belief” that Johnson did not have the
legal authority to execute the Assignment of Mortgage, as she was actually an
employee of Wells Fargo, and there was no evidence of her power, as an employee of
Wells Fargo, to execute foreclosure documents on behalf of MERS. Id., ¶ 10, Ex. 4
(Affidavit of Private Investigator).
Plaintiff claimed upon “information and belief” that after being assigned the
Mortgage, HSBC securitized plaintiff’s loan into a mortgage-backed securitization “most
likely bearing the namesake similar to the ‘HSI Asset Loan Obligation Trust.’” Id., ¶ 12.
Further, as the process of securitization is similar across the industry, plaintiff alleged
“upon information and belief” that the applicable securitization documents that the
parties complete and record the following assignments of the mortgage: (1) from
Decision One, as the originator of the loan, to HSBC, as the seller; (2) from HSBC to

3

HSI Asset Securitization Corporation, as depositor; and (3) from HSI Asset
Securitization Corporation to HSBC, as trustee. Id., ¶¶ 13, 14.
Plaintiff further alleged that “Wells Fargo was appointed master servicer of the
mortgages pooled in the trust via the Pooling and Service Agreement;” the Trust
Agreement requires delivery to the Trustee a mortgage file which contains, among other
documents, any assignments of mortgage; and upon “information and belief” the Trust
Agreement empowers Wells Fargo with the power to foreclose on any mortgage on
behalf of the Trustee. Id., ¶¶ 15-17. According to plaintiff, neither the Trust Agreement
nor any power of attorney from Decision One to HSBC appear in records for the
Property in violation of Minn. Stat. 580.05. Id., ¶ 17.
On April 9, 2012, Stephanie Nelson, an attorney at the law firm of Shapiro &
Zielke, LLP (“Shapiro”), executed a Notice of Pendency to Foreclose Mortgage on
behalf of HSBC, which was recorded in the Hennepin County Office of the Recorder on
April 10, 2012. Id., ¶ 18, Ex. 5 (Notice of Pendency). Plaintiff pled upon “information
and belief” that Nelson did not have the legal authority to execute the Notice of
Pendency at the time she executed it as there existed no prior power of attorney from
HSBC empowering Shapiro to act as its attorney-in-fact regarding this specific mortgage
or foreclosure. Id., ¶ 19.
On April 18, 2012, Keoviseth Seung, Vice President of Loan Documentation for
Wells Fargo, as the attorney-in-fact for HSBC, executed a Power of Attorney to
Foreclose Mortgage effective as of April 6, 2012, authorizing Shapiro to foreclose the
mortgage by advertisement, and ratifying all acts of Shapiro that were consistent with
the Power of Attorney taken at any time since April 6, 2012. Id., Ex. 6 (Power of

4

Attorney). The Power of Attorney was recorded with the Hennepin County Office of the
Recorder on May 8, 2012. Id. Plaintiff pled upon “information and belief” that Seung did
not have legal authority to execute this Notice of Pendency because at the time he
executed it, he was actually an employee of Wells Fargo.” Id., ¶ 21, Ex. 7 (Affidavit of
Investigator).
On August 7, 2012, Nelson executed a Notice of Pendency empowering the
Shapiro law firm to foreclose on the Property, which was recorded in the Hennepin
County Office of the Recorder on August 8, 2012. Id., ¶ 22, Ex. 8 (Notice of Pendency).
Plaintiff pled upon “information and belief” that Nelson did not have the legal authority to
execute the Notice of Pendency at the time she executed it. Id., ¶ 23. On August 8,
2012, Kendell Hoskins, Vice President of Loan Documentation of Wells Fargo, 3 signed
the Power of Attorney on behalf of HSBC, effective August 6, 2012, empowering
Shapiro to foreclose on the Property and to bid in on the Property at the foreclosure
sale, and ratified all acts by Shapiro as of the effective date of the Power of Attorney.
Id., ¶ 24, Ex. 9 (Power of Attorney).

The Power of Attorney was recorded in the

Hennepin County Officer of the Recorder on August 20, 2012. Id. Plaintiff pled upon
“information and belief” that Hoskins did not have the legal authority to execute the
Power of Attorney at the time he executed it, as there existed no power of attorney from
HSBC empowering Wells Fargo as its attorney-in-fact for this specific mortgage or loan
foreclosure. Id., ¶ 25.

3

Plaintiff pled that this Power of Attorney was signed by Hoskins as Vice President
of Loan Documentation for HSBC. Id., ¶ 24. But the document states it was signed by
Hoskins as Vice President of Loan Documentation for Wells Fargo on behalf of HSBC.
Id., Ex. 9 (August 8, 2012 Power of Attorney).
5

HSBC, through Shapiro, noticed a sheriff’s sale for the Property, which was first
published on August 15, 2012. Id., Ex. 10 (Sheriff’s Certificate of Sale and Foreclosure
Record). The sheriff’s sale for the Property occurred on October 3, 2012. Id., ¶ 27.
Shapiro appeared on behalf of HSBC at the Sheriff’s Sale, and exercised the power of
the sale clause in the Mortgage by bidding the amount owed to HSBC. Id. A Sheriff’s
Certificate of Sale and the foreclosure record was recorded in the Hennepin County
Office of the Recorder. Id., ¶ 27, Ex. 10 (Sheriff’s Certificate of Sale and Foreclosure
Record). Plaintiff alleged that HSBC did not have the legal authority to exercise the
power of sale in the Mortgage because of the unrecorded assignments of the Mortgage.
Id., ¶ 27.
Plaintiff claimed that on or about April 13, 2011, Shapiro received constructive
notice that HSBC had engaged in “unsafe and unsound” banking practices regarding
foreclosures, as on that date, HSBC entered into a Consent Order with the Officer of
Comptroller of the Currency in which HSBC did not contest that it had engaged in a
variety of “unsafe and unsound” banking practices in conducting foreclosures. Id., ¶ 28.
Plaintiff asserted that HSBC at all times knew, or had reason to know, that the
February 27, 2012 Assignment of Mortgage and various notices of pendency and
powers of attorney were all void. Id., ¶ 31.
Plaintiff alleged the following causes of action:
In Count I, Determination of Adverse Claims, Minn. Stat. § 559.01, plaintiff
asserted a quiet title action seeking a determination regarding defendants’ adverse
interest in the Property. Id., ¶¶ 35-41. According to plaintiff, in a quiet title action, the
burden of proof is on the mortgagee asserting an adverse interest in the property and

6

defendants must prove their title to the Mortgage by preponderance of the evidence.
Id., ¶¶ 38, 39. Plaintiff maintained that defendants’ claim to an interest in her Property
was void because there existed unrecorded assignments of mortgage conveying the
mortgagee’s power of sale to third parties; HSBC did not have the mortgagee’s power of
sale on the date of the sheriff’s sale; and the foreclosure was void because the
individuals executing the foreclosure documents did not have legal authority to execute
the documents when they signed the documents, and defendants did not record the
necessary powers of attorney authorizing the foreclosure. Id., ¶ 40.
In Count II, plaintiff sought a declaratory judgment under Minn. Stat. § 555.02
that the assignment of mortgage, notices of pendency, and powers of attorney were all
void, and that she remains the owner of the Property in fee title. Id., ¶¶ 42-44.
In Count III, alleging slander of title, plaintiff asserted that Shapiro, acting at
direction of HSBC, drafted and recorded documents that were false and not executed
by legally authorized persons, and that Shapiro, at the direction of HSBC, knew that the
documents were false because unauthorized persons without authority executed the
notices of pendency and the assignment of mortgage. Id., ¶¶ 45-50.
As relief, plaintiff sought: (1) a determination of adverse interest in the Property;
(2) a declaration that the Sheriff’s Certificate of Sale, the various assignments of
mortgage, notices of pendency, and powers of attorney were all void; (3) a declaration
that plaintiff remained the owner of the Property in fee title; and (4) money damages.
Id., Prayer for Relief.
Defendants moved to dismiss the Complaint pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure, contending that plaintiff’s quiet title and slander of title

7

claims failed because her allegations that every relevant mortgage-related document
was executed without authority and that there are missing mortgage assignments, were
conclusory and without support of facts and the law. Id., pp. 7-14, 16. Additionally,
defendants submitted that plaintiff lacked standing to rely on hypothetical securitization
and trust documents to claim that there was a missing and unrecorded assignment of
her mortgage. Id., pp. 11-14. As for her declaratory judgment count, because plaintiff’s
substantive claims failed, this claim must also be dismissed. Id., p. 16.
II.

STANDARD OF REVIEW
In considering a motion to dismiss under Rule 12(b)(6), the pleadings are

construed in the light most favorable to the non-moving party, and the facts alleged in
the complaints must be taken as true. Ashley County, Ark. V. Pfizer, Inc., 552 F.3d 659,
665 (8th Cir. 2009).

In addition, a court must afford the plaintiff all reasonable

inferences from those allegations. Blankenship v. USA Truck, Inc., 601 F.3d 852, 853
(8th Cir. 2010). At the same time, to withstand a motion to dismiss under Rule 12(b)(6),
litigants must properly plead their claims under Rule 8 of the Federal Rules of Civil
Procedure and meet the principles articulated by the United States Supreme Court in
Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007).
Under Rule 8(a)(2), a pleading must contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.” The pleading standard articulated by
Rule 8 “does not require detailed factual allegations, but it [does demand] more than a
unadorned, the-defendant-unlawfully-harmed-me-accusation.” Iqbal, 556 U.S. at 678
(internal quotation marks and citations omitted). A “pleading that offers ‘labels and

8

conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’”
Id. (quoting Twombly, 550 U.S. at 555).

Thus, to “survive a motion to dismiss, a

complaint must contain 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. at 677 (quoting Twombly, 550 U.S. at 556).

“[T]he plausibility standard, which

requires a federal court complaint to ‘state a claim for relief that is plausible on its face, .
. . asks for more than a sheer possibility that a defendant has acted unlawfully.” Ritchie
v. St. Louis Jewish Light, 630 F.3d 713, 717 (8th Cir. 2011) (internal quotation and
citation omitted). “Determining whether a complaint states a plausible claim for relief
will, . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679.
As a general rule, the Court may not consider materials “outside the pleadings”
on a motion to dismiss, without converting the motion to dismiss to a motion for
summary judgment. Fed. R. Civ. P. 12(d). “The court, however, ‘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,’” without converting the
motion into one for summary judgment. See Little Gem Life Sciences, LLC v. Orphan
Medical, Inc., 537 F.3d 913, 916 (8th Cir. 2008) (quoting Porous Media Corp. v. Pall
Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (internal citation and punctuation omitted).);
see also Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a

9

pleading is a part of the pleading for all purposes.”); Mattes v. ABC Plastics, Inc., 323
F.3d 695, 697 n.4 (8th Cir. 2003).
With these standards in mind, the Court turns to the defendants’ motion to
dismiss.
III.

DISCUSSION
A.

Quiet Title

In Minnesota, “[a]ny person in possession of real property personally. . . 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.
In response to defendants’ motion to dismiss the quiet title claim, plaintiff first
contended that all she had to plead was that she was in possession of the Property and
defendants had a claim adverse to her.

Memorandum in Opposition to Motion to

Dismiss (“Pl. Mem.”), pp. 5-6 [Docket No. 16].

Plaintiff also maintained that as

defendants had the burden of proof with respect to her quiet title claim, the federal rules
could not be applied in a manner that denied her state substantive rights. Id., pp. 10-11.
The position urged by plaintiff – that this Court should apply the Minnesota state
court pleading standards to her quiet title claim – is meritless. Plaintiff’s counsel has
made this exact argument in the past and the Eighth Circuit could not have been more
emphatic in its response: “[w]e apply federal pleading standards—Rules 8 and
12(b)(6)—to the state substantive law to determine if a complaint makes out a claim
under state law.” Karnatcheva v. JP Morgan Chase Bank, NA, 704 F.3d 545, 548 (8th
Cir. 2013), cert. denied, 134 S.Ct. 72 (2013); see also Dunbar v. Wells Fargo Bank,

10

N.A., 709 F.3d 1254, 1257 (8th Cir. 2013) (quoting Karnatcheva); Novak v. JP Morgan
Chase Bank, 518 F. App’x 498, 501 (8th Cir. 2013) (quoting Karnatcheva)); Gharwal v.
Federal Nat’l Mortg. Ass’n, Civ. No. 13-685 (PJS/JSM), 2013 WL 4838904, at *2 (D.
Minn. Sept. 11, 2013) (noting that the Eighth Circuit has “squarely and repeatedly
rejected” this argument).
In addition, the Eighth Circuit has settled the “burden of proof” argument
advocated by plaintiff. See Karnatcheva, 704 F.3d at 548. As the court explained in
Gharwal:
Karnatcheva rejected that [burden of proof] argument,
specifically holding that § 559.01 and the other authority on
which [plaintiff] relies ‘are not state substantive standards
that govern the success of a quiet title claim. Karnatcheva,
704 F.3d at 548. Whether or not the Eighth Circuit's holding
was “error” is not for this Court to decide; Karnatcheva is
binding precedent, and this Court must apply it. The Court
notes, however, that although he was addressing a different
issue, plaintiff's counsel himself 4 has conceded in the past
“that, under Fed. R. Civ. P. 11, a quiet-title claim must be
supported by an objectively reasonable basis for believing
that the defendant's asserted interest in the property is
invalid.” Welk v GMAC Mortg., LLC, 850 F.Supp.2d 976,
988 (D. Minn. 2012), aff'd, 720 F.3d 736 (8th Cir. 2013).
Here, plaintiffs quiet title claims are based only on
conclusory statements and speculation, but no facts. The
claim fails under Rule 12(b)(6).
2013 WL 4838904, at *3.
Thus, this Court has reviewed plaintiff’s quiet title claim applying the standards
governing Rules 8 and 12(b)(6) of the Federal Rules of Civil Procedure.
Mere allegations of plaintiff’s possession of the Property and conclusory
statements that defendants’ adverse claims are invalid are insufficient to state a claim
4

Both Gharwal and Karnatcheva were represented by William Butler, plaintiff’s
counsel in the instant case.
11

for relief. See Karnatcheva, 704 F.3d at 548 (affirming the district court's dismissal of
the plaintiff's quiet-title claim “because the plaintiff’s 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 that transfers affecting payees
and assignments of the notes were invalid.”); Yang Mee Thao-Xiong v. American Mortg.
Corp., Civil No. 13-354 (MJD/TNL), 2013 WL 3788799, at *4 (D. Minn. July 18, 2013)
(quoting Novak v. JP Morgan Chase Bank, N.A., Civ. No. 12-589 (DSD/LIB), 2012 WL
3638513, at *4 (D. Minn. Aug. 23, 2012), aff’d, 518 F. App’x 498 (8th Cir. 2013)) (finding
that plaintiffs “‘must state facts sufficient to allow the court to draw the reasonable
inference that . . . she is in possession and that a defendant claims a right or title to the
property, but has no such right or title.’”).
Consequently, plaintiff’s wholly unsupported statements – most of which were
made on “information and belief” – about unrecorded assignments and the alleged lack
of legal authority by the individuals signing various instruments, utterly fail the pleading
requirements governing actions in this Court. See Complaint, ¶¶ 10, 12, 19, 21, 23, 25,
27. While it is true that the “Eighth Circuit has yet to address whether a pleading based
on ‘information and belief’ is sufficient to state a claim,” LaCroix v. U.S. Bank, NA, Civ.
No. 11-3236 (DSD/JJK), 2012 WL 2357602, at *6 (D. Minn. June 20, 2012), the Eighth
Circuit has unequivocally held that conclusory allegations lacking in factual support are
insufficient to satisfy the Rule 8 pleading standards or the standards described by the
Supreme Court in Iqbal and Twombly. See Karnatvcheva, 704 F.3d at 548; Blaylock v.
Wells Fargo Bank, N.A., 502 Fed. Appx. 623, 2013 WL 1688894, at *1 (8th Cir. April 19,
2013) (based on Karnatcheva, dismissed quiet title claim for falling short of federal

12

pleading requirements); Iverson v. Wells Fargo Bank, N.A., 2 Fed. Appx. 624, 2013 WL
1688903, at *1 (8th Cir. April 19, 2013) (unpublished) (same); Sorem v. Bank of New
York Mellon, Civ. No. 13-290 (DWF/JSM), 2013 WL 4611115, at *2-3 (D. Minn. Aug. 29,
2013); Ko v. Mortgage Elec. Registration Sys., Civ. No. 13-596 (JRT/AJB), 2013 WL
4052680, at *2 (D. Minn. Aug. 9, 2013); Quale v. Aurora Loan Services, LLC, Civ. No.
13-621 (JNE/AJB), 2013 WL 3166584, at *1 (D. Minn. June 20, 2013) (string citation
omitted); Lara v. Federal Nat’l Mortg. Ass’n, Civ. No. 13-676 (SRN/AJB), 2013 WL
3088728, at *3 (D. Minn. June 18, 2013); Schumacher v. Federal Home Loan Mortg.
Corp., Civil No. 13-29 (DSD/FLN), 2013 WL 3033746, *2 (D. Minn. June 17, 2013).
Further, plaintiff’s claims that the foreclosure of the mortgage was void under
Minnesota law because there was an unrecorded assignment of her mortgage as
evidenced by a MERS ServicerID Report, and the securitization documents and a trust
allegedly required assignments of mortgage to the trustee and that they be recorded,
find no support in the facts or law. Complaint, ¶¶ 9, 13, 14, 16, 18, Ex. 2 (MERS
ServicerID Report dated March 20, 2013); Pl. Mem., pp. 6-9.
First, there is nothing about the MERS ServicerID Report dated March 20, 2013,
that mentions HSBC, much less when HSBC was assigned the Mortgage from MERS.
But even if the this report did state that HSBC was the “investor” on plaintiff’s loan as
alleged by plaintiff, (Complaint, ¶ 8), the fact that HSBC was an investor as of March
2013 is totally consistent with the Assignment of Mortgage to HSBC on February 27,
2012. See Welk v. Federal Nat’l Mortg. Ass’n, Civ. No. 12-2864 (SRN/TNL), 2013 WL
2155463, at *3 (D. Minn., May 17, 2013) (rejecting the same “evidence”—consisting of a
screen shot of the MERS loan information page—and noting “[i]t is no surprise that

13

Fannie Mae is listed as having an interest in October 2012—Fannie Mae acquired an
interest from Wells Fargo in March 2011. There is no plausible allegation that Fannie
Mae acquired any interest before 2011”); Butler v. Fed. Nat'l Mortg. Ass'n, Civ. No. 122697 (SRN/TNL), 2013 WL 2145701, at *3 (D. Minn. May 15, 2013) (rejecting the same
“evidence”–a screen shot from the MERS loan finder website showing Fannie Mae as
the “investor” for the Mortgage, and stating “this screen shot is only evidence that, on
October 3, 2012, Fannie Mae had an interest in the Mortgage. It does not establish the
allegations in the Complaint; rather, it is just the sort of ‘shot in the dark’ allegation that
does not meet Rule 8's pleading standards. Thus, not only is there no factual support
for plaintiff’s bald assertions, the record shows the exact opposite – the foreclosure and
the subsequent quit claim deed were proper.”).
Second, allegations about unidentified mortgage securitization documents, some
unnamed trust and unknown provisions within these documents, to speculate that there
must have been an unrecorded assignment of plaintiff’s mortgage at a certain point in
time, are of no avail. In fact, this Court has no basis for assuming that the purported
language of any of these documents even applies to plaintiff or her mortgage. But even
if the language did govern plaintiff’s mortgage, it does not provide a plausible inference
that an unrecorded assignment to HCBS had actually occurred. See, e.g., Richter v.
Federal Nat’l Mortg. Ass’n, Civ. No. 13-475 (ADM/JSM), 2013 WL 3223377, at *3 (D.
Minn. June 25, 2013) (dismissing the quiet title claim, and stating “[s]imply quoting a
Fannie Mae policy document does not plausibly establish how Fannie Mae obtained an
unrecorded interest in the Property in this case. Plaintiff’s allegations do not rise above
speculation.”); Cheng Lee v. Federal Nat’l Mortg. Ass'n, Civ. No. 13-180 (DWF/SER),

14

2013 WL 2631904, at *2 n.4 (D. Minn. June 12, 2013) (“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. This conclusory allegation is insufficient.”).
Third, the language of the alleged securitization documents and trust agreement
does not support the inference that an unrecorded assignment took place or when it
took place, particularly when plaintiff admits that a recorded assignment occurred from
MERS to HSBC and attached to her Complaint a facially valid record of the assignment
(Complaint, ¶ 9, Ex. 2 (Assignment of Mortgage)). See Dunbar v. Wells Fargo Bank,
N.A., 853 F. Supp.2d 839, 848 (D. Minn. 2012), aff’d 709 F.3d 1254, 1257 (8th Cir.
2013) (“Plaintiffs appear to argue that an unrecorded assignment from Option One to
Wells Fargo must exist that renders invalid the 2010 assignment from Option One to
Wells Fargo. The PSAs do not, however, say that Option One actually assigned the
mortgage years ago, only that it had agreed to do so. Mere speculation about what may
have happened does not allow a plausible inference when defendants present a facially
valid record of assignment from Option One to Wells Fargo. As a result, dismissal is
warranted.”).
Fourth, plaintiff’s allegations on “information and belief” that Johnson lacked
signing authority on behalf of MERS to execute the Assignment of Mortgage, or that
Nelson, Seung and Hoskins lacked signing authority on behalf of HSBC to execute
mortgage foreclosure-related documents, “do not hold up to even the slightest scrutiny.”
See Simmer v. HSBC Bank USA, N.A., Civ. No. 13-1549(DSD/AJB), 2013 WL 6244710,
at *3 (D. Minn. Dec. 3, 2013) (plaintiffs’ allegations regarding individuals’ alleged lack of

15

authority to sign Notices of Pendency and Powers of Attorney failed because the
allegations are “merely conclusory assertions without any factual allegations to support
them.”); Segura v. Federal Nat’l Mortg. Ass’n, Civ. No. 13-531 (SRN/JJK), 2013 WL
3034096, *2 (D. Minn. June 17, 2013) (rejecting “contention that nearly every individual
who signed a document in support of the foreclosure did not have the authority to do so”
as “implausible and speculative, just the sort of ‘vague claims’ that have been rejected
repeatedly by courts in this District and by the Eighth Circuit Court of Appeals.”) (citing
Mine v. Federal Home Loan Mortg. Corp., Civ. No. 13–220, 2013 WL 2443852, at *4 (D.
Minn. June 5, 2013)); Welk, 2013 WL 2155463, at *4 (“[Plaintiff] insists that the
individual who signed the assignment to Wells Fargo and the individual who signed the
power of attorney allowing Wells Fargo to institute foreclosure proceedings did not have
the authority to do so, and that the law firm and Trisko knew that the individuals had no
authority but proceeded with the foreclosure anyway. But there are no facts of any
kind—no evidence pled supporting these allegations.”); Stilp v. HSBC Bank USA, N.A.,
Civ. No. 12-3098 (ADM/JJK), 2013 WL 1175025, at *4 (D. Minn. Mar. 20, 2013), aff’d,
2013 WL 5340399, at *3 (8th Cir. Sept. 25, 2013) (“Plaintiffs plead upon information and
belief that all individuals executing assignments of mortgage and power of attorney lack
legal authority to do so. Plaintiffs believe the individuals executing assignments and
POAs are employed by organizations other than the ones on whose behalf they have
signed. . . . Even if the individuals do work for other organizations, it does not mean that
they could not also work for or be hired as agents on behalf of different clients. Absent
even an iota of evidence of fraud, these are conclusory allegations which do not state a
claim for which relief may be granted.”) (citations omitted).

16

To the contrary, the documents referenced in and attached to the Complaint and
in the public record, show an assignment of the mortgage to HSBC prior to the
foreclosure proceedings, and a properly recorded Notice of Pendency5 and Power of
Attorney to Foreclose. 6

Complaint, Exs. 3 (Assignment of Mortgage), 8 (Notice of

Pendency), 9 (Power of Attorney), 10 (Sheriff’s Certificate of Sale and Foreclosure
Record); Def. Appx., App. 1-5 (March 24, 2009 Limited Power of Attorney from HSBC
and Wells Fargo). Thus, plaintiff’s claim that the foreclosure was void on the basis that
the April 9, 2012 and August 7, 2012 Notices of Pendency and Powers of Attorney
giving Shapiro the power to foreclose on behalf of HSBC were invalid, (Complaint, ¶¶
18, 19, 22, 23), is belied by the documents.
On April 18, 2012, Seung, Vice President of Loan Documentation for Wells
Fargo, as the attorney-in-fact for HSBC, executed a Power of Attorney to Foreclose
Mortgage, authorizing Shapiro to foreclose the mortgage by advertisement. Id., Ex. 6
(April 9, 2012 Power of Attorney). The Power of Attorney stated it was effective as of
5

The publication of the notice of foreclosure first occurred on August 15, 2012,
and the Notice of Pendency was recorded on August 7, 2012. As required by Minn.
Stat. § 580.32, subd. 3, the Notice of Pendency was recorded prior to the first date of
publication of the foreclosure notice.
6

The Power of Attorney was recorded on August 20, 2012, but the foreclosure
sale did not take place until October 3, 2012. As required by Minn. Stat. § 580.05, the
Power of Attorney was recorded before the foreclosure sale took place. Smith v. Wells
Fargo Bank, N.A., Civil No.13-0439 (SRN/TNL), 2013 WL 5720150, at *3 (D. Minn. Oct.
21, 2013) (“Plaintiff claims that no valid power of attorney existed when the law firm of
Shapiro & Zielke, LLP, created the Notice of Sale and caused it to be published,
because the Power of Attorney was executed after the date of the Notice of Sale and
after the date of the first publication of the Notice of Sale. However, the relevant statute
does not dictate when the power of attorney must be executed. Rather, it requires only
that the power of attorney be recorded prior to the foreclosure sale. Here, the Power of
Attorney was recorded on April 26, 2012, and the property was sold at a foreclosure
sale on August 7, 2012. Thus, Defendant complied with the statutory requirements.”). .
17

April 6, 2012, and ratified all acts of Shapiro that were consistent with the Power of
Attorney taken at any time since April 6, 2012. Id. Similarly, the August 9, 2012 Power
of Attorney signed by Hoskins for Wells Fargo (as the attorney-in-fact for HSBC), stated
that it was effective August 6, 2012, and ratified all of the acts made by Shapiro since
the effective date. These documents gave Shapiro the authority to execute the April 9,
2012 and August 7, 2012 Notices of Pendency. See Smith v. Wells Fargo Bank, N.A.,
Civil No. 13-0439 (SRN/TNL), 2013 WL 5720150, at *3 (D. Minn. Oct. 21, 2013) (“The
power of a principal to retroactively validate the acts of its agents has long been
recognized, See United States v. Heinszen, 206 U.S. 370, 382 (1907), and nothing in
Minn. Stat. § 580.05 prohibits such ratification.”).
Likewise, plaintiff’s allegations that Wells Fargo lacked any authority from HSBC
to act as its attorney-in-fact ignored the Limited Power of Attorney from HSBC to Wells
Fargo to service all of HSBC mortgage loans, which was recorded with the Hennepin
County Recorder on March 24, 2009. Def. Appx., App. 1-5 (Limited Power of Attorney
between HSBC Bank and Wells Fargo Bank).
In sum, not only is there no factual support for plaintiff’s bald assertions, the
record shows the exact opposite—there was no unrecorded assignment of the
mortgage, those individuals who signed the Assignment of Mortgage and foreclosurerelated documents had the authority to do so, and the foreclosure was proper.
Finally, even if the language from the alleged securitization documents and trust
agreement described in the Complaint did apply to plaintiff’s mortgage and there was
any truth to plaintiff’s speculative statements about the lack of signing authority of
Johnson (as to the Assignment of Mortgage), and Nelson, Seung and Hoskins (as to the

18

Notices of Pendency and Powers of Attorney), 7 plaintiff suffered no injury in fact as a
result and, therefore lack standing to pursue a quiet title claim on this basis.

See

Karnatcheva, 704 F.3d at 547 (“The plaintiffs base this request for declaratory relief on
allegations that their notes and mortgages were transferred to trusts underlying
mortgage-backed securities and that their foreclosures violated the terms of the trust
agreements relating to these mortgage-backed securities. But district courts in
Minnesota have recently addressed this issue and have uniformly held that mortgagors
do not have standing to request declaratory judgments regarding these types of trust
agreements because the mortgagors are not parties to or beneficiaries of the
agreements. We believe that the reasoning in these cases is sound, and we adopt it.”)
(internal citations omitted); Sorem, 2013 WL 4611115, at *3 (“Plaintiffs base their claims
on the primary argument that the foreclosure is void because unrecorded assignments
exist, and in support Plaintiffs argue that BNYM's Pooling and Servicing Agreement
requires that an assignment be executed in favor of BNYM. Plaintiffs lack standing to
make this challenge.”) (citations omitted); Quale, 2013 WL 3166584, at *1 (string
citation omitted) (“Insofar as the Quales based their claims on the allegations that an
individual lacked authority to execute the assignment of mortgage, the Court rejects this
argument because the Quales lack standing to make such a challenge, and even if they
did have standing, their claims are fatally implausible and speculative.”); Forseth v.
Bank of Am., N.A., Civil No. 13-38 (SRN/TNL), 2013 WL 2297036, at *5 (D. Minn. May
24, 2013) (“The allegations regarding unauthorized signatures on every document
7

Under Minn. Stat. § 358.50, an acknowledgment made in a representative
capacity “is prima facie evidence” that the instrument or electronic record was executed
and delivered with proper authority.
19

related to the foreclosure process for the Forseths’ mortgage are similarly implausible
and pure speculation. But even if the signatures were unauthorized, the harm caused
by the lack of signing authority is harm to MERS or BAC, in the case of Mr. Bruns, or
BAC/Bank of America or Fannie Mae in the case of Mr. McDaniel and Ms. Girvan.
There is no allegation in the Amended Complaint that any of these individuals falsely
initiated foreclosure proceedings against the Forseths’ property, and the documents in
the public records belie such a claim in any event. The Forseths defaulted on their
mortgage by not making payments as they promised. Even if all three of these
individuals lacked signing authority, as the Forseths claim, they have suffered no injury
as a result and therefore have no standing to pursue their claims.”) (citations omitted);
Welk, 2013 WL 2155463, at *3 (“[the] ‘Guide’ about which the Amended Complaint
makes much hay is, at best, a contract between Fannie Mae and its servicers. It is not
for the benefit of [plaintiff] and imposes no duties on any entity vis-a-vis the borrower.
So even if Wells Fargo failed to comply with its purported obligations under the ‘Guide,’
such a failure would be for Fannie Mae, not [plaintiff], to prosecute.”); Kaylor v. Bank of
America, N.A., Civ. No. 12-1586 (DSD/SER), 2012 WL 6217443, at *5 (D. Minn. Dec.
13, 2012) (homeowners who were not parties to the mortgage assignment lack
standing); Novak, 2012 WL 3638513, at *6 (“plaintiffs lack standing to challenge the
assignment: they are not parties to the assignment and any dispute would be between
the assignor and assignee”); Stinson v. U.S. Bank, N.A., Civ. No. 12-68 (SRN/AJB),
2012 WL 2529354, at *3 (D. Minn. June 12, 2012) (“[T]o the extent that the [plaintiffs]
allege that the defendants did not comply with the provisions of the PSA, the [plaintiffs]
have no standing to assert claims on this basis because they are not parties or third-

20

party beneficiaries to such agreements.”); Sovis v. Bank of New York Mellon, Civ. No.
11-2253 (DWF/LIB), 2012 WL 733758, at *4-5 (D. Minn. Mar. 6, 2012), (finding that
general allegations that defendants unlawfully foreclosed on plaintiff’s home pursuant to
a series of invalid assignments of mortgage, “cannot furnish the causal nexus
necessary to establish standing to assert her claims.”); Gerlich v. Countrywide Home
Loans, Inc., Civ. No. 10-4520 (DWF/LIB), 2011 WL 3920235, at *2-3 (D. Minn. Sept. 7,
2011) (plaintiff not a party to the assignment and, therefore, lacked standing to assert a
claim regarding the assignment); Kebasso v. BAC Home Loans Servicing, LP, 813 F.
Supp.2d 1104, 1113 (D. Minn. 2011) (finding that mortgagors, lacked standing to
challenge the defendants’ authority to foreclose, as “‘any disputes that arise between
the mortgagee holding legal title and the assignee of the promissory note holding
equitable title do not affect the status of the mortgagor for purposes of foreclosure by
advertisement.’ The court reaffirmed the principle that ‘legal and equitable title can be
separated’ and if a dispute arises between the holder of legal and equitable title with
respect to foreclosure, ‘[i]t is a matter between them alone, and does not concern the
mortgagor,’ and such a transaction does “not affect the interests of the mortgagor, and
he could not object.’”) (quoting Jackson, 770 N.W.2d at 500); Greene v. Home Loan
Servs., Inc., Civ. No. 09-719 (DWF/JJK), 2010 WL 3749243, at *4 (D. Minn. Sept. 21,
2010) (“Plaintiffs do not have standing to bring their challenge regarding the
securitization of the mortgage or the Pooling and Service Agreement. Even assuming
this matter was adequately pled, which it was not, Plaintiffs are not a party to the
Pooling and Service Agreement and therefore have no standing to challenge any
purported breach of the rights and obligations of that agreement.”).

21

For all the reasons stated above, the Court finds that defendants’ motion to
dismiss the quiet title actions against them should be granted.
B.

Slander of Title

To state a claim for slander of title, a plaintiff must allege facts that show: (1)
there was a false statement concerning the real property owned by the plaintiff; (2) the
false statement was published to others; (3) the false statement was published
maliciously; and (4) 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) (citation omitted). To plead malice, plaintiff “must
raise factual allegations sufficient to create a plausible claim that at least one of the [ ]
parties acted with a reckless disregard for the truth, ‘despite a high degree of
awareness of probable falsity.’” Dunbar, 709 F.3d at 1258 (quoting Brickner v. One
Land Dev. Co., 742 N.W.2d 706, 711 (Minn. Ct. App. 2007)); see also Quevli Farms,
Inc. v. Union Sav. Bank & Trust Co., 178 Minn. 27, 226 N.W. 191, 192 (Minn. 1929)
(concluding that to be a malicious statement, it must be a “groundless disparagement of
the plaintiff's title or property . . . made without probable cause.”). The filing of an
instrument known to be inoperative is a false statement that, if done maliciously,
constitutes slander of title. Kelly v. First State Bank of Rothsay, 177 N.W. 347, 347
(Minn. 1920).
Plaintiff responded to defendants’ motion to dismiss her slander of title claim by
merely stating the elements for the claim and restating the allegations from the
Complaint. Pl. Mem., pp. 9-10. The Court finds the claim must be dismissed because
plaintiff has alleged no facts from which this Court could infer that defendants made a

22

false statement, acted maliciously or that plaintiffs suffered any pecuniary loss from a
publication concerning title to his property. See Ko, 2013 WL 4052680, at *4 (“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. Because Ko fails to allege malice, he has not stated a claim for
slander of title, and this claim will be dismissed.”) (internal citation omitted); Lara, 2013
WL 3088728, at *3 (dismissing slander of title claim based on allegation that individuals
signing documents lacked authority to do so and stating “[plaintiffs pleaded no plausible
facts to support their allegations regarding signing authority.”).
Additionally, even assuming that documents recorded as to the Property are
technically false, this does not amount to a cloud on the title of the Property where
plaintiff has clouded the title based on her default. Pope v. Fed Home Loan Mortgage
Corp., Civ. No. 12-3094, 2013 WL 2251001, at *4 (D. Minn. May 22, 2013) (“An
unauthorized assignment may be technically false, but it does not cloud the title to
property on which the mortgagee has undisputedly defaulted. The only cloud on the
title of the Popes’ property is a cloud of their own making: they did not make the
payments due under their mortgage and as a result, they lost their property through
foreclosure.”).
For all of these reasons, defendants’ motion to dismiss plaintiff’s slander of title
claim should be granted. 8

8

The Court notes that a slander of tile claim is subject to the heightened pleading
standard of Fed. R. Civ. P. 9(b). See Murphy v. Aurora Loan Servs., LLC, 699 F.3d
1027, 1032 (8th Cir. 2012) (Rule 9(b) applies to slander of title claims); see also Ko,
2013 WL 3088728, at *4; Pope, 2013 WL 2251001, at *4; Haubrich, 2012 WL 3612023,
at *6. Defendants did not argue in favor of dismissal based on plaintiff’’s failure to meet
23

C.

Declaratory Judgment

A declaratory judgment is a remedy, not a cause of action. See, e.g., Onvoy, Inc.
v. ALLETE, Inc., 736 N.W.2d 611, 617-618 (Minn. 2007) (a declaratory judgment action
may be maintained only where there is a justiciable controversy); Buck v. American
Airlines, Inc., 476 F.3d 29, 33 n.3 (1st Cir. 2007) (noting that the Declaratory Judgment
Act, 28 U.S.C. § 2201 “creates a remedy, not a cause of action”). In light of the Court's
conclusion that plaintiff’s substantive claims must be dismissed under Rule 12(b)(6),
“[she is] left with a remedy in search of right.” Scanlon v. Northwest Mortg., Inc., Civ.
No. 11-3128 (MJD/TNL), 2012 WL 2885131, *7 (D. Minn. July 13, 2012); see also Lara,
2013 WL 3088728 at *3 (finding that where plaintiff had failed to state a substantive
claim, the Amended Complaint also failed to state a claim for declaratory judgment)
(citing Weavewood, Inc. v. S & P Home Invs., LLC, 821 N.W.2d 576, [579] (Minn. 2012)
(“A declaratory judgment is a procedural device through which a party’s existing legal
rights may be vindicated so long as a justiciable controversy exists.”)).
Plaintiff’s claim for declaratory judgment must be dismissed because there is no
legal basis for affording the remedy.
For all of these reasons, defendants’ motion to dismiss should be granted in its
entirety and plaintiff’s suit should be dismissed with prejudice. 9

this standard. Suffice it to say, however, having failed to plead any facts to support a
slander of title claim, the claim also fails to meet the Rule 9(b) standard. Therefore, the
Court recommends dismissal of the suit with prejudice.
9

“Ordinarily dismissal of a [pleading] for failure to comply with Rule 8 should be
with leave to amend.” Michaelis v. Neb. State Bar Ass’n., 717 F.2d 437, 438-39
(8th Cir. 1983). Nonetheless, when a complaint is so deficient or defective that the
court is convinced that its defects cannot be cured through re-pleading, dismissal with
prejudice is appropriate. That is the case here. See McLean v. United States, 566 F.3d
24

IV.

RECOMMENDATION
For the reasons set forth above, it is recommended that:
1.
2.

Dated:

Defendants’ Motion to Dismiss [Docket No. 10] be GRANTED.
This matter be dismissed with prejudice.

January 6, 2014

s/ Janie S. Mayeron
JANIE S. MAYERON
United States Magistrate Judge

NOTICE
Under D. Minn. LR 72.2(b) any party may object to this Report and Recommendation by
filing with the Clerk of Court, and serving all parties by January 20, 2014, a writing
which specifically identifies those portions of this Report to which objections are made
and the basis of those objections. A party may respond to the objecting party's brief
within ten days after service thereof. All briefs filed under this Rules shall be limited to
3500 words. A judge shall make a de novo determination of those portions to which
objection is made. This Report and Recommendation does not constitute an order or
judgment of the District Court, and it is therefore not appealable directly to the Circuit
Court of Appeals.

391, 400 (4th Cir. 2009) (“to the extent . . . that a district court is truly unable to conceive
of any set of facts under which a plaintiff would be entitled to relief, the district court
would err in designating [a] dismissal to be without prejudice. Courts, including this one,
have held that when a complaint is incurable through amendment, dismissal is properly
rendered with prejudice and without leave to amend.”); McKesson HBOC, Inc. v. New
York State Common Ret. Fund, Inc., 339 F.3d 1087, 1096 (9th Cir. 2003) (dismissal
with prejudice is appropriate where “deficiencies in [plaintiff’s] claims cannot be cured by
amendment”); Cato v. United States, 70 F.3d 1103, 1106 (9th Cir. 1995) (a pro se
litigant should be given chance to amend complaint unless it is “absolutely clear that the
deficiencies of the complaint could not be cured by amendment.”); Ikechi v. Verizon
Wireless, Civ. No. 10-4554 (JNE/SER), 2011 WL 2118797, at *5, n. 6 (D. Minn. April 7,
2011) (recommending dismissal with prejudice of plaintiff’s fraud claims because it was
unlikely that plaintiff could cure the defective pleading on re-pleading), 2011 WL
2118791, *3 (D. Minn. May 25, 2011) (adopting the Report and Recommendation of
Magistrate Judge Rau regarding dismissal of plaintiff’s fraud claims for failure to satisfy
the particularity requirement of Rule 9(b)).
25