Rogers v. Bank of America, N.A. et al
Filing
21
ORDER granting 9 Motion to Dismiss. Plaintiff's Complaint [Doc. No. 1] is DISMISSED with prejudice; and any notice of lis pendens recorded in connection with this lawsuit and the property located at 13443 Red Fox Road, Rogers, Minnesota, is DISCHARGED.(Written Opinion). Signed by Judge Susan Richard Nelson on 07/01/2014. (SMD)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Irene A. Rogers,
Case No. 13-cv-1698 (SRN/TNL)
Plaintiff,
v.
MEMORANDUM OPINION
AND ORDER
Bank of America, N.A. as successor by
merger to Countrywide Home Loans, Inc.,
and Countrywide Home Loans Servicing,
LP; Bank of New York Mellon formerly
known as the Bank of New York as Trustee
for the Certificateholders CWABS, Inc.,
Asset-backed Certificates, Series 2005-4;
Bank of New York Mellon Trust Company
N.A. formerly known as Bank of New
York Trust Company N.A. as Co-Trustee
for Certificateholders CWABS, Inc., Assetbased Certificates, 2005-4; Mortgage
Electronic Registration Systems, Inc.; John
and Jane Does 1-10,
Defendants.
Michael J. Keogh, Keogh Law Office, P.O. Box 11297, St. Paul, MN 55111, for Plaintiff.
Keith S. Anderson, Bradley Arant Boult Cummings LLP, One Federal Place, 1819 Fifth
Avenue North, Birmingham, AL 35203; and Mark G. Schroeder, Briggs and Morgan,
P.A., 2200 IDS Center, Minneapolis, MN 55402, for Defendants Bank of America, N.A.,
Bank of New York Mellon, and Mortgage Electronic Registration Systems, Inc.
SUSAN RICHARD NELSON, United States District Judge
I.
INTRODUCTION
This matter is before the Court on Defendants Bank of America, N.A. as successor
by merger to Countrywide Home Loans, Inc. and Countrywide Homes Loans Servicing, LP
(“BANA”), Bank of New York Mellon formerly known as The Bank of New York as
Trustee for the Certificateholders CWABS, Inc., Asset-backed Certificates, Series 2005-4
(“BONY”), and Mortgage Electronic Registration Systems (“MERS”)’s (collectively,
“Defendants”)1 Motion to Dismiss [Doc. No. 9] Plaintiff Irene Rogers’ Complaint [Doc.
No. 1] with prejudice. For the reasons set forth below, the Court grants Defendants’
Motion.
II.
BACKGROUND
In this lawsuit, Plaintiff is challenging the foreclosure of the mortgage on her home.
According to the Complaint, in April 2005, Plaintiff’s husband refinanced the existing
mortgage on their home located at 13443 Red Fox Road, in Rogers, Minnesota
(“Mortgage”), in favor of Countrywide Home Loans, Inc. (Compl. [Doc. No. 1] ¶¶ 4, 15 &
Ex. B.) MERS was the mortgagee. (Id., Ex. B ¶ C.) Plaintiff’s husband, but not Plaintiff,
signed the Note. (Id. ¶ 15.) MERS assigned its interest in the Mortgage to BONY on June
10, 2008, and the assignment was subsequently recorded with the Hennepin County
Recorder on June 27 (“First Assignment”). (Id. ¶ 25 & Ex. E.) Meanwhile, on June 12,
Plaintiff and her husband sent a letter to Countrywide Home Mortgage (a subsidiary of
BANA), in which they requested a mortgage modification. (See id. ¶ 24 & Ex. D.)
Plaintiff’s husband passed away on September 26, 2009. (Id. ¶ 30.)
1
The Court notes that the motion does not expressly state that it is brought on
behalf of Defendant Bank of New York Mellon Trust Company. However, because
Defendant BONY seeks dismissal, and because BONY and the Bank of New York
Mellon Trust Company share counsel, the Court will assume that the motion pertains to
Bank of New York Mellon Trust Company, as well.
2
Plaintiff alleges that, in November 2009, BANA offered a “trial loan modification”
contingent on Plaintiff making three timely payments in January, February, and March of
2010. (Id. ¶ 31.) According to Plaintiff, she made the required payments in a timely
manner and received documents for a permanent loan modification. (Id. ¶ 33.) When
Plaintiff learned that the forms required her husband’s signature, she informed BANA of his
death and provided documentation showing that she was the personal representative of his
estate. (Id. ¶ 34 & Ex. F.) However, BANA refused to honor the loan modification because
Plaintiff was not a party to the Note. (Id. ¶ 35.) Plaintiff “continued to make partial and late
payments,” (id. ¶¶ 36, 38), and attempted to obtain assistance from the U.S. Department of
Housing and Urban Development, (id. ¶¶ 39–42). But, according to the Complaint,
Plaintiff’s application was denied because she was not a party to the Note. (See id. ¶¶ 42–
43.)
On October 28, 2011, another assignment of the Mortgage was recorded. (Id. ¶ 44 &
Ex. G.) This assignment was executed on October 17, 2011, and again assigned the
Mortgage from MERS to BONY (“Second Assignment”). (Id. ¶ 44 & Ex. G.) On January
11, 2012, a Notice of Pendency of Proceeding and Power of Attorney to Foreclose
Mortgage by Corporation (“Notice of Pendency”) was recorded. (Id. ¶ 46 & Ex. H.) And,
on May 17, 2013, the property was purchased by BONY at a sheriff’s sale. (See id. ¶ 39 &
Ex. I.) BONY, which is the trustee of a securitized mortgage trust, (see id. ¶¶ 6–7), was a
party to a Pooling and Servicing Agreement (“Pooling Agreement”) entered into between
various entities, not including Plaintiff, (see id. ¶ 16 & Ex. C). According to Plaintiff, the
3
Pooling Agreement “required that all mortgages to be included in the corpus of the
Mortgage Trust were to be transferred into the Mortgage Trust between June 1, 2005 and
August 8, 2005. (‘the Funding Period’).” (Id. ¶ 17.)
Plaintiff’s Complaint raises six causes of action. In Count I, Plaintiff seeks a
declaratory judgment that the assignments, and therefore the resulting foreclosure, are void
for failure to comply with the Pooling Agreement. (See id. ¶¶ 47–52.) In Count II, Plaintiff
seeks a declaratory judgment that the foreclosure is void for failure to comply with the
statutory foreclosure requirements. (See id. ¶¶ 57–52.)2 Count III asserts a breach of
contract claim based on BANA’s failure to execute a final loan modification agreement.
(See id. ¶¶ 67–71.) In Count IV, Plaintiff asserts a defamation of title claim. (See id. ¶¶ 73–
78.) Count V alleges that BANA violated Minnesota law by failing to record a legal
assignment of the Note prior to commencing the foreclosure by advertisement proceedings
and by failing to include the Second Assignment in the Notice of Mortgage Foreclosure
Sale. (See id. ¶¶ 83–86.) Finally, in Count VI, Plaintiff seeks relief under Minn. Stat.
§ 8.31. (See id. ¶¶ 89–90.)
Defendants filed a motion to dismiss Plaintiff’s Complaint on November 14, 2013
[Doc. No. 9], along with a supporting memorandum [Doc. No. 11] and affidavit with
several exhibits [Doc. No. 12]. Plaintiff filed an opposition memorandum on December 6
[Doc. No. 15], and Defendants filed a reply brief on December 20 [Doc. No. 16]. The
2
There are many duplicate paragraph numbers throughout Plaintiff’s Complaint. For
example, after paragraph 58, the numbering of the paragraphs begins again at 50.
4
matter was heard on April 10, 2014, at which time Plaintiff was granted leave to submit
supplemental briefing. Plaintiff did so on April 18 [Doc. Nos. 19–20].
III.
DISCUSSION
A.
Standard of Review
Defendants move to dismiss Plaintiff’s Complaint pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure for failure to state a claim upon which relief can be
granted. When evaluating a motion to dismiss under Rule 12(b)(6), the Court assumes the
facts in the Complaint to be true and construes all reasonable inferences from those facts in
the light most favorable to Plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986).
However, the Court need not accept as true wholly conclusory allegations, see Hanten v.
Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir. 1999), or legal conclusions
Plaintiff draws from the facts pled, Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th
Cir. 1990). In addition, the Court ordinarily does not consider matters outside the pleadings
on a motion to dismiss. See Fed. R. Civ. P. 12(d). The Court may, however, consider
exhibits attached to the complaint and documents that are necessarily embraced by the
pleadings, Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003), and may also
consider public records, Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007).3
3
Several exhibits have been submitted by the parties. Attached to the Complaint
are the following: a Warranty Deed (Exhibit A), the Mortgage (Exhibit B), the Pooling
Agreement (Exhibit C), a letter from Plaintiff to Countrywide Mortgage (Exhibit D), the
First Assignment (Exhibit E), Letters Testamentary (Exhibit F), the Second Assignment
(Exhibit G), the Notice of Pendency (Exhibit H), and the Sheriff’s Certificate of Sale
(Exhibit I). Attached to the Affidavit of Keith S. Anderson submitted in support of
Defendants’ motion are the following documents: the Note (Exhibit A), the Mortgage
(Exhibit B), the First Assignment (Exhibit C), the Notice of Pendency (Exhibit D), and
5
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative level.”
Id. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 555). In sum, this standard “calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of [the claim].” Twombly, 550
U.S. at 556.
B.
The Claims
1.
Declaratory Judgment—Defective Assignments
Count I of Plaintiff’s Complaint fails because Plaintiff lacks standing to challenge
the validity of the assignments of the Mortgage under the Pooling Agreement. Plaintiff
argues that, because the Mortgage was assigned to BONY outside of the Funding Period
mandated by the Pooling Agreement, the assignments and subsequent foreclosure are void.
(See Compl. ¶¶ 47–52.) However, numerous courts within this District—including this
Court—have held that a plaintiff mortgagor is not a party to, or beneficiary of, the
agreement that governs the trust to which the mortgagor’s debt instrument has been
transferred and, therefore, does not have standing to challenge that agreement. See, e.g.,
Nelson v. Bank of N.Y. Mellon, Civ. No. 12-1096 (SRN/SER), 2012 WL 4511165, at *3
the Sheriff’s Certificate of Sale (Exhibit E). The Court may properly consider these
documents because they are necessarily embraced by the pleadings and/or are public
6
(D. Minn. Oct. 1, 2012) (“Moreover, Plaintiffs were not parties to the pooling and servicing
agreements by which their notes were pooled into mortgage-backed securities. They
therefore do not have standing to challenge those agreements.”) (citation omitted);
Anderson v. Countrywide Home Loans, Civ. No. 10-2685 (MJD/JJG), 2011 WL 1627945,
at *4 (D. Minn. Apr. 8, 2011) (“Plaintiffs do not have standing to challenge the validity of
the assignment to the Trust because they are not parties to the PSA.”), Report and
Recommendation adopted by 2011 WL 1630113, at *1 (D. Minn. Apr. 28, 2011); Greene v.
Home Loan Servs., Inc., Civ. No. 09-719 (DWF/JJK), 2010 WL 3749243, at *4 (D. Minn.
Sept. 21, 2010) (“Even assuming this matter was adequately pleaded, which it was not,
Plaintiffs are not a party to the Pooling and Servicing Agreement and therefore have no
standing to challenge any purported breach of the rights and obligations of that
agreement.”). And, when the Eighth Circuit Court of Appeals was presented with this issue
in Karnatcheva v. JP Morgan Chase Bank, N.A., it agreed:
The plaintiffs base [their] request for declaratory relief on allegations that
their notes and mortgages were transferred to trusts underlying mortgagebacked 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.
704 F.3d 545, 547 (8th Cir. 2013) (internal citations omitted), cert. denied, 134 S. Ct. 72
(2013).
records.
7
Plaintiff makes two main arguments in support of her claim. First, Plaintiff asserts
that the cases discussed above lack sufficient analysis of the “standing” issue and were
wrongly decided under U.S. Supreme Court precedent regarding standing. (See Pl.’s Mem.
in Opp. to Mot. to Dismiss [Doc. No. 15] (“Pl.’s Opp.”) at 9–11; Pl.’s Supplemental Mem.
in Opp. to Mot. to Dismiss [Doc. No. 19] (“Pl.’s Supp. Mem.”) at 2–3.) However, Eighth
Circuit precedent is binding authority in this District, and Karnatcheva is directly on point.
Therefore, this Court is bound to apply the rule set forth therein.
Second, Plaintiff asserts that the trust in this case is governed by New York law,
under which untimely transfers to a trust are void, and that the cases finding otherwise are
inapposite because they applied Minnesota law. (See Pl.’s Opp. at 11–12.) This argument,
too, is unavailing. As noted by Defendants, “[e]ven if New York law governs the pooling
and servicing agreement as to the rights and obligations of the parties thereto, the law
governing the PSA is irrelevant as Plaintiff is not a party to the PSA and has no standing to
state a claim based on alleged non-compliance with the agreement.” (Defs.’ Reply Mem. of
Law in Supp. of Mot. to Dismiss [Doc. No. 16] (“Defs.’ Reply”) at 4.)
Moreover, the application of New York law does not change the outcome as to
Plaintiff’s lack of standing. Plaintiff cites to two opinions—a New York state district court
opinion in Wells Fargo Bank, N.A. v. Erobobo and a California state court of appeals
opinion in Glaski v. Bank of America, N.A.—for the proposition that untimely transfers to
the trust violated the Pooling Agreement and are void. (See Pl.’s Opp. at 12.) It is true that
the courts in those cases held that transfers made to a trust after the trust’s closing date are
8
void under New York law and that the courts allowed a borrower to challenge the
assignment. See Glaski v. Bank of America, N.A., 160 Cal. Rptr. 3d 449, 463–64 (Cal. Ct.
App. 2013); Wells Fargo Bank, N.A. v. Erobobo, No. 31648/2009, 2013 WL 1831799, at
*8 (N.Y. Sup. Ct. Apr. 29, 2013). However, the holdings in those cases are contrary to the
holdings of other New York courts, which have held that a borrower does not have standing
to allege a breach of a pooling and servicing agreement to which it is not a party—including
a challenge to the validity of an assignment made thereunder. See Karamath v. U.S. Bank,
N.A., No. 11 CV 1557(NGG)(RML), 2012 WL 4327613, at *7 (E.D.N.Y. Aug. 29, 2012)
(“[P]laintiff is not a party to the PSA or to the Assignment of Mortgage, and is not a thirdparty beneficiary of either, and therefore has no standing to challenge the validity of that
agreement or the assignment.”), Report and Recommendation adopted by 2012 WL
4327502 (E.D.N.Y. Sept. 20, 2012); Cimerring v. Merrill Lynch Mortg. Investors, No.
8727/2011, 2012 WL 2332358, at *9 (N.Y. Sup. Ct. June 13, 2012) (“[P]laintiffs lack
standing to allege a claim for breach of the PSA because they are not parties to this contract,
nor do they allege that they are third-party beneficiaries to the agreement . . . .”). And, as
noted by another court in this District, “the majority of courts that have examined Erobobo
have criticized the decision and held that under New York law, an assignment of a mortgage
into a trust in violation of the terms of the PSA is voidable, and not void, as the action can
be ratified by the beneficiaries.” Wolff v. Bank of N.Y. Mellon, LLC, ___ F. Supp. 2d ___,
2014 WL 641510, at *9 (D. Minn. Feb. 19, 2014) (collecting cases). Glaski also has been
rejected. See, e.g., Apostol v. CitiMortgage, Inc., Case No. 13-cv-01983-WHO, 2013 WL
9
6140528, at *7 (N.D. Cal. Nov. 21, 2013) (“[C]ourts in this District have expressly rejected
Glaski and adhered to the majority view that individuals who are not parties to a PSA
cannot base wrongful foreclosure claims on alleged deficiencies in the PSA/securitization
process.”). Thus, Plaintiff’s arguments in favor of standing are unavailing. For these
reasons, the Court finds that Count I fails to state a claim upon which relief can be granted.
2.
Declaratory Judgment—Defective Foreclosure
Count II fails because Plaintiff has not stated a claim for a defective foreclosure.
Plaintiff seeks relief under Minn. Stat. §§ 580.02, 580.04, and 580.11, but her allegations
fail under each statutory provision.
a.
Minn. Stat. § 580.02
In order for a party to be entitled to foreclose on a property, Minn. Stat. § 580.02
requires “that the mortgage has been recorded and, if it has been assigned, that all
assignments thereof have been recorded.” Minn. Stat. § 580.02(3). Plaintiff’s allegations in
support of a breach of this statutory provision are:
At the time of the commencement of the foreclosure proceeding on January
11th, 2012[,] no valid and legal assignment of Plaintiffs’ [sic] mortgage
obligation was recorded on the title records to the subject Property. See
Count One supra.
(Compl. ¶ 46.) Therefore, Plaintiff’s claim is based solely on the alleged invalidity of the
assignments as set forth in Count I—i.e., that because the Mortgage was assigned to BONY
outside of the Funding Period mandated by the Pooling Agreement, the assignments were
void. As discussed above, Plaintiff lacks standing to challenge the validity of the
assignments to the extent that the claim is based on an alleged violation of the Pooling
10
Agreement. Because Plaintiff cannot state a claim that the assignments are void, she also
cannot state a claim for defective foreclosure under Minn. Stat. § 580.02 based on the
alleged invalidity of those assignments.
b.
Minn. Stat. § 580.04
Under Minn. Stat. § 580.04, each notice of foreclosure must include “the name of . . .
each assignee of the mortgage, if any.” Minn. Stat. § 580.04(a)(1). In Count II, Plaintiff
alleges that the Notice of Foreclosure Sale violated this provision because the Second
Assignment was not included. (Compl. ¶ 58.) Defendants argue that, as a “subsequent
recorded assignment,” the Second Assignment is “irrelevant and has no effect on the
validity of the subject foreclosure proceedings.” (Defs.’ Mem. at 7.) According to
Defendants, the Mortgage was properly transferred from MERS to BONY by virtue of the
First Assignment, so there was no interest to transfer in the Second Assignment and that
assignment had no effect on the legal title. (Id.)
Plaintiff cites to several cases for the proposition that the foreclosure by
advertisement statutes are to be strictly construed. (See Pl.’s Opp. at 13–15.) However, the
holdings and reasoning in those cases actually support Defendants’ argument that the
statutes only require notice of assignments affecting legal title. For example, in Jackson v.
Mortgage Electronic Registration Systems, Inc., the Minnesota Supreme Court held that
“the specific language of sections 580.02 and 580.04 does not require that a promissory note
assignment be recorded before foreclosing a mortgage by advertisement.” 770 N.W.2d 487,
496 (Minn. 2009). The court determined that its holding was “consistent with [its]
11
longstanding principles of real property law which establish that . . . only assignments of
legal title of the security instrument must be recorded in order to commence a foreclosure by
advertisement.” Id. at 501. And, in Moore v. Carlson, two assignments—one from the
mortgagee to a third party and another from the third party back to the original mortgagee—
were recorded but not referred to in the notice of foreclosure sale. 128 N.W. 578, 578
(Minn. 1910). The Minnesota Supreme Court determined that the statutory provision
requiring that the notice specify the name of “the assignee” had been violated. Id. at 579.
The court explained:
To name the various assignees is not without value to the mortgagor. He is
entitled to know the history of the transaction, and to consider in connection
with his action the various assignments which affect the title of the person
seeking to foreclose by advertisement.
Id. (emphasis added).
The Minnesota Court of Appeals addressed an issue similar to the present dispute in
Oppong-Agyei v. Chase Home Finance, LLC. In that case, JP Morgan assigned a mortgage
to Chase in 2008. No. A12-2325, 2013 WL 3368869, at *2 (Minn. Ct. App. July 8, 2013).
In November 2010, Chase purchased the property at a foreclosure sale, and JP Morgan
purported to again assign its interest in the mortgage, this time to MERS. Id. The court
determined that the second assignment “had no legal effect, because JP Morgan, having
assigned its interest to Chase in 2008, had no interest to assign in 2010.” Id. In reaching its
conclusion, the court relied on the Minnesota Supreme Court’s decision in Sander v.
Stenger for the proposition that, when an assignor has no interest to assign, “‘neither [the
assignment’s] existence of record, nor the fact that the notice referred to it, in any way
12
affected the right to foreclose the mortgage under the power of sale.’” Id. (quoting Sander
v. Stenger, 136 N.W. 4, 5 (Minn. 1912)).
While it is true that the foreclosure by advertisement statutes are strictly construed,
the Court notes that Minn. Stat. § 580.04 requires only that the name of “each assignee” be
included on the notice, not a list of each “assignment.” Thus, the Notice of Foreclosure
complied with the plain language of the statute because the assignee in both the First and
Second Assignment was BONY, and BONY is listed as the assignee on the Notice of
Foreclosure. (See Compl., Ex. I.) Moreover, even if the statute required a listing of each
“assignment,” the Notice of Foreclosure is not void for failure to include the Second
Assignment because the Second Assignment had no legal effect. After MERS assigned its
interest in the Mortgage to BONY in June 2008, it no longer had any interest to assign and
so could not transfer legal title of the security instrument in October 2011. Accordingly, the
absence of the Second Assignment from the Notice of Foreclosure did not affect the right to
foreclose by advertisement, and Plaintiff’s claim under Minn. Stat. § 580.04 fails.
c.
Minn. Stat. § 580.11
Pursuant to Minn. Stat. § 580.11, “[t]he mortgagee, the mortgagee’s assignee, or the
legal representative of either or both, may fairly and in good faith purchase the premises” at
a foreclosure-by-advertisement sale. Minn. Stat. § 580.11. In Count II, Plaintiff alleges that
“mortgagees and assignees are permitted to ‘credit bid’ at Sheriff’s sales based on their
ownership of the mortgage debt being foreclosed.” (Compl. ¶ 48.) However, Plaintiff
contends, BONY’s May 17, 2013, credit bid on the property was improper because the First
13
and Second Assignments were not valid and did not transfer the Mortgage to BONY. (See
id. ¶¶ 49–50.) Therefore, Plaintiff asserts that the sheriff’s sale is void for lack of
consideration. (Id. ¶ 51.)
Here, again, Plaintiff’s claim is based solely on the alleged invalidity of the
assignments as set forth in Count I—i.e., that because the Mortgage was assigned to BONY
outside of the Funding Period mandated by the Pooling Agreement, the assignments were
void. As discussed above, Plaintiff lacks standing to challenge the validity of the
assignments to the extent that the claim is based on an alleged violation of the Pooling
Agreement. Because Plaintiff cannot state a claim that the assignments are void, she also
cannot state a claim for violation of Minn. Stat. § 580.11 based on the alleged invalidity of
those assignments. For all of the reason discussed above, Plaintiff’s Count II fails.
3.
Breach of Contract
Similarly, Count III fails because Plaintiff’s allegations regarding BANA’s purported
failure to honor a loan modification agreement do not state a claim for breach of contract.
(See Compl. ¶¶ 67–71.) Pursuant to Minn. Stat. § 513.33, “[a] debtor may not maintain an
action on 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 “an agreement to lend or forbear repayment
of money, goods, or things in action, to otherwise extend credit, or to make any other
financial accommodation.” Id., subd. 1(1). Thus, an “agreement by a creditor to take
certain actions, such as entering into a new credit agreement, forbearing from exercising
14
remedies under prior credit agreements, or extending installments due under prior credit
agreements,” must be in writing in order to give rise to a claim. Id., subd. 3(3).
Accordingly, allegations of an oral loan modification agreement, or an unexecuted written
loan modification agreement, are not sufficient to form the basis of a breach of contract
claim. See Myrlie v. Countrywide Bank, 775 F. Supp. 2d 1100, 1109 (D. Minn. 2011)
(finding that an action based on a loan modification agreement is barred by Minn. Stat.
§ 513.33 unless the agreement is in writing, expresses consideration, sets forth terms and
conditions, and is signed); Armstrong v. Ocwen Loan Serv., LLC, Civ. No. 12-146
(DWF/LIB), 2012 WL 4009448, at *3 (D. Minn. Sept. 12, 2012) (dismissing the plaintiff’s
breach of contract claim based on an alleged loan modification agreement because “the
proposed agreement was never executed” and “the alleged oral communication . . . was
never reduced to a signed written agreement”); Grueling v. Wells Fargo Home Mortg., Inc.,
690 N.W.2d 757, 761–62 (Minn. Ct. App. 2005) (stating that “claims on agreements falling
under section 513.33 fail as a matter of law if the agreement is not in writing”) (citation
omitted).
Plaintiff alleges that BANA offered her a loan modification provided that she made
three trial payments. According to Plaintiff, she made the payments and received
documentation for a final loan modification, but BANA refused to sign the final agreement.
Thus, according to Plaintiff’s own allegations, no enforceable contract was ever formed
because the requirements of Minn. Stat. § 513.33 were not met—the alleged agreement was
never executed. Plaintiff’s only arguments in response appear to be that modifications of
15
existing loans are subject to different requirements than the formation of new credit
agreements, and that “the statute of frauds is not always an absolute defense.” (Pl.’s Supp.
Mem. at 5.) As to the former argument, the definition of “credit agreement” plainly
contemplates loan modification agreements. See Myrlie, 775 F. Supp. 2d at 1109 (stating
that “a loan modification agreement would constitute a credit agreement” under Minn. Stat.
§ 513.33); Armstrong, 2012 WL 4009448, at *3 (stating that, “under Minnesota law, a loan
modification constitutes a credit agreement”). As to the latter argument, Plaintiff does not
explain why the statute of frauds would not apply in this case. Therefore, because Plaintiff
cannot maintain a claim for breach of a contract that does not exist, Count III fails.
4.
Slander of Title
Count IV fails because Plaintiff has not pleaded sufficient facts to support a slander
of title claim.4 To prevail on such a claim, a plaintiff must show: “(1) [t]hat there was a
false statement concerning the real property owned by the plaintiff; (2) [t]hat the false
statement was published to others; (3) [t]hat the false statement was published maliciously;
[and] (4) [t]hat the publication . . . caused the plaintiff pecuniary loss in the form of special
damages.” Paidar v. Hughes, 615 N.W.2d 276, 279–80 (Minn. 2000) (citations omitted).
Here, Plaintiff claims that the recording and publishing of the First Assignment, Notice of
4
Plaintiff entitled her cause of action under Count IV “Defamation of Title.” In
Minnesota, “the elements of defamation require the plaintiff to prove that a statement was
false, that it was communicated to someone besides the plaintiff, and that it tended to
harm the plaintiff’s reputation and to lower [her] in the estimation of the community.”
Rouse v. Dunkley & Bennett, P.A., 520 N.W.2d 406, 410 (Minn. 1994) (citation
omitted). Plaintiff has not pled these elements. Rather, she has pled the elements of a
slander of title claim, as discussed herein. Therefore, the Court will evaluate the viability
of Count IV as a slander of title claim.
16
Pendency, and Sheriff’s Certificate constitute slander of title because no valid assignment
had been executed. (See Compl. ¶¶ 73–77.) Plaintiff’s claim fails because she has not pled
facts upon which the Court could infer that Defendants made a “false” or “malicious”
statement.
First, Plaintiff argues that, “if the assignments of records are void pursuant to New
York Trust law, these documents are false because they convey no equitable or title interest
whatsoever . . . and the Co-Trustees lacked the legal authority to commence the foreclosure
by advertisement.” (Pl.’s Opp. at 16.) Thus, Plaintiff’s claim is based on the allegations in
Count I—i.e., that the assignments were void because they were not transferred in
compliance with the Pooling Agreement. As discussed above, however, the case law
overwhelmingly indicates that an untimely assignment of a mortgage into a trust renders an
assignment voidable, not void, even under New York law. Moreover, Plaintiff lacks
standing to challenge the validity of the assignments because she is not a party to, or
beneficiary of, the Pooling Agreement. Because Plaintiff has failed to state a claim that the
assignments were void, she likewise fails to state a claim that Defendants published a
“false” statement.
Second, a malicious statement is one that is a “‘groundless disparagement of the
plaintiff’s title or property . . . made without probable cause.’” Mine v. Fed. Home Loan
Mortg. Corp., No. 13-220 (ADM/JSM), 2013 WL 2443852, at *5 (D. Minn. June 5, 2013)
(quoting Quevli Farms, Inc. v. Union Sav. Bank & Trust Co., 226 N.W. 191, 192 (Minn.
1929)). Thus, “[t]o plead malice, the [plaintiff] must raise factual allegations sufficient to
17
create a plausible claim that at least one of the [defendants] acted with a reckless disregard
for the truth, ‘despite a high degree of awareness of probable falsity.’” Dunbar v. Wells
Fargo Bank, N.A., 709 F.3d 1254, 1258 (8th Cir. 2013) (quoting Brickner v. One Land Dev.
Co., 742 N.W.2d 706, 711 (Minn. Ct. App. 2007)). Plaintiff has made no such allegations.
Rather, Plaintiff makes only an insufficient, conclusory allegation that “[t]he Statements
were published maliciously, without legal authority to do so.” (Compl. ¶ 77.) Plaintiff has
not raised factual allegations sufficient to create a plausible claim that Defendants acted
with reckless disregard for the truth despite a high degree of awareness of probable falsity.
Accordingly, Plaintiff’s Count IV fails to state a claim upon which relief may be granted.
5.
Minn. Stat. §§ 58.13 and 58.18
Plaintiff’s claims under Minn. Stat. §§ 58.13 and 58.18 fail because they are based
on the insufficient allegations discussed above. Under Minn. Stat. § 58.13, a “residential
mortgage originator or servicer” is prohibited from “violat[ing] any provision of any other
applicable state or federal law regulating residential mortgage loans.” Minn. Stat. § 58.13,
subd. 1(a)(8). And, Minn. Stat. § 58.18 provides that “[a] borrower injured by a violation of
the standards, duties, prohibitions, or requirements of sections 58.13, 58.136, 58.137, 58.16,
and 58.161 shall have a private right of action.” Id. § 58.18, subd. 1.
Plaintiff claims that she is entitled to relief under these provisions because (1) BANA
violated Minn. Stat. § 580.02 by failing to record a legal assignment of the Note prior to
commencing foreclosure by advertisement proceedings, and (2) BANA violated Minn. Stat.
§ 580.04 by failing to include the Second Assignment on the Notice of Foreclosure. (See
18
Compl. ¶¶ 80–86.) In other words, Plaintiff’s claims under Minn. Stat. §§ 58.13 and 58.18
are based on the allegations in Count II. As discussed above, Plaintiff has failed to state a
claim based on those allegations. Therefore, Count V fails, as well.
6.
Minn. Stat. § 8.31
Finally, Plaintiff’s attempt to bring a cause of action under Minn. Stat. § 8.31 in
Count VI fails. “A borrower injured by a violation of the standards, duties, prohibitions, or
requirements of [Minnesota Statutes] sections 58.13, 58.136, 58.137, 58.16, and 58.161 also
may bring an action under section 8.31.” Minn. Stat. § 58.18, subd. 2. Plaintiff asserted a
violation of § 58.13 in Count V. As discussed above, however, Plaintiff failed to state a
claim under that statutory provision. Therefore, she may not proceed to bring an action
under § 8.31 that is based on a violation of that statutory provision, and Count VI fails.
C.
“John and Jane Doe” Defendants
Plaintiff’s Complaint states that “Defendants John and Jane Does 1-10 are involved
in the instant case and transaction and are currently unknown to Plaintiffs. Said entities will
be joined upon further discovery of their true nature and liability once these facts are known
and supported by competent evidence.” (Compl. ¶ 9.) According to the Eighth Circuit, “an
action may proceed against a party whose name is unknown if the complaint makes
allegations specific enough to permit the identity of the party to be ascertained after
reasonable discovery.” Estate of Rosenberg by Rosenberg v. Crandell, 56 F.3d 35, 37 (8th
Cir. 1995). Plaintiff makes no specific allegations against the unnamed defendants.
Therefore, the action is properly dismissed as to Defendants John and Jane Does 1-10.
19
D.
Request for Leave to Amend
Plaintiff asks the Court to grant her leave to amend her Complaint should any of her
claims be determined to be legally insufficient to state a claim. (See Pl.’s Opp. at 18; Pl.’s
Supp. Mem. at 6.) While the Court may grant leave to amend the pleadings when justice so
requires, Fed. R. Civ. P. 15(a)(2), leave to amend is properly denied when the proposed
amendment would be futile, see Zutz v. Nelson, 601 F.3d 842, 852 (8th Cir. 2010). A
proposed amendment is futile when “‘the district court has reached the legal conclusion that
the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6).’” Id.
at 850 (citation omitted). Plaintiff has not described the manner in which she would amend
her Complaint. Nevertheless, the Court finds that Plaintiff’s claims fail for reasons that
cannot be overcome by amendment. Accordingly, Plaintiff’s request is denied, and
Plaintiff’s Complaint is dismissed with prejudice.
THEREFORE, IT IS HEREBY ORDERED THAT:
1.
Defendants’ Motion to Dismiss [Doc. No. 9] is GRANTED;
2.
Plaintiff’s Complaint [Doc. No. 1] is DISMISSED with prejudice; and
3.
Any notice of lis pendens recorded in connection with this lawsuit and the
property located at 13443 Red Fox Road, Rogers, Minnesota, is
DISCHARGED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: July 1, 2014
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
20
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?