Matulka v. M&T Bank et al

Filing 31

MEMORANDUM AND ORDER-This matter is dismissed with prejudice. Defendants' Motions to Dismiss (Filing Nos. 22 , 26 , and 29 -1) are granted to the extent they are consistent with this Memorandum and Order. Defendant M&T Bank's Motion for Leave to File Responsive Pleading Out of Time (Filing No. 29 ) is granted. Defendants McCubbin and Kozeny & McCubbins Motion to Strike (Filing No. 25 ) is denied. Ordered by Senior Judge Richard G. Kopf. (Copy mailed to pro se party)(MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MICHAEL J. MATULKA,
Plaintiff,
v.
M&T BANK, MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, Inc., WELLS FARGO
BANK, NA, HSBC BANK USA,
NA, as Trustee for WFALT 2007PA3, GARRY MCCUBBIN,
KOZENY & MCCUBBIN, L.C., and
DOES 1-10, (inclusive),
Defendants.

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8:12CV236

MEMORANDUM
AND ORDER

This matter is before the court on Defendants’ Motions to Dismiss, Motion to
Strike, and Motion to File Responsive Pleading Out of Time. (Filing Nos. 22, 25, 26,
and 29.) Plaintiff Michael Matulka (“Plaintiff”) has not responded to Defendants’
Motions, and the time in which to do so has now passed. As discussed in detail
below, the court will grant Defendants’ Motions to Dismiss.
I. BACKGROUND
Plaintiff filed a Complaint in this matter on July 6, 2012. (Filing No. 1.) He
filed an Amended Complaint on July 17, 2012. (Filing No. 4). Plaintiff’s Amended
Complaint is the operative Complaint in this matter. In this action, Plaintiff seeks to
set aside a trustee’s deed that conveyed property to HSBC Bank USA (“HSBC”).
Plaintiff also challenges the origination of the loan provided to purchase this property.
He has named M&T Bank, Mortgage Electronic Registration Systems, Inc.
(“MERS”), Wells Fargo Bank (“Wells Fargo”), HSBC, Gary McCubbin

(“McCubbin”), and Kozeny & McCubbin, L.C. (“Kozeny & McCubbin”) as
Defendants. (Id. at CM/ECF pp. 1-2.)
The relevant factual background is set forth in the paragraphs below. This
factual background is taken from the allegations set forth in Plaintiff’s Amended
Complaint, and evidence submitted by the parties that is a matter of public record. See
Stahl v. United States Dep’t of Agric., 327 F.3d 697, 700 (8th Cir. 2003) (“The district
court may take judicial notice of public records and may thus consider them on a
motion to dismiss”); Stutzka v. McCarville, 420 F.3d 757, 760 n.2 (8th Cir. 2005)
(stating courts “may take judicial notice of judicial opinions and public records”). See
also Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697, n.4 (8th Cir. 2003) (“[I]n
considering a motion to dismiss, the district court may sometimes consider materials
outside the pleadings, such as materials that are necessarily embraced by the pleadings
and exhibits attached to the complaint.”).
A.

Facts

1.
The property at issue in this action is real property located in Lancaster
County at 5401 Benton Street in Lincoln, Nebraska (“the Property”).1 (Filing No. 4
at CM/ECF p. 3.)

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The Property is described in the Deed of Trust as:

UNITS A, B, C AND D, BUILDING 4, WOODLANDS
CONDOMINIUM PROPERTY REGIME, A CONDOMINIUM
ORGANIZED UNDER THE LAWS OF THE STATE OF NEBRASKA,
LANCASTER COUNTY, NEBRASKA, PURSUANT TO MASTER
DEED AND DECLARATION RECORDED AUGUST 15, 1983 AS
INST. NO. 83-16260 IN THE OFFICE OF THE REGISTER OF
DEEDS OF LANCASTER COUNTY NEBRASKA[.]
(Filing No. 24-2 at CM/ECF p. 3.)
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2.
Bonnie Matulka purchased the Property on April 9, 2007, with a loan
from M&T Bank. A deed of trust (“the Deed of Trust”) granted a security interest in
the Property to M&T Bank, with MERS as the beneficiary. (Id. at CM/ECF pp. 2-3.)
3.
Plaintiff became the executor of Bonnie Matulka’s estate on October 21,
2007. (Id. at CM/ECF p. 3.)
4.
On April 29 and August 14, 2008, McCubbin, acting as successor trustee,
caused notices of default to be recorded against the Property. (Filing Nos. 24-4 and
24-6.)
5.
Plaintiff, acting as the personal representative of Bonnie Matulka’s estate,
conveyed the Property to himself on June 22, 2009. (Filing No. 4 at CM/ECF p. 6;
Filing No. 24-7.)
6.
McCubbin caused another notice of default to be recorded against the
property on April 12, 2010. (Filing No. 24-8.)
7.
On June 18, 2010, Plaintiff conveyed the Property by warranty deed to
Benton Street Ministries Mid West (“Benton Street Ministries”). (Filing No. 24-9.)
8.
On June 21, 2010, the Property sold at a trustee’s sale. (Filing No. 4 at
CM/ECF p. 6; Filing No. 24-10.)
9.
Plaintiff filed a complaint in the Lancaster County District Court (Case
Number CI 11-1738) on April 27, 2011, against M&T Bank, MERS, HSBC, Wells
Fargo, Shirley Fralin, and Robert Fralin. (Filing No. 24-11.) Plaintiff alleged
wrongful foreclosure of the Property, and he sought to quiet title in the Property. The
state district court dismissed the complaint, but gave Plaintiff leave to amend. (Filing
No. 24-12.)

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10. Thereafter, an amended complaint was filed in the state district court case,
which substituted Benton Street Ministries as the plaintiff. (Filing No. 24-13.) The
state district court dismissed the amended complaint with prejudice on November 2,
2011. It determined that (1) Benton Street Ministries, as a private trust, lacked the
capacity to sue on its own behalf, and (2) regardless of the standing issue, the
amended complaint did not show a defect in the trustee’s sale procedure that could
constitute wrongful foreclosure or entitle a plaintiff to quiet title. (Filing No. 24-14
at CM/ECF p. 8.)
11. On February 7, 2012, Eric Madej, acting as trustee for Benton Street
Ministries, filed a complaint in the Lancaster County District Court against HSBC,
Wells Fargo, and MERS seeking to quiet title in the Property. (Filing No. 24-15.)
The state district court dismissed the complaint with prejudice on June 26, 2012,
because it failed to state a claim upon which relief could be granted. (Filing No. 2416.)
II. MOTIONS TO DISMISS
Defendants argue, among other things, that Plaintiff (1) lacks standing, (2) is
precluded from litigating his claims, (3) is time barred from raising a claim under the
Truth and Lending Act (“TILA”), and (4) failed to identify any legal basis for setting
aside the foreclosure. (Filing No. 23 at CM/ECF p. 2; Filing No. 27 at CM/ECF p. 4;
Filing No. 29-2 at CM/ECF p. 2.) The court agrees.
A.

Standing

Standing is a core component of the Article III case and controversy
requirement. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). In order to
satisfy Article III’s standing requirements, Plaintiff must show that:

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“(1) he suffered an injury in fact that is (a) concrete and particularized
and (b) actual or imminent, not conjectural or hypothetical; (2) the injury
is fairly traceable to the challenged action of the defendant[s]; and (3) it
is likely, as opposed to merely speculative, that the injury will be
redressed by a favorable decision.”
McClain v. American Econ. Ins. Co., 424 F.3d 728, 731 (8th Cir. 2005) (internal
quotation marks omitted).
Defendants argue Plaintiff lacks standing to bring the claims alleged in the
Amended Complaint. Specifically, they argue Plaintiff does not have standing to
challenge the foreclosure sale because he conveyed the Property to Benton Street
Ministries prior to its sale. (Filing No. 23 at CM/ECF pp. 7-8; Filing No. 27 at
CM/ECF p. 4.) They also argue Plaintiff lacks standing to allege a violation of TILA
because he was not the original borrower under the Deed of Trust. (Filing No. 23 at
CM/ECF p. 20; Filing No. 27 at CM/ECF p. 4.) The court agrees with both
arguments.
At the time of the trustee’s sale, Plaintiff was not the title holder of the
Property. As set forth above, Plaintiff conveyed the Property to Benton Street
Ministries on June 18, 2010, and the Property sold at a trustee’s sale on June 21, 2010.
(Filing No. 24-9; Filing No. 24-10.) Plaintiff has not identified any injury he suffered
that could be corrected by reversing the foreclosure sale or by setting aside the
trustee’s deed upon sale. He has not shown an invasion of his legally protected
interests, given that he no longer owned the property when the Property sold at the
trustee’s sale. Thus, Plaintiff has failed to establish “injury in fact.”
As to Plaintiff’s TILA claim, he claims that TILA was violated at loan
origination by the lender’s purported failure to provide the original borrower, Bonnie
Matulka, with “proper (3-Day) Notice of Right to Cancel or Right of Recision.”
(Filing No. 4 at CM/ECF p. 9.) Here, the court agrees with Defendants that Plaintiff
lacks standing to allege a violation of TILA on behalf of the original borrower.
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See Hodak v. City of St. Peters, 535 F.3d 899, 904 (8th Cir. 2008) (“As a general rule,
a plaintiff may only assert his own injury in fact and cannot rest his claim to relief on
the legal rights or interest of third parties.”). Plaintiff has not alleged that he
participated in the loan origination or executed the promissory note or Deed of Trust.
Indeed, Plaintiff did not respond in any way to Defendants’ Motions to Dismiss.
Again, Plaintiff has failed to establish “injury in fact.”
B.

Issue Preclusion and Claim Preclusion

Regardless of the potentially curable standing issues Plaintiff faces, further
amendment of his claims would be futile because he is precluded from raising the
claims set forth in his Amended Complaint. “The doctrine of collateral estoppel, also
known as issue preclusion, provides that ‘when an issue of ultimate fact has been
determined by a valid and final judgment, that issue cannot again be litigated between
the same parties in another lawsuit.’” Chavez v. Weber, 497 F.3d 796, 803 (8th Cir.
2007) (quoting United States v. Brekke, 97 F.3d 1043, 1049 (8th Cir. 1996)).
Non-parties to an original judgment may raise collateral estoppel offensively
against losing parties. See Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). In
addition, a non-party to an earlier litigation may be precluded from re-litigating
certain claims or issues in subsequent litigation when that individual is in privity with
the losing party from the earlier action. Richards v. Jefferson County, Ala., 517 U.S.
793, 798 (1996). Privity for purposes of preclusion is “based on a variety of preexisting substantive legal relationships between the person to be bound and a party to
the judgment.” Taylor v. Sturgell, 553 U.S. 880, 894 (2008) (internal brackets and
quotation marks omitted). One such “substantive legal relationship” that satisfies the
privity requirement is between “preceding and succeeding owners of property.” Id.
The scope of the preclusive effect of a state court judgment is governed by the
laws of that state. W.F.M., Inc. v. Cherry County, Nebraska, 279 F.3d 640, 643 (8th

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Cir. 2002). Four elements must be satisfied before an issue is precluded under
Nebraska law:
the issue concluded must be identical, it must have been raised and
litigated in the prior action, it must have been material and relevant to the
disposition of the prior action, and the determination made of the issue
in the prior action must have been necessary and essential to the resulting
judgment.
Id.
Defendants argue that Plaintiff is precluded from relitigating issues raised by
Benton Street Ministries in Case Number CI 11-1738, issues that were decided by the
Lancaster County District Court on November 2, 2011. Defendants are correct.
Plaintiff and Benton Street Ministries are “preceding and succeeding owners of
property,” and Plaintiff may be precluded from re-litigating claims raised by Benton
Street Ministries in Case Number CI 11-1738. See Taylor, 553 U.S. at 894. Notably,
Plaintiff originally brought the suit in Case Number CI 11-1738, and it was only later
that Benton Street Ministries was substituted as the plaintiff. (Compare Complaint
in Case No. CI 11-1738 at Filing No. 24-11 and Amended Complaint in Case No. CI
11-1738 at Filing No. 24-13.)
The premise underlying Counts I, III, and IV of Plaintiff’s Amended Complaint
in this action is that McCubbin was not properly appointed as successor trustee and,
therefore, had no right to foreclose on the Property on behalf of HSBC. This identical
issue was raised by Benton Street Ministries and decided by the Lancaster County
District Court. (Filing No. 24-13 at CM/ECF pp. 23-24; Filing No. 24-14.) The
question of whether McCubbin had authority to foreclose on the Property was material
to Benton Street Ministries’s claim that the foreclosure was wrongful. The state
district court decided this issue, and also other issues that Plaintiff is attempting to
relitigate in this action. Specifically, the state district court determined that (1) there
was “no apparent irregularity in the nonjudicial foreclosure sale”; (2) production of
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a promissory note was not required in order to foreclose on the Property; (3) Benton
Street Ministries was precluded from challenging terms in the borrower’s agreement
that were previously accepted; and (4) Benton Street Ministries was not entitled to an
order of quiet title. (Filing No. 24-14 at CM/ECF pp. 4-9.) Indeed, each of the claims
rejected by the state district court reappear in Plaintiff’s Amended Complaint in this
case. Because these issues were previously litigated in an action to which Plaintiff
was both a party (at one time) and in privity, Plaintiff is precluded from relitigating
them here.
In addition, to the extent that Plaintiff raises additional claims in his Amended
Complaint that relate to the foreclosure of the property—claims that were not actually
decided by the state district court—the doctrine of claim preclusion bars relitigation
of issues that could have been litigated in the first suit. See Lovell v. Mixon, 719 F.2d
1373, 1376 (8th Cir. 1983) (“[R]es judicata or claim preclusion bars the relitigation
of issues which were actually litigated or which could have been litigated in the first
suit.”). Thus, because Plaintiff and Benton Street Ministries had the opportunity to
challenge the foreclosure in the state court action, and took advantage of that
opportunity, Plaintiff cannot now relitigate claims relating to the foreclosure of the
property in this court.
C.

TILA Claim

Plaintiff raises a TILA claim in his Amended Complaint. He claims that TILA
was violated at loan origination by the lender’s purported failure to provide the
original borrower, Bonnie Matulka, with “proper (3-Day) Notice of Right to Cancel
or Right of Recision.” (Filing No. 4 at CM/ECF p. 9.) Plaintiff does not assert his
TILA claim against any specific Defendant, but the court assumes the claim is directed
at M&T Bank, given that Bonnie Matulka purchased the Property with a loan from
M&T Bank. (Filing No. 4 at CM/ECF p. 3.)

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Defendants argue that Plaintiff’s TILA claim is barred by the doctrine of claim
preclusion. However, the court is reluctant to find that Plaintiff’s TILA claim could
have been litigated in the state court action discussed above. While it is true that
M&T Bank was a defendant in the state court action, Plaintiff and Benton Street
Ministries primarily attacked the foreclosure process, not the origination of the loan.

Regardless, the court reiterates its finding above that Plaintiff does not have
standing to allege a violation of TILA on behalf of the original borrower, Bonnie
Matulka. In addition, the court finds that, even if Plaintiff had standing, the claim is
time-barred. The right to rescind a loan under TILA for failure to provide required
disclosures expires “three years after the date of consummation of the transaction or
upon sale of the property.” 15 U.S.C. § 1635(f). Consummation takes place when the
loan documents are executed. Gaona v. Town & Country Credit, 324 F.3d 1050, 1054
(8th Cir. 2003). Thus, even assuming that Bonnie Matulka did not receive the
required disclosures under TILA, a claim for recission would be time barred because
the loan documents were signed in 2007, and this action was not brought until July 6,
2012.
III. MOTION TO STRIKE
Defendants McCubbin and Kozeny & McCubbin filed a Motion to Strike a
“forensic mortgage analysis” report prepared for Plaintiff by Forensic Professionals
Group USA, Inc. This “report” is attached to Plaintiff’s Complaint and Amended
Complaint and sets forth, among other things, that there was a “fabricated foreclosure
transaction” at the origination of the loan to Bonnie Matulka.2 (See, e.g., Filing No.

2

Another court presented with a similar “forensic mortgage analysis” noted the
following:
The second document is a “Certified Forensic Loan Audit”
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4 at CM/ECF p. 30.) Defendants McCubbin and Kozeny & McCubbin argue that this
“report” presents impertinent and scandalous accusations, and it is immaterial to
Plaintiff’s claims. (Filing No. 25.)
The court will deny the Motion to Strike as moot in light of its decision to
dismiss this matter. In the alternative, the Motion is denied because, while the
“report” borders on impertinence, it has no legal significance and striking it would
have no legal effect. See Fed. R. Civ. P. 12(f) (“The court may strike from a pleading
an insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter”).
IT IS THEREFORE ORDERED that:
1.

This matter is dismissed with prejudice.

prepared by someone named D. Alex-Saunders. Mr./Ms. Alex-Saunders,
for whom no contact information is provided, claims, variously, to be a
“Senior Auditor: Home and Asset Ombudsman Program, International
Environmental Association, 501(c)3,” “Senior ombudsman,” “Certified
forensic auditor by National Association of Mortgage Underwriters,”
“Associate of Global Association of Risk Professionals,” and the author
of “Stop! Illegal Predatory Lending.” The Court is unfamiliar with these
organizations (if they exist), but it is quite confident that there is no such
thing as a “Certified Forensic Loan Audit” or a “certified forensic
auditor.” In any event, the documents make no more sense than anything
else in the Debtor’s papers and confirm the empty gimmickery of these
types of claims.
In re Norwood, No. 10–84443–PWB, 2010 WL 4642447, at *2 (Bankr. N.D. Ga. Oct.
25, 2010) (observing that the Federal Trade Commission has issued a “Consumer
Alert” regarding “Forensic Mortgage Loan Audit Scams”).
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2.
Defendants’ Motions to Dismiss (Filing Nos. 22, 26, and 29-1) are
granted to the extent they are consistent with this Memorandum and Order.
3.
Defendant M&T Bank’s Motion for Leave to File Responsive Pleading
Out of Time (Filing No. 29) is granted.
4.
Defendants McCubbin and Kozeny & McCubbin’s Motion to Strike
(Filing No. 25) is denied.
DATED this 12th day of March, 2013.
BY THE COURT:
Richard G. Kopf
Senior United States District Judge

*This opinion may contain hyperlinks to other documents or Web sites. The U.S. District Court for the District
of Nebraska does not endorse, recommend, approve, or guarantee any third parties or the services or products they
provide on their Web sites. Likewise, the court has no agreements with any of these third parties or their Web sites. The
court accepts no responsibility for the availability or functionality of any hyperlink. Thus, the fact that a hyperlink ceases
to work or directs the user to some other site does not affect the opinion of the court.

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