Parker v. Greenpoint Mortgage Funding, Inc. et al

Filing 32

ORDERED that P's # 26 Motion for Reconsideration is DENIED. FURTHER ORDERED that Ds GreenPoint Mortgage Funding, Inc. and Marin Conveyancing Corp.'s # 27 Motion for Clarification is GRANTED. P's claim against Defendants GreenPoint and Marin are DISMISSED. Signed by Judge Edward C. Reed, Jr on 11/1/2011. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
RENO, NEVADA

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CARYN ERIKA PARKER,

)
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Plaintiff,
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9
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vs.
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GREENPOINT MORTGAGE FUNDING
)
11 INC.; PINNACLE MORTGAGE GROUP;
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MARIN CONVEYANCING CORP.; MORTGAGE )
12 ELECTRONIC SYSTEMS, INC. [MERS];
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BAC HOME LOANS SERVICING, LP;
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13 RECONTRUST COMPANY; FIRST AMERICAN )
TITLE INSURANCE COMP.; and DOES
)
14 1-25 CORPORATIONS, DOES and ROES
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1-25 Individuals, Partnerships, or )
15 anyone claiming any interest to
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the property described in the
)
16 action,
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)
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Defendants.
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)
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)

3:11-cv-00039-ECR-RAM

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Order

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Plaintiff is a homeowner who alleges that she is the victim of
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a predatory lending scheme perpetrated by Defendants.

Now pending

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before the Court are Plaintiff’s Motion for Reconsideration (#26)
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and Defendants GreenPoint Mortgage Funding, Inc. (“GreenPoint”) and
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Marin Conveyancing Corp.’s (“Marin”) Motion for Clarification (#27)
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of Court’s July 15, 2011 Order (#25).
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I. Factual Background
Plaintiff alleges that on or about December 17, 2004, she

3 executed a note in the amount of $311,900 in favor of lender
4 GreenPoint (the “Note”) and a deed of trust (the “Deed of Trust”)
5 with respect to the real property located at 214, 216, 218 Moran
6 Street, Reno, Nevada 89501.

(Compl. ¶ 35 (#1 Ex. 1).)

The Deed of

7 Trust names GreenPoint the Lender, Marin the Trustee, and MERS both
8 the beneficiary and the Lender’s nominee.

(#9 Ex. E.)1

Stewart

9 Title of Northern Nevada recorded the Deed of Trust on December 27,
10 2004.

(Id.)

The Complaint (#1 Ex. 1) alleges that ReconTrust

11 Company (“ReconTrust”), as agent for BAC Home Loans Servicing
12 (“BAC”), executed a “Notice of Default/Election to Sell under Deed
13 of Trust,” which was recorded by First American National Default on
14 September 16, 2010 (the “Notice of Default”).

(Id. ¶ 36.)

The

15 Complaint (#1 Ex. 1) further alleges that the Notice of Default was
16 signed by Charlotte Olmos as agent for First American Title
17 Insurance Comp. (“First American”), as agent for ReconTrust, as
18 agent for BAC. (Id.)

However, the Notice of Default itself shows

19 that ReconTrust executed the Notice of Default as agent for the
20 Beneficiary under the Deed of Trust, and notified Plaintiff that she
21 could contact BAC c/o ReconTrust to discuss possible reinstatement,
22 cure, and loan modification.

(Notice of Default at 1-2 (#9 Ex. F).)

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The Court takes judicial notice of the Note, the Deed of Trust,
and the Notice of Default as incorporated by reference as though fully
set out in the Complaint. FED . R. CIV . P. 10(c). Judicial notice of
these documents is also proper under Federal Rule of Evidence 201
because they are capable of accurate and ready determination by resort
to sources whose accuracy cannot reasonably be questioned.

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II. Procedural Background

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Plaintiff filed her Complaint (#1 Ex. 1) in state court on

3 December 13, 2010.

Defendant MERS filed a petition for removal (#1)

4 on January 20, 2011.

On February 7, 2011, Defendants BAC, MERS, and

5 ReconTrust filed a Motion to Dismiss (#8) with a Request for
6 Judicial Notice (#9) in support thereof.

On March 31, 2011,

7 Defendants GreenPoint and Marin joined (#18) the Motion to Dismiss
8 (#8).

On May 27, 2011, Plaintiff filed a Motion for Leave to File

9 Amended Complaint (#21).
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By Order (#25) on July 15, 2011, the Court granted Defendants

11 BAC, MERS, and ReconTrust’s Motion to Dismiss (#8) and denied
12 Plaintiff’s Motion for Leave to File Amended Complaint (#21).
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On August 3, 2011, Defendants GreenPoint and Marin filed a

14 Motion for Clarification (#27) of the Court’s July 15, 2011 Order,
15 seeking an Order clarifying that the Court’s July 15 Order (#25)
16 includes dismissal of Plaintiff’s claims against Defendants
17 GreenPoint and Marin.
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Also on August 3, 2011, Plaintiff filed a Motion for

19 Reconsideration (#26).

Defendants BAC, MERS, and ReconTrust filed a

20 Response (#28) on August 22, 2011 that Defendants GreenPoint and
21 Marin joined (#29).

Plaintiff replied (#30) on September 2, 2011.

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III. Legal Standard

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A motion for reconsideration is appropriately brought under

25 Federal Rule of Civil Procedure 59(e).

“Amendment or alteration is

26 appropriate under Rule 59(e) if (1) the district court is presented
27 with newly discovered evidence, (2) the district court committed
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1 clear error or made an initial decision that was manifestly unjust,
2 or (3) there is an intervening change in controlling law.”
3 Zimmerman v. City of Oakland, 255 F.3d 734, 740 (9th Cir. 2001)
4 (citing Sch. Dist. No. 1J, Multnomah Cty. v. ACandS, Inc., 5 F.3d
5 1255, 1263 (9th Cir. 1993)). A Rule 59(e) motion is properly denied
6 where it presents no arguments that have not already been raised in
7 opposition to the original motion.

Backlund v. Barnhart, 778 F.3d

8 1386, 1388 (9th Cir. 1985).
9

A motion for reconsideration may also be brought under Rule

10 60(b) for reasons of (1) mistake, inadvertence, surprise, or
11 excusable neglect; (2) newly discovered evidence; (3) fraud or other
12 misconduct by an opposing party; (4) the judgment is void; (5) the
13 judgment has been satisfied, released, or discharged; or (6) any
14 other reason that justifies relief.”

FED . R. CIV . P. 60(b).

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IV. Discussion
Plaintiff seeks reconsideration because “the Court surprised

18 the Plaintiff[]” by dismissing the case before the parties could
19 engage in discovery.

The Court agrees with Defendants that this is

20 not the type of “surprise” contemplated in Rule 60(b).

“Judgment is

21 taken by surprise if it is taken against a party contrary to the
22 party’s understanding or agreement with the adversary or when the
23 relief obtained with the judgment varies materially from what is
24 asked for in the underlying pleading.”

47 AM . JUR . 2D JUDGMENTS § 688.

25 Plaintiff does not claim that there was an understanding or
26 agreement between the parties related to the motion to dismiss.
27 Defendants confirm that there was no such agreement.
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Also, there

1 was no relief awarded that differed from what was asked for in the
2 pleadings.

Instead, it appears to the Court that Plaintiff was

3 surprised by the Court’s dismissal of the Complaint and denial of
4 leave to amend due to futility.

For these reasons, the Court finds

5 that Plaintiff is not entitled to relief from the Court’s Order
6 (#25) under Rule 60(b).
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Plaintiff seeks relief from the Court’s Order (#25) pursuant to

8 Rule 59(e) on the grounds of clear error and manifest injustice.2
9 Specifically, Plaintiff alleges the Court erred in dismissing the
10 original complaint and denying leave to amend due to futility in
11 light of two cases that Plaintiff claims stand for the proposition
12 that Defendants did not have standing to foreclose.

The Court now

13 addresses these cases in turn.
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A.

Leyva v. Nat’l Default Servicing Corp., 255 P.3d 1275
(Nev. 2011)

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In Leyva, the Nevada Supreme Court addressed the issue of who
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has standing to foreclose on a property pursuant to a deed of trust
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or a mortgage note.

At the outset, the Court disagrees with

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Defendants that Leyva is of no precedential value in this suit
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merely because it was primarily focused on compliance with Nevada’s
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foreclosure mediation statutes.

On the contrary, the Leyva court

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found it necessary to determine a party’s standing to foreclose on
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In her reply, Plaintiff purports to also seek relief under Rule
59(e) due to an intervening change in the law. However, the cases
Plaintiff cites in support thereof, Leyva v. Nat’l Default Servicing
Corp., 255 P.3d 1275 (Nev. 2011) and In re Veal, 450 B.R. 897 (B.A.P.
9th Cir. 2011), were each handed down in June 2011 - before the
Court’s Order (#25) of July 15, 2011.
Accordingly, the Court
addresses these cases under the clear error prong of Rule 59(e)
relief.

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1 the property at issue in that case and to clarify Nevada foreclosure
2 law in light of the “increase in the number of foreclosure appeals
3 in this state.”

255 P.3d at 1281.

Accordingly, the Court will

4 address the application of Leyva to the instant case, keeping in
5 mind that only clear error and/or manifest injustice justifies
6 granting Plaintiff relief from our previous Order (#25) pursuant to
7 Rule 59(e).
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Specifically, Plaintiff claims that Leyva stands for the

9 proposition that a party cannot initiate a non-judicial foreclosure
10 until it establishes who the “true holder” of the note is and the
11 true holder’s relationship with the entities foreclosing on the
12 property as a matter of standing.

Plaintiff claims that Defendants

13 in this case have failed to establish their standing to foreclose.
14 Plaintiff finds support in the Leyva Court’s assertion that “[t]he
15 obligor on the note has the right to know the identity of the entity
16 that is ‘entitled to enforce’ the mortgage note under Article 3 [of
17 the Uniform Commercial Code (“U.C.C.”)], see NRS 104.3301,
18 ‘[o]therwise, the [homeowner] may pay funds to a stranger in the
19 case.’” 255 P.3d at 1279-80 (quoting In re Veal, 450 B.R. 897, 920
20 (B.A.P. 9th Cir. 2011)).

While at first glance this proposition

21 appears to support Plaintiff’s claim, the Leyva Court was addressing
22 enforcement of a note “by a party other than to whom the note is
23 originally payable.”

255 P.3d at 1280.

The Leyva Court went on to

24 hold that for such a note to be enforceable by someone other than
25 the original party named on the note, it must be assigned either by
26 negotiation or transfer in accord with Article 3 of the U.C.C., as
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1 codified in Nevada Revised Statues (“NRS”) § 104.3201.

255 P.3d at

2 1280-81.
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In this case, the judicially noticed documents confirm that the

4 original party named on the Note, Defendant GreenPoint, is the party
5 seeking to enforce the Note.

The Note was originally made payable

6 to the order of the Lender, GreenPoint Mortgage Funding, Inc.
7 at 1 (#9 Ex. D).)

(Note

The Deed of Trust names GreenPoint the Lender,

8 Marin the Trustee, MERS the beneficiary and nominee for Lender, and
9 refers to the Note and property at issue.
10 Ex. E).)

(Deed of Trust at 2 (#9

The Deed of Trust further provides that “MERS (as nominee

11 for Lender and Lender’s successors and assigns) has the right: to
12 exercise any or all of those interests, including, but not limited
13 to, the right to foreclose and sell the Property; and to take any
14 action required of Lender...”

(Id. at 3.)

Courts in this district

15 have recently clarified that MERS, where it is nominated on a deed
16 of trust by the holder of a promissory note, is the lender’s agent
17 with the limited role of administering the deed of trust on the
18 holder’s behalf.

See, e.g., Weingartner v. Chase Home Fin., LLC,

19 702 F. Supp. 2d 1276, 1279 (D. Nev. 2010).

The Notice of Default

20 was executed by ReconTrust, acting as an agent of MERS.
21 Default at 1 (#9 Ex. F).)

(Notice of

Therefore, in this case, Defendant

22 GreenPoint is the party enforcing the Note through its agent MERS,
23 through MERS’ agent ReconTrust.

Leyva’s holding with regard to the

24 assignment of mortgage notes is therefore inapplicable to this case
25 where the original note holder is the party enforcing the note.
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Moreover, a foreclosure is not improper under Nevada’s

27 foreclosure statute, NRS 107.080, where, as here, the entity that
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1 filed the notice of default is the agent of the lender’s agent.
2 Karl v. Quality Loan Serv. Corp., 759 F. Supp. 2d 1240, 1246 (D.
3 Nev. 2010); see also Vega v. CTX Mortg. Co, LLC, 761 F. Supp. 2d
4 1095, 1099 (D. Nev. 2011) (“This Court agrees with the state trial
5 court’s view that only the beneficiary of the debt secured by a
6 mortgage, the trustee, or an agent of one of these, may foreclose.”)
7 (citing NRS § 107.080(2)(c))(emphasis added); Kartman v. Ocwen Loan
8 Servicing, LLC, No. 2:09-cv-02404, 2010 WL 3522268,at *1 (D. Nev.
9 Sept. 1, 2010) (“In Nevada, the power of sale cannot be exercised
10 until one of two particular entities - the beneficiary or the
11 trustee - or an agent thereof, records the [notice of default].”)
12 (emphasis added).
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For the foregoing reasons, Leyva provides no grounds for

14 relieving Plaintiff from the Court’s previous Order (#25) dismissing
15 Plaintiff’s claims and denying leave to amend the complaint due to
16 futility.
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B.

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Plaintiff contends that In re Veal supports her split note

In re Veal, 450 B.R. 897 (B.A.P. 9th Cir. 2011)

19 theory, namely that securitization of the note, or splitting a note
20 from the deed of trust, renders the transfer a nullity and the
21 assigned deed of trust a worthless piece of paper.

“The key to this

22 argument is that, under the common law generally, the transfer of a
23 mortgage without the transfer of the obligation it secures renders
24 the mortgage ineffective and unenforceable in the hands of the
25 transferee.”
26 (THIRD)

OF

In re Veal, 450 B.R. at 915-16 (citing RESTATEMENT

PROPERTY (MORTGAGES ) § 5.4 cmt. e (1997)).

The Veal Court

27 went on to validate the split-note theory pursuant to Illinois law,
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1 which follows the common law rule.

In re Veal, 450 B.R. at 916-17.

2 This Court, however, must decide the issue according to Nevada law.
3

Unlike the case in Illinois, however, the Nevada Supreme Court

4 has yet to address the split note issue. See Leyva, 255 P.3d at 1280
5 n.7 (“[W]e express no opinion on the issue addressed in the
6 Restatement (Third) of Property section 5.4 concerning the effect on
7 the mortgage of the note having been transferred or the reverse.”).
8 Section 5.4(b) of the Restatement, however, sets up a general
9 presumption that the transfer of a mortgage normally includes an
10 assignment of the obligation it secured.

Moreover, the theory does

11 not apply in this case where the mortgage or the note has not been
12 transferred.

As explained above, the original holder of the Note,

13 Defendant GreenPoint, is the party enforcing the Deed of Trust
14 through its agent MERS through its agent ReconTrust.
15

Furthermore, courts in this District and others have repeatedly

16 rejected the idea that securitization somehow splits a note from a
17 deed of trust and renders either a nullity.

See, e.g., Manderville

18 v. Litton Loan Servicing, No. 2:10-cv-1696, 2011 WL 2149105, at *2
19 (D. Nev. May 31, 2011) (“As plaintiff is basing her quiet title
20 claim on the ‘split the note’ theory, which has been rejected by
21 many courts with regards to nonjudicial foreclosures such as this,
22 it cannot survive.”); Vega, 761 F. Supp. 2d at 1098 (“The new rule
23 proposed in the Restatement thus binds the note and the mortgage as
24 a matter of law, as if the two agreements (the promissory note and
25 the mortgage) simply appeared on consecutive pages of the same
26 document.”); Birkland v. Silver State Fin. Servs., Inc, No. 2:10-cv27 00035, 2010 WL 3419372, at *2 (D. Nev. Aug. 25, 2010) (Plaintiff is
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1 “incorrect” in “claiming that the securitization - or placement of
2 her note/loan on the secondary market - makes it impossible to
3 identify which parties have purchased an interest in the note, and
4 thus, that the deed of trust ‘is split from the note and is
5 unenforceable.’”); see also Horvath v. Bank of N.Y., N.A., 641 F.3d
6 617, 624 (4th Cir. 2011) (“If . . . the transfer of a note splits it
7 from the deed of trust, . . . there would be little reason for notes
8 to exist in the first place.

One of the defining features of notes

9 is there transferability, . . . but on Horvath’s view, transferring
10 a note would strip it from the security that gives it value and
11 render the note largely worthless.

This cannot be - and is not -

12 the law.”); Commonwealth Prop. Advocates v. Mortg. Elec.
13 Registration Sys., Inc., No. 2:11-CV-214 TS, 2011 WL 1897826, at *2
14 (D. Utah May 18, 2011) (“[A]s any assignment of the note necessarily
15 carries with it the deed of trust securing the property, the Court
16 has found that such a ‘split-note’ scenario is untenable.”)
17 (footnote omitted); In re Mortg. Elec. Registration Sys. Lit., MDL
18 Docket No. 09-2119-JAT, 2011 WL 251452, at *5 (D. Ariz. Jan. 25,
19 2011) (“Plaintiffs have not cited any legal authority where the
20 namings of MERS - and the consequents ‘splitting of the note’ - was
21 cause to enjoin a non-judicial foreclosure as wrongful.

Indeed

22 Nevada case law universally holds that these deeds are
23 enforceable.”) (citations and footnote omitted).
24

The Court therefore did not commit clear error in rejecting

25 Plaintiff’s splitting of the note theory - In re Veal provides no
26 grounds for relief from the Court’s previous Order (#25).
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V. Conclusion

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Plaintiff has failed to show that the Court committed clear

3 error or manifest injustice by our previous Order (#25) dismissing
4 Plaintiff’s claims and denying leave to amend for reason of
5 futility.

The two cases Plaintiff cites provide no reason for

6 departing from our previous Order (#25), as neither are applicable
7 to the facts of this case where no transfer of the Note has taken
8 place.
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Further, pursuant to Federal Rule of Civil Procedure 60(a), the

10 Court now clarifies that Plaintiff’s claims against Defendants
11 GreenPoint and Marin should have also been dismissed in the Court’s
12 previous Order (#25) granting Defendants BAC, MERS, and ReconTrust’s
13 Motion to Dismiss (#8).

Defendants GreenPoint and Marin timely

14 filed a Joinder and Supplement (#18) to the other Defendants’ Motion
15 (#8) and should have been included in the Order (#25).
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IT IS, THEREFORE, HEREBY ORDERED that Plaintiff’s Motion for

18 Reconsideration (#26) is DENIED.
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IT IS FURTHER ORDERED that Defendants GreenPoint Mortgage

20 Funding, Inc. and Marin Conveyancing Corp.’s Motion for
21 Clarification (#27) is GRANTED.

Plaintiff’s claim against

22 Defendants GreenPoint and Marin are DISMISSED.
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24 DATED: November 1, 2011.
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____________________________
UNITED STATES DISTRICT JUDGE

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