O'Sullivan et al v. Deutsche Bank National Trust Company, Trustee
Filing
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///ORDER granting 4 defendant's Motion to Dismiss. So Ordered by Judge Steven J. McAuliffe.(lat)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Roger and Lisa O’Sullivan,
Plaintiffs
v.
Case No. 15-cv-114-SM
Opinion No. 2015 DNH 175
Deutsche Bank National Trust
Company, as Trustee for GSSA
Home Equity Trust 2006-18,
Defendant
O R D E R
Deutsche Bank National Trust Company, as trustee of the GSSA
Home Equity Trust 2006-18, holds a mortgage on plaintiffs’ home.
Plaintiffs challenge its right to foreclose that mortgage under
New Hampshire law.
The court has subject matter jurisdiction
over plaintiffs’ claim pursuant to 28 U.S.C. § 1332 (diversity of
citizenship).
Deutsche Bank moves to dismiss the sole claim in plaintiffs’
complaint, asserting that plaintiffs lack standing to challenge
the validity of the assignment by which Deutsche Bank assumed the
mortgage at issue.
For the reasons discussed, that motion to
dismiss is granted.
Background
The relevant facts are largely undisputed.
In May of 2006,
plaintiffs obtained a $263,700 loan from Wells Fargo.
To secure
repayment of that loan, plaintiffs gave Wells Fargo a mortgage
deed to their home.
The terms of the mortgage included a
statutory power of sale, allowing Wells Fargo to foreclose upon
the property under certain specified circumstances (including
default on the underlying promissory note).
In January of 2014,
Wells Fargo assigned the mortgage to Deutsche Bank, as trustee
for a Real Estate Mortgage Investment Conduit Trust.
That trust
is governed by a Pooling and Service Agreement.1
At some point (the complaint does not specify exactly when),
plaintiffs began having difficulty making monthly payments on the
loan.
They sought, but were unable to obtain, a loan
modification from Wells Fargo.
With the loan in default,
Deutsche Bank sought to foreclose the mortgage and it scheduled a
foreclosure auction for March 31, 2015.
A few days before that
auction, however, plaintiffs obtained an ex parte temporary
restraining order from the state court, based upon their
assertion that Deutsche Bank lacked authority to foreclose on the
1
In order to pool and securitize loans, investors often
establish what is known as a Real Estate Mortgage Investment
Conduit or “REMIC” - a unique form of trust that receives
favorable tax treatment. In turn, such a trust is often governed
by what is known as a pooling and servicing agreement or a “PSA.”
Here, plaintiffs allege that the operative PSA had a closing date
in 2006, by which the trust was required to stop receiving assets
(and at which point the trust would simply become a “static pool
of assets.”). See generally Juarez v. Select Portfolio
Servicing, Inc., 708 F.3d 269, 272 (1st Cir. 2013).
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mortgage.
Deutsche Bank removed the proceeding to this court,
invoking the court’s diversity subject matter jurisdiction.
Discussion
Plaintiffs’ argument is a familiar one: they claim that
Deutsche Bank is not the lawful holder of their mortgage because
it took an assignment of that mortgage after the closing date
specified in the applicable pooling and servicing agreement.
As explicitly explained in the attached February 20,
2015 letter, the party foreclosing (i.e., Deutsche
Bank, et al.) can not be a valid mortgagee with rights
to foreclose since they are a Real Estate Mortgage
Investment Conduit (“REMIC”) trust with a closing date
in 2006. Wells Fargo alleged to assign our mortgage to
Deutsche Bank in 2014, but Deutsche Bank has never
substantiated that it is the legal mortgagee.
Complaint (document no. 1-1) at 2.
Even crediting all of
plaintiffs’ factual allegations as true, it remains plain that
they lack standing to challenge the allegedly untimely assignment
of their mortgage from Wells Fargo to Deutsche Bank.
Assuming that Wells Fargo assigned plaintiffs’ mortgage to
Deutsche Bank after the closing date of the relevant trust (and
contrary to the terms of the governing PSA), that flaw merely
renders the assignment voidable (at the option of the trust’s
beneficiaries).
It does not render the assignment void.
New Hampshire Supreme Court recently recognized,
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As the
This is because . . . unauthorized acts by trustees are
generally subject to ratification by the trust
beneficiaries. The principle that a trustee’s
unauthorized acts may be ratified by the beneficiaries
is harmonious with the overall principle that only
trust beneficiaries have standing to claim a breach of
the trust. If a stranger to the trust also had such
standing, the stranger would have the power to
interfere with the beneficiaries’ right of
ratification.
Pike v. Deutsche Bank Nat’l Trust Co., __ N.H. __, 2015 WL
4266759 at *2 (July 15, 2015).
So, the assignment of a mortgage to a trust that fails to
comply with the procedural requirements of a PSA or other trust
agreement is a voidable, not a void, transaction.
And, as this
court has repeatedly held, a mortgagor lacks standing to
challenge a voidable (as opposed to a void) transfer of his or
her mortgage.
See, e.g., Bradley v. Wells Fargo Bank, N.A., 2014
WL 815333, at *3 (D.N.H. Mar. 3, 2014); Calef v. Citibank, N.A.,
2013 WL 653951, at *4 n.4 (D.N.H. Feb. 21, 2013).
See also Woods
v. Wells Fargo Bank, N.A., 733 F.3d 349, 354 (1st Cir. 2013)
(“Thus, claims that merely assert procedural infirmities in the
assignment of a mortgage, such as a failure to abide by the terms
of a governing trust agreement, are barred for lack of
standing.”) (citations omitted).
Cf.
Pike, supra (construing
New York law and concluding that “an action that violates the
terms of a trust agreement, such as a transfer of a loan to a
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trust after the trust’s closing date, renders the transaction
voidable at the election of either party to the agreement and a
non-party to the PSA, such as the petitioner in this case, does
not have standing to challenge such a transaction.”).
Conclusion
For the foregoing reasons, as well as those set forth in
defendant’s legal memorandum, it is plain that plaintiffs lack
standing to challenge the allegedly untimely assignment of their
mortgage from Wells Fargo to defendant.
Defendant’s motion to
dismiss (document no. 4) is, therefore, granted.
The Clerk of Court shall enter judgment in accordance with
this order and close the case.
SO ORDERED.
____________________________
Steven J. McAuliffe
United States District Judge
September 14, 2015
cc:
Roger A. O’Sullivan, pro se
Lisa M. O’Sullivan, pro se
Michael R. Stanley, Esq.
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