HERNANDEZ v. FEDERAL NATIONAL MORTGAGE ASSOCIATION AS TRUSTEE FOR SECURITIZED TRUST FANNIE MAE REMIC TRUST 2007-69 et al

Filing 8

OPINION. Signed by Judge William J. Martini on 5/26/15. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 2:14-7950 (WJM)

GRIMALDO HERNANDEZ,
Plaintiff,

OPINION
v.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION AS TRUSTEE FOR
SECURITIZED TRUST FANNIE MAE
REMIC TRUST 2007-69, et al.
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Pro se Plaintiff Grimaldo Hernandez brings this action arising out of the execution
of a mortgage agreement and the subsequent foreclosure on his property. This matter
comes before the Court on Defendants’ unopposed motion to dismiss for failure to state a
claim. For the reasons stated in this Opinion, the motion to dismiss will be GRANTED.
I.

BACKGROUND

Pro se Plaintiff Grimaldo Hernandez (“Hernandez”) is a resident of Middlesex
County, New Jersey and the alleged owner of property that is the subject of a pending
foreclosure action in state court (“the State Foreclosure Action”). Defendant Bank of
America, N.A. (“BANA”) is the alleged holder of Plaintiff’s mortgage on the subject
property and is a party to the State Foreclosure Action. The Complaint also names the
Federal National Mortgage Association as Trustee for Securitized Trust Fannie Mae
REMIC Trust 2007-69 (“Fannie Mae”) and Mortgage Electronic Registration Systems, Inc.
(“MERS”) as Defendants. Unless otherwise noted, the following facts are what Plaintiff
has alleged in the Complaint.

1

On June 5, 2007, Hernandez executed a note (“the Note”) in favor of Vertical Lend,
Inc. (“Vertical”) in the amount of $227,000 1 to purchase property located at 68 State Street,
Perth Amboy, New Jersey (the “Property”). The Note was secured by a mortgage (“the
Mortgage”), and together, the Note and the Mortgage constitute the Loan. Exhibits to
Defendants’ motion to dismiss show that the Note has been re-assigned three times, leaving
BANA as its current holder. The exhibits also show that BANA is the current holder of
the Note, which was previously endorsed in blank. On June 29, 2007, Fannie Mae – who
is the investor in the Loan – securitized the Loan as a derivative mortgage-backed security. 2
On September 15, 2014, BANA brought the State Foreclosure Action in New Jersey
Superior Court – Chancery Division – Middlesex County (Docket No. F-038402-14). In
response, Hernandez has brought this action seeking to, among other things, quiet title on
the Property. He argues that because the Loan was securitized, none of the Defendants
own the Mortgage (or the Note) and therefore have no right to foreclose on the Property. 3
Specifically, Hernandez argues that when a promissory note is securitized, it ceases to
remain a negotiable instrument and becomes a security. Therefore, Hernandez contends,
the only possible holders of the Note are certificate holders of the relevant trust, not
Defendants.
In addition to seeking to quiet title, Hernandez brings the following causes of action:
declaratory relief; injunctive relief; negligence per se; accounting; breach of good faith and
fair dealing; breach of fiduciary duty; wrongful foreclosure; violation of the Real Estate
Settlement Procedures Act; violation of the Home Ownership Equity Protection Act; fraud;
intentional infliction of emotional distress; and slander of title. In support of these claims,
Hernandez contends, among other things, that Vertical made the loan without proper due
diligence; Vertical sold a deceptive loan product and never explained its inherent volatility;
and the Mortgage did not comply with the Trust’s Pooling and Servicing Agreement
(“PSA”). Defendants now move to dismiss the Complaint pursuant to 12(b)(6).
II.

DISCUSSION
A. Abstention

Defendants first argue that this Court should abstain from hearing this matter under
the Younger and/or Colorado River abstention doctrines.

1

According to Defendants, the Mortgage named MERS as mortgagee in its capacity as nominee for Vertical and
Vertical’s successors and assigns.
2

As servicer, BANA holds the Note at the behest of investor Fannie Mae.

3

Plaintiff claims that SEC documents show that the Mortgage was securitized with other loans into Fannie Mae
REMIC Trust Trust 2007-69, with Fannie Mae as trustee.
2

i.

Younger Abstention Doctrine

The Younger abstention doctrine requires federal courts to abstain from interfering
with certain pending state proceedings. Younger v. Harris, 401 U .S. 37 (1971); See also
Gonzalez v. Waterfront Comm'n of N.Y. Harbor, 755 F.3d 176, 180 (3d Cir. 2014). In
Sprint Communications, Inc. v. Jacobs, 134 S.Ct. 584 (2013), the Supreme Court clarified
that Younger applies in only three ‘exceptional’ classes of cases: (1) ‘state criminal
prosecutions,’ (2) ‘civil enforcement proceedings,’ and (3) ‘civil proceedings involving
certain orders that are uniquely in furtherance of the state courts' ability to perform their
judicial functions.’ ” Here, the ongoing state court foreclosure action is neither a criminal
nor a civil enforcement proceeding, nor is it “uniquely in furtherance of the state court['s]
ability to perform [its] judicial function[ ].” Sprint, 134 S.Ct. at 591 (quoting NOPSI, 491
U.S. at 368). Since Sprint, courts have declined to apply the Younger doctrine in the
context of state foreclosure proceedings. See Carrier v. Bank of Am., N.A., No. CIV. 12104 RMB/JS, 2014 WL 356219 (D.N.J. Jan. 31, 2014) aff'd sub nom. Carrier v. Bank of
Am. NA, 592 F. App'x 135 (3d Cir. 2015) (declining to apply Younger despite existence of
pending foreclosure action); Tucker v. Specialized Loan Servicing, LLC, No. PWG-14-813,
2015 WL 452285 (D. Md. Feb. 3, 2015) (finding that Younger did not apply to foreclosure
proceeding in light of Sprint). Younger abstention is not warranted in this case.
ii.

Colorado River Doctrine

The Colorado River doctrine governs whether a district court should stay or dismiss
a federal suit pending the resolution of a parallel state court proceeding, with the goal of
avoiding duplicative litigation. Abstention pursuant to Colorado River will be appropriate
only if there is a “parallel state proceeding” raising “substantially identical claims [and]
nearly identical allegations and issues.” Nationwide Mut. Fire Ins. Co. v. George V.
Hamilton, Inc., 571 F.3d 299, 307 (3d Cir. 2009) (quoting Yang v. Tsui, 416 F.3d 199, 204
n. 5 (2005)). Here, Defendants fail to articulate specifically how and why Hernandez’s
complaint raises claims and issues substantially identical to what is currently before the
state court; instead they rely on a threadbare recital and superficial application of the
Colorado River factors. AAR Intern., Inc. v. Nimelias Enters., 250 F.3d 510, 520 (7th Cir.
2001) (“any doubt regarding the parallel nature of the [state] suit should be resolved in
favor of exercising jurisdiction.”) (citations omitted). The Court will therefore not dismiss
or stay the case pursuant to Colorado River.
B. Failure to State a Claim
While Defendants have not met their burden of showing that Younger or Colorado
River abstention apply, the Court will nonetheless dismiss the thirteen counts in
Hernandez’s complaint for failure to state a claim.

3

A. Counts I (declaratory relief) and XI (fraud in the concealment)
Although difficult to construe, Hernandez’s claim for declaratory relief largely
arises out of his contention that Defendants do not have the right to institute foreclosure
proceedings because the mortgage was impermissibly assigned and/or securitized. A
mortgagor cannot challenge the assignment of a mortgage without showing that he or she
was a third-party beneficiary to the assignment. See, e.g., Oliver v. Bank of America, N.A.,
13-cv-4888, 2014 WL 1429605, *3 (D.N.J. Apr. 14, 2014) (citations omitted). Moreover,
the securitization of a loan does not provide a plaintiff with a cause of action. See, e.g.,
Upperman v. Deutsche Bank Nat’l Trust Co.,1:10-CV-149, 2010 WL 1610414, *3
(E.D.Va. Apr. 16, 2010). Because Hernandez is not a third-party beneficiary to any
assignment and the securitization of the Loan does not provide him with a cause of action,
his claim for declaratory relief is DISMISSED WITH PREJUDICE. Similarly, in Count
XI Hernandez asserts that Defendants committed fraud in the concealment by securitizing
the Loan without informing him. Again, Hernandez cannot rest a claim on the fact that his
loan was securitized, especially where he does not allege that Defendants affirmatively
represented that his Loan would never be packaged into a mortgage-backed security. See,
Haskins v. Moynihan, No. CV-10-1000, 2010 WL 2691562, *2 (D. Ariz. July 6, 2010).
Therefore, the fraud in the concealment claim is also DISMISSED WITH PREJUDICE.
B. Counts II (injunctive relief) and III (quiet title)
Plaintiff’s claim for injunctive relief (Count II) and quiet title (Count III) will be
dismissed because they run afoul of the Anti-Injunction Act. The Anti-Injunction act
provides that a federal district court “may not grant an injunction to stay proceedings in a
State court except as expressly authorized by Act of Congress, or where necessary in aid
of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. Therefore,
the Act prohibits a federal court from entering an injunction that would enjoin mortgage
foreclosure actions. See, e.g, id. at 561-62; Patrick v. America’s Servicing Co. (ASC), No.
2:14-6563, 2015 WL 1759567, *4 (D.N.J. Apr. 17, 2015); St. Clair v. Wertzberger, 637
F.Supp.2d 251, 255 (D.N.J. 2009). Plaintiff’s claim for injunctive relief asks this Court to
enjoin the pending foreclosure action, while Plaintiff’s quiet title claim asks the Court to
enter an order prohibiting “Defendants and their successors and assigns…[from] asserting
any rights, lien, title or interest in the property.” (Complt. at ¶161). Because these claims
run afoul of the Anti-Injunction Act, they must be DISMISSED WITH PREJUDICE.
C. Counts IV (negligence) and VII (breach of fiduciary duty)
Hernandez’s claims for negligence (Count IV) and breach of fiduciary duty (Count
VII) will also be dismissed. A claim for negligence or breach of fiduciary duty can succeed
only where the defendant owes the plaintiff a legal duty. See, e.g., Strachan v. John f.
Kennedy Memorial Hosp., 109 N.J. 523, 529 (1988); Paradise Hotel Corp. v. Bank of Nova
Scotia, 842 F.2d 47, 53 (3d Cir. 1988). New Jersey courts have held that a bank does not
4

owe a legal duty to a borrower. Galayda v. Wachovia Mortg., FSB, No. 10-1065, 2010
WL 5392743, *13 (D.N.J. Dec. 22, 2010)(citations omitted). Because Defendants did not
owe Hernandez a legal duty, his claims for negligence and breach of fiduciary duty are
DISMISSED WITH PREJUDICE.
D. Counts V (accounting), VI (breach of the implied covenant of good faith
and fair dealing), VIII (wrongful foreclosure), XII (intentional infliction
of emotional distress), and XIII (slander of title)
The Court will also dismiss Hernandez’s claims for an accounting (Count V), breach
of the implied covenant of good faith and fair dealing (Count VI), wrongful foreclosure
(Count VIII), and slander of title (Count XIII). Hernandez argues that he is entitled to an
accounting of the amount of money he has paid Defendants pursuant to his loan agreement
because “Defendants collected monthly payments from Plaintiff without providing any
consideration.” (Complt. at ¶173). However, it is clear that Hernandez received a
mortgage loan to purchase his home and therefore received consideration for his monthly
payments. Moreover, as previously discussed, the subsequent assignment of the Mortgage
does not give Hernandez a cause of action. Finally, Hernandez’s loan agreement gives the
lender the right to foreclose on his property if he fails to make mortgage payments.
Hernandez therefore cannot show malice on the part of Defendants, which is a required
element for a slander of title claim. Rogers Carl Corp. v. Moran, 103 N.J. Super. 163, 168
(App.Div.1968). Similarly, Hernandez cannot show that Defendants engaged in
outrageous conduct, which means that his intentional infliction of emotional distress claim
also fails. See. e,g., Buckley v. Trenton Saving Fund Soc., 111 N.J. 355, 367 (1988). Nor
can he maintain a claim for breach of the covenant of good faith and fair dealing. See, e.g.,
Fields v. Thompson Printing Co., Inc., 363 F.3d 259, 271-72 (3d Cir. 2004) (“The [implied
covenant] does not operate to alter the clear terms of an agreement and may not be invoked
to preclude a party from exercising its express rights under such an agreement.”)
Consequently Counts V, VI, VIII, and XIII are DISMISSED WITH PREJUDICE.
E. Counts IX (Real Estate Settlement Procedures Act) and X (Home
Ownership Equity Protection Act)
Hernandez’s claims for violations of the Real Estate Settlement Procedures Act
(Count IX) and the Home Ownership Equity Protection Act (Count X) are barred by the
applicable statutes of limitation. The factual allegations surrounding these claims are all
based on events that occurred during or around the time when Hernandez executed the Note
in 2007. The Real Estate Settlement Procedures Act has a three-year statute of limitations,
12 U.S.C. §§2605, 2614, whereas the Home Ownership Equity Protection Act has a oneyear statute of limitations for damage claims and a three-year statute of limitations for
rescission claims. 15 U.S.C. §§1640(e), 1635(f). 4 Therefore, Hernandez was required to
4

In his complaint, Hernandez

vaguely alleges that he learned of Defendants’ wrongdoing only
5

file these claims by 2010 at the latest. Consequently Counts IX and X are DISMISSED
WITH PREJUDICE. 5 See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380,
1384 n.1 (3d Cir. 1994) (statute of limitations defense may be raised in a Rule 12(b)(6)
motion to dismiss where it is clear on the face of complaint that the action is time-barred).
III.

CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss is GRANTED. While the
Court sympathizes with Hernandez and others who have lost their homes in the wake of
the mortgage crisis, courts have routinely held that the type of claims asserted by
Hernandez are simply not legally cognizable. Therefore, Hernandez’s complaint is
DISMISSED WITH PREJUDICE.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: May 26, 2015

recently, and therefore any applicable statute of limitations should be tolled. Such a “conclusory
allegation is the type of bald assertion or legal conclusion that the Court need not credit in deciding
a motion to dismiss.” In re Shop-Vac Marketing and Sales Practices Litigation, 964 F.Supp.2d
355, 363 (M.D.Pa. 2013)(citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 908 (3d Cir.
1997)). Moreover, in light of the substance of his allegations, the Court cannot conceive of a
scenario in which Defendants’ alleged wrongdoing would have been concealed from him.
5

Moreover, Hernandez does not explain which non-real estate services Defendants charged him
for in violation of the Real Estate Settlement Procedures Act.
6