Sovereign et al v. Deutsche Bank et al
Filing
71
OPINION and ORDER: The Court GRANTS the Motion 59 to Dismiss by Defendants CM, MERS, and CWRC and DISMISSES with prejudice Plaintiffs' Amended Complaint against them. The Court also GRANTS the Motion 38 to Vacate Temporary Restrain ing Order by Defendants CM, MERS, and CWRC and VACATES the Temporary Restraining Order 7 issued on August 31, 2011. Granting 59 Motion to Dismiss for Failure to State a Claim. The Court directs defendants to confer and to submit to the Court no later than March 15, 2012, an Order in which Defendants stipulate as to the particular Defendant(s) to whom Plaintiffs' security ($500.00 cash bond) should now be released. Signed on 03/05/2012 by Judge Anna J. Brown. See attached 32 page Opinion and Order. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
RICK L. SOVEREIGN and AMY J.
SOVEREIGN,
Plaintiffs,
v.
DEUTSCHE BANK; MORTGAGEIT,
INC.; MORTGAGE ELECTRONIC
REGISTRATION SYSTEM, a foreign
corporation; CITIMORTGAGE,
INC., a foreign corporation;
and CAL-WESTERN RECONVEYANCE
CORPORATION, a foreign
corporation,
Defendants.
RICK L. AND AMY J. SOVEREIGN
401 Cherry Avenue
Oregon City, OR 97045
Plaintiffs, Pro Se
1 - OPINION AND ORDER
3:11-CV-995-BR
OPINION AND ORDER
WILLIAM D. MINER, III
BLAKE J. ROBINSON
Davis Wright Tremaine, LLP
1300 S.W. Fifth Avenue, Suite 2300
Portland, OR 97201-5630
(503) 241-2300
Attorneys for Defendants Deutsche Bank and
Mortgageit, Inc.
LETA E. GORMAN
Jordan Schrader Ramis PC
Two Centerpointe Drive, Sixth Floor
Lake Oswego, OR 97035
(503) 598-7070
Attorneys for Defendants Mortgage Electronic
Registration System and CitiMortgage
TIMOTHY B. HERING
Dunn Carney Allen Higgins & Tongue, LLP
851 S.W. Sixth Avenue, Suite 1500
Portland, OR 97204-1357
(503) 224-6440
Attorneys for Defendant Cal-Western Reconveyance
Corporation
BROWN, Judge.
This matter comes before the Court on the Motion (#59) to
Dismiss by Defendants Mortgage Electronic Registration System
(MERS), CitiMortgage (CM), and Cal-Western Reconveyance
Corporation (CWRC)1 and the Motion (#38) to Vacate Temporary
1
In its Order (#65) issued on January 4, 2012, the Court
granted CWRC’s Motion to Join the Motion to Dismiss filed by CM
and MERS.
2 - OPINION AND ORDER
Restraining Order by CM, MERS, and CWRC.2
FACTUAL BACKGROUND
The following facts are drawn from Plaintiffs’ First Amended
Verified Complaint (#55).3
On approximately January 24, 2007, Plaintiffs entered into a
refinance loan on their home, which is located at 401 Cherry
Avenue, Oregon City, Oregon 97045.
In exchange for their promise
to repay the loan secured by a Deed of Trust in their home (which
appears to have been recorded on January 31, 2007), Plaintiffs
accepted a loan of approximately $333,000.
The loan named
MortgageIt, Inc. (MIT) as the Lender and Western Title and Escrow
as Trustee and appointed MERS as nominee of the Lender and as
beneficiary of the Deed of Trust.
Although MIT is designated as
the Lender in the loan documents, Plaintiffs allege MIT did not
fund the loan, is not the lender in fact, and was instead a loan
broker.
2
In its Order (#65) issued on January 4, 2012, the Court
granted CWRC’s Motion to Join the Motion to Vacate filed by CM
and MERS.
3
The Court granted the Motion to Dismiss by MortgageIt,
Inc. (MIT) and Deutsche Bank (DB), a successor to MIT, on
November 15, 2012, on the ground that Plaintiffs did not state a
claim for declaratory relief against these Defendants under the
facts of the original Complaint. In their Amended Complaint
filed on December 15, 2011, Plaintiffs again name MIT and DB as
Defendants. MIT and DB filed a second Motion (#63) to Dismiss on
January 3, 2012, which the Court granted at the hearing on
January 4, 2012. See Order (#66).
3 - OPINION AND ORDER
Plaintiffs allege they do not owe any obligation to the
named Defendants and have not defaulted on the loan at issue.4
Plaintiffs assert their mortgage was part of a pooling
service that made numerous transfers of Plaintiffs’ mortgage that
have not been properly recorded.
In August 2010 Plaintiffs sought a loan modification with
CM.
During that process the parties failed to reach an agreement
to restructure the loan, and Plaintiffs assert CM instructed them
to stop making payments on their mortgage.
On March 15, 2011, MERS assigned the Deed of Trust to CM and
CM appointed CWRC as Trustee.
Clackamas County records.
Both actions were recorded in the
On April 7, 2011, Plaintiffs received
the Notice of Default and Election of Sale and the Trustee Notice
of Sale from CWRC.
These documents also were recorded in the
Clackamas County records.
Plaintiffs allege these recorded
documents reflect unlawful or potentially fraudulent acts.
Paragraphs 15-17 of the Amended Complaint set out Plaintiffs’
specific allegations in this regard:
14. On or about March 15,2011 CM claims to
have become the successor in interest to the
Plaintiff’s Deed of Trust and through a
4
Plaintiffs, however, have repeatedly admitted to this
Court that they have not made any payments to any entity on their
loan obligation since approximately September 2010. Despite
their allegation that Defendants have not provided proof that
Plaintiffs owe an obligation to any of them, Plaintiffs admit
they negotiated with CM in August 2010 for the purpose of
obtaining a modification of their existing loan.
4 - OPINION AND ORDER
document titled “Assignment of Deed of Trust”
signed by Scott Scheiner, Assistant Secretary
of MERS and Notarized on the same day by Alex
D. Grossman of Missouri. The document was
entered into Clackamas County official
records under the recorder’s number, 2011019535, on March 30, 2011. See Exhibit 9 Assignment of Deed of Trust.
15. On or about March 15, 2011 CWRC claims
to have become the successor trustee or the
Deed of Trust by and through a document
titled "Substitution of Trustee," signed by
Scott Scheiner, Vice President, CitiMortgage,
Inc. and Notarized on the same day by Alex D.
Grossman of Missouri. The document was
entered into Clackamas County official
records under the recorder's number,
2011-019536, on March 30, 2011. See Exhibit
10 - Substitution of Trustee
16. On or about April 7, 2011 Plaintiffs
received a document titled "Notice of Default
and Election to Sell," created, recorded and
sent to Plaintiffs by CWRC, the signatory of
which was Yvonne J. Wheeler, A.V.P.
(presumably Assistant Vice President), a
known robo-signer, who signed the Notice on
March 23, 2011. The Notice was not notarized
until March 29, 2011 by Rosalyn Hall of
California, leaving no doubt that Wheeler was
not in the Notaries presence when Hall
notarized the document. The document was
entered into Clackamas County official
records under the recorder's number,
2011-019537, on March 30, 20ll. See Exhibit
11 - Notice of Default and Election to Sell.
17. On or about April 7. 2011 Plaintiffs
received a document titled "Trustee's Notice
of Sale” from CWRC dated March 23, 2011 and
signed by an unknown person, whose corporate
capacity is absent and unknown. The document
bears a certification stamp with the
signature of Naomi Faisel, claiming “I
CERTIFY THIS DOCUMENT IS A CORRECT COPY OF
THE ORIGINAL.” The signature on the
certification stamp and the signature as a
5 - OPINION AND ORDER
designee for CWRC are different. No
acknowledgement or jurat notarization is
present. See Exhibit 12 - Trustee's Notice
of Sale. See also Plaintiffs' Affidavit ¶ 8.
In their Amended Complaint Plaintiffs seek declaratory
relief “as to the legal duties of the parties and their agents,
especially those claiming Plaintiffs to be in default and those
claiming they are the entity entitled to payment” based on their
allegations that (1) MIT was not the lender-in-fact on their
original loan, (2) Defendants have not met the condition
precedent under Oregon law (Or. Rev. Stat. § 86.735) for nonjudicial foreclosures that require proof of the borrower’s
default and of the entity entitled to payment, and (3) Defendants
have not met the condition precedent under Oregon law for nonjudicial foreclosure that requires all assignments of a mortgage
to be recorded in the county records.
Plaintiffs seek the following specific declaratory relief
and an award of costs in their Amended Complaint:
a.
Declare that Defendants initiated this
controversy by claiming Plaintiffs are
in default to CM by causing to issue a
Notice of Default and Election to Sell.
b.
Declare Defendants failed to establish
through evidence which would be
admissible at trial, Plaintiffs are in
default to CM or any another Defendant.
c.
Declare Defendants failed to establish,
through evidence which would be
admissible at trial, the identity of the
entity entitled to payment.
6 - OPINION AND ORDER
d.
Declare Defendants, prior to
foreclosure, failed to record in the
Clackamas County land records
assignments required by the Pooling and
Service Agreement.
e.
Declare that Defendant MERS does not
possess the written authority in the
Deed of Trust or anywhere else, from the
original obligee, or any successor,
authorizing MERS as nominee, mortgagee
or beneficiary.
f .
Declare the only signature on the Deed
of Trust is that of Plaintiffs, i.e.
counterparty signatures are absent.
g.
Declare Defendant is barred from using a
non-judicial foreclosure.
Am. Compl. at 10-11.
PROCEDURAL BACKGROUND
Although the nonjudicial sale of Plaintiffs' home was
originally scheduled for August 1, 2011, the parties reached an
agreement to postpone the sale to September 1, 2011.
Plaintiffs
filed their original Complaint for Emergency Declaratory Relief
on August 17, 2011.
After a hearing, the Court enjoined the sale
of Plaintiffs’ home by issuing a Temporary Restraining Order
(TRO) (#7) on August 31, 2011.
At the hearing on August 31,
2011, the Court ordered Plaintiffs to post security in the amount
of $500.00, which Plaintiffs paid on September 8, 2011.
On September 30, 2011, CM and MERS filed their Motion (#20)
to Modify Security for the TRO seeking a monthly security amount
7 - OPINION AND ORDER
equal to the monthly payment owed on the balance of Plaintiffs’
mortgage.
Defendants each subsequently filed their initial Motions to
Dismiss.
On November 10, 2011, CM and MERS filed their Motion
(#38) to Vacate the TRO.
At the hearing on November 10, 2011, the Court granted the
Motion by Defendants to modify Plaintiffs' security and set a
briefing schedule for the parties to state their positions as to
the fair rental value of the home.
On November 15, 2011, the
Court issued an Opinion and Order (#42) in which the Court (1)
granted the Motion to Dismiss by DB and MIT on the ground that
there is not any justiciable legal dispute between Plaintiffs and
DB or MIT; (2) denied the Motion to Dismiss by CWRC on the ground
that there is a legal dispute between Plaintiffs and CWRC, the
Trustee of the Deed of Trust at issue and the party invoking the
right of sale; and (3) granted the Motion to Dismiss by CM and
MERS and dismissed Plaintiffs' claims against those Defendants
with leave to file an Amended Complaint by December 15, 2011.
The Court advised it would consider the pending Motion to Vacate
in light of any Amended Complaint.
In its Order (#52) issued December 12, 2011, the Court
modified Plaintiffs' security requirement for maintaining the TRO
to $2,000 per month (the amount determined by the Court to
represent the fair rental value of Plaintiffs’ home) to be paid
8 - OPINION AND ORDER
on the fourth of each month.
Plaintiffs filed their Amended Complaint on December 15,
2011, in which they seek a declaratory judgment as set out above
and allege violations of Oregon Revised Statute § 86.735 against
CM, MERS, and CWRC.
Plaintiffs again include MIT and DB as
Defendants in their Amended Complaint and allege almost the
identical facts and claims as in their original Complaint.
On December 30, 2011, CM and MERS filed a Motion (#59) to
Dismiss the Amended Complaint.
On January 3, 2012, Defendants
MIT and DB also filed a Motion (#63) to Dismiss the Amended
Complaint.
At the hearing on January 4, 2012, the Court heard argument
on the Motion to Vacate the TRO and the Motions to Dismiss.
Plaintiffs stated they could not afford and did not intend to pay
the modified security amount to maintain the TRO.
At the
hearing and in its Opinion and Order (#67) issued on January 5,
2012, the Court granted the Motion to Dismiss filed by Defendants
MIT and DB for failure to state a claim.
The Court took under
advisement the remaining Motion (#59) to Dismiss and the stillpending Motion (#38) to Vacate the TRO by MERS, CM, and CWRC.
STANDARDS
I.
Motion to Dismiss.
To survive a motion to dismiss, a complaint
must contain sufficient factual matter,
9 - OPINION AND ORDER
accepted as true, to “state a claim to relief
that is plausible on its face.” [Bell
Atlantic v. Twombly, 550 U.S. 554,] 570, 127
S. Ct. 1955. A claim has facial plausibility
when the plaintiff pleads factual content
that allows the court to draw the reasonable
inference that the defendant is liable for
the misconduct alleged. Id. at 556. . . .
The plausibility standard is not akin to a
“probability requirement,” but it asks for
more than a sheer possibility that a
defendant has acted unlawfully. Ibid. Where
a complaint pleads facts that are “merely
consistent with” a defendant's liability, it
“stops short of the line between possibility
and plausibility of ‘entitlement to relief.’”
Id. at 557, 127 S. Ct. 1955 (brackets
omitted).
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).
See also Bell
Atlantic v. Twombly, 550 U.S. 554, 555-56 (2007).
The Supreme Court further clarified in Iqbal the
requirements for a pleading to survive a motion to dismiss:
As the Court held in Twombly, 550 U.S. 544,
127 S. Ct. 1955, 167 L. Ed. 2d 929, the
pleading standard Rule 8 announces does not
require “detailed factual allegations,” but
it demands more than an unadorned, thedefendant-unlawfully-harmed-me accusation.
Id., at 555, 127 S. Ct. 1955 (citing Papasan
v. Allain, 478 U.S. 265, 286, 106 S. Ct.
2932, 92 L. Ed. 2d 209 (1986)). A pleading
that offers “labels and conclusions” or “a
formulaic recitation of the elements of a
cause of action will not do.” 550 U.S., at
555, 127 S. Ct. 1955. Nor does a complaint
suffice if it tenders “naked assertion[s]”
devoid of “further factual enhancement.”
Id., at 557, 127 S. Ct. 1955.
129 S. Ct. at 1949-50.
"[A] complaint may survive a motion to dismiss only if,
10 - OPINION AND ORDER
taking all well-pleaded factual allegations as true, it contains
enough facts to 'state a claim to relief that is plausible on its
face.'”
Hebbe v. Pliler, 627 F.3d 338, 341-42 (9th Cir.
2010)(quoting Iqbal, 129 S. Ct. at 1949 (2009), and Twombly, 550
U.S. at 570).
A pro se plaintiff's complaint “must be held to
less stringent standards than formal pleadings drafted by
lawyers.”
curiam).
Erickson v. Pardus, 551 U.S. 89, 94 (2007)(per
Thus, the court must construe pro se filings liberally.
If a plaintiff fails to state a claim, “[l]eave to amend should
be granted unless the pleading ‘could not possibly be cured by
the allegation of other facts,’ and should be granted more
liberally to pro se plaintiffs.”
Ramirez v. Galaza, 334 F.3d
850, 861 (9th Cir. 2003)(quoting Lopez v. Smith, 203 F.3d 1122,
1130 (9th Cir. 2000)).
II.
Declaratory Judgments.
The Declaratory Judgment Act provides in relevant part that
“[i]n a case of actual controversy within its jurisdiction, . . .
any court of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not further
relief is or could be sought.”
28 U.S.C. § 2201(a).
“The
limitations that Article III imposes upon federal court
jurisdiction are not relaxed in the declaratory-judgment context.
Indeed, the case-or-controversy requirement is incorporated into
11 - OPINION AND ORDER
the language of the very statute that authorizes federal courts
to issue declaratory relief.”
Gator.com Corp. V. L.L. Bean,
Inc., 398 F.3d 1125, 1129 (9th Cir. 2005).
As the Supreme Court
held in MedImmune Inc. v. Genetech Inc.:
Aetna and the cases following it do not draw
the brightest of lines between those
declaratory-judgment actions that satisfy the
case-or-controversy requirement and those
that do not. Our decisions have required
that the dispute be “definite and concrete,
touching the legal relations of parties
having adverse legal interests”; and that it
be “real and substantial” and “admi[t] of
specific relief through a decree of a
conclusive character, as distinguished from
an opinion advising what the law would be
upon a hypothetical state of facts.” Id., at
240–241, 57 S. Ct. 461. In Maryland Casualty
Co. v. Pacific Coal & Oil Co., 312 U.S. 270,
273, 61 S. Ct. 510, 85 L. Ed. 826 (1941), we
summarized as follows: “Basically, the
question in each case is whether the facts
alleged, under all the circumstances, show
that there is a substantial controversy,
between parties having adverse legal
interests, of sufficient immediacy and
reality to warrant the issuance of a
declaratory judgment.”
549 U.S. 118, 127 (2007).
The Supreme Court has emphasized the
district court’s “unique and substantial” discretion as to
whether to issue declaratory judgments.
Co., 515 U.S. 277, 286 (1995).
Wilton v. Seven Falls
The Court underscored “[i]f a
district court, in the sound exercise of its judgment, determines
after a complaint is filed that a declaratory judgment will serve
no useful purpose, it cannot be incumbent upon that court to
proceed to the merits before staying or dismissing the action.”
12 - OPINION AND ORDER
Id. at 288.
“When there is no actual controversy, the court has
no discretion to decide the case.
When there is an actual
controversy and thus jurisdiction, the exercise of that
jurisdiction is discretionary.”
Spectronics Corp. v. H.B. Fuller
Co., 940 F.2d 631, 634 (Fed. Cir. 1991).
MOTION (#59) TO DISMISS BY CM, MERS, AND CWRC
Defendants CM, MERS, and CWRC move the Court to Dismiss
Plaintiffs’ Amended Complaint under Federal Rule of Civil
Procedure 12 for failure to state a claim.
Specifically,
Defendants contend they have met the requirements under Oregon
Revised Statute § 86.735 that permits CWRC, as trustee of the
Deed of Trust on Plaintiffs’ home, to proceed with a nonjudicial
foreclosure.
In support of their Motion, Defendants provide a
copy of the executed and recorded Deed of Trust with the
Declaration (#60) of Leta E. Gorman.
I.
The Law.
Oregon Revised Statute § 86.735, a part of the Oregon Trust
Deed Act, provides in relevant part:
The trustee may foreclose a trust deed by
advertisement and sale in the manner provided
in ORS 86.740 to 86.755 if:
(1) The trust deed, any assignments of the
trust deed by the trustee or the beneficiary
and any appointment of a successor trustee
are recorded in the mortgage records in the
counties in which the property described in
the deed is situated; and
13 - OPINION AND ORDER
(2) There is a default by the grantor or
other person owing an obligation, the
performance of which is secured by the trust
deed, or by their successors in interest with
respect to any provision in the deed which
authorizes sale in the event of default of
such provision; and
(3) The trustee or beneficiary has filed for
record in the county clerk's office in each
county where the trust property, or some part
of it, is situated, a notice of default
containing the information required by ORS
86.745 and containing the trustee's or
beneficiary's election to sell the property
to satisfy the obligation; and
(4) No action has been instituted to recover
the debt or any part of it then remaining
secured by the trust deed . . . .
II.
The Court’s January 5, 2012, Opinion and Order (#67).
In its Opinion and Order (#67), the Court stated:
As the Court explained to Plaintiff Rick
Sovereign at the hearing, the Court’s task in
resolving Defendants’ Motion to Dismiss is to
determine whether Plaintiffs have stated a
plausible claim for relief. Because
Plaintiffs’ only potential claim in this
matter is one for “declaratory judgment,”
Plaintiffs must be able to show in their
response to Defendants’ Motion that they have
stated a legal basis for relief that
satisfies the “case-or-controversy”
requirement for this Court’s jurisdiction
over an action for declaratory relief. See
Opin. & Order (#42) issued November 15, 2011,
at 7-9. Plaintiffs’ factual allegations
concerning their suspicions about
transactions involving their mortgage between
its origination and the issuance of the
Notice of Default and Election to Sell are
alone insufficient to state a legal basis for
such relief. As noted, Plaintiffs must
provide some basis in law that, when
considered in light of their factual
14 - OPINION AND ORDER
allegations, shows Plaintiffs have a legal
“justiciable” dispute with Defendants that
the Court has authority to resolve by
declaration. As explained at oral argument,
Defendants do not bear any burden of proof at
this stage of the proceedings. Furthermore,
as explained by Magistrate Judge Paul Papak
in Stewart v. Mortgage Electronic
Registration Systems, the Oregon Trust Deed
Act (under which Plaintiffs proceed here)
“does not require presentment of the Note or
any other proof of ‘real party in interest’
or ‘standing,’ other than the Deed of Trust.”
No. 09-CV-687-PK, 2010 WL 1055131, at *12 (D.
Or. Feb. 9, 2010).
Opin. and Order (#67) at 6-7.
III. Analysis.
Viewed in its most liberal terms, Plaintiffs’ Amended
Complaint sets out five sets of facts that they contend entitle
them to the declarations they seek from this Court:
(1) MIT was
not the lender-in-fact in the original loan transaction, which
nullifies each of the legal documents stemming from the original
mortgage transaction; (2) MERS is not the beneficiary of the
Deed of Trust under Oregon law; (3) Plaintiffs are not in
default, and, in any event, Defendants have not provided
sufficient proof that they are entitled to payments under
Plaintiffs’ mortgage; (4) there are unrecorded assignments of
Plaintiffs’ mortgage, and Defendants, therefore, are not in
compliance with § 86.735 and cannot proceed with a nonjudicial
foreclosure; and (5) irregularities with the documents related to
Plaintiffs’ mortgage that have been recorded in the Clackamas
15 - OPINION AND ORDER
County records preclude nonjudicial foreclosure.
A.
Lender-in-Fact.
Plaintiffs allege MIT did not actually fund the loan even
though MIT was designated as the lender in the original lending
documents, the Promissory Note, and the Deed of Trust.
Thus,
Plaintiffs allege MIT was not the lender in the original
transaction but was instead a mortgage broker.
As noted, the Court dismissed MIT as a party to this matter
for the reasons explained in the Court’s Opinion and Order (#42)
issued on November 15, 2011; at the hearing on January 4, 2012;
and in its Opinion and Order (#67) issued on January 5, 2012.
Although Plaintiffs maintain they have not alleged and do not
intend to allege a claim of fraud or wrongdoing against MIT,
Plaintiffs, nevertheless, assert the following in their Amended
Complaint:
“If MIT was not the Lender, all transactions and the
attendant documents based on that fact are a nullity, not the
least of which is the following:
1) Promissory Note, 2) Deed of
Trust, 3) Assignments, 4) Substitution of Trustee, 5) Notice of
Default and Election to Sell, and 6) Notice of Trustee Sale.”
Plaintiffs admit they received the proceeds of the loan in
the sum of $333,000 for which they bargained in the original
mortgage transaction.
Plaintiffs, however, assert those funds
were provided by a third party rather than by MIT.
Assuming at
this stage that MIT received funding from some external “lender”
16 - OPINION AND ORDER
to fund Plaintiffs’ loan, the Court must determine whether this
fact would entitle Plaintiffs to the declaratory relief sought by
Plaintiffs.
As noted, the Court has instructed Plaintiffs numerous times
to explain the legal basis for this cause of action.
The Note
and the Deed submitted with Plaintiffs’ Amended Complaint appoint
MIT the “Lender” that Plaintiffs promised to pay.
The Court
remains unaware of any case, statute, or regulation that requires
a party to a mortgage transaction to be the entity from which the
funds for the loan originate in order for that party to be
designated the lender in the mortgage documents.
Thus,
Plaintiffs have not shown a plausible basis for relief based on
the alleged fact that MIT obtained funds for the mortgage
transaction from some other source, and, in any event, the Court
concludes that fact is not sufficient in this context to render
the mortgage documents and the subsequent related transactions
“nullities.”
Accordingly, the Court grants Defendants’ Motion to Dismiss
as to this basis for declaratory relief.
B.
MERS as Beneficiary of the Deed of Trust.
To the extent that Plaintiffs continue to maintain MERS is a
sham beneficiary or that MERS cannot be a beneficiary of the
Trust Deed, the Court has already addressed those arguments in
its Opinion and Order (#42) issued on November 15, 2011, and
17 - OPINION AND ORDER
similar arguments in its recent opinion in Reeves v. Recontrust
Co, N.A., No. 11-CV-1278-BR, Docket No. 12 (D. Or. Feb. 28,
2012)(citing James v. Recontrust Co., No. 11-CV-324-ST, 2011 WL
3841558, at *6-9 (D. Or. Aug. 26, 2011)(assesses recent federal
and state judicial opinions in Oregon with respect to the
involvement of MERS as nominee of a lender and beneficiary of a
deed of trust in a mortgage transaction and reaches the same
conclusion as this Court)).
The Court need not repeat those
arguments here.
Although District Judge Michael H. Simon recently issued an
Opinion and Order declining to adopt some of Magistrate Judge
Janice M. Stewart’s rationale in James on which this Court relied
in Reeves, the Court respectfully adheres to the Magistrate
Judge’s reasoning and to the analysis of District Judge Michael
Mosman in Beyer v. Bank of America in which he concluded language
similar to that in the Deed of Trust at issue renders MERS a
beneficiary of the Deed under Oregon law.
See Beyer v. Bank of
Am., N.A., 800 F. Supp. 2d 1157, 1159-62 (D. Or. Aug. 2, 2011).
In summary, the Court reiterates its conclusion that
Plaintiffs have not stated a claim based on the involvement of
MERS or on a lack of authority for MERS to act as a beneficiary
of the Deed and to transfer the mortgage in accordance with the
express provisions of the Deed.
18 - OPINION AND ORDER
C.
Default.
Plaintiffs assert they are not in default, and, in any
event, Defendants have not proven they are entitled to payment on
the Note.
Accordingly, Plaintiffs allege Defendants have failed
to comply with Oregon Revised Statute § 86.735(2).
Plaintiffs’ assertion that they are not in default is an
implausible one.
Plaintiffs have provided the Court with the
Note and the Deed for their mortgage.
The Note requires monthly
payments on the loan until February 1, 2037; Plaintiffs have
admitted to this Court that they stopped making payments on their
loan on or about September 2010 without paying off the balance of
the loan; and the Notice of Default and Election to Sell
indicates Plaintiffs have failed to make their monthly payments
on an outstanding principal balance of $321,016.56.
Plaintiffs
do not explain why their failure to make the loan payments does
not constitute a default on their loan.
In addition, Plaintiffs’ assertion that they are not in
default to any Defendant is similarly implausible in light of the
fact that Plaintiffs negotiated with CM in an effort to modify
the terms of their mortgage loan to make it more affordable.
To
enter into such negotiations, Plaintiffs must have believed CM
had the authority to make modifications to their loan.
In any
event, CM is not the party responsible for the foreclosure in
this matter.
CWRC is the appointed Trustee under the Trust Deed
19 - OPINION AND ORDER
on Plaintiffs’ home, and CWRC has invoked the right of
foreclosure set out in the Deed of Trust.
As noted, to invoke a nonjudicial foreclosure under the
Oregon Trust Deed Act, § 86.735(2) requires:
There is a default by the grantor or other
person owing an obligation, the performance
of which is secured by the trust deed, or by
their successors in interest with respect to
any provision in the deed which authorizes
sale in the event of default of such
provision.
Thus, the statute requires only a default on an obligation
secured by a deed of trust that authorizes a sale in the event of
a default; i.e., it does not, as Plaintiffs contend, require
identification of the entity entitled to payment of the
obligation.
As the Court stated at the hearing on January 4,
2012, and in its Opinion and Order (#67) issued on January 5,
2012, Defendants do not bear the burden of proof as to any matter
at this stage of the proceedings despite Plaintiffs’ repeated
demands in their Amended Complaint and briefing for Defendants to
“prove” by “evidence admissible at trial” that Plaintiff is in
default and to whom their obligation is owed.
The fact that
Defendants have not “proved” Plaintiffs are in default or that
one of Defendants is the holder of the Note does not bear on
whether Plaintiffs have stated a claim for relief in their
Amended Complaint.
See Stewart v. Mortgage Elec. Registration
Sys., No. 09-CV-687-PK, 2010 WL 1055131, at *12 (D. Or. Feb. 9,
20 - OPINION AND ORDER
2010)(The Oregon Trust Deed Act “does not require presentment of
the Note or any other proof of ‘real party in interest’ or
‘standing,’ other than the Deed of Trust.”).
Thus, Plaintiffs’
alternate contention that Defendants have not demonstrated they
have “standing” to file a Motion to Dismiss is merely another
attempt to place a burden on Defendants that does not exist at
this stage of the proceedings.
The Court is satisfied on this record that the conditions
set out in § 86.735(2) have been met and that Plaintiffs cannot
state a claim based on their allegations that they are not in
default or that Defendants have not shown to whom the obligation
is owed.
Accordingly, the Court grants Defendants’ Motion to
Dismiss as to this basis for declaratory relief.
D.
Unrecorded Assignments.
Plaintiffs also contend Defendants have failed to meet the
requirements of § 86.375(1) because they have failed to record
each of the assignments of Plaintiffs’ mortgage.
Specifically,
Plaintiffs contend their mortgage is governed by a Pooling and
Servicing Agreement that securitized their mortgage and resulted
in numerous assignments of their mortgage that have not been
properly recorded in the Clackamas County records.
Accordingly,
Plaintiffs contend Defendants are not entitled to proceed with a
nonjudicial foreclosure.
Beyond their general assertion that their mortgage has been
21 - OPINION AND ORDER
assigned and transferred as a part of a pool of securitized
mortgages, Plaintiffs’ only specific allegation of an unrecorded
assignment of their mortgage stems from their research on the
internet that revealed Fannie Mae may have an interest in their
mortgage.
Nevertheless, the Court will assume at this stage that
there have been transfers of the mortgage beyond those plainly
indicated in the documents submitted with Plaintiffs’ Amended
Complaint.
Section 86.735(1) requires:
The trust deed, any assignments of the trust
deed by the trustee or the beneficiary and
any appointment of a successor trustee [must
be] recorded in the mortgage records in the
counties in which the property described in
the deed is situated.
As noted, this record reflects the original Deed of Trust, the
assignment of the Deed of Trust from MERS to CM, the appointment
by CM of CWRC as the substitute Trustee, and the Notice of
Default and Election to Sell have each been recorded in the
Clackamas County records.
The only question before the Court raised by Plaintiffs’
allegation of unrecorded transfers is whether § 86.735(1)
requires any and all assignments of the mortgage to be recorded
as a prerequisite to a nonjudicial foreclosure.
By its plain
language, § 86.735(1) applies only to transfers of a trust deed
by the trustee or the beneficiary.
The Oregon Trust Deed Act
does not regulate transfers of promissory notes, which are
22 - OPINION AND ORDER
themselves negotiable instruments and not conveyances of real
property.
The statute controls the power of foreclosure by
requiring public disclosure of deeds of trust, their appointed
trustees, and the transfers of those instruments.
Under similar
circumstances, Magistrate Judge Janice M. Stewart addressed the
application of § 86.735(1) in James when analyzing the
plaintiffs’ contention that an assignment of their promissory
note constituted an assignment of the mortgage that must be
recorded:
That concept is embodied in Oregon law.
ORS 86.110(1)(“a promissory note secured by a
mortgage on real property [can be]
transferred by indorsement without a formal
assignment of the mortgage”). Since the
trust deed follows the note, whoever holds
the note by transfer also has the power to
foreclose the trust deed, even without
recording an assignment of the mortgage.
Barringer v. Loder, 47 Or 223, 227–29, 81 P
778, 780 (1905).
Simply put, the security interest
embodied in the trust deed follows any
transfer of the note in favor of the lender
and its successors, such that the trust deed
does not become split or separated from the
note. However, plaintiffs seek to use this
legal fiction to defeat its very purpose by
depriving the note holder of the full benefit
of its security instrument and the right to
foreclose by advertisement and sale. The
court can find no authority to support
plaintiffs' novel theory.
Nothing in Oregon law requires recording
of each assignment of the trust deed when the
underlying note is transferred. The only
recording requirement is found in ORS
86.735(1) for all “assignments of the trust
23 - OPINION AND ORDER
deed by the trustee or the beneficiary”
before a non judicial foreclosure by
advertisement and sale. However, this
statute by its express terms only requires
the recording of assignments by the parties
who have a recorded interest in the real
property providing security, that is, “the
trustee or the beneficiary.”
Although a transfer or assignment of the
note transfers the security interest for the
protection of the beneficiary, it is not the
same act as “an assignment of the trust deed
by the trustee or the beneficiary”
contemplated by ORS 86.735(1). That statute
makes no mention of recording a transfer of
the promissory note, opposed to the deed of
trust. A promissory note is not a conveyance
of real property and is not recorded or even
susceptible to recordation. ORS 93.610,
93.630, 205.130. Recording interests in a
promissory note would not serve the purpose
of the recording statutes because the
promissory note does not contain a
description of the property, does not
transfer title to real property, and does not
affect title.
Plaintiffs do not allege that either the
Trustee (Fidelity National) or the
Beneficiary (MERS) made any assignment of the
Deed of Trust prior to the assignment by MERS
to BACHLS.
James v. Recontrust Co., No. 11-CV-324-ST, 2011 WL 3841558, *1011 (D. Or. Aug. 26, 2011).
As noted, the Court finds Magistrate
Judge Stewart’s reasoning to be sound and respectfully concludes
Judge Simon’s later opinion does not foreclose the Magistrate
Judge’s interpretation of Oregon law adopted by this Court in
Reeves and herein.
Plaintiffs assert their mortgage was transferred or assigned
24 - OPINION AND ORDER
as a part of a securitization pool, but they do not allege MERS,
CWRC (the present Trustee), or any prior Trustee (such as the
original Trustee, Western Title and Escrow) made transfers of the
Deed that have not been recorded.
To the extent that Plaintiffs’
allegations could be so construed, the lack of any underlying
factual development renders them insufficient under Iqbal to
state a legal basis for a claim.
See 129 S. Ct. at 1949-50.
As
the Court concluded in its Opinion and Order (#67) issued on
January 5, 2012, “Plaintiffs’ factual allegations concerning
their suspicions about transactions involving their mortgage
between its origination and the issuance of the Notice of Default
and Election to Sell are alone insufficient to state a legal
basis for such relief.”
Plaintiffs rely only on conjecture as
the basis for their assertion that Defendants have not recorded
each of the required transactions.
Accordingly, the Court grants Defendants’ Motion to Dismiss
as to this basis for declaratory relief.
E.
Irregularities in Recorded Documents.
Finally, Plaintiffs contend the assignment of the Deed from
MERS to CM, the appointment by CM of CWRC as substitute Trustee,
the Notice of Default and Election to Sell, and the Trustee’s
Notice of Sale each are the result of unlawful actions by
Defendants or otherwise do not constitute valid recordings that
satisfy § 86.735(1).
Accordingly, Plaintiffs contend Defendants
25 - OPINION AND ORDER
cannot proceed with nonjudicial foreclosure.
1.
Assignment of Deed from MERS to CM and
Substitution of CWRC as Trustee.
Plaintiffs appear to allege the Assignment of Deed of
Trust (recorded in the Clackamas County records, Exhibit 9 to
Plaintiffs’ Amended Complaint) and the Substitution of Trustee
(also recorded, Exhibit 10 to Plaintiffs’ Amended Complaint) are
invalid because both were executed by one person, Scott Scheiner,
who purports to be both the Assistant Secretary of MERS on the
Assignment and a Vice President of CM on the Substitution of
Trustee.
At the hearing on January 4, 2012, the Court noted the
mere fact that one person signed the Assignment and the
Substitution of Trustee in a dual capacity is not enough to
nullify those documents or to warrant declaratory relief.
James, 2011 WL 3841558, at *12.
See
In order for this claim to
survive the Motion to Dismiss by Defendants, the Court instructed
Plaintiffs that they would need to provide some legal authority
to support their theory that such a practice is illegitimate and
renders the Assignment or Substitution invalid.
Plaintiffs have
failed to do so.
Accordingly, the Court grants Defendants’ Motion to Dismiss
as to this basis for declaratory relief.
2.
Notice of Default and Election to Sell.
Plaintiffs also assert the Notice of Default and
26 - OPINION AND ORDER
Election to Sell (recorded in the Clackamas County records,
Exhibit 11 to Plaintiffs’ Amended Complaint) is legally
insufficient because it was signed by a “known robo-signer” and
the signature was not made in the presence of the notary.
Specifically, Plaintiffs point out that the Notice bears a date
of March 23, 2011, and they allege Yvonne J. Wheeler, a “robosigner,” executed the document on March 23, 2011, outside of the
presence of the Notary as evidenced by the fact that the Notary
did not sign the Notice until six days later on March 29, 2011.
As the Court pointed out to Plaintiffs at the hearing
on January 4, 2011, the mere fact that the Notice bears a printed
date of March 23, 2011, below Wheeler’s signature does not
demonstrate any fraud or illegal act by the Notary who attested
on March 29, 2011, that she witnessed Wheeler’s signature.
The
time disparity that Plaintiffs seize on is insufficient to form
the basis for this claim under these circumstances.
In addition, Plaintiffs’ assertion that Wheeler is a
“known robo-signer,” coupled with the lack of any authority to
support Plaintiffs’ position that such a fact creates an
actionable claim, is insufficient to form the basis of this
claim.
Plaintiffs acknowledge they are not advancing a claim for
fraud and are not making any specific allegations of intentional
wrong-doing by Defendants.
Accordingly, the Court grants Defendants’ Motion to Dismiss
27 - OPINION AND ORDER
as to this basis for declaratory relief.
3.
Notice of Sale.
Plaintiffs also contend the Notice of Sale (recorded in
the Clackamas County records, Exhibit 12 to Plaintiffs’ Amended
Complaint) is legally insufficient because the signature of Naomi
Feistel on the first and second pages “is different” and the
document lacks an “acknowledgement or jurat notorization.”
The
Court’s review of the signatures does not bear out Plaintiffs’
assertion that they are different.
They appear to be the same
signature.
In addition, Plaintiffs assert the lack of an
“acknowledgment” or “jurat notification” nullifies the Notice of
Sale.
Again Plaintiffs’ allegation lacks any legal authority
that requires such an acknowledgment.
The Court instructed
Plaintiffs at the hearing on January 4, 2012, and in its Opinion
and Order (#67) issued on January 5, 2012, that Plaintiffs must
provide legal authority to show their factual assertions entitle
them to some form of legal relief.
The Court has reviewed the
detailed requirements of Oregon law for Notices of Sale, and they
do not require the acknowledgment that Plaintiffs assert is
mandatory.
See Or. Rev. Stat. § 86.745.
Thus, the Court does
not find any deficiency in the Notice of Sale under § 86.745 and,
therefore, grants Defendants’ Motion to Dismiss as to this basis
for declaratory relief.
28 - OPINION AND ORDER
In summary, the Court has again reviewed each of Plaintiffs’
alleged bases for declaratory relief and has concluded Plaintiffs
have failed to state factual and legal grounds on which relief
could be granted.
Accordingly, the Court grants Defendants’
Motion to Dismiss for Failure to State a Claim and dismisses
Plaintiff’s Amended Complaint.
As noted, the Court has “unique and substantial discretion
in deciding whether to declare the rights of litigants” under the
Declaratory Judgments Act even when there is an actual
justiciable dispute between the parties.
286-87.
Winter, 515 U.S. at
Based on the foregoing and on the record as a whole, the
Court concludes there is not any basis nor compelling reason for
the Court to declare the rights of the parties in this matter.
Thus, the Court declines to do so and, in the exercise of its
discretion, dismisses this matter.
DEFENDANTS’ MOTION (#38) TO VACATE THE TRO
Defendants move the Court to vacate the TRO (#7) in effect
since August 31, 2011.
A party seeking a temporary restraining order or preliminary
injunction must demonstrate (1) it is likely to succeed on the
merits, (2) it is likely to suffer irreparable harm in the
absence of preliminary relief, (3) the balance of equities tips
in its favor, and (4) an injunction is in the public interest.
29 - OPINION AND ORDER
Winter v. Natural Res. Def. Council, 129 S. Ct. 365, 374 (2008).
"The elements of [this] test are balanced, so that a stronger
showing of one element may offset a weaker showing of another.
For example, a stronger showing of irreparable harm to plaintiff
might offset a lesser showing of likelihood of success on the
merits."
Alliance For The Wild Rockies v. Cottrell,
No. 09-35756, 2011 WL 208360, at *4 (9th Cir. Jan. 25, 2011)
(citing Winter, 129 S. Ct. at 392).
The Court’s analysis of the second and fourth factors are
unchanged from the Court’s original analysis in its TRO (#7)
issued on August 31, 2011.
In addition, the Court addressed the
balance of the equities in this matter in its Opinion and Order
(#67) issued on January 5, 2012:
At the hearing on Defendants’ Motion to
Vacate the TRO, Plaintiffs represented that
they could not pay and, therefore, did not
intend to pay the $2,000 monthly security
required by the Court as a condition of
maintaining the Temporary Restraining Order
(TRO) in its Order (#52) issued on December
12, 2011. As set out on the record, the
Court has determined Plaintiffs’ intended
failure to pay this security likely tips the
Court’s analysis of the equities in favor of
Defendants in this matter under this factor
of the four-part test for determining whether
to grant (or to maintain) injunctive relief.
Nonetheless, the Court must still weigh
Plaintiffs’ likelihood of success on the
merits to determine whether it is appropriate
to maintain the TRO, an issue which is
inextricably intertwined with the Court’s
resolution of the recently-filed Motion by
Defendants CM and MERS (#59) to Dismiss
[Plaintiffs’ First Amended Complaint] for
30 - OPINION AND ORDER
Failure to State a Claim. The Court,
therefore, will consider and resolve both
Motions (#38, #59) simultaneously.
Opin. and Order (#67) at 2-3.
In light of the foregoing, the fact that Plaintiffs have
lived in their home since approximately September 2010 without
paying their mortgage, and the costs to Defendants associated
with this litigation, the Court now concludes the equities favor
Defendants.
Accordingly, the final factor the Court must weigh
is Plaintiffs’ likelihood of success on the merits.
The Court’s initial determination that Plaintiffs had shown
a likelihood of success on the merits rested on several factors:
the impending nature of the nonjudicial foreclosure and scheduled
sale of Plaintiffs’ home, the recent unsettled state of the law
in this area, and the nature and extent of the allegations in the
original Complaint filed by pro se Plaintiffs.
In light of the
Court’s assessment of the equities, the irreparable nature of the
loss of Plaintiffs’ home, and the Court’s perception that there
would only be a “short delay” of the foreclosure while
determining whether Plaintiffs’ Complaint had merit, the Court
found on August 31, 2011, that Plaintiffs had demonstrated a
sufficient likelihood of success to sustain a temporary
intervention by the Court.
The Court notes Plaintiffs have had six months to file two
complaints and to allow them to demonstrate the plausibility of
31 - OPINION AND ORDER
their claims in several hearings, during which Plaintiffs have
lived rent free in the home at issue here.
Moreover, now that
the Court has dismissed Plaintiffs’ Amended Complaint, there is
not any question they are unable to demonstrate likely success on
the merits of their claims.
Accordingly, the Court grants
Defendants’ Motion (#38) and vacates the TRO (#7) issued on
August 31, 2011.
CONCLUSION
For these reasons, the Court GRANTS the Motion (#59) to
Dismiss by Defendants CM, MERS, and CWRC and DISMISSES with
prejudice Plaintiffs’ Amended Complaint against them.
The Court
also GRANTS the Motion (#38) to Vacate Temporary Restraining
Order by Defendants CM, MERS, and CWRC and VACATES the Temporary
Restraining Order (#7) issued on August 31, 2011.
The Court directs Defendants to confer and to submit to the
Court no later than March 15, 2012, an Order in which Defendants
stipulate as to the particular Defendant(s) to whom Plaintiffs’
security ($500.00 cash bond) should now be released.
IT IS SO ORDERED.
DATED this 5th day of March, 2012.
/s/ Anna J. Brown
ANNA J. BROWN
United States District Judge
32 - OPINION AND ORDER
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