Graham v. ReconTrust Company, N.A. et al
Filing
13
ORDER: The Court GRANTS Defendants' Motion 4 to Dismiss. Because the Court concludes Plaintiff has not stated a claim for Wrongful Foreclosure and cannot amend her Complaint to state such a claim under any of the theories espoused by Plaintiff, the Court DISMISSES with prejudice Plaintiff's First, Second, and Third Claims for Wrongful Foreclosure as pleaded. The Court also DISMISSES with prejudice Plaintiff's Sixth Claim for Declaratory Relief to the extent that Claim i s based on Plaintiff's Wrongful-Foreclosure Claims. Because, however, Plaintiff may be able to amend her Complaint to plead facts sufficient to state claims for fraud and/or lIED, the Court DISMISSES without prejudice Plaintiff's Fourth Cla im for Fraud and Fifth Claim for lIED. The Court GRANTS Plaintiff leave to file an Amended Complaint no later than April 13, 2012, in order to cure the deficiencies set forth in this Opinion and Order as to Plaintiff's Fourth Claim for Fraud and Fifth Claim for lIED. Signed on 03/27/2012 by Judge Anna J. Brown. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
SHARON GRAHAM,
Plaintiff,
v.
RECONTRUST COMPANY, N.A.; US
BANK NATIONAL ASSOCIATION,
SUCCESSOR TRUSTEE TO BANK OF
AMERICA BANK OF AMERICA, N.A.,
SUCCESSOR TRUSTEE TO LASALLE
BANK, N.A., AS TRUSTEE FOR THE
HOLDERS OF THE FIRST FRANKLIN
MORTGAGE LOAN TRUST, MORTGAGE
LOAN ASSET-BACKED CERTIFICATES,
SERIES 2006-FF18; BANK OF
AMERICA, NA; and MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.,
Defendants.
JOHN P. BOWLES
5200 S.W. Meadows Road
Suite 150
Lake Oswego, OR 97035
(503) 726-5930
Attorney for Plaintiff
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3:11-CV-01339-BR
OPINION AND ORDER
GREGORY A. CHAIMOV
P. ANDREW MCSTAY , JR.
Davis Wright Tremaine, LLP
1300 s.w. Fifth Avenue
Suite 2300
Portland, OR 97201-5630
(503) 241-2300
Attorneys for Defendants
BROWN, Judge.
This matter comes before the Court on Defendants' Motion
(#4) to Dismiss for failure to state a claim under Fed. R. Civ.
P. 12(b) (6).
For the reasons that follow, the Court GRANTS
Defendants' Motion.
BACKGROUND
This case was filed in Clackamas County Circuit Court on
October 11, 2010, and was removed to this Court on November 8,
2011.
Plaintiff seeks damages and declaratory relief allegedly
arising from Defendants' pending foreclosure of her home.
The facts are drawn from Plaintiff's state court Complaint
and documents as to which the Court has taken judicial notice.
In October 2006, Plaintiff and her now-deceased husband
obtained a $264,170 loan, reflected by a promissory note, to
finance the purchase of real property located in Estacada,
Oregon.
2
The purchase was secured by a Trust Deed recorded in
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Clackamas County on October
20, 2006.
The Trust Deed identified
Plaintiff as grantor/borrower, First Franklin Mortgage Loan Trust
as lender, Ticor Title Company as Trustee, and Defendant Mortgage
Electronic Registration System (MERS) as beneficiary of the
promissory note "acting solely as nominee for Lender and Lender's
successors and assigns."
Notice of Removal, Compl., Ex. 1 at 1.
On April 19, 2011, MERS assigned its beneficial interest in
the Trust Deed to U.S. Bank.
Id., Ex. 2.
On the same day,
Defendant U.S. Bank executed an "Appointment of Successor
Trustee," naming Defendant ReconTrust Company, N.A.
(ReconTrust)
as the "successor Trustee under [the Trust Deed], to have all
the powers of said original trustee, effective immediately." Id.,
Ex. 4 at 2.
On April 20, 2011, ReconTrust executed and recorded a Notice
of Default and Election to Sell Plaintiff's property in Clackamas
County on August 25, 2011.
Id., Ex. 3.
The Notice of Default
stated, among other things, that Plaintiff had failed to make any
monthly mortgage payments since June 1, 2010.
Id., Ex. 3 at 1.
On April 22, 2011, both the Trust Deed Assignment and the
Successor Trustee Appointment were recorded in Clackamas County.
Id., Ex. 2 at 1; Ex. 4.
On October 3, 2011, Plaintiff filed a Complaint in Clackamas
County Circuit Court asserting the following claims against
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ReconTrust, U.S. Bank National Association, Bank of America, and
MERS:
(1) Wrongful Foreclosure based on a "defective appointment"
of ReconTrust as Successor Trustee;
(2) Wrongful Foreclosure based on Defendants'
failure to
properly record all assignments of the trust deed in violation of
Ore. Rev. Stat. 86.735(1);
(3)
Wrongful Foreclosure based on "Invalid Ownership" and
violations of state law relating to the assignment of mortgages;
(4)
Fraud and Intentional Misrepresentation by Defendant
Bank of America; and
(5)
Intentional Infliction of Emotional Distress by
Defendant ReconTrust.
Plaintiff seeks a Declaratory Judgment establishing her
legal rights under the Trust Deed and other related documents.
Defendants move to dismiss Plaintiff's Complaint in its
entirety on the ground "there is neither a legal nor a factual
basis for the Court's providing Plaintiff with the windfall she
seeks."
Def. Mem. at 18.
STANDARDS
1.
Motion to Dismiss - Failure to State a Claim.
To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as
true, to "state a claim to relief that is
plausible on its face." A claim has facial
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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.
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. 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' ."
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal
citations omitted); See also Bell Atlantic v. Twombly, 550 U.S.
554, 555-56 (2007).
In Iqbal,
the Supreme Court clarified the pleading standard
necessary to survive a motion to dismiss:
[Tlhe pleading standard Rule 8 announces does not
require "detailed factual allegations," but it
demands more than an unadorned, the-defendantunlawfully-harmed-me accusation. A pleading that
offers "labels and conclusions" or "a formulaic
recitation of the elements of a cause of action
will not do." Nor does a complaint suffice if it
tenders "naked assertion[sl" devoid of "further
factual enhancement."
129 S. Ct. at 1949 (internal citations omitted).
"[Al complaint
may survive a motion to dismiss only if, taking all well-pleaded
factual allegations as true, it contains enough facts to 'state a
claim to relief that is plausible on its face.'"
Pliler, 627 F.3d 338, 341-342
Hebbe v.
(9 th Cir. 2010).
liThe court need not accept as true, however, allegations
that contradict facts that may be judicially noticed by the
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court."
Shwarz v. United States, 234 F.3d 428, 435 (9 th Cir.
2000) (citations omitted) .
When "ruling on a 12(b) (6) motion, a court may generally
consider only allegations contained in the pleadings, exhibits
attached to the complaint, and matters properly subject to
judicial notice."
Swartz v. KPMG LLP, 476 F.3d 756,763
(9 th
Cir. 2007) (citing Jacobson v. Schwarzenegger, 357 F. Supp. 2d
1198, 1204 (C.D. Cal. 2004)).
A court "may consider a writing
referenced in a complaint but not explicitly incorporated therein
if the complaint relies on the document and its authenticity is
unquestioned."
Id.
706 (9 th Cir. 1998),
(quoting Parrino v. FHP, Inc., 146 F.3d 699,
superseded by statute on other grounds as
stated in Abrego v. Dow Chem. Co., 443 F.3d 676 (9 th Cir. 2006)).
Similarly, the court's reliance on judicially-noticed documents
does not convert a motion to dismiss into a summary-judgment
motion.
Intri-Plex Technologies, Inc. v. Crest Gp., Inc., 499
F.3d at 1052.
2.
Declaratory Judgment
The Declaratory Judgment Act provides in relevant part that
"[iln 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
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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
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 declaratoryjudgment actions that satisfy the case-orcontroversy 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[tl 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).
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Wilton v. Seven Falls
The Court underscored "[ilf 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."
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).
DISCUSSION
Defendants move to dismiss Plaintiffs' Complaint because
not one of the claims alleged therein is supported by factual
allegations and, in any event, all of them are contradicted by
judicially noticeable documents and/or rely on alleged
misinterpretations of settled principles of law.
1.
Wrongful Foreclosure.
Plaintiff seeks to bring three claims for wrongful
foreclosure, alleging (1)
u.s.
Bank's appointment of ReconTrust
as the successor trustee was defective;
(2) a violation of ORS
86.735(1) in the assignment of the Trust Deed from MERS to U.S.
Bank, and (3) even if the assignment from MERS to U.S. Bank was
proper, a violation of provisions of a Pooling and Servicing
Agreement (PSA) to which U.S. Bank was subject.
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a.
Appointment of ReConTrust as Successor Trustee.
Plaintiff's first claim for wrongful foreclosure anticipates
a finding by the Court that MERS was not lawfully named as the
beneficiary under the Trust Deed because MERS did not provide
consideration to the lender, First Franklin, in exchange for the
beneficial interest.
If the Court were to make such a finding,
Plaintiff contends it would necessarily follow that MERS did not
possess a valid interest in the Trust Deed which was capable of
being assigned to U.S. Bank, and, consequently, U.S. Bank would
not have authority to appoint ReconTrust as successor trustee and
ReconTrust would not have authority to proceed with a foreclose
sale.
In two recent cases, however, this Court held, on facts
that are indistinguishable from those in this case, that MERS
is a proper beneficiary under the Trust Deed and, therefore,
was authorized in those cases to transfer the Trust Deed and the
mortgage at issue in accordance with the express provisions of
the Trust Deed.
See Sovereign v. Deutsche Bank, No. 11-CV-995-
BR, 2012 WL 724796 *7-8 (D. Or. Mar. 5, 2012); Reeves v.
ReconTrust Co., N.A., No. 11-CV-01278, 2012 WL 652681 *10-16 (D.
Or. Feb. 28, 2012).
The Court finds no reason to revisit the rationale for
its decisions in either of those cases.
Applying the analysis
in Sovereign and Reeves to the facts in this case, the Court
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concludes that MERS properly assigned a valid beneficial interest
it held in the Trust Deed to U.S. Bank, which, in turn, properly
appointed ReconTrust as successor trustee for the purpose of
conducting any foreclosure sale. 1
1 The Court notes a difference in analysis of these types of
foreclosure issues has arisen among judges in the District of
Oregon who have agreed to certify the issue and related issues to
the Oregon Supreme Court in the following cases now pending in
the District:
Mirarabshahi v. ReconTrust, 12-cv -10-HA
Mayo/Plancarte v. ReconTrust, 11-cv-1533-PK
Powell v. ReconTrust, 11-cv- 1399-HZ
Brandrup v. ReconTrust, 11-cv- 1390-JE
The questions submitted to the Oregon Supreme Court are:
1. Mayan entity such as MERS, that is neither a lender nor
successor to a lender, be a "beneficiary" as that term is used in
the Oregon Trust Deed Act?
2. May MERS be designated as beneficiary under the Oregon
Trust Deed Act where the trust deed provides that MERS "holds
only legal title to the interests granted by Borrower in this
Security Instrument, but, if necessary to comply with law or
custom, MERS, as nominee for Lender and Lender's successors and
assigns, has the right to exercise any or all of those
interests"?
3. Does the transfer of a promissory note from the lender
to a successor result in an automatic assignment of the securing
trust deed that must be recorded prior to the commencement
of non-judicial foreclosure proceedings under Or. Rev. Stat.
§ 86.735(1)?
4. Does the Oregon Trust Deed Act allow MERS to retain and
transfer legal title to a trust deed as nominee for the lender,
after the note secured by the trust deed is transferred from the
lender to a successor or series of successors?
In the meantime, however, the Court has decided as a general
rule not to stay further proceedings in cases in which these
questions are pending.
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h.
Recordation of the Trust Deed Assignment.
Plaintiff contends Defendants' initiation of foreclosure
proceedings is improper because Defendants did not record the
initial assignment of the Trust Deed from the lender, First
Franklin, to MERS, in violation of Ore. Rev. Stat. 86.735(1).
That statute allows the foreclosure of a trust deed if "[tlhe
[tlrust [dleed [orl any assignments of the trust deed
recorded.
"
are
Plaintiff contends MERS' assignment of the
underlying promissory note to the Trust Deed "constitutes a
transfer of the [Trust Deedl and is an assignment of the [Trust
Deedl" which, therefore, must be recorded.
Compl. ~ 48.
This Court, however, concluded in Sovereign and Reeves that
the recording requirement set forth in the statute applies "only
to transfers of a trust deed by the trustee or the beneficiary."
Sovereign, 2012 WL 724796 at *9.
It "does not regulate transfers
of promissory notes, which are themselves negotiable instruments
and not conveyances of real property."
Id.
The Court adheres to its holdings in Sovereign and Reeves
and, therefore, concludes Defendants' foreclosure proceedings
were not improper solely because the promissory note to the Trust
Deed was not recorded.
c.
Violation of a Pooling and Servicing Agreement.
Plaintiff's Third Claim for Relief is entitled "Wrongful
Foreclosure - Invalid Ownership and Additional Violations of
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Ore. Rev. Stat. 86.060 and 86.735(1)."
Plaintiff contends that the allegations in her Third Claim
for Relief relating to a "Pooling and Servicing Agreement"
(PSA)
filed with the SEC "constitute prima facie evidence of multiple
unrecorded assignments of the Deed of Trust" that are at issue in
this case.
As such, Plaintiff does not appear to be asserting a
claim based on any violation of the Pooling Servicing Agreement
itself.
In any event, the Court notes such a claim would be
fruitless because a borrower such as Plaintiff does not have
standing to assert a violation of a PSA to which she is not a
party.
In re Canellas, 6:11-CV-1247, 2012 WL 868772 *3 (M.D.
Fla. Mar. 14, 2012); Edwards v. Ocwen Loan Servicing, LLC, 9:10CV-89, 2012 WL 844396 *5 (E.D. Tex. Mar. 12, 2012); Estate of
Malloy v. PNC Bank, No. 11-12922, 2012 WL 176143 *5 (Jan. 23,
2012) .
d.
Inadequate Notice of Default.
Plaintiff also contends Recontrust's Notice of Default and
Election to Sell is defective because the Notice was executed on
April 20, 2011, while the appointment of the successor trustee
who signed the Notice was not recorded until two days later on
April 22, 2011.
Accordingly, it appears the successor trustee
executed the document before she had the authority to do so.
Plaintiff, however, does not assert this issue as part of
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any claim in her Complaint.
In any event, under Ore. Rev. Stat.
86.735(3), a Notice of Default is effective only after it has
been recorded.
Here, the successor trustee did not record the
Notice until after he was appointment on April 22, 2011.
In
these circumstances, the Court concludes the successor trustee
was properly appointed under Oregon law before he caused the
Notice of Default to be recorded.
e.
Summary.
For all of the reasons stated above, the Court concludes
Plaintiff's First, Second, and Third Claims for Relief based on
Wrongful Foreclosure do not state any plausible claims for
relief.
2.
Fraud/Intentional Infliction of Emotional Distress.
In her Fourth and Fifth Claims, Plaintiff alleges fraud
against Bank of America and
intentional infliction of emotional
distress against ReconTrust.
Plaintiff's allegations in each of these claims and the
arguments she asserts in opposing their dismissal for failure
to state a claim are materially identical to claims asserted by
the plaintiff and rejected by the Court in Reeves.
The Court
does not see any reason to reach a different result given the
substantial similarity in the facts in both cases.
Accordingly, the Court adheres to its rulings in Reeves and
dismisses Plaintiff's claims for Fraud against Defendant Bank of
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America and for Intentional Infliction of Emotional Distress
against Defendant ReconTrust, with leave to replead.
3.
Declaratory Judgment.
In her Sixth Claim, Plaintiff seeks a declaration by the
Court that the pending foreclosure proceedings are void because
of serious questions that have arisen based on the allegations
in her claims for Wrongful Foreclosure.
For all the reasons
stated above, the Court concludes there is no justiciable
controversy as to the validity of the proposed foreclosure
proceedings and, therefor, plaintiff has not established any
grounds for declaratory relief.
Accordingly, the Court dismisses Plaintiff's claim for
Declaratory Relief.
CONCLUSION
For the above reasons, the Court GRANTS Defendants' Motion
(#4) to Dismiss.
Because the Court concludes Plaintiff has not
stated a claim for Wrongful Foreclosure and cannot amend her
Complaint to state such a claim under any of the theories
espoused by Plaintiff, the Court DISMISSES with prejudice
Plaintiff's First, Second, and Third Claims for Wrongful
Foreclosure as pleaded.
The Court also DISMISSES with prejudice Plaintiff's Sixth
Claim for Declaratory Relief to the extent that Claim is based on
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Plaintiff's Wrongful-Foreclosure Claims.
Because, however, Plaintiff may be able to amend her
Complaint to plead facts sufficient to state claims for fraud
and/or lIED, the Court DISMISSES without prejudice Plaintiff's
Fourth Claim for Fraud and Fifth Claim for lIED.
The Court GRANTS Plaintiff leave to file an Amended
Complaint no later than April 13, 2012, in order to cure the
deficiencies set forth in this Opinion and Order as to
Plaintiff's Fourth Claim for Fraud and Fifth Claim for lIED.
IT IS SO ORDERED.
DATED this 27th day of March, 2012.
AN~
United States District Judge
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