Angels Alliance Group LLC v. ReconTrust Company, N. A. et al
Filing
31
OPINION AND ORDER: I GRANT IN PART defendants motion to dismiss 20 . I GRANT defendants requests for judicial notice 22 27 . I DISMISS plaintiffs first, third, fifth, sixth, and seventh claims with prejudice as they are all either directl y or indirectly premised on the theory that MERS is not a valid beneficiary under Oregon law and/or that the OTDA requires the recordation of any assignments or conveyances of both the DOT and the note. I DISMISS plaintiffs second claim with prejudice as amendment will not cure either allegation advanced in the current complaint. Lastly, I DENY with leave to renew at summary judgment defendants motion to dismiss plaintiffs fourth claim. Signed on 5/17/12 by Judge Michael W. Mosman. (dls)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
ANGELS ALLIANCE GROUP LLC,
Plaintiff,
No. 3:11-cv-01382-MO
v.
OPINION AND ORDER
RECONTRUST COMPANY, N.A., et al.,
Defendants.
MOSMAN, J.,
Plaintiff brings this action seeking to enjoin the foreclosure of its home. Defendants
ReconTrust Company, N. A. (“ReconTrust”), Bank of America N.A., successor by merger with
BAC Home Loan Servicing, LP f/k/a Countrywide Home Loans Servicing, N.A. (“BANA”),
Federal National Mortgage Association (“Fannie Mae”), and Mortgage Electronic Registration
Systems, Inc. (“MERS”) filed a Motion to Dismiss [20] pursuant to Fed. R. Civ. P. 12(b)(1) and
Fed. R. Civ. P. 12(b)(6). Defendants also filed a Request for Judicial Notice [22] and a
Supplemental Request for Judicial Notice [27]. I grant defendants’ motion to dismiss in part for
the following reasons.
1 – OPINION AND ORDER
BACKGROUND1
Nonparty Anayansi Sprague entered into a loan agreement with Hyperion Capital Group,
LLC (“Hyperion”) on or about December 28, 2005, whereby she borrowed $310,000.00 and
executed a promissory note and a Deed of Trust (“DOT”), establishing a security interest in
residential real property located at 5730 SE Aldercrest Road in Milwaukie, Oregon (“the
Property”). (Notice of Removal [1] Ex. 1, 4). The DOT was properly recorded and identified
Hyperion as the “Lender,” nonparty Ticor Title Insurance Company as the “Trustee,” and MERS
as the “Beneficiary” as nominee for Hyperion and its successors and assigns. (Id.). Plaintiff
alleges that Fannie Mae “acquired ownership” of Ms. Sprague’s loan “sometime shortly after
origination.” (Id. at 21).
On or about July 2, 2007, Ms. Sprague conveyed title to the Property to plaintiff, Angels
Alliance Group LLC, a Nevada limited liability company of which Ms. Sprague is the sole
member. (Id. at 6–7); (Pl.’s Resp. [25] 7). On March 20, 2009, MERS caused to be recorded an
Appointment of Successor Trustee appointing ReconTrust as the successor trustee under the
DOT. (Tranetzki Decl. [23] Ex. 2). On the same day, ReconTrust recorded a Notice of Default
and Election to Sell indicating that Ms. Sprague had entered into default beginning June 2008.
(Notice of Removal [1] Ex. 1, 44). On January 27, 2010, ReconTrust recorded a Rescission of
Notice of Default rescinding the March 2009 notice of default. (Id. at 49).
1
I preliminarily note that I grant defendants’ requests for judicial notice. In general, I may not
consider any material beyond the pleadings in ruling on a motion to dismiss pursuant to Fed. R.
Civ. P. 12(b)(6). See Fed. R. Civ. P. 12(d). However, I may consider documents that are “not
physically attached to the complaint…if the documents' authenticity ... is not contested and the
plaintiff's complaint necessarily relies on them,” and I may take judicial notice of “matters of
public record.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (quotations
omitted). The materials at issue in defendants’ requests all satisfy either one or both of these
exceptions.
2 – OPINION AND ORDER
On December 9, 2010, MERS caused to be recorded an Assignment of the Deed of Trust,
designating all beneficial interest under the DOT to BANA. (Id. at 41). Also on December 9,
2010, ReconTrust recorded a second Notice of Default and Election to Sell, which similarly
indicated that Ms. Sprague had entered into default beginning June 2008. (Tranetzki Decl. [23]
Ex. 3). ReconTrust recorded a second Rescission of Notice of Default on March 3, 2011, thereby
cancelling the December 2010 notice of default. (Notice of Removal [1] Ex. 1, 51). On April 6,
2011, ReconTrust recorded the Notice of Default and Election to Sell (“Notice of Default”) at
issue here, which indicated that Ms. Sprague entered into default beginning June 2008 and that
the trustee’s sale would take place in August 2011. (Tranetzki Decl. [23] at Ex. 4).
BANA executed an Assignment of Deed of Trust to Fannie Mae on August 12, 2011, and
caused the assignment to be recorded on August 22, 2011. (Notice of Removal [1] Ex. 1, 54).
Fannie Mae purchased the property at a foreclosure sale on August 16, 2011, and the Trustee’s
Deed designating Fannie Mae as the purchaser of the Property was recorded on August 22, 2011.
(Id. at 46).
STANDARD
Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain
statement of the claim showing that the pleader is entitled to relief.” To survive a Rule 12(b)(6)
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.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). The plausibility standard “asks for
more than a sheer possibility that a defendant has acted unlawfully.” Id. I need not accept as true
legal conclusions, as “[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678.
3 – OPINION AND ORDER
DISCUSSION
Plaintiff’s complaint includes seven claims for relief, including four wrongful foreclosure
claims, one unlawful debt collection claim, and two remedial claims for injunctive and
declaratory relief. Plaintiff does not allege in this case that there was an assignment of the DOT
which has not been recorded, and instead seeks to have the foreclosure declared unlawful
pursuant to the following four arguments: (1) MERS is not a valid “beneficiary” under the
Oregon Trust Deed Act (“OTDA”); (2) the OTDA requires the recordation of any assignments or
conveyances of both the DOT and the note, and because the note was conveyed to Fannie Mae
without being recorded, this foreclosure violates Or. Rev. Stat. § 86.735(1); (3) the operative
Notice of Default is facially incorrect; and (4) the foreclosure was wrongfully conducted in the
name of the loan servicer, BANA, rather than in the name of the loan owners, Fannie Mae.
In Beyer v. Bank of America, 800 F. Supp. 2d 1157 (D. Or. 2011), I rejected plaintiff’s
first two arguments, which underlie its first and third claims for relief, in finding that: the OTDA
does not require presentment of the promissory note or any other proof of real party in interest or
standing, other than the deed of trust; the OTDA does not preclude a note and deed of trust from
being separated; and MERS is a proper beneficiary under Oregon law. See also Peirce v.
Assurity Fin. Services, LLC, 3:10–cv–01269–MO, 2011 WL 7740690 (D. Or. Dec. 15, 2011);
Thompson v. Bank of New York Mellon, 3:12–cv–00066–MO, 2012 WL 1253203 (D. Or. Apr.
12, 2012). Accordingly, I grant defendants’ motion to dismiss as to plaintiff’s first and third
claims for relief and dismiss these claims with prejudice for failing to state claim.
Plaintiff’s second claim for relief alleges that the foreclosure was wrongful because the
Notice of Default was defective. Specifically, plaintiff alleges that the Notice of Default: (1) fails
to include language required under Or. Rev. Stat. § 86.745(9)(a)–(d), (Notice of Removal [1] Ex.
4 – OPINION AND ORDER
1, 15); and (2) alleges an incorrect amount due in default, (Id. at 15–17). Plaintiff’s first
allegation fails for three reasons. First, Or. Rev. Stat. § 86.745(9) only applies if “the property
includes one or more dwelling units that are subject to ORS chapter 90.” Plaintiff has not alleged
that the Property is subject to Chapter 90, nor did it address this argument in its opposition to
defendants’ motion for summary judgment. Therefore, I dismiss with prejudice plaintiff’s
allegation that the Notice of Default fails to include language required under Or. Rev. Stat. §
86.745(9)(a)–(d).
Plaintiff’s second allegation within its second claim for relief alleges that the Notice of
Default—which indicates that Ms. Sprague had been in default since June 2008—was defective
because the January 27, 2010, and March 3, 2011, Rescissions of Notice of Default established
that Ms. Sprague’s default had been “removed, paid and overcome so that said Trust Deed
should be reinstated.” (Notice of Removal [1] Ex. 1, 16–17). Plaintiff argues, therefore, that Ms.
Sprague’s default that occurred before March 3, 2011, was excused, and thus, the Notice of
Default could only have included amounts owed for missed payments after March 3, 2011,
regardless of whether Ms. Sprague actually made payments to cure the default. (Id.). I disagree.
Both the January 2010 and March 2011 rescissions of notice of default also included the
following language: “this rescission shall not be construed as waiving or affecting any breach or
default (past, present or future) under said Trust Deed or as impairing any right or remedy
thereunder…but is and shall be deemed to be only an election without prejudice, not to cause a
Sale to be made pursuant to said notice so recorded.” (Id. at 49, 51). This language makes clear
that defendants were not forfeiting any rights to collect any amounts owed that were established
in the notice of default that was being rescinded. Moreover, the three notices of default at issue
in this case consistently indicated that Ms. Sprague had been in default since June 2008, and
5 – OPINION AND ORDER
plaintiff has not alleged that Ms. Sprague made any payments in order to cure the default. In
light of this fact, as well as in taking the language of the rescission notices as a whole, I find that
neither Rescission of Notice of Default in this case acted as a waiver of Ms. Sprague’s mortgage
obligation or default. See Reeves v. ReconTrust Co., N.A., 3:11–cv–01278–BR, 2012 WL
652681, at *11–12 (D. Or. Feb. 28, 2012). Therefore, I grant defendants’ motion to dismiss with
prejudice to the extent that plaintiff is alleging that the rescission notices acted to cure Ms.
Sprague’s default thereby rendering the amounts owed in the Notice of Default per se inaccurate.
Plaintiff advances several arguments in its fourth wrongful foreclosure claim. First,
plaintiff alleges that the foreclosure was wrongful because Fannie Mae purchased “what it
already owned.” (Notice of Removal [1] Ex. 1, 19). Plaintiff cites no authority prohibiting a loan
owner from purchasing the fee simple ownership of property at a foreclosure sale, and I therefore
dismiss this allegation for failure to state claim. Second, plaintiff alleges that this foreclosure
violated Or. Rev. Stat. § 86.735(1), because “Fannie Mae’s interest” as the note owner was not
recorded at the time the non-judicial foreclosure was initiated. (Notice of Removal [1] Ex. 1, 19–
20). In line with my finding above, however, the foreclosure proceedings were not improper
merely because defendants did not record an assignment of the note to Fannie Mae. Third,
plaintiff alleges the August 12, 2011, assignment of the DOT from BANA to Fannie Mae, which
was recorded on August 22, 2011, renders the foreclosure defective because Or. Rev. Stat.
§ 86.735(1) requires any assignments of the trust deed to be recorded before the trustee can
foreclose a trust deed by advertisement and sale. However, the assignment to Fannie Mae was
recorded before the recording of the Trustee’s Deed caused completion of the sale, and I thus
reject this argument. Lastly, plaintiff alleges that ReconTrust conducted the non-judicial
foreclosure sale in the name of the loan servicer, BANA, rather than the loan owner, Fannie Mae,
6 – OPINION AND ORDER
and therefore, because BANA was not the owner of the loan, it had no standing to proceed with
the foreclosure. (Id. at 20–21). As stated, MERS is a “beneficiary” under the OTDA and the
December 9, 2010, assignment of the DOT from MERS to BANA was properly recorded,
thereby giving BANA standing as the servicer of the loan in this foreclosure. Further, Or. Rev.
Stat. § 86A.175(1) states that a mortgage banker—with permission from the note owner — “may
service or collect a mortgage banking loan or mortgage loan in the name of the mortgage banker
or mortgage broker or in the name of the lender, note owner, note holder or other holder of an
interest in the note.” Plaintiff does not dispute that this statute allows a servicer to act as an agent
of the owner of a loan and conduct a foreclosure in its own name. (Pl.’s Resp. [25] 39). Instead,
plaintiff solely argues that the foreclosure was still wrongful, because Fannie Mae, as principal,
conducted the non-judicial foreclosure without recording all assignments of the DOT presumably
based on the unrecorded assignments of the note, and thus, § 86A.175(1) is inapposite insofar as
the servicer in this case cannot conduct actions that its principal cannot. This argument is
meritless in line with my previous findings. However, defendants have not presented evidence
attesting the fact that Fannie Mae permitted BANA to conduct the foreclosure in this case, and I
therefore deny defendants’ motion to dismiss solely as to this issue with leave to renew at
summary judgment.2
Plaintiff’s fifth claim for relief concerning unlawful debt collection alleges that
ReconTrust and BANA sought to enforce a right or remedy that they knew did not exist as
evidenced by the fact: (1) that ReconTrust knew of the defects precluding its ability to conduct a
2
For example, in Sharpe v. Wells Fargo Home Mortg., No. 11–3020–PA, 2011 WL 5825927, at
*3 (D. Or. Nov. 16, 2011), Judge Panner noted that Fannie Mae authorizes its servicers to
“appear in the land records as the mortgagee,” and that “the Fannie Mae Servicing Guide grants
servicers, acting in their own names, the authority to represent Fannie Mae's interests in
foreclosure proceedings as holder of the mortgage note.” (quotation omitted).
7 – OPINION AND ORDER
lawful non-judicial foreclosure; and (2) that both defendants knew that the amounts owed set
forth in the April 2011 Notice of Default were inaccurate. (Notice of Removal [1] Ex. 1, 22). My
previous finding that the foreclosure proceedings were proper in this case necessarily defeats
plaintiff’s first allegation. I dismiss plaintiff’s second allegation with prejudice to the extent that
it is alleging that defendants must have known that the amounts owed set forth in Notice of
Default were inaccurate solely because the rescission notices cured any past default, and thus,
plaintiff could not have been in default for the full amount owed since June 2008.
Lastly, plaintiff’s sixth and seventh claims for injunctive and declaratory relief are
entirely derivative of its wrongful foreclosure claims, and it has not addressed these claims in its
opposition to defendants’ motion to dismiss. For both of these reasons, I dismiss these claims
with prejudice.
CONCLUSION
I GRANT IN PART defendants’ motion to dismiss [20]. I GRANT defendants’ requests for
judicial notice [22] [27]. I DISMISS plaintiff’s first, third, fifth, sixth, and seventh claims with
prejudice as they are all either directly or indirectly premised on the theory that MERS is not a valid
beneficiary under Oregon law and/or that the OTDA requires the recordation of any assignments or
conveyances of both the DOT and the note. I DISMISS plaintiff’s second claim with prejudice as
amendment will not cure either allegation advanced in the current complaint. Lastly, I DENY with
leave to renew at summary judgment defendants’ motion to dismiss plaintiff’s fourth claim.
IT IS SO ORDERED.
DATED this
17th
day of May, 2012.
/s/ Michael W. Mosman_____
MICHAEL W. MOSMAN
United States District Court
8 – OPINION AND ORDER
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