Roisland v. Flagstar Bank, FSB et al

Filing 30

OPINION AND ORDER: For the reasons explained, I dismiss Ms. Roislands first, second, third, fourth, fifth, and seventh claims with prejudice as to all Defendants. I dismiss Ms. Roislands sixth claim with prejudice as to Defendants MERS and Freddie Mac and without prejudice as to Defendants Flagstar and Northwest. Signed on 11/15/13 by Judge Michael W. Mosman. (dls)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

JOAN F. ROISLAND,
No. 3:13-cv-0588-MO
Plaintiff,
OPINION AND ORDER
v.
FLAGSTAR BANK, FSB, NORTHWEST
TRUSTEE SERVICES, INC., MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., and FEDERAL HOME
LOAN MORTGAGE CORPORATION,
Defendants.

MOSMAN, J.,
Plaintiff Joan Roisland filed suit in Multnomah County Court in November 2012, seeking
to unwind the nonjudicial foreclosure of her residence and to recover for other damages.
Defendants removed to this court under 28 U.S.C. § 1441 and moved to dismiss [11, 15] the
complaint under Federal Rule of Civil Procedure 12(b)(6). I have considered Defendants’
motions and the evidence appended to Ms. Roisland’s complaint and submitted by Defendants.
As discussed further below, I dismiss Ms. Roisland’s first, second, third, fourth, and seventh
1 – OPINION AND ORDER

claims with prejudice. I dismiss Ms. Roisland’s fifth claim with prejudice as to Defendants
MERS, Freddie Mac, and Flagstar and without prejudice as to Defendant Northwest. I dismiss
Ms. Roisland’s sixth claim with prejudice as to Defendants MERS and Freddie Mac and without
prejudice as to Defendants Flagstar and Northwest.
BACKGROUND
Ms. Roisland alleges that she first purchased the property at issue “over [twenty] years
ago” and that she executed the deed of trust at issue in this case in 2009. (Compl. [1-1] ¶ 1–2.)
Ms. Roisland does not dispute that she went into default on the loan in 2011. The property was
nonjudicially foreclosed upon in 2012. The property was purchased at the trustee’s sale by
Federal Home Loan Mortgage Corporation , and Ms. Roisland remains in possession. (Compl.
[1-1] ¶ 1, 7.) Ms. Roisland brought suit in Multnomah County Court against Flagstar Bank, FSB
(“Flagstar”); Northwest Trustee Services, Inc.; (“Northwest”); Mortgage Electronic Registration
Systems, Inc. (“MERS”); and “Federal Home Loan Mortgage Corporation” (“Freddie Mac”).
Her suit challenges the nonjudicial foreclosure proceedings as improper and seeks to unwind the
trustee’s sale. (Compl. [1-1] at 8.)
The gravamen of the complaint is that Defendants “knew or should have known that the
preconditions for initiating a non-judicial foreclosure of Plaintiff’s real property were not met . . .
the recorded assignment [from MERS] to Flagstar was false . . . [and] that MERS did not have
authority to act on behalf of the beneficiary.” (Compl. [1-1] ¶ 8.)
The complaint was filed on November 27, 2012, but Ms. Roisland did not serve any of
the defendants until March 8, 2013. Only Defendant MERS was served on that date.
Defendants MERS and Flagstar then removed the suit to this court under 28 U.S.C. § 1441. No
other Defendant has been served.

2 – OPINION AND ORDER

In Oregon, a loan secured by the borrower’s real property is most often secured using a
deed of trust, which functions as a mortgage. See Brandrup v. ReconTrust Co., N.A., 353 Or.
668, 675–77, 303 P.3d 301, 305–06 (2013). In this case, the deed of trust secures a promissory
note embodying Ms. Roisland’s obligation to repay the loan for $110,000 from First Priority
Financial, Inc., the lender.1 (Def.’s Mem. [12] Ex. A.) The promissory note bears an
endorsement from First Priority to Defendant Flagstar. (Def.’s Mem. [12] Ex. A.) The
endorsement shows that Defendant Flagstar is the holder of the promissory note. As noted, the
promissory note is secured by the deed of trust granted by Ms. Roisland.
The deed of trust named Defendant MERS as beneficiary and Fidelity National Title2 as
trustee. (Compl. [1-1] ¶ 2 & Ex. 1 at 1.) Ms. Roisland submitted the deed of trust along with her
complaint. (Compl. [1-1] Ex. 1.) The deed of trust, which was recorded on March 26, 2009,
includes a notation directing return of the deed to “Flagstar Bank” after recording. (Compl. [1-1]
Ex. 1 at 1). Ms. Roisland alleges that Defendant Flagstar “serviced Plaintiff’s loan secured
through Plaintiff’s deed of trust” and that she made all loan payments to Flagstar. (Compl. [1-1]
¶¶ 2, 5.) Defendant Flagstar argues that because this notation already appeared on the deed of
trust when it was recorded on March 26, 2009, it is clear that at that time Flagstar “would
immediately acquire” the promissory note from First Priority. (Def.’s Mem. [12] at 2–3.)
Plaintiff has pointed to no alternative explanation for this notation on the deed of trust, and my
examination of the documents has revealed none.
Ms. Roisland does not dispute that she defaulted on the promissory note in 2011.
Defendants argue that at that time Defendant Flagstar, as holder of the note, was already entitled

1

First Priority is not a party to this suit.

2

Fidelity National Title is not a party to this suit.

3 – OPINION AND ORDER

to enforce the deed of trust notwithstanding that Defendant MERS was nominally the beneficiary
of the deed of trust.3 (Def.’s Mem. [12] at 3.)
On December 29, 2011, MERS assigned its nominal beneficial interest in the deed of
trust to Defendant Flagstar, which then appointed Defendant Northwest as successor trustee.
Both the assignment and appointment were recorded on January 11, 2012. (Compl. [1-1] Ex. 2;
Def.’s Mem. [12] Ex. B.) Defendant Northwest recorded a Notice of Default and Election to Sell
on the same day and held a trustee’s sale on May 18, 2012. (Compl. [1-1] ¶ 7 & Ex. 3, 4.) The
property was purchased by Defendant Freddie Mac. (Compl. [1-1] ¶ 7.) The Trustee’s Deed was
recorded on May 23, 2012. (Compl. [1-1] Ex. 4.)
The complaint includes some allegations that negotiations had been or were occurring
after Ms. Roisland’s default and prior to the foreclosure. (Compl. [1-1] ¶ 7.) Ms. Roisland
alleges:
From March 2012 to Mid-May 2012, and as late as the morning of May 18, 2012,
Flagstar negotiated with Plaintiff’s authorized representatives to postpone or
rescind the foreclosure sale, suggested the prospects of postponement were
encouraging, and yet took no action to stop the sale or communicate further with
Plaintiff or her representatives.
(Compl. [1-1] ¶ 7.) Ms. Roisland does not, however, contend that she ever actually entered into
a forbearance agreement with Defendant Flagstar.
Ms. Roisland asserts seven claims for relief: (1) unlawful foreclosure under Or. Rev. Stat.
§ 86.735; (2) violation of the Oregon Unlawful Trade and Business Practices Act (“UTPA”)
under Or. Rev. Stat. § 646.607–08; (3) declaratory judgment as to the validity of the foreclosure;
(4) declaratory judgment as to the validity of the deed of trust and promissory note and the
3

As discussed further below, until June 2013 the Supreme Court of Oregon had yet to decide whether the Oregon
Trust Deed Act allowed MERS to serve as beneficiary; some state and federal courts in this district had previously
held that it did. C.f. Sovereign v. Deutsche Bank, 856 F. Supp. 2d 1203, 1212 (D. Or. 2012); Beyer v. Bank of
America et. al., 800 F. Supp. 2d 1157, 1161–62 (D. Or. 2011); Somers v. Deutsche Bank Nat’l Trust Co., No.
11020133, slip op. at 4 (Or. Cir. Ct. Jul. 6, 2011); but see James v. ReconTrust Co., 845 F. Supp. 2d 1145, 1155–59
(D. Or. 2012).

4 – OPINION AND ORDER

interests in the real property; (5) breach of contract; (6) violation of the Oregon Unlawful Debt
Collection Practices Act (“UDCPA”), Or. Rev. Stat. § 646.639; and (7) to quiet title. (Compl. [11] ¶¶ 9–33.)
On May 10, 2013, Defendants Flagstar, MERS, and Freddie Mac filed a motion to
dismiss [11] under Federal Rule of Civil Procedure 12(b)(6).4 On June 6, 2013, the Oregon
Supreme Court issued two opinions pertinent to Plaintiff’s claim. See Brandrup, 353 Or. 668,
303 P.3d 301; Niday v. GMAC Mortgage, LLC, 353 Or. 648, 302 P.3d 444 (2013). My
construction of these opinions and their application to the facts of this case guides my rulings on
Defendants’ motion to dismiss [11].
LEGAL STANDARDS
When reviewing a motion to dismiss, the court must “accept all factual allegations in the
complaint as true and construe the pleadings in the light most favorable to the nonmoving party.”
Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). A court need not accept legal
conclusions as true because “[t]hreadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In
considering a motion to dismiss, a court may take notice of documents appended to a pleading or
on which a pleading necessarily relies without converting the motion to one for summary
judgment. Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 2001).
To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to

4

Defendant Northwest filed a separate motion to dismiss [15]. Subsequently, I entered a stipulated judgment [23]
between Plaintiff and Defendant Northwest. Defendant Northwest agreed to be bound by my ultimate judgment on
the validity of the deed of trust or notices issued by Northwest (as trustee) in connection with the nonjudicial
foreclosure. Consequently, the claims against Defendant Northwest stand or fall with my rulings on the other
defendants’ motion to dismiss [11].

5 – OPINION AND ORDER

‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A pleading that offers only “labels and
conclusions” or “‘naked assertion[s]’ devoid of ‘further factual enhancement’” will not suffice.
Id. (quoting Twombly, 550 U.S. at 555, 557). While the plaintiff does not need to make detailed
factual allegations at the pleading stage, the allegations must be sufficiently specific to give the
defendant “fair notice” of the claim and the grounds on which it rests. See Erickson v. Pardus,
551 U.S. 89, 93–94 (2007) (per curiam) (citing Twombly, 550 U.S. at 555).
Federal Rule of Civil Procedure 81(c) provides that these standards apply to suits
removed from state court under 28 U.S.C. § 1441 just as they do to complaints originally filed in
federal court. Ms. Roisland has not moved for leave to amend or submitted a proposed amended
complaint, and thus I have considered the sufficiency of her pleading in the form originally filed
in Multnomah County. To the extent I dismiss a claim solely for failure to satisfy these
standards I dismiss without prejudice; Ms. Roisland is free to file an amended complaint that
satisfies federal pleading standards.
DISCUSSION
I.

Consideration of Extrinsic Evidence
Ms. Roisland attaches several pertinent documents to the complaint: the deed of trust, the

recorded assignment of the beneficial interest therein by Defendant MERS to Defendant
Flagstar, the Notice of Default and Election to Sell filed by Defendant Northwest, and the
trustee’s deed. (Compl. [1-1] Exs. 1–4.) Defendants submit a copy of the promissory note signed
by Ms. Roisland and the Appointment of Successor Trustee recorded on January 11, 2012.
(Def.’s Mem. [12] Exs. A & B.) Because the pleadings and the parties’ arguments rely upon
evidence adduced from these documents, I must determine whether I may consider this evidence

6 – OPINION AND ORDER

without converting Defendants’ motion to dismiss into a motion for summary judgment under
Federal Rule of Civil Procedure 12(d).
The Ninth Circuit recognized in Lee v. City of Los Angeles that a court may consider
documents submitted as part of the complaint without so converting a motion. 250 F.3d at 688.
It is also proper for a court to consider additional documents if their authenticity is not contested
and the complaint “necessarily relies on them.” Id. (internal quotations omitted). Ms. Roisland
alleges that she signed a promissory note and deed of trust on March 20, 2009 naming Defendant
MERS as beneficiary. All claims are premised on the existence of the promissory note and deed
of trust and on the foreclosure proceedings evidenced by Defendant Northwest’s appointment as
trustee, the Notice of Default, and the trustee’s deed. Ms. Roisland’s complaint relies upon the
existence of these documents, including those submitted by Defendants. Ms. Roisland does not
dispute the submitted documents’ authenticity. Consequently, I consider it proper to rely on
these documents and have done so.
II.

Validity of the Trustee’s Sale
The Supreme Court of Oregon held in Brandrup that for purposes of the Oregon Trust

Deed Act (“OTDA”) Defendant MERS cannot serve as nominee beneficiary of a deed of trust.
The court held that “beneficiary,” as used in the OTDA, means the lender or subsequent holders
of the promissory note secured by the deed of trust, as the lender (or successor) is “the person for
whose benefit a trust deed is given.” Brandrup, 353 Or. at 683–88, 303 P.3d at 309–11 (quoting
Or. Rev. Stat. § 86.705(2)); see also Niday, 353 Or. at 657–60, 302 P.3d at 449–51.
The core of most of Ms. Roisland’s challenges to the foreclosure proceedings is
Defendant MERS’s involvement in the execution and enforcement of the deed of trust.

7 – OPINION AND ORDER

Although the complaint is vague on this point,5 Ms. Roisland’s arguments in opposition to the
motion to dismiss indicate that the underlying basis for her challenge to the non-judicial
foreclosure is that Defendant MERS “never had authority to transfer beneficial interest in a trust
deed to Flagstar, who later assigned to a foreclosing trustee.” (Pl.’s Resp. [22] at 3.)
A.

As Holder of the Promissory Note, Defendant Flagstar Held the Beneficial
Interest in the Deed of Trust

The facts apparent from the documents filed with Multnomah County in connection with
the deed of trust and nonjudicial foreclosure proceedings indicate that the nonjudicial foreclosure
proceeding in this case complied with Oregon law notwithstanding MERS’s involvement.
The deed of trust at issue in this case indicates that the lender was First Priority, the
trustee was Fidelity National Title, and that Defendant MERS held the beneficial interest “as
nominee for Lender and Lender’s successors and assigns.” (Compl. [1-1] Ex. 1 at 1.) Brandrup
and Niday establish that MERS cannot legally hold this beneficial interest, however. Rather, it is
clear under these decisions that the lender or its successor-in-interest is holder of the beneficial
interest in a deed of trust.6 Thus, under the deed of trust here, the holder of the beneficial interest

5

Ms. Roisland alleges that the defendants failed “to record all assignments of Plaintiff’s Trust Deed or promissory
note prior to instituting disclosure,” that defendants filed “a false assignment of Plaintiff’s Trust Deed in support of
their foreclosure action,” that defendants initiated and conducted a non-judicial foreclosure “without proper
authority,” and that defendants assigned the deed of trust subsequent to instituting foreclosure proceedings “while
proceeding with foreclosure proceedings under an invalid [Notice of Default].” (Compl. [1-1] ¶ 10.) No specifics
are alleged. Consequently, I would dismiss Ms. Roisland’s first, third, fourth, and seventh claims for failure to state
a claim on which relief could be granted even if I did not dismiss them for the reasons articulated below.

6

The Niday court concluded:
[R]egardless of MERS’ designation as [beneficiary] in the trust deed, and regardless of wording in
the trust deed that purports to grant MERS various “interests” belonging to the lender “if
necessary to comply with law or custom,” MERS cannot be the beneficiary of the trust deed in this
case. Rather, insofar as the trust deed “secures to Lender” the “repayment of the Loan” and other
covenants relating to that obligation, the lender [ ] was the original “beneficiary” of the trust deed
for purposes of the OTDA.

353 Or. at 660, 302 P.3d at 451. In this case, the lender’s interests were conveyed to a successor-in-interest when
the lender endorsed the promissory note over to Defendant Flagstar.

8 – OPINION AND ORDER

was First Priority Financial, the lender, notwithstanding that the deed of trust said that MERS
was the beneficiary “as nominee.”7
In Brandrup, the Supreme Court of Oregon reaffirmed the longstanding principle that
when a promissory note changes hands the beneficial interest in a deed of trust securing that
promissory note “follows the promissory note that it secures” by operation of law. 353 Or. at
694, 303 P.3d at 315. In this case, the promissory note bears an endorsement from the original
lender, First Priority, to Defendant Flagstar. This endorsement made Defendant Flagstar holder
of the promissory note.8 By virtue of that status, Defendant Flagstar also became the holder of
the beneficial interest in the deed of trust securing that note by operation of law. See Niday, 353
Or. at 660–62, 302 P.3d at 451–52.
The endorsement apparent on the face of the promissory note shows that after its
execution by Ms. Roisland on March 20, 2009, Defendant Flagstar became the holder of the
note. As such, Flagstar became the holder of the beneficial interest in the deed of trust securing
that note by operation of law. See Niday, 353 Or. at 660–62, 302 P.3d at 451–52. As holder of
the beneficial interest, Flagstar itself could appoint a successor trustee to institute non-judicial
foreclosure proceedings under the OTDA. Although an assignment of the beneficial interest in
the deed of trust from Defendant MERS (the “nominee” holder) to Defendant Flagstar was made
and recorded with the county prior to the trustee’s sale, this assignment can have had no effect,

7

In contrast with the facts at issue in Niday, in this case it was the holder of the note that instituted foreclosure by
appointing a successor trustee, rather than MERS itself appointing a successor trustee. See Niday, 353 Or. at 659–60,
302 P.3d at 450–51. Thus, in this case whether MERS could hold the beneficial interest as a properly-appointed
agent of the true beneficiary is not at issue. See Brandrup, 353 Or. at 701–10, 303 P.3d at 319–23. Consequently, I
need not consider whether MERS is an agent of the holder of the note in this case.

8

Although the exact date on which Defendant Flagstar became the holder of the promissory note is not asserted by
Defendants, based on the relevant documents I find that Defendant Flagstar become the holder either between March
19 and March 26, 2009, or immediately thereafter. In either case, Defendant Flagstar was the holder by January
2012, when the nonjudicial foreclosure proceedings were initiated. I have found no other reason why the deed of
trust (which was security for the promissory note) would have come into its possession after recording.

9 – OPINION AND ORDER

because as a matter of law MERS could not hold the beneficial interest in the deed of trust. An
assignment of an interest by an entity that does not hold that interest to the entity that does hold
that interest can be regarded as nothing more than a legal nullity.
Because Defendant Flagstar held the beneficial interest in the deed of trust by virtue of its
position as holder of the promissory note, its appointment of Defendant Northwest as successor
trustee was proper under Oregon law.
B.

Brandrup and Niday Reaffirmed that Such a Transfer of the Beneficial
Interest Is Not An “Assignment” that Need Be Recorded

Ms. Roisland argues that the nonjudicial foreclosure violated the OTDA even if Flagstar
held the beneficial interest in the deed of trust when it appointed Defendant Northwest as
successor trustee because the assignment of the promissory note by First Priority to Defendant
Flagstar had not been recorded. Oregon law provides that non-judicial foreclosure cannot be
instituted to enforce a deed of trust unless “[t]he 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.” Or.
Rev. Stat. § 86.735(1). Ms. Roisland argues that this statute renders the foreclosure on her
property improper.
The Supreme Court of Oregon, however, established that informal transfer of the
beneficial interest in a deed of trust, such as that which occurs by operation of law when a
promissory note is endorsed over to a new holder, is not an assignment that must be recorded to
satisfy Or. Rev. Stat. § 86.735(1). The court reasoned that § 86.735 “assumes the existence of an
assignment in recordable form” and found that “the transfer of a promissory note cannot serve
that function. Because a promissory note generally contains no description of real property and
does not transfer, encumber, or otherwise affect the title to real property, it cannot be recorded.”

10 – OPINION AND ORDER

Brandrup, 353 Or. at 696, 303 P.3d at 316. This principle was reaffirmed in Niday, in which the
court held that where the trust deed’s beneficiary, the original lender, had “sold the promissory
note associated with the trust deed, that transaction does not qualify as an ‘assignment[ ] of the
trust deed’ for purposes of the recording requirement of ORS 86.735(1).” Niday, 353 Or. at 660–
61, 302 P.3d at 451. Consequently, Defendant Flagstar’s failure to record the transfer of the
deed of trust securing the promissory note is not grounds for invalidating the non-judicial
foreclosure under Or. Rev. Stat. § 86.735(1).
***
Ms. Roisland does not allege any other assignment of the trust deed that was required by
Or. Rev. Stat. § 86.735 to be recorded in order for the trustee to institute nonjudicial foreclosure
proceedings. (Pl.’s Resp. [22] at 3–4.) As such, her complaint alleges no violation of § 86.735
that could render the trustee’s sale invalid. To the extent that Ms. Roisland seeks to allege any
other theory by which the OTDA was violated in the course of the foreclosure proceedings, her
complaint fails to state a claim on which relief can be granted under Iqbal. Consequently, Ms.
Roisland’s first claim for relief is dismissed. Because Ms. Roisland has alleged no improprieties
in the nonjudicial foreclosure proceedings that could invalidate the trustee’s sale, her third and
fourth claims seeking declaratory judgment of the validity of the sale and the rights and
obligations of the parties and her seventh claim to quiet title are also dismissed.
III.

Or. Rev. Stat. § 86.770(1) Bars Post Hoc Challenge to a Trustee’s Sale
Defendants direct the court to Or. Rev. Stat. § 86.770(1), which provides that “[i]f, under

ORS 86.705 to 86.795, a trustee sells property covered by a trust deed, the trustee’s sale
forecloses and terminates the interest in the property that belongs to a person to which notice of
the sale was given.” This court has closely analyzed Or. Rev. Stat. § 86.770(1) and its
interaction with the OTDA’s overarching scheme for nonjudicial foreclosures in Mikityuk v.
11 – OPINION AND ORDER

Nw.Tr. Servs., Inc., --- F. Supp. 2d ---, No. 12-1518, 2013 WL 3388536 (D. Or. June 26, 2013).
The statute provides that an interest is “foreclosed and terminated” if the trustee’s sale occurred
“under ORS 86.705 to 86.795.” The Mikityuk court considered whether a trustee’s sale can be
said to have occurred “under ORS 86.705 to 86.795” where the plaintiff points to errors in the
nonjudicial foreclosure proceedings, but raises these errors only after the sale has been
completed and the trustee’s deed recorded. Id. at *3–5 (quoting Or. Rev. Stat. § 86.770(1)).
The OTDA gives the trustee—who holds legal title to the deed of trust—“the power to
sell property securing an obligation under a trust deed in the event of default . . . subject to strict
statutory rules designed to protect the grantor.” Staffordshire Invs., Inc. v. Cal-Western
Reconveyance Corp., 209 Or. App. 528, 542, 149 P.3d 150, 157 (2006). The OTDA has dual
purposes: (1) to “provide ‘creditors with a quick and efficient remedy against a defaulting
grantor;’” and (2) to “‘protect the grantor against the unauthorized loss of its property and to give
the grantor sufficient opportunity to cure any default.’” Mikityuk, 2013 WL 3388536 at *6
(quoting Staffordshire, 209 Or. App. at 542, 149 P.3d at 157–58). The OTDA provides that the
recitals in a trustee’s deed that has been recorded after a properly noticed nonjudicial foreclosure
sale are “prima facie evidence in any court of the truth of the matters set forth therein” and are
“conclusive in favor of a purchaser for value in good faith relying upon them.” See id. These
presumptions have been described as an “explicit ‘statutory presumption of finality.’” Mikityuk,
2013 WL 3388536 at *6 (quoting Staffordshire, 209 Or. App. at 543). This presumption of
finality arises, however, only after a grantor is given ample notice of an impending sale by the
required notices such that any improprieties may be raised before the trustee’s sale takes place.
See id. at *7 (“Presumably, the legislature believed anyone choosing to challenge a non-judicial
foreclosure should raise those challenges before the sale.”)

12 – OPINION AND ORDER

The Mikityuk court concluded that the OTDA’s combination of detailed notice
requirements and the statutory presumption of finality indicate that “[o]ne who waits until after
the trustee’s sale risks having one’s property interest ‘foreclosed and terminated.’” Id. (quoting
Or. Rev. Stat. § 86.770(1)). Having noted that other OTDA provisions support the conclusion
that a recorded trustee’s deed is to be regarded as final, the court concluded:
[T]he text and context of the OTDA demonstrate that the legislature weighed
efficiency, certainty, and finality against the threat of wrongful foreclosure and,
after including notice provisions intended to protect the grantor from wrongful
foreclosure, came to the conclusion that the need for certainty and finality
trumped the risks of wrongful foreclosure.
Id.
I find the Mikityuk court’s reasoning persuasive and its conclusion sound. The grantor’s
remedy for OTDA violations in connection with the enforcement of a deed of trust is to raise any
defects in the trustee’s power of sale upon receipt of notice, prior to the trustee’s sale and the
recordation of the trustee’s deed.
In this case, as was the case in Mikityuk, Ms. Roisland does not dispute that she was in
default on the loan at the time of the trustee’s sale and that she received the required notice. Any
claim to challenge the propriety of the trustee’s sale could have been brought upon receipt of the
statutorily required notices. Consequently, even if I had not found that the trustee’s sale was
proper due to Defendant Flagstar’s equitable interest in the deed of trust, I would bar this post
hoc challenge to the trustee’s sale under Or. Rev. Stat. § 86.770(1). Ms. Roisland’s interest in
the property was “foreclosed and terminated” under Or. Rev. Stat. § 86.770(1) by the trustee’s
sale.
IV.

Breach of Contract Claim
Ms. Roisland also brings a claim for breach of contract. She alleges that “Defendants

failed to deal with Plaintiff in good faith, acted without proper authority, and foreclosed upon the

13 – OPINION AND ORDER

Plaintiff’s real property in violation of Oregon law and by using false certifications.” (Compl.
[1-1] Ex. 1 ¶ 24.) She alleges that these actions “breached the [ ] promissory note and Trust
Deed agreements as well as the implied covenant of good faith and fair dealing for each.” Id.
At the outset, I note that this claim must be dismissed as to all Defendants who have
never been in a contractual relationship with Ms. Roisland. Ms. Roisland alleges no contractual
relationship with Defendants MERS and Freddie Mac. Consequently, I dismiss with prejudice as
to these defendants. The alleged contracts—the promissory note and deed of trust—were entered
into with the original lender, First Priority. Defendant Flagstar became a party as First Priority’s
successor-in-interest. In the same way, and although it is not specifically alleged, it appears on
the face of the deed of trust that Defendant Northwest would have become a party to the deed of
trust contract upon appointment as successor trustee. See Brandrup, 353 Or. at 681, 303 P.3d at
308 (discussing the “traditional three-party trust deed arrangement—debtor/grantor, trustee, and
lender-beneficiary”).
Defendants argue that all claims in this suit should be dismissed for Ms. Roisland’s
failure to provide notice and opportunity to cure as required under the deed of trust. The deed of
trust provides:
Neither Borrower nor Lender may commence . . . any judicial action . . . that
arises from the other party’s actions pursuant to this Security Instrument or that
alleges that the other party has breached any provision of, or any duty owed by
reason of, this Security Instrument, until such Borrower or Lender has notified the
other party . . . of such alleged breach and afforded the other party hereto a
reasonable period after the giving of such notice to take corrective action.
(Complaint [1-1] Ex. 1 ¶ 20.) It cannot be denied that this breach of contract claim “alleges that
[Defendants Flagstar] breached [a] provision of, or [a] duty owed by reason of” the deed of trust.
Ms. Roisland does not dispute that she did not give notice and opportunity to cure before
filing this suit to challenge enforcement of the deed of trust through nonjudicial foreclosure

14 – OPINION AND ORDER

proceedings. Rather, she argues that her obligation under the notice and cure provision would
run only to the original lender, First Priority, who was the other party to the contract. (Pl.’s
Resp. [22] at 4.) Putting aside the internal inconsistency of an argument that no defendant is
entitled to rights under the contract while asserting a claim against each for breach of that same
contract, I find that Defendant Flagstar, as successor-in-interest to the original “Lender” under
the contract, succeeds to its rights and obligations.9 Consequently, Ms. Roisland did owe an
obligation to provide notice and opportunity to cure to Defendant Flagstar, and perhaps to
Defendant Northwest.10
Ms. Roisland does not dispute that she did not satisfy the requirements of the notice and
cure provision. Because it is clear that Ms. Roisland cannot allege that she satisfied the notice
and cure provision, amendment would be futile, and thus I dismiss with prejudice as to
Defendant Flagstar as well.11
Furthermore, the allegations supporting the breach of contract claim are insufficient to
give fair notice of the basis of the claim. Consequently, I dismiss this claim against the only
remaining Defendant, Defendant Northwest, without prejudice for failure to state a claim on

9

See Williston on Contracts § 74.10 (4th Ed.) (noting that all contract rights may be assigned in the absence of clear
language expressly prohibiting the assignment). In this case, the deed of trust clearly provides that “[t]he Note or a
partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior
notice to Borrower.” (Compl. [1-1] ¶ 20.)

10

The notice and cure provision applies on its face only to disputes between “lender” and “borrower,” and thus it is
not clear whether this provision would require notice to Defendant Northwest of claims against it. Because I dismiss
this claim, I decline to decide this question.
11

Defendant argues that all claims ought to be dismissed for failure to satisfy the notice and cure provision. (Def.’s
Mem. [12] at 6–8.) While I expect that at least the first, third, fourth, and seventh claims would fall under the
requirements of the notice and cure provisions, as claims “arising from the other party’s actions pursuant to this
Security Instrument,” I decline to rule on that question because I have dismissed these claims on independent
grounds. The only claim I dismiss without prejudice is Ms. Roisland’s UDCPA claim against Defendants Flagstar
and Northwest. I am unable to determine, on the sparse allegations contained in this complaint, whether any
UDCPA claim that Ms. Roisland may be able to allege would arise from “actions pursuant to this Security
Instrument” (or otherwise fall within the provision’s purview). Defendant Flagstar is, however, free to argue that a
failure to provide notice bars such a claim if Ms. Roisland chooses to reassert it. As noted, it is not apparent on the
evidence before me that Defendant Northwest is a party to this contract.

15 – OPINION AND ORDER

which relief can be granted. See Iqbal, 556 U.S. at 678 (internal citations omitted).12 Although
Defendant Northwest was likely in privity with Ms. Roisland during the relevant time period by
virtue of being the trustee in the deed of trust transaction, there are no allegations against it in the
complaint [1-1]. As such, Ms. Roisland would have to completely re-plead her breach of
contract claim in order to assert any claim she may have against Defendant Northwest for breach
of contract.
V.

Unlawful Business and Trade Practices
Ms. Roisland’s second claim for relief is for violation of the Oregon Unfair Trade

Practices Act. She alleges that Defendants “[m]isrepresent[ed] their authority to foreclose;” that
Defendants recorded an assignment of the deed of trust “containing false information;” that
Defendants “[assessed] improper and unauthorized fees or charges; [caused] confusion related to
the parties’ relationships, rights, and services; and [misrepresented] information.” (Compl. [1-1]
¶ 13.) Without more factual detail than these allegations provide, it is unclear exactly what acts
of Defendants are at issue in these allegations. Consequently, the complaint fails to state a claim
under the UTPA on which relief can be granted. At the very least I must dismiss this claim
without prejudice.
However, the UTPA did not cover loan transactions when Ms. Roisland took out the loan
and granted the deed of trust in 2009. See Lamm v. Amfac Mort. Corp., 44 Or. App. 203, 204,
605 P.2d 730, 730 (1980); Haeger v. Johnson, 25 Or. App. 131, 132, 548 P.2d 532, 534–35
(1976); see also Hogan v. Nw. Tr. Servs, No. 10-6028, 2010 WL 1872945 at *8 (D. Or. May 7,
2010). The UTPA is inapplicable to a loan transaction that occurred prior to its amendment in
2010. See Mikityuk, 2013 WL 3388536, at *2; Hernandez v. BAC Home Loan Servicing, LP,

12

Defendant Northwest is free to argue that the notice and cure provision of the deed of trust contract bars a breach
of contract claim against it. Defendants have not briefed this point, and I decline to decide the question.

16 – OPINION AND ORDER

No. 12-106, 2012 WL 1941745, at *3 (D. Or. May 23, 2012). The UTPA was amended to
include “loans and extensions of credit,” effective March 23, 2010. Or. Rev. Stat. § 646.605(6),
as amended by Or. Laws. Spec. Sess. Ch. 94 § 1 (2010). However sparse the factual allegations,
at least this much is clear: Ms. Roisland’s UTPA claim arises from the loan she received and the
deed of trust she granted in 2009. Ms. Roisland consequently cannot support a claim challenging
the enforcement of the deed of trust under the UTPA. I dismiss her second claim against all
defendants with prejudice.
VI.

Unfair Debt Collection Practices Act
Ms. Roisland’s sixth claim for relief is brought under the Oregon Unfair Debt Collection

Practices Act (“UDCPA”), Or. Rev. Stat. § 646.639. Defendants argue that the claim must be
dismissed under the UDCPA’s one-year statute of limitations. Or. Rev Stat. § 646.638(6).
The complaint was filed in Multnomah County Court on November 27, 2012. Oregon
law provides that an action is commenced on the date it is filed only if the defendant is served
within sixty days of filing. Or. Rev. Stat. § 12.020(2). Otherwise, the action is commenced
when the defendant is served. Or. Rev. Stat. § 12.020(1).
The first Defendant to be served in this suit was Defendant MERS, and service occurred
on March 8, 2013, well beyond the sixty day deadline that would allow the suit to be considered
filed on November 27, 2012 for purposes of the statute of limitations. See Torre v. Brickey, 278
F.3d 917, 919 (9th Cir. 2002) (per curium). Consequently, Ms. Roisland cannot sustain a claim
for violation of the UDCPA based on events occurring prior to March 8, 2012, the date on which
the first defendant in this case was served. This bars any claim based on the assignment of the
beneficial interest from Defendant MERS to Defendant Flagstar or Defendant Flagstar’s
appointment of Defendant Northwest as successor trustee, recorded on January 11, 2012.
(Compl. [1-1] Ex. 2; Def.’s Mem. [12] Ex. B).
17 – OPINION AND ORDER

Although Ms. Roisland’s allegations in support of this claim are impermissibly vague,
her arguments in opposition to Defendants’ motion to dismiss indicate that she intends to base
her claim on events arising in connection with the trustee’s sale and negotiations she alleges
were occurring between herself and Defendant Flagstar prior to the date of the sale. (Pl.’s Resp.
[21] at 6–7.) The trustee’s sale occurred on May 18, 2012. (Compl. [1-1] Ex. 4.) Consequently,
the statute of limitations would not necessarily bar a claim arising from events occurring between
March 27, 2012 and May 18, 2012. 13
The complaint as currently pled, however, is insufficient to satisfy federal pleading
standards. The allegations specifically connected to Ms. Roisland’s UDCPA claim are the kind
of “threadbare recitals of the elements of a cause of action” that are insufficient under Iqbal, 556
U.S. at 678. The complaint is insufficient to give Defendants notice of the factual basis of the
claims or to state a claim for relief “that is plausible on its face.” Id. at 678 (quoting Twombly,
550 U.S. at 570); see also Erickson, 551 U.S. at 93–94.
I dismiss this claim without prejudice as to Defendants Flagstar and Defendant
Northwest. Because Ms. Roisland suggests that she intends to base the UDCPA claim on the
alleged negotiations and the trustee’s sale—events that occurred within the limitations period—
Ms. Roisland may be able to state a claim on which relief could be granted. I caution that any

13

Defendants point out that Or. Rev. Stat. § 12.020(1) provides that a claim is commenced “as to each defendant,
when the complaint is filed, and the summons served on the defendant, or on a codefendant who is a joint contractor,
or otherwise united in interest with the defendant.” They thus argue that no claim within the statute of limitations
can be asserted against those defendants that have not been served. Ms. Roisland points out that these defendants
had actual notice from the time Defendant MERS was served and have appeared in this suit. I take Plaintiff’s
argument to be that the other Defendants are “joint contractors” or “united in interest” with Defendant MERS within
the meaning of Or. Rev. Stat. § 12.020(1). The parties have not briefed Defendants’ relationship to one another in
terms of § 12.020(1). Without more from the parties, I decline to decide this question today. Because it is possible
that they are “joint contractors” or “united in interest” with Defendant MERS by virtue of the deed of trust contract,
I do not consider amendment futile by reason of the statute of limitations at this time.

18 – OPINION AND ORDER

amended complaint must state a claim for relief arising from events occurring within the
limitations period and must satisfy federal pleading standards.
Defendant MERS, however, was not involved in these transactions, and consequently I
dismiss the claim with prejudice as to it. Similarly, there is no indication that Defendant Freddie
Mac, who purchased the property at the trustee’s sale, was involved in the alleged negotiations.
Moreover, Defendant Freddie Mac cannot be said to have been involved in any “debt collection
activities” covered by the UDCPA. Consequently, I also dismiss the claim with prejudice as to
Defendant Freddie Mac.
CONCLUSION
For the reasons explained above, I dismiss Ms. Roisland’s first, second, third, fourth,
fifth, and seventh claims with prejudice as to all Defendants. I dismiss Ms. Roisland’s sixth
claim with prejudice as to Defendants MERS and Freddie Mac and without prejudice as to
Defendants Flagstar and Northwest.
IT IS SO ORDERED.
15
DATED this _____ day of November, 2013.
/s/Michael W. Mosman
_______________________
MICHAEL W. MOSMAN
United States District Judge

19 – OPINION AND ORDER