Oliver v. Delta Financial Liquidating Trust, et al

Filing 12

ORDER: Granting Defendants' Motion to Dismiss Case for Lack of Jurisdiction 5 . Defendants' request for oral argument is denied as unnecessary. Signed on 8/27/2012 by Chief Judge Ann L. Aiken. (lg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
DONALD E. OLIVER,
Plaintiff,
v.
DELTA FINANCIAL LIQUIDATING
TRUST; MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
a Delaware corporation;
OCWEN LOAN SERVICING, LLC, a
Delaware limited liability
company; HSBC BANK USA,
NATIONAL ASSOCIATION, a New
York corporation, as indenture
trustee for RENAISSANCE HOME
EQUITY LOAN TRUST 2006-3;
Defendants.
Donald E. Oliver
836 S.W. 12th Street
P.O. Box 1471
Redmond, Oregon 97756
Pro se plaintiff

Page 1 - OPINION AND ORDER

Case No. 6:12-cv-00869-AA
OPINION AND ORDER

Michael J. Farrell
Thomas W. Purcell
Martin, Bischoff, Templeton, Langslet & Hoffman, LLP
888 S.W. 5th Avenue, Suite 900
Portland, Oregon 97204
Attorneys for defendants Mortgage Electronic Registration
Systems, Inc., Ocwen Loan Servicing, LLC, and HSBC Bank USA,
National Association, as indenture trustee for Renaissance
Home Equity Loan Trust 2006-3
AIKEN, Chief Judge:
Defendants Mortgage Electronic Registration Systems, Inc.
(“MERS”), Ocwen Loan Servicing, LLC (“Ocwen”), and HSBC Bank USA,
N.A. (“HSBC”), as indenture trustee for the registered noteholders
of Renaissance Home Equity Loan Trust 2006-3 (“Renaissance”)1 move
to dismiss plaintiff Donald Oliver’s2 claim pursuant to Fed. R.
Civ. P. 12(b)(1) and Fed. R. Civ. P. 12(b)(6).

For the reasons set

forth below, defendants’ motion is granted.
BACKGROUND3
In

2000,

plaintiff

purchased

a

residential

property

(“Property”), in Redmond, Oregon, pursuant to a warranty deed.

On

1

Sued erroneously as “HSBC Bank USA, National Association,
as indenture trustee for Renaissance Home Equity Loan Trust 20063.”
2

Plaintiff asserts that he is proceeding pro se, yet he has
been practicing law since 1982 and is an active member of the
Oregon State Bar. Since he has had the benefit of his own legal
counsel, plaintiff’s pleadings will not be held to the “less
stringent standards” afforded to pro se litigants. Florer v.
Congregation Pidyon Shevuyim, N.A., 639 F.3d 916, 923 n.4 (9th
Cir. 2011), cert. denied, 132 S.Ct. 1000 (2012).
3

All background information is taken from plaintiff’s
complaint.
Page 2 - OPINION AND ORDER

September 9, 2006, plaintiff took out a loan from Fidelity Mortgage
(“Fidelity”), a division of Delta Funding Corporation, to refinance
the Property.

Pursuant to this transaction, plaintiff executed a

promissory note (“Note”) in favor of Fidelity.

The Note was

secured by a deed of trust (“DOT”), which lists MERS as the nominee
and beneficiary, and Fidelity as the lender.

The DOT was duly

recorded in Deschutes County, Oregon.
Shortly after the Note was executed, Ocwen was instated as the
servicer

of

plaintiff’s

loan.

Plaintiff

has

furnished

the

requisite monthly repayments due under the Note to Ocwen since that
time; accordingly, plaintiff is not in default and defendants have
not initiated any foreclosure proceedings or otherwise attempted to
enforce their security interest in the Property.
Plaintiff was “advised” that the “Lender” effectuated sales or
transfers of its interest in the DOT.

In addition, on September

28, 2006, Fidelity transferred its beneficial interest in the Note
and DOT to Renaissance, a Real Estate Mortgage Investment Conduit
(“REMIC”).

Thereafter, HSBC became the indenture trustee for

Renaissance. The REMIC is governed by a series of agreements known
collectively as the Pooling and Servicing Agreement (“PSA”), which
in turn lists Renaissance REIT Investment Corporation as the
Seller,

Renaissance

Mortgage

Acceptance

Corporation

as

Purchaser, and Delta Funding Corporation as the Originator.

the
No

assignments of the DOT reflecting these transfers were recorded in

Page 3 - OPINION AND ORDER

the official records of Deschutes County.
In December 2007, Delta Funding Corporation filed a petition
for relief under Chapter 11 of the Bankruptcy Code in the District
of Delaware.4

Delta Financial Liquidating Trust (“Delta”)5 was

appointed by the Bankruptcy Court as the sole holder of any and all
assets or other interests of Delta Financial Corporation and its
subsidiaries.

On December 20, 2011, the Bankruptcy Court entered

an order in a proceeding in which Delta, Ocwen, Bank of America,
N.A., Wells Fargo, N.A., The Bank of New York Mellon, and HSBC were
listed as defendants; under the order, the “Mortgage Loan Files,”
which contained documentation relating to certain mortgage loans
that were securitized and placed into trusts, were transferred from
the “debtors” to Ocwen and neither the “debtors” nor Delta retained
any interest in these files.6
On April 9, 2012, plaintiff filed a complaint in the Deschutes

4

Plaintiff incorporates these proceedings by reference.
See Compl. ¶ 10 (citing In re Delta Financial Corp., Case Nos.
07-11880-CSS, 07-11881-CSS, 07-11882-CSS, 07-11883-CSS
(Bankr.D.Del. Dec. 17, 2007)). Further, they are part of the
public record and therefore “not subject to reasonable dispute.”
Fed. R. Evid. 201(b). As such, the Court considers these
documents pursuant to defendants’ motion to dismiss.
5

On July 24, 2012, this Court granted plaintiff’s motion for
default against Delta pursuant to Fed. R. Civ. P. 55(a). Thus,
Delta is not a party to the present motion.
6

Plaintiff neither attaches this order to his complaint,
nor does he provide any further factual elaboration. In
addition, he failed to include a case number or name for this
proceeding.
Page 4 - OPINION AND ORDER

County Circuit Court, alleging “quiet title to residential real
property and remove cloud on title.”7

On May 16, 2012, defendants

removed plaintiff’s case to this Court, and now move to dismiss.
STANDARDS
Where the court lacks subject-matter jurisdiction, the action
must be dismissed.

Fed. R. Civ. P. 12(b)(1).

A challenge to

standing or ripeness is appropriately raised pursuant to Fed. R.
Civ. P. 12(b)(1).

Chandler v. State Farm Mut. Auto. Ins. Co., 598

F.3d 1115, 1122 (9th Cir. 2010).
subject-matter

jurisdiction

of

The party who seeks to invoke the
the

court

has

the

burden

of

establishing that such jurisdiction exists. See, e.g., Stock West,
Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d
1221, 1225 (9th Cir. 1989).

In such instances, the court may hear

evidence regarding subject-matter jurisdiction and resolve factual
disputes where necessary; however, “no presumptive truthfulness
attaches to plaintiff’s allegations, and the existence of disputed
material facts will not preclude the [court] from evaluating for
itself the merits of jurisdictional claims.”

Kingman Reef Atoll

Invs., LLC v. United States, 541 F.3d 1189, 1195 (9th Cir. 2008).

7

“[A]n action to remove cloud on title is distinct from an
action to quiet title.” Staton v. BAC Home Loans Servicing,
L.P., 2012 WL 1624296, *8-10 (D.Or. May 5, 2012) (citation
omitted). Plaintiff nonetheless construes these actions as
synonymous and alleges them as a single claim. Because this
claim is expressly raised under Or. Rev. Stat. § 105.605, which
governs quiet title actions, the Court construes plaintiff’s
complaint as solely alleging a claim to quiet title.
Page 5 - OPINION AND ORDER

Similarly, where the plaintiff “fails to state a claim upon
which relief can be granted,” the court must dismiss the action.
Fed. R. Civ. P. 12(b)(6).

To survive a motion to dismiss, the

complaint must allege “enough facts to state a claim to relief that
is plausible on its face.”
U.S. 544, 570 (2007).

Bell Atlantic Corp. v. Twombly, 550

For the purposes of the motion to dismiss,

the complaint is liberally construed in favor of the plaintiff and
its allegations are taken as true.
1422, 1424 (9th Cir. 1983).
amount

to

nothing

more

Rosen v. Walters, 719 F.2d

Nevertheless, bare assertions that

than

a

“formulaic

recitation

of

the

elements” of a claim “are conclusory and not entitled to be assumed
true.” Ashcroft v. Iqbal, 556 U.S. 662, 680-81 (2009).

Rather, to

state a plausible claim for relief, the complaint “must contain
sufficient allegations of underlying facts” to support its legal
conclusions.

Starr v. Bacca, 652 F.3d 1202, 1216, reh’g en banc

denied, 659 F.3d 850 (9th Cir. 2011).
DISCUSSION
Defendants

assert

that

this

jurisdiction over plaintiff’s claim.

Court

lacks

subject-matter

Alternatively, defendants

contend that plaintiff’s claim fails at the pleadings level.
I.

Subject-Matter Jurisdiction
Plaintiff asserts that he is entitled to quiet title because

“there

is

no

entity

that

has

a

cognizable

and/or

enforceable security interest in the [Property].”

Page 6 - OPINION AND ORDER

legally-

Compl. ¶ 19.

Specifically, plaintiff alleges that Fidelity no longer possesses
an interest in the Note or DOT because it “has, in effect, ceased
to exist as a business entity”; likewise, Renaissance has no
interest in the Note or DOT because the transfer from Fidelity to
Renaissance did not comply with the PSA, which also violated 26
U.S.C.

§

860G.8

Id.

In

addition,

plaintiff

argues

that

defendants’ actions violated Or. Rev. Stat. § 86.735 because they
failed to publicly record all transfers of the DOT.

As a result,

plaintiff contends that “there is no entity that has either the
authority or any legal duty to execute a full conveyance of the
security interest created by the [DOT] if plaintiff were to either
continue making payments under the terms of the [Note] until the
obligation is fully satisfied in November of 2036 or try to pay off
the amount claimed to be due at some earlier date.”
A.

Id. at ¶ 20.

Preliminary Matter

There are a number of legal and factual misconceptions in
plaintiff’s complaint that must be clarified prior to reaching the
merits of defendants’ motion.

First, under Oregon law, a transfer

of the promissory note automatically transfers the trust deed. See
Niday v. GMAC Mortg., LLC, 2012 WL 2915520, *9 (Or.App. July 18,
2012) (citations omitted); James v. Recontrust Co., 2012 WL 653871,

8

As defendants note, plaintiff’s reliance on the Internal
Revenue Code, 26 U.S.C. § 860A-G, is misplaced. This statute
does not create a private right of action but rather regulates
the taxation of REMIC trusts. In other words, the provisions of
the Internal Revenue Code do not impact the validity of the DOT.
Page 7 - OPINION AND ORDER

*19-21 (D.Or. Feb. 29, 2012).

Because the trust deed follows the

promissory note, Renaissance acquired the DOT at the same time it
acquired Fidelity’s beneficial interest in the Note in 2006.
Further, contrary to plaintiff’s assertion, defendants were not
required to record this transfer in order to gain a security
interest in the Property. Branson v. Recontrust Co., N.A., 2012 WL
1473395, *4 (D.Or. Apr. 26, 2012) (“Oregon law does not require the
note’s transfer to be recorded”).
This is especially true because the Oregon Trust Deed Act
(“OTDA”), and specifically the recording requirements set forth in
Or. Rev. Stat. § 86.735(1), is irrelevant, as defendants have not
commenced a non-judicial foreclosure.

Moreover, “assignments of

the trust deed need only be recorded prior to the non-judicial
foreclosure and not concurrent to when they actually occur.”
Vettrus v. Bank of America, N.A., 2012 WL 2905167, *3 (D.Or. July
13, 2012) (citations omitted).

As such, the fact that defendants

have not yet recorded every transfer of the DOT does not bear
adversely on their ability to claim ownership over the Note or DOT.
Second, because defendants could enforce the Note without
being subject to the OTDA, MERS’ designation as beneficiary in the
DOT is also irrelevant.

See Memmott v. OneWest Bank, FSB, 2011 WL

1560985, *11 (D.Or. Feb. 9), adopted as modified, 2011 WL 1559298
(D.Or. Apr. 25, 2011) (noting the three ways to enforce a security
interest, only one of which involves non-judicial foreclosure under

Page 8 - OPINION AND ORDER

the OTDA); see also Crowden v. Fed. Nat'l Mortg. Assoc., 2011 WL
6740741, *9 (D.Or. Dec. 22, 2011) (MERS’ designation as nominee and
beneficiary in the trust deed “does not mean the non-judicial
foreclosure proceedings necessarily violate Oregon law”).

In any

event, Oregon law does not recognize a cause of action for wrongful
attempted foreclosure; by extension, plaintiff cannot sustain a
claim for potentially wrongful non-judicial foreclosure based on
MERS’ role as beneficiary. See Hartley v. Fed. Nat’l Mortg. Ass’n,
2012 WL 775679, *3 (D.Or. Mar. 5, 2012).
Third, filing for Chapter 11 bankruptcy does not make an
entity cease to exist.

Unlike Chapter 7, Chapter 11 bankruptcy

allows a debtor to enter into an agreement with creditors under
which all or a part of the business continues.
1101 et seq.

See 11 U.S.C. §§

Accordingly, Fidelity’s Chapter 11 bankruptcy does

not necessarily effect its existence as a business entity.9

Even

if it did, it does not logically follow that there is no entity
with an ownership interest in plaintiff’s Note or DOT.

See, e.g.,

Logan v. Tiegs, 2008 WL 4482405, *1 (D.Or. Oct. 1, 2008) (Chapter
11 reorganization does not destroy an entity’s assets, but rather
involves the transfer or sale of these assets in order to satisfy

9

The Court notes that Renaissance is a subsidiary of Delta
Financial Corporation and therefore was a party to the bankruptcy
proceedings. See In re Delta Financial Corp., Case No. 07-11883CSS, Chapter 11 Plan at 17-20 (Bankr.D.Del. Sept. 15, 2008).
Yet, as plaintiff acknowledges, Renaissance continues to exist as
a business entity.
Page 9 - OPINION AND ORDER

the debts owed to certain creditors).
Finally, plaintiff is not a party to the PSA or an investor in
the REMIC trust.

It is well-settled that a plaintiff lacks

standing to enforce the terms of a PSA where he is neither a party
to, nor a third party beneficiary of, that agreement.

Graham v.

ReconTrust Co., N.A., 2012 WL 1035712, *4 (D.Or. Mar. 27, 2012);
Branson, 2012 WL 1473395 at *3; Staton, 2012 WL 1624296 at *8.
Further, “numerous courts” have rejected “[t]he argument that
parties lose their interest in a loan when it is assigned to a
securitization trust or REMIC.”

White v. IndyMac Bank, FSB, 2012

WL 966638, *6 (D.Hawaii Mar. 20, 2012) (surveying cases).
Once these misconceptions are resolved, however, plaintiff’s
complaint fails to articulate a legal basis to remove the DOT from
the Property or otherwise allege any wrongful conduct that is
redressable by this Court. See Lujan v. Defenders of Wildlife, 504
U.S.

555,

560-61

(1992)

(outlining

Article

III’s

standing

requirements); see also United Investors Life Ins. Co. v. Waddell
& Reed Inc., 360 F.3d 960, 966-67 (9th Cir. 2004) (the court has an
independent duty to establish subject-matter jurisdiction, “whether
the parties raised the issue or not”).
subject-matter

jurisdiction

because

Thus, this Court lacks

plaintiff

does

not

have

standing; defendants’ motion to dismiss is granted.
B.

Ripeness

Even assuming that plaintiff’s claim was not barred by the

Page 10 - OPINION AND ORDER

considerations set forth above, defendants’ motion is granted
because plaintiff’s claim is unripe.
As part of Article III’s case or controversy requirement, the
ripeness doctrine prevents the court from overseeing matters that
are premature for review because the injury is speculative and may
never occur.

Western Oil & Gas Ass’n v. Sonoma Cnty., 905 F.2d

1287, 1290 (9th Cir. 1990), cert. denied, 498 U.S. 1067 (1991)
(“[t]he ripeness inquiry asks whether there yet is any need for the
court to act”); see also United States v. Braren, 338 F.3d 971, 975
(9th Cir. 2003) (discussing the ripeness doctrine in the context of
an action for declaratory relief). In deciding whether an issue is
ripe for review, the court evaluates both the fitness of the issue
for judicial review and the hardship on the parties if the court
withholds consideration.

Standard Ala. Prod. Co. v. Schaible, 874

F.2d 624, 627 (9th Cir. 1989), cert. denied, 495 U.S. 904 (1990)
(citation omitted).
Here, even accepting plaintiff’s allegations as true, his
claim is premised upon a harm that he might suffer in 2036.
Specifically, plaintiff argues that he is entitled to a declaration
granting him sole title to the Property because, otherwise, if and
when he repays the Note in full, the holder of the security
interest in the Property may not be able to reconvey that interest
to him.

Thus, the alleged harm is contingent upon events that are

not certain to occur.

Page 11 - OPINION AND ORDER

In other words, because plaintiff has not defaulted on his
loan, or paid it off in its entirety, there is no current need for
this Court to act and plaintiff will not suffer any hardship as a
result.

See, e.g., Nastrom v. New Century Mortg. Corp., 2012 WL

2090145, *4 (E.D. Cal. June 8, 2012) (unlawful foreclosure claim,
based in MERS’ designation as beneficiary in the trust deed, was
not yet ripe in the absence of any action to enforce the security
instrument). While the chain of title for plaintiff’s Note and DOT
is admittedly convoluted, any decision that this Court could reach
based on the speculative events alleged in the complaint would be
advisory in nature.

These are precisely the circumstances that

Article III’s ripeness requirement seeks to prevent federal courts
from presiding over.

For this additional reason, defendants’

motion is granted.
II.

Failure to State a Claim
Finally, even if subject-matter jurisdiction was not lacking,

plaintiff’s complaint is dismissed for failure to state a claim.
Plaintiff seeks a decree from this Court that he is the sole owner
of the Property.

Specifically, because defendants neglected to

follow the PSA and record all transfers of the DOT, plaintiff
asserts that he is entitled to keep the Property free and clear of
all encumbrances, and without having to repay the Note.
A claim to quiet title is an equitable action to determine
conflicting or adverse claims, interests, or estates in real

Page 12 - OPINION AND ORDER

property.
quieting

See Or. Rev. Stat. § 105.605.
title,

a

plaintiff

must

To secure a judgment

establish

that

he

has

“a

substantial interest in, or claim to, the disputed property and
that his title is superior to that of defendants.”

Coussens v.

Stevens, 200 Or.App. 165, 171, 113 P.3d 952 (2005), rev. denied,
340 Or. 18, 128 P.3d 1122 (2006) (citations omitted).

While this

standard “does not require the plaintiff's title to be above
reproach, it does require that [plaintiff] prevail on the strength
of his own title as opposed to the weaknesses of defendants’
title.”

Id. (citations and internal quotations omitted).

To satisfy this requirement, plaintiff must expressly allege
that: (1) his title is superior to that of defendants; and (2) “the
subject loan has been satisfied or that plaintiff is ready, willing
and able to tender the full amount owed on the loan.”

Rigor v.

Freemont Inv. & Loan, 2012 WL 913631, *1 (D.Or. Feb. 13), adopted
by 2012 WL 913566 (D.Or. Mar. 16, 2012); see also Longley v. Wells
Fargo Bank, N.A., 2011 WL 1637334, *3-4 (D.Or. Mar. 29), adopted by
2011 WL 1636934 (D.Or. Apr. 29, 2011).
Here, plaintiff neglects to allege the superiority of his own
title

and

instead

only

attacks

defendants’

title.

More

importantly, plaintiff does not assert, nor can he, that the Note
has been repaid in full.

Therefore, due to deficiencies in the

pleadings, plaintiff fails to state a claim to quiet title.
In addition, while not dispositive, plaintiff’s requested

Page 13 - OPINION AND ORDER

remedy is inappropriate, even if he did have standing to enforce
the PSA.

Plaintiff is essentially seeking to expunge his debt as

a

of

result

defendants’

allegedly

wrongful

actions.

It

is

undisputed, however, that plaintiff borrowed these funds for his
personal benefit and contractually agreed to repay them.

Further,

as discussed above, satisfaction of the underlying loan is a
prerequisite to quieting title. Accordingly, even if plaintiff was
somehow able to hold defendants liable under the facts alleged, he
would

remain

responsible

for

fulfilling

his

ongoing

debt

obligation.
CONCLUSION
Defendants’

Motion

to

Dismiss

(doc.

5)

is

GRANTED.

Accordingly, defendants’ request for oral argument is DENIED as
unnecessary.

This case is DISMISSED.

IT IS SO ORDERED.
Dated this 27th day of August 2012.

_______________

/s/ Ann Aiken
_________________
Ann Aiken
United States District Judge

Page 14 - OPINION AND ORDER